The economy has a familiar rhythm these days. Unfortunately, it’s a dangerous rhythm.
Several economic reports hit the street today, and they ring familiar. It’s been clear for some time that inflation is bubbling while the housing sector, among others, is still weakening. Today’s economic updates reconfirms the trends.
New housing starts fell again last month, dropping to the lowest level since the early 1990s, the Census Bureau reports. Meanwhile, the forward-looking metric of new building permits issued slipped in May compared with the previous month, which means it continues to trawl depths last seen more than a decade ago.
There’s also a fresh update on wholesale inflation, and the news is as unsurprising as it is humbling. Producer prices are now rising by 7.2% a year through May, the Bureau of Labor Statistics reports. Once again, the main culprits are higher food and energy costs. Stripping those items away reduces PPI to an annual pace of 3.0%, although that’s the highest since the early 1990s too. The problem is that stripping out energy and food costs, whatever the merits for the dismal science, isn’t possible for Joe Sixpack, who must pay the higher costs.
What are we to make of all this? For starters, there’s momentum in the trends. That doesn’t mean it can’t all end tomorrow, of course, but that’s unlikely. For what it’s worth, this observer thinks that inflation will continue to creep higher and housing and other sectors of the economy will continue to weaken. Nothing dramatic, perhaps, but sudden salvation looks remote.