Published: Tuesday, 18 Aug 2009 | 8:48 AM ET

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New U.S. housing starts and permits unexpectedly fell in July, a government report showed on Tuesday, pulled down by steeper declines in multifamily units, while the producer price index also fell.

AP

The Commerce Department said housing starts fell 1 percent to a seasonally adjusted annual rate of 581,000 units, well below market expectations for 600,000 units. June's housing starts were revised up to 587,000 units from the previously reported 582,000 units.

Multifamily unit starts tumbled 13.3 percent in July. However, groundbreaking for single family homes—the worst-hit part of the housing market, rose 1.7 percent to an annual rate of 490,000 units, the highest since October.

Compared to July last year, housing starts dropped 37.7 percent. New building permits, which give a sense of future home construction, fell 1.8 percent to 560,000 units in July. That compared to analysts' forecasts for 580,000 units. Compared to the same period a year-ago, building permits declined 39.4 percent.

The inventory of total houses under construction fell to record low 609,000 in July, the department said, while the total number of permits authorized but not yet started also hit a record low at 102,300.

PPI Down 0.9% on Gasoline

In the meantime, U.S. producer prices fell by a larger-than expected amount and notched a record decline compared with a year earlier as gasoline prices plummeted.

The Labor Department said the seasonally adjusted index for prices paid at the farm and factory gate dropped by 0.9 percent versus a 1.8 percent gain in June.

Analysts polled by Reuters had expected producer prices to decline by 0.3 percent last month.

Compared with the same period last year, producer prices were a record 6.8 percent lower in July. They had been forecast to decline by 5.9 percent.

The longest U.S. recession since the Great Depression of the 1930s has crushed demand and pummeled prices throughout the economy, keeping inflation pressures firmly at bay despite massive official efforts to stimulate growth.

Core producer prices, which exclude food and energy costs, edged 0.1 percent lower in July compared with a forecast for a 0.1 percent rise, and after a 0.5 percent increase in June.

The core producer price index stood 2.6 percent higher measured on a year-on-year basis, versus a forecast for a 2.8 percent advance.

The Labor Department said that gasoline prices fell 10.2 percent in July and were down 45.2 percent versus a year ago, while finished energy goods overall fell by 2.4 percent on the month and 29.7 percent over the past year.

Capital equipment prices edged down 0.2 percent in July but were up 1.8 percent over the year.

Earlier in the production process, prices received by manufacturers of intermediate goods fell by 0.2 percent in July after rising 1.9 percent the month before. The crude goods index was down 4.5 percent after a 4.6 percent rise in June.

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