Bad Tuesday

THE BE YOUR OWN ECONOMIST ® BLOG

The Federal Reserve
(http://www.federalreserve.gov/releases/g17/Current/default.htm),
Census Bureau
(http://www.census.gov/const/newresconst.pdf)
and Bureau of Labor Statistics
(http://stats.bls.gov/news.release/ppi.nr0.htm) issued three unhappy releases today.

The Fed’s capacity-utilization data reports industry’s current operating level, measured as a percentage of maximum output. The table below shows that industry’s operating rate has weakened this spring. It had been roughly 82% before the current downturn began.

There were over a million single-family housing starts (Census Bureau) during the housing boom that peaked a couple of years ago. Soon, as the table below reveals, they’ll be less than half that record level.

Inflation at the wholesale level, as measured by the BLS’s producer-price index, has averaged almost one percent per month this year. That’s about 10% at an annual rate. It includes energy and food prices, which have been the most volatile. Excluding food and energy reduces inflation to a modest level. But, since most folks drive and eat, leaving food and energy in the picture presents a realistic portrait of current conditions.


…………………………….........Jan……Feb……Mar…….Apr…….May
Capacity Utilization(%)....80.0……80.3……80.3……79.6…..79.4
Housing Starts*…………....750…....722……..711….…681……..674
Producer Prices**….......…1.2……..0.3……....1.1……..0.2……...1.4

*Single-family in thousands

** Monthly percentage rate of increase

Summing up: Economic activity is declining while prices are surging.

It was a bad Tuesday.

© 2008 Michael B. Lehmann