21 August, 2008

According to the official figures, the number of homes and apartments being built up in the US plummeted to the lowest level since March 1991.

Commerce Department revealed that, the 11 per cent decrease to an annual rate of 965,000, the lowest level for over 17 years, followed a 1.084 million rate of the previous month. In addition to this, the building permits, an indication of future creation has also dropped down considerably.

The news has created a more concern that strict lending rules would increase the borrowing costs, falling house prices and record foreclosures will add to plummeting home sales and cause construction to drop even further.

In related news, the rising inflation rate pressure saw US wholesale prices gain by 1.2% in July, its highest speed in almost 3 decades. According to the Labor Department, core inflation that eliminates energy and food costs was increased by 0.7% from June, exceeding the expectations of 0.2%.

The swift wholesale rise noted in July was primarily linked to energy costs during the month, which saw crude oil strike followed by an increase of $147.27 per barrel, which in turn shot up petrol prices to the top.

Last week, the Labour Department showed that the US inflation rate has strike 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 increase in energy prices and food costs which were 30% higher and 6% higher respectively.

The rising costs have meant that Americans are under pressure to meet with day-to-day expenses. After results have revealed from Realtytrac exposed that over 272,000 people in the US were issued with a foreclosure notice last month, which showed a gain of 55% compared to last year.

Last week, the US Federal Reserve left interest rates unaffected at 2 per cent as it is fighting with high inflation rate and a possible downturn.

Interest rates in the US have been put on hold since April after destructive reduction in late 2007 and early 2008.

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