Today the Commerce Department's Bureau of the Census released its report on Housing Starts and Building Permits for February.

According to the report, housing starts in February were at a seasonally adjusted annual rate of 1,490,000. This is up 3 percent from the annualized rate in January.

The month-to-month changes in housing starts are estimated from sample surveys, and have a statistical uncertainty of plus-or-minus 8 percent. The uncertainties in this and other indicators are clearly stated in government news releases; but, somehow they never make it into reports issued by the Wise purveyors of popular financial news. It's a lot more exciting and, certainly, much more easy to explain, to state that February's housing starts jumped by 3 percent. If they reported that the number for February could actually lie anywhere between -5 percent and +11 percent, then they would have to explain that the February number was not statistically significant. In other words, it had no meaning.

In the official government report, the Bureau of the Census warns readers that month-to-month changes in housing starts often show irregular movements and that it may take 4 months of data to determine the underlying trend of the data.

Fortunately, when the data is examined over longer periods of time, the month-to-month irregularities balance one another so that annual totals of housing starts have only a +/- 3 percent relative standard error. This means that there is a 90 percent certainty that the annual figures lie within plus or minus 3 percent of the stated values.

Ignoring uncertainties for the moment, new starts of single-family units were up 2.63 percent in February. This compares with a unit increase of 4.23 percent in structures with 2 or more units. During January single-family units dropped by about 1 percent and multiple-occupancy units grew by 11.64 percent. So, in February, emphasis shifted toward the construction of single-family homes. This is consistent with yesterday's National Association of Home Builders report of a pick-up in home buying in the February-March timeframe.

The data collected from building permit surveys must be more complete than the housing starts data. The uncertainty associated with the monthly permits data is only plus or minus 1 percent. Perhaps this is one of the reasons why the Commerce Department chose the permits figure as one component of its 11-element Composite Index of Leading Economic Indicators. In February, the permits number was 2 (+/-1) percent higher than January. So, it looks like permits were up for February. For the year ending February, permits rose 13 (+/-1) percent.

Maybe next month we should just ignore the starts data and concentrate on the permits data.

On the retail front, Mitsubishi Bank/Schroder Wertheim announced today that strong apparel sales helped U.S. chain store sales to grow by 1.2 percent in the week ending March 16. This follows a sales increase of 1 percent in the preceding week. Mitsubishi forecasts that an early Easter will push March same-store sales up by 5 percent. This would be an improvement of 3.3 percent over March of last year.

Yesterday afternoon, Federal Reserve Chairman Alan Greenspan indicated that he was unperturbed by the "outsized number" reported for nonfarm payrolls a week and a half ago. Speaking at a banking industry forum in New Orleans, the Chairman said that he perceived the economy as "moving forward with inflation in check," unchanged from the picture he painted during his Humphrey-Hawkins testimony last month. He said that he saw nothing in the news since then "which alters that view." He went on to say," it is very easy to be blindsided by one or more statistics," and, "all of our data are flawed to some extent," and, "It is prudent (to) look at a series of other numbers as well."

In spite of the fact that inflation has been low and fairly constant over the past several years, the Chairman warned, "Inflation is never dead." "So long as you have a system in which you have (the) complex economic interrelationships that we have in today's environment, there always has to be considerable vigilance (so that) the process of expansion isn't overdone."

Perhaps traders in the bond market took some of the Chairman's words to heart today. Although there was an initial reaction to today's housing starts data, by the end of the day the price of the 30-year T-bond was little changed.

Byline: Lafferty (MF Merlin)