Weekly Economic Review: Consumer Prices Hit Largest Gain in 4 Years, Home Builder Confidence Falls

Posted by Laine Smith on 2/17/17 9:14 AM

Topics: Economy Housing Market Mortgage Rates

In this week’s economic review, January’s consumer prices hit a stride, retail sales increased and home builder confidence slipped. Mortgage rates eased slightly.

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iStock/xijian

Consumer prices posted the largest gain in nearly four years, according to Wednesday’s Consumer Price Index report. CPI was expected to increase by a maximum of 0.4 percent but exceeded expectations with a 0.6 percent gain. Core CPI (minus food and energy) increased 0.3 percent, which is the highest monthly gain since 2006, according to Business Insider. Year-over-year, core CPI is up 2.3 percent.

Consumer confidence has been trending high and January’s Retail Sales report fell into line. January sales increased 0.4 percent versus a low-end consensus level of 0.1 percent. December’s report, which is the strongest retail sales month of the year, also saw an upward revision of 0.4 percent.

The recent peak in home builder confidence may be over, according to the February Housing Market Index. According to the National Association of Home Builders’ report, the index dipped a sizable 2 points to a lower-than-expected level of 65. While the present sales and six-month expectations components remain strong, a large contraction of 5 points in the traffic component derailed those positives.

Housing starts fell 2.6 percent in January but still remained well above consensus levels at a 1.246 million annualized rate. The descent is mostly due to a 10.2 percent decline in multi-family units. Regardless, year-over-year both single-family homes and multi-family units are up 6.2 and 19.8 percent.

Permits increased 4.6 percent in January to a 1.285 million rate, easily outsizing expectations. Single-family permits dropped 2.7 percent but remain 1.1 percent higher year-over-year.

This week in the economy:

  • The 30-year fixed-rate eased slightly as of February 16 with the average at 4.15 percent with 0.5 points, according to Freddie Mac.
  • Purchase applications fell a seasonally adjusted 5.0 percent in the week of February 10, according to MBA Mortgage Applications. The purchase index is up just 3.0 percent from a year ago. Refinance applications also fell 3.0 percent in the week, declining the refinance share of mortgage activity by another percentage point. Refinances are at their lowest share of mortgage activity since June 2009.
  • Initial jobless claims increased by 5,000 in the February 11 week but still remain historically low.
  • The Bloomberg Consumer Comfort Index pressed 1 full point higher in the week of February 12, which marks a new cycle high at a level of 48.1.

What’s on economic calendar for the week of February 20, 2017:

  • Wednesday – MBA Mortgage Applications, Existing Home Sales, FOMC Minutes
  • Thursday – Jobless Claims, Bloomberg Consumer Comfort Index
  • Friday – New Home Sales, Consumer Sentiment

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