Builders broke ground on more homes than forecast in October and construction permits climbed to the highest level since March 2010, signs that housing may become less of a laggard in the third year of the U.S. recovery.
Starts decreased 0.3 percent to a 628,000 annual rate from September’s 630,000 pace that was slower than previously reported, Commerce Department figures showed today in Washington. The median estimate of economists surveyed by Bloomberg News called for a drop to 610,000. Building permits, a proxy for future construction, increased 10.9 percent.
Mortgage rates near a record low and a reduced stock of new properties may benefit builders like D.R. Horton Inc. At the same time, foreclosures are holding down property values as unemployment at 9 percent restrains sales, helping explain why the Federal Reserve and the Obama administration are looking for ways to jumpstart housing.
“We’re in a phase of stabilization, and demand will slowly start to improve,” Russell Price, a senior economist at Ameriprise Financial Services Inc. in Detroit, said before the report. “Builders have been under-producing relative to sales. Inventories have been coming down.”
Starts were forecast to decline from a previously reported 658,000 annual rate. Estimates of the 82 economists surveyed by Bloomberg ranged from 575,000 to 640,000.
The October results compare with last year’s tally of 587,000 starts, the second-fewest on record. Home construction totaled 554,000 units in 2009, the lowest since record-keeping began in 1959.
Initial Jobless Claims in U.S. Decrease to Seven-Month Low
Fewer Americans than forecast filed first-time claims for unemployment insurance payments last week, an indication the labor market may be gaining traction.
Applications for jobless benefits decreased 5,000 in the week ended Nov. 12 to 388,000, the lowest level since April, Labor Department figures showed today in Washington. Economists forecast 395,000 claims, according to the median estimate in a Bloomberg News survey. The number of people on unemployment benefit rolls fell to a three-year low.
As firings diminish, U.S. companies may add to payrolls at a faster pace as demand picks up. Sales that grew more than expected in October set the stage for higher levels of output, which could require more employees.
“A modest improvement in the labor market is taking place,” Michael Gapen, a senior U.S. economist at Barclays Capital Inc. in New York, said before the report. “We now need a pickup in hiring. If consumption continues apace, production will gradually accelerate and hiring will look better.”
Claims estimates ranged from 382,000 to 405,000 in the Bloomberg survey of 44 economists. The Labor Department revised the prior week’s figure to 393,000 from an initially reported 390,000.
A Labor Department official today said there was nothing unusual in the state data last week. The seasonal adjustment process projected a drop in claims because of the holiday- shortened week, the official said, and the actual decrease was larger than the government estimated.
Oil Slides From Five-Month High Amid Speculation Europe Crisis Spreading
Oil fell from a five-month high in New York as Spain’s borrowing costs surged, heightening concern that Europe’s debt crisis is spreading and will hurt demand.
Futures fell as much as 2.5 percent after Spain sold 3.56 billion euros ($4.8 billion) of a new 10-year benchmark bond at an average yield of almost 7 percent, the most since the euro’s creation. Oil surged yesterday after the Energy Department said U.S. crude stockpiles declined for a second week and Enbridge Inc. said it will reverse the direction of the Seaway pipeline, adding an outlet to transport from the central U.S. and Canada to the coast of the Gulf of Mexico.
“We expect the euro zone to get into recession next year,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, who expects the price of Brent to slip to $100 a barrel by the end of the year. “I don’t think prices fully reflect the weakening outlook for Europe. There’s still some geopolitical fears priced in with Brent at $112.”
Crude for December delivery fell as much as $2.58 to $100.01 a barrel in electronic trading on the New York Mercantile Exchange and was at $101.04 at 1:19 p.m. London time. Earlier it reached $103.37, the highest price since May 31. Prices have gained 11 percent this year, after increasing 15 percent in 2010.
Brent oil for January settlement on the London-based ICE Futures Europe exchange was down $2.26, or 2 percent, at $109.62 a barrel. The European contract was $8.55 higher than West Texas Intermediate crude. The premium narrowed earlier to as little as $7.90, the least since March 9, and is down 70 percent from its Oct. 14 record-high settlement of $27.88.
U.S. Supplies
Enbridge and Enterprise Products Partners LP, the other owner of the 500-mile (800-kilometer) Seaway pipeline, will reverse the north-flowing line that extends from Houston-area refineries on the Gulf of Mexico to Cushing, Oklahoma. This may reduce stockpiles from the storage depot by opening access to refiners on the Texas coast.
Goldman Sachs Group Inc. said Brent’s premium to West Texas will shrink to $6.50 a barrel sooner than it had estimated, citing the pipeline reversal. The spread will narrow to that level in six months, half the period the bank forecast previously, David Greely, a New York-based managing director, said in an e-mailed report.
Supplies at Cushing increased for the fifth time in six weeks, rising to 32 million barrels in the period to Nov. 11, according to yesterday’s Energy Department report.
Pound Strengthens Versus Dollar After Retail Sales Surge, Beating Estimate
The pound strengthened against the dollar, snapping a three-day decline, after U.K. retail sales unexpectedly rose in October.
Sterling appreciated against all but one of 16 major peers tracked by Bloomberg. Spain’s borrowing costs surged at an auction of 10-year debt. U.K. retail sales including fuel increased 0.6 percent from September, the most since June, compared with a median estimate of a 0.2 percent decline in a Bloomberg survey of economists.
The pound was 0.3 percent stronger at $1.5773 at 12:58 p.m. London time. It was little changed at 85.55 pence per euro and 0.2 percent higher at 121.42 yen.
The 10-year gilt yield was three basis points higher at 2.19 percent, after earlier sliding to 2.111 percent. The rate yesterday dropped to a record 2.107 percent.
