Housing starts plunged 17.6% in March, their steepest drop in more than 14 years, as groundbreaking for both single-family and multi-family homes tumbled, a Commerce Department report showed Tuesday

In a second report, the Labor Department said a surge in energy costs pushed wholesale prices up a steep 0.7% last month but outside of volatile food and energy costs, producer prices advanced a mild 0.1% for a second month.

March housing starts fell to a 1.837 million unit rate from an upwardly revised 2.229 million unit pace in February. The decline was the largest monthly drop since January 1991, when starts also fell 17.6%.

Economists had expected housing starts to drop a far smaller 4.8% in March to a 2.09 million unit rate from the 2.195 million unit clip initially reported for February.

Single-family housing starts slid 14.4% to a 1.539 million unit pace, largest drop since January 1991, when they fell 19.6%. Starts on structures with five or more units also tumbled, falling 31.6%, biggest decline since a 38.3% drop in March 2000.

Permits for future groundbreaking, an indicator of builder confidence, also fell more than expected, dropping 4.0% to a 2.023 million unit pace. Analysts had forecast permits to dip 0.3% to a 2.10 million unit pace from a revised 2.107 million unit rate the previous month.

Housing starts fell 29.3% in the Midwest, 18% in the South, 12.7% in the West and 3.6% in the Northeast, the Commerce Department said.

While low mortgage rates have supported the housing sector, industry analysts have expected housing starts and existing home sales to edge back from 2004's record levels.

Meanwhile, the Labor Department said the jump in its producer price index, a measure of prices received by farms, factories and refineries, was the biggest since a matching energy-led gain in November.

While the increase in overall producer prices was slightly higher than the 0.6% economists expected, the rise in so-called core prices at 0.1% came in a tick below expectations.

Energy prices shot up 3.3% in March, biggest jump since October, with gasoline prices up 5.3%, home heating oil up 15.7% and residential natural gas up 2.3%. Food prices advance 0.3%.

The past 12 months, producer prices have risen a sharp 4.9% — biggest year-on-year gain since November — as oil prices pushed higher.

Oil prices hit a record high above $58 a barrel early this month, but quickly retreated. Some analysts expect some energy price relief when the April producer price report is released.

Prices for cars, light trucks and SUVs slipped 0.2% last month, the second consecutive monthly drop, while the cost for computers plunged 3.4%.

The cost of business capital equipment contributed to the pickup in overall producer prices, rising 0.3% — a turnaround from a February drop

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