Consumer Prices Fall

The report keeps alive worries that deflation is emerging. Also, housing starts fell, while consumer sentiment rose

The April consumer price index fell 0.3%, the largest decline in 19 months, due to a fall in gasoline prices that took energy prices 4.6% lower. The data keeps alive worries that deflation is emerging but slowly. Most analysts had been looking for 0.2% overall decline, following a rise of 0.3% in the CPI in March.

Excluding food and energy, the April core CPI was unchanged for the second consecutive month. The weakness was fairly broadbased. Transportation fell 1.7%. On a year-to-year basis, the CPI is up 2.4% and the core is up 1.5%. It's worth noting that energy prices been rising in the past couple of weeks.

On Thursday, May 15, April's producer-price index, generally taken as a look at wholesale-level prices, posted a record 1.9% drop.

Housing Starts Fall

April housing starts, a measure of new construction, fell more than expected 6.8% to a 1.63 million annual rate after rising a revised 6.6% in March, or a 1.748 million rate. The April data was less than 1.73 million pace expected.

Housing permits rose 1.2% to 1.708 million, vs. an upwardly revised 1.688 million in March. Cold weather in the East caused some of the slowdown. But demand remains strong due to low mortgage rates, and indications that they won't rise again anytime soon.

Consumer Sentiment Survey Sharply Higher

The University of Michigan Consumer Sentiment Index climbed to 93.2 in May from 86.0 in April, according to its preliminary reading. The number was higher than most economists expected.

The improvement was paced by the future expectations component, which rose to 92.7 from 79.3. The present situations component fell to 94.1 from 96.4.

The data could give rise to some profit-taking in Treasuries, and give a little boost to stocks and the beleaguered dollar.

From Standard & Poor's MarketScope, news reports

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