Ground breaking for new US homes fell unexpectedly in July, but a rise in single-family home construction for a fifth straight month kept hopes alive the economy was poised to recover from recession.
The Commerce Department on Tuesday said housing starts fell 1% to a seasonally adjusted annual rate of 581,000 units, well below market expectations for 600,000 units.
June's housing starts were revised up to 587,000 units from the previously reported 582,000 units. Groundbreaking for single family homes, the worst-hit part of the housing market, rose 1.7% to an annual rate of 490,000 units -- the highest since October.
“The single-family sector continued to edge higher and that was the silver lining of the report,” said Michelle Meyer, an economist at Barclays Capital in New York.
US stock index futures pared gains, while US government debt prices trimmed losses after the weak housing and prices data.
While data has pointed to the likely end of the recession, analysts have warned of a weak recovery as rising unemployment crimps consumer spending.
A higher-than-expected quarterly profit reported by Home Depot Inc on Tuesday helped ease investor fears as the world's largest home-improvement chain partly offset weak sales with cost cutting.
No. 2 US discount retailer Target Corp also reported better than expected results.
Compared to July last year, housing starts dropped 37.7%. New building permits, which give a sense of future home construction, fell 1.8% to 560,000 units in July, and were down 39.4% from a year ago.
The inventory of total houses under construction fell to record low 609,000 in July, the department said, while the total number of permits authorized but not yet started also hit a record low at 102,300.
A separate report from the Labor Department showed US producer prices fell 0.9% versus a 1.8% gain in June. Compared with the same period last year, producer prices were a record 6.8% lower in July.
Core producer prices, which exclude food and energy costs, edged 0.1% lower in July compared with a forecast for a 0.1% rise, and after a 0.5% increase in June.
The core producer price index stood 2.6% higher measured on a year-on-year basis, versus a forecast for a 2.8% advance. (Reuters)