US inflation muted; housing starts hit 17-year low
WASHINGTON - United States consumer prices moved up a bit less than expected last month.
The number of new housing units on which work started, meanwhile, fell to the lowest in 17 years. leaving the Federal Reserve some room to lower interest rates to ward off a housing- led slowdown.
The Commerce Department said yesterday that housing starts dropped 11.9 per cent to an annual rate of 947,000 units, the slowest pace since March 1991 and well below the 1.02 million units expected by economists.
“These housing starts suggest that the pace of decline is intensifying, which is the last thing the US economy needs right now,” said Mr Stephen Malyon, senior currency strategist at Scotia Capital in Toronto.
Separately, the Labour Department said consumer prices rose 0.3 per cent last month, slightly less than expected, after a flat reading in February.
Stripping out food and energy, core prices, which also held steady in February, moved up an even milder 0.2 per cent, restrained by a big drop in the cost of clothing.
US stock prices shot up at the open yesterday, as investors saw the price data as leaving more room for the central bank to keep cutting interest rates to try to spur a slowing economy.
After two hours of trading, the Dow Jones Industrial Average was up 179.78 points to 12,542.25.
The Fed has lowered benchmark borrowing costs by three percentage points since mid-September last year, trying to ward off spreading weakness from the deep housing downturn and a related drying up of credit.
The report on consumer prices showed rising energy costs continuing to exert upward pressure on overall inflation.
Energy prices shot up 1.9 per cent last month. The cost of petrol, which hit record highs during the month, rose 1.3 per cent.
Year on year, consumer prices were up a sharp 4 per cent on the back of surging energy costs.
REUTERS
Source : Straits Times - 17 Apr 2008
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