Accelerating inflation in the US but housing remains depressed

Though the Eurozone sovereign debt crisis remains on everybody's lips as we await the October 23 summit we are treated to a couple of interesting economic data points today, notably US CPI which is expected to accelerate to 3.9 percent year-on-year.



Inflation continues to accelerate in the US: Yesterday's massive 0.8 percent increase in the Producer Price Index (PPI) in September was mostly due to energy as evident by Core PPI, which only rose 0.2 percent, and is not expected to be carried over into consumer prices. Consensus looks for an increase of 0.3 percent (0.2 in Core CPI), meaning that producers will swallow most of the energy-related inflation.



Housing market still dismal: That the US housing market remains in the doldrums cannot come to a surprise to anybody and no immediate improvements are expected. However, beneath the surface, advancement is being made with the excess supply slowly but surely declining. Add to this the welcome 18 print in the NAHB Housing Market Index yesterday for October on expectations of 15 and 14 prior (even if one point does not constitute a trend ) and we have a couple of things that are pointing in the right direction. However, as noted above we are still a long way from a healthy state and the improvements will be gradual and slow, but they will be welcome nonetheless.

For September consensus looks for entrepreneurs to break ground on 590,000 new houses up from 571,000 in August while permits are expected to come in at around 610,000 against 625,000 in August after four months of growth in permits.



Fed's Beige Book: The notoriously untimely Federal Reserve's Beige Book will be released tonight at 18:00 GMT for those who care and is bound to show a struggling economy with decelerating growth. The most recent Beige Book released on September 7 noted that "[reports] from the twelve Federal Reserve Districts indicated that economic activity continued to expand at a modest pace, though some Districts noted mixed or weakening activity." On the development in prices the Fed wrote that "[price] pressures edged lower, although input costs continued to increase in some industries...".