Producer prices, housing starts jump in November By Patrick Rucker
2 hours, 50 minutes ago
U.S. producer prices recorded their largest gain in more than three decades in November, while the nation's pace of home building also rose for the month in a sign of health for the housing sector.
A spike in energy prices sent the producer price index up 2 percent, the largest increase since a matching rise in November 1974, the Labor Department said Tuesday.
Prices excluding volatile food and fuel jumped 1.3 percent, the biggest increase since July 1980, as car and light truck prices bounced back from an October drop. Stripping out vehicle prices, core producer prices were up just 0.2 percent.
Meanwhile, November new home starts climbed 6.7 percent, rebounding from a sharp decline in October. But building permits, an indicator of builder confidence, fell 3 percent, the Commerce Department said.
Expectations for the Federal Reserve to cut interest rates shrank on the stronger than expected data. U.S. Treasury debt prices and stock index futures fell after the reports, while the dollar briefly regained some ground versus the euro.
"It (the PPI) pretty much removes any thought of a rate cut anytime soon. The Fed seriously can't be talking about cutting rates with inflation measures running higher," said Richard Yamarone, chief economist, Argus Research, New York.
Analysts polled by Reuters were expecting producer prices to rise 0.5 percent and core prices to grow 0.2 percent.
On the housing data, while the rise in housing starts beat economists' expectations, permits to build new homes fell to their lowest rate in nearly nine years.
November housing starts came in at an annual pace of 1.588 million units, up from 1.488 million units in October. Economists had forecast November housing starts to climb to 1.530 million units from October's originally reported pace of 1.486 million units.
Still, housing starts were down 25.5 percent from the November 2005 pace of 2.131 million units.
Permits for future groundbreaking fell 3 percent to an annual pace of 1.506 million units, the lowest since December 1997, from a 1.553 million pace in October. Economists had expected the Commerce Department to report November permits at a 1.540 million pace.
Permits applications were down 31.3 percent from November 2005.
In separate reports on Tuesday, the International Council of Shopping Centers and UBS Securities said U.S. chain store sales rose 1.6 percent last week to stand 2.4 percent above the year-earlier level, while Redbook Research said sales climbed 2.8 percent above last year.
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