Housing starts surge in November; consumer prices tame

Wednesday, December 16th, 2009

Martin Crutsinger
USA Today

WASHINGTON — Construction of new homes, helped by better weather, rebounded in the U.S. in November following a setback in the previous month.

The Commerce Department said construction of new homes and apartments rose 8.9% in November to a seasonally adjusted annual rate of 574,000 units. The gain represented strength in all areas of the country although the increase was slightly lower than economists had expected.

Applications for new building permits were also up, rising 6% to an annual rate of 584,000 units, a stronger showing than economists predicted.

The gains are a hopeful sign that the housing recovery is continuing, a development viewed as critical to lifting the overall economy out of recession.

In a second report Wednesday, the Labor Department said consumer prices moved higher last month, but they mostly reflected higher energy costs.

The consumer price index, the government’s most closely watched inflation barometer, rose 0.4% in November, up from a 0.3% increase in October, the Labor Department said.

But stripping out energy and food, all other prices were flat last month, signaling that inflation isn’t rising through the economy. It was the first time this measure, known as “core” inflation, was unchanged, after 10 straight monthly increases.

The reading on overall inflation matched economists’ forecasts. The showing on core inflation turned out even better than the tiny 0.1% increase analysts were expecting.

Looking ahead, companies will find it difficult to jack up prices when consumers are expected to remain cautious, the job market is weak and the recovery is slow, analysts say.

Wednesday’s report gives the Fed, wrapping up a two-day meeting Wednesday, leeway to hold its key interest rate at a record low to nurture the recovery.

Copyright 2009 The Associated Press. All rights reserved.

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