US housing data suggests strengthening economy
By Lucia Mutikani, ReutersWASHINGTON--U.S. housing starts surged to their highest level in nearly six years in November, a sign of strength in the housing market that could give the Federal Reserve ammunition to start cutting back its bond purchases.
December 19, 2013, 12:10 am TWN
The Commerce Department said on Wednesday housing starts jumped 22.7 percent, the biggest increase since January 1990, to a seasonally adjusted annual rate of 1.09 million units. That was the highest level since February 2008.
“The last piece of the economic puzzle is falling into place and the expansion is assured. The last argument against tapering fell today, let's hope the Fed hears the news,” said Chris Rupkey chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
The report was released as Fed officials met for a second day. The housing market had slowed in recent months, a development policymakers acknowledged at the central bank's October meeting.
Some economists expect the Fed to announce a reduction in
its $85 billion monthly bond buying program later on Wednesday, although more believe it will wait until January or March.
Groundbreaking increased 1.8 percent in October to an 889,000 unit pace. Economists had expected starts to come in at a 950,000-unit rate in November and set a 915,000-unit pace in October.
A run-up in mortgage rates, in anticipation of the U.S. central bank tapering its monthly bond purchases, took some edge off the sector's recovery earlier in the year, but not enough to halt the process as a steady increase in household formation from multi-decade lows props up demand.
Single-family Starts Surge
The housing starts data was the latest indication the economy was strengthening, with employment rising solidly in October and November, and retail sales and industrial production exceeding expectations last month.
The firmer tone appears to have spilled over into December, with a separate report on Wednesday showing the services sector maintained its sturdy growth pace this month.
U.S. financial markets were little moved by the data as investors awaited the outcome of the Fed meeting later on Wednesday.
Last month, groundbreaking for single-family homes, the largest segment of the market, soared 20.8 percent to a 727,000-unit pace, the highest level since March 2008.
Starts for volatile multi-family homes jumped 26.8 percent to a 364,000-unit rate.