Groundbreaking for new homes also increased but remained well below
the post-recession peak hit in November, signaling the drag the
housing market is placing on the economy.
"Several parts of the economy are warming up, but housing is the
exception," said Ryan Sweet, a senior economist at Moody's Analytics
in West Chester, Pennsylvania. "We are still on track for very
strong second-quarter growth."
Output at the nation's factories, mines and utilities rose 0.7
percent last month after an upwardly revised gain of 1.2 percent in
February, the Federal Reserve said on Wednesday.
The increase in industrial production, which beat economists'
expectations for a 0.5 percent gain, reflected in part a 0.5 percent
rise in manufacturing output. There were also hefty increases in
production at mines and utilities.
The report added to data such as retail sales and employment in
painting a bullish picture of the economy at the end of the first
quarter after it was slammed by an unusually cold and disruptive
The weather's loosening grip on the economy was also highlighted by
the Federal Reserve's anecdotal Beige Book on Wednesday. The U.S.
central bank said reports from its contacts suggested economic
activity increased in most regions of the country in recent weeks.
Forecasting firm Macroeconomic Advisers estimates the brutal weather
sliced off 1.4 percentage points from first-quarter gross domestic
product and its end will boost second-quarter growth by 1.6
Growth estimates for the first three months of this year range as
low as a 0.6 percent annual rate, which would mark a sharp
deceleration from the fourth-quarter's 2.6 percent pace.
While the rest of the economy is perking up, housing continues to
struggle. A separate report from the Commerce Department showed
housing starts failed to bounce back as strongly as expected from
Groundbreaking activity increased 2.8 percent in March to a
seasonally adjusted annual rate of 946,000, well below economists'
expectations for a 973,000-unit rate.
Compared to March last year, starts were down 5.9 percent, the
biggest decline since April 2011.
Though the cold winter weighed on homebuilding in December and
January, activity has also been hampered by shortages of building
lots and skilled labor, as well as rising prices for materials.
"There have been growing signs that the rebound in the housing
market we have seen the past several years might be petering out,"
said Anthony Karydakis, chief economic strategist at Miller Tabak in
"We have been seeing this in other housing indicators. With the
slowdown, housing will become a smaller contributor to overall
growth going forward."
[to top of second column]
Stocks on Wall Street pushed higher as investors were heartened by
data that showed stronger-than-expected economic growth in China,
but an index tracking shares of homebuilders was little changed.
Prices for U.S. Treasuries slipped and the dollar was steady against
a basket of currencies.
SINGLE-FAMILY STARTS RISE
The housing market is under strain from higher mortgage rates and
elevated house prices that are sidelining potential buyers. A report
on Tuesday showed homebuilders in April were still downbeat about
the sector's near-term prospects.
But there is a ray of hope for a pick-up. In another report on
Wednesday, the Mortgage Bankers Association said applications for
loans to buy houses rose last week.
Applications for new home purchases increased 15 percent in March
compared to February, which bodes well for home sales during that
period. Mortgage applications are, however, well below where they
were last year.
Groundbreaking for single-family homes, the largest segment of the
market, surged 6.0 percent to a 635,000-unit pace last month.
Despite rising for a second consecutive month, single-family starts
are below November's 713,000-unit rate, which was the highest since
Starts for the volatile multi-family homes segment fell 3.1 percent
to a 311,000-unit rate, a five-month low. They were flat in
"These soft trends challenge our view there will be a solid bounce
back in residential investment in the second quarter," said Daniel
Silver, an economist at JPMorgan in New York.
Spending on residential construction fell in the fourth quarter, the
first quarterly decline in three years. It is expected to have
declined again in the first quarter.
Last month, permits to build homes fell 2.4 percent to a
990,000-unit pace, pointing to weaker starts in the months ahead.
Permits for single-family homes rose 0.5 percent but fell 6.4
percent for the multi-family sector.
(Reporting by Lucia Mutikani; additional reporting by Richard Leong
in New York and Elvina Nawaguna in Washington; editing by Paul Simao
and Andrea Ricci)
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