19 Feb 2016
US: Housing softer, but inflation may be picking up pace – ING
Rob Carnell, Chief International Economist at ING, suggests that the signs of a slowdown in the US housing market may be weather related, but are worth watching amidst signs of other weakness, whilst conversely; PPI suggests we might look for a slightly stronger CPI release today.
Key Quotes
“US housing starts were soft in January – though this is a month of very low housing construction activity typically, and the seasonals can distort very small underlying changes. Bad snowfalls in January may account for much of the decline, and we wouldn’t get too carried away with what appears to be a slight softening in the trend for this sector until we get another month’s data. Still, it is another warning light for US activity, so not to be ignored.
But PPI data came in unexpectedly strong, rising 0.1% MoM against expectations for a 0.2% decrease, and core PPI measures were also stronger than expected. Strong results in the services sector seem to account for all of the good news, with trade, transport and warehousing all coming in strongly above zero, helped too by the “other” category.
This price data is probably helping bond yields to rise on a day when sentiment seems slightly more upbeat than recently. Normally, it would be a mistake to read too much into what PPI means for the CPI release on the 19th Feb, as the overlap between these two series is limited. That said, with the services sector accounting for a large chunk of CPI, the risks for CPI coming in higher than the expected -0.1% MoM decrease look to have improved, and could push yields a little higher by the end of the week.”
Key Quotes
“US housing starts were soft in January – though this is a month of very low housing construction activity typically, and the seasonals can distort very small underlying changes. Bad snowfalls in January may account for much of the decline, and we wouldn’t get too carried away with what appears to be a slight softening in the trend for this sector until we get another month’s data. Still, it is another warning light for US activity, so not to be ignored.
But PPI data came in unexpectedly strong, rising 0.1% MoM against expectations for a 0.2% decrease, and core PPI measures were also stronger than expected. Strong results in the services sector seem to account for all of the good news, with trade, transport and warehousing all coming in strongly above zero, helped too by the “other” category.
This price data is probably helping bond yields to rise on a day when sentiment seems slightly more upbeat than recently. Normally, it would be a mistake to read too much into what PPI means for the CPI release on the 19th Feb, as the overlap between these two series is limited. That said, with the services sector accounting for a large chunk of CPI, the risks for CPI coming in higher than the expected -0.1% MoM decrease look to have improved, and could push yields a little higher by the end of the week.”