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

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Consumer Price Index, Jobless Claims, Housing Starts Each of These Reports Have Favorable Aspects to Note January 19, Asha G. Bangalore agb3@ntrs.

1 Consumer Price Index, Jobless Claims, Housing Starts Each of These Reports Have Favorable Aspects to Note January 19, Asha G. Bangalore The Consumer Price Index (CPI) held steady in December, after posting a similar reading in November. The energy price index inched down 1.3% in December, marking the third consecutive decline. The recent increase in oil prices should be reflected in the January CPI report. The food price index increased.% in December putting the year-to-year gain at.7% vs. 1.5% in all of 1. The energy price index moved up 6.6% in compared with a 7.7% jump in 1. The 3.% increase in the overall CPI in reflects these gains as well as an acceleration of the core CPI, which excludes food and energy. Chart 1 6 CPI-U: All Items % Change - Year to Year NSA, 198-8=1 CPI-U: All Items Less Food and Energy % Change - Year to Year NSA, 198-8= Sources: Bureau of Labor Statistics /Haver Analytics The core CPI, which excludes food and energy, increased.1% in December, amounting to a.% increase in vs. a.8% increase in 1. The core CPI accelerated faster in the firsthalf of (+.5%) compared with the second-half of the year (+.%). In December, shelter costs (+.%), medical care (+.%) and recreation costs (+.%) were a few of the large increases, while prices for clothing (-.1%) fell.

2 Chart.8 CPI-U: All Items Less Food and Energy 6-month %Change-ann SA, 198-8= JAN FEB MAR APR MAY JUN JUL AUG Source: Bureau of Labor Statistics /Haver Analytics SEP OCT NOV DEC. As we have mentioned in several recent commentaries, the Fed has a dual mandate of full employment and price stability to satisfy. In this context, inflation data are contained and the Fed has more or less met the price stability aspect of the mandate but the Fed falls short on the full employment front with 8.5% unemployment in December after ten quarters of economic growth. Moreover,.5% of the unemployed have been unemployed for over six months. The Fed, with new voting members on the FOMC, is unlikely to take action at the January -5 meeting. This meeting will be marked with more information from Fed in view of increasing transparency. The Fed will publish its own forecast of the fed funds rate as part of economic projections at the close of the January 5 meeting.

3 CONSUMER PRICE INDEX DECEMBER % change annualized % change % change prior month 3 mo. ago 6 mo. ago Dec- yoy Dec-1 yoy CPI - ALL ITEMS CORE - ALL ITEMS LESS FOOD & ENERGY (77.18)* CPI ALL ITEMS LESS ENERGY (9.9) FOOD (13.7) ENERGY (9.8) SHELTER (3.) COMMODITIES (.1) COMMODITIES LESS FOOD & ENERGY (.9) SERVICES (59.9) SERVICES LESS ENERGY SERVICES (56.3) FRB CLEVELAND TRIMMED-MEAN CPI In other related economic news, initial jobless claims fell 5, to 35, during the week ended January 1. This is the lowest mark since March 8. Continuing claims, which lag initial jobless claims by one week, fell 15, to 3.3 million, the lowest since September 8. The main message is that firms are not shrinking their payrolls anymore. Chart Unemployment Insurance: Initial Claims, State Programs SA, Thous Continuing Claims SA, Thous Sources: Department of Labor /Haver Analytics 1 5 3

4 Total housing starts fell.1% in December to an annual rate of 657,, reflecting a.% decline in construction of multi-family units and a.% increase in single-family starts. On a year-to-year basis, single-family starts posted a sharp 1.% increase, this occurrence is a first in a long time without support from special programs such as the first time home buyer program (see Chart ); it is a noteworthy development and bears close watching. Housing starts have moved up in 1 and, after four annual declines. Chart 6 Housing Starts: 1 Unit % Change - Year to Year NSA, Thous.Units Source: Census Bureau /Haver Analytics 9 1-6

5 Chart 5 1 Housing Starts % Change - Annual Rate SAAR, Thous.Units Source: Census Bureau /Haver Analytics

CPI-U: All Items, =100 SA, M/M %Change CPI-U: All Items Less Food and Energy % Change - Period to Period SA, =100 0.

CPI-U: All Items, =100 SA, M/M %Change CPI-U: All Items Less Food and Energy % Change - Period to Period SA, =100 0. Inflation: Signs of Moderation in September Data October 9, Asha G. Bangalore agb@ntrs.com The Consumer Price Index (CPI) moved up.% in September, following gains of.5% and.5% in July and August, respectively.