Homebuilder Optimism Reaches Pre-Recession Levels; CPI Stagnant in July; Stocks Take Beating

Builder confidence in the market for newly built single-family homes rose three points from July to an August reading of 59. The Consumer Price Index for All Urban Consumers increased 0.2 percent in July, a meager peak. And stocks fell significantly after two giant companies announced low sales and layoffs.

Builder confidence in the market for newly built single-family homes rose three points from July to an August reading of 59, according to the National Association of Home Builders on Thursday. This fourth consecutive monthly gain brings the index to its highest level in nearly eight years, though few argue that the industry is bubbling again – it’s more like the kind of relief one feels emerging from a long, dark tunnel.

Two of the index’s three components posted monthly gains. The component gauging current sales conditions rose three points to 62, while the component tracking sales expectations in the next six months gained a single point to 68. The component gauging traffic of prospective buyers, which is the only one still below the optimism-pessimism threshold of 50, held unchanged at 45.

“Builder confidence continues to strengthen along with rising demand for a limited supply of new and existing homes in most local markets,” NAHB chief economist David Crowe said in a statement. “However, this positive momentum is being slowed by the ongoing headwinds of tight credit and low supplies of finished lots and labor.”

CPI Stagnant in July

As reported on Wednesday, wholesale prices haven’t been increasing much lately, and the same is true with retail prices. According to the Bureau of Labor Statistics on Thursday, the Consumer Price Index for All Urban Consumers increased 0.2 percent in July. Over the last 12 months, the all-items index increased 2 percent, or exactly the target of the Federal Reserve. The stagflationary ’70s this is not.

The meager rise in July was because of smallish price increases for shelter, gasoline, apparel, and food. Despite the gasoline increase, the energy index rose only 0.2 percent, since the price of natural gas and electricity declined. The increase in the food index was caused by a sharp rise for fruits and vegetables.

The index for all items less food and energy – the so-called core rate of inflation rose 0.2 percent in July, the third straight such monthly increase. Along with the advances in shelter and apparel prices, the cost of medical care, tobacco, and new vehicles all rose. On the other hand, the price of household furnishings and operations, airline fares, and used cars and trucks all declined in July. The core rate of inflation was only 1.7 percent since this time last year.

Stocks Take Beating 

Wall Street took a dive on Thursday, with the Dow Jones Industrial Average dropping 225.47 points, or 1.47 percent. The S&P 500 was off 1.43 percent and the Nasdaq fell 1.72 percent.

The rush to sell among investors came despite the aforementioned good news of optimistic homebuildiers and tame inflation, and the fact that only 320,000 Americans filed first-time jobless claims for the week ending August 10. That was a drop of 15,000 from the previous week, and much better than economists expected.

Investors’ dyspepsia seemed to be touched off by report from Wal-Mart Stores Inc. on Thursday. The retail behemoth reported earnings below expectations, namely an anemic 0.3 percent annual increase in same-store sales in the second quarter of this year. Tech giant Cisco, for its part, upset investors by announcing a 4000-job layoff.