Retail Inflation Climbs in June; Housing Starts Also Rise
U.S. consumer prices rose by a slightly bigger-than-expected 0.2% in June on higher food costs and they were up by the same amount after stripping out volatile food and energy prices, the Labor Department reported on Wednesday.
Meanwhile, groundbreaking on new homes rose unexpectedly in June after the rate of housing starts for May was revised lower.
Last month's gain in the Consumer Price Index was slightly larger than the 0.1% advance Wall Street economists were expecting to see after a fall-off in energy prices. But the increase in the more closely watched core prices index was directly in line with expectations.
Food prices advanced 0.5% in June, continuing a string of increases. They contributed 17% to the overall CPI increase in the first half of this year.
Energy prices were down 0.5% last month, but the Labor Department said for the first half of this year, they advanced at a 27.8% seasonally adjusted annual rate and accounted for about 48% of the advance in the overall CPI.
Ex-food, ex-energy prices were up 2.2% from the same time a year ago, this was in line with expectations. The overall CPI was up 2.7% from a year ago, slightly more than the 2.6% advance economists were expecting.
June Housing Starts Up 2.3%, Permits Plummet
The pace of U.S. home construction rose 2.3% in June but building permit activity, a sign of future construction plans, sank to its lowest rate in 10 years according to government data on Wednesday, signaling further weakness in the listless housing market.
The Commerce Department said housing starts set an annual rate of 1.467 million units in June compared with a revised 1.434 million unit pace in May. Economists had forecast June housing starts to drop to a 1.45 million unit pace from the 1.474 million unit rate originally reported for May last month.
Building permits fell 7.5% in June to a pace of 1.406 million units. That's just above the 1.402 million unit rate seen in June 1997 and below the 1.48 million unit rate that economists had expected.
Wednesday's data comes a day after a report indicating that home-builder confidence is sinking as mortgages become more difficult to obtain, with banks tightening their lending standards.
The National Association of Homebuilders/Wells Fargo Housing Market Index dropped two points to 28 in June to the lowest level in more than 16 years. Readings below 50 indicate more builders view market conditions as poor rather than favorable.