July Housing Starts, Producer Prices Down

Two key economic indicators were released moments ago and they continue to paint a picture of a sluggish economy trying to slog its way out of recession.

In the first number, July housing starts were down 1 percent in July compared to June, which means builders are backing off their enthusiasm for putting up new housing.

This comes after a June that saw housing starts rise 6.5 percent compared to May, so this is a definite retracement and a big disappointment: Forecasters expected housing starts to rise 3 percent last month.

In the second number, the Producer Price Index -- the prices paid by people who make the stuff we buy -- was down .9 in July, compared to an increase of 1.8 percent in June, the Labor Department said. If you take out the volatile food and energy prices, core PPI was down .1 for July.

Producer prices -- the price of products before they reach store shelves -- was down a whopping 6.8 percent over the past year, which is worrisome. It marked the biggest decrease in more than 60 years of record-keeping.

PPI is the best indication of future Consumer Price Index, or the best measure of inflation, meaning rising prices. The CPI released last week hinted at least disinflation and possibly deflation, which is one of the worst things that can happen to an economy -- its sustained contraction, when prices and wages fall hand-in-hand, as happened in the Great Depression.

-- Frank Ahrens
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By Frank Ahrens | August 18, 2009; 8:31 AM ET
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Comments

obozo the joker clown and the democrat socialist party circus with their huge stimulus package (more like pork), cap and trade, more taxes, and trying to shove the government health care down our throats have made it impossible for the USA economy to get going again. Since the democrats caused the subprime meltdown, no one trusts them so people are saving what they can. We are going back to a hand me down society. Tough times ahead for people who didn't save and depend on the government. Hide you money middle class, the democrats are coming for it.

Posted by: charlietuna666 | August 18, 2009 9:28 AM | Report abuse

Wow, talk about misinformed.

Posted by: obrier2 | August 18, 2009 9:33 AM | Report abuse

70% of the economy is consumption. For over a decade a significant portion of this was funded by debt based on the real estate bubble backed by absurdly low interest rates. The party is over.

It has nothing to do with Democrats in power. The entire foundation of the US economy is unsound, period! Tough times ahead.

Posted by: knutton | August 18, 2009 9:41 AM | Report abuse

At some point with deficits reaching to the stratosphere American common sense kicks in and we realize that we the taxpayer will foot all the spending so we the consumer buy a whole lot less and save a whole lot more. Wish the Ds would get a clue.

Posted by: sah2 | August 18, 2009 9:43 AM | Report abuse

It's called deflation. Japan has been suffering from its insidious effects since 1989, other that a wall of protectionism or bombing the factories of Asia, their is no known cure. On the positive side, if you have a secure job, little or no debt and some ready cash in the bank, the world will soon become your oyster.

Posted by: slim2 | August 18, 2009 9:54 AM | Report abuse

the recession ends when America is put back to work...
the anti American worker agenda of the dems has got to stop...

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July Housing Starts, Producer Prices Down