Housing Starts
New residential construction decreased 1.5% in July to an annualized rate of 604,000 units. Single and multi-family starts diverged in July. Single family housing starts fell 4.9% to 425,000 while multi-family starts rose 6.3% to 170,000 units. Over the year total starts are up 9.8%. Building permits for new homes decreased 3.2% to 597,000 in July but remains 3.8% above the July 2010 estimate of 575,000.  Housing completions increased 11.8% in July to an annual rate of 636,000 from 569,000. The housing market remains extremely weak and we expect limited improvement this year.

Existing Home Sales
Existing home sales fell 3.5% in July to 4.67 million annualized units from 4.84 million in June. Over the year sales are up 21%. The inventory of unsold homes decreased 1.7% to 3,652,000 from 3,717,000 in June. At the current sales rate the months’ supply is 9.4, up from 9.2 in June. Median home prices fell 0.9% in July, from $175,600 in June to $174,000. Over the past year prices are down 4.4%. Sales of existing homes remain weak and there is no positive momentum at this point.

Industrial Production
Industrial production increased 0.9% in July following a 0.4% gain in June. The gains were spread across all industries. Production in manufacturing industries rose 0.6% following a smaller increase of 0.2% in June. Motor vehicle sales, a component of manufacturing drove the increase, rising 5.2 and partially offsetting declines in the previous three months. Utilities rose 2.8% after an increase of 0.8% in the previous month. Finally, mining rose 1.1% after growing 1.2% in June. Capacity utilization, which has gradually improved over the past year, rose slightly in July to 77.5%. 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 0.5% in July after falling 0.2% in June. The increase in headline inflation was driven by modest growth in food prices and a sharper increase in energy prices. Energy prices rose 2.8% after falling 4.4% in June. Food prices increased 0.4%, up from 0.2% in June. Over the year the CPI is up 3.6%. Core prices, net of food and energy prices increased 0.2% in July and are up 1.8% over the year. The pace of growth in food prices has gradually slowed since the first quarter and energy prices have slowed as well. At the same time, core prices have increased over the past few months, although the pace has been more gradual. We expect further price increases over the next few months as the economy regains some momentum.