MercoPress. South Atlantic News Agency

US construction industry and housing market remain stagnant

Commerce Department said housing starts dropped 10.6%

Construction of new homes in the United States fell sharply last month, showing potential weakness in the economy's recovery, while consumer prices rose slightly more than expected.

The Commerce Department said housing starts dropped 10.6% to a seasonally adjusted annual rate of 529,000 units, the lowest level since April and the percentage drop was the biggest since January.

Financial markets had expected starts to rise to 600,000 units. September's housing starts were revised upwards to a 592,000 unit rate from the previously reported 590,000 units.

A separate report from the Labour Department showed the Consumer Price Index rose 0.3%, a touch above market expectations for a 0.2%, after rising an unrevised 0.2% in September.

Groundbreaking for single-family homes fell 6.8% in October last month to an annual rate of 476,000 units, the lowest since May. Starts for the volatile multifamily segment tumbled 34.6% to a 53,000 annual pace, extending the previous month's slide. Compared to October last year, housing starts dropped 30.7%.

The latest data will be a blow to the housing market, which had shown signs of stabilization after a three-year slump. Residential investment contributed to economic growth in the July-September period for the first time since 2005.

The US economy expanded in the last quarter after four straight quarters of decline. The recovery in the housing market has been led by the popular 8.000 USD tax credit for first-time buyers, which has since been extended and expanded by the government.

New building permits, which give a sense of future home construction, fell 4% to 552,000 units in October. That compared to analysts' forecasts for 580,000 units. Compared to the same period a year-ago, building permits fell 24.3%.

The inventory of total houses under construction dropped to a record low 560,000 units last month, the department said, while the total number of permits authorized but not yet started tumbled to an all-time low of 93,900 units.

In the Labour Department report, core prices, which exclude food and energy, rose a more moderate 0.2% last month after increasing by the same margin in September. A spike in prices on used cars and trucks and new vehicles accounted for more than 90% of the rise in core prices. It was the biggest increase in new vehicle prices since 1981.