BUILDING: Drop in number of new homes may signal wider problems for the economy, analysts say. By Martin Crutsinger THE ASSOCIATED PRESS Construction of new homes plunged to the lowest level in 14 years in September as turmoil in credit markets intensified the problems in the housing industry. Consumer prices, meanwhile, rose at the fastest pace in four months, reflecting higher energy and food costs. The Commerce Department reported Wednesday that construction of new homes fell 10.2 percent in September to a seasonally adjusted annual rate of 1.191 million units. The decline was more than double the 4.2 percent drop that analysts had been expecting, and it pushed activity down to the lowest level since March 1993. Meanwhile, the Labor Department reported that consumer prices rose by 0.3 percent in September, slightly more than the 0.2 percent that analysts expected as energy prices rose after three straight declines and food costs shot up at the fastest pace since June. Core inflation, excluding energy and food, remained tame, though, rising by 0.2 percent, in line with expectations. Analysts said the bigger-than- expected drop in housing construction could be signaling that the housing downturn, already the worst in 16 years, may be headed for bigger troubles. Housing activity is 30.8 percent below the level of a year ago. Asked whether the housing slump could push the country into a recession, President Bush told a news conference that “I feel good about many of the economic indicators” and said his administration was working to help homeowners deal with rising mortgage delinquencies. “When you got more houses than you got buyers, the price tends to go down. And we’re going to have to work through the issue,” Bush said. But private economists were not as certain that the steep housing slump will not cause a recession. “The contraction in housing is transitioning from an average downturn to among the worst in the post-World War II history,” said Michael Gregory, an economist with BMO Capital Markets. Many economists expect housing will trim growth by more than a full percentage point in the current quarter, but they believe the country will avoid an outright downturn because the Fed, which cut rates for the first time in four years in September, will cut rates again should further weakness develop. 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!