Housing Construction Leaps 7% in December
Housing construction shot up 7.1% in December, the Commerce Department reported Wednesday, capping off the best year for housing since 1986 despite the fact that mortgage rates were creeping higher.
Meanwhile, the Federal Reserve said its latest review of the U.S. economy showed strong business activity around the nation, with retailers recording a strong Christmas and manufacturing companies enjoying a broad-based rebound.
The Fed report, known as the “beige book,” said surveys of its 12 regions reported “strong economic growth in December and early January.”
The strength was coming from continued robust spending by consumers, who account for two-thirds of total economic activity, and a rebound in manufacturing as overseas markets began to revive, especially in Asia.
The Fed report noted that even though labor markets remained tight around the country, there was still no sign that employers were handing out large wage increases. Consumer prices also remained in check, the report said.
The Fed survey will be used by the central bank when it meets Feb. 1 and 2 to review interest rate policies. Economists are predicting the Fed will increase rates for a fourth time in the belief that more credit-tightening is needed to make sure rapid economic growth does not trigger inflation down the road.
Separately, the Fed said Wednesday that it will put into place for its February meeting a new disclosure policy in an attempt to deal with confusion that arose last year over just what the central bank was trying to tell financial markets about the future course of interest rates.
With its new procedures, the Fed scrapped its “policy directive,” which was intended to signal the future course of interest rate decisions by the Federal Open Market Committee, the group of Fed board members and regional bank presidents who meet eight times a year to set rates.
Instead, the Fed will issue a brief statement at the end of every FOMC meeting saying whether Fed policymakers believe there is a risk of inflation going forward or a risk of economic weakness.
In its housing report, the Commerce Department said builders, aided by good weather, began work on new units at a seasonally adjusted annual rate of 1.71 million units last month.
That was the largest monthly increase in housing starts since a 7.7% gain in October 1998.
For all of 1999, builders started construction on 1.66 million new units, up 3% from 1998. That followed a 10% annual gain the year before. Still, the 1.66-million level was the highest since 1.8 million units were started in 1986.
Housing starts fell 15% in the West but were up strongly elsewhere. Starts surged 13.4% in the Midwest and 7.6% in the Northeast.
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Housing Starts
Seasonally adjusted annual rate, millions of units:
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December: 1.71 million
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Source: Commerce Department
