Housing starts plunge while producer prices rise? This is not a good day to search for My Bush Boom.
U.S. housing starts posted their steepest drop in more than 14 years in March, suggesting some cooling in the long-hot housing market, while producer prices rose steeply on surging energy costs.
Housing starts plunged 17.6 percent in March, their biggest drop since January 1991, to a 1.837 million unit rate from an upwardly revised 2.229 million unit pace in February, the Commerce Department said on Tuesday.
Separately, the Labor Department said its Producer Price Index, a gauge of prices received by farms, factories and refineries, shot up 0.7 percent.
Wall Street economists had looked for housing starts to slip a far smaller 4.8 percent in March to a 2.09 million unit rate, with some pointing to poor weather. The producer price report, in contrast, came in close to expectations.
“There was a large drop (in housing starts) and we saw it right across the board, all parts of the country,” said Rick Egelton, chief economist at BMO Financial Group in Toronto. He said rising interest rates may finally be having some impact, but cautioned the data is often volatile.
The increase in the producer price index in March was the largest since a matching energy-led gain in November.
Energy prices shot up 3.3 percent in March, the biggest jump since October, with gasoline prices up 5.3 percent, home heating oil up 15.7 percent and residential natural gas up 2.3 percent. Food prices advance 0.3 percent.
Over the past 12 months, producer prices have risen a sharp 4.9 percent — the biggest year-on-year gain since November — as oil prices have pushed higher.
Some economists warned that even though core prices at the finished goods level were well contained, price pressures appeared to be building at earlier stages of production.
“As we go up the pipeline, there’ll be future prices increases — I don’t think inflation is dead by any stretch of the imagination,” said Ram Bhagavatula, chief economist at Royal Bank of Scotland Financial Markets in New York.
The housing starts report showed widespread weakness, with groundbreaking activity for both single-family and multifamily homes tumbling.
Single-family housing starts slid 14.4 percent to a 1.539 million unit pace, the largest drop since January 1991. Starts on structures with five or more units fell 31.6 percent, the biggest decline since March 2000.
Starts fell 29.3 percent in the Midwest, 18 percent in the South, 12.7 percent in the West and 3.6 percent in the Northeast.
Permits for future groundbreaking, an indicator of builder confidence, also fell more than expected.
And now the obligatory whistling past the grave yard, brought to you by the National Association of Home Builders:
“We’ll probably see better numbers in April,” [David Seiders, chief economist at the National Association of Home Builders] said. “It’s not time to panic over here for sure.”
That’s good advice: Don’t Panic.
UPDATE: Let’s throw GM’s $1.1 billion 1st quarter loss into the mix, shall we?