Industrial production, housing starts plunge in United States

The Associated Press ~ staff The News
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WASHINGTON - Big industry production in the United States throttled back in January due partly to auto shutdowns, and housing construction tumbled to a record low, weaker-than-expected performances that show the country caught in a worsening economic tailspin.

WASHINGTON - Big industry production in the United States throttled back in January due partly to auto shutdowns, and housing construction tumbled to a record low, weaker-than-expected performances that show the country caught in a worsening economic tailspin.
The U.S. Federal Reserve reported Wednesday that production at the country's factories, mines and utilities fell 1.8 per cent last month. Many economists expected a 1.5 per cent decline. It marked the third straight month where production was cut back and December's performance was even weaker than initially reported, plunging 2.4 per cent.
Another report from the U.S. Commerce Department said construction of new homes and apartments plummeted 16.8 per cent in January from the previous month, to a seasonally adjusted annual rate of 466,000 units, a record low. Analysts expected a pace of 530,000 housing units.
Builders are slashing home construction as skyrocketing home foreclosures dump more empty properties on an already glutted market. The reduction in new projects should aid the housing market in the long run as fewer properties for sale help increase competition and stabilize prices for those left on the market.
Applications for building permits, a barometer of future activity, also sank to a record low pace of 521,000 units in January, a 4.8 per cent drop from the prior month.
''Another horrible month; more pain ahead,'' predicted Patrick Newport, economist at IHS Global Insight.
With damage from the housing collapse piling ever higher, the White House on Wednesday said the government will spend US$75 billion to help prevent millions of Americans from losing their homes.
But in another sign that tougher times are ahead, the Fed on Wednesday sharply downgraded its projections for the country's economic performance this year. Under the new projections, the unemployment rate - now at 7.6 per cent - will rise to between 8.5 and 8.8 per cent. The Fed also believes the economy will contract this year between 0.5 and 1.3 per cent.
''Given the strength of the forces currently weighing on the economy,'' Fed officials ''generally expected that the recovery would be unusually gradual and prolonged,'' according to documents on the Fed's updated economic outlook.
Fed chairman Ben Bernanke pledged anew to do everything in his power to lift the country out of recession, while defending the extraordinary steps the central bank has taken to fight the worst credit and financial crisis since the 1930s.
''In the United States, the Federal Reserve has done, and will continue to do, everything possible within the limits of its authority to assist in restoring our nation to financial stability and economic prosperity as quickly as possible,'' Bernanke said in remarks to the National Press Club.
The pair of new government reports and the updated Fed projections underscored the growing toll wrought by a trio of crises - housing, credit and financial - that are the worst since the 1930s.
Many economists believe the current January-March quarter will be the worst of the recession in terms of lost economic activity. The economy contracted at a pace of 3.8 per cent in the fourth quarter of last year and is probably shrinking at a pace of five per cent or more now, analysts said.
The economy is expected to remain feeble this year, with unemployment rising, even with the $787-billion stimulus package of tax cuts and increased U.S. government spending signed into law by President Barack Obama on Tuesday.

Organizations: U.S. Federal Reserve, U.S. Commerce Department, IHS Global Insight National Press Club

Geographic location: United States, WASHINGTON

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