Leading U.S. economic indicators retreat; housing market continues to slide.
The continued trouble in the housing and financial markets that prompted the Federal Reserve to slash interest rates this week is expected to slow spending and economic growth in the months ahead. Here's a look at this week's economic developments and how they may affect your business.
Leading Indicators Drop
Following gains in July, the index of leading U.S. indicators dropped by 0.6 percent last month, dragged down by falling stock market prices and rising jobless claims, the Conference Board reported Thursday.
Overall, eight of 10 index components faded in August, including consumer expectations, weekly new claims for unemployment insurance, and vendor performance, among others, the New York-based private research group said. The only positive contributor was real money supply, while average weekly manufacturing hours held steady.
Despite ups and downs, the index has grown by 0.5 percent since February, including a revised 0.7 percent gain in July.
The coincidence index, which gauges current economic conditions, rose by 0.1 percent, led by gains in industrial production, personal income, and manufacturing and trade sales.
"Economic growth is likely to continue in the near term, although at a slower pace," Ken Goldstein, the group's labor economist, said in a statement. In particular, lower housing prices combined with fewer jobs could have a "negative impact on consumer spending" in the months ahead, Goldstein said.
On Tuesday, the Federal Reserve cut interest rates by half a percentage point, citing a need to bolster price stability.
Consumer, Producer Prices Drop
Lower energy prices drove down overall consumer prices by 0.1 percent in August, the Labor Department reported Wednesday.
Excluding food and energy prices -- which fell by 3.2 percent alone -- so-called core consumer prices rose a modest 0.2 percent, the report said. In the past year, core consumer prices have climbed by 2.1 percent.
Last month, transportation, apparel, and recreation prices were all cheaper, while prices continued to rise for medical care and communications. Housing prices remained unchanged.
Meanwhile, cheaper energy costs also drove down prices paid by manufacturers, which fell by 1.4 percent in August following a 0.6 increase in July, the Labor Department said in separate report Tuesday.
Housing Starts Down
The number of privately-owned housing starts in August fell by 2.6 percent from July, down 19.1 percent from the same period last year, the Commerce Department reported Wednesday.
Also down were building permits, by 5.9 percent, and housing completions, by 0.2 percent, the report said.
The declines included an 8.1 percent drop in building permits for single-family homes, the fifth straight monthly decline and the biggest drop in 12 years.
Gas Prices Down
Average gas prices across the nation fell by 3.1 cents last week to $2.787 per gallon, 29 cents higher than the same period last year, the Energy Information Administration reported Thursday.
While prices in the Midwest fell by 12 cents to $2.859 per gallon -- the sharpest regional decline -- prices on the West Coast rose by 4.4 cents to $2.86 per gallon, including a 6.5 cent increase in California to $2.904 per gallon.
Jobless Claims Fall
After a sharp rise in August, the number of new claims for unemployment benefits dropped by 9,000 last week to 311,000, the Labor Department reported Thursday.
Declines the previous week knocked 0.1 percentage points off the nation's insured unemployment rate, which fell to 1.9 percent.
The biggest decreases last week were in California, Texas, and New York, while the biggest gains were in Michigan, Georgia, and Arkansas.