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). 

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<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>
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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

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Tom Moeller

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The Conference Board's Index of Consumer Confidence declined 5.9% (-6.5% y/y) to 97.0 during April following a 1.6% March drop, revised from a 0.1% slip. A reading of 104.0 had been expected in the Action Economics Forecast Survey. These declines came after a 5.5% February fall and a 2.7% January rise. The latest level remains well below the high of 137.9 in October 2018.

The Present Situations Index fell 2.7% (-5.9% y/y) this month to 142.9 following a 0.5% March slip and February’s 4.7% decline. The Expectations Index fell 10.3% (-7.4% y/y) to 66.4, the lowest point since July 2022, after falling 3.0% in March and 6.4% in February.

An improved 20.6% of respondents characterized current business conditions as good in April, remaining below its high of 23.4% in June. Labor market readings deteriorated this month. The jobs gap, representing the difference between respondents indicating that jobs are plentiful and those saying jobs are hard to get, fell to 25.3% from 29.5% in March. The reading remained below the March 2022 high of 47.1%. Calculated by Haver Analytics, this series has a 64% correlation with the unemployment rate over the last ten years. The jobs plentiful measure fell to 40.2% from 41.7% and remained below the March 2022 high of 56.7%. The jobs hard-to-get measure of 14.9% compared to 12.2% in March and a recent high of 15.6% in October. The jobs not-so-plentiful reading fell to 44.9% from 46.1% in March and remained well above its 30.5% low in September 2021.

In April, a greatly lessened 12.8% of consumers believed that business conditions in six months would improve and a higher percentage of 19.9% believed they would worsen. A lessened 11.7% of respondents felt there would be more jobs in six months, down from a high of 41.2% in April 2020. This remains below a recent high of 20.0% in December of 2022. A lessened 15.4% expected income to increase in six months, down from 18.3% in December and below a high of 19.6% in October of 2022.

The expected inflation rate in twelve months of 5.3% compared to 5.3% in March. It remained below the 7.9% high in June 2022, but above the 4.4% low in January 2020.

A steady 53.8% of respondents felt that interest rates would be higher in twelve months, up from a low of 42.1% in January. A diminished 20.5% thought they would be lower. A lessened 46.3% of respondents believed that stock prices would be higher in twelve months. Roughly 27% thought stock prices would be lower in twelve months versus a high of 44.7% in July of 2022. The share of respondents planning to buy a home within six months declined to 4.9% from 5.2% and remained below the October 2022 high of 7.4%. The percentage of respondents planning to buy a major appliance fell sharply m/m to 41.2% and remained below a high of 52.4% in October 2022.

The Consumer Confidence data are available in Haver's **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

**How Do Households Respond to Income Shocks?** from the Federal Reserve Bank of Minneapolis is available [here](https://www.minneapolisfed.org/article/2024/wealth-moves-dramatically-with-income-shocks-with-implications-for-policy-and-theory).

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- Decline moves to roughly two-year low.
- Present situations and expected conditions decline.
- Inflation expectations remain steady.

U.S. Consumer Confidence Diminishes Greatly in April

Sandy Batten

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The MNI Chicago Business Barometer fell for the fifth consecutive month, to 37.9 in April, its second lowest reading since the pandemic and well below the critical 50 level that separates expansion from contraction. The Action Economics Forecast Survey had looked for the index to increase to 45.0 in April.

Haver Analytics calculates an ISM-adjusted version of this index that gives equal weights to each of the five key component subindexes. The headline index includes the same subindexes but with varying weights. This ISM-adjusted index fell to 41.0 in April, equaling the lowest reading in 15 years, from 44.0 in March. This index has been pointing to weak activity for quite a while, having been above the critical 50 level in only one month since August 2022.

All the subindexes remained below the critical 50 level in April with four of the five declining from March. Only the inventories subindex increased, rising to 45.8 from 39.5 in March. The production subindex declined 6.9 points to 35.5, its lowest reading since November 2022, with 14% of respondents reporting an increase and 35% reporting a decrease. The new orders subindex fell 5.1 points to 37.9, its lowest reading since November 2022, with 40% of respondents reporting a decline in orders. After having risen in March, the employment index fell 8.5 points to 38.6 in April, its lowest reading since February 2023. Twenty-eight percent of respondents reported a decline in employment while only 9% reported an increase. And the supplier deliveries subindex slipped 0.8 point to 47.3 in April, its third consecutive month below 50, indicating that delivery times are shortening.

Input prices continued to rise in April with the increase picking up pace. The index increased 6.7 points to 69.3, its highest reading since August 2023. Forty-seven percent of respondents reported paying higher prices in April vs. 35% in March while only 3% reported paying lower prices in April.

The Chicago Business Barometer is considered to be a leading indicator of the U.S. economy. A reading above 50 indicates expansion while one below 50 suggests contraction. Summary data are contained in Haver’s **USECON** database with detail including the ISM-style index in the **SURVEYS** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Index falls to the second lowest level since the pandemic and moved deeper into contraction territory.
- All component indexes remained below 50.
- The prices paid index rose to highest level since August 2023.

Chicago Business Barometer Unexpectedly Falls Again in April

Winnie Tapasanun

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U.S. house prices rose 1.2% m/m in February following a 0.1% easing in January (unrevised) and a 0.2% increase in December (+0.1% previously), according to the Federal Housing Finance Agency (FHFA) House Price Index. The February reading was the 17th m/m gain in 18 months. The February HPI at 423.00 was 50.0% above a low of 281.93 in May 2020. The year-on-year rate of increase accelerated to 7.0% in February, the highest since November 2022, after easing to 6.5% in January; it was up from 4.6% in February 2023 but down from a high of 18.9% in February 2022.

The month-on-month increases in house prices were evident in February (vs. January) in all of the nine census divisions. These included New England (3.0% vs. 0.2%), Middle Atlantic (2.6% vs. -0.3%), South Atlantic (1.4% vs. -0.8%), Pacific (1.3% vs. -0.02%), East South Central (1.2% vs. -1.0%), West North Central (1.1% vs. 1.5%), East North Central (0.9% vs. -0.1%), Mountain (0.4% vs. 0.1%), and West South Central (0.4% vs. 0.7%).

Year-on-year house prices continued to gain in February, with the pace of advance accelerating (vs. January) in six of the nine census divisions. These included Middle Atlantic (10.8% vs. 8.9%), New England (10.5% vs. 8.4%), East North Central (8.9% vs. 8.6%), West North Central (7.3% vs. 7.1%), South Atlantic (7.1% vs. 6.0%), and Pacific (6.6% vs. 5.1%). Meanwhile, house price growth decelerated y/y in February (vs. January) in the following three census divisions: West South Central (3.7% vs. 4.5%), Mountain (4.4% vs. 5.2%), and East South Central (4.9% vs. 5.2%).

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The FHFA data are available in Haver’s **USECON** database.

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- FHFA HPI +1.2% (+7.0% y/y) in Feb. vs. -0.1% (+6.5% y/y) in Jan.
- House prices rise m/m in nine census divisions, w/ the highest rate in New England (3.0%).
- House prices gain y/y in all of the nine regions, w/ the highest rate in Middle Atlantic (10.8%).

U.S. FHFA House Prices Rebound M/M in February, w/ the Highest Y/Y Rate Since Nov. ’22

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The employment cost index (ECI) for civilian workers rose 1.2% (4.2% y/y) during Q1’24 following a 0.9% Q4 increase, according to the Bureau of Labor Statistics. Earlier figures were revised. The latest increase was the strongest in four quarters, up from a 0.4% low in Q3’20. A 1.0% gain had been expected in the Action Economics Forecast Survey.

Wages and salaries for civilian workers rose 1.1% (4.3% y/y) in Q1, the same as in the prior two quarters. The increase was more than double its 0.4% low in mid-2020. Benefits rose 1.1% (3.8% y/y), up from 0.7% in Q4 and 0.9% in both of the quarters before that, and also more than double the Q2’21 low of 0.4%.

Private industry workers’ compensation rose 1.1% (4.1% y/y) in Q1 following two 0.9% increases. Wages and salaries for private industry workers increased 1.1% last quarter after two 1.0% gains. The 4.3% y/y increase was below the 5.6% high in Q2’22. Benefits for private industry workers rose 1.0% in Q1, up from 0.7% in Q4. Year-over-year, benefits were up 3.8% in Q1, down from a 5.1% rise in Q2‘22.

By industry sector, total compensation in goods-producing industries rose 1.1% (3.9% y/y) in Q1’24 following a 1.0% Q4 gain and 0.9% increases in the two prior quarters. In service-producing industries, total compensation increased 1.2% after rising 0.9% in Q4. The 4.2% y/y gain stood below a 5.2% y/y high which occurred throughout most of 2022.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts, across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Increase is largest in one year.
- Wages remain strong; benefits gain improves.
- Both goods-producing & service-sector compensation move higher.

U.S. Employment Cost Index Strengthens in Q1

	Oct 04	Sep 04	Oct 03	M/M %	Y/Y %	2003	2002	2001
Worker Households, Real Indexes (2000=100)
Income	95.8	98.5	96.4	-2.74	-0.62	95.6	98.1	99.1
Disposable income	97.0	99.6	97.4	-2.61	-0.41	95.6	97.8	99.1
Living expenditures	98.0	99.2	98.1	-1.21	-0.10	97.9	99.0	99.2
Unemployment Rate %	4.7	4.6	5.2	0.1*	-0.5*	5.3	5.4	5.0
Industrial Production (2000=100)	98.8	100.4	97.5	-1.59	1.33	95.1	92.0	93.2
Exports (Tril. Yen)	5283.9	5124.1	4653.4	3.12	13.55	54548.1	52141.9	49086.3
Imports (Tril. Yen)	4431.7	4312.8	3684.0	2.76	20.30	44349.7	42229.4	42346.2
Mineral Fuels	975.5	932.3	678.1	4.64	43.85	9349.9	8173.9	8523.7
Balance (Tril. Yen)	852.2	811.3	969.41	5.04	-12.10	10198.4	9912.5	6740.1