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The Uneven Expansion Continues

uneven roadThis week provided a mixed bag of economic news, and the still-slow growing economy is weighing on monetary policymakers as they mull the timing of the first increase in interest rates since the Great Recession.

The Consumer Price Index, released Wednesday by the Bureau of Labor Statistics, showed prices were up 0.1 in July, and 0.2 over the last 12 months. Inflation continues to be tempered by the relatively low energy prices over the last year, said Bob Hughes, senior research fellow at the American Institute for Economic Research. Services were the main driver of inflation, amid flat to falling prices of core goods, Hughes noted.

Housing starts, released Tuesday by the Commerce Department, were essentially flat, and new permits for construction fell by 218,000. The decline effectively gave back two very strong gains over the last two months, Hughes said.

The standout in the latest housing report was sales of existing homes, which posted a nice gain of 130,000, which is the third increase in a row, Hughes said. Home builder sentiment ticked up ever so slightly. “Housing seems to be grinding back,” Hughes said.

Amid the uneven growth of the U.S. economy, the minutes of the Federal Open Market Committee, released Wednesday, show the group seemingly “still undecided on the timing of the first rate increase,” Hughes said. Add in the economic chaos in China, Greece and elsewhere, currency devaluations and equity market declines, and “all of those things are going to be part of the Fed’s discussion,” he said.

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