US president Barack Obama has unveiled a plan pledging up to $275 billion (€219 billion) to help arrest home foreclosures in an attempt to break the housing sector's downward spiral, which has plunged the US economy into recession.
US housing starts and building permits dropped to record lows last month, data showed today, as builders shelved construction plans to try to clear a glut of unsold houses caused by a slump in demand.
Further darkening the picture for an economy mired in a 13-month old downturn, US industrial production shrank more than expected in January, while the amount of manufacturing capacity being tapped hit its lowest level on record.
Housing starts fell16.8 per cent last month to an annual rate of 466,000 units, the lowest since the Commerce Department started keeping records in 1959. It was the biggest percentage drop since January 1994, the department said.
US stocks brushed aside the grim housing data, with investors focusing on the Obama administration's plan to combat a rising tide of home foreclosures. That took some steam off government bond prices, which normally benefit from data showing increased stresses in the economy.
New building permits, which give a sense of future home construction, dropped 4.8 per cent to a 521,000 unit pace, also an all-time low.
Compared to the same period in 2008, housing starts were down a record 56.2 per cent in January, with permits off 50.5 per cent. Housing completions slumped a record 41.7 percent.
The withering economy is driving unemployment higher and contributing to a deluge of bank repossessions, depressing house prices and creating a negative feedback loop that threatens to worsen the recession.
Restoring stability to the housing sector is critical to any economic recovery. Growing unemployment, combined with the housing and stock market collapse, has led consumers to cut spending sharply.
A separate report from the Federal Reserve showed industrial production dropped by 1.8 per cent in January, steeper than analysts had expected. December's figure was revised lower to show a 2.4 per cent decline.
The amount of the nation's industrial capacity being put to use last month fell to 72 per cent, 8.9 percentage points below its long-run average. Manufacturing capacity use dropped to 68 per cent, the lowest since the data series began in 1948.
Reuters
