Boockvar on Import Costs, Housing Construction
The following is from Peter Boockvar:
Import price inflation/Housing construction
July import prices fell .4% m/o/m and followed a .3% drop in June, all led by the decline in energy prices. This was well below the estimate of up one tenth and the June figure was revised down from up .3% initially. Energy prices for imports by the way fell by 7.5% in July and 4.3% in June but will be reversing in the coming months and thus this is old news.
Taking out the energy influence, import prices were as expected, up .3% m/o/m in July and after a .2% gain in June. Prices ex food and fuel saw rose .3% m/o/m and now up 4.8% y/o/y. Ex petro only prices were up .3% m/o/m and by 4.5% y/o/y.
The price gains were led by capital goods, materials, paper and autos/parts. Prices were flat for consumer goods ex autos.
Bottom line, price pressures at the business level are a problem and even more so for those that don’t have pricing power and can’t pass it on. Energy prices too have inflected up, while product pricing is at record levels for this time of the year.
Import Prices ex petro y/o/y
Housing starts in July were well below expectations as single family starts dropped a sharp 89k m/o/m to just 808k. That is the least amount of starts since late 2022. Multi family starts are very volatile month to month and totaled 431k vs 518k in June, 293k in May and 500k in April.
As for permits, the precursor to an eventual start, they rebounded for single family by 22k after falling by 20k in June. Multi family permits rose by 47k to 549k. I’m guessing that most of those multi family permits are in the coastal markets (I’m seeing it first hand in NJ) where rents keep rising as starts in the Sunbelt have fallen sharply after the flood of supply over the past few years that has weighed on new lease rents.
Bottom line, the single family starts figure reflects the affordability challenges we’re all well aware of. The rental market will be the beneficiary and I expect rents to be rising again in late ‘26 and in 2027 as the excess Sunbelt supply gets absorbed.
Single Family Starts
Multi Family Starts
Positions: None.
