Tom Moeller

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Total housing starts fell 8.1% (-7.7% y/y) during September to 1.439 million units (SAAR) from 1.566 million in August, revised from 1.575 million. Starts in July were revised to 1.377 million from 1.404 million. Starts overall were 20.3% lower last month than the April 2022 peak. The Action Economics Forecast Survey expected 1.47 million starts in September.

Single-family starts weakened 4.7% (-18.5% y/y) in September to 892,000 after rising 4.0% to 936,000 in August. Single-family starts were 31.8% below their December 2020 peak. Multi-family starts declined 13.2% (+17.6% y/y) to 547,000 after rising 32.1% in August. They were 13.4% below the April 2022 peak.

Housing starts remined regionally mixed. In the South, housing starts declined 13.7% (-8.8% y/y) to 738,000 following a 20.8% August increase. Starts in the Northeast fell 12.5% (+15.7% y/y) to 147,000 after holding steady in August. Starts in the Midwest weakened 2.7% (-10.8% y/y) in September to 182,000 after rising 16.1% in the prior month. Working 4.5% higher (-11.2% y/y) to 377,000 were starts in the West after a 4.7% August increase.

Building permits improved 1.4% (-3.2% y/y) in September to 1.564 million after falling 8.5% in August. Single-family permits weakened -3.1% (-17.3% y/y) to 872,000. It was the seventh consecutive monthly decline. Multi-family permits increased 7.8% (+23.4% y/y) to 692,000 after falling 14.7% in August.

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

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- Both single and multi-family starts decline.
- Regional declines remain mixed.
- Building permits improve modestly.

U.S. Housing Starts Weaken in September

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Mortgage applications dropped 4.5% (-68.3% y/y) in the week ended October 14, following a 2.0% decline during the prior week. Applications have fallen by roughly three-quarters from the early-2021. These data are from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house declined 3.7% (-38.3% y/y) after a 2.1% decline. Applications for refinancing a loan declined 6.8% (-85.9% y/y), the third consecutive weekly decline.

The share of applications for refinancing an existing loan eased to 28.3% in the week of October 14 from 29.0% in the prior week. The percentage of applications that were ARMs rose to 12.8% from 11.7% in the week prior.

The effective rate on a 30-year fixed-rate loan was 7.21% last week, up from 7.09% in the prior week. It was the highest since April 2002. The rate on 15-year fixed-rate mortgages eased to 6.39% from 6.44% which was the highest rate since October 2008. The rate on 30-year Jumbo loan rose to 6.50% from 6.42%, while the rate on a 5-year ARM rose to 5.98% from a low of 2.55% in September 2021.

The average loan size increased to $366,600 in the week of October 14 from $360,400. The series high of $401,900 was reached in the week ended May 6. The average size of a purchase loan edged higher to $402,600 from $399,100 in the prior week. The average loan size to refinance a mortgage rose to $275,200 last week from $265,600 in the week prior.

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.

- Total applications equal May 1997 low.
- Purchase and refinancing applications both weaken.
- 30-year fixed-rate mortgage hits 20-year high.

U.S. Mortgage Applications Decline Further

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Industrial production increased 0.4% (5.3% y/y) during September after easing 0.1% in August, revised from -0.2%. Production rose 0.7% in July, revised from 0.5%. The level of industrial output during September was a record, and it has risen by roughly one-quarter since the 2020 low. A 0.1% improvement had been expected in the Action Economics Forecast Survey.

**By industry group**, manufacturing production increased 0.4% in September (4.7% y/y), the same as in August, revised from 0.1%. Durable goods rose 0.5% (6.0% y/y) after edging 0.1% higher in August. Computer & electronic products production gained 1.1% (1.9% y/y) for the second straight month. Motor vehicle & parts production rose 1.0% (19.4% y/y) after falling 1.5% in August. Electrical equipment & appliance production surged 0.9% in September (3.9% y/y) following declines in three of the prior four months. Furniture production rose 0.7 (+0.9% y/y), after declining in each of the prior six months. Machinery output rose 0.3% last month (5.2% y/y) after a 2.6% surge. Fabricated metal product output improved 1.0% (5.0% y/y) but primary metals eased 0.2% (-2.7% y/y), off for the second straight month. In the nondurable goods sector, production rose 0.3% (3.6% y/y) after rising 0.7% in August. Apparel output strengthened 1.6% in September (4.6% y/y) while petroleum & coal product output gained 1.1% (3.9% y/y) after strengthening 4.1% in August. Chemical output rose 0.3% (4.4% y/y) after a 0.7% rise, but paper production fell 0.9% (+0.6% y/y), the fourth decline in five months. Food, beverages & tobacco production rose 0.6% (3.3% y/y) after easing 0.1% in August.

Utilities output eased 0.3% (+0.5% y/y) in September after dropping 3.3% in August. Mining activity rose 0.6% (+11.1% y/y) in September after holding steady in August.

**By market groups**, consumer goods output rose 0.6% (3.8% y/y) in September, following declines in three of the prior four months. Business equipment production rose 0.5% (8.2% y/y) while construction supplies production jumped 1.1% (+3.6% y/y) after a 0.4% decline.

**In the special classifications**, factory output of selected high-tech industries rose 0.8% in September (4.9% y/y) after minimal gains in the prior two months. Manufacturing production excluding selected high-tech industries rose 0.4% (4.6% y/y) after a 0.2% August rise. Manufacturing production excluding both selected high-tech and motor vehicles & parts increased 0.3% (3.6% y/y) after a 0.5% August gain.

Capacity utilization rose to 80.3% in September from 80.1% in August. An 80.0% rate had been expected. Factory utilization rose to 80.0% in September from 79.7% in the prior month.

Industrial production and capacity are located in Haver's **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.

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- Factory production leads increase.
- Consumer & business output both are strong.
- Capacity utilization returns to expansion high.

U.S. Industrial Production Firms During September

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Retail gasoline prices fell last week to $3.87 per gallon (+16.5% y/y) from $3.91 during the previous week. Prices remained below the mid-June peak of $5.01 per gallon. The cost of diesel fuel rose to $5.34 per gallon (45.4% y/y) from $5.22 per gallon.

The price of West Texas Intermediate crude oil edged higher to an average $88.67 per barrel (9.2% y/y) in the week ended October 14 from $88.04 in the prior week. Prices previous hit a high of $120.46 per barrel in the second week of June. Yesterday, the price was $85.46 per barrel. The average price of Brent crude oil eased to $94.62 per barrel last week (12.8% y/y) after rising to $94.66 in the week. The price peaked at $127.40 in mid-June. Yesterday, the price was $91.04 per barrel.

The price of natural gas rose last week to $6.29/mmbtu (13.5% y/y) from $6.01/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. Yesterday, the price was $6.08/mmbtu.

In the four weeks ended October 7, gasoline demand declined 5.5% from a year earlier after falling 4.1 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 fell 3.8% 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 3.5% y/y.

Gasoline inventories fell 6.1% y/y in the week of October 7, while crude oil inventories declined 18.8% y/y.

Measured in days' supply, gasoline inventories in the week ended October 7 edged higher to 24.0 days from 23.6 days in the prior week. The supply of crude oil rose to 27.6 days but 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 ease.
- Crude oil prices increase slightly.
- The cost of natural gas climbs.

U.S. Energy Prices Are Mixed

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The Empire State Manufacturing Index of General Business Conditions declined to -9.1 during October from -1.5 in September. These figures were improved from -31.3 in August, suggesting that the rate of deterioration has moderated. A reading of -1.5 had been expected in the Action Economics Forecast Survey. The latest survey was conducted between October 3 and October 11.

Haver Analytics constructs an ISM-adjusted Empire State diffusion index using methodology similar to the ISM series and information from five component indexes in the survey. Remaining just above the level of 50 which separates expansion from contraction, this index fell to 51.5 this month from 54.5 in September.

The headline index reflects the answer to a single question on general business conditions. The details in the report this month are mixed. The employment index fell to 7.7 from 9.7. An increased 20.5% of respondents reported more hiring while a greatly increased 12.8% reported a decline. The shipments series weakened to -0.3 from 19.6 as a lessened 27.5% of respondents reported higher shipments and an increased 27.8% reported a decline. The delivery times index weakened to -0.9 and reversed it September gain. The inventories reading fell to 4.6 from 9.4. It was the lowest figure since June 2021.

Moving higher, the unfilled orders measure rose to -3.7, its highest reading since May. The average workweek reading improved to 3.3 from -0.1 in September as 12.6% of respondents worked longer hours while 9.3% reported fewer. The new orders measure held steady at 3.7, up from -29.6 in August. A greatly increased 29.7% of respondents reported more orders while a lessened 26% reported a decline.

On the pricing front there was upward pressure m/m. The prices paid index rose to 48.6 this month from 39.6 in September. It remained below the level of 86.4 six months earlier. The percentage reporting paying higher input prices rose to 55.0%. The percentage paying lower prices increased slightly to 6.4%. The prices received index eased to 22.9 last month from 23.6. It as the lowest reading since January 2021.

Looking ahead six months, the respondents' optimism index deteriorated to -1.8 from +8.2 in September. Inflation expectations rose slightly but the employment figure fell to its lowest point since February 2021. Expectations for new orders also fell sharply.

The Empire State data, reported by the Federal Reserve Bank of New York, reflect business conditions in the manufacturing sector in New York State. The headline measure is constructed from the answer to a single question on business conditions. The Empire State figures are diffusion indexes, which are calculated by subtracting the percent of respondents reporting declines from the percent reporting gains. The data are available in Haver's **SURVEYS** database. The ISM-adjusted headline index dates back to 2001. The Action Economics Forecasts can be found in Haver's **AS1REPNA** database.

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- Employment weakens; shipments, delivery times & inventories decline.
- Order backlogs & employee hours improve.
- Prices paid index gains but prices received ease.

Empire State Manufacturing Index Declines in October

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index rose 4.8% (-28.3% y/y) to 104.4 in August after a 5.4% July increase. These gains followed nine consecutive monthly declines. Despite the latest increase, the level of affordability remained down 40.5% from its January 2021 peak.

Affordability improved In August as the median home price fell 2.3% (+7.6% y/y) to $396,300. The price peaked at a record $420,900 in June. Also helping affordability, the average mortgage rate eased to 5.29% from 5.48%, though that remained up from the 2.73% low in December 2020. These declines reduced principal & interest payments to $1,759 per month (+43.7% y/y) from June's record $1,933. It remained up from $984 in February 2020.

Also helping to raise affordability, the median family income rose 0.3% (3.1% y/y) to $88,173 in August after a 0.2% July rise. It remained 0.7% below the March 2021 high of $88,827. Mortgage payments as a percent of income declined to 23.9% from a high of 26.5% in June. This figure remained up from a 13.9% low in April 2020.

The Housing Affordability Index equals 100 when median family income qualifies for an 80% mortgage on a median priced existing single-family home. This index has been above 100 in each month (except June 2022) since July 1990, reaching its all-time high of 213.3 in January 2013.

Data on Housing Affordability can be found in Haver's **REALTOR** database. Median home sale prices are also located in **USECON**. Higher frequency interest rate data can be found in **SURVEYW**, **WEEKLY**, and **DAILY**.

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- Home prices & mortgage rates ease.
- Mortgage payment as percent of income falls.
- Index remains down sharply y/y.

U.S. Housing Affordability Improves During August

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Total retail sales were unchanged (+8.2% y/y) during September after rising 0.4% in August, revised from 0.3%. A 0.2% increase was expected in the Action Economics Forecast Survey. Excluding motor vehicles & parts, retail sales edged 0.1% higher (8.9% y/y) following a 0.1% August easing, revised from -0.3%. No change had been expected in September. Retail sales excluding restaurants eased 0.1% (7.8% y/y) after rising 0.2% in August.

Sales of motor vehicles & parts fell 0.4% in September (+5.6% y/y) after rising 2.8% in August. This compares to a 2.2% gain (10.8% y/y) in unit sales of motor vehicles. Gasoline service station sales declined 1.4% (+20.6% y/y) as prices fell. That followed a 5.2% August decline. Sales at building materials & garden equipment stores fell 0.4% (9.7% y/y) after two months of strong increase.

In the retail control group, which excludes autos, gas stations, building materials & food services, sales improved 0.4% last month (6.6% y/y) after rising 0.2%, revised from unchanged. These sales are used in the construction of personal consumption expenditures in NIPA accounts.

Sales gains were mixed amongst other categories of retail sales. General merchandise store sales gained 0.7% last month (3.7% y/y) following a 0.4% August rise. Nonstore retail sales increased 0.5% (11.6% y/y) after falling 0.3% in August. Apparel & accessory store sales also increased 0.5% (121.0% y/y) after rising 0.9%. General merchandise store sales improved 0.7% (3.7% y/y) after a 0.4% August gain. Within that category, department store sales rose 1.3% during September (1.8% y/y) after rising 1.0% in the prior month.

Offsetting these increases, electronics & appliance store sales weakened 0.8% in September (-8.6% y/y), the fifth consecutive monthly decline. Sporting goods & hobby shop store sales fell 0.7% (3.7% y/y) after rising 0.6% in August. Furniture & home furnishing store sales declined 0.7% last month (+0.9% y/y) after rising 0.9% in August.

In the nondiscretionary sales categories, food & beverage store sales rose 0.4% (6.4% y/y) in September after a 0.3% August gain. Health & personal care store sales increased 0.5% (4.3% y/y) following a 0.4% rise during August.

Dining out has been one of the strongest retail activities this year. Restaurant & drinking place sales rose 0.5% (11.4% y/y) in September, following a 1.8% August 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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- Auto & gasoline sales weaken.
- Sales are mixed amongst most other categories.

U.S. Retail Sales Hold Steady in September; August Sales Firm

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The inflation environment is hot. Consumer prices rose 0.4% during September (8.2% y/y) after a 0.1% August rise and stability in July. These readings are below the 1.0% and 1.3% increases logged in May and June, when energy prices were rising. A 0.2% September rise had been expected in the Action Economics Forecast Survey. Prices excluding food and energy strengthened 0.6% in September, the same as in August. The 6.6% y/y gain remained nearly the highest since August 1982. A 0.5% September increase had been expected.

Food prices increased 0.8% (11.2% y/y) for the second consecutive month. Fruit & vegetable prices jumped 1.6% (10.4% y/y) while cereal & bakery product prices strengthened 0.9 % (16.2% y/y). Meat, poultry & fish prices increased 0.7% (7.7% y/y) while the cost of dairy products moved up 0.3% (15.9% y/y). Egg prices declined 3.5% (+30.5% y/y) while nonalcoholic beverage costs increased 0.6% (12.9% y/y).

Offsetting this strength was a 2.1% decline (+19.8% y/y) in energy prices. Gasoline prices fell 4.9% (+18.2% y/y), down sharply for a third straight month, while the cost of fuel oil weakened 2.7% (NSA, +58.1% y/y), off for the fourth consecutive month. Offsetting these declines, natural gas price strengthened 2.9%, up one-third y/y. Electricity prices rose 0.4% and by 15.5% y/y.

Services prices less energy surged 0.8% (6.7% y/y), the strongest monthly gain since August 1990. Transportation services prices jumped 1.9% (14.6% y/y). Medical care services prices rose 1.0% (6.5% y/y), the biggest monthly increase since February, 1984. Medical care service costs rose 1.0% (11.3% y/y), the largest gain since November 1982. Shelter costs increased 0.7% (6.6% y/y) for a second consecutive month, as the owners' equivalent rent of primary residences gained 0.8% (6.7% y/y). Rental costs increased 0.8% (6.7% y/y) but prices for lodging away from home fell 1.0% (+2.9% y/y). Education & communication costs rose 0.2% (1.4% y/y) while recreation service prices also gained 0.2% (4.1% y/y).

Goods prices less food & energy held steady (+6.6% y/y) after advancing 0.5% in August. Household furnishings prices strengthened 0.6% (9.9% y/y) but appliance costs eased 0.3% (+1.7% y/y), off for the third straight month. New vehicle prices increased 0.7% (9.4% y/y) and recreation product prices eased slightly (+4.0% y/y). Medical care product prices eased 0.1% (+3.7 y/y) while apparel prices fell 0.3% (+5.5% 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.

**What Is the Impact of Monetary Policy on Households' Desired Labor Supply?** from the Federal Reserve Bank of Chicago is available [here](https://www.chicagofed.org/publications/chicago-fed-letter/2022/472).

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- Y/Y increase is largest in 40 years.
- Core prices remain firm.
- Food prices continue strong; energy costs decline.

U.S. CPI Marches Higher in September

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The Producer Price Index for Final Demand increased 0.4% during September after falling 0.2% in August, revised from -0.1%. The 0.4% July decline was unrevised. During the last 12 months, the PPI increase moderated to 8.5% from an 11.7% March peak. A 0.2% September PPI gain had been expected in the Action Economics Forecast Survey.

The Producer Price Index less food, energy & trade services increased 0.4% (5.6% y/y) following unrevised gains of 0.2% in August and 0.1% in July. The PPI excluding just food & energy rose 0.3% last month. A 0.3% increase had been expected.

The rise in the September PPI was paced by a 1.2% increase (11.9% y/y) in food prices after they eased 0.1% in August. Fresh & dried vegetable prices surged 15.7% (40.2% y/y) while egg prices strengthened 16.7% (97.3% y/y). Beef & veal prices weakened 4.6% (-23.0% y/y) and dairy product prices declined 1.6% (+18.2% y/y).

Energy prices rose 0.7% (24.2% y/y), following two straight months of sharp decline. Gasoline prices weakened 2.0% (+18.1% y/y). Home heating oil prices surged 10.7% (73.2% y/y). Natural gas costs jumped 2.6% (25.5% y/y) while electric power costs edged 0.1% higher (12.7% y/y).

The PPI for goods less food & energy held steady (7.5% y/y) in September following two straight months of 0.2% increase. These recent readings are the slowest since late in 2020. Finished consumer goods prices less food & energy increased 0.2% (8.0% y/y) following a 0.5% August rise. Durable consumer goods prices ticked 0.1% higher (7.3% y/y) while core nondurable consumer goods prices rose 0.3% (8.4% y/y). Prices for private capital equipment improved 0.3% in September (8.8% y/y) after rising 0.4% in August. Core government goods prices held steady (8.9% y/y).

Services prices increased 0.4% (6.8% y/y) in September after a 0.3% August gain. Trade services prices improved 0.1% (12.7% y/y) after rising 0.5% in August. Services prices less trade, transportation & warehousing strengthened 0.6% (2.7% y/y) after rising 0.4% in August.

Construction product prices rose 0.4% in September (23.1% y/y) after rising 0.3% in August and 5.0% in July. Construction product prices for private capital investment rose 0.4% (25.4% y/y) and government construction costs gained 0.4% (18.9% y/y).

Intermediate goods prices edged 0.1% higher (13.1% y/y) in September following two consecutive months of sharp decline. Processed fuel costs rose 2.6% (33.8% y/y), after declining sharply in the prior two months.

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.

The minutes to the latest FOMC meeting can be found [here](https://www.federalreserve.gov/newsevents/pressreleases/monetary20221012a.htm).

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- Food & energy prices move higher.
- Core price increase picks up
- Services prices continue to rise.

U.S. Producer Prices Show Unexpected Strength in September

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Retail gasoline prices increased last week to $3.91 per gallon (19.7% y/y) from $3.78 during the week before. It was the third increase since late-September when the price hit a low of $3.65 per gallon. Prices remained below the mid-June peak of $5.01 per gallon.

The price of West Texas Intermediate crude oil rose to an average $87.95 per barrel (12.1% y/y) in the week ended October 7 from $79.87 in the prior week. Prices hit a high of $120.46 per barrel in the second week of June. Yesterday, the price was $89.35 per barrel. The average price of Brent crude oil rose $93.14 per barrel last week (13.7% y/y) after falling to $86.49 in the previous week. The price peaked at $127.40 in mid-June. Yesterday, the price moved up to $94.43 per barrel.

The price of natural gas weakened last week to $5.95/mmbtu (+1.4% y/y) from $6.63/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. Yesterday, the price was $6.20/mmbtu.

In the four weeks ended September 30, gasoline demand declined 4.1% from a year earlier after falling 6.6 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 fell 3.8% 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 5.2% y/y.

Gasoline inventories fell 7.8% y/y in the week of September 30, while crude oil inventories declined 18.6% y/y.

Measured in days' supply, gasoline inventories in the week ended September 23 fell to 23.67 days from 24.7 days in the prior week. The supply of crude oil was steady with the previous week at 26.8 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**.

The latest **Oil Price Dynamics Report** from the Federal Reserve Bank of New York is available [here](https://www.newyorkfed.org/research/policy/oil_price_dynamics_report).

- Gasoline prices rise for a third straight week.
- Crude oil prices Increase.
- Natural gas prices decline again.

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The NFIB Small Business Optimism Index rose to 92.1 during September from 91.8 in August, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. This was the third consecutive monthly increase and left the reading at the highest level since May. The NFIB Uncertainty Index fell to 72 in September from 74 in August.

Five of the index's ten components rose in September. The reading of planned employment rose to 23%, its highest level in three months. Though it remained negative, the index of expected real sales in six months rose to -10% last month from -19% in August. It stood at the highest level since February of this year . The index of expected credit conditions also remained below zero at -6%, but it was the least negative reading in three months. Those reporting that now was a good time to expand improved minimally to 6%, the highest level in four months. The earnings trend measure edged higher to -31%, but remained near the expansion low.

Working lower, the percent of firms expecting the economy to improve fell to -44% and reversed a small piece of its August gain. The percent of firms with positions they were unable to fill right now weakened to 46% from 49% in August. It the lowest since June of last year. Firms expecting to make capital outlays in the next three to six months eased minimally to 24%. The reading for those reporting that inventories were too low fell to one from three, and those planning to add to inventories weakened to zero from four.

On the pricing front, the percentage of firms raising prices fell to 51% from 53%, the least percentage in twelve months and down from a 66% March high. The percentage of firms planning to raise prices eased to 31%, the fewest since January 2021 and down from a November 2021 high of 54%. As for labor costs, the percentage of firms raising compensation during the last three months eased to 45% from 46% and stood at the lowest level since February. The percentage of firms planning to raise compensation declined to 23% in September from 26%. It remained down from highs of 32% in each month of Q4'21.

The single most important problem facing small business was inflation, reported 30% 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 22% 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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- Gain adds to July & August increases.
- Sales & employment readings move higher.
- Inflation indexes fall.

U.S. Small Business Index Improves During September

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The National Association for Business Economics reduced its forecast for real GDP growth in 2022 to 0.1% (Q4/Q4) from 1.8% expected in May (Q4/Q4). For 2023, expected growth also was reduced to 1.1% from 2.1%. Quarterly, GDP is expected to rise 1.3% in Q3'22 and 1.5% in Q4 after declining in both quarters earlier in the year. Personal consumption expenditures are forecast to grow 2.4% this year, revised from 3.0%. Expected growth next year also was reduced to 1.3% from 2.2%. Business fixed investment is expected to rise 4.3% this year, revised from 6.0% while the expected 2023 rise was reduced to 2.0% from 3.9%. An expected decline in residential investment this year of 7.7% compares the earlier expectation for a 0.4% rise and a 6.3% decline in 2023 was reduced from a 1.3% gain. Government spending growth is now expected to decline 1.5% this year, revised from -0.5%, and to rise 0.8% in 2023, revised from 1.5%.

The net export deficit is expected to deepen to a record in 2022 then marginally narrow in 2023. Exports should rise 6.5%, revised from 4.6%, in 2022. Growth in 2023 should slow to 3.7%, revised from 5.3%. Import growth should pick up to 9.0% this year, revised from 9.5%, then slow to a little-revised 1.4% next year. Accumulation of inventories is expected to slow to a greatly lessened $99 billion in 2022 from a lessened $41 billion in 2023.

Housing starts are forecasted to hold steady this year at 1.57 million units, revised from 1.66 million, then fall to 1.42 million in 2023, revised from 1.55 million. Light vehicle sales are projected to fall to 14.0 million, revised from 15.1 million, then rise to 15.0 million next year, revised from 16.5 million. Sales will remain below the 2016 peak of 17.5 million. An average monthly gain in payroll employment of 348,000 this year was revised from 369,000 while next year's expected increase was revised to 80,000 from 151,0000. Expectations for the unemployment rate place it at 3.7% this year, revised from 3.6%, and it should rise to 4.0% in 2023, revised from 3.6% projected in March.

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Inflation pressures should strengthen. The Consumer Price Index is projected to rise 7.2% (Q4/Q4) this year, revised from 5.6%, then rise 2.7% in 2023, revised from 2.6%. Price inflation year, as measured by the PCE price index, is expected to surge to 5.5%, revised from 4.8%, then slow to 2.7% In 2023. The chain PCE price index excluding food & energy should rise 4.4% this year, revised from 4.2%, then slow to 2.7% in 2023, revised from 2.5% expected earlier. The cost of crude oil is expected to average $91, revised from $98 at the end of this year, from a little revised $84 per barrel at the end of 2023.

Interest rates are expected to rise more than anticipated earlier. The forecasted 3.53% rate on a ten-year Treasury note at the end of this year compares to the May forecast of 3.06%. The 3.45% rate at the end of 2023 compares to 3.25% expected in May. The Federal funds rate is projected to rise to 3.88% at the end of 2022 compared to the May expectation of 2.38%. The projected rate at the end of next year of 3.88% compares to 3.00% expected earlier. After-tax corporate profits should rise 7.2% this year, revised from 4.0%, then ease 0.1% next year, revised from a 2.4% gain. The expected Federal government budget deficit should fall to $988 billion, revised from $1.200 trillion, then total $1.084 trillion in 2023, revised from $1.003. The deficit hit a peak of $3.132 trillion in 2020.

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

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- Growth expectations are reduced across all categories.
- Housing starts are predicted to hold steady then fall next year.
- Vehicle sales should fall this year then rise in 2023.
- Price inflation and interest rate estimates are raised.

NABE Reduces Growth Forecasts Again

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Tom Moeller

Publications by Tom Moeller

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NABE Reduces Growth Forecasts Again