Construction shivers in US

BAD weather in the US last month resulted in the sharpest drop in housing starts for three years, according to official US figures published yesterday.

Construction begun in January on new houses and apartments plunged by 17.6 per cent to an annual rate of 1.29 million after adjustment for seasonal influences.

There were declines in every region except the west, where starts rose slightly. The fall was even sharper than forecast. US economists had expected bad weather to cut starts to an annual rate of 1.4 million homes.

However, starts in December were revised upwards to show a surge of 11.7 per cent from a provisionally reported increase of 6.2 per cent. The US Commerce Department blamed the fall-off on bad weather and economists accepted it had little to do with the underlying pace of economic activity.

Like other official figures for the final month of last year, the upward revision in December starts points to an accelerated pace of expansion.

The figures follow a rise of 0.5 per cent in US industrial production last month, which was considered a bullish indication of activity, given bad weather and the Los Angeles earthquake. Industry's capacity use also rose above 83 per cent - the point at which the US Federal Reserve traditionally considers raising short- term interest rates.

Indications of surging activity in December mean the economy should have grown faster than the 5.9 per cent annual rate reported recently.