INSTANT VIEW: U.S. housing starts down 1.0 percent in July

NEW YORK (Reuters) - - New U.S. housing starts and permits unexpectedly fell in July, pulled down by steeper declines in multifamily units, a government report showed on Tuesday.

U.S. producer prices fell by larger-than expected amount in July and notched a record decline compared with a year ago as gasoline prices plummeted, government data on Tuesday showed.

KEY POINTS:

HOUSING STARTS: * The Commerce Department said housing starts fell 1 percent to a seasonally adjusted annual rate of 581,000 units in July. * The reading was well below market expectations for 600,000 units. * June's housing starts were revised up to 587,000 units from the previously reported 582,000 units. * Multifamily unit starts tumbled 13.3 percent in July, but groundbreaking for single family homes -- the worst-hit part of the housing market, rose 1.7 percent to an annual rate of 490,000 units, the highest since October * New building permits fell 1.8 percent to 560,000 units in July. * That compared to analysts' forecasts for 580,000 units.

PPI: * The Labor Department said the seasonally adjusted index for prices paid at the farm and factory gate dropped by 0.9 percent versus a 1.8 percent gain in June. * Analysts polled by Reuters had expected producer prices to decline by 0.3 percent last month.

COMMENTS:

MICHELLE MEYER, ECONOMIST, BARCLAYS CAPITAL, NEW YORK:

"Housing starts were disappointing in terms of the headline number, but if you look at the components it was due to weakness in the multifamily sector, while the single-family sector continued to rise. The single-family component is not as volatile and was 82 percent of the market as of June. The single-family sector continued to edge higher and that was the silver lining of the report."

JOHN SPINELLO, CHIEF TREASURY STRATEGIST, JEFFERIES & CO. NEW

YORK:

"The housing starts were a bit disappointing, but the inflation number came in better than expected...I think we are going to be in consolidation mode. There's some profit-taking going on right now."

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR &

ASSOCIATES, TORONTO:

"The inflation number was low, and I think that means the Fed can remain with its policy through next year. From their point of view, you have these large deficits and a lot of money going into the system from the government. The PPI numbers suggest they don't need to worry about inflation. It's more an issue of deflation right now, in my opinion.

"The housing data came in around expectations, so I don't think there's anything new in there. I believe equities are in correction and will remain that way, though not to the extent of yesterday's downward move. The market will focus on retail sales and consumer company earnings rather than economic data.

"On the bond side, the data and stronger U.S. dollar will support the bond market and the treasury market."

MARKET REACTION: STOCKS: U.S. stock index futures pare gains after housing, PPI data. BONDS: U.S. Treasury debt prices pare losses. DOLLAR: U.S. dollar pares gains versus yen.