Housing Starts, Jobless Claims, and Wholesale Price Index Mixed Bag

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Housing Starts, Jobless Claims, and Wholesale Price Index Mixed Bag February 16, 2 Asha G. Bangalore agb3@ntrs.com January Housing Starts: It is a Multi-Family Story Total housing starts increased 1.

1 Housing Starts, Jobless Claims, and Wholesale Price Index Mixed Bag February 16, 2 Asha G. Bangalore agb3@ntrs.com January Housing Starts: It is a Multi-Family Story Total housing starts increased 1.5% to an annual rate of 699, in January. The entire gain came from an.5% jump in starts of multi-family units to an annual rate of 191,. New construction of single-family units slipped 1.% to 5,. Chart 1 2 Housing Starts Housing Starts: 1 Unit Sources: Census Bureau /Haver Analytics Chart 1 makes the compelling point that starts of new homes have moved up only slightly from the cycle established in March 29. How far is new construction of single-family homes lagging behind the historical trend? The historical median of housing starts for the years ended is 1.6 million units. Construction of new homes in January 2 is roughly 53% below the historical median, implying there is a long road ahead before normality is reached.

2 Chart 2 Housing Starts: 1 Unit Median = 1.6 mill. units Source: Census Bureau /Haver Analytics On a regional basis, starts of new homes fell sharply in the Midwest (-.7%) but rose in all other parts of the nation. The number of permits issued for construction of new homes moved up.% to an annual rate of 676, in January comprising of small gains for single and multi-family units. Jobless Claims Point to Significant Improvement in Labor Market Initial jobless claims fell 13, to 3, during the week ended February. The four-week moving average stands at 365,25, the lowest in almost four years. Continuing claims, which lag initial jobless claims by one week, dropped 1, to 3.26 million, the lowest since August 2. The message from this labor market indicator is that firms have stopped firing at a rapid pace and hiring at rapid pace is probably around the corner. 2

3 Chart 3 Unemployment Insurance: Initial Claims, -Week Moving Average SA,Thous Source: Department of Labor /Haver Analytics January Wholesale Prices Maintain Contained Trend The January Producer Price Index (PPI) increased.1% in January, reflecting declines in prices of energy (-.5%) and food (-.3%). Although the price of gasoline (+2.%) rose, the 1.7% drop in the price of electricity and lower prices for natural gas led to the decline in the energy price index. An.% drop in prices of fresh fruits and vegetables accounted for the.3% decline of the food price index. 3

4 Chart PPI: Finished Goods [Including Foods & Fuel] % Change - Year to Year NSA, 192=1 PPI: Finished Goods Less Food and Energy % Change - Year to Year NSA, 192= Sources: Bureau of Labor Statistics /Haver Analytics The core PPI, which excludes food and energy, moved up.% in January. The large increase sticks out and begs an explanation. Higher prices for medicines (+2.%) were responsible for about % of the increase. This is a non-repetitive annual adjustment of prices for medicines, implying that a sharp increase in core wholesale prices in the months ahead would have to be from other sources. Producer Price Index January 2 % change annualized % change % change prior month 3 mo. ago 6 mo. ago Jan- yoy Dec- yoy PPI - FINISHED GOODS ALL ITEMS CORE - ALL ITEMS LESS FOOD & ENERGY FOOD ENERGY CAPITAL EQUIPMENT PPI - INTERMEDIATE GOODS ALL ITEMS CORE PPI - CRUDE GOODS ALL ITEMS CORE

5 At the earlier stages of production, the intermediate goods price indexes dropped in January. In particular, the year-to-year change of the core intermediate goods price index, which excludes food and energy, shows a marked decelerating trend (see Chart 5). The main take away is that wholesale prices do not present a threat in the inflation-growth debate at FOMC meetings, for now. Chart 5 PPI: Intermediate Materials Less Food & Energy % Change - Year to Year NSA, 192= Source: Bureau of Labor Statistics /Haver Analytics 9 1-5

Consumer Price Index, Jobless Claims, Housing Starts Each of These Reports Have Favorable Aspects to Note

Consumer Price Index, Jobless Claims, Housing Starts Each of These Reports Have Favorable Aspects to Note January 19, Asha G. Bangalore agb3@ntrs.com The Consumer Price Index (CPI) held steady in December,