WASHINGTON -- The homebuilding industry showed renewed signs of life in October as housing starts advanced to the highest level in nearly a year with solid gains in all regions of the United States, the Commerce Department reported yesterday.
Total housing starts jumped 7.3% to a seasonally adjusted annual rate of 1.096 million units. The increase came on solid gains in both the single-family and multi-family sectors and more than erased a revised decrease of 3.3% in September.
Private economists and Bush administration officials agreed that the report -- which also showed building permits advanced for the second month in a row -- suggested that lower interest rates were starting to provide some spark to the housing industry and the general economy.
"Housing starts are a leading indicator of economic activity, therefore, these figures are a welcome development," said White House spokesman Marlin Fitzwater. "Continued declines in interest rates bode well for housing activity during the rest of the year."
However, at a meeting of the National Association of Manufacturers, Deputy Treasury Secretary John Robson could not refrain from taking a few potshots at the Federal Reserve Board and urged further cuts in short-term interest rates.
Mr. Robson said the risk of inflation is low, and it is more important for the Fed to sustain economic growth. Asked whether the Fed should ease policy further, he replied, "It strikes us that that is a very takeable direction."
In criticizing the Fed, Mr. Robson repeated the administration's complaint that growth in the M2 and M3 measures of the money supply is below the target ranges set by the central bank. And, Mr. Robson went on, although the Fed under Chairman alan Greenspan has lowered short-term rates during the last year, it has done so "belatedly."
The Commerce report said builders took out permits for new single-family homes at an annual rate of 1.035 million units, up 5.4% from 982,000 in September and the highest level since August 1990.
The rise in permits followed a revised gain of 3% in September and came largely on a jump in the multifamily sector. But permits for single-family homes rose for the second month in a row, and there were gains in all regions of the United States except for a small decrease in the South.
"The figures suggest that lower interest rates are having an impact on the housing market, and the housing market is moving ahead sluggishly, and that's having an impact on the economy," said David Berson, senior economist for the Federal National Mortgage Association.
According to the Federal Home Loan Mortgage Corp., the average rate on fixed mortgages in the week ending Nov. 15 was 8.69%, while the average rate on adjustable mortgages was 6.40%.
"Coming on the heels of negative statistics from both the economy and stock market, the rise in housing starts suggests that the economy is stumbling through a weak recovery, but a recovery nonetheless," said John Tuccillo, chief economist for the National Association of Realtors.
Other government economic reports for October have showed the economy was slowing down after the tepid recovery that got under way in the summer. The unemployment rate for the month rose to 6.8%, industrial production was flat, and retail sales edged down slightly.
Mr. Robson said the British administration is reluctant to recommend new measures to stimulate the economy, in part because officials are fearful of agitating the bond market and sending interest rates higher.
He also blamed Congress for failing to act on the President's proposals to cut the capital gains tax and other measures designed to help the economy.