It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines:
Consumer Price Index (CPI) Falls
On Wednesday, the Labor Department reported that its Consumer Price Index fell 0.1% in December, missing economists’ estimates for no change. Core CPI, which doesn’t include food and energy costs, increased 0.1% last month. In the past 12 months, CPI increased 0.7%, while core CPI rose 2.1%. Inflation still remains well below the Federal Reserve’s 2% target, and further weakness in energy prices will likely continue to keep inflation low. There is also no doubt that deflation is spreading, and the Fed will be under no pressure to raise key interest rates.
Housing Starts & Building Permits Decline
The Commerce Department reported that housing starts fell 2.5% to a 1.15 million-unit pace in December. November’s housing starts were revised slightly higher to a 1.18 million-unit pace. Last month, building permits dropped 3.9% to a 1.23 million-unit pace. A drop in both single-family and apartment construction attributed to the weaker-than-expected housing starts and permits data last month. And while 2015 was the best year for home construction since 2007, building permits are still at about half of their 2005 highs.
Initial Claims for Unemployment Increase
For the week ending January 16, initial claims for unemployment increased by 10,000 to 293,000. The Labor Department noted that’s the highest reading since July 2015. Economists were expecting claims to drop to 278,000. The four-week moving average also increased, rising by 6,500 to 285,000. Clearly, there have been layoffs in the energy patch, and with decelerating economic growth, more layoffs may be forthcoming. Since Fed Chair Janet Yellen is a labor economist, I expect that she will be very reluctant to raise key interest rates further if the labor market continues to deteriorate.
Existing Home Sales Rebound
The National Association of Realtors reported that the pace of existing home sales rebounded 14.7% in December to an annual rate of 5.46 million units. This beat economists’ forecasts for a 5.20 million pace. November’s sales rate remained unrevised at 4.76 million units. Unseasonably warm weather in much of the country helped boost sales last month. Overall, existing home sales increased by 6.5% in 2015, which is the strongest year of sales since 2006.
Index of Leading Economic Indicators Slips
The Conference Board announced this morning that its index of leading economic indicators slipped 0.2% in December to 123.7. The drop was attributed to weak manufacturing orders and a decline in housing permits. The index of leading economic indicators lost some momentum at the end of the year, signaling that economic growth in the U.S. is moderating.
Have a great weekend,