Inflation in the United States continues to show mixed signals, whereas the producer price index signaled inflationary pressures eased in September, as the ongoing weakness in demand levels amid rising unemployment and tightened credit conditions continue to weigh down on prices, meanwhile the housing market is still showing signs of stabilization, as we are yet to see a strong rebound in the housing market activity.
The producer price index declined in September by 0.6% following the prior reported 1.7% rise back in August and well below median estimates for a flat estimate, while compared with a year earlier PPI declined by 4.8% more than the prior and expected estimate of -4.3%, meanwhile, core PPI declined by 0.1% also below median estimates and the prior estimates of 0.1% and 0.2% respectively, while compared with a year earlier core PPI rose by 1.8% down from the prior rise of 2.3% and below median estimates of 2.0%.
prices dropped over a variety of items, whereas gasoline prices dropped by 5.4% in September following the prior huge rise of 23.0% back in August, and consumer goods dropped by 0.7%, which further signals that the ongoing weak demand levels will probably continue to weigh down on the general level of prices and this rather supports the Feds’ projections that core inflation will remain subdued.
However, the outlook of inflation remains a major worry for the Federal Reserve Bank at the moment, as though inflation is still under control over the short term, yet over the long term, the outlook for inflation is a threat, as it’s widely expected that inflation rates will start to soar once the economy regains its health due to the huge increase in money supply as a result of the Feds’ programs.
The U.S. economy started to show signs of recovery during the third quarter of this year, and it’s widely expected now that the U.S. economy started to expand during the third quarter, as activity in the manufacturing, services, and housing sectors seem to be either stabilizing or even rising, however, this doesn’t mean that we are out of the woods yet, as challenges remain.
The housing market in specific has been showing signs that the worst slump for the sector since the Great Depression is coming to and end, as the housing market seems to have hit the bottom, whereas cheap home values in addition to the government’s aid for first time home buyers managed to help the sector and helped in stabilizing activity, yet the housing sector still has a long way to go.
Housings starts rose less than expected in September according to a report released today, whereas housing starts rose by 3,000 to 590,000 units from the prior revised estimate of 587,000 and well below estimates of 610,000, while building permits declined in September to 573,000 from the prior revised estimate of 580,000 and below expectations of 590,000.
The housing market will probably continue to show signs of stabilization over the upcoming period, as we don’t expect activity to start rising over a noticeable pace yet, especially, as rising unemployment and tightened credit conditions continue to weigh down on overall activity including activity in the housing market.
Article source : http://www.fxstreet.com
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