Highlights
The consumer price report for November was calming on most financial markets despite the rise in the headline number. Both the headline and core numbers were much less inflationary than yesterday’s scary PPI numbers. Headline consumer price inflation jumped 0.4 percent in November after gaining 0.3 percent the month before. The November headline matched the consensus forecast. Core CPI inflation-in contrast with yesterday’s core PPI run up-eased to 0.0 percent (no change) after a 0.2 percent increase in October. The consensus had called for a 0.1 percent rise.
The headline number was boosted mainly by a 4.1 percent surge in energy costs after a 1.5 percent gain in October. Gasoline was up 6.4 percent, following a 1.6 percent gain the month before. Food price inflation was soft in November with a 0.1 percent rise-the same as in October.
Within the core, declines in shelter indexes offset increases in costs for new and used motor vehicles, medical care, airline fares, and tobacco. Shelter costs declined 0.2 percent in the latest month, led by a 1.5 percent drop in lodging away from home. Owners’ equivalent rent dipped 0.1 percent. Hotels-including resorts-continued to engage in heavy discounting. High unemployment is keeping rent soft in general.
Year-on-year, headline inflation increased to plus 1.9 percent (seasonally adjusted) from minus 0.2 percent in October. The core rate was unchanged in November at up 1.7 percent. On an unadjusted year-ago basis, the headline number was up 1.8 percent in November while the core was up 1.7 percent.
Inflation is still high at the headline level but it is not as severe as earlier indicated by the PPI for November. A flat reading for the CPI core suggests that a sluggish economy is keeping underlying inflation tame for now.
Housing Starts
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| Released on 12/16/2009 8:30:00 AM For November, 2009 |
|
Prior |
Consensus |
Consensus Range |
Actual |
| Starts – Level – SAAR |
0.529 M |
0.575 M |
0.540 M to 0.600 M |
0.574 M |
| Permits – Level – SAAR |
0.552 M |
|
|
0.584 M |
|
|
Highlights
Housing starts looked good for November but most of the gain was largely a comeback and then some in multifamily starts-a volatile component. The single-family component posted only a partial rebound. Construction companies picked up the pace of groundbreaking for new homes as housing starts in November rebounded 8.9 percent, following a revised 10.1 percent plummet in October. The November pace of 0.574 million units annualized came in right at the market forecast for 0.575 million units and was down 12.4 percent on a year-ago basis. The latest comeback was led by a 67.3 percent rebound in multifamily starts, following a sharp 29.5 percent plunge in October. Meanwhile the single-family component edged up 2.1 percent after a 7.1 percent fall the month before.
By region, the November rebound in starts was led by 16.4 percent rebound in the Northeast with gains also seen in the South, up 12.3 percent; Midwest, up 3.0 percent; and West, up 1.9 percent.
Homebuilders are modestly optimistic about ramping up the pace of construction as housing permits in November rebounded 6.0 percent after falling 4.2 percent in October. October’s pace of 0.552 million units annualized was down 24.3 percent on a year-ago basis.
Today’s housing starts report is good but should be seen in the context of October’s weak numbers. The two months together indicate that housing is in a slow recovery. The bad news is that the recovery is slow. But the good news is that the housing construction recovery is slow-anything more robust at this point would not be sustainable.
FOMC Meeting Announcement
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| Released on 12/16/2009 2:15:00 PM |
|
Prior |
Consensus |
| Federal Funds Rate – Target Level |
0 to 0.25 % |
0 to 0.25 % |
|
|
Market Consensus Before Announcement
The FOMC announcement for the December 15-16 FOMC policy meeting is expected to leave the fed funds target rate unchanged at a range of zero to 0.25 percent. However, traders will be watching to see if the “extended period” language is qualified with any additional wording regarding the future path of the fed funds rate. Traders also will look for updates on the Fed’s view of the recovery and on the Fed’s plan for unwinding balance sheet expansion. |
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