Economic Roundup: October 18, 2010

In the News

Producer prices continued their upward trend in September, the Bureau of Labor Statistics reported last week. The Bureau's producer price index (PPI) for finished goods increased 0.4 percent in September, seasonally adjusted, mirroring August's 0.4 percent increase.
Similarly the PPI for intermediate materials, supplies and components increased 0.5 percent thanks to a broad-based increase in prices for various items. For instance, prices for foods and feeds climbed 2.1 percent and prices for energy advanced 0.7 percent.
However, the PPI for crude materials requiring further processing dropped 0.5 percent, countering a three-month rise. The Bureau chalked up September's decrease to the index for crude energy materials, which fell by a sizable 8.8 percent.
The PPI increase for finished goods beat out economists' expectations of a slight 0.1 percent rise, which should certainly nix any concerns of a deflation. But any concerns over inflation due to the increase would be unjustified, according to Mesirow Financial's chief economist Adolfo Laurenti.
"Food prices are high, but the index is relatively stable in its core component," Laurenti told Northwestern University's Medill Reports. "It's not enough of a change to convince the Federal Reserve there is any uptick in inflation."
Meanwhile, the trade balance remained at a deficit for August, with total exports at $153.9 billion and total imports of $200.2 billion for the month, according the Census Bureau's latest figures released last week. This put the goods and services deficit at $46.3 billion, up from July's $42.6 billion.
The increase in the deficit was thanks to our largest trading partner, China, which had a record trade gap with the United States for the month. China accounted for more than half of August's $46.3 billion gap. This can be chalked up to the weaker yuan, which makes Chinese products cheaper in the U.S. and other overseas markets.
On the bright side, while the trade gap widened, exports ceased their slide in August, totaling $153.9 billion, up 0.3 percent from July.
This week's financial headlines kick off today with the latest NAHB/Wells Fargo Housing Market Index (HMI) figures for October, which provide a gauge of recent home sales, as well as indications of future home construction.
This is followed Tuesday by the Census Bureau's data on housing starts and building permits, which provide information on how much new construction was started and how much more construction was approved — another good measure of the housing market.
The Conference Board rounds out the week with its latest report of leading indicators, a compendium of previously announced data on new orders, jobless claims, money supply, average workweek, building permits and stock prices to provide a broader picture of where the economy is headed.

Mark Ott

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