Housing Starts Decrease 8.9%
New home construction tumbled in December, pointing to further cooling in the U.S. real estate boom, but other figures Thursday showed a robust labor market as new jobless claims fell to a six-year low.
A third report on regional manufacturing revealed an unexpected stalling in factory activity in the Philadelphia Federal Reserve’s Mid-Atlantic district, despite an improvement in new orders.
Analysts said the figures showed moderate economic growth that was unlikely to deter the Federal Reserve from raising interest rates again in late January, despite mounting evidence of a slower housing market.
“I don’t think these economic numbers we’ve seen change prospects for Fed policy. We still look for another quarter [percentage] point rate hike at the end of the month,” said Gary Thayer, chief economist at A.G. Edwards & Sons Inc.
The Commerce Department said housing starts fell 8.9% in December to an annual rate of 1.933 million units, led by a decline in construction of single-family homes.
That was below the pace of 2.050 million units anticipated on Wall Street, though economists said unseasonably cold winter weather contributed to the decline.
“The long-awaited drop-off in housing activity may have started,” Lehman Bros. economist Drew Matus said.
A separate report from the Philadelphia Fed said factory growth nearly stalled in January, with its business activity index sliding to 3.3 from 10.9 in December.
That was well short of Wall Street’s forecast of a rise to 12.6.
It was the weakest reading since June, although key components of the index showed signs of strength.
“Businesses are toning down their expectations with investment and hiring this year,” said Joel Naroff, president of Naroff Economic Advisors.
Analysts said the housing data signaled that a slowdown was clearly underway. Many economists have been looking for a slow, steady moderation in the market to bring price gains and investment back to levels seen as more sustainable.
For the year as a whole, starts rose 5.6% to 2.065 million units -- the second-highest on record. The highest came in 1972.
Housing starts have fallen in two of the last three months. In December, starts plummeted throughout most of the U.S.
A 21.7% drop in the West marked the biggest percentage decline for that region since February 1999, when starts dropped 24.7%.
Total single-family starts dropped 12.3% in December while groundbreaking on multifamily units jumped 10.2%.
Permits for future groundbreaking, an indicator of builder confidence, fell 4.4% in December.
A separate report suggesting a robust labor market showed that the number of U.S. workers making new claims for unemployment benefits fell unexpectedly last week to the lowest level in nearly six years.
The Labor Department said initial claims for state jobless aid fell 36,000 last week to 271,000, the lowest since April 2000, from a revised 307,000 the previous week.
