April 26, 2024

Weakening Seen in Economic Growth Data

Other data released on Tuesday suggested that the housing market recovery was losing momentum, even though builders started work on new homes at an annual rate of more than one million units for the first time since June 2008.

“For the Fed, it’s business as usual,” said Millan Mulraine, senior economist at TD Securities. “There is not likely to be an acceleration in growth momentum that would cause them to shift their policy stance anytime soon.”

The Labor Department said its Consumer Price Index edged down 0.2 percent last month as gasoline prices tumbled, unwinding some of February’s 0.7 percent increase. Economists expected a flat reading.

Underscoring the benign inflation environment, consumer prices rose just 1.5 percent in the 12 months through March — the smallest increase since July. Prices increased 2 percent year-on-year in February.

Stripping out volatile energy and food costs, the so-called core C.P.I. was up only 0.1 percent after gaining 0.2 percent in February. That lowered the 12-month increase to 1.9 percent in March from 2.0 percent in February.

A separate report from the Fed showed that production at the nation’s factories decreased 0.1 percent after advancing 0.9 percent in February. The decline was fairly broad-based, with output dropping for primary metals and electronics. Automobile assembly, however, increased.

Despite the factory weakness, overall industrial production rose 0.4 percent last month, mainly because of a jump in utilities’ output.

Economic data for January and February have suggested growth accelerated in the first quarter after activity almost stalled in the final three months of 2012.

But in a replay of the previous two years, the economy appears to have hit a speed bump at the end of the quarter, with data ranging from employment to retail sales and manufacturing weakening significantly in March.

Much of the weakness is blamed on higher taxes and deep government spending cuts put in place in Washington.

“We definitely see the second quarter slowing from the first in terms of overall growth across many of the sectors. Obviously, the drag from fiscal policy is playing into this a little bit,” said Erik Johnson, senior United States economist at IHS Global Insight.

A third report from the Commerce Department showed that housing starts rose 7.0 percent last month to a 1.04 million-unit annual rate, the highest in nearly five years.

The increase in home building was driven by the volatile multifamily sector, while groundbreaking for single-family units fell. In addition, permits for future construction tumbled 3.9 percent — reversing February’s gain.

That suggested a slowdown in housing activity, coming on the heels of a report on Monday that showed a third consecutive decline in homebuilders’ confidence in April.

“The decline in single starts and permits is consistent with recent hints the housing recovery has lost some momentum,” said David Sloan, senior economist at 4Cast Ltd.

Article source: http://www.nytimes.com/2013/04/17/business/economy/weakening-seen-in-economic-growth-data.html?partner=rss&emc=rss

Rising Gas and Food Prices Push U.S. Inflation Higher

The Labor Department said in its monthly report that the Consumer Price Index, the most widely used measure of inflation, was up 0.4 percent in April from March, and up 3.2 percent from a year earlier. The 12-month figure represents the biggest increase in the index in any 12-month period since October 2008.

Analysts had forecast the same monthly rise but a slightly smaller increase for the year, at 3.1 percent.

Food and gasoline price rises accounted for most of the increases, with gasoline accounting for almost half of the month-to-month rise.

Food prices were up 0.4 percent in April, smaller than the 0.8 percent rise in March as prices for fresh vegetables slowed their advance. Energy prices rose 2.2 percent in April, the 10th consecutive monthly increase, although the rise was smaller than the jumps of 3.5 percent in March and 3.4 percent in February, the report said.

Gasoline prices were up 3.3 percent in April. According to the report, energy prices have now risen 19 percent over the last 12 months, with gasoline prices up 33.1 percent.

Consumers are “painfully aware” that if high energy and food costs continue, “the cost of living is going to go up,” said Stuart Hoffman, the chief economist at the PNC Financial Services Group.

Inflation as measured by the core C.P.I., which strips out volatile prices for energy and food, edged up 0.2 percent in April, making it the third increase of that size in the last four months, the department’s Bureau of Labor Statistics said.

Housing and apparel prices each climbed by 0.2 percent, the figures showed.

Core inflation was up 1.3 percent from a year earlier, the department said. The core index, which was also in line with analysts’ forecasts, was also pushed up by rises in the prices of new vehicles, shelter, medical care and airline tickets.

“I think that you are seeing inflation drift higher,” said Joshua Shapiro, chief United States economist at MFR Inc. “On the core side it is a slow drift, but it is nonetheless there. What will be important to the Fed is the mix between inflation and real growth.”

Many economists expect gasoline prices to ease over the summer. But in some regions of the country, consumers have been paying $4 or more a gallon at the pump since demand in emerging markets and turmoil in the Middle East and North Africa in the first quarter of the year sent prices higher. While consumers are feeling the strain, economists emphasized that the Federal Reserve was unlikely to take any action to relieve it by lowering interest rates or extending its quantitative easing program.

The Fed has raised its forecast of inflation, projecting that prices could rise 2.1 to 2.8 percent this year, mostly because of higher oil prices, although it stressed that those increases would subside. In April, the Fed’s policy-making body voted to continue several stimulus policies, like keeping short-term interest rates near zero. In a statement, the committee said it expected inflation from higher prices in energy and other commodities to be “transitory.”

Mr. Hoffman said core inflation, which is the rate the Fed focuses on, had edged up in the last year, meaning the Fed could put deflation concerns behind it. The 1.3 percent rate in the latest report was still below the unofficial target of the central bank of 2 percent or less.

“It is still not of concern to the Fed,” Mr. Hoffman said. “We are sort of in the middle, not going up too fast to worry the Fed about inflation.”

Article source: http://feeds.nytimes.com/click.phdo?i=2b210908d43c6097b069d34ace71cb74