Kritika Jain

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The latest UK housing market data from the Royal Institute of Chartered Surveyors (RICS) residential market survey and from the latest Halifax House Price Index revealed surprising signs of improvement. 

The key messages from these reports were as follows-

•	The RICS measure for new buyer enquiries in May climbed to -18%, a significant improvement compared to the previous reading of -34% in April. However, despite a noteworthy turnaround in buyer interest over the past 12 months, the figure still suggests a relatively subdued trend in buyer demand.

•	Alongside this, the agreed sales balance rose to -7% in May, also much less negative from figures of -29% and -18% recorded in March and April respectively.

•	The national house price balance additional remained in negative territory but still rose to -30% in May, up from –38% in April. This was firmer than expected as the consensus forecast was centred on a net balance of -38%.

•	This news chimed with yesterday’s survey of house prices from the Halifax building society. The headline house price index, for example, showed no growth in May, following a decline of 0.4% in April.

•	Still, the weaker house price trend in recent months meant that UK house prices experienced their first year-on-year contraction since 2012 with a -1.0% fall in the annual rate of growth in May.


United Kingdom

UK Housing Market Improves Amidst Rising Interest Rates

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Tom Moeller

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New single-family home sales strengthened 8.8% (8.3% y/y) to 693,000 (SAAR) after falling 5.1% to 637,000 in February, revised from 662,000, according to the U.S. Census Bureau. The March reading was the highest in six months, up from the November low of 609,000. The Action Economics Forecast Survey expected sales of 670,000 new homes. Sales remained 32.7% below their peak of 1.029 million in August 2020.

By region, new home sales in the Northeast rebounded 27.8% in March (-13.2% y/y) to 46,000 after falling 25.0% in February. Sales in the Midwest rose 5.3% (23.4% y/y) to 79,000 after falling 10.7% in February. Sales in the South rose 7.7% (4.5% y/y) to 391,000 after falling 1.9% in February. New home sales in the West improved 8.6% (18.8% y/y) to 177,000 after weakening 3.6% in February.
		
The median sales price of a new home increased 6.0% (-1.9% y/y) to $430,700 in March following a 3.5% February decline. The median sales price remained 13.3% below its October 2022 peak of $496,800. The average sales price of a new home improved 7.4% (1.0% y/y) to $524,800 in March, the highest price since August of 2023. These sales price data are not seasonally adjusted.

The number of unsold new homes on the market rose 2.6% (10.2% y/y) to 477,000 in March, the eighth consecutive rise. It was the highest level since February 2008. The latest figure was well above a low of 281,000 in October 2020. The seasonally adjusted months' supply of new homes for sale eased to 8.3 months in March. The months' supply remained down from a high of 10.1 months in July 2022.

The median number of months a new home stayed on the market edged up to 2.8 months in March, the highest since May 2023 and increased from 2.7 months in March of last year. The reading remained up from the record low of 1.5 months in both September and October of 2022 but down from 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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- Sales rise to highest level in six months.
- Regional sales gain is broad-based.
- Median sales price increases sharply.

U.S. New Home Sales Rebound in March

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Retail gasoline prices for all grades increased to $3.79 per gallon (0.7% y/y) in the week ended April 22 from $3.75 in the prior week. These compare to a low of $3.18 in the middle of January and the latest was the highest price since the second week of October. The recent high stands at $4.00 per gallon in the third week of September, and the all-time high was $5.11 in the week ended June 13, 2022. Retail prices for on-highway diesel fuel slipped to an average $4.00 per gallon (-2.1% y/y) last week from $4.02 in the prior week. A recent low of $3.77 per gallon occurred in the week ended July 3, 2023.

The average price of West Texas Intermediate crude oil declined to $84.18 per barrel (+6.3% y/y) in the week ended April 19 versus an average $86.19 in the prior week. It remained well above its low of $69.37 per barrel in the week of June 30, 2023. The price remained below a high of $91.45 in the week of September 29, 2023. The all-time high was seen in the week of July 4, 2008 at $142.46 per barrel. Yesterday, the price of West Texas Intermediate crude oil was $82.85 per barrel. The price of European Brent crude oil declined to $89.59 per barrel (5.9% y/y) in the week ended April 19 compared to $92.01 in the prior week. The price of Brent has recently ranged from a low of $73.55 in the week ended June 30, 2023 to a high of $127.40 in the week ended June 10, 2022. Yesterday, the price was $87.30 per barrel.

Natural gas prices weakened to an average of $1.46/mmbtu (-33.9% y/y) in the week ended April 19 from $1.69/mmbtu in the prior week. These compare to a high of $3.20 averaged in the week of October 13, 2023. Yesterday, the natural gas price was $1.64/mmbtu.

Gasoline demand fell 1.9% y/y in the four weeks ended April 12 after declining 2.7% y/y in the four weeks ended April 5. Demand for all petroleum products eased 0.2% y/y, after falling 0.4% y/y in the prior four-week period. Crude oil input to refineries rose 1.1% y/y in the four weeks ended April 12 after rising 1.6% y/y in the previous four week period.

Gasoline inventories rose 1.7% y/y in the week of April 12 after rising 2.8% y/y in the prior week. Inventories of residual fuel oil fell 11.6% y/y in the week of April 12 after declining 4.7% y/y in the previous week. Crude oil inventories, including the Strategic Petroleum Reserve, decreased 1.1% y/y in the week of April 12 after a 2.2% y/y fall in the prior week.

Measured in days’ supply, gasoline inventories held steady w/w at 25.8 days in the week of April 12. The recent low was 23.4 days in the week of June 30, 2023. Crude oil inventories rose to 29.0 days of supply in the week of April 12 from, down from 28.9 days in the prior week. These compare to a recent high of 31.9 days in the week of March 3, 2023 and a low of 25.0 days in the week of September 1, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** & **USENERGY** database.

- Gasoline prices continue to rise.
- Crude oil costs drop, reversing earlier increase.
- Natural gas prices fall sharply.

U.S. Energy Prices Are Mixed in Latest Week

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**EMU Shows Some Services Upswing, But still Is Range-bound**
The PMI data for April from S&P Global shows a mixed performance that tends toward strengthening except for the United States. U.S. data in April show a weaker composite, a weaker manufacturing sector, and a weaker services sector and these three readings were also weaker month-to-month in March in the United States. The other seven countries reporting on the table show stronger data for April and while a bit more mixed strengthening in March as well. On average, the monthly data from February to March to April show the composite readings creeping higher. Manufacturing ratings move higher in March compared to February and then stall in April. For services, there is a steady progression of stronger service sector numbers from February to March to April.

Sequential data are far more equivocal with the average Composite Index at the same level over three months as it is over 12 months. The manufacturing reading is a tick higher at 47.7 over three months compared to 47.6 over 12 months. The services reading is slightly lower on average over three months at 51.3 compared to its 12-month average of 51.5.

The PMI this month highlights conflicting trends with the February-to-March-to-April data showing an upswing while the averages from 12-months to six-months to three-months show flatness to slight weakness. On balance, it's not the improving picture that we'd hope to see at this point.

The queue percentile standings data place the April flash data in a four-year queue of observations and viewed in that way the average for the Composite Index is at 62nd percentile, the average for manufacturing is at the 38th percentile and the average for services is at its 67.6 percentile. The services sector is barely inside of the top third of its 4-year historic range for this. Manufacturing at a 38-percentile standing is a good ten percentage points of percentile standing points below its median.

Of course, they're very different experiences across countries. India has the strongest performance with rankings in the 90th percentile for the composite, manufacturing, and services. Japan has firmed showing strong standings with the composite ranking in its 87.8 percentile and a services sector in its 91.8 percentile. But Japan’s manufacturing is still only in its 51st percentile. Japan and India are the only two countries that have manufacturing percentile standings above their respective medians (above the 50th percentile mark). Manufacturing in the euro area as a whole has a 22.4 percentile standing, Germany has a 16.3 percentile standing, and France has a 16.3 percentile standing. Manufacturing remains a weak sector in the global economy. India is benefiting from some relocation activity from some of the businesses leaving China.

The table also presents data and changes from just before COVID struck using January 2020 as a base. On that comparison, Germany, France, and the U.S. have weaker composite readings than they had four years ago. The European Monetary Union has a higher reading but only by 0.4 points, on its composite diffusion index. India's composite is higher by 6.1 points, Australia is better by 5 points, Japan is better by 2.5 points, and the U.K. is better by 1.7 points. None of these are very remarkable increases over a period of four years, but the statistics for India and Australia are quite respectable.

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The global economy continues to struggle. While central banks seem to have started on a rate cutting cycle, the Federal Reserve has stepped back from its ‘plan’ to cut rates as inflation in the U.S. has stopped falling and started rising on a short-term basis. The European Monetary Union is still expecting the ECB to cut rates around mid-year. Japan, contrarily, is expecting to raise rates. And since inflation progress in the U.K. has stalled out, it's not clear where U.K. monetary policy is headed.

PMIs Are Flat or Better in April, But Trend Remains Flat

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The Chicago Fed National Activity Index (CFNAI) rose 0.15 in March from 0.09 in February, revised from to 0.05. The index reached a four- year low of -0.81 in January. Smoothing out the monthly volatility, the index's three-month moving average rose to -0.19 from a downwardly revised -0.28 in February.

This index is expressed in standard deviation units from zero (with a value of zero defined as trend real GDP growth). Research at the FRB Chicago indicates that readings on the three-month average of -0.70 or below are consistent with the economy being in a recession. As a result, the three-month reading in March indicates that the US economy is on a positive growth path.

Movement in the four broad categories of indicators used to construct the index was mixed in March versus February. Production-related indicators contributed 0.11 point to the CFNAI in March after adding 0.13 in February. These were improved from a 0.39 January subtraction. The employment, unemployment & hours series added 0.04 point after subtracting 0.01 point in February. This was the first positive reading since November of last year. The sales, orders and inventories category held steady after subtracting 0.05 from the CFNAI one month earlier. The personal consumption and housing category’s contribution to the CFNAI eased to a 0.01 point subtraction after adding 0.02 in February.

The CFNAI Diffusion Index, which measures the breadth of the change in the component series and is also a three-month moving average, rose to -0.06 in March from -0.16 in February. It was the sixth consecutive reading in negative territory. A reading of zero indicates that all of the indicators are growing at their long-term average. If all of the underlying indicators in a given month are below their long-run averages, the diffusion index will equal -1. If all of the indicators are above their long-run averages, it will equal +1.

In March, 50 of the 85 individual indicators made positive contributions to the CFNAI, while 35 made negative contributions. Fifty indicators improved from February to March, while 35 indicators deteriorated. Of the indicators that improved, 16 made negative contributions.

The CFNAI is a weighted average of 85 monthly indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. 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.

**Generative AI: A Turning Point for Labor's Share?** From the Federal Reserve Bank of Philadelphia can be found [here](https://www.philadelphiafed.org/the-economy/generative-ai-a-turning-point-for-labors-share#:~:text=If%20AI%20is%20significantly%20more,2024%20issue%20of%20Economic%20Insights.).

- Index is positive for second straight month.
- Three-month average remains negative.
- Improvement led by labor market indicators.