February 19, 2010

Slight recovery in U.S. housing construction

WASHINGTON, D.C.

Housing construction in the U.S. posted a better-than-expected increase in January which pushed activity to the highest level in six months. The solid gain raised hopes that the construction industry is beginning to mount a sustained rebound from its worst slump in decades.

The Commerce Department said Wednesday that construction of new homes and apartments rose 2.8 per cent last month to a seasonally adjusted annual rate of 591,000 units. That was better than the 580,000 annual pace that economists were forecasting.

Applications for building permits, considered a good barometer of future activity, fell 4.9 per cent to a rate of 621,000, but that was after two months of large increases.

In another sign of strength, Wednesday’s report revised up activity in December to show builders were starting construction at an annual pace of 575,000 units during that month, much stronger than the 557,000 originally reported. Even with the upward revision, activity fell a slight 0.7 per cent in December, a dip that was blamed on severe weather in many parts of the country that depressed construction activity.

Economists are hoping that housing is beginning to recover and a rebound in this area will help support the economy as it struggles to mount a sustained recovery from the deepest recession since the 1930s.

In a separate report suggesting strength, the Federal Reserve said industrial production rose 0.9 per cent in January, the seventh consecutive monthly increase.

January’s numbers rose in all three major categories: manufacturing, mining and energy utilities. That is the first such show of strength since August 2009.

Manufacturing rose 1.0 per cent, while mining and utilities each gained 0.7 per cent, the report said.

In the housing report, the strength last month was led by a 10 per cent jump in activity in the Northeast and an 8.9 per cent increase in the West. Construction was up a smaller one per cent in the South and 3.2 per cent in the Midwest.

The strength in January pushed construction activity up by 21.1 per cent from the pace in January 2009. Last month’s building rate the fastest pace since July.

Construction of single-family homes rose by 1.5 per cent to a seasonally adjusted annual rate of 484,000 units while construction of multi-family units increased 9.2 per cent to an annual rate of 107,000 units.

The National Association of Home Builders said Tuesday that its housing market index rose by two points to 17 in February after having fallen for two consecutive months. That increase in sentiment was likely influenced by a number of favourable developments including a report earlier this month that the nation’s unemployment rate fell in January to 9.7 per cent, still high, but lower than the 10 per cent of the previous month.

Associated Press

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