US housing starts at 17-year low

Official figures show that the number of homes and apartments being constructed in the US plummeted to the lowest level since March 1991.

According to the Commerce Department, the 11% fall to an annual rate of 965,000, the lowest level for over 17 years, followed a 1.084 million rate the previous month.

In addition, building permits, an indication of future construction, also fell.

The news will add to concern that tighter lending rules, increased borrowing costs, falling house prices and record foreclosures will add to plummeting home sales and cause construction to fall even further.

In related news, inflationary pressures saw US wholesale prices increase by 1.2% in July, its fastest pace in almost 3 decades.

According to the Labor Department, core inflation, which excludes energy and food costs, rose by 0.7% from June, exceeding the forecast of 0.2%.

The rapid wholesale inflation noted in July was primarily linked to energy costs during the month, which saw crude oil hit a high of $147.27 per barrel, which in turn, sent petrol prices through the roof.

Last week, the Labour Department revealed that US inflation has hit the highest point for 17 years.

Prices in the US increased by 5.6% in the 12 months to July and the rate of inflation was much higher than economists had forecasted, pushed higher by the increases in energy prices and food costs which were 30% higher and 6% higher respectively.

Increased costs has meant that Americans are struggling to cope with day-to-day living after results from Realtytrac discovered that over 272,000 people in the US were issued with a foreclosure notice last month, an increase of 55% compared with last year.

Last week, the US Federal Reserve left interest rates unchanged at 2% as it battles with high inflation and a possible recession.

Interest rates in the US have been on hold since April after aggressive cuts in late 2007 and early 2008.

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