Economics Update

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H/t Calculated Risk

H/t Calculated Risk


H/t Calculated Risk


H/t Calculated Risk


ABI, H/t Calculated Risk

The Consumer Price Index is up again, largely on rising fuel prices, with CPI up 0.3%, and down -0.2% year over year, and the "core" CPI, which strips out food and energy, is up 0.2%, up 1.7% year over year for the core rate.

This is raising concerns about inflation (stupid, but it's the way that these folks think) because energy is still about 14% lower than it was last year, so if equilibrium in oil prices is higher than it is now we may see non trivial (over 2% annual according to the inflation hawks) inflation rates.

Meanwhile, the bad news continues along (see graph pr0n), with housing starts and applications for building permits falling unexpectedly in October. (pics 1, 2, 3, and 4)

Additionally, the Architecture Billings Index (ABI) while rising, remained below 50, indicating a continuing contraction in future commercial real estate construction. The ABI leads construction by 9-12 months, so 2010 looks bleak for non-residential building. (pic 5)

There is also the fact that rents are continuing to fall, and since the best metric of house prices is their ratio to renting, this indicates that there housing in general, not just the price of a single family dwelling are still overpriced, and have a way to fall.

Additionally, I think that home sellers are running out of buyers, as mortgage applications fell even though rates were down this week.

The inflation that I mention has spooked the bond market, driving prices down and yields up.

And some news on the weird side, monoliner insurer Ambac announced in its SEC filing that its capital levels were well in excess of regulatory requirements.

Everyone figured that they were due for a takeover by regulators...I guess that "everyone" was wrong.

We are seeing some signs of recovery in international trade, with the Baltic Dry Index, an indicator of the demand for shipping hitting a high for this year.

It appears to be driven by increased Chinese demand for raw materials, and the fact that there are large fleets of ships that have been mothballed that won't be able to address marked demand for months.

Meanwhile, in energy, oil rose above $80/bbl on a drop in US inventories, and in currency, the dollar fell on statements by a Federal Reserve member that rates would stay low.