May housing construction jumps by 17.2 percent

WASHINGTON - Construction of new homes has jumped in May by the largest amount in three months, providing an encouraging sign that the nation's deep housing recession was beginning to bottom out. And, wholesale prices rose less than expected in May.

The Commerce Department says that construction of new homes and apartments jumped 17.2 percent last month to a seasonally adjusted annual rate of 532,000 units. That was better than the 500,000-unit pace that economists had expected and came after construction had fallen in April to a record low of 454,000 units.

In another encouraging sign, applications for building permits, seen as a good indicator of future activity, rose by 4 percent in May to an annual rate of 518,000 units.

WHOLESALE PRICES

Wholesale prices rose less than expected in May as a large jump in the price of gasoline offset a drop in food costs.

The Labor Department says the Producer Price Index increased by a seasonally adjusted 0.2 percent from April. That's below analysts' expectations of a 0.6 percent rise.

The department also says wholesale prices fell 5 percent over the past 12 months, the largest annual drop in almost 50 years.

Falling prices can raise fears about deflation, a destabilizing period of extended price declines. But most economists believe efforts by the Federal Reserve to combat the recession will prevent that from happening.

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