Housing Construction Improves in July; Inflation Remains Subdued

Hovnanian OutlookHousing construction grew robustly in July, showing strength in the housing market as the economy gains traction after interest rates rose modestly in 2014 but remain subdued due to geo-political tensions in Ukraine and the Middle East as investors flee to the safety of the 10 yr. Treasury.

Housing starts increased 15.7 percent in July to a seasonally adjusted 1.09 million units after two consecutive months of declines, marking the highest level of construction since November.

Economists from Briefing.com estimated that housing starts would rise to 925,000 units in July.

Separately, the Bureau of Labor Statistics reported this morning that consumer prices increased 0.1 percent in July on a seasonally adjusted basis, the slowest pace in five months after increasing 0.3 percent in June.

Over the past 12 months ending in July the CPI jumped 2 percent after increasing 2.1 percent in June.

The index for all items, excluding food and energy, increased 0.1 percent in July and 1.9 percent over the last 12 months, matching the same figure as for the 12 months ending June.

The Federal Reserve reviews inflation and job growth to help determine monetary policy and stimulus measures.

The Fed has an inflation target of 2 percent that is primarily based on an index showing personal consumer expenditures (PCE).

While Fed policymakers evaluate changes in inflation by reviewing several different price indexes, they tend to emphasize price increases measured by core personal consumer expenditures (PCE) to  be the most significant since the index from the Commerce Department covers the widest range of household spending.

The latest revised core PCE headline from June shows an inflation reading of 1.49 percent after 1.52 percent in May and 1.43 percent in April.

Core PCE rate is 1.60 percent year over year.

-Johnathan Schweitzer


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