Wholesale prices up just 0.1% in August; Home construction dropped 6%

The Labor Department reported that wholesale prices edged up 0.1% in August as gasoline prices fell, helping to offset a jump in food costs. Gasoline prices actually fell at the wholesale level last month, dropping 2.2%, the biggest decline in seven months. Food costs shot up 1.4 percent in August after having declined by 0.3 percent in July. 

Outside of energy and food, core inflation was even better behaved, falling by 0.4% after a 0.3% decline in July. It marked the first back-to-back declines in core inflation in more than three years. The capital equipment index decreased 0.3 percent in August after moving down 0.2 percent in July. Leading the August decline, prices for light motor trucks dropped 3.4%, while the cost of passenger cars was down 2.6 percent.

The latest price changes showed wholesale prices have risen by 3.7% in the past 12 months while core inflation, which excludes energy and food, was up by just 0.9%.

Housing Starts:

Home construction dropped a sharp 6 percent in August, a much bigger decline than analysts had been expecting. The Commerce Department said that work was started on 1.665 million homes at a seasonally adjusted annual rate last month. It was the fifth decline in the past six months and provided further evidence that the housing sector is slowing sharply after five record-breaking years.

Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 1,722,000. This is 2.3% below the revised July rate of 1,763,000 and is 21.9% below the August 2005 estimate of 2,205,000.

Privately-owned housing completions in August were at a seasonally adjusted annual rate of 1,868,000. This is 3.2% below the revised July estimate of 1,929,000 and is 4.4% below the August 2005 rate of 1,954,000.

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