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Housing Starts Rise, Consumer Inflation Driven Up by Gas Prices

A surge in gasoline costs helped drive overall U.S. consumer prices up at the sharpest rate in nearly a year during March, though so-called core prices that exclude food and energy items rose at a muted pace, the Labor Department said. In separate reports, housing starts rose unexpectedly in March and industrial output fell for the second time in three months, reflecting a big drop in production at the nation's utilities because of the warmer-than-usual weather.

The Consumer Price Index climbed at a 0.6% rate, up from 0.4% in February. It was the largest monthly increase since a matching 0.6% rise last April.

A 10.6% jump in gasoline prices last month eclipsed a 0.3% gain in February and was the largest increase in 1-1/2 years since a 17.4% gain in September 2005.

But excluding food and energy, consumer prices edged up by a slim 0.1% in March following increases of 0.2% in February and 0.3% in January. Wall Street economists had forecast that overall consumer prices would gain 0.6% and that core prices would be up by a slightly larger
0.2%.

The overall prices number may make Federal Reserve policy-makers wary about the potential flare-up in inflation pressures, though the core rate has so far stayed low. During this year's first quarter, overall consumer prices increased at a seasonally adjusted annual rate of 4.7%, nearly twice the 2.5% pace posted for all of 2006.

The department said that stiffer energy costs accounted for 41% of the overall increase in first-quarter consumer prices.

Home Building on the Rise

The pace of U.S. home construction rose 0.8% in March to a rate that beat analysts' predictions but the rise was well below the previous month's increase and the rate was sharply off the year-ago figure, a government report showed.

The Commerce Department said housing starts set an annual pace of 1.518 million units in March compared with a 1.506 million unit pace in February. Economists had forecast March housing starts to drop to a 1.495 million unit pace from February's originally reported 1.525 million units.

Building permits, which signal future construction plans, also rose 0.8% to a 1.544 million unit pace. Economists were expecting building permits to register a 1.510 million unit pace, down from the 1.532 million in February.

Last month's permits figure was off 25.9% from the March 2006 pace of 2.085 million units.

Meanwhile, housing completions were off 25.9% in March from a year ago at a 1.632 million unit pace -- the biggest percentage decline since June 1982.

The middling housing data comes a day after a private survey of homebuilders showed that they took a gloomy view of the market in April.

The National Association of Homebuilders/Wells Fargo Housing Market Index dropped to 33 this month from 36 in March. That was the second consecutive monthly fall and its lowest since December when it also came in at 33.

Readings below 50 indicate more builders view market conditions as poor rather than favorable.

Surprise Drop in Industrial Production

U.S. industrial production unexpectedly fell 0.2% in March as utility output retreated sharply from robust February gains fueled by cold weather, a Federal Reserve report showed.

The Federal Reserve said utility output fell 7.0% in March after a 7.6% gain in February, more than offsetting a strong 0.7% March gain in manufacturing output.

Analysts had expected a modest industrial production gain of 0.1% after February output expanded by a downwardly adjusted 0.8%.

The capacity use rate of factories, mines and utilities eased to 81.4%, from a downwardly revised 81.6% in February, a figure previously estimated at 82.0%.

Analysts polled by Reuters had predicted the overall capacity use rate would edge lower to 81.9% in March.

The March data brought industrial output growth for the first quarter to an increase of 1.4%, nearly recouping the 1.5% fall recorded in the fourth quarter of 2006.

Driving the March manufacturing output growth was a 0.7% rise in chemical output and a 0.9% rise in plastics and rubber products. Machinery output rose 1.0%, while computer and electronics production rose 2.0%.

Motor vehicle and parts output rose 0.2%, while motor vehicle assemblies slipped to a seasonally adjusted annual rate of 10.64 million units from 10.69 million in February.

Output at U.S. mines rose 0.1% in March, slowing from a 0.3% gain in February.

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