Construction starts higher than expected
While the surge in construction was far better than the continued decline economists had expected, experts viewed the rebound as a temporary gain given all the problems the housing industry still faces.
The Commerce Department reported Tuesday that construction of new houses and apartments jumped 22.2 percent in February compared with January, pushing total activity to a seasonally adjusted annual rate of 583,000 units.
Meanwhile, the Labor Department said wholesale prices edged up a slight 0.1 percent in February as a big drop in food costs offset a second monthly increase in energy prices.
Even with the big increase, construction activity remains 47.3 percent below where it was a year ago. The strength in February was led by a sharp gain in apartment construction, which can be highly volatile from month to month.
All areas of the country reported an increase in February, except the West, which has been hardest hit by the housing slump.
Patrick Newport, U.S. economist for IHS Global Insight, said the uptick in construction was driven by improving weather in February, particularly in the Northeast, where a severe winter had slowed construction in December and January.
"The numbers are so low that any increase will give you a big percentage increase," Newport said.
The 0.1 percent increase in wholesale inflation was much lower than the 0.8 percent surge in January and smaller than the 0.4 percent increase economists had expected. Compared with a year ago, wholesale prices are actually down 1.3 percent.
Core inflation, which excludes energy and food, edged up 0 no credit check payday loan.2 percent in February, only slightly higher than the 0.1 percent gain economists had expected. Core prices had risen 0.4 percent in January.
The world economy remains soft and is getting weaker, making it difficult for companies to raise prices, said Nigel Gault, chief U.S. economist at IHS Global Insight.
"Inflation is clearly very quiet," Gault said. "The risks, if we’re looking over the rest of the year, are more toward deflation than inflation, but deflation certainly is not here yet."
Today, Fed officials are expected to signal that they will continue to keep a key interest rate at a record low near zero percent for as long as necessary and use other unorthodox means to jump-start the economy.
The Fed has the leeway to focus on the weak economy because inflation pressures are expected to remain low in the face of widespread layoffs that are depressing wage demands.
The 0.1 percent rise in wholesale inflation in February reflected a 1.3 percent increase in energy prices, which have been rising for two months after having retreated for five straight months.
Inflation is not expected be a problem for some time to come given the prolonged recession, which is already the longest downturn in a quarter-century. Overall economic growth fell at an annual rate of 6.2 percent in the October-December quarter.
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