U.S. home building to slow, factory activity up

By Joanne Morrison

WASHINGTON (Reuters) - Prospects for U.S. home building look dim but the nation's manufacturing sector is showing some signs of a pickup, data on Wednesday showed.

The Commerce Department reported U.S. home construction unexpectedly rose last month but permits for future building sank to the lowest pace in nearly a decade, signaling extended troubles in the beleaguered housing sector.

On the industrial side, however, output jumped more than expected in April on gains in utilities, auto and high-tech manufacturing output, a separate Federal Reserve report showed.

The data offered a mixed picture of the economy's health, but most economists are still expecting to see tepid growth through the first half of this year as the economy squeezes out of its housing market troubles.

"Make no mistake about it, residential investment will take another big bite out of Q2 GDP," said Ken Mayland, economist and president of ClearView Economics in the Cleveland area.

U.S. Treasury debt prices were largely unchanged on Wednesday after the data on housing starts and industrial production did little to alter expectations on interest rate moves by the Federal Reserve.

However, U.S. stocks opened up higher on investor perceptions that the housing market may be stabilizing.

The dollar rose to a three-month high versus the yen on Wednesday, ahead of Japanese economic growth data largely expected to show some slowing and a central bank meeting expected to keep interest rates among the lowest in the industrialized world.