Industrial Production
Industrial production increased 0.2% in September following no growth in August. Production in manufacturing industries rose 0.4% following an increase of 0.3% in August. Motor vehicle sales, a component of manufacturing, rose 0.7%. Mining rose 0.8% after growing at the same pace in the previous month. Utilities fell 1.8% after a deeper 2.9% drop in the previous month. Capacity utilization, which has gradually improved since the end of the recession, rose slightly in September to 77.4%. The pace of production has picked up a bit in the last couple of months, but with capacity utilization still low we do not expect much acceleration from our current growth rates.

Consumer Price Index
The consumer price index rose 0.3% in September after rising 0.4% in August. The slight slowdown in headline inflation was driven by more modest growth in food prices. Energy prices rose 2.0% after growing 1.2% in August. Food prices increased 0.4%, down from 0.5% in August. Over the year the CPI is up 3.9%. Core prices, net of food and energy prices increased 0.1% in September and are up 2.0% over the year. Despite the well publicized run up in oil prices earlier in the year, we still are not seeing much in the way of rising price pressures and we expect only limited price increases over the next few months.

Housing Starts
New residential construction increased 15.0% in September to an annualized rate of 658,000 units. Both single and multi-family starts rose in September. Single family housing starts rose 1.7% to 425,000 while multi-family starts rose 53.4% to 227,000 units. Over the year total starts are up 10.2%. Building permits for new homes increased 3.2% to 620,000 in September and is 7.8% above the September 2010 estimate of 575,000.  Housing completions decreased 5.0% in September to an annual rate of 594,000 from 625,000. The gain in September reflected a sharp increase in multi-family starts that is unlikely to be repeated in coming months. As a result, we continue to expect limited improvement this year.

Existing Home Sales
Existing home sales fell 3.0% in September to 4.91 million annualized units from 5.06 million in August. Over the year sales are up 11.3%. The inventory of unsold homes decreased 2.0% to 3,480,000 from 3,551,000 in August. At the current sales rate the months’ supply is 8.5, up from 8.4 in August. Median home prices fell 3.4% to $165,400 from $171,200 in August. Over the past year prices are down 3.5%. Sales of existing homes remain weak and there is little positive momentum at this point.