Thursday, March 16, 2006

Housing and Inflation

These are the two big New items for Today. They are functionally covered by Everyone. Here, though, We are in a quandary! The first is a hidden loss, and the second is a false Reading. Explaining the context stands as problem in itself.

Housing is in decline across the Board. The Febuary decline is based not only on total activity, but in the area of Housing permits. Household decisions to build Housing reflect longterm planning, and consider all factors which can impact their decision. The decision to obtain a building permit contains a minimum of two months planning, even among the Wealthy who utilize little mortgage acquirement worry. Housing permit decisions of last month were probably made before Christmas of last Year. We are now witnessing the impact of higher Interest rates from last Year's Fed positioning, alongside last Year's other Construction Costs. What does this mean for the Economy? We can expect a continuation of the current trend through June or July, especially if the Fed continues to raise Interest rates--something on the order of the same percentage decline per month.

Inflation, on the other hand, relies on Core readings. Energy is expected to drop through the Summer, if and without a Gasoline refining shortage. Energy pricing is expected to regain its advance with the approach of Winter. Energy pricing will therefore hide Inflation advances throughout the Summer, then blare with the coming of Winter. Food pricing will generally follow the same pattern as Energy. These big Two, Fuel and Food, are large in Everyone's budget, and universal in impact throughout the Consumer universe. As they roll, so does even the Core Inflation rate. There is nothing particularly pleasing about the current Inflation numbers! lgl

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