Housing, production mixed while wholesale inflation recedes

Today's economic reports provided a mixed bag to those of us who have long ago grown weary of being pounded by news of the worst recession in decades. But I am heartened by the unexpectedly strong jump in housing starts for May.

Granted, a surge in the volatile multi-family sector underpinned construction, but there were modest gains in single-family starts. In addition, building permits improved, including a solid gain in permits for single-family homes. The $8,000 tax credit for first-time buyers appears to be having the desired effect.

The big drop in manufacturing was generally expected but helped to sully the upbeat housing number. Manufacturing is in the throes of a terrible recession (stating the obvious?) as global demand disappeared late last year, leaving factories idle all around the globe. But in order to get rid of the excess goods on hand, the steep drop in production is needed, painful as it may be. See Falling business inventories viewed in positive light.

Finally, I'd like to wrap up with the wholesale inflation report. It's clear that core producer price pressures, prices minus energy and food, continue to recede, and the headline number is falling due to the linger impact of last year's drop in oil prices.

With all the slack still in the economy, there is little to be concerned about regarding inflation, at least through the remainder of the year and probably well into next year.