Thursday, February 19, 2009
WASHINGTON (AP) — Big industry production throttled back in January due partly to auto shutdowns, and housing construction tumbled to a record low, weaker-than-expected performances that show the country caught in a worsening economic tailspin.
The Federal Reserve reported Wednesday that production at the nation’s factories, mines and utilities fell 1.8 percent last month. Many economists expected a 1.5 percent decline. It marked the third straight month where production was cut back and December’s performance was even weaker than initially reported, plunging 2.4 percent.
Another report from the Commerce Department said construction of new homes and apartments plummeted 16.8 percent in January from the previous month, to a seasonally adjusted annual rate of 466,000 units, a record low. Analysts expected a pace of 530,000 housing units.
Builders are slashing home construction as skyrocketing home foreclosures dump more empty properties on an already glutted market. The reduction in new projects should aid the housing market in the long run as fewer properties for sale help increase competition and stabilize prices for those left on the market.
Applications for building permits, a barometer of future activity, also sank to a record low pace of 521,000 units in January, a 4.8 percent drop from the prior month.
“Another horrible month; more pain ahead,” predicted Patrick Newport, economist at IHS Global Insight.
With damage from the housing collapse piling ever higher, the White House on Wednesday said the government will spend $75 billion to help prevent millions of Americans from losing their homes.
But in another sign that tougher times are ahead, the Fed on Wednesday sharply downgraded its projections for the country’s economic performance this year. Under the new projections, the unemployment rate — now at 7.6 percent — will rise to between 8.5 and 8.8 percent.
The Fed also believes the economy will contract this year between 0.5 and 1.3 percent.
Fed Chairman Ben Bernanke pledged anew to do everything in his power to lift the country out of recession.