Wholesale inflation hike largest in 26 years
Labor Department says soaring energy costs, from gasoline to home heating oil, responsible for 6.3% increase last year

WASHINGTON (AP) -- Wholesale inflation shot up in 2007 by the largest amount in 26 years even though falling gasoline costs allowed price pressures to moderate in December.

The Labor Department reported that wholesale inflation was up 6.3 percent for all of 2007, reflecting a huge increase for the year in various types of energy costs ranging from gasoline to home heating oil.

The year ended on a more positive note, with wholesale prices falling by 0.1 percent in December. That reflected decreasing costs at the time for gasoline and other energy products. It was a significant slowdown after prices had soared by 3.2 percent in November, which had been the biggest one-month increase in 34 years.

Meanwhile, the Commerce Department reported that retail sales fell by 0.4 percent in December. It was a worse-than-expected decline and increased worries that the country could topple into a recession.

The combination of rising inflation pressures and a weak economy represent a dilemma for the Federal Reserve over whether to cut rates to boost economic growth even at the risk of making inflation worse.

But last week, Federal Reserve Chairman Ben Bernanke sent a strong signal that the Fed is more worried at the moment about weak growth than inflation -- given a series of weaker-than-expected data in recent weeks.

The economy skidded to a virtual standstill in the final three months of last year, raising fears the country could fall into a recession, unable to withstand the multiple blows from a prolonged downturn in housing, a severe credit crisis and soaring energy costs.

Already, unemployment is rising. The jobless rate jumped to 5 percent in December, up from 4.7 percent in November. That was the biggest one-month surge in unemployment since October 2001 in the wake of the 2001 terrorist attacks


It would appear that the banks and big oil have pulled off an act that is similar in scope to the terrorist attacks in 2001.

Homebuilding: Sharpest drop in 27 years
Steeper than expected plunge in December ends year that saw home building, permits post declines not seen since past recessions.

NEW YORK (CNNMoney.com) -- Housing starts and building permits plunged in December much more than expected, resulting in a full-year decline in new home construction that was the sharpest drop in 27 years.

And there is little sign things will get better soon. According to government data released Thursday, the full-year total for building permits posted the biggest drop in 33 years. The sharp dropoff in building is one of the reasons that many leading economists are growing increasingly fearful that an economic recession is near, if it hasn't already struck.

The pace of housing starts in December dropped 14 percent to a seasonally-adjusted annual rate of 1.01 million in December, according to the Census Bureau report.

That figure is down from the 1.17 million November reading, which was also revised lower. Economists surveyed by Briefing.com had forecast the annual pace of starts would fall to 1.15 million in the latest reading.

The level of starts in the month was the weakest since May 1991, when the country was just coming out of the 1990-91 recession.

"These figures confirm that the housing recession continues to deepen," said Mike Larson, a real estate analyst for Weiss Research. "Slumping consumer confidence and tighter lending standards have already taken their toll on demand, and the broader economic slowdown we're starting to see unfold now threatens to make a bad situation worse."

For the year, housing starts fell 25 percent to 1.35 million. That decline represents the biggest drop since the recession year of 1980 and the third largest drop since the Census Bureau started tracking this activity in 1959.

Building permits, which are often taken as a measure of builders' confidence in the market, fell 8 percent to an annual rate of 1.07 million from 1.16 million in November. Economists had forecast permits would fall to 1.14 million in the latest reading.

Permits were at the lowest level since March 1993 in the month. For the year permits plunged 25 percent, which was the biggest drop in that measure since the 1974 recession year. It was also the second largest decline on record.

Builders are slamming the brakes on production, because the glut of completed new homes on the market is eating into housing prices and company earnings. A separate Census Bureau reading reported a record 193,000 completed new homes on the market for sale at the end of November, and that builders were typically facing a 6.2 month wait to sell homes after they are completed.

"The only potentially good news [in the report] is the continued decline will help to alleviate bulging inventories," said Adam York, an economic analyst with Wachovia.

The report also comes the day after a survey by the National Association of Home Builders found that confidence in the sector only slightly above record lows, with three out of four builders saying the level of buyer traffic was either low or very low, more than two-thirds saying the current market conditions were poor, and just over half expecting the market to still be poor in six months.

That weakness has also hammered at the results of the nation's largest builders. A week ago KB Home (KBH, Fortune 500), the nation's No. 5 builder by revenue, reported a fiscal fourth quarter loss that was nearly 10 times worse than forecasts, as CEO Jeff Mezger told investors during a conference call that "As we enter 2008, we see no indication markets are stabilizing."

Lennar (LEN, Fortune 500), the nation's No. 1 home builder, is forecast to report a large increase in fiscal fourth quarter losses when it releases results Jan. 24. Those losses are forecast to continue throughout this fiscal year as well. Analysts are looking for No. 6 builder Hovnanian Enterprises (HOV, Fortune 500) to post losses in both fiscal 2008 and 2009.

Analysts are also forecasting that No. 2 Centex (CTX, Fortune 500), No. 3 D.R. Horton (DHI, Fortune 500) and No. 4 Pulte Homes (PHM, Fortune 500) are going to report continuing losses until at least their final quarters of this calendar year.

The builder with the forecast of the quickest return to profits is luxury home builder Toll Brothers (TOL, Fortune 500), seen as posting a narrow gain in the quarter ending in July. It posted its first loss as a public company in its most recent period, which ended in Octobe

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Bank of New York Mellon hurt by subprime
The trust bank says profit fell 68% in the fourth quarter due to a writedown on mortgage-backed investments.

The trust bank runs funds for companies and wealthy individuals rather than mass-market retail banking. It has not been exposed to the consumer problems other banks have, but was at risk for mortgage defaults through products called collateralized debt obligations, or CDOs. The bank's exposure to those pools of mortgage-backed debt resulted in a $118 million write-down in the latest quarter.

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quote Originally posted by ditch: Consumers are not mindless drones. They need to take some of the responsibility in this as well.

WaMu accused of appraisal fraud

Lawsuit claims the lender insisted she offer rosier housing outlook so risky mortgages could get approved. From Money Magazine's Stephen Gandel

NEW YORK (Money) -- A former real estate appraiser for Washington Mutual is suing the bank, claiming she was blacklisted last year for providing a housing market forecast that was too gloomy.

"Consumers are not mindless drones." you called that right...

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Cake anyone?

Foreclosure rate sets new high
The Mortgage Bankers Association reported 384,000 new actions in the third quarter, while modified mortgages for the period topped 235,000.

NEW YORK (CNNMoney.com) -- There were a record-breaking 384,000 foreclosures in the third quarter of last year, according to the Mortgage Bankers Association, as the housing slump continued.

The mortgage industry association also reported that it initiated more than 235,000 loan modifications in the third quarter of 2007.

Approximately 54,000 of these loans have been successfully adjusted, and nearly half of these modifications - 103,000 - were for subprime adjustable rate mortgages (ARMs).

"The mortgage industry took major steps during the third quarter to help those borrowers who could be helped," said Jay Brinkmann, MBA's Vice President of Research.

Hell... make it 24.

DJIA 6 Mo chart


Looks like a "G" meter reading from an old wooden roller coaster.

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