Housing, Price Data Points to Sluggish Recovery

October 21, 2009

Softer-than-expected U.S. housing starts last month and a drop in prices paid at the farm and factory gate pointed to an anemic economic recovery, backing views that interest rates could stay low for a while.

A Commerce Department report on Tuesday showed groundbreaking for new homes rose 0.5 percent to an annual rate of 590,000 units in September, shy of forecasts for a 610,000 unit rate. August’s figure was revised down to 587,000. For a graphic showing housing starts data, click here.

Separately, the Labor Department said its producer price index — a gauge of prices received by farms, factories and refineries — dropped 0.6 percent last month after rising 1.7 percent in August. Analysts had expected prices to hold steady.

Mortgage“The expectations are for a very tepid economic recovery. The recovery is firmly in place, but I don’t think that consumers are going to recognize this until we start to see job growth,” said John Canally, an economist and investment strategist at LPL Financial in Boston.

U.S. stocks ended down on the economic data that overshadowed yet another set of strong results from bellwethers such as Apple Inc (AAPL.O) and Caterpillar (CAT.N).

Prices for U.S. government debt rallied as investors viewed the reports as more evidence that the Federal Reserve would keep lending rates near zero for a prolonged period. The Fed has held benchmark overnight rates near zero since December.

San Francisco Fed President Janet Yellen said on Tuesday she did not anticipate the U.S. central bank would withdraw its support to the economy any time soon and adding that economic conditions would be the main deciding factor.

The rise in housing starts last month was held back by a 15.2 percent drop in groundbreaking in the volatile multifamily sector. Starts on single-family homes, often seen as a better harbinger for the direction of the market, rose 3.9 percent, partially reversing a fall in August.

Compared with September last year, housing starts were down 28.2 percent.

Source: Reuters

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Written by djumper · Filed Under Real Estate Blog