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| Last week’s economic headlines were a mixed bag, with producer prices and new home construction falling, while layoffs declined further than analysts had expected. Producer Price Index Producer prices witnessed their biggest decline since 2009, as cheap oil dragged the producer price index for final demand — the prices that businesses get for their goods and services — down by 0.8 percent in January, according to last week’s report from the Bureau of Labor Statistics. The decline in final demand prices was led by the index for gasoline, which fell a whopping 24 percent, the Bureau reported. Prices for diesel fuel, jet fuel, basic organic chemicals, and home heating oil also fell. January’s drop marked the third-straight monthly drop in PPI for final demand. Should the drop lend any credibility to jitters over possible deflation? Not according to Ian Shepherdson, chief economist for Pantheon Macroeconomics. “It’s absolutely not going to happen,” Shepherdson told the Wall Street Journal. “You need to have a broad decline in prices, and at the moment we absolutely do not have that by any stretch of the imagination.” Housing Starts New home construction fell in January, with starts on construction of homes of all types dropping 2 percent to an annual rate of 1,065,000, the Census Bureau reported last week. Starts on single-family homes fell a sizable 6.7 percent to an annual rate of 678,000. Building permits issued for construction of private housing also declined, dipping 0.7 percent to an annual rate of 1,053,000. Permits for single-family homes dropped 3.1 percent to an annual rate of 654,000. A key contributor to the attenuation in new home construction would be factors preventing first-time buyers from entering the market, such as student debt and rising prices. That said, increased employment — and hopefully future improvement in wages — will improve new home construction. “We’re getting there, though gradually,” First Trust Portfolios LP deputy chief economist Robert Stein told Bloomberg. “We see the housing recovery continuing this year. It’ll be choppy, but we’ll see consistent improvement over the previous year.” Initial Jobless Claims First-time claims for unemployment benefits filed by the newly unemployed fell below expectations, after lay-offs saw an equally unexpected rise the week before. Initial jobless claims filed during the week ending Feb. 14 fell to 283,000 claims, a drop of 21,000 claims from the preceding week’s level of 304,000, the Employment and Training Administration reported last week. Last week’s jobless activity outperformed analysts’ expectations of a smaller drop to 295,000 claims. The four-week moving average, considering a more stable gauge of lay-off activity, dropped to 283,250 claims, a decline of 6,500 from the preceding week’s average of 289,750. “It appears that once we come out of the Veterans Day to Presidents Day fog bank, when the individual readings tend to be prone to gyrations, we may settle at a pace of layoffs consistent with where we were before mid-November,” Amherst Pierpont Securities chief economist Stephen Stanley wrote in a public statement. |
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