(WASHINGTON) Big industry production throttled back in January due partly to car shutdowns, and housing construction tumbled to a record low, weaker-than-expected performances that show the US caught in a worsening economic tailspin.
The Federal Reserve reported yesterday that production at the nation's factories, mines and utilities fell 1.8 per cent last month. Many economists expected a 1.5 per cent decline. It marked the third straight month where production was cut back and December's performance was even weaker than initially reported, plunging 2.4 per cent.
Another report from the Commerce Department said construction of new homes and apartments plunged and building permits dropped to record lows in January last month, data showed yesterday, as builders shelved construction plans due to a glut of unsold houses and a slump in demand.
The data came as President Barack Obama was due to unveil a plan to stem home foreclosures in an attempt to break housing's downward spiral, which has plunged the US economy into recession and swamped the global financial system.
Housing starts tumbled 16.8 per cent to a seasonally adjusted annual rate of 466,000 units, the lowest since the Commerce Department started keeping records in 1959, from December's upwardly revised 560,000 units. That was the biggest percentage drop since January 1994, the Commerce Department said. Analysts polled by Reuters had expected an annual rate of 530,000 units for January.
'It's a pretty awful (housing) number but in a certain way, the bad reading was to be expected. There's no bottom yet in sight for the US economy,' said Matt Esteve, a foreign exchange trader at Tempus Consulting in Washington.
New building permits, which give a sense of future home construction, dropped 4.8 per cent to 521,000 units, also an all-time low, from 547,000 units in December. That was below analysts' estimates of 530,000.
Compared with the same period last year, housing starts dived a record 56.2 per cent last month and permits plunged 50.5 per cent. Completions slumped a record 41.7 per cent. There was some glimmer of hope as data showed applications for US home mortgages soared last week as fixed mortgage rates dropped below the key 5 per cent level.
The Mortgage Bankers Association said that its seasonally adjusted index of mortgage application activity jumped 45.7 per cent in the week ended Feb 13 to its highest reading since Jan 16. The increase coincided with a 0.2 percentage point drop in average 30-year mortgage rates over the past week to 4.99 per cent, the MBA said.
The increase was mostly due to refinancing of mortgages, with the MBA's index of such loans climbing 64.3 per cent. The gauge of loan requests for home purchases rose 9.1 per cent from last week's level, which was an eight-year low. - Reuters, AP
Source: Business Times - 19 Feb 2009