Share this article

print logo


The economy appears to be cooling and may not need higher interest rates to keep it from overheating and igniting a fresh round of inflation, new government reports suggested Thursday.

New-home building slumped during September while the pace of industrial expansion eased, confirming a slowdown in national economic activity in the late summer and fall.

Two other government reports showed a sharp pileup of unsold goods during August on the shelves of wholesalers, retailers and manufacturers and a spike in new applications for jobless pay last week.

Analysts said the avalanche of data indicated the economy lost momentum after a second-quarter surge, but remained healthy and poised to keep growing at a more restrained rate.

"After a fast sprint in the first half of the year, the economy is now in an extended pause, taking some rest and recuperation," said economist Sung Won Sohn of Norwest Corp. in Minneapolis. "But later this year, around Christmas time, I expect to see the economy pick up steam again."

The Commerce Department said building starts on new homes and apartments fell by 6 percent last month to a seasonally adjusted annual rate of 1.438 million. It was the biggest decline since a 9 percent drop in January 1995.

The Federal Reserve said production by the nation's mines, factories and utilities increased only 0.2 percent last month after a revised 0.4 percent rise in August. Businesses eased back to 83.3 percent of their maximum operating capacity in September from 83.4 percent, the Fed said.

The Fed also said growth in industrial output slowed to 4.4 percent from the second quarter's 6.7 percent surge, adding that the winding down was evident in nearly every type of activity.

The weaker data was expected to reduce chances that the Fed might raise interest rates any time soon, since a slowing economy helps keep price and wage rises in check.

The Commerce Department also said business inventories jumped 0.5 percent in August to a seasonally adjusted $1 trillion. That was the highest value on record since the department began tracking the data in 1982.

Robert Dederick, economic consultant to Northern Trust Co. in Chicago, said higher stocks of unsold goods likely resulted from a combination of reduced consumer spending in the summer and planned additions for sale later in the year.

The Labor Department also said Thursday that claims for unemployment pay shot up by 18,000 last week to 340,000. That was more than expected as the four-week moving average also rose to its highest level since the end of July, up 2,750 to 335,750.

There are no comments - be the first to comment