Housing Starts, Permits, CPI All Miss

Following last week's jump in headline PPI some expected a reversal in the recent trend of BLS-measured disinflation. No such luck: moments ago the BLS reported that according to its hedonic adjustments, May headline consumer price inflation rose by 0.1%, below expectations of a 0.2% increase, and up 1.4% from the prior year. Alternatively, core CPI, excluding food and energy rose by 0.2% in line with expectations, and up 1.7% from past year. According to the BLS, "The shelter index rose 0.3 percent and accounted for more than half of the seasonally adjusted all items increase in May. The energy index rose modestly, with the gasoline index flat but increases in the electricity and natural gas indexes accounting for the rise. The food index, however, turned down in May, with the food at home index falling 0.3 percent." Should the recent surge in WTI continue, look for this "disinflation" to not persist, and certainly look for it to end as soon as the PBOC decides the time to get involved in markets returns.

Breaking down the CPI by component, fuel saw a -2.9% drop, while food supposedly declined -0.1% in May. This was offset by utility gas service rising 2.4% (and Energy services posting a broad 1.2% price increase), even though the Industrial Production data released previously by the Fed showed an underperformance in utility businesses. Go figure.

Elsewhere, the housing market, despite some so-called recovery, continues to be moribund, with both housing starts (914K, below expectations of 950K), and permits (974K, Exp. 975K) missing expectations. And the miss would have been much worse if one were to exclude the multi-familiy (rental) housing units, which after plunging by the most since 2006 last month, which once again spiked from 245K to 306K even as single-family housing unites stayed essentially flat in May at 599K vs 597K the last month. More notably, the single-family housing market was only boosted thanks to a jump of building in the south, where units jumped from 295K to 331K, while unit starts dropped in the Northeast, Midwest, and the West.

Seasonally-adjusted Starts data showing that the single-family housing market remains virtually unchanged for the past 5 years.

The divergence is even more pronounced on a non-seasonally adjusted basis.

Source: Census


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