American Housebuilding Rise Divides Economists
Wednesday, March 18, 2009 16:18
The number of houses started by builders in the US rose unexpectedly by 22% in February to 583000, up from 477000 in January. Yet economists were split on whether this was good news.
Paul Dales, US economist at Capital Economics, said that it could be a sign that the property market was close to rock-bottomm. According to him, with housing starts some 75% below their peak and residential investment as a share of GDP extremely low, housing activity could be stabilising.
Patrick Newport, US economist at HIS Global Insight said that, prices of existing homes are dropping at double-digit rates, inventory of unsold homes remains near all-time highs and foreclosures are still increasing.
The number of building permits granted last month rose from 531000 to 547000, a less marked improvement. Meanwhile, American producer prices rose by 0.1% last month compared with January, less than expected but enough to keep deflation fears sidelined. The producer price index, which measures the prices that producers receive for their products, had been expected to rise by 0.4% in February, but it was held down by a 1.6% drop in food prices that offset the gain in energy prices, including an 8.7% rise in petrol costs. Core PPI, which strips out food and energy, wsa up by 0.2% compared with January, in part due to an incongruous 1.3% rise in light truck sales. Clothes rose by 1.5%. The consumer price index for February is due out.
There has been concern in the US about deflation, in which prices show persistent falls an the inflation rate drops below 0%. The price of property and shares can fall as a result and salaries are cut, leading from a recession into a depression.
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