U.S. Housing Construction Falls To Lowest In Three Years (Bloomberg)

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Sept. 19 (Bloomberg) -- Housing construction in the U.S. declined more than forecast last month to the lowest level in three years as waningdemand left builders with a growing number of unsold homes.

The 6 percent decrease in housing starts to an annual rate of 1.665 million followed a 1.772 million pace in July, the Commerce Department said today in Washington. Building permits dropped for a seventh straight month to the lowest level in four years and a sign home construction will keep slowing.

The battered U.S. housing market poses a risk of a larger slowdown in the economy and reinforces economist forecasts that Federal Reserve policy makers tomorrow will keep interest rates unchanged for a second month. Producer prices rose less than forecast last month, suggesting inflation is cooling along with economic growth, a Labor Department report showed today.

``There's no doubt the housing market is declining and we expect it to continue to decline through most of 2007,'' said Phillip Neuhart, an economist at Wachovia Corp. in Charlotte, North Carolina. ``Combined with the PPI data, it really sits with the Fed-on-hold scenario.''