WRAPUP 4-US home construction rises, consumer morale ebbs

* New home construction hits highest level since Nov 2008

* Building permits touch 17-month peak

* Consumer confidence surprisingly falls to five-month low

(Updates with closing market action)

By Lucia Mutikani

WASHINGTON, April 16 (BestGrowthStock) – Permits to build new U.S.
homes surged in March to a 17-month peak and construction
activity was the most vigorous in more than a year, providing
fresh evidence that economic prospects are brightening.

But a surprising slump in U.S. consumer confidence this
month indicated that average Americans remain frustrated at the
slow pace of recovery, which is not generating strong jobs
growth.

“The recovery is broadening, but it doesn’t appear the
consumers are seeing it,” said Ryan Sweet, a senior economist
at Moody’s Economy.com in West Chester, Pennsylvania.

“The encouraging thing is it’s broadening out from
manufacturing to services and that’s very important for both
the sustainability and durability of the recovery.”

Data such as retail sales, trade and orders for
long-lasting manufactured goods have indicated the recovery
from the worst downturn in 70 years is gaining muscle and
filtering to other sectors. Payrolls resumed growth in March.

Building permits, an indicator of future activity, jumped
7.5 percent to a 685,000-unit-a-year pace last month, the
Commerce Department said on Friday. Markets had expected a
630,000 unit pace.

New home construction hit its highest level since November
2008 but most of it was in the volatile multifamily segment.

Separately, the Thomson Reuters/University of Michigan’s
Surveys of Consumers index of consumer sentiment slipped to a
five-month low of 69.5 in early April from 73.6 at the end of
March. That was below market expectations for 75.0.

Boosting consumer spending, which fuels 70 percent of total
production of goods and services, is critical to get a
self-sustaining recovery on track.

The data had little impact on U.S. financial markets, which
were fixated on other events. U.S. stocks (Read more about the stock market today. ) tumbled, snapping a
six-day winning streak after investment bank Goldman Sachs
(GS.N: ) was charged with fraud by the U.S. securities market
regulator. Corporate earnings missing raised forecasts also
soured the mood.

The risk aversion triggered by the fraud charges against
Goldman Sachs related to subprime loans bolstered the
safe-haven appeal of U.S. government bonds and the dollar.

CONFIDENCE DATA AT ODDS WITH SPENDING

The drop in consumer confidence, a proxy for spending, is
at odds with the rise in retail sales seen in recent months.

“The confidence numbers do not seem to match up with the
strength in retail sales. It could be a little bit of
frustration that as you see the signs of recovery, the labor
market is still not vibrant,” said Nick Kalivas, vice president
of financial research at MF Global in Chicago.

“I don’t put a lot of stock into them because it is
important to see what people are actually doing as opposed to
what they are saying.”

Retail sales have risen even as the unemployment rate has
remained elevated at 9.7 percent and income growth has been
sluggish. Analysts reckon that an improving economic and jobs
picture are helping to prop up spending.

The recovery story was partially illustrated in Bank of
America Corp’s (BAC.N: ) financial results on Friday, which
showed the bank posting its first quarterly profit since summer
2009 and setting aside less money to cover bad loans.

The bank’s lower credit provision signals that borrower
defaults may be stabilizing as the economy improves.
[ID:nN16232262]

Despite frustration with the pace of the economic recovery,
consumers invested in new residential property last month.
House starts rose 1.6 percent to a higher than expected
seasonally adjusted annual rate of 626,000 units.

February’s housing starts were revised up to show a 1.1
percent increase, which was previously reported as a 5.9
percent drop. Markets had expected housing starts to rise to
610,000 units in March.

The rise was probably due to a combination of consumers
rushing to take advantage of a homebuyer tax credit and a snap
back from February’s snowstorms which had held back activity.

Prospective homeowners have to sign contracts by the end of
this month and close them by end of June to take advantage of
the tax break.

Starts for the volatile multifamily segment jumped 18.8
percent jump in March, while groundbreaking for single-family
homes slipped 0.9 percent.

The data was a welcome relief after the housing market
recovery appeared to have stalled in recent months and sales
dropped following strong gains in the second half of 2009.

Economists at Goldman Sachs said the report suggested “that
the apparent sharp drop in residential investment in the first
quarter will end in the second quarter.”

A National Association of Home Builders survey on Thursday
showed home-builder sentiment rose to a seven-month high in
April. New building permits increased across both segments of
the housing market and were up 34.1 percent from March 2009,
Friday’s Commerce Department data showed, the biggest
year-on-year gain since February 1992.

“The surge in single-family permits should be regarded as a
very positive sign that the recovery is gaining some momentum
even within the weakest sector of the economy,” said Alan
Ruskin, chief international strategist at RBS Securities in
Stamford, Connecticut.

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GRAPHICS:

U.S. housing starts, building permits:

http://link.reuters.com/hyd28j

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Growth Stocks

(Additional reporting by Richard Leong in Washington; Editing
by Andrea Ricci)

WRAPUP 4-US home construction rises, consumer morale ebbs