Another batch of negative economic reports Tuesday: One showed inflation sharply higher; another found consumers in a glum mood; and a third reported housing prices continuing to fall. Nevertheless, the stock market ended the day up.
Let's start with the report on housing: The S&P Case/Shiller Home Price Index showed average prices in 20 large cities in the country down about 9 percent from a year ago.
Mickey Levy, chief economist at Bank of America in New York, says there's no silver lining there.
"Housing prices are declining at an accelerating rate. I don't think we're close to the bottom," Levy says.
Fellow economist Stuart Hoffman at PNC Financial Services Group agrees.
"We will still see buyers holding back, either because they can't get a mortgage or they're waiting for maybe interest rates to go down, or, most likely, thinking house prices are going to fall — totally different mentality than a couple years ago, and that means the bottom isn't here," Hoffman says.
Given the dismal shape of the housing market, it's not surprising that the monthly report from the Conference Board showed consumer confidence falling. But the depth of the index's decline — from nearly 88 to 75 — did surprise observers, Hoffman says.
"All in all, the consumer's in a very glum mood, and all this talk about recession and falling house prices is almost becoming a self-fulfilling prophecy anymore, and helping to bring on a recession and maybe having it start sooner rather than later," he says.
Despite all that gloom, President Bush said Tuesday that the economy is not in a recession — but he acknowledged that it's in a slowdown.
On top of the bad news on housing and consumer confidence, the government reported Tuesday that producer prices rose 7.4 percent during the past 12 months. That's the sharpest rise in wholesale prices since 1981, at the end of a long period of slow growth and high inflation known as "stagflation."
But Hoffman says he doesn't think we're seeing a repeat of those difficult times.
"I would not say this is the start of a multiyear, prolonged malaise for the U.S. economy, and inflation at the same time picking everybody's pockets," he says. "I think that's much too dire and not an appropriate analogy to say that the worst of times are here to stay."
That's because inflation lags growth, Hoffman says, and the current slow growth will slow price increases, especially because there's no sign of wage inflation.
That consolation helped the stock market recover from a mild sell-off Tuesday morning and end the day higher.
The high inflation numbers will put some pressure on the Federal Reserve, Levy says.
"The Fed is very concerned about inflation, and it should be, and it's also very, very concerned about maintaining its inflation-fighting credibility," he says.
Levy says that means that on Wednesday, when Federal Reserve Chairman Ben Bernanke goes before Congress to report on the state of the economy, he will argue that the central bank has not taken its eye off inflation.
But both Levy and Hoffman say the Fed remains focused on heading off recession and will soon cut interest rates again.
The number of homes threatened with foreclosure jumped by 57 percent in January, compared with one year ago. And in another sign that the nation's economic troubles have widened, wholesale prices soared by 1 percent in January — more than double the increase economists had expected.
The Labor Department says the jump in wholesale prices followed a worse-than-expected report that consumer prices rose by 0.4 percent in January, as Americans paid more for groceries, gasoline and health care.
Over the past 12 months, wholesale prices have risen by 7.5 percent — the fastest increase since the fall of 1981, when the country was in a deep recession.
Food prices saw their biggest monthly increase in three years, rising 1.7 percent as the cost of beef, bakery goods and eggs jumped.
Core wholesale inflation, which excludes food and energy, posted a 0.4 percent increase, the largest rise in 11 months. The gain was led by a 1.5 percent spike in the cost of prescription and non-prescription drugs.
The news of rising prices came as new housing data indicated that the fallout from the subprime mortgage crisis isn't over yet.
Nationally, owners of 233,001 homes received at least one late payment notice last month, compared with 148,425 homes a year earlier, according to Irvine, Calif.-based RealtyTrac Inc. Nearly half of the total involved first-time default notices.
The Senate could vote as early as Tuesday on whether to begin debate on a measure backers said would make it easier for some homeowners to avoid foreclosure.
The bill would allow judges to modify mortgage terms during bankruptcy proceedings, even allowing them to reduce the amount of principal owed. Sponsors said the provision could help hundreds of thousands of borrowers avoid foreclosure.
Democrats have argued that the subprime mortgage crisis and a newly reported decline in sales of existing homes are evidence that some consumers need help hanging onto their homes, and that the housing industry needs a boost.
But lenders oppose the measure, saying it could actually increase costs for borrowers because lenders would have to charge more for loans with the risk that mortgage terms would be changed.
Lenders have Republican support, and it is uncertain whether Democrats can muster the 60 votes necessary to bring up the measure without making some changes.