Housing Starts Disappoint & PPI Turns Negative

September Housing Starts finished the month at an annual rate of 590K (+0.5%). At the same time, August Housing Starts were revised down to 587K versus its original release of 598K. Housing permits declined by -1.2%, to 573K. Unlike starts, August permits experienced a modest upward revision to 580K from 579K. Single-family starts rose +3.9%, while multi-family units dropped -15.2%.  September’s gains were essentially a wash when you factor in August’s revisions.  On a regional basis, in the South starts rose +7.1%-a record gain– while they fell -8.8% in the West, -5.5% in the Northeast, and -1.8% in the Midwest.

September Producer Price Index (PPI) fell -0.6%, after rising +1.7% in August. The Core PPI, which excludes food and energy, fell -0.1% in September following +0.2% increment in August.  The decline in the headline number was not unexpected given a pullback in energy prices for the month.  For the moment, the risk of deflation continues to outweigh the risk for immediate inflation.  However, the likely path is that core prices will remain stagnant until the economic recovery gains more traction and inflationary pressures once again take hold.