• Year-over-year CPI poised to accelerate as oil plunge fades
  • NAHB homebuilder gauge backs away from a decade high

What you need to know about Tuesday’s U.S. economic data:

CONSUMER-PRICE INDEX (NOVEMBER)

  • Unchanged from month earlier; climbed 0.2 percent for third month when excluding food and energy
  • Rose 0.5 percent from November 2014, while core CPI increased 2 percent for the biggest 12-month advance since May of last year
  • Costs of services increased 2.5 percent in 12 months through November, while goods prices declined 2.8 percent

The Takeaway: Inflation remained well below the Federal Reserve’s 2 percent goal in November on a year-over-year basis. When the December and January figures are released, however, inflation will be a lot closer to 2 percent because the CPI will be compared with year-earlier periods that reflected steep drops in energy costs. The data should help assure Fed policy makers, who are forecast to raise interest rates on Wednesday, that inflation is moving in the right direction. The Labor Department’s November report highlights the divergence between growth in the U.S. and the rest of the world. While deflationary effects of slow demand for commodities such as crude oil are keeping a lid on price pressures, stronger domestic growth is pushing up costs of services.

NAHB/WELLS FARGO HOMEBUILDER SENTIMENT (DECEMBER)

  • 61 after 62 a month earlier
  • Decline reflected less buyer traffic, dimmer sales outlook
  • Confidence dropped in three of four U.S. regions, paced by Midwest

The Takeaway: Confidence among U.S. homebuilders slid this month, retreating further from a decade high reached in October. Developers are increasingly worried about the rising costs for viable land and workers, which are harder to come by as the housing recovery has progressed. Though the job market has continued to strengthen, giving would-be buyers the means to buy a home, momentum in the industry has slowed over the last few months. And a potential challenge for housing looms ahead: a possible interest rate increase from the Fed. Buyers and builders alike may hold back on additional investments in housing until the effect from higher borrowing costs becomes clearer.

EMPIRE STATE MANUFACTURING (DECEMBER)

  • Improved to minus 4.6, highest since July, from minus 10.7
  • Sales rose for first time in five months, orders contracted at a slower pace and six-month expectations strongest since January
  • Employment gauge slumped to minus 16.2, weakest since July 2009

Takeaway: The improvement signals the worst of the manufacturing slump may be over. Cuts in inventories have put stockpiles more in line with sales and a more stable dollar may mean exports will be under less pressure. The caveats are that continued declines in fuel prices may lead to further reductions in spending by energy companies and factory payrolls in the region are now being trimmed more aggressively.

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