Core Inflation Tame, Housing Continues to Slow

- The Producer Price Index for March rose .5% versus estimates of a .4% increase and a 1.4% decline in February.
- The PPI Ex Food & Energy for March rose .1% versus estimates of a .2% increase and a .3% gain in February.
- Housing Starts for March fell to 1960K versus estimates of 2025K and 2126K in February.
- Building Permits for March fell to 2059K versus estimates of 2100K and 2179K in February.

BOTTOM LINE: Producer prices in the US rose last month, while a smaller-than-expected rise in costs excluding fuel and food pointed to tame inflation, Bloomberg said. The .1% rise in the core rate was the smallest gain since November. Computers, metal-cutting machine tools and floor coverings all fell in price in March. Costs of intermediate goods, which are partially finished goods such as lumber or steel, fell .1% last month, the second straight fall. Raw materials fell 2.7%. Core producer prices rose 1.7% over the last 12 months. I continue to believe inflation readings will decelerate throughout most of the year.

Builders started work last month on the fewest new houses in a year as rising mortgage rates and record inventories of unsold homes discouraged new projects, Bloomberg said. Housing starts fell 7.8% in February, while Building Permits declined 5.5%. Starts fell 16% in the West, 8.2% in the Midwest, 4.8% in the South and .5% in the Northeast. I continue to expect housing to slow to average levels from historic highs. This will also help slow consumer spending and overall US growth back to average levels from robust rates.