Inflation Down, Housing Starts Up

By John S. McClenahen After six consecutive increases this year, the U.S. Labor Department's Consumer Price Index (CPI) fell one-tenth of a percentage point in July. Energy costs decline by 1.9% last month, after advancing sharply during the first six months of 2004, the department said as it released the July CPI data on Aug. 17. Gasoline prices alone were down a seasonally adjusted 4.2%. "The weaker-than-expected CPI, particularly the gasoline component, is positive for real spending power," believes UBS Investment Research, New York. In July the so-called core CPI, which strips away price changes for food and fuel, rose only 0.1%, the same as in June and lower than any other month so far this year. As consumer prices were falling last month, residential construction was rising. Starts for privately owned housing in July were at a seasonally adjusted rate of 1.978 million, 8.3% higher than June's revised figure of 1.826 million, the U.S. Commerce Department and Department of Housing and Urban Development jointly reported on Aug. 17. Starts for single-family houses were at a rate of 1.651 million; starts for multiple-family dwellings were at a rate of 260,000. "The rebound in housing starts in July extended to single and multifamily activity and to all four major [U.S. geographical] regions," notes UBS.

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