Consumer Prices Shoot Up 0.3% But Housing Construction Drops To Lowest Level In A Year
Higher costs for food, education and airline fares combined to push consumer inflation up by 0.3 percent in February while housing construction fell for a second straight month.
Financial markets, ignoring the worrisome inflation figures, pushed stocks into record territory for the second time this week, believing that the drop in housing and another report on business activity in the Northeast were signaling that the long-awaited soft landing has occurred.
The Dow Jones industrial average gained 30.78 while demand for bonds pushed the yield for the Treasury’s benchmark 30-year bond down to a nine-month low. The rally reflected hopes that a slowing economy will keep the Federal Reserve from raising interest rates again.
The Labor Department reported that the February increase in its Consumer Price Index matched a similar 0.3 percent gain in January and left inflation so far this year running at an annual rate of 3.7 percent, a full percentage point above the 2.7 percent rate in both 1994 and 1993.
The government blamed the February price pressures on rising costs for food and a variety of other products, which offset the first drop in gasoline prices in four months.
The report on housing showed that construction of new homes and apartments dropped by 2.6 percent in February following an even sharper 12 percent decline in January. The consecutive monthly decreases, the first since early 1993, pushed housing starts down to an annual rate of 1.32 million units, the lowest level in a year.
Investors also seized on a monthly survey done by the Federal Reserve Bank in Philadelphia showing that the business outlook in March dropped sharply to its lowest level since August 1993.
Even though the Philadelphia survey only reflects conditions in one region of the country, economists said it was significant, especially combined with other statistics pointing to slower growth. Another report Thursday showed that jobless claims rose by 5,000 last week to 343,000, the first time claims have risen for two straight weeks since early October.
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