July 24, 2007—Producer prices for finished goods fell 0.2% in June as food and energy prices dropped. Concurrently, the consumer price index rose 0.2%. Industrial production increased 0.5% as manufacturing, mining, and utilities output grew. Furthermore, housing starts rose 2.3% in June but are still down 19.4% compared to a year ago. Lastly, the index of leading indicators fell 0.3%.

Producer Price Index
After four consecutive monthly increases, producer prices for finished goods fell 0.2% in June. The overall decrease was driven by declines in prices for food and energy products, which fell 0.8% and 1.1%, respectively. Core prices, which exclude food and energy prices, increased 0.3%. Compared to a year ago, the overall PPI has risen 3.2% while the core PPI is up 1.8%. This month's report was mixed, and with the acceleration in core prices, inflation remains a concern.

Consumer Price Index
The consumer price index rose 0.2% in June following a 0.7% jump in May. The deceleration in growth was caused by a 0.5% decrease in energy prices. The core CPI, which excludes food and energy prices, inched up 0.2% for the month. On a year-ago basis, the top-line CPI has increased 2.7% while the core CPI is up 2.2%. With slow economic growth projected, core inflationary pressures should continue to moderate.

Industrial Production
Industrial production increased 0.5% in June following a downwardly revised 0.1% decline in May. Manufacturing output growth was strong, jumping 0.6% for the month. Concurrently, mining increased 0.5% while utilities output rose 0.3%. Capacity utilization increased from 81.4% to 81.7% and raises concerns about inflationary pressures. Lastly, industrial production increased 3.5% during the 2^nd quarter.

New Residential Construction
Housing starts grew 2.3% to 1.467 million units in June following a 3.4% drop in May. Despite the increase, housing starts are down 19.4% on a year-ago basis. Housing permits plunged 7.5% to 1.406 million units in June and are down 25.2% compared to one year ago. The housing market remains in poor shape and will serve as a drag on growth through the rest of the year. Housing starts will likely be weak going forward.

Conference Board Leading Indicators
The Conference Board's Index of Leading Economic Indicators fell 0.3% in June, more than reversing its 0.2% increase in May. Five of the ten components made negative contributions to the index, led by a huge drop in residential building permits. Over the past three months, the index has decreased 1.2% at an annual rate while the 6-month annualized growth rate is -1.3%, its first negative reading in seven months.