Economy Perking Up

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Jan. 21, 2005 -- The economy's temperature is improving, according to a slew of recent economic reports. Cheaper oil meant consumer prices dropped a bit last month -- a welcome change from 2004, when prices rose 3.3%, due chiefly to energy. Still, core inflation increased slightly in January, which means the Federal Reserve will likely continue moving interest rates upward.

In a more dramatic vein, housing starts rose 10.9 percent in December, the biggest spike in seven years. Housing starts are residential units with construction underway, tracked by the Commerce Department. December's seasonally adjusted annual rate was 2.001, up from 1.807 in November. However, looking at all of 2004, the pace was slower -- up 5.7% to just 1.953. Housing has been buoyed by low mortgage rates recently, even as it's being tempered by interest-rate increases from the Federal Reserve. As well, permits for future groundbreaking, another common housing-optimism indicator, fell by 0.3% to a pace of 2.021 million.

Finally, in surprising data from the Department of Labor , the number of jobless claims dropped 48,000 for the week ending Jan. 15. That's the biggest drop in three years. However, economists tend to give little weight to weekly reports, which fluctuate often, preferring instead to look at four-week moving average and monthly jobs data. Still, such a dramatic drop could suggest that the job market is recovering.