Two key reports, one on housing and the other on producer prices give us more numbers to ponder.
First to the housing market:
- The Commerce Department reported that housing starts fell 1% last month to 581,000 units.
- Ground breaking for single family homes rose 1.7% to 490,000 units annually.
- Construction of multi family units fell 13.3%
- Confidence among home builders rose in August.
- Permits for new building fell 1.8% to 560,000 units, down 39.4% from a year ago.
- The inventory of total houses under construction fell to a record low of 609,000 while permits for new construction also hit a record low of 102,000 units.
- Compared to last year housing starts fell 37.7%
Now let's look at producer prices.
- The Labor Department reported that downward pressure on producer prices still remains.
- Prices received by US farms, factories and refineries fell .9% last month after gaining 1.8% in June.
- Core producer prices (excluding food and energy) fell .1% in July after a .5% increase in June.
- Compared to last year producer prices are down 6.8%
Putting both housing and producer prices in larger perspective we see that deflationary forces are still present. With wholesale prices down almost 7%, pricing power remains weak.
With a cautionary note on the stock market, Mohamed El-Erian of Pacific Investment Management Company, warned that the rally in the US stock market had topped out and that valuations (prices) we running ahead of fundamentals.
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