Import Prices Rise, Housing Starts Increase, Labor Market Healthy, Natural Gas Supplies Still Soaring

- The Import Price Index for January rose 1.3% versus estimates of a 1.0% increase and a .1% decline in December.
- Housing Starts for January rose to 2276K versus estimates of 2020K and an upwardly revised 1988K in December.
- Building Permits for January rose to 2217K versus estimates of 2064K and 2075K in December.
- Initial Jobless Claims for last week rose to 297K versus estimates of 285K and 278K the prior week.
- Continuing Claims fell to 2511K versus estimates of 2520K and 2550K prior.
- The EIA reported weekly natural gas supplies fell 102 bcf versus estimates of a 110 bcf drawdown.

BOTTOM LINE: Prices of goods imported into the US increased in January for the first time in three months, led by higher costs for petroleum, metals and building materials, Bloomberg reported. Prices for all imported goods, excluding petroleum, rose 2.4% over the last 12 months. Prices for imported computer equipment and other office machinery declined 8.1% from year-ago levels. Import price increases have likely peaked for the year as falling commodity prices lead to a deceleration in the reading.

Builders took advantage of warm weather to start work on the most houses in almost 33 years, following the best year in US history for new home sales, Bloomberg reported. Housing starts rose 29% in the Northeast, 24% in the Midwest, 17% in the West and 8.7% in the South. I expect home building to decelerate for most of the remainder of the year as the housing market slows to more healthy sustainable levels.

The number of Americans filing first-time claims for unemployment benefits rose last week to a level that still points to a robust labor market, Bloomberg said. For the first time since the stock market bubble burst in 2000, initial claims for unemployment held below 300,000 for five straight weeks. The four-week moving average of claims ticked up to 283,000 from 276,750 the prior week. The unemployment rate among those eligible for jobless benefits, which tracks the unemployment rate, held at 2%. The labor market has recently tightened as a result of the unseasonably warm weather. Over the intermediate-term I expect the labor market to remain healthy without generating substantial unit labor cost increases.

Supplies of natural gas are now 44% above the 5-year average even as 16% of Gulf of Mexico production remains shut-in from the hurricanes. Fundamentals continue to weaken for the entire energy complex. I continue to expect oil to break down through long-term support at $56/bbl and head meaningfully lower over the intermediate-term.