Housing Starts Rise to Better-than-Expected 591K Annual Rate

Housing starts in the US rose in January to a better than expected 591K annual rate, a sign that the housing market is stabilizing. New construction were up 2.8% and the figure for December was revised higher to 575K from the originally reported 557K. An extension of a homebuyer tax credit is likely to boost demand in teh coming months, though on the downside the unemployment rate remains high and the country is still seeing mounting foreclosures. Building permits meanwhile, a sign of future constructions, fell 4.9% to a 621K annual pace from 653K in December. That level however was slightly better than the 5.1% drop expected. December’s figure was the highest level since October 2008. Overall a positive report from the construction sector.

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Import Prices Surge in January on Fuel Costs

Import prices surged 1.4% in January, the sixth straight month of increases. The main reason for the increase was a 5.3% jump in fuel import prices. Excluding petroleum, import prices were up 0.6% in January. On the year import prices rose 11.5%, the largest annual gain since September 07-08 period. The Federal Reserve tends to look at core prices, which exclude volatile items like energy and food, so this report may not pose too much concern for policy makers, as there have been few signs that core inflation is heating up. Measures on producer and consumer inflation will come out later this week.

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Industrial Production Up 0.9%

Industrial production increased 0.9% in January, extending into the seventh month the the gains in output.  Automotive products were the biggest contributor to the increase. The figure was slightly better than the 0.8% rise expected by economists. Manufacturing production rose by 1% as car and parts output surged by 4.9%. Utility output increased by 0.7%, compared to a 6.3% surge in December.

The rate at which industries used their capacity rose to 72.6%, in line with expectations of economists. Overall, the figure shows that the US economy continues to rebound and that the recovery is gaining traction. The manufacturing sector was the first sector to show positive results as companies places new orders to restock their inventories. That rise in production was a big part of growth in the 3rd and 4th quarters of 2009.

Provided by: Federal Reserve