US housing starts rise in July, inflation ticks up

U.S. housing starts rose but to a much weaker rate than expected in July, while permits for future home construction fell to their lowest level in more than a year, pointing to a weak economic recovery.
The Commerce Department said on Tuesday housing starts rose 1.7% to a seasonally adjusted annual rate of 546,000 units. June's housing starts were revised to show an 8.7% fall, which was previously reported as a 5% drop.
Analysts polled by Reuters had expected housing starts to rise to 560,000 units. Compared to July last year, groundbreaking activity was down 7%.
New building permits, which give a sense of future home construction, dropped 3.1% to a 565,000-unit pace last month, the lowest level since May 2009.
That followed a 1.6% rise in June and compared to analysts' forecasts for a slip to 580,000 units.
Separately, prices paid at the farm and factory gate rose 0.2% last month, pulled by higher prices for food and consumer goods, the Labor Department said.
The increase, which was in line with market expectations, was the first advance in producer prices in four months.
John Canally, economist at LPL Financial in Boston said the PPI data should ease some market concerns about deflation. But he said the housing figures suggested an economic recovery that was listless.
"That ties into a lot of other data recently that has the market worried about a double dip," he said.
"We still think it's slow growth rather than a double dip, but each week that passes you tend to get a little more concerned if you don't get better activity indicators."
U.S. stock index futures initially pared gains after the reports, while the dollar held at weaker levels against the euro. U.S. Treasury debt prices were weaker.
Data such as retail sales have suggested the economic slowdown that started in the second quarter will continue into the third quarter amid high unemployment.
The end in April of a popular homebuyer tax credit has left a void in the housing market, depressing sales and building activity. Sentiment among home builders touched a 17-month low in August, a survey showed on Monday.
The rise in housing start last month reflected a 32.6% surge in groundbreaking activity in the volatile multifamily segment to an annual rate of 114,000 units. Single-family homes starts fell 4.2% to a 432,000-unit pace, the lowest since May 2009.
Home completions tumbled a record 32.8% to an all-time low 587,000-unit pace. The inventory of total houses under construction fell 1.1% to a record low 444,000 units last month, while the total number of units authorized but not yet started dropped 1.5%, 89,000 units.