Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061017f.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) October Composite Housing Market Index rose to 31 from 30 in September. It was the first m/m increase since last year. Regardless, the latest level remained down by more than one half from the levels of 2005. 
During the last twenty years there has been a 75% correlation between the y/y change in the Composite Index and the change in single family housing starts. 
The improvement was led a sharp gain in the sub-index covering prospective sales in the next six months (10.8% m/m, -43.8% y/y). The sub-index for current sales was unchanged m/m (-56.8% y/y). 
Traffic of prospective home buyers rose modestly from the extremely low levels of the prior two months. 
Only the housing market indexes for the Northeast (-50.7% y/y) and the Midwest (-55.6% y/y) improved m/m. In the South the index fell (-51.3%) as it did out West (-64.8% y/y). 
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Oct. &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">Composite Housing Market Index</td>
<td>31</td>
<td>30</td>
<td>68</td>
<td>67</td>
<td>68</td>
<td>64</td>
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The National Association of Home Builders' (NAHB) October Composite Housing Market Index rose to 31 from 30 in September. It was the first m/m increase since last year. Regardless, the latest level remained down by more than one half [...]

NAHB Housing Market Index Ticked Up

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Tian Yong Woon

This week, we explore how the new round of US reciprocal tariffs is reshaping global trade patterns. The US import profile is already being reshaped: imports from China have fallen as intended, while higher shipments from other economies, such as India and Taiwan, have broadly offset the decline, keeping overall import levels largely unchanged (chart 1). Coupled with steadily growing exports, this has improved the US trade balance. China, meanwhile, has absorbed the hit from reduced US export revenues by redirecting shipments elsewhere, particularly to its Asian trading partners. Substantial growth has been seen in transportation goods, including EVs, while exports of mineral products have declined (chart 2).

Looking more broadly, the current tumultuous global trade landscape—while having supported Asian growth (chart 3) through front-loading by US importers—now poses significant downside risks for the region, particularly with higher US reciprocal tariffs in effect. At the same time, the combination of these growth risks and cooling inflation has paved the way for further central bank easing across much of Asia. Many central banks have opted to follow the path of least resistance, implementing additional easing so far this year (chart 4), with further moves expected in the coming weeks.

In sector-specific developments with potential global impact, President Trump’s threat to impose up to 300% tariffs on semiconductors could reverberate through Asia, home to most of the world’s semiconductor manufacturing and the primary source of US imports (chart 5). This would also affect American consumers, given how pervasive semiconductors are in everyday products. Another potential flashpoint is rare earths: Trump has threatened a 200% tariff on China if it does not supply sufficient magnets, underscoring China’s dominant position in the sector (chart 6).

**The new normal**
We have entered a new normal, marked by US President Trump’s updated reciprocal tariff rates that took effect earlier this month. Beyond the usual considerations—such as comparative production advantages, shipping costs, and geographic proximity—producers now must also account for varying US tariff rates in their decisions. They must decide whether to onshore production to the US, reshore from abroad, or shift operations to economies facing lower US tariffs. Given how fluid the tariff landscape remains, it is unsurprising that many businesses are cautious about committing to major, long-term investments. Moreover, with Washington increasingly hawkish on alleged “transshipments” designed to circumvent tariffs—particularly from economies like China—producers face added deterrents against simply re-routing trade flows. As shown in Chart 1, this new tariff regime has already reshaped US trade patterns. Imports from China have cooled sharply as the rivalry intensified and mutual tariffs escalated earlier. In contrast, despite persistent uncertainty over future trade actions, US imports from some other Asian economies—such as Taiwan and India—have surged, led by computer and electronic products. Overall, rolling 12-month US import values have stalled this year, while exports have continued to expand, resulting in an improved US trade balance.

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Although China’s trade has been hurt by reduced US imports, chart 2 shows its overall exports have still grown. While its trade with the US has fallen sharply, exports to other partners, particularly in Asia, have risen significantly. Chinese exports have risen sharply to ASEAN economies such as Thailand, Vietnam, and Indonesia, as well as to other Asian markets like India and Taiwan. Transportation goods, especially automobiles, account for much of this surge. This suggests China has, so far, managed to more than offset lost US export revenue by redirecting goods to other markets. On the other hand, China’s exports of mineral products and some other goods have declined in several destinations. Interestingly, China’s exports of goods classified as “miscellaneous” have surged sharply.

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**Growth, inflation, and monetary policy**
The latest round of US tariff actions has only just begun to register in US inflation data, but their impact on Asia’s trade—and by extension, growth—is already evident. Chart 3 shows that, on average, regional growth has held steady so far. Yet this masks a clear divergence among economies. Taiwan and Vietnam rode strong electronics demand and export momentum in Q2, while Thailand continues to struggle to identify new growth engines. Many Asian economies also benefited earlier from US importers front-loading purchases to avoid potential tariff hikes. Those temporary gains are likely to fade, and when combined with the tariff increases that took effect earlier this month, they present a significant downside risk after a robust start to the year. Looking ahead, India’s Q2 GDP data is expected later this week, followed by Australia’s figures in early September. Meanwhile, inflation pressures have eased across much of Asia. China and Thailand are still grappling with deflationary trends, whereas Japan and Vietnam continue to see relatively firm price growth.

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The combination of significant downside growth risks and cooling inflation has paved the way for further central bank easing across much of Asia. Indeed, most Asian central banks have implemented monetary easing via interest rate cuts this year, as shown in chart 4. This is likely a response to lingering downside risks from Trump’s post-pause reciprocal tariffs, which, while averting investors’ worst-case fears, still represent a notable increase from the prior 10% baseline pause rate. Most recently, Indonesia’s central bank surprised markets with a 25 bps rate cut last week and signalled the possibility of further easing to support growth in a low-inflation environment. While low growth amid subdued inflation makes easing a relatively straightforward choice, central banks remain mindful of other risks, including rising household debt (e.g., in South Korea), property prices, and the potential for excessive currency weakening due to rate cuts. Looking ahead, several central bank decisions are scheduled this week. In South Korea, a sharp rise in household debt during Q2 complicates the path for further easing, making a rate hold likely. By contrast, the Philippines appears set for additional cuts, with the central bank governor indicating that the first of two planned rate reductions this year could occur at the August meeting.

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**Semiconductors and magnets**
Beyond broad, economy-specific US tariffs, attention is now turning potential US sectoral tariffs on semiconductors. President Trump has threatened that these could reach as high as 300%. If fully enacted with no concessions, such tariffs would undoubtedly ripple through the global semiconductor industry and across Asia, which accounts for most of the world’s semiconductor manufacturing and supplies the bulk of US imports, as shown in chart 5. For American consumers, a broad 300% semiconductor tariff would likely lead to higher prices for a wide range of electronics. It would also affect other products, such as cars, which increasingly rely on electronic components, reflecting the pervasive role of semiconductors in modern life. That said, there appears to be some room for concessions and exemptions. Companies with manufacturing capabilities or committed investment in the US—such as Apple and TSMC—are likely candidates for exemptions, although the specific criteria remain unclear.

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Lastly, a potential flashpoint for renewed US-China tensions is President Trump’s recent threat to impose a 200% tariff on China if it does not supply sufficient magnets. This underscores both the fragility of the US-China tariff truce and China’s dominant position in the rare earth market. China eased its rare earth export controls some time ago to resume supply flows, which may have helped prevent a re-escalation of tensions at the time. Since then, Chinese rare earth exports to the US reportedly reached a six-month high in July. As shown in chart 6, China is the main supplier of magnets to the US, which are critical for EV production and other high-end industries. Many alternative suppliers also rely on Chinese raw materials, highlighting China’s pivotal role in the supply chain.

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Asia

Economic Letter from Asia: A New Normal

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Sales of new single-family home sales fell 0.6% (-8.2% y/y) to 652,000 (SAAR) during July after increasing 4.1% in June to 656,000, revised from 627,000, and falling 10.8% in May to 630,000, revised from 623,000 according to the U.S. Census Bureau. The Action Economics Forecast Survey expected sales of 635,000 in July. The sales gain occurred as the average 30-year fixed-rate mortgage eased m/m to an average 6.72% in July from 6.82% in June, according to Freddie Mac.

By region, new home sales varied across the country last month. Sales of new homes in the Midwest fell 6.6% (+4.9% y/y) to 85,000, after rising 12.3% during June. In the South, new home sales weakened 3.5% (-4.0% y/y) to 388,000, following a 7.2% Increase in June. Offsetting these declines, sales of new homes in the West rose 11.7% (-19.9% y/y) in July to 153,000, after three straight months of decline. Showing less weakness, new home sales in the Northeast held steady last month (-23.5% y/y) at 26,000, after declining 10.3% in June.

The median sales price of a new home declined 0.8% (-5.9% y/y) to $403,800 (NSA) in July after falling 3.8% to $407,200 in June. New home prices were 12.3% below the all-time peak of $460,300 in October 2022. The average sales price of a new home fell 3.6% (-5.0% y/y) to $487,300 in July, off for the third straight month. The average price was 10.0% below a high of $541,200 in July 2022. These sales price data are not seasonally adjusted.

The number of unsold new homes on the market fell 0.6% (+7.3% y/y) to 499,000 (SA) in July, after easing 0.2% in June. The seasonally adjusted months' supply of new homes for sale held steady at 9.2 months in July, after falling from 9.6 months in May. The latest reading remained above a low of 6.9 months in May 2023.

The median number of months a new home stayed on the market increased to 2.9 months in July, remaining above a June 2024 low of 2.1 months. The latest number stood well above its record low of 1.5 months in both September and October of 2022, but remained below a high of 5.1 months in March 2021. These figures date back to January 1975.

New home sales are recorded when the sales contract is signed. New home sales activity and prices are available in Haver's **USECON** database. The consensus expectation figure from Action Economics is available in the **AS1REPNA** database.

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- Small decline in sales follows sharp increase.
- Sales are mixed throughout the country.
- Median sales price declines for second straight month.

U.S. New Home Sales & Prices Ease in July

Winnie Tapasanun

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General business activity in Texas eased in August after expanding in July for the first time since January, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The overall measure, the general business activity index, was at -1.8 in August, down from +0.9 in July and up from -12.7 in June. The August reading was below a high of +14.1 in January but up from its recent low of -35.8 in April and -8.8 in August 2024. The index had been in negative territory from February through June 2025. A lessened 21.7% of respondents reported improved business activity in August, down from 22.1% in July. An increased 23.5% of respondents reported worsened business conditions, up from July's 21.2%. The company outlook index was at 3.3 in August following 4.7 in July and five successive negative readings. Twenty-four percent of respondents expected improved company outlook this month while 21.0% expected deterioration. Data were collected from August 12-20 from 82 Texas manufacturers.

The production index, a key measure of state manufacturing conditions, decreased to 15.3 in August after a 20.0-point jump to 21.3 in July (the highest level since December 2021), indicating production expanded for the sixth straight month and remained well above the historical average. Thirty-three percent of respondents reported higher production this month while 17.8% reported a decline. The capacity utilization index fell to 13.7 in August following an 18.3-point surge to 17.3 in July and five consecutive negative readings; it was up from -15.0 in January 2024 but well below a record-high 46.3 in March 2021. 

The growth rate of orders index climbed to 2.6 in August after increasing to -9.1 in July, registering the first positive reading since January and the highest level since a high of 4.8 in April 2024. The index was above a low of -24.3 in November 2023 but significantly below a peak of 29.6 in April 2021. The new orders index rose to 5.8 this month after improving to -3.6 in July, indicating a rise in demand for the first time in seven months and at the highest level since January. The index was above a low of -21.8 in November 2022 but well below a high of 22.6 in February 2022 and a record-high 38.6 in April 2021. The unfilled orders index increased to -5.1 in August, the 12th straight negative reading, from -12.0 in July. The index, while below a high of 1.4 in August 2024, was above a low of -26.3 in July 2024. The shipments index advanced to 14.2 this month, the third positive reading in four months and the highest since February 2022, after rising to 2.7 in July. Meanwhile, the delivery time index rose to 2.3 this month, the highest reading since March, from -7.8 in July.

Labor market indexes showed employment growth and longer workweeks in August. The employment index rose to 8.8 this month after rising to 8.4 in July, indicating employment expanded for the fourth successive month and at the highest level since September 2023. The latest reading was up from a low of -9.7 in January 2024 but well below a high of 17.9 in January 2023 and a record-high 31.8 in April 2021. An increased 20.0% of respondents reported net hiring in August while 11.2% reported net layoffs. The hours worked index jumped to 15.0 this month, the highest reading since March 2022, after a 16.1-point surge to 7.7 in July. The wages & benefits index rebounded to 15.4 in August, the highest level since March, from 13.2 in July; nevertheless, having been trending downward since a peak of 55.0 in March 2022 and remaining below the historical average.

Inflationary pressures increased this month. The index for prices received for finished goods rose to 15.1 in August following a 15.0-point drop to 11.1 in July; it was up from a low of -7.0 in November 2023 but meaningfully below a high of 47.4 in March 2022 and a peak of 51.4 in October 2021. An increased 24.3% of respondents reported raising prices in August while 9.2% reported lowering prices. The index of prices paid for raw materials rose to 43.7 this month after a 1.3-point decline to 41.7 in July, marking the highest reading since April and well above its average reading of 27.4. The index was well above a low of 1.0 in June 2023 but significantly below 73.2 in March 2022 and a record-high 83.8 in November 2021.

Expectations on future manufacturing activity remained positive this month. The future general business activity index rose to 24.8 in August from 19.0 in July, registering the fourth consecutive positive reading and the highest since January. The future production index jumped to a solid 40.4, the highest figure since January, from July’s 30.3. Other indexes of future manufacturing activity also rose in August (vs. July), with most currently residing above their average levels: company outlook (26.8 vs. 21.6), capacity utilization (40.4 vs. 27.8), new orders (36.0 vs. 23.7), growth rate of new orders (28.4 vs. 18.8), shipments (37.2 vs. 21.0), employment (27.6 vs. 27.3), and wages & benefits (42.1 vs. 37.2). 

Each index is calculated by subtracting the percentage reporting a decrease in activity from the percentage reporting an increase. When all firms report rising activity, an index will register 100. An index will register -100 when all firms report a decrease. An index will be zero when the number of firms reporting an increase equals the number reporting a decrease. Data for the Texas Manufacturing Outlook, conducted by the Federal Reserve Bank of Dallas, can be found in Haver's **SURVEYS** database.

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- General business activity -1.8 in Aug. vs. +0.9 in July.
-Company outlook (3.3) positive for the second straight mth.; production (15.3) still above historical avg.
- New orders growth (2.6) and new orders (5.8) up; both positive for the first time since Jan.
- Employment (8.8) rises, the fourth consecutive expansion and the highest since Sept. ’23.
- Prices received index up 4 pts. to 15.1; prices paid index up to a 4-month-high 43.7.
- Future general business activity up to 24.8, the highest since Jan.

Texas General Business Activity Turns Slightly Negative in August, But Expectations Remain Positive

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The National Activity Index (CFNAI) of -0.19 in July, reported by the Federal Reserve Bank of Chicago, edged down from -0.18 in June, revised from -0.10, and -0.18 in May, revised from -0.16.

The index's three-month moving average, which smooths out the m/m volatility in the index, improved to -0.18 last month from -0.26 in June. A reading of zero equals trend real GDP growth. Research at the Chicago Fed indicates that an average reading of -0.70 or below is consistent with the economy being in a recession.

The July reading reflected a negative contribution from three of the four component series. The Production & Income index of -0.10 compared to +0.1 in June and -0.06 in May. The Employment, Unemployment & Hours index of -0.06 last month compared -0.08 in June and -0.05 in May. The Sales, Orders and Inventories reading of -0.02 came after -0.10 in June and +0.02 in May. The Personal Consumption & Housing contribution of 0.00 in July was little changed from -0.01 in June and compared to -0.10 in May.

Thirty-two of the 85 individual indicators made positive contributions to the CFNAI in July, while 53 made negative contributions. Forty-two indicators improved from June to July, while 41 indicators deteriorated and two were unchanged. Of the indicators that improved, 17 made negative contributions.

The CFNAI Diffusion Index, which measures the breadth of change in the component series and is also a three-month moving average, stood at -0.37 in June compared to -0.32 in May and -0.08 in April. A reading of zero indicates that all of the indicators are growing at their long-term average. Thirty-seven of the 85 individual data series made positive contributions to the total index in June while 48 contributed negatively.

The CFNAI is a weighted average of 85 indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

These figures are available in Haver's **SURVEYS** database.

- Three of four components make negative contributions.
- Production & employment lead downturn.
- Three-month trend improves.

NAHB Housing Market Index Ticked Up

Summary

Tom Moeller

More Economy in Brief

Economic Letter from Asia: A New Normal

U.S. New Home Sales & Prices Ease in July

Texas General Business Activity Turns Slightly Negative in August, But Expectations Remain Positive

Chicago Fed’s National Activity Index in July Suggests Growth Slowdown