Consumer prices. The Consumer Price Index (CPI) information was released on Wednesday. The headline price index (including food and energy costs) fell 0.1 percent for the month, which is down from the flat result of the previous month and below the expected flat result. Year-on-year, headline CPI increased 0.7 percent, up from the prior month’s result of 0.5 percent due to a low reading in the prior year. But, again, this was below expectations of 0.8 percent.
Core CPI (excluding food and energy costs) was up 0.1 percent, but even here, the result was below the previous month’s figure of 0.2 percent and below expectations of 0.2 percent. Year-on-year, core CPI also came in slightly higher than the previous month, at 2.1 percent, which was in line with expectations.
These below-expectations results were a surprise and suggest that price pressures are not growing as fast as expected. That being said, the core figure remains in the Federal Reserve’s target range and will most likely not affect its thinking just yet. But the inflation weakness will bear watching.
Housing. The housing data was mixed, suggesting continued strong performance but some weakening. The National Association of Home Builders released the NAHB index on Wednesday, which came in below expectations at 60, though it was in line with the figure from the previous month, which was revised down to 60 from 61. Although this remains a strong number, it suggests that the housing industry is no longer improving.
In line with that, housing starts, released on Friday, fell by 30,000, or 2.5 percent; this worse-than-expected decline came after an increase of 10.1 percent in the previous month. Building permits also declined, showing an increase of just 3.9 percent for the month. (They increased 10.4 percent in the prior month.) These results were better than expected, however.
Overall, last week’s data suggests that parts of the economy continue to slow but that growth continues. This week’s data should provide more information as to the extent of the potential slowdown.
On Tuesday, the Conference Board will release its consumer confidence survey. Expectations are for confidence to remain flat at 96.5, which is a healthy level. Potential downside risk comes from turbulence in the stock market, but this should be offset by decreasing gas prices and healthy labor market conditions. Overall, there is the potential for a positive surprise.
New home sales figures will be released on Wednesday and are expected to increase slightly, from 490,000 to 500,000. There has been a substantial rebound in this figure over the past several months, and the survey data has actually been trending down, so this figure may well be a negative surprise and remain flat. Even that result, however, would still be reasonably strong on an absolute basis.
On Thursday, durable goods orders will be released. Both headline orders and core orders, excluding transportation, were flat last month, and expectations are for a decline of 0.5 percent in headline orders and flat core orders. There appears to be a real risk for disappointment on the headline figure, due to a decline in aircraft orders. The more meaningful core number, however, should remain stable. Given the weakness in manufacturing and mining, this is actually a positive result.
Finally, on Friday the initial estimate of the gross domestic product for the fourth quarter of last year will be released. It is expected to be very weak, at 0.8 percent, down from 2.0 percent in the prior quarter. The decline is probably due to factors such as a slower buildup of inventories and weak investment, as mining and oil drilling continue to decline. This is expected, and while certainly disappointing, it continues to reflect past weakness even as many forward-looking indicators remain healthy.
Have a great week!