- The Consumer Price Index for June rose .2% versus estimates of a .1% gain and a .7% increase in May.
- The CPI ex Food & Energy for June rose .2% versus estimates of a .2% increase and a .1% gain in May.
- Housing Starts for June rose to 1467K versus estimates of 1450K and a downwardly revised 1434K in May.
- Building Permits for June fell to 1406K versus estimates of 1480K and an upwardly revised 1520K in May.
BOTTOM LINE: Consumer prices in the US rose .2% in June, the smallest gain in five months, as gasoline prices retreated, Bloomberg reported. The CPI year-over-year rose 2.7%, below the 20-year average of 3.1%. Core prices are now rising at a 2.3% pace, versus 3% in the first half of last year. Today’s report showed energy prices fell .5% in June as gasoline fell 1.1%. Clothing prices fell .6% versus a .3% decline the prior month. Auto prices were unch. versus a .2% decline the prior month. Moreover, Bernanke said in his speech today that the PCE core, the Fed’s favorite inflation gauge, will rise between 1.75-2.0% next year, below the 20-year average of 2.5%. I continue to believe inflation fears have peaked for this cycle and that measures of inflation will continue to decelerate through year-end as energy and food prices fall meaningfully from current levels.
US builders unexpectedly started work on more homes in June while permits for future construction fell to the lowest level in a decade, Bloomberg reported. The rise in starts was led by a 9% increase in the West and 2.4% gain in the South. Starts fell 3.7% in the Mid-west and 2.4% in the Northeast. I continue to believe the substantial, but diminishing, drag on the US economy from housing is an overall positive for US stocks. I still think home sales are stabilizing at relatively high levels by historic standards, however home construction will likely remain muted at least through year-end as homebuilders continue to work down inventories.
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