October 23, 2007—The housing market continues to struggle as housing starts plunged 10.2% in September. Overall prices for consumer goods increased 0.3% in September, while the core CPI rose 0.2%. Industrial production increased 0.1% for the month, while the Index of Leading Indicators grew 0.3%.
 
Consumer Price Index
The consumer price index rose 0.3% in September after falling 0.1% in August. The increase was driven by rises in food and energy prices, which jumped 0.5% and 0.3%, respectively. 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 2.8%, while the core CPI is up 2.1%. Core inflationary pressures remain under control and should continue to ease through the rest of 2007.

New Residential Construction
Housing starts plunged 10.2% to 1.191 million units in September following a 3.2% drop in August. Furthermore, housing starts are down 30.8% on a year-ago basis. Housing permits decreased 7.3% to 1.322 million units and are down 25.9% compared to one year ago. Despite the cut in the funds rate by the Fed, the housing market is still weak and housing starts will be constrained for the remainder of 2007.

Industrial Production
Industrial production increased 0.1% in September after going unchanged in August. Mining output rose 0.2% while manufacturing output saw a 0.1% uptick. Utilities output, however, decreased 0.1%, led by low natural gas production. Last, capacity utilization remained unchanged at 82.1%. Overall industrial production growth should be steady through the rest of the year.

Conference Board's Leading Indicators
The Conference Board's Index of Leading Indicators rose 0.3% in September, reversing a little bit of the 0.8% decrease in August. Eight of the ten components made positive contributions to the index, led by higher stock prices, lower initial jobless claims, and longer manufacturer delivery times. Over the last three months, the index has increased at a 0.9% annual rate, while the 6-month annualized growth rate is 0.0%.