Last Week in the News – Economic Update!

The Consumer Price Index rose by 0.2% in January, as falling energy prices only partially offset big increases in the cost of medical care and airline tickets, the Labor Department reported February 21. Although smaller than December’s 0.4% rise, consumer prices were higher than the 0.1% increase Wall Street had forecast. Core inflation, which excludes volatile energy and food prices, also was up more than analysts had expected, rising by 0.3%. It was the largest one-month gain in seven months.

However, in minutes released on February 21 from its late-January policy meeting, the Federal Reserve said the outlook for core inflation had improved. It stated that a confluence of “better-than-expected news” on the economy and inflation suggested there were smaller risks to growth and improved prospects for inflation.

The Conference Board’s Index of Leading Economic Indicators — designed to forecast economic activity over the next three to six months — rose by 0.1% in January. Although not the 0.2% rise analysts had anticipated, the reading suggested continued modest growth for the U.S. economy.

The number of people filing new claims for unemployment insurance fell by 27,000 for the week ended February 17, the Labor Department said February 23. Although not as large a drop as economists had expected, it was a sharp improvement over the prior week when claims jumped by 46,000.

For the week ended February 22, interest rates on 30-year and 15-year mortgages fell, Freddie Mac said. With the latest decline, mortgage rates are slightly lower than they were at this time a year ago.

This week look for updates on existing home sales on February 26.
Compliments of American Home Mortgage Corp.

Last Week in the News – Economic Update!

The Producer Price Index — wholesale prices that suppliers charge retailers for their goods — fell 0.6% in January, the largest drop since October, the Labor Department reported February 16. Core wholesale inflation, which strips out volatile food and energy prices, rose 0.2%. Both numbers were in line with economists’ expectations.

The U.S. trade deficit widened to $61.2 billion in December, a 5.3% increase over November. Economists had expected a deficit of only $59.5 billion. For all of 2006, the trade deficit was a record $763.6 billion, a 6.5% increase from the previous high of $716.7 billion set in 2005.

Construction of new homes and apartments plunged by 14.3% in January, the Commerce Department said February 16. The bigger-than-expected drop left construction at a seasonally adjusted annual rate of 1.4 million units, the lowest level in 10 years.

Nationally, home sales fell 10.1% in the fourth quarter of 2006, compared with the same period a year ago, the National Association of Realtors said February 15. The states with the biggest declines in sales from October through December were Nevada, down 36.1%; Florida, down 30.8%; Arizona, down 26.9%; and California, down 21.3%. The national median price — the point where half of homes sold for more and half sold for less — fell to $219,300, down 2.7% from the fourth quarter of 2005.

Retail sales were essentially flat in January, the Commerce Department reported February 14. While sales at department stores showed strength, auto sales fell 1.3%, the biggest one-month drop since falling 2.4% last June.

This week look for updates on the Consumer Price Index on February 21.

Compliments of American Home Mortgage Corp.