Tom Moeller

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Total housing starts fell 4.2% (-8.8% y/y) during October to 1.425 million (SAAR) from 1.488 million in September, revised from 1.439 million. Starts in August were revised to 1.508 million from 1.566 million. Starts in October were 21.1% lower last month than the April 2022 peak. The Action Economics Forecast Survey expected 1.41 million starts in October.

Single-family starts weakened 6.1% (-20.8% y/y) in October to 855,000 after falling 1.3% to 911,000 in September. Single-family starts were 34.6% below their December 2020 peak. Multi-family starts declined 1.2% (+17.8% y/y) to 570,000 after falling 1.4% in September. They were 9.8% below the April 2022 peak.

Housing starts remained regionally mixed. In the Northeast, starts declined 34.7% (-15.8% y/y) to 96,000 after a 17.4% drop in September. October starts in the Midwest were off 11.1% (-13.6% y/y) to 185,000, after rising 13.7% in each of the prior two months. Starts in the West fell 10.6% last month (-19.6% y/y) to 336,000 following a 6.5% rise. Working 6.7% higher (-1.1% y/y) to 808,000 were starts in the South, recapturing a 4.7% September shortfall.

Building permits declined 2.4% (-10.1% y/y) during October to 1.526 million after rising 1.4% in September. Single-family permits weakened 3.6% (-22.1% y/y) to 839,000. It was the eighth straight consecutive monthly decline. Multi-family permits eased 1.0% (+10.6% y/y) to 687,000 after rising 8.1% in September.

The housing starts and permits figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

**The Economic Outlook and a Word of Caution on Inflation** from Fed Governor Christopher J. Waller can be found here.

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- Decline in single-family starts again exceeds drop in multi-family sector.
- Regional changes are mixed.
- Building permits continue to trend downward.

U.S. Housing Starts Fall Sharply in October

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The Federal Reserve Bank of Philadelphia reported that overall manufacturing activity in the region declined this month. The current general activity diffusion index fell to -19.4 after improving slightly to -8.7 in October. A reading of -6.0 had been expected by the Action Economics Forecast Survey. A slightly improved 16.5% of firms reported improved general activity but a greatly increased 35.9% reported deterioration.

Haver Analytics calculates an ISM-adjusted general business conditions index from five key components using the same methodology as the national ISM index. The index eased to 48.1 from 48.9 in October and remained below the 50 expansion/contraction mark. It is down from a high of 65.4 twelve months ago.

The employment reading fell to 7.1 from 28.5 in November and stands at the lowest level since June 2020. A lessened 18.7% of firms reported increased hiring compared to 29.1% in October, while a greater 11.6% reported reduced hiring compared to 0.6% last month. A cutback in hours worked pushed the hours index down to 1.4 from 10.4 in October. The index stands well below the high of 36.4 in March 2021.

The index of new orders eased to -16.2 from -15.9 in October and was negative for the sixth straight month. Unfilled orders eased to -22.9 this month from -22.5 in October, also negative for the sixth straight month. Shipments fell to 7.0 from 8.6, down from 35.3 in May. The inventories reading fell to -6.5 from -1.7, negative for the fifth month in the last six. Working the other way, the delivery time index rose to -8.8 from -12.6 in October.

Inflation indicators continued to fall this month from their April high. The prices paid index fell to 35.3 from 36.3 in October. The index reached a near-record high of 84.6 in April. A slightly increased 46.9% of respondents reported paying higher prices this month versus 45.9% in October, and 11.6% reported paying lower prices versus 9.6% last month. The prices received index rose to 34.6, a five-month high.

The diffusion index for future general activity remained negative for the sixth consecutive month, though it rose to -7.1 from -14.9 in October. The future new orders index rose to -4.8 from -16.7, while the future shipments index improved to 10.2 from 4.7 in October. The future employment reading fell to 11.1 from 12.2, down from 56.6 in July of last year. The future prices paid fell sharply to 18.5 from 25.8, down from a high of 76.4 this past January.

The survey panel consists of 150 manufacturing companies in the third Federal Reserve District (which consists of southeastern Pennsylvania, southern New Jersey and Delaware). The diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease in activity. The ISM-adjusted figure, calculated by Haver Analytics, is the average of five diffusion indexes: new orders, shipments, employment, delivery times and inventories with equal weights. Each ISM-adjusted index is the sum of the percent responding "higher" and one-half of the percent responding "no change."

The figures from the Philadelphia Federal Reserve dating back to 1968 can be found in Haver's **SURVEYS** database. The expectation from the Action Economics Forecast Survey is available in **AS1REPNA**.

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- Employment index falls sharply as shipments ease.
- Prices paid reading continues to decline.
- Expectations are less pessimistic.

U.S. Philadelphia Fed General Activity Index Declines in November

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The consumer appears to be getting a jump on the holidays as the job market remains firm. Total retail sales increased 1.3% (8.3% y/y) during October after holding steady in September, which was unrevised. A 1.0% increase was expected in the Action Economics Forecast Survey. Excluding motor vehicles & parts, retail sales rose 1.3% (9.0% y/y) following an unrevised 0.1% September uptick. A 0.4% rise had been expected.

Sales in the retail control group, which excludes autos, gas stations, building materials & food services, rose 0.7% last month (6.5% y/y) after a 0.6% gain in September, revised from 0.4%. The latest increase was the strongest since June. These sales are used in the construction of personal consumption expenditures in NIPA accounts.

Sales of motor vehicles & parts rose 1.3% in October (5.2% y/y) after easing 0.3% in the prior month. This gain compares to an 11.7% rise (14.4% y/y) in unit sales of motor vehicles. Gasoline service station sales rose 4.1% (17.8% y/y) as the average price of gasoline increased a seasonally adjusted 1.3%. The latest gasoline sales gain followed a 3.7% September decline as prices weakened. Sales at building materials & garden equipment stores rose 1.1% last month (9.2% y/y) after declining 0.2% in September.

Sales performance was mixed amongst other categories of retail sales. Nonstore retail sales strengthened 1.2% (11.5% y/y) following two months of 0.6% increase. Furniture & home furnishing store sales increased 1.1% (0.4% y/y) after falling 0.9% in September. Holding fairly steady were clothing store sales (3.1% y/y) after having risen 1.0% in both September & August. Working 0.3% lower (-12.1% y/y) were sales of electronics & appliance stores, down for the fifth month in the last six. Sporting goods & hobby shop store sales fell 0.3% (+2.5% y/y) after declining 0.8% in September. General merchandise store sales eased 0.2% (+2.3% y/y) after rising 0.8% in September. Department store sales declined 2.1% last month (-1.6% y/y) following a 1.3% September increase.

In the nondiscretionary sales categories, food & beverage store sales rose 1.4% (7.6% y/y) in October after a 0.7% September gain. Health & personal care store sales increased 0.5% (5.4% y/y) following a 0.8% rise during September.

Dining out remained one of the strongest retail activities this year. Restaurant & drinking place sales rose 1.6% (14.1% y/y) in October following a 0.9% September increase.

The retail sales data can be found in Haver's **USECON** database. The Action Economics forecast is in the **AS1REPNA** database.

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- Autos & gasoline, with higher prices, lead upturn.
- Nonstore & furniture purchases are strong.
- Electronics & general merchandise store sales lag.

U.S. Retail Sales Firm in October; Nonauto Sales Strengthen

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The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo fell 13.2% (-60.2% y/y) during November to 33, the lowest level since April 2020. The index is down 63.3% from its November 2020 high of 90. A reading of 36 had been expected in the Informa Global Markets survey.

Each of the three HMI components declined again this month. The index of present sales conditions fell 13.3% (-56.2% y/y) to 39, the tenth decline in eleven months. The November level was 59.4% below the record-high of 96 in November 2020. The index of expected sales over the next six months dropped 11.4% in November (-63.1% y/y), down for a seventh consecutive month. The November value was the lowest level since April 2012. The index measuring traffic of prospective buyers fell 20.0% (-71.0% y/y), the eighth consecutive monthly decline.

Among the regions of the country, the Housing Market Index in Northeast fell 36.2% (-56.5% y/y). The other regions, the index in the South fell 17.1% (-60.9% y/y). In the Midwest, the index weakened 2.7% (-52.0% y/y). Working 12.0% higher (-68.2% y/y) was the index in the West.

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions which ask builders to rate sales and sales expectations as "good," "fair" or "poor" and traffic as "very high," "average" or "very low". The figures are diffusion indexes with values over 50 indicating a predominance of "good"/"very high" readings. In constructing the composite index, the weights assigned to the individual index components are: 0.5920 for single-family detached sales, present time, 0.1358 for single-family detached sales, next six months, and 0.2722 for traffic of prospective buyers. These data are included in Haver's **SURVEYS** database. The Informa Global Markets survey is in Haver's **MMSAMER** database.

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- Present & expected sales decline.
- Traffic of prospective buyers falls further.
- Regional declines are widespread except in the West.

U.S. Home Builder Index Continues to Fall

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The Producer Price Index for Final Demand increased 0.2% during October after a similar September gain, revised from 0.4%. The unchanged August reading was revised from -0.2%. During the last 12 months, the PPI increase has moderated to 8.0% from an 11.7% March peak. A 0.4% October gain had been expected in the Action Economics Forecast Survey.

The Producer Price Index less food, energy & trade services increased 0.2% last month (5.4% y/y) following a 0.3% September rise, revised from 0.4%. The 0.2% August gain was unrevised. Core prices peaked at a 7.0% y/y rate of increase in both November & December of last year. The PPI excluding just food & energy rose 0.2% last month. A 0.3% increase had been expected.

The rise in the PPI last month was led by a 2.7% gain (21.8% y/y) in energy prices which followed a 0.6% September rise. Gasoline prices rose 5.7% (17.9% y/y). Home heating oil prices surged 9.4% (62.2% y/y). Natural gas costs declined 2.1% (19.0% y/y) and was offset by a 2.0% rise (14.1% y/y) in electric power costs.

Food prices rose 0.5% last month (12.7% y/y) after they strengthened 1.3% in September. Fresh & dried vegetable prices surged 22.4% (45.8% y/y) while egg prices strengthened 15.0% (157.9% y/y). Fresh fruit & melon prices increased 11.5% (34.5% y/y). Dairy product prices rose 0.8% (17.9% y/y) but beef & veal prices weakened 2.1% (-15.9% y/y).

The PPI for goods less food & energy eased 0.1% (+6.6% y/y) in October after holding steady in September. Finished consumer goods prices less food & energy increased 0.2% (7.7% y/y) for the second straight month. Durable consumer goods prices eased 0.1% (+6.7% y/y) while core nondurable consumer goods prices rose 0.3% (8.2% y/y). Prices for private capital equipment improved 0.3% in October (8.5% y/y) for a second straight month. Core government goods prices held steady (8.0% y/y) for a third consecutive month.

Services prices eased 0.1% (+6.3% y/y) in October after rising 0.2% in September. Trade services prices declined 0.5% (+11.1% y/y) after falling 0.3% in September. Transportation & warehousing services costs fell 0.2% (+16.1% y/y) but passenger transportation prices surged 2.1% (30.4% y/y). Services prices less trade, transportation & warehousing improved 0.2% (3.0% y/y) after rising 0.5% in September.

Construction product prices strengthened 2.9% in October (19.6% y/y) after rising 0.3% in September and 0.2% in August. Construction product prices for private capital investment rose 2.9% (20.7% y/y) and government construction costs gained 2.8% (17.4% y/y).

Intermediate goods prices fell 0.2% (+10.1% y/y) in October after holding steady in September. Processed energy goods prices at the intermediate level increased 1.7% after a 2.2% September gain.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver's **USECON** database. Further detail is contained in **PPI** and **PPIR**. The expectations figures are available in the **AS1REPNA** database.

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- Energy prices jump & food prices rise moderately.
- Core goods prices ease.
- Services prices also slip.

U.S. Producer Prices Rise Modestly in October

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Retail gasoline prices fell last week to $3.76 per gallon (+10.7% y/y) after rising to $3.80 per gallon during the previous week. Prices remained below the mid-June peak of $5.01 per gallon. The retail cost of diesel fuel slipped two cents (+42.3% y/y) last week to $5.31 per gallon.

The price of West Texas Intermediate crude oil slipped to an average $88.37 per barrel (+7.8% y/y) in the week ended November 11 from $89.13 in the prior week. Prices hit a low of $79.87 per barrel at the end of June. Yesterday, the price was $85.87 per barrel. The average price of Brent crude oil edged up to $95.45 per barrel last week (14.8% y/y) from $95.22 in the prior week. The price peaked at $127.40 in mid-June. Yesterday, the price was $93.30 per barrel.

The price of natural gas eased last week to $4.22/mmbtu (-15.4% y/y) from $4.56/mmbtu in the previous week. Prices peaked at $9.56/mmbtu in the last week of August. They remained up from a low of $3.56/mmbtu in the last week of December, 2021. Yesterday, the price jumped to $6.24/mmbtu.

In the four weeks ended November 4, gasoline demand declined 6.5% from a year earlier after falling 8.2% y/y during the prior four weeks. These declines compare to 15.2% y/y growth at the end of last year. Demand for all petroleum products rose 2.6% y/y in the latest four weeks in contrast to the 14.4% growth at the end of 2021. Crude oil input to refineries increased 4.1% y/y.

Gasoline inventories fell 3.3% y/y in the week of November 4, while crude oil inventories declined 19.9% y/y.

Measured in days' supply, gasoline inventories in the week ended November 4 fell to 23.3 days and has been declining steadily from 29.2 days since early-February. The supply of crude oil held steady at 28.0 days and remained down from 41.8 days in early-March of last year.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price data can be found in Haver's **WEEKLY** and **DAILY** databases. Greater detail on prices, as well as the demand, production and inventory data are in **USENERGY**.

- Gasoline prices fall.
- Crude oil costs ease.
- Natural gas prices decline again.

U.S. Energy Prices Weaken

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) rose 1.2% last week (-11.6% y/y). Nevertheless, during the last four weeks, the price index was off 1.5% and remained 21.2% below its peak in the second week of March.

Price declines were largest in the **Miscellaneous** group where they fell 2.7% (-11.2% y/y) during the last four weeks. Natural rubber prices declined 6.6% in four weeks and were off 9.5% during the last year. Framing lumber prices fell 8.3% in four weeks and were down by one-third y/y, mirroring weakness in home construction activity. Hide prices held steady over four weeks but fell 28.2% y/y.

**Metals** prices slid 1.6% in the last four weeks and were off 23.4% y/y. Steel scrap prices fell 6.3% in the last four weeks (-30.3% y/y) while tin prices fell 4.3% (-50.3% y/y). The price of zinc, used in the manufacture of batteries, dropped 4.1% in four weeks and fell 12.8% y/y. Lead prices fell 1.7% (-14.5% y/y). Offsetting these declines, copper scrap prices increased 4.8% (-19.0% y/y) in four weeks and aluminum prices improved 0.9% (-9.9% y/y).

Textile prices eased 0.3% (-5.2% y/y). Prices of burlap, used for sacks, bags and gardening, fell 2.5% in the last four weeks and weakened 8.6% y/y. Cotton prices weakened 0.5% in four weeks (-24.1% y/y).

**Crude Oil & Benzene** group prices fell 0.9% during the last four weeks but have risen 1.4% y/y. The cost of West Texas crude oil eased 0.6% to $88.31 per barrel, up 7.6% y/y. Prices for the petro-chemical benzene fell 3.3% in four weeks and were down 6.9% y/y. The FIBER price index excluding crude oil fell 1.6% during the last four weeks and was 12.6% lower y/y.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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- Gain follows three straight weeks of decline.
- Textile & metals prices rise.
- Oil prices ease.

Industrial Commodity Prices Move Up

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The U.S. Treasury Department reported a federal budget deficit of $87.8 billion during October following a deficit of $429.7 billion in September. It was the smallest deficit since May. The Action Economics Forecast Survey expected a $90.0 billion deficit for October.

Overall revenues improved 12.2% y/y last month following their 21.0% y/y rise during all of last fiscal year. Individual income tax receipts rose 21.8% y/y after the 28.8% y/y rise in FY'22, lifted by higher employment. Corporate tax payments declined 6.9% y/y following a surge last year with strength in business earnings. Social insurance taxes rose 8.5% y/y after a 12.9% increase in FY'22 and excise taxes grew 4.0% y/y after rising 16.5% last fiscal year.

Federal government outlays declined 9.5% y/y in October after falling 8.1% y/y in FY'22. Income security payments fell 39.1% y/y after the level halved in FY'22 with the absence of economic stimulus checks. National defense outlays grew 11.3% y/y after a 1.6% y/y rise in FY'22. Outlays on health programs rose 1.3% y/y after a 14.8% gain in FY'22. Social Security outlays increased 8.4% y/y in October following a 7.4% rise last fiscal year, Medicare outlays fell by two-thirds y/y after 8.4% y/y growth in FY'22. Interest payments surged 43.8% y/y in October following a 34.9% y/y gain during the last fiscal year.

Haver's data on Federal Government receipts & outlays are contained in **USECON**. The expectations figure is in the **AS1REPNA** database.

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- Revenues increase sharply y/y.
- Spending collapses versus FY'22.

U.S. Government Budget Deficit Narrows in October

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The price inflation environment cooled off a bit in October. Consumer prices rose 0.4% (7.7% y/y), repeating the September gain. These readings remain below the 1.0% and 1.3% increases logged in May and June when energy prices were rising more quickly. A 0.6% October rise had been expected in the Action Economics Forecast Survey. Prices excluding food and energy improved 0.3% last month after two straight 0.6% gains. The 6.3% y/y gain remained close to the strongest since August 1982. A 0.5% October increase had been expected.

Energy prices strengthened 1.8% last month (17.6% y/y) led by fuel oil prices which rose 10.5% (44.2% y/y). Gasoline prices increased 4.0% (17.5% y/y) following three straight monthly declines. Electricity prices edged 0.1% higher (14.1% y/y). Natural gas prices declined 4.6%, though they rose 20.0% y/y.

Food prices increased 0.6% in October (10.9% y/y), down from two straight 0.8% monthly gains. Food prices away from home increased 0.9% (NSA, 8.6% y/y). Cereal & bakery product prices rose 0.8% (15.9% y/y) while egg prices jumped 10.1% (43.0% y/y). Beverage prices gained 0.5% (12.7% y/y). To the downside, fruit & vegetable prices fell 0.9% (+9.3% y/y) while meat, poultry & fish prices eased 0.1% (+5.9% y/y). The cost of dairy products also slipped 0.1% (+15.5% y/y).

Services prices less energy increased 0.5% (6.7% y/y) last month, the weakest increase in three months. Education & communication costs improved 0.1% (1.4% y/y) but medical care services prices declined 0.6% (+5.4% y/y). Transportation services prices strengthened 0.8% (15.2% y/y) while recreation service prices also gained 0.8% (3.9% y/y). Shelter costs increased 0.8% (6.9% y/y) as the owners' equivalent rent of primary residences gained 0.6% (6.9% y/y) and rental costs increased 0.7% (7.5% y/y). The cost of lodging away from home jumped 4.9% (5.9% y/y).

Goods prices less food & energy declined 0.4% in October (+5.1% y/y) after holding steady in September. Household furnishings prices weakened 0.2% (+8.8% y/y) and appliance costs declined 0.5% (+0.9% y/y), off for the fourth straight month. Medical care product prices held steady (+3.1% y/y) while apparel prices fell 0.7% (+4.1% y/y), down for the second straight month. To the upside, recreation product prices increased 0.7% (4.3% y/y) and new vehicle prices increased 0.4% (8.4% y/y).

The Consumer Price Index data can be found in Haver's **USECON** database with additional detail in **CPIDATA**. The Action Economics survey figure is in the **AS1REPNA** database.

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- Year-to-year gains diminish.
- Core prices lead moderation.
- Food prices remain firm; energy costs rebound.

U.S. CPI Gain Unexpectedly Moderates in October

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Wholesale inventories rose 0.6% (24.1% y/y) during September following a 1.4% August increase, revised from 1.3%. The latest gain compared to a 0.9% rise in the advance report issued earlier. Monthly increases have slowed significantly since early this year. The Informa Global Markets Survey expected a 0.8% rise in September.

Durable goods inventories rose 0.8% (26.5% y/y) in September following a 1.5% gain in August. Motor vehicle & parts inventories rose 1.8% (36.8% y/y). Furniture & home furnishings inventories rose 0.6% (42.4% y/y) while professional equipment inventories rose 0.9% (18.5% y/y). Electrical equipment inventories increased 0.3% (33.0% y/y), while machinery inventories gained 2.2% (22.9% y/y). Inventories of metals & minerals excluding petroleum declined 1.0% in September (+19.0% y/y).

In the nondurable goods sector, inventories edged 0.1% higher (20.6% y/y) in September after strengthening 1.2% in August. Petroleum & petroleum product inventories fell 3.8% (+18.1% y/y) with lower prices. Chemical inventories fell 2.6% (+24.9% y/y). On the other hand, apparel inventories rose 3.4% (69.1% y/y). and grocery product inventories rose 1.7% (23.0% y/y).

Wholesale sales rose 0.4% (14.4% y/y) in September after little change in August. The Action Economics Forecast Survey expected a 0.5% rise. Durable goods sales rose 0.7% (10.9% y/y) after easing 0.1% in August. Motor vehicle & parts sales rose 5.9% (20.3% y/y). Sales of machinery rose 0.8% (14.9% y/y) while electrical machinery sales in September rose 1.6% (13.9% y/y). Professional equipment sales rose 1.7% (4.6% y/y), but furniture & home furnishings sales fell 1.4% (+10.7% y/y).

Sales of nondurable goods edged 0.1% higher (17.6% y/y) in September, the same as in August. A 0.6% decline (+30.9% y/y) in petroleum sales held back the total change. Apparel sales also weakened 2.0% (+6.4% y/y) and paper & product sales fell 0.6% (+14.2% y/y). In contrast, chemical sales rose 0.4% (18.9% y/y) and grocery sales improved 0.7% (10.9% y/y) in September.

The inventory-to-sales (I/S) ratio held steady at 1.31 in September and remained up from 1.29 in July. It was the highest ratio since November 2020. The durable goods I/S ratio remained at 1.72 in September and compared to a low of 1.48 in July 2021. The I/S ratio for nondurable goods also was steady at 0.96 and remained at the highest level since June of last year.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are in the **AS1REPNA** database.

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- Increase moderates after August surge.
- Sales rebound modestly.
- Inventory-to-sales ratio holds steady.

U.S. Wholesale Inventories Continue to Rise in September

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The Mortgage Bankers Association reported that mortgage applications eased 0.1% (-69.6% y/y) in the week ended November 4 after a 0.5% decline during the prior week. Applications for loans to purchase a home rose 1.3% last week (-41.6% y/y) following six straight weeks of decline. They were near the lowest level since January-2015. Applications for refinancing a loan weakened 3.5% (-86.9% y/y) following a 0.2% uptick in the prior week. They were at the lowest level since January 2000.

The share of applications for refinancing an existing loan rose to 28.1% in the week of November 4. That remained down from 65% late in 2021. The percentage of ARM applications was 12.0% in the latest week compared to 11.8% the week prior.

The effective rate on a 30-year fixed-rate loan was 7.36% last week versus 7.27% in the prior week, up significantly from 3.39% in December of last year. The rate on 15-year fixed-rate mortgages of 6.68% compared to 6.77% two weeks earlier. The rate on 30-year Jumbo loans eased to 6.72%. The rate on the 5-year ARM rose to 6.21%, up from 2.82% at yearend 2021.

The average loan size increased to $368,100 (8.3% y/y) in the week of November 4. The series high of $401,900 was reached in the week ended May 6. The average size of a purchase loan rose to $403,300 (-1.5% y/y). The average loan size to refinance a mortgage increased to $277,000 (-7.4% y/y).

The Mortgage Bankers Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver's **SURVEYS** database.

- Purchase applications rise sharply following several weekly declines.
- Applications for loan refinancing continue to fall.
- Mortgage rates reverse earlier decline.

U.S. Mortgage Applications Are Little Changed Even As Rates Rise

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The NFIB Small Business Optimism Index declined to 91.3 in October from 92.1 in September, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. The reading remained above the June 2022 low of 89.5. The NFIB Uncertainty Index held steady at 72 in October.

Seven of the index's ten components declined in October. The percent of firms expecting the economy to improve fell to -46%, a three-month low. The index of planned employment fell to 20%, also its lowest level in three months. The percentage of expected real sales in six months declined to -13% last month from -10% in September. The index of expected capital outlays fell to 23%, down from an October 2021 high of 31%. Expected credit conditions fell to -8% and reversed the September improvement. Those reporting that now was a good time to expand deteriorated minimally to 5% and also reversed the prior month's gain. The percentage reporting that inventories were too low fell to zero from one, down from 15% in November of last year.

Moving upward, the trend measure of earnings edged higher to -30%, the highest level in three months. The percentage of firms planning to raise inventories rose to two percent and reversed half of the September decline. The percent of firms with positions they were unable to fill now held steady at 46%, the lowest since June of last year.

On the pricing front, the percentage of firms now raising prices eased to 50% from 51% and remained down from a 66% March high. The percentage of firms planning to raise prices rose sharply to 34%, the largest percentage in three months. As for labor costs, the percentage of firms raising compensation during the last three months eased to 44% from 45%, the lowest percentage since November 2021. The percentage of firms planning to raise compensation surged to 32% last month from 23% in September. It stood at the highest level since December 2021, up from a September low of 23%.

The single most important problem facing small business was inflation, reported 33% of NFIB members, up from nearly zero at the beginning of last year. The quality of labor was reported as the most important problem by 23% of respondents, down from a November 2021 high of 29%. The cost of labor was reported as the most important problem by a steady 10% of firms, up from eight percent in June.

Roughly 24 million small businesses exist in the U.S. and they create 80% of all new jobs. The typical NFIB member employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver's **SURVEYS** database.

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- Decline reverses September rise.
- Economy & employment plans fall.
- Current inflation index falls but expectations surge.

U.S. Small Business Index Weakens in October

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