US new housing figures disappoint

Housing starts were still well down from last year's level

The number of new houses being built in the US edged up in September, but by less than expected, raising concerns about the strength of the US recovery.

Housing starts rose by 0.5% to a seasonally adjusted annual rate of 590,000 homes, compared with a revised figure of 587,000 in August.

But the rate was still down by 28.2% on the 822,000 homes started in September 2008, the Commerce Department said.

Analysts had expected a rate of more than 600,000 housing starts.

"It doesn't bode too well. We really want to see an uptick here, as obviously housing is so important," said Dan Cook at IG Markets.

"If we can get more starts, we're putting more people to work and that would be very positive, and unfortunately we just didn't see that today."

New applications for building permits, considered a good sign of future activity, fell by 1.2% in September.

The disappointing figures helped to push US shares lower, with the Dow Jones index down 49 points, or 0.5%, at 10,043 in early trading.

Volatile prices

Separate figures from the Labour Department showed that producer prices fell unexpectedly by 0.6% in September. Analysts had expected prices to remain unchanged.

The fall was sparked by a drop in fuel costs during the month.

The Producer Price Index tracks the price of goods before they reach the shops and is considered an early indicator of price trends.

However, the index has been volatile in recent months, giving little indication of the long-term trend.

A recovery in the US economy would usually lead to rising prices.

"We keep waiting for some sort of inflationary pressures to reflect the better-than-expected [third quarter] earnings we're seeing in corporate America, [but] surprisingly enough we're just not seeing it," said David Dietze at Point View Financial Services.