Housing construction up in February

Housing construction posted a surprisingly large increase in February, bolstered by strength in all parts of the country except the West.

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.

While the surge in housing construction was far better than the continued decline economists had expected, specialists viewed the rebound as a temporary gain given all the problems the housing industry still faces.

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.

The protracted housing downturn, rising foreclosures and a deepening U.S. recession have battered homebuilders and scared off many potential buyers. Analysts expect job losses and foreclosures, as well as tight lending standards, to continue to suppress home sales.

“Building permits are indicating that starts could improve modestly in coming months, but we believe the reprieve will be short-lived,” Soleil Securities Group analyst Anna Torma wrote in a research note.

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 sharp gain 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 housing slump.

Patrick Newport, U.S. economist for IHS Global Insight, said the uptick in construction was driven by improving weather in February, particularly in the Northeast, where a severe winter had slowed construction in December and January.

“The numbers are so low that any increase will give you a big percentage increase,” Mr. Newport said.

He said a surer sign of a turnaround would be a three-month sustained increase in single-family permits.

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 percent.