US housing market: unprecedented decline

2006-12-26

Richard Moore

Original source URL:

        Investment in home building declined at an 18.7 percent rate
        -- even more than previously estimated -- and was the
        largest cut in 15 years.

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http://www.truthout.org/docs_2006/122106E.shtml
http://www.startribune.com/535/story/890387.html

Last update: December 21, 2006 ­ 8:40 PM
Housing stall remains a drag on the economy

By Jeannine Aversa, Associated Press

WASHINGTON - The economy felt the strain of the housing bust and lost momentum 
during late summer, with more sluggish performances expected in the months 
ahead.

Growth slowed to a 2 percent pace in the July-through-September quarter, the 
Commerce Department said Thursday.

That was slightly worse than the 2.2 percent annual rate the government 
estimated a month ago, yet better than the anemic 1.6 percent rate initially 
calculated for those months.

Still, the message was clear: The deepening housing slump is crimping growth. 
Investment in home building declined at an 18.7 percent rate -- even more than 
previously estimated -- and was the largest cut in 15 years. That shaved 1.2 
percentage points off third-quarter growth, the most in nearly 25 years.

Stocks fell after the Philadelphia Federal Reserve's December business index, 
which gauges regional manufacturing activity, moved into negative territory. The
Dow Jones industrials fell 42.62, to 12,421.25.

Even with expectations that economic activity will continue to be subpar, most 
analysts do not expect that the housing market will push the economy into a 
recession.

Economists say the gross domestic product in the October-through-December 
quarter could come in at a pace of 1.7 to 2.5 percent, or slightly higher; 
estimates for the first quarter of 2007 are in the same range.

Gross domestic product measures the value of all goods and services produced in 
the United States. It is the best barometer of the country's economic health.

In other economic news, the Conference Board reported that its index of leading 
economic indicators advanced 0.1 percent in November, suggesting that the 
economy is not in danger of stalling.

The Labor Department said that the number of newly laid-off workers signing up 
for unemployment benefits rose last week by 9,000, to 315,000.

An inflation gauge tied to the GDP report showed that core prices -- excluding 
food and energy -- rose at a rate of 2.2 percent in the third quarter, down from
a 2.7 percent pace in the second quarter. Energy prices, which had soared in the
summer, have calmed.

©2006 Associated Press. All rights reserved.
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