US home construction rose 2.8% in January compared to December on a seasonally adjusted basis according to the US Department of Commerce. It was the biggest gain in six months, exceeding expectations. Compared to last year that’s a 21% rise. December’s housing starts were also revised upward.
Unfortunately, all is not rosy on the housing front. New building permits, a gauge of future construction, fell 4.9% from December. Analysts worry that with unemployment still at close to 10%, the April 30th expiration of the home buyers’ tax credit, and the Fed pulling its support from low mortgage interest rates by the end of the current quarter, the housing recovery remains fragile.
Today the Federal Reserve Bank reported that industrial production rose by 0.9 % in January compared to last month lifted by gains in mining, manufacturing and utilities, the first time since August that these three sectors showed increases. Much of the growth in industrial production came from a 3.2% increase in consumer products manufacturing and a 2% increase in the manufacturer of materials. Business equipment and construction supplies manufacturing declined.
As of this writing, the Dow Jones Industrial Average is up 18 points on the economic news.
In the meantime, marking the one year anniversary today of the $787 billion American Recovery and Reinvestment Act, President Obama credits the stimulus bill with averting a second Great Depression. According to many independent economists including Moody’s Economy.com, the act has been responsible for the creation 1.6 million to 1.8 million jobs with more in the offing. The challenge was daunting since the economy lost 8.4 million jobs since December 2007. President Obama acknowledged that the recovery remains a work in progress and that for the unemployed, “It doesn’t yet feel like much of a recovery.”
The Treasury Department released news today that shows the difficulty in getting another stimulus bill passed. The federal deficit for January totaled $42.63 billion. So far this budget year the deficit has ballooned to $430.69 billion, 8.8 percent higher than last year’s record breaking deficit of $1.42 trillion.