Last Updated Aug 17, 2010 9:35 AM EDT
Housing starts and building permits both came in lower than expected, as the nation's real estate market struggles to climb out of the boom and bust cycle. Starts were up 1.7 percent from June at a seasonally adjusted annual rate of 546,000, but the June figure was revised down to 537,000 from 549,000, so the bar was pretty low. The number stinks, but it's still 14 percent higher from the record low in April 2009 of 477,000 (the lowest level since the Census Bureau began tracking housing starts in 1959).
The news was worse on the building permits front. Permits, which are a good way to sneak a peek into the future, were down 3.1 percent to seasonally adjusted rate of 565,000. I guess there's some comfort in the idea that builders realize that we have plenty of inventory, but that's cold comfort for unemployed construction workers.
Many have predicted that with scads of inventory, house prices are bound to drop in the second half of the year. That would certainly add fuel to the worries over deflation, which has seen interest rates plummet over the past few weeks. Just yesterday, the yield on the 10-year fell below 2.6 percent, despite the announcement that China was a net seller of US debt in June for the second month in a row. As a reminder, the last time we were at these levels--March, 2009--investors thought the world was falling apart. This time, we can't explain 2.6 percent rates with the "flight to quality" mantra. Nope, this is plain old deflation fear.
Well, for one day, maybe you don't have to worry about deflation. The Bureau of Labor Statistics said that wholesale prices rose 0.2 percent--it was the first increase in four months. Excluding food and energy (aka the only things that you really care about), PPI was up 0.3 percent, more than projected and the biggest gain since January.
Image by Flickr User denverjeffrey, CC 2.0