Updated March 27 at 6:35pm

Home construction rebounds as inflation eases

Home construction rebounded in July and the cost of living rose at a slower pace, showing a strengthening U.S. economy has yet to generate a sustained pickup in inflation. More

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Home construction rebounds as inflation eases

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WASHINGTON – Home construction rebounded in July and the cost of living rose at a slower pace, showing a strengthening U.S. economy has yet to generate a sustained pickup in inflation.

A 15.7 percent jump took housing starts to a 1.09 million annualized rate, the strongest since November, and halted a two-month slide, the Commerce Department said in Washington. The consumer price index increased 0.1 percent after rising 0.3 percent in June, the Labor Department also reported.

An improving job market and cheaper borrowing costs are helping revive residential real estate, helping boost sales at companies such as Home Depot Inc. As inflation continues to run below the Federal Reserve’s target, it gives the central bank room to keep interest rates low well after the projected end of its bond-buying program in October.

“The recovery remains on track, but we’re not moving forward at a burning-hot pace,” said Laura Rosner, a U.S. economist at BNP Paribas in New York, who accurately forecast the increase in consumer prices. “The Fed has the luxury really to keep policy very accommodative and keep fostering economic growth and labor market improvement.”

“There’s no hurry to raise rates at this point,” said Rosner.

The improving economy and low inflation helped stocks advance. The Standard & Poor’s 500 Index climbed 0.4 percent to 1,979.15 at 12:10 p.m. in New York.

U.K. inflation

Price pressures also abated overseas. U.K. inflation cooled more than economists forecast in July, giving the Bank of England leeway to keep its key interest rate at a record low. The rate of consumer-price growth fell to 1.6 percent from 1.9 percent in June, the Office for National Statistics said Tuesday in London.

The pickup in housing starts in the U.S. exceeded all estimates in a Bloomberg survey of 75 economists. The median projection called for 965,000, within a range of 898,000 to 1.03 million. The Commerce Department also revised June’s reading up to a 945,000 pace from a previously reported 893,000.

The report also indicated the building industry will probably consolidate gains in coming months as permits for future projects advanced 8.1 percent to a 1.05 million pace, about in line with the current level of starts. The gain reflected the most applications for single-family dwellings since November.

Starts breakdown

Starts of single-family properties rose 8.3 percent to a 656,000 rate in July, the fastest this year, the Commerce Department said. Construction of multifamily projects such as condominiums and apartments rose 28.9 percent to an annual rate of 437,000, the most since January 2006 and the second-strongest since February 2000.

Three of four regions showed an increase in groundbreaking last month, led by a 44 percent jump in the Northeast to the highest level since July 2008. Starts rebounded 29 percent in the South and climbed 18.6 percent in the West.

construction starts, housing industry, labor department, homebuilding
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