Homebuilding breather, wholesale loan

Free and hollow house sitting next to well-maintained occupied house in thriving eastside neighborhood in Detroit, Michigan January 23, 2013.

Credit: Reuters/Rebecca Cook

By Lucia Mutikani

WASHINGTON | Wed Feb 20, 2013 at 9: 19 am EST

Washington (Reuters)-housing construction fell in January but the jump in permits for future home building to high the hope 4-1/2 year housing market recovery remains on track.

Another report Wednesday showed wholesale prices rose for the first time in four months in January as rising costs offset weak gasoline prices. However the slow economic growth should keep price pressures muted.

Housing starts dropped 8.5% last month to an annual rate of 890,000 unit, pulled down by a sharp fall in the category of volatile multi-family unit, the Commerce Department said.

But starts for single-family units hit its highest level since July 2008, and permits for future Home construction are high 4-1/2 years.

"It could be a correction of sorts, but nothing to signal newfound concerns the housing market," says Sean Incremona, an economist at 4CAST in New York.

In a separate report, the Labor Department said a seasonally adjusted producer price index increased 0.2 percent last month after slipping 0.3 percent in December.

The increase of prices received by farms, factories and refineries is below the 0.4 percent gain economists had expected.

U.s. financial markets have moved on a bit from the data.

Details on wholesale inflation report offered no signs of price pressures

In the 12 months through January wholesale prices were 1.4%. That followed a 1.3 percent increase in December.

This should give the Federal Reserve some room to keep your campaign very easy accommodative monetary policy as it tries to stimulate the economy.

The Central Bank of the United States last year launched an open Bond purchase program and said it would maintain it until she saw a significant improvement in the Outlook for the labour market. He hopes the purchases will drive down borrowing costs.

The Fed also pledged to hold interest rates near zero, while unemployment reached 6.5 percent, provided that it does not threaten to push inflation above 2.5%.

Wholesale prices, excluding volatile food and energy costs, edged up 0.2 percent last month after gaining 0.1 percent in December. The so-called core PPI is expected to rise 0.2 percent.

In the 12 months through January, the core PPI was up 1.8%, at least increase from February 2011. It has increased 2.0% in December.

In January, over three-quarters of the increase in overall producer prices may be due to a 0.7% rise in the cost of food, the Labor Department said. Food prices fell 0.8 percent in December. Last month's increase reflected a jump in the price of fresh and dried vegetables.

Gasoline price surprisingly fell 2.1 percent after falling 1.8 percent in December. Gasoline prices at the pump rise almost every week this year and the decline in wholesale gasoline prices last month probably are related to seasonal factors.

The core PPI was lifted from a 2.5 percent jump in the price of pharmaceuticals. Elsewhere, prices of passenger cars fell 0.8 percent after rising 0.2 percent a month ago.

(Additional reporting by Jason Lange in Washington and Chris Reese in New York; editing by Andrea Ritchie)