-BMO Capital Markets
US housing starts declined more than expected in March, while permits for future home construction slipped to a one-year low, indicating some cooling in the housing market in line with signs of a steep slowdown in economic activity in the first quarter. Housing starts plunged 8.8% from a month earlier to a seasonally adjusted annual rate of 1.089 million in March, according to the Commerce Department. At the same time, new applications for building permits, a bellwether for forthcoming construction, dropped 7.7% to 1.086 million, from a revised February rate of 1.177 million. Demand for housing has been robust over the past year, with home prices up in many markets amid a shortage of inventory. Buyers could turn to new homes, which only account for about 10% of the overall housing market, as the supply of existing homes declines.
Economists say the fragile economy, combined with low inflation justifies the Fed's cautious approach to hiking interest rates. The economy has been hit by a strong US Dollar and sluggish global demand, which have weighed on exports. Lower oil prices are also a drag as they have undercut profits of energy firms, prompting them to sharply curb spending on capital projects. First-quarter gross domestic product growth estimates are currently as low as a 0.2% annualized rate. The world's number one economy expanded at a 1.4% rate in the December quarter.
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