Thursday, January 18, 2007

CPI Bounces, Job Market Healthy, Housing Starts Surge, Philly Manufacturing Expanding

- The Consumer Price Index for December rose .5% versus estimates of a .4% increase and an unch. reading in November.
- The CPI Ex Food & Energy for December rose .2% versus estimates of a .2% gain and an unch. reading in November.
- Initial Jobless Claims for last week fell to 290K versus estimates of 314K and 298K the prior week.
- Continuing Claims rose to 2530K versus estimates of 2438K and 2410K prior.
- Housing Starts for December rose to 1642K versus estimates of 1565K and 1572K in November.
- Building Permits rose to 1596K versus estimates of 1505K and 1513K in November.
- Philly Fed for January rose to 8.3 versus estimates of 3.1 and an upwardly revised -2.3 in December.

BOTTOM LINE: US consumer prices accelerated in December for the first time in four months, Bloomberg reported. Energy prices jumped 4.6% and gasoline prices surged 8% during December. Both have since decline substantially. New vehicle prices fell .2% and airfares fell 2.4%. I expect next month’s CPI to show another meaningful deceleration.

The number of Americans filing first-time claims for state unemployment benefits unexpectedly fell last week to the lowest level in 11 months, Bloomberg reported. Faster job and income growth are helping boost consumer spending. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, rose to 1.9% from 1.8% the prior week. I continue to believe the labor market will remain healthy over the intermediate-term as weakness in construction and manufacturing subsides and companies gain confidence in the sustainability of the current expansion.

Housing starts in the US unexpectedly rose in December as sales improved and the weather turned unseasonably warm, Bloomberg reported. The increase in starts was led by a 26% jump in the Northeast, 12% rise in the West and 1.8% increase in the Midwest. Starts fell 2% in the South. This report just adds to data that suggests the worst of the housing downturn is over. However, rising starts are a negative for homebuilding stocks even as they are an overall positive for the US economy.

Manufacturing in the Philly region resumed its expansion in January as orders and sales improved, Bloomberg said. The Shipments component of the index rose to 23.9, the highest since April 2005, versus 14 the prior month. The Expectations component of the index soared to 22.4 versus 5.4 in December. The Prices Paid component plunged to 11.9, the lowest since July 2003, from 19 the prior month. The underlying components of this index are very positive and point to a pick-up in manufacturing activity as auto production and housing-related cutbacks subside.

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