Mixed Signals

Housing starts showed some interesting signs today. Starts were up 2.8% in January after falling .7% in December, but permits fell back 4.9%. The annualized pace for home starts rose to .591 million, which was higher than the average forecast of .580, but right in line with the University of Oregon's EC 410 class' forecast of .592. Good stuff from professor Duy. It's amazing what a simple ar(1) model can do for you on a short term one period forecast. Multifamily home starts jumped significantly, up 9.2% while the single family side remained more tempered, edging up 1.5%. Here's the report from Bloomberg.

In other news, industrial production increased .9%, growth was strong across the entire sector, particularly in the auto-industry, where motor vehicles and parts were up 4.9% in January after receding .3% December.

With an exception for the activity in building permits, housing and industrial production had good months in January. We'll see if anything translates over to higher employment numbers when the jobless claims come out tomorrow. The one concerning piece of news I saw come out today was from the import and export price report.

"Import prices jumped 1.4 percent in January, driven by a 4.8 percent surge in the price of petroleum imports but also showing a 0.6 percent rise excluding petroleum. . . . . Export prices, up 0.8 percent, rose for a third straight month. Agricultural prices show pressure, up 1.4 percent, as do industrial supplies, up 1.9 percent."

Most of the growth in prices was due to inputs, raw materials and such, rather than in final goods, implying that producers are sheltering most of the burden for increased prices. Tomorrow the producer price index (PPI) will be released and on Friday we'll see the consumber price index (CPI). My guess is that we might see larger increases in the PPI than in the CPI. In other words, consumer demand still might not be able to carry the burden of higher prices. We'll see in the next few days.