Published February 17, 2007


Building of new homes at 10-year low

Jan wholesale prices fall by the largest amount in three months

(WASHINGTON) US new home construction plunged to the lowest level in nearly 10 years while wholesale prices fell in January by the largest amount in three months amid retreating energy prices.

The Commerce Department reported that construction of new homes and apartments plunged by 14.3 per cent in January, pushing total activity down to a seasonally adjusted annual rate of 1.408 million units, the slowest pace in nearly 10 years. The last time construction was lower was in August 1997.

Applications for new building permits, considered a good barometer of future activity, fell as well in January, dropping by 2.8 per cent to an annual rate of 1.568 million units.

The overall housing decline was much sharper than the 2.6 per cent drop that Wall Street had been expecting and raised concerns that the steep slide in housing has yet to run its course.

Many economists are worried that the housing bust, which followed a five-year boom, could be a prolonged one as sellers struggle to reduce record levels of unsold homes.

The Labour Department yesterday reported that wholesale inflation declined 0.6 per cent last month, the largest drop since a 1.8 per cent fall in October.

The improvement came from a 4.6 per cent drop in energy costs, reflecting lower prices for petrol, natural gas and home heating oil. But even outside of the volatile energy and food categories, inflation pressures were well contained, rising by a modest 0.2 per cent.

Meanwhile, US consumer sentiment fell in February, confounding expectations for a slight gain and moderating from January's rise to its highest in two years.

The Reuters/University of Michigan Surveys of Consumers said its preliminary February consumer sentiment index declined to 93.3 from 96.9 in January.

Analysts, on average, had predicted that February's reading would edge up to 97.0 but the actual result was slightly below their lowest forecast, which was 93.5.

The January reading was the highest since December 2004. - AP, Reuters