Economic Update 2/19/2007

The Producer Price Index -- wholesale prices that suppliers charge retailers for their goods -- fell 0.6% in January, the largest drop since October, the Labor Department reported February 16. Core wholesale inflation, which strips out volatile food and energy prices, rose 0.2%. Both numbers were in line with economists' expectations.

The U.S. trade deficit widened to $61.2 billion in December, a 5.3% increase over November. Economists had expected a deficit of only $59.5 billion. For all of 2006, the trade deficit was a record $763.6 billion, a 6.5% increase from the previous high of $716.7 billion set in 2005.
Construction of new homes and apartments plunged by 14.3% in January, the Commerce Department said February 16. The bigger-than-expected drop left construction at a seasonally adjusted annual rate of 1.4 million units, the lowest level in 10 years.

Nationally, home sales fell 10.1% in the fourth quarter of 2006, compared with the same period a year ago, the National Association of Realtors said February 15. The states with the biggest declines in sales from October through December were Nevada, down 36.1%; Florida, down 30.8%; Arizona, down 26.9%; and California, down 21.3%. The national median price -- the point where half of homes sold for more and half sold for less -- fell to $219,300, down 2.7% from the fourth quarter of 2005.

Retail sales were essentially flat in January, the Commerce Department reported February 14. While sales at department stores showed strength, auto sales fell 1.3%, the biggest one-month drop since falling 2.4% last June.

This week look for updates on the Consumer Price Index on February 21.