US Business Inventories Unchanged, Homebuilder Sentiment Improves Slightly

Business Inventories Remain Flat

• 📦 Business inventories were unchanged in May, marking the second consecutive month without a change.
• 📉 This follows increases in the first quarter (January, February, March), suggesting a potential inventory drawdown is underway.
• ⚠️ Close attention is being paid to whether sales will deplete existing stock or if excess inventory remains.

Homebuilder Sentiment Sees Modest Rise

• 🏠 The National Association of Homebuilders (NAHB) sentiment index rose one point to 38.3 in July.
• 📉 Despite the slight increase, the index remains below 50, indicating negative sentiment for the 15th consecutive month.
• 💰 A recent budget act provided some tax relief, contributing to the small boost.

Affordability Challenges Persist for Homebuyers

• ⚠️ Poor affordability conditions, driven by elevated interest rates, continue to be a major headwind for homebuilders.
• 💲 Consequently, 38% of builders reported cutting prices in July, the highest share since tracking began in 2022.
• 📈 While current sales conditions and future sales expectations saw slight improvements, buyer traffic dropped to its lowest point since late 2022.

Regional Sentiment Variations

• 📍 Builder sentiment was strongest in the Northeast, showing a one-point increase.
• ↔️ The Midwest remained flat, while sentiment dropped further in the South and West, where it is weakest.