Bill Losey’s Weekly Economic Update for August 22, 2011

RISING GAS PRICES KEY FACTOR IN INFLATION SPIKE
The federal government’s Consumer Price Index recorded a 0.5% inflation increase for July. Gasoline prices rose 4.7% during the month; food prices rose 0.4%. Core CPI advanced 0.2%. Producer prices rose as well – the Labor Department’s July Producer Price Index posted a 0.2% increase, with core PPI up 0.4%. Economists surveyed by Reuters had expected gains of just 0.2% in overall CPI and 0.1% in overall PPI for the month.

EXISTING HOME SALES DECLINE IN JULY
The National Association of Realtors noted a 3.5% fall in residential resales for July. While the rate of existing home sales hit an 8-month low last month, sales in July were still up 21% from a year ago (the federal homebuying credit expired in July 2010). The median sale price was $174,400, down 4.4% from a year ago.

$1,800 GOLD IS HERE; OIL MOVES LOWER
Gold settled at $1,852.20 per ounce on the COMEX Friday; the precious metal is on track for its best month in 12 years, and the gold bull market has now run for more than 1,000 days. Oil settled at $82.26 on the NYMEX Friday, wrapping up its fourth straight down week.

GAINS IN INDUSTRIAL OUTPUT, LEADING INDICATORS
The Conference Board Leading Economic Index advanced 0.5% in July to follow an 0.3% rise in June and an 0.7% gain in May. Industrial output increased by 0.9% in July according to the Federal Reserve – the best month for that indicator since December. Auto production alone improved 5.2% for the month.

STOCKS UNDER PRESSURE
The ongoing debt crisis in Europe, disappointing U.S. economic indicators and some subpar earnings reports all did some damage. So it was a negative week for the big Wall Street benchmarks: DJIA, -4.01% to 10,817.65; S&P 500, -4.69% to 1,123.53; NASDAQ, -6.62% to 2,341.84.