U.S. housing starts slide 6.8% in March, manufacturing output drops
U.S. homebuilding fell in March after unseasonably mild weather buoyed activity in February and manufacturing output dropped for the first time in seven months, further indications that economic growth braked sharply in the first quarter.
Coming on the heels of data last week showing the second monthly decline in retail sales in March as well a decrease in consumer prices, Tuesday’s dour reports could reduce prospects of a Federal Reserve interest rate increase in June.
“The economy seems to have hit a soft patch in the first quarter and Fed officials are likely to wait to see the rebound before raising rates again. The clouds from the outlook skies may not lift until late this summer,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.
Housing starts decreased 6.8 percent to a seasonally adjusted annual rate of 1.22 million units as the construction of single-family homes in the Midwest recorded its biggest decline in three years, the Commerce Department said.
Economists had forecast homebuilding falling to a 1.25 million-unit pace last month. Housing starts were up 9.2 percent compared to March 2016.
In a separate report, the Fed said manufacturing production dropped 0.4 percent in March, weighed down by a 3.0 percent decline in the output of motor vehicles and parts.
That was the first and biggest decline in factory production since last August. The return of cold temperatures, however, resulted in a record 8.6 percent surge in utilities output, helping to lift industrial production 0.5 percent last month.
Manufacturing output rose at a 2.7 percent annual rate in the first quarter as the sector, which accounts for about 12 percent of the U.S. economy, continues to recover after a prolonged drag from lower oil prices, a strong dollar and an inventory overhang.
WEAK FIRST-QUARTER GROWTH
Reports on consumer and construction spending as well as inventory investment suggest the economy slowed sharply in the first quarter after gross domestic product increased at a 2.1 percent annualized rate in the fourth quarter of 2016.
