By Timothy R. Homan
Feb. 18 (Bloomberg) -- U.S. industrial production probably fell in January and homebuilding dropped to a record low amid the recession and credit crisis, economists said ahead of government reports today.
Figures from the Federal Reserve will show output at factories, mines and utilities dropped 1.5 percent last month, according to the median estimate in a Bloomberg News survey of economists. A Commerce Department report will probably show builders broke ground on the fewest homes since record-keeping began in 1959 and construction permits also slumped.
With consumers unable to secure credit for purchases, slow sales of homes and factory goods such as automobiles are causing builders and manufacturers to scale back on production. President Barack Obama yesterday signed into law a $787 billion stimulus package designed to jolt the economy through a mix of government spending and tax cuts for families and businesses.
“We expect a reduction in production across most manufacturing industries, compounded by a sharp reduction in motor-vehicle production,” Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, said in a note to clients before today’s report. IHS also projects “the slide in single-family starts and permits will continue,” he said.
The Fed’s industrial production report for January is due at 9:15 a.m. in Washington. Estimates by the 75 economists surveyed ranged from a decline of 3.1 percent to a gain of 0.5 percent.
Housing, Permits
The Commerce Department’s housing starts report, due at 8:30 a.m., may show work began in January on 529,000 homes at an annual pace. Survey estimates from 73 economists polled ranged from 480,000 to 578,000.
Permits, an indicator of future residential construction, are forecast to fall to a record low 525,000 on an annual basis.
Plummeting demand for automobiles in January helped drag down overall production in the U.S. Unit sales for the month were the fewest since December 1981, while the annualized sales rate was the lowest since June 1982, according to Woodcliff Lake, New Jersey-based Autodata.
The drop-off in sales is spurring payroll reductions at other companies. Delphi Corp., the bankrupt auto-parts maker, said this week it is cutting 775 jobs, or 20 percent of the workforce, at the company’s steering components operation in Saginaw, Michigan.
General Motors Corp. and Chrysler LLC, already relying on government aid to survive, took their case to the U.S. Treasury yesterday that they can undo past mistakes and justify more U.S. aid to return to profit. Obama’s chief spokesman, Robert Gibbs, said the administration can’t rule out a restructuring through bankruptcy for struggling automakers, while adding the industry is “tremendously important” to the economy.
Deflation Threat
As another sign of falling demand from U.S. consumers and companies, a Labor Department report today may show the cost of products from overseas fell for a sixth straight month in January, the longest series of declines since 2001. Figures from the import-price index are due at 8:30 a.m. in Washington.
Some policy makers are worried the deceleration in prices, or disinflation, may lead to outright deflation. The level of concern among Fed officials about the economic downturn and its pressure on prices will be reflected in minutes of their January Federal Open Market Committee meeting, due today at 2 p.m.
Another Labor report at the end of this week may show consumer prices in the U.S. posted their first year-over-year decline since 1955.
Fed Bank of St. Louis President James Bullard yesterday said the U.S. faces a risk of “sustained deflation” and called on the central bank to avert a decline in prices by growing the money supply.
“By expanding the monetary base at an appropriate rate, the FOMC can signal that it intends to avoid the risk of further deflation and the possibility of a deflation trap,” Bullard said in the text of remarks to the New York Association for Business Economics.
Bloomberg Survey
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Import Housing Building Ind.
Prices Starts Permits Prod.
MOM% ,000’s ,000’s MOM%
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Date of Release 02/18 02/18 02/18 02/18
Observation Period Jan. Jan. Jan. Jan.
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Median -1.2% 529 525 -1.5%
Average -1.0% 528 522 -1.5%
High Forecast 1.2% 578 565 0.5%
Low Forecast -4.2% 480 480 -3.1%
Number of Participants 52 73 51 75
Previous -4.2% 550 547 -2.0%
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4CAST Ltd. -1.5% 530 490 -1.4%
Action Economics -1.7% 530 530 -1.3%
AIG Investments -0.4% 525 --- 0.5%
Aletti Gestielle SGR --- 540 520 -1.5%
Ameriprise Financial Inc -0.6% 520 515 -2.2%
Argus Research Corp. -0.2% 505 --- -1.0%
Bank of Tokyo- Mitsubishi 1.0% 480 510 -1.3%
Barclays Capital -0.5% 500 --- -1.8%
BBVA 0.2% 570 540 -0.9%
BMO Capital Markets -1.0% 528 525 -1.5%
BNP Paribas -1.5% 530 --- -1.2%
Briefing.com --- 525 520 -1.5%
Calyon --- 515 520 -1.5%
Castlestone Management LT 0.2% 520 515 -1.8%
CIBC World Markets 0.5% 500 500 -2.5%
Citi -0.3% 530 525 -1.7%
Commerzbank AG --- 520 500 -1.5%
Credit Suisse -1.8% 525 --- -2.1%
Daiwa Securities America --- 540 --- -1.5%
Danske Bank --- 560 500 -1.0%
DekaBank -1.7% 520 525 -1.5%
Desjardins Group 0.0% 550 565 -2.5%
Deutsche Bank Securities -2.0% 530 530 -1.7%
Deutsche Postbank AG -1.3% 540 --- -1.1%
DZ Bank -1.9% 500 510 -1.7%
First Trust Advisors -1.9% 520 --- -1.4%
Fortis --- 550 --- -0.5%
FTN Financial --- 530 530 -1.0%
Goldman, Sachs & Co. --- 578 --- -1.5%
Helaba --- 540 530 -1.3%
Herrmann Forecasting --- 529 517 -1.3%
High Frequency Economics -2.0% 550 550 -1.8%
IDEAglobal -1.5% 540 535 -0.8%
IHS Global Insight --- 533 545 -3.1%
Informa Global Markets 0.5% 555 560 -1.5%
ING Financial Markets -1.5% 530 515 -1.6%
Insight Economics -0.5% 550 --- -1.7%
Intesa-SanPaulo -1.5% 500 500 -1.3%
J.P. Morgan Chase -1.7% 510 520 -2.3%
Janney Montgomery Scott L -0.7% 520 505 -1.7%
JPMorgan’s Private Wealth --- 560 550 -0.6%
Landesbank Berlin 0.8% 515 490 -0.8%
Landesbank BW -1.0% 520 530 -1.5%
Lloyds TSB -1.8% 530 530 -1.5%
Maria Fiorini Ramirez Inc -1.5% 525 --- -1.5%
Merrill Lynch 1.2% 525 525 -2.7%
MFC Global Investment Man -2.0% 520 515 -1.5%
Moody’s Economy.com -1.5% 520 530 -2.5%
Morgan Stanley & Co. --- 500 --- -1.7%
National Bank Financial --- 520 530 -1.5%
Natixis --- 530 --- -1.6%
Newedge -0.8% --- --- -1.7%
Nomura Securities Intl. --- 565 540 -1.7%
Nord/LB -1.0% 540 530 -0.6%
Okasan Securities --- 560 --- -2.0%
PNC Bank --- 510 --- -1.4%
Raymond James -4.2% 560 550 -1.9%
RBS Greenwich Capital --- 510 --- -1.4%
Ried, Thunberg & Co. -1.5% --- --- -1.0%
Schneider Foreign Exchang --- 541 487 -1.3%
Scotia Capital -1.0% 500 500 -2.0%
Societe Generale --- 530 --- -1.3%
Standard Chartered -1.5% 515 510 -1.5%
Stone & McCarthy Research 0.6% 540 530 -1.6%
TD Securities --- 550 --- -0.9%
Thomson Reuters/IFR -2.0% 490 480 -1.5%
Tullett Prebon -1.5% 520 --- -1.6%
UBS Securities LLC -1.3% 525 --- -1.6%
Unicredit MIB -0.5% 550 550 -0.5%
University of Maryland -2.5% 510 510 -1.2%
Wachovia Corp. -0.5% 500 --- -0.8%
Wells Fargo & Co. -1.1% 530 530 -1.3%
WestLB AG -0.5% 530 525 -1.5%
Westpac Banking Co. -1.0% 506 503 -1.8%
Wrightson Associates -1.5% 530 510 -1.2%
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To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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