* U.S. factory output falls 0.2 percent in March
* Industrial production flat
* Housing starts off 5.8 percent, permits up 4.5 percent
By Jason Lange
WASHINGTON, April 17 Output at U.S. factories
slipped in March and builders started construction on fewer
homes, offering cautionary signals for an economy that appeared
to be gaining traction.
Manufacturing output slipped for the first time in four
months, dropping 0.2 percent, the U.S. Federal Reserve said on
The decline dragged on overall industrial production which
was unchanged and fell short of analysts' expectations.
"It looks pretty bad on the face of it," said Tom Porcelli,
an economist at RBC Capital Markets in New York.
Surging exports and efforts by companies to restock their
shelves have made economic growth look more solid in recent
The factory data did little to change that view, but
economists said it suggested the recovery lost a little steam at
the close of the first quarter, in part due to headwinds from
Europe's debt crisis, which is weighing on global growth.
"(It) raises the possibility that the recent easing in
global demand is starting to take a toll on U.S. manufacturers,"
said Paul Dales, an economist at Capital Economics in London.
Signs of a cooldown in growth became apparent earlier this
month when a report showed hiring slowed sharply in March.
Still, Porcelli and others said the factory sector, which
has been a key driver of America's recovery from the 2007-2009
recession, appeared to have enough momentum to continue growing.
Auto production, for example, increased 0.6 percent after
rising 0.8 percent in February. Also, initial estimates for
manufacturing output in February were revised higher.
Citing these factors, Goldman Sachs on Tuesday raised its
forecast for first-quarter growth in gross domestic product to a
2.6 percent annual rate from 2.5 percent. That would be a
slowdown from the 3 percent rate clocked in the fourth quarter,
but still faster than many analysts expected a few weeks ago.
HOME PERMITS RISE
A separate report on new home construction also provided
Housing starts slipped 5.8 percent in March to a seasonally
adjusted annual rate of 654,000 units, the Commerce Department
That unwinds some of the incipient recovery seen in recent
months in the long-moribund U.S. housing sector. At the same
time, the data still suggests housing construction will add to
gross domestic product during the first quarter, said Millan
Mulraine, a macro strategist at TD Securities in New York.
Also, new permits for home construction surged to their
highest level in 3-1/2 years, which could lead to more housing
construction in coming months.
Although many economists think homebuilding could add to
economic growth this year for the first time since 2005, an
oversupply of unsold homes is depressing prices, creating a big
hurdle for the sector.
"It's going to be rocky for a while," said Gregory Miller,
an economist at Suntrust Banks in Atlanta, adding the data
pointed at best to a tentative recovery.
Some analysts speculated that a mild winter in the United
States led homebuilders to start new projects ahead of schedule,
and that March's decline amounted to a payback.
U.S. stocks rose and government debt prices fell as
investors welcomed a slew of corporate results and as a decline
in borrowing costs for Spain eased concerns about Europe's debt
Coca-Cola Co posted higher-than-expected quarterly
profits and its chief executive said the company saw signs the
U.S. economy was improving. Goldman Sachs Group Inc said
its first-quarter profit fell from a year earlier, but the drop
was milder than analysts had expected.
The drops in factory output and housing starts will give Fed
policymakers more to chew on when they review interest rate
policy next week.
Stronger economic data has made the central bank more
reluctant to consider further monetary stimulus.