The month-over-month decline in new-home construction in the US was worse than economists had expected, down -4.3% compared to November 2010 and down 8.2% from December 2009, according to the Commerce Department.

The big monthly decline was led by a -9% drop in single-family home construction in December and total housing starts for the month were just 529,000, with 550,000 expected. This compares with 2.273m at the peak in June 2006, so construction is currently down 77% from those levels. The construction industry now accounts for just 2.22% of GDP in the US, down from 6.34% of GDP at the height of the housing bubble.

Regionally, on a month-to-month basis, the West had the strongest construction starts, rising 45.8% on the month and up 28.4% compared to the previous year. The Midwest was the weakest for December with a -38.4% decline and down -26.6% annually.

The silver cloud for US homeowners is that fewer starts means that there will be fewer houses added to the inventory of homes currently looking for buyers. However, historically, residential investment - of which new home construction is the largest part - has always been the main locomotive in pulling the economy out of recessions.

This is because each new home that is built generates a huge amount of economic activity. It puts construction workers back into work, and they currently account for over 25% of the total jobs lost in the US, even thought they were less than 6% of the total workforce when the recession started.

The current construction figures therefore, simply re-affirm the belief that the US economy is only growing because of the continued quantitative easing measures introduced under the Obama administration.