Housing Starts, Wholesale Inflation, Economic Growth

February 17, 2016

Wednesday – February 17

The Commerce Department reported that January Housing Starts fell 3.8% from December to an annual rate of 1.099 million units versus the 1.171 million expected, a three-month low. All four major regions across the country saw declines in starts, while a big East Coast snowstorm caused a halt in some late month construction in that area. January Building Permits, a sign of future construction, fell 0.2% from December to 1.202 million units, just above the 1.200 million expected, while December was revised lower to 1.204 million from 1.232 million.

Wholesale inflation, as measured by the Producer Price Index (PPI), rose 0.1% in January, above the -0.2% expected and above the -0.2% recorded in December. On an annual basis, PPI decreased 0.2% after declining 1.0% in December. However, Core PPI, which strips out volatile food and energy, surged 0.4%, well above the 0.0% expected and up 0.8% annually. The one month jump in Core prices does not constitute a pattern and the Fed will more closely watch the Consumer Price Index releasing on Friday. Inflation overall remains tepid with no threat of gathering speed at this time.

Economic growth appears to have slowed in late 2015 and at the start of 2016, perhaps foreshadowing another year of potentially unspectacular economic growth, according to Fannie Mae’s Economic & Strategic Research Group’s February 2016 Economic and Housing Outlook. On the housing front, home price gains are likely to outpace household income growth as the year continues. However, the rise in home prices should help lift underwater mortgages and create a healthier housing market.