Oct
20
Builders in the U.S. broke ground on fewer homes than forecast and wholesale prices unexpectedly fell in September, giving the Federal Reserve more reason to keep interest rates low to ensure an economic recovery.
Housing starts rose 0.5 percent to an annual rate of 590,000 from a 587,000 pace in August that was lower than previously estimated, a Commerce Department report showed today in Washington. Prices paid to factories, farmers and other producers fell 0.6 percent, the second drop in three months, the Labor Department said.
Builders may be paring back in anticipation of the end of the government’s $8,000 tax credit for first-time homebuyers on Nov. 30. The decline in producer prices confirms the Fed’s view that inflation is “subdued,” helping Fed Chairman Ben S. Bernanke and fellow policy makers fulfill a pledge to keep the benchmark rate at a record low for an “extended period.”
“Builders are a little bit cautious about the outlook,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “There is still a huge amount of slack in the economy, and downside risks for inflation.”
Builder shares fell after the housing report, with the Standard & Poor’s Supercomposite Homebuilder Index down 2.2 percent at 12:16 p.m. in New York. The Standard & Poor’s 500 Index decreased 0.9 percent to 1,088.53. Treasuries rose, pushing the yield on the 10-year note down to 3.33 percent from 3.39 percent late yesterday.
Economists forecast starts would increase to a 610,000 rate, from a previously reported 598,000 in August, according to the median of 76 projections in a Bloomberg News survey. Estimates ranged from 582,000 to 630,000.
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