· Less food & energy prices fell 0.1%, the first monthly decline since December 1982. Consensus expectations for a 0.1% rise.

· Deflation in the prices of core consumer goods continued as they fell 0.4% (-2.5% y/y). Apparel prices fell 0.5% (-1.9% y/y). Prices for household furnishings & operation fell 0.3% (-2.3% y/y). New vehicles were unchanged (-2.1% y/y).

· Core services prices were unchanged in November as the 0.4% firming in the prior month  evaporated. Shelter prices were unchanged m/m (2.2% y/y) after the 0.4% October increase. Public transportation prices fell for the third month in the last four (2.8% y/y). Medical care services prices were strong again, up 0.5% m/m (4.0% y/y).

· Energy prices fell 3.0% as gasoline prices dropped 5.0% (5.4% y/y). So far in December gasoline prices have fallen another 2.3% to $1.48/gallon. Piped gas & electricity prices fell 1.4% (6.5% y/y) but fuel oil prices rose 1.1% (+10.7% y/y).

· Food prices again were firm last month, up 0.4% (3.2%). Meat prices soared 3.2% (10.6% y/y).

· The chained CPI which adjusts for shifts in consumer buying behavior fell 0.4%. It is similar to the PCE price deflator. The core price measure also fell by 0.3%.

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· Single family starts rose another 3.3% to another record level of 1.695M units.

· Multi-family starts also rose a firm 10.6% and reversed most of the prior month's decline.

· Housing starts were notably strong m/m in the Northeast (22.9% y/y) and in the West (35.3% y/y). Starts were up moderately in the Midwest but fell in the South.

· Building permits fell 5.4% m/m and reversed all of the prior month's gain. 

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 · During the last fifteen years there has been a 79% correlation between the y/y change in the NAHB index and the change in single family housing starts.

· The index of current market conditions for home sales fell 1.3% m/m to 77 (6.9% y/y).

· The index which measures expected home sales in six months dropped for the second month, down 6.2% m/m to 76 (10.1% y/y).

· Traffic of prospective buyers improved and recovered most of the November decline.

· The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.

· Visit the National Association of Home Builders using this link. 

Dec

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2001

· Industrial production surged 0.9% in November, nearly double Consensus expectations for a 0.5% gain.

· Factory sector boomed 0.9% (1.9% y/y) and the prior month was revised up to a 0.3% gain. It was the strongest monthly increase in factory output since August 1999.

· Output in selected high-technology industries surged another 4.1% (27.5% y/y) after the 4.0%, upwardly revised October jump. Output of computers and peripheral equipment jumped 2.6% (15.1% y/y) and output of semiconductors & related equipment skyrocketed 6.2% (45.8% y/y). Output of communications equipment rose a paltry 1.0% (7.8% y/y).

· "Taking the Pulse of the Tech Sector: A Coincident Index of High-Tech Activity" from the Federal Reserve Bank of New York can be found here.

· Excluding high-tech, factory output rose 0.7% (0.3% y/y) and the slight October decline was revised to a slight increase. Electrical equipment & appliance output rose 1.1% (0.4% Y/Y) and furniture output jumped 1.7% (-1.6% y/y). Output of motor vehicles & parts fell for the second  consecutive month (-0.3% y/y).

· Total capacity utilization rose to 75.7%, the highest level since September 2002.

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· Exports of merchandise rose 2.1% (2.0% y/y) following a 5.1% decline last year and a 6.9% drop in 2001. Goods imports rose 0.6% (5.5% y/y).

· The surplus on services expanded to $14.9B  last quarter but the year-to-date surplus of $57.6B (AR) is down from $64.8B last year. The peak services surplus was $91.1B in 1997. 

2Q '03

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