surge; wholesale prices edge up
By MARTIN CRUTSINGER
AP Economics Writer Mar 17, 11:47 AM EDT
WASHINGTON (AP) � Housing construction
posted a surprisingly large increase in February, bolstered by strength in all
parts of the country except the West.
(ap) - Just
posting this story to Gloat a little... And you can read why here, back when FAR
too many people, including the Boy King President, were spewing "Catastrophe"
and "Great Depression"... I was saying this: Click
me for the Truth about Economical Cycles and Politically Motivated
Hysteria!... Have a Good Spring and Summer America! - tha malcontent)
The Commerce Department reported Tuesday that construction of new homes and
apartments jumped 22.2 percent in February compared with January, pushing total
activity to a seasonally adjusted annual rate of 583,000 units.
Meanwhile, the Labor Department reported that wholesale prices edged up a slight
0.1 percent in February as a big drop in food costs offset a second monthly
increase in energy prices.
After the news, Wall Street posted gains, with the Dow Jones industrial average
gaining slightly and the Nasdaq composite index rising more than 1 percent. The
better-than-expected reports on housing and inflation were offset by news of a
dividend cut at Alcoa Inc. and layoffs at Nokia Corp.
While the surge in housing construction was far better than the continued
decline economists had expected, the rebound is likely to be viewed as a
temporary gain given all the problems the housing industry still faces.
Even with the big increase, construction activity remains 47.3 percent below
where it was a year ago. The strength in February was led by a big increase in
apartment construction, which can be highly volatile from month to month.
All areas of the country reported an increase in February, except the West,
which has been hardest hit by the current housing slump.
The 0.1 percent increase in wholesale inflation was much lower than the 0.8
percent surge in January and smaller than the 0.4 percent increase economists
had expected. Compared with a year ago, wholesale prices are actually down 1.3
Core inflation, which excludes energy and food, edged up 0.2 percent in
February, only slightly higher than the 0.1 percent gain economists had
expected. Core prices had risen 0.4 percent in January.
Only last summer, officials at the Federal Reserve had started to worry that a
surge in energy costs could spread to other areas of the economy and boost
inflation to unacceptable levels. But after the financial crisis struck in the
fall, the Fed switched signals and is now aggressively fighting a deepening
recession with no real threat of inflation.
On Wednesday, Fed officials are expected to signal that they will continue to
keep a key interest rate at a record low near zero percent for as long as
necessary and use other unorthodox means to jump-start the economy.
The Fed has the leeway to focus on the weak economy because inflation pressures
are expected to remain law in the face of widespread layoffs that are depressing
The 0.1 percent rise in wholesale inflation in February reflected a 1.3 percent
increase in energy prices, which have been rising for two months after having
retreated for five straight months.
Gasoline prices jumped 8.7 percent in February after a 15 percent surge in
Food costs fell for a third straight month, dropping 1.6 percent in February,
the biggest one-month decline in three years. The costs of eggs, fruits,
vegetables and dairy products were all down.
Outside of food and energy, prices for cigarettes rose 2.7 percent, the biggest
increase in two years, while the price of light trucks rose 1.3 percent, a gain
that is not expected to last given the weakness in auto sales.
Prices for computers dropped 4.5 percent, the biggest one-month fall since
Inflation is not expected be a problem for some time to come given the prolonged
recession, which is already the longest downturn in a quarter-century. Overall
economic growth fell at an annual rate of 6.2 percent in the October-December
quarter and many economists expect the drop in the gross domestic product for
the current quarter will be a similarly steep decline.
Many economists say the Fed will not even contemplate interest rate increases
until the unemployment rate, which soared to a 25-year high of 8.1 percent in
Companies are continuing to slash costs.
Alcoa became the latest Dow Jones industrial company to lower its dividend to
conserve cash. The aluminum maker said after the market closed Monday that it
was cutting its quarterly dividend 82 percent to 3 cents. It also said it plans
to sell stock and debt to help reduce annual costs by more than $2.4 billion.
Nokia, the world's top mobile phone maker, said it will lay off 1,700 people
worldwide to cut costs. Nokia fell 21 cents to $11.14. The mobile phone market
has been suffering as consumers spend less during the recession.
(The AP just
can't help themselves but to wallow in Negative News... Can't they just Report
on this Good News for once?... - tha malcontent)
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