The light at the end of the recessionary tunnel flickered yesterday as a Commerce Department report showed housing starts fell in October and the Labor Department said consumer prices rose slightly more than anticipated during the month.

Housing starts were down 10.6 percent, while the Consumer Price Index rose 0.3 percent, not the 0.2 percent economists had predicted.

The causes for the inflationary uptick: energy and car prices accelerated by the government's "Cash for Clunkers" program. Core inflation, which excludes energy and food, rose 0.2 percent, compared with an anticipated 0.1 percent.

The reports chilled investors' enthusiasm on Wall Street a bit.

"A shocker," IHS Global Insight Inc. economist Patrick Newport said of the housing report. He added quickly, however, that the housing market's recovery remains on track.

The Commerce Department's key number, building permits for single-family homes, was flat "as we had expected," Newport said - a "payback for the first-time homeowners' tax credit passed in February."

Demand sparked by the credit shifted starts and permits from 2010 and late 2009 into the first seven months of this year, he said.

Looking at consumer prices, Joel L. Naroff of Naroff Economic Advisors in Bucks County said yesterday's numbers did not "seem to indicate a huge amount" of inflationary pressure right now. But as the economy clears away the remnants of the 2008 financial meltdown, he said, "year-over-year numbers will begin to show a positive inflation rate."

Mark Zandi, chief economist of Moody's Economy.com, called the CPI report "good in that it did not auger deflation."

"It appears that businesses still have some pricing power," Zandi said. "While most people who buy stuff don't like it, a little inflation is a good thing."

Without minimizing the "significant challenges" being faced, National Association of Home Builders chief economist David Crowe said the fact that October's permits for single-family homes were roughly unchanged showed "builders are preparing for the possibility of more favorable housing-market conditions in the future."

Housing starts typically occur when a contract is signed on a "build to order" home or when a builder wants to have speculative homes that can be delivered quickly, said Wayne Norris, regional sales director for Hanley Wood Market Intelligence, which tracks the new-home market.

"Builders made a conscious decision not to start as many homes, focusing on selling what they had and closing the deals by the Nov. 30 deadline" for the first-time buyers' tax credit, Norris said.

On Nov. 6, Congress extended the credit six months into 2010, expanded it to include some current homeowners who want to trade up, and boosted income limits to jump-start sales of higher-end housing.

In the Philadelphia region, sales of previously owned homes benefited greatly from the first tax credit, rising 25.8 percent in October compared with the same month in 2008.

Though move-up buyers have begun entering the market only in the last 10 days, existing-home sale prices "are averaging $22,000 more than last November," said Art Herling, regional vice president for Long & Foster Real Estate.

Even as housing starts and permits declined, the nation's architects were reporting an increase in demand for their services in October - reaching the highest level since August 2008, at the start of the financial crisis.

Though it is "far too early to think we are out of the woods, American Institute of Architects chief economist Kermit Baker said, the increase "could prove to be an early signal toward a recovery."

Inflation Locally

For the Philadelphia area, consumer prices are measured bimonthly.

What they did in the September-October period.

% change

Category from July-August

Apparel +1.2

Transportation +0.2

Medical care -0.2

Food/beverages -0.4

All items -0.6

Education/

communication -1.0

Housing* -1.1

*Shelter portion fell 0.5 percent; household furnishings and operations portion fell 0.7 percent; fuels and utilities portion fell 4.6 percent.

SOURCE: Bureau of Labor Statistics

Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.