January 23, 2007—The top-line CPI rose 0.5% in December while the core CPI, which excludes food and energy, inched up 0.2%. The PPI rose a higher-than-expected 0.9% in December, driven by higher energy prices. Concurrently, the core PPI increased just 0.2%. Industrial production was stronger-than-expected in December, rising 0.4%. Lastly, housing starts increased 4.5% to 1.642 million units.
 
Consumer Price Index
The consumer price index rose 0.5% in December after remaining flat the previous month. The increase was driven by a rebound in energy prices, which surged 4.6% after falling for three straight months. The core CPI, which excludes volatile food and energy prices, increased 0.2% in December. On a year-ago basis, the top-line CPI has increased 2.5% while the core CPI is up 2.6%. Today's report provides further evidence that inflation is stabilizing.

Producer Price Index
Producer prices for finished goods rose a higher-than-expected 0.9% in December. The overall increase was driven primarily by large gains in both food and energy prices, which jumped 1.7% and 2.5%, respectively. Core prices, which exclude food and energy, rose a moderate 0.2% in December. Compared to a year ago, the overall PPI has increased 1.2% while the core PPI is up 2.0%. On the whole, the PPI has remained in check over the past year.

Industrial Production
Industrial production increased a stronger-than-expected 0.4% in December following a 0.1% decline in November. Manufacturing production rose 0.7% in December while mining production posted a 0.8% gain. Utilities production plunged 2.6% in December, reflecting unseasonably warm temperatures. Lastly, total capacity utilization increased 0.2 percentage points to 81.8%.

New Residential Construction
Housing starts increased 4.5% in December to 1.642 million units following a downwardly revised 6.4% jump in November. The increase was driven by a 30.6% jump in multi-family housing starts. Furthermore, on a year-ago basis, housing starts are down 18.0%. Housing permits increased 5.5% to 1.596 million units in December but are down 24.3% compared to a year ago.