WASHINGTON – Construction of new homes in the U.S. bounced back in May from the postwar low it sank to in April, while factory utilization and producer prices dropped at rates not seen since the late 1940s, the federal government reported today.
The U.S. Commerce Department estimated that builders broke ground on new homes at a seasonally-adjusted rate of 532,000 in May. That was an increase of 17.2 percent from April, when the department recorded just 454,000 housing starts – the lowest number since the end of World War II, MarketWatch reported. The number of building permits also rose 4 percent in May compared with April to a seasonally-adjusted rate of 518,000.
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But housing starts were down 45.2 percent in May compared with a year earlier, MarketWatch said, and the monthly number has fallen 77 percent since peaking in early 2006.
With the housing slump now in its fourth year, economists are waiting for evidence that construction is resuming. But analysts were not overly optimistic about today’s data.
“While bottoming is an important step, there is little upside evidence in housing to suggest recovery,” Stephen Gallagher, U.S. economist for the European investment bank Société Générale, wrote in a research note, according to MarketWatch.
Brian Fabbri, U.S. economist for BNP Paribas, added that the latest figures imply “that the massive declines in residential investment will soon be over,” MarketWatch reported.
Separately, the Federal Reserve said the country’s industrial output in May was down 1.1 percent from the previous month and 13.4 percent from a year earlier, the biggest annual decline since 1946, MarketWatch reported.
The Fed said factory utilization fell to 68.3 percent in May – the lowest figure the government has recorded since it began recording the figure in 1948, and down from 69 percent in April.
In addition, the producer price index for May posted its biggest annual decline since August 1949, dropping 5 percent from a year earlier, the U.S. Labor Department reported.
Core wholesale prices, which exclude food and energy, fell on a monthly basis in May for the first time since October 2006, declining 0.1 percent from April. But higher energy prices boosted the overall price index by 0.2 percent in May after seasonal adjustments.
Despite increased talk in recent weeks about the looming threat of inflation, especially in political circles, economists said the decline in prices actually showed deflation to be the larger concern in the near future. “Growing slack implies that deflation remains the predominant near-term risk,” wrote Sal Guatieri, an economist with BMO Capital, according to MarketWatch.
