Leading indicators drop for fifth time in eight months; Fed halts interest rates.
As declines in the housing market become sharper, prices for consumers and producers are remaining steady -- and staving off fears of widespread inflation. Here's a look at this week's economic developments and how they may impact your business.
Leading Indicators Down
Sagging consumer optimism and a weaker housing market dragged the index of leading economic indicators down 0.2% in August, continuing a steady decline since the start of the year, the Conference Board said Thursday.
In August, only three of 10 components made gains in the index -- a gauge of economic activity in coming months -- including stock prices, real money supply, and new orders for consumer goods and material at manufacturers, the New York-based private research group said.
On the downturn were consumer expectations, building permits, average weekly manufacturing hours, interest-rate spread, weekly jobless claims, vendor performance, and new orders for non-defense capital goods, the group said.
The index has declined in five of the last eight months, falling by 0.6% since February, though 0.4% above August 2005.
"The behavior of the leading index so far suggests that economic growth should continue at a slow but steady pace in the near term," the group said.
Meanwhile, the group's measure of current activity rose by 0.1% in August, with gains reported in non-farm payrolls, personal income, and manufacturing and trade sales.
Housing Starts Fall
The housing market continued to decline in August, with the number of housing starts falling by a full 6% from July to an annual rate of 1.67 million, the Commerce Department reported on Tuesday.
Also on the downturn were building permits, by 2.3% to 1.72 million, and housing completions, by 3.2% to 1.87 million, the department said.
The number of housing permits in August -- a closely watch gauge of the future strength of the housing market -- was down 21.9% from the same period last year, the department said.
Builder confidence fell for the eighth consecutive month in September, the National Association of Home Builders said on Monday.
Noting sharper declines in the housing sector, the Federal Reserve on Wednesday said it would hold overnight interest rates firm at 5.25%, the second time in as many months the central bank has opted to keep rates steady following a string of 17 consecutive hikes.
"The moderation in economic growth appears to be continuing, partly reflecting a cooling in the housing market," the Federal Open Market Committee said in a statement, adding that "some inflation risks remain."
Producer Prices Slump
While producer prices rose 0.1% in August, prices stripped of food and energy costs unexpectedly fell by 0.4%, the Labor Department reported on Tuesday.
The decline in core prices was driven by lower prices for cars, which fell by 2.6%, and light trucks, by 3.4%, the department said.
Still, prices for fresh and dry vegetables alone soared by 20.7%, after rising 6.5% in July, the department said.
On Sept. 15, the department reported a slower rise in consumer prices of 0.2% in August, compared to 0.4% in July.
Jobless Claims Rise
The number of new jobless claims rose by 7,000 to 318,000 in the week ending Sept. 16, the Labor Department reported on Thursday.
In the week ending Sept. 9, the advance seasonally insured unemployment rate was 1.9%, or about 2.4 million, the department said.
The biggest number of new claims was reported in Iowa, North Dakota, and Oregon, while the biggest declines were in California, Louisiana, and New York, the department said.