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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

April wholesale prices drop as housing starts rise

Wholesale prices dropped in April and new housing starts were up 5 percent compared with March, the government said moments ago, providing some good news to skittish U.S. markets.

The producer price index -- the measure of wholesale inflation, or the prices that businesses pay for their goods -- dropped 0.1 percent in April after rising 0.7 percent in March. It's the second decline in the past three months.

If you remove the volatile food and fuel costs, wholesale inflation rose 0.2 percent in April, compared with a 0.1 percent rise in March. This number reflects the falling price of crude in recent months.

Forecasters predicted that wholesale inflation would contract by 0.2 percent in April, after expanding slightly by 0.7 percent the previous month.

Wholesale inflation is up 5.5 percent compared with April 2009 and up 1 percent if you strip out food and fuel.

Housing starts were up 5.8 percent in April to an annualized rate of 672,000, compared with 635,000 in March. New building permits were down 11 percent, however.

On housing starts, economists said 650,000 new homes would be built in April, up from 626,000 the previous month.

Today's wholesale inflation number is a predictor of Wednesday's consumer inflation number -- the increase or decrease in prices you experience at the store. Inflation has stayed low in the wake of the financial crisis, despite the government's injection of billions in new money into the system, in its bid to head off a liquidity crisis.

The Fed predicts that inflation will remain low throughout the remainder of the year but some economists are not so sanguine on the prospects.

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By Frank Ahrens  |  May 18, 2010; 8:47 AM ET
Categories:  Data  | Tags: CPI, Economic, Government, Inflation, Office for National Statistics, PPI, United States, building permits, consumer inflation, economic recovery, housing starts, wholesale inflation  
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