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U.s. Housing Starts Declined 10% In May

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Home construction plunged in May to its lowest level since December, as builders scaled back after a federal tax credit to lure buyers expired.

While housing faltered, manufacturing continued to show signs of recovery. The Federal Reserve said that industrial production rose 1.2 percent in May. Factories — the single biggest contributor to industrial activity — increased production by a 0.9 percent, the third consecutive monthly increase.

The gains were broad-based, though mining output edged down by 0.2 percent. Production at utilities increased by 4.8 percent as warm weather created more demand for electricity.

In a third economic snapshot released Wednesday, the Labor Department said that declines in the cost of food and energy helped to drive down wholesale prices in May for a second consecutive month.

The housing report showed that building permits declined in May, a sign that the construction industry would not fuel the economic recovery.

The Commerce Department said that construction of new homes and apartments fell 10 percent in May from April to a seasonally adjusted annual rate of 593,000. April’s figure was revised downward to 659,000.

The results were driven by a 17 percent decline in the single-family market, which had benefited earlier in the year from federal tax credits of up to $8,000.

Applications for new building permits, a sign of future activity, also fell. They sank 5.9 percent to an annual rate of 574,000, the lowest level in a year.

This locked in recovery is stronger than ever...

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(Bloomberg) -- Production in the U.S. rose by the most since August and builders broke ground on fewer homes than projected, showing manufacturing is sustaining the recovery as the housing market retreats following the expiration of a government tax credit.

Output at factories, mines and utilities increased 1.2 percent last month after a 0.7 percent gain in April, a Federal Reserve report in Washington showed today. Housing starts fell 10 percent, the biggest decline since March 2009, according to figures from the Commerce Department.

Companies are rebuilding inventories and investing in new equipment as rising overseas demand drives profits at manufacturers including Deere & Co. Another report today showed producer prices fell last month, giving the Fed scope to keep interest rates near zero to sustain the recovery as less government spending and the European debt crisis hurt growth.

“We continue to have an economic expansion that’s moderate overall and uneven,” said Richard DeKaser, chief economist at Woodley Park Research in Washington, who accurately forecast the gain in industrial production. “Clearly, the factory sector is helping to offset the weakness” in the housing market.

Stocks dropped on a disappointing earnings forecast by FedEx Corp. and on concern over the outlook for housing. The Standard & Poor’s 500 Index fell 0.2 percent to 1,113.54 at 11:36 a.m. in New York. Treasury securities rose, sending the yield in the benchmark 10-year note down to 3.28 percent from 3.30 percent late yesterday.

Exceeds Expectations

Economists forecast industrial production would increase 0.9 percent in May, according to the median of 82 projections in a Bloomberg News survey. Estimates ranged from gains of 0.5 percent to 1.6 percent.

Housing starts fell to a 593,000 annual rate from a revised 659,000 pace in April that was lower than previously estimated. Building permits, a sign of future construction, unexpectedly declined to a one-year low, the report from the Commerce Department showed. Single-family home starts suffered the biggest drop since 1991.

Unexpectedly, it's not a real report unless we have that word.

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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