Housing Starts
New residential construction dropped 22.5% in February to an annualized rate of 479,000 units, considerably worse than expected. Multifamily starts lead the decline, decreasing by 47.0% in February. Single family starts, which are less volatile, were down 11.8%, following a small gain of 1.4% in January. Over the year total starts are down 20.8%. Building permits for new homes decreased 8.2% to 517,000 in February. Over the year permits are down 20.5%. Housing completions in February increased 13.9% to an annual rate of 581,000. Completions remain down 13.0% from the prior year. This report reinforces our outlook for continued weakness in the housing market through this year.

Consumer Price Index
The consumer price index rose 0.5% in February after rising 0.4% in the previous month. The increase in headline inflation was driven by energy and food prices. Energy goods surged to their highest level since June 2009, increasing 3.4%. Food prices were up 0.6% in February. Core prices, excluding food and energy costs, rose 0.2% in February. Over the year the CPI is up 2.1% while the core CPI is up 1.1%. Despite the rapid rise in gasoline prices core measures of prices suggest that inflationary pressures remain benign.

Industrial Production
Industrial production declined 0.1% in February after rising by 0.3% in January. The decrease reflected a pronounced pullback in utility production, which fell 4.5%. Production in manufacturing increased 0.4% in February, after a positive upward revision to 0.9% for January. Motor vehicle sales, a component of manufacturing, were up 4.2%, after rising 4.5% in January. Capacity utilization, which has gradually improved over the past year, declined slightly to 76.3% from 76.4% in January. As demand strengthens production capacity should continue to increase.

Leading Indicators
The Conference Board’s index of leading indicators rose 0.8% in February after a much slower gain of 0.1% in January. Recent improvement in unemployment insurance claims and with the interest rate spread drove the increase. Declines came from drags in building permits and new orders. The coincident index was up 0.2% in February after rising 0.3% in January. The leading indicators have increased at a more rapid pace in the past few months and it appears that the economy should begin to see more robust growth this year.