PPI Surges 1.2%, Housing Starts Plummet 11%

US PPI was up 1.2% in July, with the core up 0.7%.  If these numbers look unexpectedly high, you are not experiencing double vision, July PPI was twice what economists were expecting.  Some will try to blame it all on food and energy, but a 0.7% increase in the core is a very ugly number.  If you'd like to blame it on someone, you can blame it on the Fed, who has made a very difficult choice in siding with the banking system over the ordinary consumer in its recent monetary policy decisions.  Runaway inflation is surely a result of a 2.0% fed funds target in the face of rising inflationary pressure.

Meanwhile, in housing-related news, housing starts decreased 11% to an annual rate of 965,000, the lowest since March 1991.  With housing inventories at elevated levels it is not a surprise that builders are not inspired to break ground on new projects.  Optimistic economists believe that the deflationary effects of the weak housing market should help to lower pressures on overall prices.  But the average American faced with rising prices and falling home equity can't afford to be so optimistic.