Louise Curley

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040614c.jpg" width="353"></p>
<p>Indonesia reported that, seasonally unadjusted, April Industrial Production in manufacturing was 17.07% above April, 2003. For the first four months of this year, manufacturing production was up 14.94% over the corresponding months of last year.</p>
<p>Indonesia is the seventh Pacific Rim countries to have recently reported data on manufacturing activity for April 2004. The tempo of recovery from the downturn in 2001 has varied among the countries, with Indonesia being the slowest and one of the most uneven. By contrast, manufacturing in India did not suffer a decline in 2001 and has since followed a steadier, if less dramatic, upward trend than that other countries of the region--Malaysia, Thailand, Taiwan, Korea and Singapore.</p>
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<th scope="col" class="firstcol">Industrial Production in Manufacturing (NSA)</th>
<th scope="col"><b>Apr 04</b></th>
<th scope="col"><b>Mar 04</b></th>
<th scope="col"><b>Apr 03</b></th>
<th scope="col"><b>Y/Y&nbsp;%</b></th>
<th scope="col">&nbsp;<b>Jan-Apr</b> <b>Y/Y %</b></th>
<th scope="col"><b>2003</b>&nbsp;<b><br> %</b></th>
<th scope="col"><b>2002<br> %</b></th>
<th scope="col"><b>2001<br> %</b></th>
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<td class="firstcol">India (1993=100)</td>
<td>196.9</td>
<td>217.4</td>
<td>180.3</td>
<td>9.21</td>
<td>7.91</td>
<td>7.10</td>
<td>5.08</td>
<td>2.91</td>
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<td class="firstcol">Indonesia (1993=100)</td>
<td>115.95</td>
<td>114.98</td>
<td>99.04</td>
<td>17.07</td>
<td>14.94</td>
<td>5.00</td>
<td>-7.06</td>
<td>-1.08</td>
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<td class="firstcol">Korea (2000=100)</td>
<td>126.8</td>
<td>129.7</td>
<td>113.5</td>
<td>11.72</td>
<td>11.54</td>
<td>5.13</td>
<td>8.16</td>
<td>0.23</td>
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<td class="firstcol">Malaysia&nbsp; (1993=100)</td>
<td>253.0</td>
<td>247.4</td>
<td>217.9</td>
<td>16.11</td>
<td>16.43&nbsp;</td>
<td>10.44</td>
<td>4.52</td>
<td>-6.62</td>
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<td class="firstcol">Singapore (2003=100)</td>
<td>111.3</td>
<td>108.9</td>
<td>91.1</td>
<td>22.17</td>
<td>13.47&nbsp;</td>
<td>2.80</td>
<td>8.51</td>
<td>-11.59</td>
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<td class="firstcol">Taiwan (2001=100)</td>
<td>130.57</td>
<td>134.82</td>
<td>114.7</td>
<td>13.97</td>
<td>15.58&nbsp;</td>
<td>9.09</td>
<td>7.44</td>
<td>-7.99</td>
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<td class="firstcol">Thailand (1995=100)</td>
<td>147.0</td>
<td>163.2</td>
<td>136.5</td>
<td>7.69</td>
<td>10.39&nbsp;</td>
<td>12.33</td>
<td>7.48</td>
<td>1.33</td>
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Indonesia reported that, seasonally unadjusted, April Industrial Production in manufacturing was 17.07% above April, 2003. For the first four months of this year, manufacturing production was up 14.94% over the corresponding months of [...]

Recovery in Manufacturing Activity in the Pacific Rim Widens with Indonesian Report of Sharp Rise

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Tom Moeller

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U.S. house prices slipped 0.1% during March after holding steady in February, revised from a 0.1% uptick, a 0.3% January rise and three consecutive 0.4% increases, according to the Federal Housing Finance Agency (FHFA) House Price Index. The year-on-year increase decelerated to 3.7% in March, the lowest since June 2023, and remained well below the high of 18.7% in February 2022.

House prices fell during March in six of the nine census divisions of the country. These included New England (-0.1%, +6.5% y/y), East North Central (-0.4%, +5.6% y/y), West North Central (-0.1%, +4.0% y/y), West South Central (-0.3%, +1.7% y/y) and Pacific regions (-0.3%, +1.7% y/y). House prices rose in three regions in March, including the Middle Atlantic (0.5%, 6.3% y/y), South Atlantic (0.3%, 3.5% y/y) and East South Central (0.7%, 4.2% y/y)) regions.

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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- Slight monthly drop in prices pulls y/y increase to two-year low.
- Declines are widespread amongst regions.

U.S. FHFA House Prices Ease in March

Tian Yong Woon

This week, we explore a series of interconnected themes—from China’s accelerating AI ambitions to evolving geopolitical dynamics in Southeast Asia, shaped in part by the United States’ increasingly inward focus and protectionist trade measures. Despite US chip export restrictions, some—including Nvidia’s CEO—have questioned their effectiveness. Indeed, select indicators suggest that China’s AI capabilities continue to advance (chart 1), even as broader dimensions of development—beyond raw performance—reveal areas where significant progress is still needed (chart 2).

In Indonesia, we discuss last week’s central bank rate cut, which some economists saw as necessary to support the economy amid external trade-related headwinds and reduced government spending. The move was also made possible by recent signs of rupiah stability (chart 3). In response to global trade uncertainties, Indonesia is also deepening regional ties, particularly with China—a relationship that has been strengthening even prior to this year’s US trade measures (chart 4). 

Zooming out to broader regional issues, this week’s ASEAN-related summits reflect a growing inclination to expand ties with both China and the Middle East. As such, ASEAN’s already substantial trade with China (chart 5) may be poised to grow further. At the same time, ASEAN is now exploring a collective approach in trade talks with the US—alongside ongoing bilateral efforts—potentially to stave off further tariff increases on its exports (chart 6).

**China’s AI push**
It has been another revealing week in US–China developments. Nvidia CEO Jensen Huang remarked that US chip export controls have not only failed but may have accelerated China’s drive for self-reliance in AI chips—particularly at the high end. Indeed, this trend appears to be playing out. China has steadily increased investment in its AI capabilities over the years, bolstered by a strategic government push that includes substantial funding. This has led to tangible progress, such as a rising number of large-scale AI systems (see chart 1). Notably, China’s advances have continued despite sustained US efforts to hinder its technological progress—many of which were introduced under previous administrations. 

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Admittedly, there are many dimensions to consider in assessing China’s rise in the AI space—beyond just pure performance metrics. Chart 2 highlights one such multi-dimensional perspective: the IMF’s AI Preparedness Index (AIPI), which captures four key pillars—digital infrastructure, human capital, technological innovation, and legal frameworks. Based on 2023 data, China recorded a relatively high overall AIPI score but still lagged behind several major advanced economies, including the US, Germany, and Japan. A closer look at the sub-indexes shows that while China scores strongly in digital infrastructure, there remains room for improvement in the other three areas. That said, China’s current priority appears to be achieving self-reliance and eventual dominance in AI capabilities.

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**Indonesia-related developments**
Turning to Indonesia, its central bank (BI) cut its policy rate by 25 bps last week, as widely expected. Like many central banks globally, BI has shifted its focus toward supporting growth, as trade-related pressures from the US continue to weigh on economic momentum. Crucially, inflation has remained well-behaved—staying within the central bank’s target range of ±1% around the 2.5% midpoint—which provided the space for this latest rate cut. A consideration more specific to Indonesia is BI’s explicit mandate to maintain FX stability. On that front, the rupiah has recently stabilized after a prolonged period of depreciation, as shown in chart 3. This stabilization also gave BI more confidence to ease policy during its May decision. Looking ahead, however, BI has not explicitly endorsed further near-term rate cuts, signalling a more cautious stance toward additional easing.

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BI’s rate cut was widely seen by economists as necessary, given that year-on-year GDP growth in Q1 fell to multi-year lows, and amid ongoing substantial government spending cuts. With growth facing multiple headwinds—domestically and externally, such as from US trade tariffs—BI’s easing was viewed as a move to help mitigate near-term economic pressures. At the same time, Indonesia is working to diversify and strengthen its longer-term growth drivers, including through deeper engagement with other Asian economies. A high-profile example of this took place over the weekend, when Indonesian President Prabowo met with Chinese Premier Li Qiang in Jakarta, as the latter began his Southeast Asian tour. Among the key outcomes were a signed memorandum of understanding (MOU) to promote bilateral transactions in local currencies and commitments to enhance cooperation in sectors such as tourism and agricultural exports. Even prior to this latest diplomatic push, China and Indonesia had been steadily deepening their economic ties. This is reflected, for example, in the growing share of Indonesian exports destined for China over recent years (chart 4).

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**Broader ASEAN developments**
As noted earlier, Chinese Premier Li Qiang’s visit to Indonesia marked the first stop of his Southeast Asian tour. He later travelled to Kuala Lumpur, Malaysia, to attend the inaugural ASEAN–Gulf Cooperation Council (GCC)-China summit—underscoring China’s growing interest in deepening ties across both Asia and the Middle East. This renewed diplomatic and economic outreach comes at a time when the US has stepped up its trade-related actions. While these moves are intended to support the US economy, they have also strained its relationships with key partners, leaving space for other major players—most notably China—to strengthen their influence. In the case of ASEAN, China has long been the region’s largest trading partner and investor, with rapid growth over time, as shown in chart 5. While the US remains ASEAN’s second-largest trading partner and maintains strong defence ties with several member states, its ability to sustain this position is increasingly in question. As the US once again turns inward—with trade tariffs already in place and the prospect of even higher rates looming without substantive trade agreements—its economic engagement in the region faces growing challenges.

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Staying with Southeast Asia, this week’s ASEAN–GCC–China summit is part of a broader series of meetings, including the 46th ASEAN Summit, the inaugural ASEAN–GCC–China Summit, and the 2nd ASEAN–GCC Summit. During the 46th Summit on Monday, Malaysian Prime Minister Anwar—whose country holds the rotating chairmanship this year—revealed that he had written to US President Trump proposing a US-ASEAN summit. The summit could possibly be focused on dialogue on trade issues, particularly in light of ongoing US tariffs. The shared challenge of potentially steep tariff increases from current levels (see chart 6) seems to have prompted ASEAN member states to explore a collective approach to trade discussions with the US, rather than solely pursuing separate bilateral talks. However, given President Trump’s apparent preference for bilateral negotiations, it remains unclear whether the US would engage in a multilateral summit format. While an ASEAN-wide discussion with the US could produce a more comprehensive outcome for the region, it is still too early to tell whether such a summit will materialize under the current US administration.

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Asia

Economic Letter from Asia: On China and ASEAN

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Despite higher mortgage rates, sales of new single-family home sales increased last month. In April, sales jumped 10.9% (3.3% y/y) to 743,000 (SAAR) after increasing 2.6% to 670,000 during March (revised from 724,000). February sales fell 1.4% to 653,000, revised from 674,000, according to the U.S. Census Bureau. Data back to January 2019 were revised. It was the highest sales level since February 2022. The Action Economics Forecast Survey expected sales of 698,000 during April. The sales gain occurred as the average 30-year fixed-rate mortgage rose to an average 6.73% from 6.65% in March, according to Freddie Mac. It compares to a low of 6.18% averaged in September of last year.

By region, new home sales varied across the country last month. Sales of new homes in the Midwest rose 35.5% (1.2% y/y) to 84,000, after declining 7.5% during March. In the South, new home sales increased 11.7% (6.5% y/y) to 478,000, following a 4.9% March rise. Sales of new homes in the West increased 3.3% (1.3% y/y) to 158,000, after rising 6.3% in March. To the downside, new home sales in the Northeast declined 14.8% (-25.8% y/y) to 23,000 in April, after falling 20.6% in March.

The median sales price of a new home rose 0.9% (2.0% y/y) to $407,200 (NSA) in April after falling 2.1% to $403,700 in March. 
The average sales price of a new home rose 3.7% (3.6% y/y) to $518,400 in April, following a 1.4% March increase. The average price was 4.2% 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 eased 0.6% (+8.6% y/y) to 504,000 (SA) in April, after a 1.2% March increase. The seasonally adjusted months' supply of new homes for sale fell to 8.1 months in April after easing to 9.1 months in March. 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 held steady at 3.0 months in April, up from a June 2024 low of 2.1 months. It remained the highest level since April 2022. 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.

The Effects of Tariffs on Inflation and Production Costs from the Federal Reserve Bank of San Francisco is available [here]( https://www.frbsf.org/research-and-insights/publications/economic-letter/2025/05/effects-of-tariffs-on-inflation-and-production-costs/?utm_source=frbsf-homepage&utm_medium=latest-carousel&utm_campaign=2025-05&utm_id=economic-letter).



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- Sales rise to highest level in three years.
- Gains in sales are logged in most of the country.
- Supply of new homes falls again.


U.S. New Home Sales Surge in April; Prices Edge Higher

Robert Brusca

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Economic readings continue to ebb and flow as is common. In May, the UK GfK consumer sentiment index has improved to -20 from -23. However, at -20 it's still weaker than it was in March when its value was -19. The 12-month average for GfK sentiment in the UK is -18 leaving today's -20 reading from May still weaker on balance than it's been over the past year. All of this sort of ‘to and fro’ makes it a little bit more difficult to pin down what's happening. However, the chart on the GfK reading shows that the downtrend in consumer sentiment is still in place and with readings that continue to hover around -18 to -20 - good signals still are not being emitted and the trend has not been righted.

The GfK barometer has a 29-percentile ranking data back to 1996. So, this is a bottom 30% standing for the consumer sentiment rating for GfK.
 
Other economic readings continue to go back and forth just today the German GDP reading was up relatively sharply as US tariffs are being cited for stimulating German activity in the near term as firms tried to export goods before the tariff in the US went into effect. We had previously seen some improvement in the European manufacturing (PMI) indices that we speculated was due to that same sort of lead and lag, behavior surrounding the expected imposition of tariffs. For the UK itself, retail sales have been stronger than expected largely because of better weather. Yes, better sales but not on any fundamental improvement.

Economic readings are always back and forth, and readings are never gospel making it difficult to the central banks to discern trends and even to set policy if they are in a data-dependent mode. But that is nothing new. It may be a bit more of a problem now when so much uncertainty seems to hang in the air with the war in Ukraine unable to be stopped, the US pushing more defense responsibility onto Europe, and the US also brandishing tariffs to try to remake the world in a way it feels will be more fair and friendly for it. Of course, one man’s ‘friendly’ is often another man’s ‘unfriendly.’

The sentiment reading in the UK features strong readings for households’ current financial situation and savings environment…but the current economic situation is only at the 30% mark and, looking ahead, it has a modest 18-percerntile rank. By income groups upper income individual’s sentiment has a 75-percentile standing compared to an abysmal 3.8 percentile standing by lower income individuals. 

Inflation over the next 12-months continues to have a high standing at an 86-percentile mark while unemployment prospects (that have diminished very recently) are at a 75-perntiel standing (higher only 25% of the time) and despite recent improvement on this score the unemployment response is still 9 survey points higher over the last 12-months.

The slight improvement in the GFK survey this month is even less than its monthly standard deviation for change. It is a rise, but not significant. The UK economy continues to face a difficult situation with sentiment, seeming to remain under pressure. 


Recovery in Manufacturing Activity in the Pacific Rim Widens with Indonesian Report of Sharp Rise

Summary

Louise Curley

More Economy in Brief

U.S. FHFA House Prices Ease in March

Economic Letter from Asia: On China and ASEAN

U.S. New Home Sales Surge in April; Prices Edge Higher

UK Sentiment Improves in May-Remains Weak

Industrial Production in Manufacturing (NSA)	Apr 04	Mar 04	Apr 03	Y/Y %	Jan-Apr Y/Y %	2003 %	2002 %	2001 %
India (1993=100)	196.9	217.4	180.3	9.21	7.91	7.10	5.08	2.91
Indonesia (1993=100)	115.95	114.98	99.04	17.07	14.94	5.00	-7.06	-1.08
Korea (2000=100)	126.8	129.7	113.5	11.72	11.54	5.13	8.16	0.23
Malaysia (1993=100)	253.0	247.4	217.9	16.11	16.43	10.44	4.52	-6.62
Singapore (2003=100)	111.3	108.9	91.1	22.17	13.47	2.80	8.51	-11.59
Taiwan (2001=100)	130.57	134.82	114.7	13.97	15.58	9.09	7.44	-7.99
Thailand (1995=100)	147.0	163.2	136.5	7.69	10.39	12.33	7.48	1.33