Inflation Decelerates, Housing Starts Slow, Jobless Claims Steady, Philly Manufacturing Healthy

- The Consumer Price Index for February rose .1% versus estimates of a .1% increase and a .7% increase in January.
- The CPI Ex Food & Energy for February rose .1% versus estimates of a .2% increase and a .2% gain in January.
- Housing Starts for February fell to 2120K versus estimates of 2030K and 2303K in January.
- Building Permits for February fell to 2145K versus estimates of 2110K and 2216K in January.
- Initial Jobless Claims for last week rose to 309K versus estimates of 298K and 304K the prior week.
- Continuing Claims fell to 2445K versus estimates of 2498K and 2494K prior.
- Philly Fed for March fell to 12.3 versus estimates of 13.5 and a reading of 15.4 in February.

BOTTOM LINE: US consumer prices rose in February at a slower pace than the previous month as Americans paid less for fuel and the cost of clothing declined, Bloomberg said. The cost of all goods including cars, apparel and food fell .1% last month. Computer prices fell .9% in February and are now down 14.8% over the last 12 months. I continue to believe inflation measures will decelerate throughout most of the year as commodity prices weaken further, unit labor costs remain subdued and US growth slows to average levels.

The pace of US housing starts fell less than expected last month, suggesting housing demand is holding up in the face of higher mortgage rates, Bloomberg reported. Starts fell 24% in the Northeast, 11% in the South and 10% in the Midwest. Starts rose 7.9% in the West. I expect starts to continue to decelerate throughout most of the year as the housing market slows to more healthy sustainable levels.

First-time claims for US unemployment benefits unexpectedly rose last week to a level that still signals strength in the labor market, Bloomberg said. The labor market is poised to create another 2 million jobs this year. The four-week moving-average of initial claims increased to 296,500 from 293,750 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, remained at 1.9%. The US job market is off to its best start since the heights of the bubble in 1999. I continue to believe the job market will remain healthy without generating substantial unit labor costs increases, the main component of inflation.

Manufacturing in the Philly region expanded at a slower pace in March, Bloomberg said. Only 23% of companies reported price increases versus 53% in January. The prices paid component of the index fell 12 points and has plunged 74.2% in five months. This is the largest percentage decline since 2000-2001, when the bubble burst. I continue to believe manufacturing will add to US growth over the intermediate-term. Almost all of the prices paid indices are in the middle of significant declines.