Housing starts jumped by a surprising 16.2 percent in March and production at the nation's factories, utilities and mines rose by 0.3 percent, suggesting that the economic expansion is continuing, albeit at a somewhat erratic pace.
Many international currency traders had said they were looking to the government statistics released yesterday and the preliminary report of gross national product to be issued Thursday to determine the course of the U.S. economy as well as the path of the dollar. The dollar has dropped almost 20 percent in value against most major currencies since reaching its peak in February.
Economists had said that, if the reports suggested weakness in the economy, the dollar could tumble sharply because the markets would believe that interest rates would drop lower.
However, yesterday's statistics, which economists said showed continuing economic activity, had little, if any, effect on the dollar, economists said.
Housing starts hit a 1.895-million-unit annual rate in March, their highest level since April 1984, the Commerce Department said. That increase followed a 11.8 percent drop in February.
Construction of apartments with five or more units had declined sharply in February, but rebounded 53 1/2 percent in March, Commerce said. Some economists said that the increase in apartment activity was in part because of builders' desire to get apartment units started before any tax-law changes are passed.
In addition, mortgage interest rates peaked in July and declined for the next seven months. Although they rose slightly last month, they have fallen back somewhat since then, and several economists said they expect them to to remain near their current level through most of the year.
"I expect six months from today interest rates will be about where they are now, but we'll have seen both ups and downs along the way," said Warren Lasko, executive vice president of the Mortgage Bankers Association of America.
Commerce Secretary Malcolm Baldrige said that this year will be a good year for housing.
"With stable to lower interest rates and continued moderation in construction costs, the general current level of construction activity can be maintained," Baldrige said.
If the sharp drop in February is averaged with the increase in March, "What emerges is consistent with a picture of housing recovering from its fourth-quarter low point, aided by a fall in interest rates," said Timothy Howard, chief economist for the Federal National Mortgage Association.
Howard also said he believes that some builders "are starting multifamily projects with the idea of getting current tax treatment grandfathered in for the present owners." He said these builders are "recognizing that when those owners sell . . . they won't get as good a price" as they would if tax treatment were left unchanged, but the known benefits of being grandfathered in appear to outweigh the unknown penalties from tax law changes.
Building permits, a gauge of future construction activity, increased 10.9 percent in March to an annual rate of 1.814 million units, following a 2.4 percent drop in February, Commerce said.
In a separate report, the Federal Reserve Board reported that the slight increase in production at the nation's industries followed a 0.2 percent decline in February.
Manufacturing production rose 0.4 percent in March following a 0.2 percent decline in February. Business-equipment output dropped 0.2 percent following a 0.1 percent decline in February, although the consumer-goods output rose 0.1 percent after a 0.9 percent decline the previous month, the Fed said.
Production at mines rose 0.3 percent following a 1.6 percent drop in February, and utilities' output rose 0.1 percent, after increasing 0.6 percent in February, the Fed said.
The industrial production figure "indicates a satisfactory rate of growth in the U.S. economy," said Allen Sinai, chief economist for Shearson Lehman Brothers.