US home construction starts fell in September to their lowest level in more than 14 years, while consumer prices rose at the sharpest rate in four months, separate reports showed on Wednesday. Weak housing data boosted US government bond prices and the US dollar slipped versus euro and yen as some investors saw the data as a sign of continuing headwinds for the economy.
US stocks were still expected to open higher with investors more focused on healthy corporate profit reports. "We knew housing was weak, but these numbers show another pretty big drop, so the sector remains soft overall," said Shaun Osborne, senior currency strategist at TS Securities in Toronto.
US home construction starts fell 10.2 percent in September, while building permit activity, a sign of future construction plans, also dropped to the lowest level since mid-1993, a government report on Wednesday showed.
The Commerce Department said housing starts set an annual pace of 1.191 million units in September, lower than the 1.285 million units expected by economists. It was the lowest pace for housing starts since the March 1993 rate of 1.083 million units.
Building permits fell 7.3 percent, the sharpest decline since January 1995, to an annual rate of 1.226 million. Economists polled by Reuters had forecast September permits to fall to a 1.298 million rate from the 1.322 million rate of August. US consumer prices rose at the sharpest rate in four months during September, the government reported on Wednesday, as energy costs picked up after three months of decline.
The Labour Department said the Consumer Price Index, the most broadly used gauge of inflation, rose at a 0.3 percent rate last month after declining 0.1 percent in August. The September rise in overall CPI was slightly ahead of Wall Street economists' forecast for a 0.2 percent rise and was the largest since a 0.7 percent jump in May.
So-called core prices that exclude food and energy costs were up 0.2 percent in September, in line with economists' expectations. "I think the key thing to look at is the core number, because that's what (Federal Reserve Chairman Ben) Bernanke is going to be looking at, and that came in on target," said Doug Roberts, chief investment strategist with Channel Capital Research in Shrewsbury, New Jersey. Consumer prices in September were 2.8 percent higher than a year ago, the largest 12-month increase since a matching 2.8 percent gain in March, department officials said. Core prices were up 2.1 percent on a year-over-year basis.
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