US inflation cools, housing starts pick up

WASHINGTON - A MEASURE of United States inflation eased last month and housing starts unexpectedly climbed, suggesting the economy will continue to expand without a surge in prices.

The 0.1 per cent increase in core consumer prices, which exclude food and energy costs, was the smallest this year and follows a 0.2 per cent gain in February, the Labour Department said yesterday.

Builders broke ground on new homes at an annual rate of 1.518 million, up 0.8 per cent from the prior month, the Commerce Department reported.

The inflation figures mean Federal Reserve chairman Ben Bernanke may keep interest rates unchanged even if the economy picks up after the slowdown. Treasury notes rallied after the price report and held their gains after the central bank said industrial production fell.

Including food and energy, US consumer prices rose 0.6 per cent, higher than February's 0.4 per cent.

Core prices were up 2.5 per cent in the 12 months to March, the smallest year-on-year gain in almost a year.

Overall prices were up 2.8 per cent from the same time last year, compared with a 2.4 per cent rise in February.

Industrial production declined last month as warm weather reduced electricity demand. Manufacturing output increased at the fastest pace of the year.

The 0.2 per cent drop in production followed a revised 0.8 per cent rise in February. Capacity utilisation, which measures the proportion of plants in use, fell to 81.4 per cent, from 81.6 per cent in February.

Unusually warm temperatures last month, along with signs that demand is starting to firm as prices moderate, encouraged builders to start work on more homes. Building permits, a sign of future construction, rose 0.8 per cent.

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