US consumer prices dropped sharply in September while new housing construction jumped. The economy is still going strong.
WASHINGTON (Reuters) – Cheaper energy helped pull overall U.S. consumer prices down steeply in September and new-home building unexpectedly rebounded, implying a still-resilient economy.
The promising government economic data on Wednesday bolstered investors' hopes for stronger corporate profits and persuaded analysts thewill keep interest rates on hold as it gauges the impact of cheaper energy on inflation expectations.
Now, don't worry, the media still finds a big black cloud behind that silver lining:
The Labor Department said overall U.S. consumer prices dropped 0.5 percent in September after rising 0.2 percent in August. But core prices, which exclude food and energy, crept up 0.2 percent for a third successive month, enough to keep inflation risk at the forefront as a potential worry.
Separately, thesaid housing starts hit an annual pace of 1.772 million units in September, compared with an upwardly revised 1.674 million pace in August.
The scope for a housing pickup seems limited, however, since permits for future groundbreaking that gauge builders' optimism fell 6.3 percent in September to 1.619 million units a year, the lowest rate since October 2001.
Regardless, it appears the Fed will not be changing interest rates any time soon. The analysts had been predicting a drop in housing – they were wrong. Annual inflation is around 3% and the dollar is gaining strength. The economy is booming.