U.S. housing starts hit lowest level since October, construction permits hit 1-year low
U.S. housing starts fell more than expected in March and permits for future home construction hit a one-year low, suggesting some cooling in the housing market in line with signs of a sharp slowdown in economic growth in the first quarter.
Tuesday’s report from the Commerce Department continued the recent run of weak data that has cast a pall on the economy’s prospects. Economists say the fragile economy, combined with tepid inflation vindicated the Federal Reserve’s cautious approach to raising interest rates.
“It’s not just American consumers stepping back a bit this year, homebuilders also lost steam,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “This means the two key drivers of the expansion have lost their pep, which explains why the Fed will probably lift rates, at most, a couple of times in 2016.”
Groundbreaking decreased 8.8 percent to a seasonally adjusted annual pace of 1.09 million units, the lowest level since October, the Commerce Department said. Economists polled by Reuters had forecast housing starts slipping to a 1.17 million-unit pace last month.
Last month’s drop in starts pointed to a moderation in housing market activity and mirrors other reports on business spending, industrial production, trade, inventory investment and retail sales that have suggested economic growth stalled in the first quarter.
The economy has been slammed by a strong dollar and weak global demand, which have weighed on exports. Lower oil prices are also a drag as they have undercut profits of energy firms, prompting them to sharply curtail spending on capital projects.
First-quarter gross domestic product growth estimates are currently as low as a 0.2 percent annualized rate. The economy grew at a 1.4 percent rate in the fourth quarter.
The PHLX housing index .HGX was down slightly, underperforming a broadly higher stock market that was buoyed by rising oil prices. Shares in the nation’s largest homebuilder D.R. Horton Inc (DHI.N) were down 0.95 percent andLennar Corp (LEN.N) slipped 0.84 percent.
The dollar fell against a basket of currencies and prices for U.S. government debt were weak.
