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By Bob Willis
Feb. 20 (Bloomberg) -- Housing starts in the U.S. remained near the lowest level since 1991 in January, a sign the deepest real-estate recession in a quarter-century will weigh on the economy for a third year, economists said before a report today.
Commerce Department figures may show housing starts rose 0.4 percent to an annual rate of 1.01 million units, from a 16- year low of 1.006 million in December, according to the median estimate in a Bloomberg survey of 72 economists. Another report may show consumer prices rose 0.3 percent in January, a slower rate than in the prior month, according to the survey median.
A glut of unsold homes, mounting foreclosures and falling prices signal the housing slump will continue to detract from growth, setting the stage for more interest-rate cuts. Federal Reserve Chairman Ben S. Bernanke, citing the housing recession, last week said updated quarterly Fed forecasts to be published today would reflect slower growth projections.
``For 2008 as a whole, construction will continue to fall,'' Richard Moody, chief economist at Mission Residential, a real estate investment firm in Austin, Texas, said before the report. ``When we do hit bottom, we will stick there for some time, as demand will still be constrained by tougher lending standards and jittery credit markets.''
The Commerce Department will release the construction figures at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from annual rates of 950,000 to 1.1 million.
The same report may show building permits, an indicator of future construction, declined 1.7 percent to a 1.05 million pace, the lowest in 16 years, economists said. Forecasts ranged from 990,000 to 1.095 million.
Consumer Prices
Inflation figures, to be released by the Labor Department at the same time, will probably show consumer prices rose 4.2 percent in the 12 months ended in January, according to the survey median.
Core prices, which exclude food and energy, probably increased 0.2 percent in January and were up 2.4 percent from a year earlier, according to economists surveyed.
Investors and economists are betting the Federal Reserve will cut its benchmark rate by a half point to 2.5 percent at its next meeting, on March 18, while a majority forecast an additional quarter-point cut in April.
The Fed's quarterly forecasts will be released at 2 p.m., along with minutes of the Jan. 29-30 meeting that led to a half percentage-point rate cut, and a record of the emergency Jan. 21 conference that produced a three-quarter-point reduction.
The Fed's cuts in January, the fastest easing of monetary policy since 1990, came as rising subprime defaults led to a global tightening of credit standards and declines in equity prices. Bernanke and other policy makers have indicated a readiness for further reductions if necessary.
Bernanke's Testimony
The Fed ``will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,'' Bernanke told Congress last week. ``To date, inflation expectations appear to have remained reasonably well-anchored,'' he said.
The U.S. economy will probably grow at a 0.5 percent pace in the first quarter and a 1 percent rate in the following three months, according to the median forecast in a Bloomberg survey of economists taken the first week of February. Economists surveyed said a recession this year was an even bet.
``Growth looks to be weak but still positive during the first half of the year,'' Bernanke said last week.
Impact on Spending, Jobs
The decline in home construction, exacerbated by tighter credit conditions, is slowing demand for construction materials and appliances, and increasing firings at builders, lenders and retailers. Falling home prices are leaving consumers feeling less wealthy, slowing the spending that makes up two-thirds of the economy.
Rising foreclosures are adding to inventories. Home foreclosures rose 97 percent in December from a year earlier, while an estimated 1.03 percent of homes were in some stage of foreclosure in 2007, RealtyTrac reported Jan. 29.
Home builders are hardest hit. Kimball Hill Inc., a closely held homebuilder active in six states, said Feb. 15 it may file for Chapter 11 bankruptcy protection as demand for new homes tumbles.
``There are substantial doubts about whether the company will be able to continue as a going concern,'' Rolling Meadows Illinois-based Kimball Hill said in a regulatory filing.
Bloomberg Survey
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CPI Core Housing Building
CPI Starts Permits
MOM% MOM% ,000's ,000's
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Date of Release 02/20 02/20 02/20 02/20
Observation Period Jan. Jan. Jan. Jan.
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Median 0.3% 0.2% 1010 1050
Average 0.3% 0.2% 1015 1040
High Forecast 0.4% 0.3% 1100 1095
Low Forecast 0.1% 0.1% 950 990
Number of Participants 74 74 72 45
Previous 0.4% 0.2% 1006 1068
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4CAST Ltd. 0.3% 0.2% 1020 1050
Action Economics 0.3% 0.2% 1060 1060
Aletti Gestielle SGR 0.4% 0.2% 1030 1050
Allianz Dresdner Economic 0.3% 0.2% 1000 ---
Analytical Synthesis --- --- 980 990
Argus Research Corp. 0.2% 0.3% 1000 ---
Banc of America Securitie 0.4% 0.2% 1050 ---
Banesto 0.3% 0.2% 1010 1040
Bank of Tokyo- Mitsubishi 0.2% 0.2% 975 1040
Bantleon Bank AG 0.2% 0.2% 1050 1050
Barclays Capital 0.3% 0.2% 1010 ---
BBVA 0.3% 0.2% 950 ---
Bear, Stearns & Co. 0.3% 0.2% 980 1050
BMO Capital Markets 0.2% 0.2% 1050 1050
BNP Paribas 0.2% 0.2% 1050 ---
Briefing.com 0.3% 0.2% 1020 1005
Calyon 0.2% 0.2% 970 1035
CEMEX 0.3% 0.2% --- ---
CIBC World Markets 0.4% 0.3% 970 1020
Citi 0.2% 0.2% 1020 1050
ClearView Economics 0.3% 0.2% 1050 ---
Commerzbank AG 0.3% 0.2% 1030 1060
Credit Suisse 0.2% 0.2% 1000 ---
Daiwa Securities America 0.2% 0.2% 1060 ---
Danske Bank 0.2% 0.2% --- ---
DekaBank 0.3% 0.2% 1050 1020
Desjardins Group 0.3% 0.2% 1040 990
Deutsche Bank Securities 0.3% 0.2% 975 1000
Deutsche Postbank AG 0.2% 0.2% 1030 ---
Dresdner Kleinwort 0.3% 0.2% 980 ---
DZ Bank 0.4% 0.2% 975 1000
First Trust Advisors 0.3% 0.2% 1000 ---
Fortis 0.3% 0.3% 1005 ---
FTN Financial 0.3% 0.2% 1000 1000
Global Insight Inc. 0.3% 0.2% 977 1050
Goldman, Sachs & Co. 0.2% 0.2% 1046 ---
H&R Block Financial Advis 0.2% 0.2% 1010 1060
Helaba 0.3% 0.2% 1050 1090
High Frequency Economics 0.2% 0.2% 1100 1006
HSBC Markets 0.3% 0.3% 1020 1040
IDEAglobal 0.3% 0.2% 950 995
Informa Global Markets 0.3% 0.1% 1045 1095
ING Financial Markets --- --- 1000 1035
Insight Economics 0.3% 0.2% 1050 ---
Intesa-SanPaulo 0.3% 0.2% 1005 ---
J.P. Morgan Chase 0.2% 0.2% 1000 1030
Janney Montgomery Scott L 0.4% 0.2% 1020 1085
JPMorgan Private Client 0.2% 0.2% 1010 1010
Landesbank Berlin 0.3% 0.2% 1040 1050
Lehman Brothers 0.2% 0.2% 1020 1040
Maria Fiorini Ramirez Inc 0.3% 0.2% --- ---
Merrill Lynch 0.3% 0.2% 980 1020
MFC Global Investment Man 0.2% 0.1% 1006 1050
Moody's Economy.com 0.3% 0.2% 990 ---
Morgan Stanley & Co. 0.2% 0.2% 1000 ---
National Bank Financial 0.2% 0.1% 965 ---
National City Bank 0.3% 0.2% 1060 1040
Nomura Securities Intl. 0.3% 0.2% 1020 1050
Nord/LB 0.3% 0.2% 1000 1050
PNC Bank 0.3% 0.2% 1050 ---
RBS Greenwich Capital 0.3% 0.2% 1030 ---
Ried, Thunberg & Co. 0.3% 0.2% 1025 1050
Scotia Capital 0.2% 0.2% 980 ---
Societe Generale 0.3% 0.2% 1050 ---
Stone & McCarthy Research 0.4% 0.2% --- ---
TD Securities 0.3% 0.2% 1025 ---
Thomson Financial/IFR 0.2% 0.2% 1002 1080
Tullett Prebon 0.4% 0.2% 1010 ---
UBS Securities LLC 0.3% 0.2% 1000 ---
Unicredit MIB 0.3% 0.2% 1000 1050
University of Maryland 0.3% 0.2% 970 1050
Wachovia Corp. 0.1% 0.2% 1020 ---
Wells Fargo & Co. 0.3% 0.2% 1060 1060
WestLB AG 0.3% 0.2% 1000 1050
Westpac Banking Co. 0.4% 0.2% 1036 1068
Wrightson Associates 0.3% 0.2% 1050 1030
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To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
Last Updated: February 20, 2008 00:14 EST
