Recession Roundup: Producer Prices, Housing Starts Decline

Even as most economists predict that the US economy is turning the corner, there appears to be some skidding along the bend. Wholesale prices fell again, making their 12-month decline the worst on record. Construction on new homes also fell. What does this tell us about the economy?


Two things. First the drop in prices (including a 0.1 percent drop in core inflation, a more accurate measure for consumer prices) back up the Federal Reserve's position that it can continue pursuing an expansive monetary policy without threatening imminent inflation. Most of the downward pressure comes from drops in energy and food prices. If you're looking for a culprit for the drop in prices, you can point to the job market -- wages are down, part-time work is up, and even as the unemployment is holding steady under 10 percent, hundreds of thousands of people are leaving the work force or exhausting their unemployment insurance. Simply put, despite massive government overlay, US demand doesn't have the strength to push prices up.

The fall in home starts and home completions explains a different part of the picture. Home sales in July were up -- but mostly because home prices have fallen so dramatically. Distressed sales accounted for a third of the market and foreclosures have hit record highs. In short: Until this depreciated inventory is bought up, you're not going to see an increased demand for new home construction.

Yesterday I rounded up some other pieces of evidence that the economy, while almost certainly moving into positive-GDP territory, still suffers from quite a lot of drag, from sick banks to an absolutely hellacious jobs sector. Read it here.

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

The Horrors of Rat Hole Mining

"The river was our source of water. Now, the people won't touch it. They are repulsed by it."

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register with Disqus.

Please note that The Atlantic's account system is separate from our commenting system. To log in or register with The Atlantic, use the Sign In button at the top of every page.

blog comments powered by Disqus

Video

The Horrors of Rat Hole Mining

"The river was our source of water. Now, the people won't touch it."

Video

What's Your Favorite Slang Word?

From "swag" to "on fleek," tweens choose.

Video

Cryotherapy's Dubious Appeal

James Hamblin tries a questionable medical treatment.

Video

Confessions of Moms Around the World

In Europe, mothers get maternity leave, discounted daycare, and flexible working hours.

Video

How Do Trees Know When It's Spring?

The science behind beautiful seasonal blooming

More in Business

Just In