CPI Rises More Than Estimates, Housing Starts Rise Slightly

- The Consumer Price Index for January rose .4% versus estimates of a .3% gain and an upwardly revised .4% increase in December.

- The CPI Ex Food & Energy for January rose .3% versus estimates of a .2% gain and a .2% gain in December.

- Housing Starts for January rose to 1012K versus estimates of 1010K and 1004K in December.

- Building Permits for January fell to 1048K versus estimates of 1050K and an upwardly revised 1080K in December.

BOTTOM LINE: The CPI for January exceeded forecasts, Bloomberg reported. Energy prices rose .7% versus a 1.7% gain the prior month. The CPI core rose 2.5% year-over-year versus a 2.4% gain the prior month. The 10-year yield is unch. on the report and gold is falling .7%. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 2 basis points to 2.38% today, but is still down from 2.48% in November. Fed fund futures now imply a 100% probability of a 50 basis point rate cut at the upcoming March 18 meeting. The recent acceleration in inflation measures is almost exclusively a function of the historic speculation for commodities by investment funds. I still expect inflation measures to decelerate meaningfully over the intermediate-term as speculation diminishes on decelerating global demand, rising production and a firmer US dollar.

Housing starts in the US remained near their lowest level since 1991 in January, Bloomberg reported. For all of last year, construction began on 1.35 million housing units, the fewest since 1993, and down 25% from the prior year. Housing starts jumped 19% in the Northeast and 12% in the Midwest last month. Starts fell 3% in the South and 6% in the West. New home construction will remain muted over the intermediate-term as homebuilders continue to work down inventories.