Housing Starts Jump

The May report suggests housing remains extremely strong. Also: May CPI is flat

Housing starts jumped 11.6% in May, to an annual rate of 1.733 million. The increase is the largest since July, 1995, and way above the consensus estimate of 1.60 million (or up 2.9%).

In the report, single-family starts were up 9.6%, while multifamily starts surged 23.2%. All regions were up sharply, with activity in the Northeast rising 22.4% while starts in the Midwest gained 24.0%. Starts rose 10.0% in the West and 6.0% in the South.

Housing permits, a measure of future activity, were up 2.6%, still a strong performance.

The data suggest the housing sector remains extremely strong, with starts up 8.0% from a year ago. The recent drop in mortgage rates should continue to fuel home buying.

May CPI Stays Flat

The consumer price index (CPI) was unchanged in May, slightly better than the 0.1% rise expected by the consensus. The surprise was entirely in energy prices, as the core rate matched the 0.2% consensus rise..

Energy prices dropped 0.7%, and food was down 0.2%. Within the core figure, apparel prices dropped 0.6%, offset by a 0.5% rise in medical care, which is now up 4.7% from a year ago. The CPI is up only 1.2% from a year ago, while the core (excluding food and energy) is up 2.5%.

The data suggest no major inflation threat, at least yet, which will allow the Fed to keep policy stable.

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