- The Washington Times - Tuesday, June 16, 2009

Housing starts jumped in May from April’s all-time low, but industrial output continued to plunge last month as the amount of industrial capacity in use fell to a record low.

The annual rate of housing starts increased a solid 17.2 percent in May, and all regions of the country experienced a rise, led by a 29 percent jump in the West, the Commerce Department reported Tuesday. Housing starts also increased 17 percent in the South, 11 percent in the Midwest and 2 percent in the Northeast. Nationally, housing starts last month were still 45 percent below year-earlier levels.

Housing permits were also up in all four regions last month.

“Overall, this was a good report,” said Patrick Newport of IHS Global Insight. “The construction market for single-family homes is on the mend.” However, the market for multi-family homes, permits for which fell for an 11th consecutive month, remains in a deep slump, Mr. Newport said, largely because builders cannot find financing for multi-unit projects.

A 7.9 percent plunge in motor vehicle and parts output led a 1.1 percent decline in industrial production in May, the Federal Reserve reported Tuesday. Manufacturing output declined 1 percent last month.

Industrial production, which includes output from the nation’s factories, mines and utilities, was 13.4 percent below May 2008. Manufacturing output was down 15.3 percent from year-earlier levels and has now plunged 17 percent from December 2007, when the recession began.

Industrial output last month was less than it was 10 years ago, according to Federal Reserve data.

Only 68.3 percent of industrial capacity was being used last month, “well below the lows of the past two recessions,” said Mark Vitner, senior economist for Wachovia Economics Group. “The abundance of production capacity means pricing power will remain minimal,” Mr. Vitner said.

The absence of pricing power was evident in May’s producer price index, which the Labor Department released Tuesday. Overall, producer prices for finished goods increased 0.2 percent in May. But they were down 5 percent from year-earlier levels. It was the largest 12-month plunge in producer prices in half a century.

Excluding food and energy, prices of finished goods fell 0.1 percent in May.

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