Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130f.jpg" width="353">
With the Japanese economy having increased a mere 0.1% in the third quarter, October data will be scrutinized for signs indicating whether the economy has merely paused or it has entered a down trend. Today, data on industrial production, incomes and expenditures of families of household workers, the unemployment rate, exports and imports have been released by the Japanese government. In additionNTC Research has released its PMI for manufacturing in Japan in November. Most of the data are disappointing.
Industrial Production fell 1.59% in October from September. The NTC Research Purchasing Managers Survey declined in November to 51.27 from, 52.95 in October--not a good omen for future production.
With declines in real pre tax and after tax incomes of, 2.74% and 2.61%, respectively and with a one percentage point rise in the unemployment rate, families of household workers cut back on their real spending by 1.21% in November from October. Their spending, moreover, was even below, if only slightly, the corresponding month of last year. (Industrial production and the expenditures of families of workers are shown in the attached chart.
The one bright spot was an increase in exports of 3.12%. However, imports on a year-over-year basis continue to rise sharply, largely as a result of imports of petroleum and related products, including coal, Liquid Petroleum Gas (LPG) and Liquid Natural Gas (LNG). 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"></th>
<th scope="col">Oct 04</th>
<th scope="col">Sep 04</th>
<th scope="col">Oct 03</th>
<th scope="col">M/M &nbsp;%&nbsp;</th>
<th scope="col">Y/Y &nbsp;%&nbsp;</th>
<th scope="col">&nbsp;2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Worker Households, Real Indexes&nbsp; (2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Income</td>
<td>95.8</td>
<td>98.5</td>
<td>96.4</td>
<td>-2.74</td>
<td>-0.62</td>
<td>95.6</td>
<td>98.1</td>
<td>99.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable income</td>
<td>97.0</td>
<td>99.6</td>
<td>97.4</td>
<td>-2.61</td>
<td>-0.41</td>
<td>95.6</td>
<td>97.8</td>
<td>99.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Living expenditures</td>
<td>98.0</td>
<td>99.2</td>
<td>98.1</td>
<td>-1.21</td>
<td>-0.10</td>
<td>97.9</td>
<td>99.0</td>
<td>99.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate %</td>
<td>4.7</td>
<td>4.6</td>
<td>5.2</td>
<td>0.1*</td>
<td>-0.5*</td>
<td>5.3</td>
<td>5.4</td>
<td>5.0</td>
</tr>
<tr>
<td class="firstcol">Industrial Production (2000=100)</td>
<td>98.8</td>
<td>100.4</td>
<td>97.5</td>
<td>-1.59</td>
<td>1.33</td>
<td>95.1</td>
<td>92.0</td>
<td>93.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports (Tril. Yen)</td>
<td>5283.9</td>
<td>5124.1</td>
<td>4653.4</td>
<td>3.12</td>
<td>13.55</td>
<td>54548.1</td>
<td>52141.9</td>
<td>49086.3</td>
</tr>
<tr>
<td class="firstcol">Imports (Tril. Yen)</td>
<td>4431.7</td>
<td>4312.8</td>
<td>3684.0</td>
<td>2.76</td>
<td>20.30</td>
<td>44349.7</td>
<td>42229.4</td>
<td>42346.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Mineral Fuels&nbsp;</td>
<td>975.5</td>
<td>932.3</td>
<td>678.1</td>
<td>4.64</td>
<td>43.85</td>
<td>9349.9</td>
<td>8173.9</td>
<td>8523.7</td>
</tr>
<tr>
<td class="firstcol">Balance (Tril. Yen)</td>
<td>852.2</td>
<td>811.3</td>
<td>969.41</td>
<td>5.04</td>
<td>-12.10</td>
<td>10198.4</td>
<td>9912.5</td>
<td>6740.1</td>
</tr>
</tbody>
</table>
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With the Japanese economy having increased a mere 0.1% in the third quarter, October data will be scrutinized for signs indicating whether the economy has merely paused or it has entered a down trend. Today, data on industrial [...]

A Spate of New Data from Japan: Most of It Disappointing

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130e.jpg" width="353">
The Chicago Purchasing Managers Business Barometer fell 3.3 points in November to 65.2 and reversed half of the October move upward. Consensus expectations had been for a decline to 62.0.
During the last ten years there has been a 73% correlation between the level of the Chicago Business Barometer and the three month change in factory sector industrial output. That correlation has risen to 86% during the last five years.
The new orders index reversed nearly all of the October gain with a 9.4 point drop. Conversely, the employment index added 6.7 points to a slight October uptick and rose to the highest level since 1988. During the last twenty years there has been an 80% correlation between the level of this employment index and the three month change in factory sector employment.
The index of prices paid rose to 89.8. During the last ten years there has been an 88% correlation between the Chicago price index and the three month change in the &quot;core&quot; intermediate goods PPI.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Nov&nbsp;&#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>65.2</td>
<td>68.5</td>
<td>62.9</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>70.0</td>
<td>79.4</td>
<td>68.5</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>89.8</td>
<td>84.1</td>
<td>68.1</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
</tr>
</tbody>
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The Chicago Purchasing Managers Business Barometer fell 3.3 points in November to 65.2 and reversed half of the October move upward. Consensus expectations had been for a decline to 62.0. During the last ten years there has been a 73% [...]

Chicago Purchasing Agents' Index Fell, Employment Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130d.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence fell for the fourth consecutive month, down 2.6% in November to the lowest level (90.5) since March. Consensus expectations had been for a reading of 96.0.
During the last twenty years there has been a 51% correlation between consumer confidence and the y/y change in real consumer spending.
The index of consumer expectations fell sharply for the third month in the last four to 87.4 (-12.7% y/y). The present situation index rose modestly to 95.2 (+17.5% y/y) following three months of decline.
Jobs were viewed as hard to get by 28.1% of survey participants versus 27.9% in October and by 31.8% during all of last year. Fewer jobs in six months were expected by 19.7% of participants, the highest percentage in a year.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>90.5</td>
<td>92.9</td>
<td>-2.2%</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
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</tbody>
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The Conference Boards Index of Consumer Confidence fell for the fourth consecutive month, down 2.6% in November to the lowest level (90.5) since March. Consensus expectations had been for a reading of 96.0. During the last twenty [...]

Consumer Confidence Down Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130c.jpg" width="353">
Chain store sales during the pivotal Thanksgiving week slid 1.5% from the prior week, according to the International Council of Shopping Centers (ICSC)-UBS.
The decline left sales so far in November just 0.4% ahead of October.
The leading indicator of chain store sales from ICSC was unchanged after two weeks of 0.5% decline. The monthly average is up 0.1% from October which rose 0.4% from September.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">11/27/04</th>
<th scope="col">11/20/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>432.9</td>
<td>439.6</td>
<td>2.4%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Chain store sales during the pivotal Thanksgiving week slid 1.5% from the prior week, according to the International Council of Shopping Centers (ICSC)-UBS. The decline left sales so far in November just 0.4% ahead of October. The [...]

Chain Store Sales Very Disappointing During Thanksgiving Week

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130a.jpg" width="353">
US real GDP advanced 3.9% (AR) last quarter, up slightly from the advance report of growth at a 3.7% rate. The Consensus expectation had been for no change at 3.7%.
Corporate profits w/ inventory (IVA) and capital consumption adjustments (CCAdj) fell 2.4% (+8.4% y/y), the first quarterly decline since 1Q03. Part of this decline in &quot;operating&quot; profits occurred as the CCAdj for depreciation rose a sharp 6.3%, the largest quarterly advance in three years. However that was offset by a lessened (IVA).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130b.jpg" width="353">
&quot;Book&quot; profits before tax fell 2.4% (+9.5% y/y) due to lower profits earned in the financial sector, off 13.4% q/q and 10.5% y/y. Nonfinancial corporate sector profits rose 1.6% (18.9% y/y), though the quarterly rate of gain was the weakest since 1Q03 and reflected no expansion in profits per unit of output (margins).
Revisions to growth in domestic final demand were modestly positive. Personal consumption grew at a 5.1% (3.6% y/y) rate versus the initial report of 4.4% growth due to upward revisions in most categories. Business investment growth also was revised up to a 13.0% rate (10.1% y/y) with spending on equipment &amp; software growth raised to 17.2% (12.8% y/y). Growth in information processing equipment &amp; software was nearly doubled to 7.6% (13.6% y/y).
Residential investment grew at a 1.8% rate (8.1% y/y) but its contribution to real GDP growth was halved to 0.1 percentage points versus 0.9 points in 2Q04).
Slower accumulation of inventories subtracted nearly twice the 0.5 percentage points from GDP growth estimated in the advance report, but that was mostly offset by a lessened drag from foreign trade deterioration. Export growth was revised up to 6.4% (9.5% y/y) and import growth was eased to 6.0% (11.5% y/y).
Expanded detail indicated that GDP less motor vehicles rose 3.7% (AR, 4.1% y/y) and that GDP less computers rose 3.8% (3.9% y/y), both estimates up a hair from the advance report.
Price inflation was unrevised at 1.3%, as expected.
The Survey of Professional Forecasters from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/spf/survq404.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;04 (Preliminary</th>
<th scope="col">3Q &#39;04 (Advance)</th>
<th scope="col">2Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>3.9%</td>
<td>3.7%</td>
<td>3.3%</td>
<td>4.0%</td>
<td>3.0%</td>
<td>1.9%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.9%</td>
<td>-0.5%</td>
<td>0.8%</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>-0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>4.9%</td>
<td>4.2%</td>
<td>2.5%</td>
<td>3.6%</td>
<td>3.1%</td>
<td>1.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>-1.0%</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-0.7%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>4.9%</td>
<td>4.6%</td>
<td>3.5%</td>
<td>4.1%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.3%</td>
<td>1.3%</td>
<td>3.2%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

US real GDP advanced 3.9% (AR) last quarter, up slightly from the advance report of growth at a 3.7% rate. The Consensus expectation had been for no change at 3.7%. Corporate profits w/ inventory (IVA) and capital consumption [...]

US 3Q GDP Revised Up, Corporate Profits Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130a.jpg" width="353">
US real GDP advanced 3.9% (AR) last quarter, up slightly from the advance report of growth at a 3.7% rate. The Consensus expectation had been for no change at 3.7%.
Corporate profits w/ inventory (IVA) and capital consumption adjustments (CCAdj) fell 2.4% (+8.4% y/y), the first quarterly decline since 1Q03. Part of this decline in &quot;operating&quot; profits occurred as the CCAdj for depreciation rose a sharp 6.3%, the largest quarterly advance in three years. However that was offset by a lessened (IVA).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130b.jpg" width="353">
&quot;Book&quot; profits before tax fell 2.4% (+9.5% y/y) due to lower profits earned in the financial sector, off 13.4% q/q and 10.5% y/y. Nonfinancial corporate sector profits rose 1.6% (18.9% y/y), though the quarterly rate of gain was the weakest since 1Q03 and reflected no expansion in profits per unit of output (margins).
Revisions to growth in domestic final demand were modestly positive. Personal consumption grew at a 5.1% (3.6% y/y) rate versus the initial report of 4.4% growth due to upward revisions in most categories. Business investment growth also was revised up to a 13.0% rate (10.1% y/y) with spending on equipment &amp; software growth raised to 17.2% (12.8% y/y). Growth in information processing equipment &amp; software was nearly doubled to 7.6% (13.6% y/y).
Residential investment grew at a 1.8% rate (8.1% y/y) but its contribution to real GDP growth was halved to 0.1 percentage points versus 0.9 points in 2Q04).
Slower accumulation of inventories subtracted nearly twice the 0.5 percentage points from GDP growth estimated in the advance report, but that was mostly offset by a lessened drag from foreign trade deterioration. Export growth was revised up to 6.4% (9.5% y/y) and import growth was eased to 6.0% (11.5% y/y).
Expanded detail indicated that GDP less motor vehicles rose 3.7% (AR, 4.1% y/y) and that GDP less computers rose 3.8% (3.9% y/y), both estimates up a hair from the advance report.
Price inflation was unrevised at 1.3%, as expected.
The Survey of Professional Forecasters from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/spf/survq404.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;04 (Preliminary</th>
<th scope="col">3Q &#39;04 (Advance)</th>
<th scope="col">2Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>3.9%</td>
<td>3.7%</td>
<td>3.3%</td>
<td>4.0%</td>
<td>3.0%</td>
<td>1.9%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.9%</td>
<td>-0.5%</td>
<td>0.8%</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>-0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>4.9%</td>
<td>4.2%</td>
<td>2.5%</td>
<td>3.6%</td>
<td>3.1%</td>
<td>1.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-0.3%</td>
<td>-0.6%</td>
<td>-1.0%</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-0.7%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>4.9%</td>
<td>4.6%</td>
<td>3.5%</td>
<td>4.1%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.3%</td>
<td>1.3%</td>
<td>3.2%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
Chain Store Sales Very Disappointing During Thanksgiving Week 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 30, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130c.jpg" width="353">
Chain store sales during the pivotal Thanksgiving week slid 1.5% from the prior week, according to the International Council of Shopping Centers (ICSC)-UBS.
The decline left sales so far in November just 0.4% ahead of October.
The leading indicator of chain store sales from ICSC was unchanged after two weeks of 0.5% decline. The monthly average is up 0.1% from October which rose 0.4% from September.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">11/27/04</th>
<th scope="col">11/20/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>432.9</td>
<td>439.6</td>
<td>2.4%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Consumer Confidence Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 30, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130d.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence fell for the fourth consecutive month, down 2.6% in November to the lowest level (90.5) since March. Consensus expectations had been for a reading of 96.0.
During the last twenty years there has been a 51% correlation between consumer confidence and the y/y change in real consumer spending.
The index of consumer expectations fell sharply for the third month in the last four to 87.4 (-12.7% y/y). The present situation index rose modestly to 95.2 (+17.5% y/y) following three months of decline.
Jobs were viewed as hard to get by 28.1% of survey participants versus 27.9% in October and by 31.8% during all of last year. Fewer jobs in six months were expected by 19.7% of participants, the highest percentage in a year.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>90.5</td>
<td>92.9</td>
<td>-2.2%</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Fell, Employment Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 30, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130e.jpg" width="353">
The Chicago Purchasing Managers Business Barometer fell 3.3 points in November to 65.2 and reversed half of the October move upward. Consensus expectations had been for a decline to 62.0.
During the last ten years there has been a 73% correlation between the level of the Chicago Business Barometer and the three month change in factory sector industrial output. That correlation has risen to 86% during the last five years.
The new orders index reversed nearly all of the October gain with a 9.4 point drop. Conversely, the employment index added 6.7 points to a slight October uptick and rose to the highest level since 1988. During the last twenty years there has been an 80% correlation between the level of this employment index and the three month change in factory sector employment.
The index of prices paid rose to 89.8. During the last ten years there has been an 88% correlation between the Chicago price index and the three month change in the &quot;core&quot; intermediate goods PPI.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Nov&nbsp;&#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>65.2</td>
<td>68.5</td>
<td>62.9</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>70.0</td>
<td>79.4</td>
<td>68.5</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>89.8</td>
<td>84.1</td>
<td>68.1</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041129h.jpg" width="353">
Gross domestic product in Denmark rose a negligible 0.04% in the third quarter. Private consumption rose almost 1% but public consumption fell by 0.6%. Gross fixed capital spending rose 3.6% and a swing in inventory change from a liquidation of 1,051 million 1995 Krone to an accumulation of 3,003 million also added a good boost to output. But the foreign trade sector offset almost all the gains on the domestic sector. The impact of net exports in the total gross national product is illustrated in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041129g.jpg" width="353">
Although Denmark is not in the Euro zone, its currency, the krone has moved with the euro against the dollar as can be seen in the second chart. Part of the decline of 1,7% in the exports of goods and services from the second to the third quarter was due to the rising krone. At the same time, the rising krone stimulated imports of goods and service, which rose by 3.4%. However, rising prices of oil also contributed to the rise in imports. The combination of lower exports and higher imports led to a decline of 7,303 million 1995 krone in the balance of trade in goods and services from 10,224 million 1995 Krone in the second quarter to 2,921 million in the third quarter. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Millions of 1995 Krone</th>
<th scope="col">Q3 04</th>
<th scope="col">Q2 O4</th>
<th scope="col">Q1 04</th>
<th scope="col">Q4 03</th>
<th scope="col">Q3/Q2 %</th>
<th scope="col">&nbsp;2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Gross domestic product</td>
<td>303,195</td>
<td>303,080</td>
<td>301,959</td>
<td>298,778</td>
<td>0.04</td>
<td>1,188,639</td>
<td>1,186,639</td>
<td>1,170,719</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Private consumption</td>
<td>144,509</td>
<td>143,088</td>
<td>142,118</td>
<td>141,688</td>
<td>0.99.</td>
<td>556,054</td>
<td>551,375</td>
<td>547,961</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Public consumption</td>
<td>75,864</td>
<td>76,327</td>
<td>75,186</td>
<td>76,351</td>
<td>-0.61</td>
<td>305,077</td>
<td>301,922</td>
<td>295,601</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Gross fixed capital spending</td>
<td>76,564</td>
<td>73,908</td>
<td>72,464</td>
<td>75,025</td>
<td>3.59</td>
<td>285,800</td>
<td>285,554</td>
<td>295,101</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Inventory change</td>
<td>3,003</td>
<td>-1,051</td>
<td>1,888</td>
<td>-2,433</td>
<td>4,054*</td>
<td>-4,225</td>
<td>868</td>
<td>1,162</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports of goods and services</td>
<td>147,319</td>
<td>149,838</td>
<td>142,218</td>
<td>140,475</td>
<td>-1.68</td>
<td>563,819</td>
<td>563,885</td>
<td>538,315</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports of goods and services</td>
<td>144,398</td>
<td>139,614</td>
<td>131,977</td>
<td>131,560</td>
<td>3.43</td>
<td>517,886</td>
<td>520,977</td>
<td>485.662</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net exports of goods and services</td>
<td>2,921</td>
<td>10,224</td>
<td>10,241</td>
<td>8.915</td>
<td>-7,303*</td>
<td>45,933</td>
<td>42,908</td>
<td>52,653</td>
</tr>
</tbody>
</table>
</body>
</html>

Gross domestic product in Denmark rose a negligible 0.04% in the third quarter. Private consumption rose almost 1% but public consumption fell by 0.6%. Gross fixed capital spending rose 3.6% and a swing in inventory change from a [...]

Denmark's GDP Third Quarter Growth Slowed by Decline in the Foreign Trade Balance

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041129j.jpg" width="353">
Though the November reading of Consumer Sentiment from the University of Michigan rose to 92.8, that was lower than the mid-month reading of 95.5 and indicated that Sentiment faded as the month progressed. Consensus expectations for a reading of 96.0 were disappointed.
During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.
The consumer expectations index rose 1.7% m/m (-3.3% y/y) and the current economic conditions index rose 0.7% (2.1% y/y), both off from the mid-month pace
Consumer sentiment amongst families earning more than $50,000 per year rose m/m but was down 2.0% y/y. Sentiment amongst families earning less than $50,000 per year fell m/m and fell 1.3% y/y.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.
&quot;Consumer Sentiment and the Media&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-29.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>92.8</td>
<td>91.7</td>
<td>-1.0%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>104.7</td>
<td>104.0</td>
<td>2.1%</td>
<td>97.2</td>
<td>97.5</td>
<td>100.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>85.2</td>
<td>83.8</td>
<td>-3.3%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
</body>
</html>

Though the November reading of Consumer Sentiment from the University of Michigan rose to 92.8, that was lower than the mid-month reading of 95.5 and indicated that Sentiment faded as the month progressed. Consensus expectations for a [...]

U.S. Consumer Sentiment Faded Late Month

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

Resilient US economy is pushing up longer-term inflation expectations and interest rates

Positive US economic data surprises leading to upward adjustment of interest rate expectations

Recent aggressive policy easing in China has given a massive boost to equity prices

FOMC expects much more easing now than in June

US is clear world leader in business capital spending on artificial intelligence

Blue Chip forecasters expect US to lead aggressive policy rate cuts over coming year—apart from Japan

Ratio of job openings to the number unemployed in the US now below pre-pandemic level

U.S. layoffs not showing as much cooling in labor markets as unemployment rate

While goods prices have moderated, service price inflation remains elevated and sticky

Since Jan 2023, BCEI US outlook has improved, worsened for Japan and the euro area

Persistent negative US economic surprises leading to big rate-cut expectations

Germany is Euro area weakling

Flash PMIs show good start to Q3 in US; loss of momentum in the euro area

Chinese economy on downtrend could threaten global economy

Working age population labor force participation near all-time high as retirements increase

Blue Chip forecasters look for widespread policy rate cuts just ahead

Flash June PMIs point to a widespread slowdown apart from the US

Announcement of snap French election is causing concern across Europe

The UK economy’s post-pandemic under-performance relative to its pre-pandemic trend

US Beveridge Curve back to near pre-pandemic levels

Negative economic surprises in the US but positive in Europe, especially the UK

Latest PMIs show US losing momentum while RoW is gaining momentum

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) increased 6.5% (13.3% y/y) in September to 105.5 after rising 5.7% to 99.1 in August and 2.4% to 93.8 in July. These increases followed five straight months of decline. The level of home affordability has risen 17.4% from its low of 89.9 in October 2023. It remains 41.1% below the high of 179.2 in April 2020.

The rise in affordability reflected a 2.6% decline (+2.9% y/y) in the median price of an existing single-family home to $409,000. This followed two straight monthly declines from the record $432,900 in June. The price weakening accompanied a drop in the average mortgage rate to 6.26% from 6.58% in August, down from a 7.14% May high. It remained up sharply from the December 2020 low of 2.73%. The declines lowered the principal & interest payment by 5.7% (-7.3% y/y) to $2,017 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged 23.7% of income during September versus 25.2% in August. They remained up from a recent low of 14.0% in April 2020.

The decline in housing costs was accompanied by improvement in median family income. It increased 0.3% in September (5.0% y/y) to a record $102,136 after rising 0.2% in August and 0.4% in July.

Housing affordability increased across the country in September. The index increased 7.0% (11.0% y/y) to 135.6 in the Midwest, remaining the most affordable region of the country to live. In the South, the index rose 5.0% (16.0% y/y) to 109.3 and the affordability index in the Northeast rose 12.3% (8.6% y/y) to 98.7. In the West, where homes are the least affordable, the index rose 4.6% (15.0% y/y) to 74.3 in September.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022 (98.8).

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

241108H4.jpg

241108I4.jpg

- Home prices slip & mortgage rates decline.
- Median income improves.
- Affordability increases throughout the country.

U.S. Housing Affordability Index Surges in September

Robert Brusca

241108E.jpg

Industrial production in September was mixed across the 12 early reporting members of the European Monetary Union (EMU). Output fell on the month in Ireland, the Netherlands, Germany, Greece, France, and Finland, a diverse group of EMU members. At the same time, output was reported stronger in Spain, Portugal, Malta, Belgium, Italy, and Austria. The median change in September was for a decline of 0.2 percentage points; that fall follows a median change of zero in August versus an increase of 0.5% in July.

Looking over broader periods from 12-months to six-months to three-months, median output falls over 12 months by 0.5%, it falls by 2.2% over six months, and it falls by 0.5% over three months. The medians of the annual rate changes over those various periods remain consistently negative.

Over 12 months compared to 12-months ago, output is accelerating in 77.8% of the reporters. However, over six months compared to 12-months, output accelerates in only 38.5% of the reporters. Over three months compared to six-months, output accelerates in 55.6% of the reporters. While the statistics on acceleration are mixed, there seems to be more of a tendency for output to accelerate than to decelerate over these various timelines. The monthly data similarly show mixed statistics on output acceleration month-to-month for September, August, and July.

By country, output is accelerating over the three sequential broad periods in Austria and in Spain. However, sequentially, output is decelerating in Germany, the Netherlands, Malta, and Greece.

241108.jpg

In the quarter-to-date, which is for the completed quarter as of September, output is falling in seven of 12 early reporting European Monetary Union countries. It's rising in the quarter only in Ireland, Belgium, Austria, Finland, and France. Half of the 12 reporting countries show output lower in September 2024 than it was in January 2020, just before COVID struck. Countries with weaker output on this comparison are Germany, Portugal, Spain, Malta, France, and Italy. Note that each of the four largest monetary union countries is on that list.

The final column of the table ranks industrial production output growth for manufacturing on data back to December 2006. Over this period, only four countries are showing year-over-year growth rates stronger than their respective medians over the period. Those countries are Portugal, Greece, Belgium, and Malta. All the rest show percentile rankings below their 50-percentile mark, which puts their respective rates of growth below their historic medians. With rankings in their 44th percentile, Finland and Spain come closest to median results while being below them. But for the rest of the countries on the table, the weakness is much worse, with lower rankings. For example, Germany's growth ranks in its 12.6 percentile, France’s growth registers a 31.3 percentile standing, Italy’s growth has an 18.7 percentile standing. The largest countries in the monetary union have not been performing well.

The September report does not show manufacturing turning a corner, and doing better in the monetary union. It continues to show an uneven performance as well as a great deal of weakness in the area. Both short and longer trends are uneven. The future remains as clouded as ever in an environment still rife with geopolitical conflict.

IP Is Mixed across EMU in September

Andrew Cates

**Global equity markets**
The resilience of its economy in recent months and the dominance of its technology sector in particular have been key to the outperformance of the US equity market so far this year. The degree to which sentiment toward broader global equity markets has soured over the past few weeks compared with sentiment toward the US has, nevertheless, been striking (see chart 1). Uncertainty about the potential policy choices of a new US administration is likely a key factor behind this shift.

241107Z1.jpg

**Global uncertainty**
This message from equity markets chimes too with gauges of economic policy uncertainty. As chart 2 below suggests, this gauge has remained relatively low over the past few months in the US compared with the norms of the past 10 years. A gauge of global policy uncertainty, in contrast, has remained relatively high.

241107Z2.jpg

**The consensus view on monetary policy**
Against that backdrop there remains a firm consensus nevertheless that monetary policy in most major economies will continue to be loosened over the next 12 months. The ECB, for example, is expected to lower its key policy rates by 106 basis points over the next 12 months with a next cut in the cycle universally expected in December. Meanwhile, the BoE is expected to lower its Bank rate by 133 bps over the same time frame, with a clear majority having expected a 25bps cut on November 7th. These forecasts contrast with the US where the fed funds rate is expected to be lowered by 132 basis point between now and this time next year.

241107Z3.jpg

**Oil and yields**
Those aforementioned interest rate forecasts are subject to some upside risks if forthcoming policy shifts turn out to be more inflationary. One area to watch will be the energy sector and oil prices in particular. Oil prices have remained relatively low in recent weeks even though market-based gauges of US inflation expectations have shifted higher. A previously tight correlation between oil prices and US Treasury yields has broken down as a result.

241107Z4.jpg

**China’s economy**
Another focal point in the weeks ahead will be the Asian region and China in particular. The latter’s fortunes have, however, improved a little recently, thanks in part to a series of easing measures by the authorities. This is reflected in chart 5 below, which shows stronger composite PMI readings for October, based on both official and private sector indicators. Additionally, recent data surprises—captured by Citigroup’s economic surprise index—suggest positive momentum. Despite this, the Chinese economy may not be out of the woods just yet, not least if this week’s election news signals renewed tensions between China and the US.

241107Z5.jpg

**Japan’s politics**
Japan’s politics has also been grabbing headlines in recent days as the country is now set to elect a new Prime Minister on November 11th. That has led markets to scale back their expectations for further policy easing by the Bank of Japan in the near term. As it stands, market-implied probabilities indicate reduced expectations for a Bank of Japan rate hike in December, with the timing now pushed to January. Furthermore, the result of the US election has also generated a ripple effect across Asia’s financial markets, with the yen, along with several other Asian currencies, having weakened against the US dollar.

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The policy decisions of a new US administration could potentially impact the global economy in a number of ways. Key areas that might be affected include trade and tariffs, geopolitical stability, fiscal policy (US tax cuts), deregulation, and immigration policy. And possibly in anticipation of some economic instability, sentiment toward global equity markets (excluding the US) has soured over the past few weeks (see chart 1). Gauges of global policy uncertainty, in the meantime, have remained relatively high (see chart 2). There remains a strong consensus, nevertheless, that most major central banks will continue to loosen monetary policy over the next 12 months (chart 3). That consensus view, however, might be challenged if prospective US policy decisions prove to be more inflationary (chart 4). One economy that will of course be an immediate area of focus will be China (chart 5). Japan is also in the spotlight at present though that’s more because of some uncertainty surrounding its domestic politics and prospective policy choices in the period ahead (chart 6).

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Charts of the Week: Uncertainty Is the Easy Part

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At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was reduced by 25 basis points to 4.50% to 4.75% following a 50 basis point reduction at the last meeting. The decline matched expectations in the Action Economics Forecast Survey.

The statement following the meeting indicated, “Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated.”

It went on to state, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”

The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities.

Today’s **FOMC** statement can be found [here](https://www.federalreserve.gov/newsevents/pressreleases/monetary20241107a.htm).

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FOMC Lowers Funds Rate Target by 25 Basis Points

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Consumer credit outstanding increased $6.0 billion (2.2% y/y) during September after rising $7.6 billion in August, revised from $8.9 billion, and $27.3 billion in July, revised from $26.6 billion. A $14.0 billion increase had been expected in the Action Economics Forecast Survey. The ratio of consumer credit outstanding to disposable personal income was little changed at 23.3% in September, a ratio that has drifted lower the last two years.

Nonrevolving credit outstanding increased $5.0 billion (1.3% y/y) in September after increasing $9.8 billion in August and $17.0 billion in July. Nonrevolving credit held by banks fell 1.4% y/y, down from a +11.0% y/y high in April 2022 while finance company nonrevolving credit rose 3.4% y/y, half the increase early this year. Credit union nonrevolving balances declined 2.1% y/y in September, off from 20.3% y/y growth in January 2023. Federal government balances surged 3.6% y/y to $1.52 trillion in September.

Revolving credit outstanding, which includes credit cards, rose $1.1 billion in September (4.9% y/y) following a $2.1 billion August decline and a $10.4 billion July rise. Revolving credit outstanding held by depository institutions rose 5.0% y/y, down from a high of 15.4% y/y growth in August 2022. Revolving credit held by finance companies fell 10.6% y/y while revolving credit held by credit unions rose a diminished 5.3% y/y in September.

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

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- Nonrevolving credit strength continues to diminish.
- Revolving credit usage rebounds.

Economy in Brief: November 2004

Jump to:

A Spate of New Data from Japan: Most of It Disappointing

Chicago Purchasing Agents' Index Fell, Employment Strong

Consumer Confidence Down Again

Chain Store Sales Very Disappointing During Thanksgiving Week

US 3Q GDP Revised Up, Corporate Profits Fell

US 3Q GDP Revised Up, Corporate Profits Fell

Denmark's GDP Third Quarter Growth Slowed by Decline in the Foreign Trade Balance

U.S. Consumer Sentiment Faded Late Month