Data quartet: Housing starts/permits, pending home sales, industrial output, import prices

Industrial output USIP=ECI grew by 0.2% last month. Analysts expected a repeat of June's upwardly revised 0.3% increase. Manufacturing output growth also cooled to 0.2% from the prior month's 0.3%. Beneath the surface, a 1.9% jump in high-tech goods and a 0.8% increase in business equipment offset the 2.1% decrease in automobile production and suggested that the great AI capex explosion is alive and well. Excluding high-tech, industrial output rose 0.2%. Excluding autos/parts, output increased 0.4%. Year-on-year, industrial output has risen 1.1%, cooler than June's 1.3% annual growth rate. Capacity utilization USCAPU=ECI, a measure of economic slack, crept up to 76.3%. The cost of goods imported to the United States USIMP=ECI (excluding tariffs) unexpectedly fell by 0.4% last month, per Labor Department data, defying the nominal 0.1% increase economists predicted and extending June's downwardly revised 0.3% drop. A 7.5% drop in imported petroleum prices and a 3.2% decrease in industrial supplies dragged the headline into negative territory. Amid growing worries of war-related inflation, that's good news, until you remember that, year-on-year, petroleum and industrial supplies have risen 26.3% and 15.7%, respectively. Meanwhile, the cost of U.S. exports fell 1.3%, driven by a 4.0% drop in industrial supplies. Year-over-year, import prices have risen 5.9%, and export prices have gained 8.2%. "The July import price data keep the disinflation narrative from last week’s CPI and PPI data intact, offering more evidence that inflation momentum has rolled over," says Oren Klachkin, financial market economist at Nationwide. Main U.S. indexes red; Nasdaq off most, down >1%. Tech weakest S&P 500 sector; Healthcare leads gainers. Euro STOXX 600 index off ~0.5%. Dollar ~flat; bitcoin rises; U.S. crude gains ~1%; gold down >1%. U.S. 10-year Treasury yield flat at ~4.72%. Investors were offered a grab-bag of economic indicators on Tuesday, covering housing, manufacturing and inflation. Groundbreaking on new American homes USHST=ECI tumbled 12.4% in July to 1.239 million units at a seasonally adjusted annual rate (SAAR), according to the Commerce Department. That's 8.2% weaker than the 1.350 million units SAAR analysts were expecting, and marks an abrupt U-turn from June's 19.7% surge. A look at the foundation reveals single-family projects—which account for the lion's share of the total—fell 9.9%. The volatile multiple-unit segment slumped 16.8%. Building permits USBPE=ECI, considered one of the housing market's more forward-looking indicators, rose by 5.0% to 1.443 million units SAAR, or 5.3% north of consensus. Permits for single-family projects increased by 2.5% while the multiple-unit segment jumped 9.4%. "Affordability has worsened this year, as mortgage rates have climbed and wages have risen only slightly more quickly than home prices," writes Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. "The slowdown in population growth, brought on by tougher immigration curbs, also will increasingly weigh on demand." Referring to the ROAD to Housing Act that became law on July 11, Tombs adds, "The potential uplift to housing starts from streamlining environmental reviews, easing rules on manufactured housing and encouraging zoning reform will take time to filter through." Signed contracts for the pending sales of pre-owned U.S. homes USNAR=ECI unexpectedly dropped by 2.3% last month, according to the National Association of Realtors (NAR), in defiance of the sedate 0.3% gain economists projected. The number extends June's 4.8% drop. “The highest mortgage rates of the year hit right in the middle of summer, and that’s pulling back contract signings,” writes Lawrence Yun, NAR's chief economist. “Home prices are at record highs so houses for sale are sitting on the market longer, and fewer buyers are bidding above the asking price than a year ago.” NAR's pending home sales index has been wallowing near the trough touched directly after mandated COVID shutdowns ever since 30-year fixed mortgage rates crept above 6% in September 2022.

Data quartet: Housing starts/permits, pending home sales, industrial output, import prices

Industrial output and import prices

Market snapshot and economic data roundup

Housing starts, permits and pending home sales

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