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INSTANT VIEW: U.S. housing starts rebound; producer prices rise

NEW YORK (Reuters) - New U.S. housing starts unexpectedly rebounded in February, surging 22.2 percent, according to data on Tuesday that provided a rare dose of good news for the recession-hit economy and fractured housing market.

U.S. producer prices rose by less than expected in February after the pace of energy price increases slowed, government data on Tuesday showed, but core producer prices came in a bit above forecast.

KEY POINTS:

HOUSING * The Commerce Department said the jump in housing starts to a seasonally adjusted annual rate of 583,000 units was the biggest percentage rise since January 1990. * That was also the first increase since April last year, when they advanced by 1.6 percent. January’s housing starts were revised to a rate of 477,000, the department said.

PRODUCER PRICES * The Labor Department said the seasonally adjusted producer price index increased by 0.1 percent last month versus a 0.8 percent gain in January. * Analysts polled by Reuters had expected a 0.4 percent advance in the headline index.

COMMENTS:

TOM ALEXANDER, HEAD OF ALEXANDER TRADING, SAVANNAH, GEORGIA:

“It doesn’t tell us anything yet. What you’re trying to figure out here is the bottom. It takes more than one data point to make that determination.”

“The healthy thing that is real is how the market reacts. And it’s holding up okay. In light of a sharp sell-off in the last two hours of trading yesterday, overnight there wasn’t much selling.”

ROBERT MACINTOSH, CHIEF ECONOMIST, EATON VANCE CORP, BOSTON:

PPI: “I’m still surprised we’re not seeing negative numbers, given how weak the economy is. But I think the key here is it’s a lot better than the 0.8 and 0.4 we had in January, and I think we can live with 0.1 and 0.2 for the core.”

HOUSING: “That’s a big increase, but you’re coming off a much lower base.

“I’m going to have to look more into this, it could be weather, it could be some kind of building type situation, or specific state had some kind of program going on, or the expiration of something.

“It’s an absurdly strong number given what’s happening out there. There will have to be some one-timers involved in here.”

KURT KARL, CHIEF U.S. ECONOMIST, SWISS RE, NEW YORK

HOUSING STARTS: “These are still lousy numbers but the direction is helpful. This should be going up this year. I will take this as a bottom. Next month could be disappointing. It will still be a long haul before we get back to trend.”

PPI: “At this point, this isn’t bad news. We are going some help from food and energy. Producer prices are going to be very low this year.”

“These two reports will be a relief for everybody and bring some optimism. But the Fed will remain cautious because one month doesn’t make a trend. This could lead to a government bond market sell-off and relief rally perhaps in equities.”

STEVE GOLDMAN, MARKET STRATEGIST, WEEDEN & CO. IN GREENWICH, CONNECTICUT:

“The inflation number is kind of mixed, but inflation data is not a market mover, and with this decline in the economy, inflation isn’t a first and foremost concern for investors.

“The housing data is sharply higher, but I’m honestly not sure if this is good news or bad news. It increases the possibility of more available houses.

“We’re more or less seeing a little rise in the futures, and I would say that generally, investors may look at the housing data as a little bit of a positive. However, it does increase inventories.

“We have seen a very sharp acceleration in housing starts, but that might not be part of a trend. It could just be part of our having seen such a large decline earlier.”

MATT ESTEVE, FOREIGN EXCHANGE TRADER, TEMPUS CONSULTING, WASHINGTON:

“The number I am looking at is housing starts. It is obviously better than expected. That is an encouraging sign for the U.S. economy. It is good signal of what is to come. With the rally in equities we hopefully have seen a bottom for the economy here. As we start to see a recovery, we will see the dollar soften up against most major currencies as a its role as a risk aversion instrument wanes.”

MARKET REACTION: STOCKS: U.S. equity index futures pare losses. BONDS: U.S. Treasury debt prices pare gains. DOLLAR: U.S. dollar falls versus euro.

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