Economy Watch: Housing Starts in the Basement in February
- Mar 17, 2011
Housing starts dropped 22.5 percent in February to an annualized rate of 479,000 units, according to the U.S. Department of Commerce on Wednesday. The month-over-month decline in single-family starts was 11.8 percent, while the ever-volatile multifamily starts–more than five units, in government parlance–were down a whopping 47 percent between January and February.
Compared with February 2010, and with the federal homebuyer tax credit dead as a doornail, single-family starts were down 20.8 percent in February 2011. Year-over-year, multifamily starts were actually up 54.8 percent, which is probably a function of the market realizing over the course of last year just how strong multifamily fundamentals were. Residential building permits were down as well, by 8.2 percent to 517,000 units annualized, a record low.
Appropriately, homebuilder confidence is still stuck at subbasement levels, with the National Association of Home Builders reporting earlier this week that its housing market index increased only slightly in March, to 17. Fifty is the mark at which homebuilders are more optimistic than pessimistic.
Energy, food drive producer prices upward
The U.S. Bureau of Labor Statistics reported on Wednesday that the Producer Price Index for finished goods increased 1.6 percent in February, following advances of 0.8 percent in January and 0.9 percent in December. That puffing sound you hear is the inflating of the U.S. economy; the PPI increase is the largest one since a 1.9 percent increase in the summer of 2009.
At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 2 percent, while the crude goods index climbed 3.4 percent. On an unadjusted basis, according to the BLS, prices for finished goods advanced 5.6 percent for the 12 months ended February 2011–the largest 12-month increase since March 2010.
Take away food and energy, and the PPI rose only 0.5 percent, which itself is a month-over-month spike from January’s 0.2 percent increase. Food rose 3.9 percent month-over-month in February, and energy was up 3.3 percent.
Nuclear situation still confounds the world
The fog of uncertainty around the nuclear incident in Japan continued unabated on Wednesday; the race seemed to be on to cool the stricken Fukushima power plant. In terms of economic impact, on Wednesday in Japan the Nikkei 225 gained back some of its previous losses, but started to slide again on Thursday. The yen was up, however, as speculators in the currency started betting that rebuilding the damaged areas will increase the demand for yen dramatically.
One curious effect of Fukushima worldwide was a rush to buy iodine pills in countries other than Japan–in fact in countries on the other side of the world, reportedly depleting stocks of the chemical and driving up its price in places. Iodine protects those exposed to radiation from a very specific problem, namely thyroid cancer. Perhaps the panicked iodine buyers are many of the same people who refused to buy pork back during the early days of the H1N1 swine flu.
Wall Street was clobbered on Wednesday, with investors seemingly worried that the sky was falling. The Dow Jones Industrial Average lost 242.12 points, or 2.04 percent, while the S&P 500 and the Nasdaq sank 1.95 percent and 1.89 percent, respectively.