Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040726a.jpg" width="353">
Existing single family home sales rose in June to another record high of 6.95M. The 2.1% increase versus May was versus Consensus expectations for a decline to 6.65M. May sales were revised up slightly.
The figures reflect closings of home sales in earlier months.
Sales rose across the nation.
The median price of an existing home jumped 5.2% m/m to $191,800 (+9.6% y/y).
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/publicaffairsweb.nsf/Pages/JuneEHS04?OpenDocument"> here</a>.
&quot;Housing and the Business Cycle&quot; from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/pubs/feds/2004/200411/200411abs.html"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM"> Existing Home Sales (000, AR)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;6,950</td>
<td>&nbsp;6,810</td>
<td>17.4%</td>
<td>6,111</td>
<td>5,583</td>
<td>5,290</td>
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Existing single family home sales rose in June to another record high of 6.95M. The 2.1% increase versus May was versus Consensus expectations for a decline to 6.65M. May sales were revised up slightly. The figures reflect closings of [...]

Existing Home Sales Another Record High

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The National Association for Business Economics expects that following a 2.8% gain in 2024, real GDP growth will slow to 1.3% this year, revised from 1.9% in the June survey and 1.4% in 2026, revised from 2.0%. Growth from Q4-to-Q4 is expected to slow to 0.7% in 2025 from 2.5% in 2024, then rise a minimally changed 1.9% next year. Quarterly GDP is expected to grow 0.6% in Q3’25 and 0.9% in Q4. In the first two quarters of 2026, real growth of 1.6% followed by 1.8% is expected, followed by 2.0% in both Q3’26 and Q4’26.

Real growth in personal consumption expenditures was reduced. Expected PCE growth in 2025 was shaved to 2.3% from 2.8%, and reduced to 1.4% from 2.8% in 2026. The projection for business fixed investment growth was little-changed at 1.6% this year followed by 0.9% in 2026. An expected 0.5% gain in residential fixed investment this year has been reduced from 1.1%, followed by 0.9% growth in 2026, reduced substantially from 2.4%. Government spending growth of 1.3% this year compares to 1.7% projected earlier, and 0.5% growth in 2026 lessened from 0.8%.

The net export deficit is expected to widen to $1.204 trillion in 2025, revised from $1.118, then narrow to $1.085 trillion in 2026, revised from $1.150 trillion expected earlier. Exports should increase 1.1% this year, revised from 2.3% expected earlier, then 1.6% in 2026, revised from 2.0%. Imports are projected to rise 4.7% in 2025, revised from 4.0%, then fall 0.9% in 2026, down sharply from up 1.7% as expected earlier. Inventory accumulation should rise this year to little-revised $55.0 from $39 billion in 2024, then ease to $40.0 billion in 2026, revised from $52.0 billion expected earlier.

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Housing starts are expected to steady at 1.36 million, then rise to 1.39 million in 2026, revised from 1.40 million. They have been trending lower since the 2021 peak of 1.60 million. Light vehicle sales should ease to 15.5 million units, revised from 16.0. then improve to 15.5 million next year, revised from 16.2 million. The average gain in payroll employment should soften to 91 million per month in the current year, revised from 115,000, then increase to 99,000 in 2026, revised from 125,000. Payrolls increased 216,000 in 2023. The unemployment rate in 2025 has been nudged up to 4.4% from 4.3% projected earlier. The jobless rate is now expected to rise to 4.7% in 2026, revised from 4.3%.

Inflation pressures are expected to eventually abate. After falling in 2024 to 2.7% (Q4/Q4), the increase in the CPI is forecast to first rise to 3.4% this year, revised from 3.0%, then fall to 2.6% in 2026, revised from 2.5% a 2.7%. These increases compare to a 7.1% rise in 2022. Price inflation, as measured by the PCE chain price index, is expected to rise to 3.1% in 2025, revised from 2.3%, then fall to an unrevised 2.3% in 2026. It hit 6.0% in 2022. The gain in the chain PCE price index excluding food & energy is projected to rise to 3.1% this year, revised from 2.8%, then fall to 2.4% in 2026. The index rose to its high of 5.2% in 2022. The projected cost of crude oil of $65 per barrel compares to $70 projected earlier. The $68 per barrel at the end of next year compares to $66 expected earlier, and $70 per barrel at the end of 2024.

Long-term interest rates are expected to ease. The forecast of 4.19% at the end of this year compares to 4.23% expected earlier, with 4.00% forecast at the end of next year compared to 4.06% previously projected. The Fed is expected to continue its easing of monetary policy. The Federal funds rate is forecast to decline to 3.88% at the end of 2025 from 4.37% at the end of 2024, then fall to an unrevised 3.38% by the end of 2026. After-tax corporate profits are predicted to rise 2.1% this year, revised from 2.7%, and a minimally-changed 3.3% next year.

The figures from the latest NABE report can be found in Haver's **SURVEYS** database.

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- Consumer spend growth is reduced.
- Business investment growth unchanged.
- Price inflation is forecast to pick up, then moderate.

NABE Forecasts Sharply Reduced Growth for 2025 & 2026

Winnie Tapasanun

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The Empire State Manufacturing Index of General Business Conditions decreased to -16.0 in June, down from -9.2 in May and -8.1 in April, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. A reading of -6.0 for June had been expected in the Action Economics Forecast Survey. The unexpected decrease in the June index indicated that the business activity in New York State contracted for the fifth time in six months and to the lowest level since March; it was also down from -7.7 in June 2024. The percentage of respondents reporting an increase in general business conditions was 16.9% in June, down from 28.3% in May; the percentage reporting a decrease was 32.9%, down from May’s 37.5%. The latest survey was conducted between June 2 and June 9.

The headline index reflects the answer to a single question concerning the state of economic activity. Haver Analytics calculates a composite index from the five major components, which is comparable to the ISM manufacturing index. This calculated index dropped to 48.6 in June, down from 51.1 in May and 49.3 in April, indicating contraction for the third month in four and to the lowest level since October. It was up from 48.5 in June 2024 and a low of 42.5 in January 2024; however, registering below 50, the breakeven point between expansion and contraction. The index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each).

In the latest survey, the new orders index dropped to -14.2 in June after a 15.8-point jump to 7.0 in May, indicating new orders contracted for the third month in four and to the lowest level since March; nevertheless, it was an improvement from a low of -35.0 in January 2024. The shipments index slid to a three-month-low -7.2 in June following a 6.4-point rise to 3.5 in May, but it was up from a low of -22.7 in April 2024. The unfilled orders index decreased to -8.3 in June after a 0.7-point increase to 4.8 in May, indicating unfilled orders contracted this month following two successive months of expansion; the index reached a low of -24.2 in January 2024. The inventories index fell to 0.9 in June after a 2.6-point decline to 4.8 in May, suggesting that inventories expanded at the slowest pace in eight straight months of expansion. Meanwhile, the delivery times index increased to 1.8 in June, the highest reading since February, from 1.0 in May, with 14.7% of respondents reporting higher delivery times and 12.8% of respondents reporting lower delivery times.

On the labor front, the number of employees index rebounded to a positive 4.7 in June after a 2.5-point decline to -5.1 in May, showing employment expanded for the first time since January and at the highest level since December 2022. The index was up from a low of -9.7 in December 2023. A higher 14.6% of respondents reported an increase in employment in June while a lessened 9.9% reported a decline. The average workweek index increased to -1.5 in June, the highest reading since February, from -3.4 in May; however, having remained in negative territory for the seventh consecutive month.

Inflation indicators were mixed this month. The prices paid index dropped to 46.8 in June, the lowest level since March, following an 8.2-point rise to 59.0 in May. The index was up from its recent low of 21.1 in December and a low of 16.7 in December 2023 but significantly down from a high of 86.4 in April 2022. A 49.5% of respondents reported higher prices paid in June while only 2.8% reported lower prices paid. The prices received index rose to 26.6 in June following a 5.8-point drop to 22.9 in May. The index was up from its recent low of 4.2 in December and a low of 3.9 in July 2023 but well below a peak of 56.1 in March 2022. An increased 29.4% of respondents reported higher prices received in June while a lessened 2.8% reported lower prices received.

Firms grew optimistic about the future business outlook in the latest survey. The index for future business conditions jumped to 21.2 in June, the highest reading since February, from -2.0 in May and a near-record-low -7.4 in April, with an increased 38.4% of respondents expecting business conditions to improve in the next six months. Future new orders (26.1 vs. -2.7) and shipments (23.0 vs. -3.4) expanded in June after contracting in May. Growth in employment (10.4 vs. 11.6) weakened slightly in June vs. May but still showed continued expansion. Capital spending plans remained soft, with expectations for capital spending falling to -7.3 in June, the lowest reading since May 2020, from -6.7 in May. Expected prices paid fell to 59.6 in June, the lowest level since March, from 66.7 in May, while expected prices received rebounded to 41.3 from May’s five-month-low 35.2.

The headline index reflects the answer to only one question concerning general business conditions and is not calculated from the components. The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease with zero separating expansion from contraction.

The New York Fed survey data are contained in Haver’s **SURVEYS** database. The expectations series is in Haver’s **AS1REPNA** database.

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- June General Business Conditions Index down 6.8 pts. to -16.0.
- Negative numbers for new orders (-14.2), shipments (-7.2), and unfilled orders (-8.3), but positive readings for employment (4.7, highest since Dec. ’22) and inventories (0.9).
- Current prices paid drops 12.2 pts. to a three-month-low 46.8.
- Firms are optimistic about the future business outlook, w/ Future Business Conditions Index up to a four-month-high 21.2 and future prices paid down to a three-month-low 59.6.

U.S. Empire State Manufacturing Index Unexpectedly Falls in June to a Three-Month Low

Tian Yong Woon

This week, we focus on India’s economic developments, which continue to demonstrate resilience amid persistent global headwinds. In Q1, GDP growth accelerated to its fastest pace in a year, surpassing expectations. Services remained the primary growth driver, bolstered by gains in construction and manufacturing (chart 1). Despite widespread global downgrades, the World Bank still expects India to be the fastest-growing major economy in 2025.

While services have long underpinned India’s growth, the country is gradually pivoting toward manufacturing, including higher-end, IP-intensive sectors. Progress has been made—such as attracting iPhone production—but manufacturing has yet to significantly shift the composition of GDP, which remains heavily weighted toward services (chart 2). India’s rising role as a “China Plus One” destination has enhanced its global appeal, though the shift has drawn criticism from former US President Trump, who favours bringing manufacturing back to the US.

India’s strategic ties with both the US and China require a careful balancing act. The US is India’s top export destination, with major exports including pharmaceuticals, jewellery, and smartphones (chart 3). At the same time, India relies heavily on China for critical inputs such as Key Starting Materials (KSMs) and Active Pharmaceutical Ingredients (APIs), both vital to its pharmaceutical sector (chart 4). As a result, India is seeking to deepen trade relations with the US while avoiding actions that might provoke China. Trade negotiations with the US are reportedly progressing, with an interim deal possible ahead of Trump’s July 9 tariff deadline.

On the monetary front, the Reserve Bank of India cut policy rates by 50 bps in June and announced a phased 100 bps reduction in the Cash Reserve Ratio (CRR), in response to falling inflation and risks of weaker demand (chart 5). As a partial consequence, the rupee has underperformed its Asian peers—though the primary pressures stem from persistent foreign outflows and narrower interest rate differentials (chart 6).

**India’s economic developments**
India’s economy grew faster than expected in calendar Q1, with growth accelerating to 7.4% y/y—exceeding economists’ expectations and marking the fastest growth rate in a year. By sector, and based on gross value added at basic prices, services remained the primary growth driver, as shown in chart 1. However, contributions from the construction and manufacturing sectors also improved. More broadly, many investors and economists continue to view India as one of the few economies expected to deliver robust growth this year. This remains a rare distinction, given the growth-dampening effects of US tariffs and the associated retaliatory actions. That said, recent US-China breakthroughs on trade-related agreements have eased much of this latent risk.

Despite enacting widespread forecast downgrades in its latest projections just last week, the World Bank still expects India to post the fastest growth among major economies in 2025. Nonetheless, India’s outlook has been somewhat dampened by weaker export potential and slowing investment amid rising global trade barriers. Similarly, panellists in our recent Blue Chip Economic Indicators survey continued to rank India as the top-growing major economy among those covered.


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Over the years, India has positioned itself as a services-oriented economy, a strategy that initially offered a degree of insulation from external shocks. More recently, however, the country has begun shifting its focus toward manufacturing—not only at the low- and mid-range levels but also in high-end, intellectual property (IP)-intensive sectors. In support of this pivot, India has been gradually improving its IP protection framework. Nonetheless, it remains on the US Trade Representative’s 2025 Priority Watch List, partly due to what has been described as “inconsistent” progress on IP protection and enforcement. In more traditional forms of manufacturing, India has made several high-profile strides, including securing production capacity for iPhones. However, despite such headline-grabbing developments, the shift has yet to meaningfully alter the structure of India’s GDP (chart 2), which remains heavily services-dependent—likely due to the limited scale of manufacturing gains thus far. 

India has also emerged as a key beneficiary of the “China Plus One” strategy, as global firms seek to diversify production away from China amid rising geopolitical tensions, particularly with the US. These concerns—recently reinforced by US policy actions—have helped position India as a partial but increasingly viable alternative. That said, the shift has not been without controversy. The redirection of US-linked manufacturing capacity toward India has drawn criticism from former President Donald Trump, who has advocated for bringing such production back to American soil—even though the current US manufacturing landscape may be ill-equipped to fully absorb it.

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**India’s relationship with the US and China**
Amid ongoing US-China tensions, India finds itself in a complex—but potentially advantageous—position. On one hand, India is heavily reliant on the US as a key export market, with the US currently being its top export destination. On the other hand, India depends on China for critical inputs across several major sectors. Among India’s key exports to the US are pharmaceutical products, jewellery, and, more recently—as mentioned earlier—smartphones (see chart 3). Given this dual dependency, it is unsurprising that India is eager to maintain constructive trade relations with the US. India-US trade talks are reportedly progressing well, with an interim deal likely before President Trump’s 90-day tariff pause ends on July 9.

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At the same time, India remains highly dependent on China for low-level inputs, which may temper its willingness to appear too closely aligned with the US or to pursue a trade deal perceived as unfavourable to China. This strategic caution stems from India’s reliance on key material imports from China, including rare earth elements (REEs), recently spotlighted by China’s export restrictions. REEs are critical to several industries, notably automotive manufacturing. India is also heavily dependent on China for key starting materials (KSMs) and active pharmaceutical ingredients (APIs), both essential to its large and growing pharmaceutical export sector (see chart 4). As a result, India must carefully balance its strategic interests—deepening ties with the US while avoiding actions that could provoke a negative response from China amid rising geopolitical tensions.

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**India’s financial and monetary developments**
In response to the potentially demand-dampening effects of ongoing US tariffs, the Reserve Bank of India (RBI) cut policy rates by a larger-than-expected 50 bps at its June meeting. The move was supported by a sharp decline in CPI inflation, which fell well below the RBI’s 4% target amid easing commodity prices. However, the central bank warned that it now has “very limited” policy space left to support growth, a concern reflected in its shift in policy stance from “accommodative” to “neutral.” In addition, the RBI announced a 100 bps cut to the Cash Reserve Ratio (CRR), to be implemented in four tranches of 25 bps each from September to November, ultimately bringing the CRR down to 3%. This measure aims to release additional liquidity into the financial system.

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Lastly, we turn to the Indian rupee, which has underperformed relative to its Asian peers so far this year (see chart 6), despite the broad-based weakening of the US dollar. Weighing on the rupee have been persistent foreign equity outflows—substantial on a year-to-date basis—along with some net FDI outflows and other external pressures. The RBI’s recent interest rate cuts, though necessary to support the domestic economy, have also reduced the rupee’s appeal by narrowing interest rate differentials. Investor sentiment was further shaken during the previous wave of US-China tensions, prompting capital flight from emerging markets, including India. While some of that risk aversion has eased amid a temporary cooling in US-China rhetoric, caution remains warranted, as the US appears poised to announce a new round of unilateral tariffs in the coming weeks.

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Asia

Economic Letter from Asia: India Rising

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) fell 2.3% (+6.2% y/y) in April to 101.0 after rising moderately in each of the prior four months. The recent high was 104.9 in September. The level of home affordability remained 12.3% higher than its low of 89.9 in October 2023. It remains 43.6% below the high of 179.2 in April 2020.

The decline in affordability in April occurred as the median price of an existing single-family home rose 2.6% (1.7% y/y) to $418,000, and mortgage rates rose to 6.81% from 6.73% in March. The price compared to the record $432,900 in June 2024. The rise in mortgage rates left them up from a recent low of 6.26% in September of last year and below a 7.70% high in October of 2023. It remained well above a December 2020 low of 2.73%. These changes raised the principal & interest payment by 3.5% (-1.0% y/y) to $2,182 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a higher 24.8% of income during April. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in April was accompanied by improvement in median family income. It increased 1.0% (5.1% y/y) to a record $105,791 after rising 0.4% in each of the prior two months.

Housing affordability declined m/m across the country in April. The index fell 3.7% (+4.2% y/y) to 130.1 in the Midwest. It remains the most affordable region of the country. In the South, the index declined 1.1% (+8.3% y/y) to 105.6 and the affordability index in the Northeast declined 3.9% (+0.5% y/y) to 92.0. In the West, where homes are the least affordable, the index fell 1.1% (+7.7% y/y) to 71.0 in April.

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.

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**.

**Inflation Expectations** from the Federal Reserve Bank of Cleveland is available [here](https://www.clevelandfed.org/indicators-and-data/inflation-expectations).

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- Home prices & mortgage rates rise.
- Median income improves.
- Affordability falls across country.

Existing Home Sales Another Record High

Summary

Tom Moeller

More Economy in Brief

NABE Forecasts Sharply Reduced Growth for 2025 & 2026

U.S. Empire State Manufacturing Index Unexpectedly Falls in June to a Three-Month Low

Economic Letter from Asia: India Rising

U.S. Housing Affordability Declines in April