US home construction shows surprise fall

Builders in the US have dramatically scaled back the number of new homes in the works, for fear that the possible expiry of tax credits for homebuyers could lead to a new downturn in the market.

Housing starts for October, the measure of the number of new building projects started last month, fell to a six-month low. They dropped 10.6 per cent to an annual rate of 529,000, confounding the optimistic forecasts of economists, who had predicted another month-on-month rise to 600,000.

"It's going to be a slow, uneven recovery. There has been a bit of a pause in the last month or so. We have a low growth situation here, but I wouldn't say it's big enough to return to recession," said Nick Kalivas, vice-president of financial research at MF Global.

Separately, consumer prices rose 0.3 per cent in the US last month as the cost of new vehicles rose by the most in more than 28 years. The increase in the consumer price index, though a touch above market expectations, confirmed that price pressures remain largely absent from what is still a weak economy, largely buoyed this year by government programmes such as tax credits and subsidies for car buyers.