New housing starts in US show steep decline

(First Edition)

New housing starts in the US showed an unexpected dip of 7.2 per cent in January the lowest level in six months according to figures released by the Commerce Department.

January marked the first time in four months that there has not been some growth in the number of new homes being built and showed the largest fall since a shocking 16.9 per cent plunge in April last year.

While part of the decline may be the result of winter storms impeding construction, analysts warned that the overall strong growth in home starts registered in 1992 may not be repeated this year. Over the full twelve months, 1992 showed an advance in home starts of 18.4 per cent.

Housing starts are considered an important indicator of the country's economic health, in part because of the spin-off construction of new homes gives to other industries, like the furniture trade, but also because demand for new homes can offer some glimpse of public confidence in the economy.

In spite of a recent flurry of highly encouraging economic statistics, notably showing surges in productivity and factory orders, President Clinton has warned, as a backdrop to his economic policy speech to Congress last night, that the recovery remains uncertain, particularly in terms of generating jobs.

Hopes that this year will nonetheless see some further growth in home starts are based partly on low interest rates in America, which have translated into mortgage rates that are at their lowest for two decades. The construction trade reports meanwhile that inventories of new homes are low, suggesting that further building will come to keep up with demand.