"Better" Data, Bad Logic
We note a couple of peculiar celebrations in the world of economic data today.
First, much to Wall Street’s delight, housing starts jumped 17.2% from April to May. The Commerce Department blew expectations out of the water on this one, as the Street was hoping for a 7% climb. Permits to build new property rose as well, up 4% and also nearly double trader expectations.
“Wow” we heard a CNBC talking face beam. “Another good sign,” said The Washington Post. Maybe we’re just too thickheaded… but with a 10.1 month supply of homes already on the market, how does building more make us all better off?
Second, producer prices posted a 5% annual decline in May, its biggest yearly fall since 1949. The PPI actually inched up 0.2% from April to May, but still far less than the Street’s 0.6% estimate. Thus, as CNN declared, inflation remains “in check.” We certainly won’t argue that idea in the near term, but as you may have gathered from yesterday’s 5, we don’t have the stomach to bet against a trend like this one: