Cold Weather Chills Housing Starts
The Wall Street Journal
By Justin Lahart
January 21, 2010
New-home construction fell in December, as bad weather kept construction crews from breaking ground. But an increase in newly issued building permits suggested the decline was only temporary.
Separately, inflation at the wholesale level was muted last month, as higher food prices were offset by a decline in energy prices.
The number of new-home starts in December fell 4% from November to a seasonally adjusted 557,000 annual rate, the Commerce Department said Wednesday. Single-family construction declined 6.9% to 456,000. Construction of apartment buildings and other multifamily units rose 12.2% to 101,000.
Last month was the coldest December in nine years in the contiguous 48 states, with several winter storms. Because home-building activity is always low during the winter months, weather can have an outsize effect on the construction figures.
"Small distortions can really add up in December," said J.P. Morgan economist Michael Feroli. "You don't need a whole lot of change to swing the seasonally adjusted number around."
Housing starts fell 19% in the Northeast and 18.5% in the Midwest, both regions that were buffeted by snowstorms in December. Starts fell 0.9% in the West and rose 3.3% in the South.
Newly issued building permits rose 10.9% in December to a 653,000 annual rate, the highest level since October 2008. Less likely to have been affected by weather, the permit level suggests construction activity will pick up in the months ahead.
There were a total of 553,800 housing units started last year, down 38.8% from 2008 and about a third of the average over the previous 50 years.
Wholesale Inflation Tame
Also Wednesday, the Labor Department reported that its index of wholesale, or "producer," prices rose a seasonally adjusted 0.2% last month from November. Food prices rose 1.4%, but energy prices fell 0.4%. Core producer prices, which exclude food and energy prices, were flat.
Compared with a year earlier, producer prices were up 4.4.%—the largest annual increase in 14 months. That largely reflected a rebound in oil prices from a steep fall at the end of last year; excluding food and energy, prices were up 0.9%.
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