This Week's Economic Roundup
Jan. 19, 2006--Prices kept climbing in December, though at a slower rate than expected, while signs of a cooling housing sector and tighter job market continued. Here's a look at this week's economic developments and how they may impact your business.
Consumer Prices Dip
Easing fears of rapid inflation ahead, the Labor Department on Wednesday reported an unexpected 0.1% drop in consumer prices in December from the previous month. Excluding food and energy, which alone fell 2.2% last month, so-called core prices rose a modest 0.2%, the report showed.
Energy prices, which are now rising again, were down in December for the third consecutive month, the department said.
However, over the 12 months ending in December, prices were up 3.4% -- the biggest hike since 2000 -- led by a 17.1% gain in energy prices, according to the report. In 2005, prices rose in every commercial sector except apparel, which dropped 1.1% over the year. Consumers paid more for housing, transportation, medical care, recreation, and communications, among other goods and services.
Many producers also paid more. On Jan. 10, the National Federation of Independent Business, a Washington, D.C.-based small-business lobby, said 20% of respondents to its monthly survey in December blamed lower earnings on higher material costs. About the same number passed higher costs on to consumers, the survey showed.
Fewer New Homes
Homebuilders and independent contractors were less busy in December, with housing starts down 8.9% from November, the Commerce Department reported Thursday.
Residential construction was down in every region except the South in December, where it rose by 5.2.%, the report showed.
The construction slowdown comes as the overall housing market appears to be cooling off amid higher prices and rising interest rates. Still, more than 1.9 million homes were built in 2005, a 4.8% increase over 2004, the department said.
Jobless Claims Down
Last week, jobless claims fell to their lowest level since April 2000, dropping by 36,000 to 271,000, the Labor Department reported Thursday. In the week ending Jan. 7, 2.5 million people filed unemployment claims, a 0.1% decline from the previous week. The overall unemployment rate stood at 4.9% in December, with 7.4 million people out of work, the department reported.
The latest figures, which showed the second big drop in three weeks, align with the findings of a payroll survey released in January, which showed that small-business owners are increasingly struggling to find qualified workers.