Economic data

Oct Housing Starts totaled 529k annualized, well below forecasts of 600k and down from 592k in Sept. It’s the lowest level of starts since April and the drop in Permits show that it won’t pick up so soon. Permits were 552k annualized, 28k below forecasts and down 23k from Sept. I put a big caveat on this Oct data as the uncertainty over whether the tax credit was going to be extended certainly influenced behavior both on the buyers and builders standpoint. With that said, with a national housing market that still has too much inventory, a slowdown in starts is welcome.

Oct CPI rose .3% headline and .2% core, both .1% above expectations. Y/o/Y, CPI is down .2%, the smallest rate of decline since Feb ’09. The core rate is now up 1.7% y/o/y, the highest since June. Helping to boost the core rate was a 1.6% rise in new vehicle prices and a 3.4% gain in used cars and trucks. Let’s thank the Clunker plan for that as the rest of us now have to pay higher prices for our cars. The headline reading was boosted by a 1.5% rise in energy prices. Owners Equivalent Rent was flat and makes up 24% of the CPI and rents fell by .1%. Apparel prices fell by .4%. Medical care rose by .2%. Overall commodity prices rose by .5%, led by the rise in energy. Bottom line, the inflation readings over the next 6 months will only get worse (meaning higher) as the y/o/y comparisons get very easy and persistent US$ weakness and higher commodity prices work its way through the economic inflation stats with the degree being the only question.

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