The government’s last economic reports before President Bush’s inauguration showed declining consumer prices, surging home construction and an improving job market.
The Labor Department said Wednesday that its consumer price index fell 0.1 percent in December and that initial jobless claims last week posted their biggest drop in three years. The Commerce Department reported that housing starts rose 11 percent last month, the biggest jump in more than seven years.
“How could you do any better to start out his second term in office?” said Roger Kubarych, senior economic adviser to HVB America Inc. in New York and a former Federal Reserve economist. “The economy is doing exceedingly well. The inflation pressures we have are no more than a sign that the economy is bubbling along.”
The “core” consumer price index, which excludes volatile food and energy prices, rose 0.2 percent for the third month in a row. The core index increased 2.2 percent last year, less than the 2.8 percent average of the last 14 years but twice the rate of 2003.
“Inflation remains tame, and, in any event, Alan Greenspan has it on a short leash,” said Oscar Gonzalez, an economist at John Hancock Financial Services in Boston.
Chairman Alan Greenspan and other members of the Federal Reserve’s Open Market Committee are expected to raise interest rates to 2.5 percent from 2.25 percent when they meet Feb. 1-2. It would be the sixth increase in as many meetings.
Overall, consumer prices rose 3.3 percent in 2004, the biggest advance in four years. Economists attributed that mostly to energy prices. They declined 1.8 percent in December, but jumped 16.6 percent for the year, the most since 1990.
Housing starts surged to an annual rate of 2.004 million units in December, capping the best year in home construction since 1978. Starts for all of last year totaled 1.953 million, up 5.7 percent from 2003.
Starts of single-family homes rose 13.1 percent in December. New construction rose 18.8 percent in the Midwest, 5.7 percent in the Northeast, 10.6 percent in the South and 7.9 percent in the West.
Building permits, an indicator of future construction, slipped 0.3 percent, to 2.021 million, but December was the third straight month in which permits exceeded 2 million.
In the third report, the Labor Department said initial jobless claims dropped by 48,000 last week, to 319,000.
The department said the statistics may still reflect the difficulty the government has in adjusting for seasonal variations around the year-end holidays. Last week’s decline was the biggest since a 77,000 drop in the week ended Dec. 8, 2001.
“It’s hard enough to seasonally adjust weekly figures, but when you throw in floating holidays like Christmas and New Year’s, it makes it even that much harder to do,” said Brian Jones, an economist at Citigroup Global Markets Inc. in New York.
The four-week moving average of claims, a less-volatile indicator, fell to 341,000 from 344,000. The number of people continuing to collect jobless benefits rose to 2.694 million in the week ended Jan. 8 from 2.647 million a week earlier.
