Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050216c.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index fell again in February to 68 versus 70 in January.
Only the current sales of new single family homes component fell. The index components of prospective sales and the traffic of prospective buyers were stable.
During the last twenty years, annual changes in the composite index had an 83% correlation with the change in new home sales. There&#39;s been an 86% correlation with the change in single family housing starts.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the National Association of Home Builders using this <a href="http://www.nahb.org">link</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>68</td>
<td>70</td>
<td>66</td>
<td>68</td>
<td>64</td>
<td>61</td>
</tr>
</tbody>
</table>
</body>
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The National Association of Home Builders' (NAHB) Composite Housing Market Index fell again in February to 68 versus 70 in January. Only the current sales of new single family homes component fell. The index components of prospective [...]

NAHB Housing Market Index Fell Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050216a.jpg" width="353">
Housing starts unexpectedly rose 4.7% in January to a record high of 2.159M following an upwardly revised 14.4% jump in December.Consensus expectations had been for a decline to 1.93M starts.
Single-family starts rose a moderate 2.7% m/m to a record high of 1.760M. The increase, however, was limited to a 20.0% gain in starts in the South. In other regions of the country single family starts fell.
Multi family starts jumped 14.1% m/m but the gain was just about back to the October level.
Building permits rose 1.7% in January, again mostly reflecting strength in single family permits in the South.
Today&#39;s testimony by Federal Reserve Board Chairman Alan Greenspan is available <a href="http://www.federalreserve.gov/boarddocs/hh/2005/february/testimony.htm"> here</a>.
Wicksell&#39;s Natural Rate from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20050301/cover.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>2,159</td>
<td>2,063</td>
<td>11.6%</td>
<td>1,952</td>
<td>1,853</td>
<td>1,710</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,760</td>
<td>1,713</td>
<td>12.5%</td>
<td>1,605</td>
<td>1,505</td>
<td>1,363</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>399</td>
<td>350</td>
<td>8.1%</td>
<td>348</td>
<td>348</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,105</td>
<td>2,069</td>
<td>6.8%</td>
<td>2,035</td>
<td>1,889</td>
<td>1,749</td>
</tr>
</tbody>
</table>
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Housing starts unexpectedly rose 4.7% in January to a record high of 2.159M following an upwardly revised 14.4% jump in December.Consensus expectations had been for a decline to 1.93M starts. Single-family starts rose a moderate 2.7% [...]

Housing Starts At A New High in January

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050216a.jpg" width="353">
Housing starts unexpectedly rose 4.7% in January to a record high of 2.159M following an upwardly revised 14.4% jump in December.Consensus expectations had been for a decline to 1.93M starts.
Single-family starts rose a moderate 2.7% m/m to a record high of 1.760M. The increase, however, was limited to a 20.0% gain in starts in the South. In other regions of the country single family starts fell.
Multi family starts jumped 14.1% m/m but the gain was just about back to the October level.
Building permits rose 1.7% in January, again mostly reflecting strength in single family permits in the South.
Today&#39;s testimony by Federal Reserve Board Chairman Alan Greenspan is available <a href="http://www.federalreserve.gov/boarddocs/hh/2005/february/testimony.htm"> here</a>.
Wicksell&#39;s Natural Rate from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20050301/cover.pdf"> here</a>.

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</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>2,159</td>
<td>2,063</td>
<td>11.6%</td>
<td>1,952</td>
<td>1,853</td>
<td>1,710</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,760</td>
<td>1,713</td>
<td>12.5%</td>
<td>1,605</td>
<td>1,505</td>
<td>1,363</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>399</td>
<td>350</td>
<td>8.1%</td>
<td>348</td>
<td>348</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,105</td>
<td>2,069</td>
<td>6.8%</td>
<td>2,035</td>
<td>1,889</td>
<td>1,749</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index Fell Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 16, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050216c.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index fell again in February to 68 versus 70 in January.
Only the current sales of new single family homes component fell. The index components of prospective sales and the traffic of prospective buyers were stable.
During the last twenty years, annual changes in the composite index had an 83% correlation with the change in new home sales. There&#39;s been an 86% correlation with the change in single family housing starts.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the National Association of Home Builders using this <a href="http://www.nahb.org">link</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>68</td>
<td>70</td>
<td>66</td>
<td>68</td>
<td>64</td>
<td>61</td>
</tr>
</tbody>
</table>
Mortgage Applications Dipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 16, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050216d.jpg" width="353">
Mortgage applications dipped modestly last week following two weeks of gain according to the Mortgage Bankers Association (MBA) Survey. The 0.5% w/w decline followed gains of 4.2% and 7.3% during the prior two weeks.
The decline was due to a 4.8% drop in purchase applications. During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance rose another 4.1% following two weeks of gain but versus last year still are down 23.3%.
The effective interest rate on a conventional 30-year mortgage ticked higher to 5.75% but remained below the 5.89% averaged last month. The effective rate on a 15-year mortgage also rose to 5.41% last week.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">02/11/05</th>
<th scope="col">02/04/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>732.3</td>
<td>735.9</td>
<td>-12.5%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>423.3</td>
<td>444.6</td>
<td>2.3%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,530.1</td>
<td>2,430.7</td>
<td>-23.3%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Warm Weather Left Industrial Production Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 16, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050216b.jpg" width="353">
Industrial production was unchanged last month versus Consensus expectations for a 0.3% increase. The shortfall was entirely due to a 3.1% decline in utility output as well as a 0.3% drop in mining output.
The factory sector again performed well and output rose 0.5% (5.3% y/y) following a downwardly revised 0.4% gain in December.
High tech sector output increased 1.5% (18.1% y/y) as output of communications equipment rose 3.0% (13.8% y/y). Semiconductor &amp; related equipment output rose 0.9% (26.5% y/y) and computer &amp; peripheral output also gained 0.9% (6.0% y/y).
Factory output excluding high tech rose 0.4% in December (4.4% y/y). A 1.2% decline in clothing output (-5.0% y/y) was offset by a 1.6% rise (9.5% y/y) in machinery output. Nondurables output also rose as did output of metals. Production of appliances, furniture &amp; carpeting fell 1.1% (-0.4% y/y) as furniture output fell 0.5% (+1.3% y/y).
Motor vehicle output fell 2.0% (+0.2% y/y) in January. Excluding motor vehicles, factory output rose 0.7% (5.7% y/y). Excluding both high tech and motor vehicles factory output rose 0.6% (4.8% y/y).
Total capacity utilization fell slightly to 79.0%. Capacity grew 1.2% y/y.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>0.0%</td>
<td>0.7%</td>
<td>4.0%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>79.0%</td>
<td>79.1%</td>
<td>76.9% (01/04)</td>
<td>78.0%</td>
<td>75.5%</td>
<td>75.3%</td>
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</tbody>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050215f.jpg" width="353">
Preliminary estimates of the growth of Gross Domestic Product in the Euro-Zone reveal a disappointing rise of 0.2% in the fourth quarter of 2004, about one-half of what the consensus was looking for. Not all of the twelve countries comprising the Euro Zone have reported. Among those that have, Germany, Italy and the Netherlands showed unexpected declines from the third to the fourth quarter of 0.23%, 0.31% and. 0.08%, respectively. Spain and France, on the contrary, reported increases of 0.8% and 0.7%, respectively.
For the year as a whole, growth in the Euro-Zone is estimated at about 1.6% compared with a growth of 4.4% for the U.S. Among the individual countries that have reported, Spain and France are estimated to have led the group with growth rates of 2.65% and 2.40%.The Netherlands, Italy and Germany are estimated to have risen 1.35%, 1.14% and 1.03%. The better performance of France over Germany over the past few years is shown in the first chart showing the quarterly changes in GDP in Germany and France.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050215e.jpg" width="353">
Part of the cause of the relatively slow growth of the Euro-Zone over the last few years can be attributed to the rise in the euro and the high price of oil.These trends are shown in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Gross Domestic Product % change&nbsp; Period to Period</th>
<th scope="col">&nbsp;Q1 04&nbsp;</th>
<th scope="col">&nbsp;Q2 04</th>
<th scope="col">&nbsp; Q3 04&nbsp; &nbsp;</th>
<th scope="col">&nbsp;Q4 04</th>
<th scope="col">&nbsp; 2004&nbsp; &nbsp;</th>
<th scope="col">&nbsp;2003 &nbsp;</th>
<th scope="col">&nbsp;2002</th>
<th scope="col">&nbsp; 2001&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.49</td>
<td>0.35</td>
<td>0.02</td>
<td>-0.23</td>
<td>1.03</td>
<td>-0.14</td>
<td>0.12</td>
<td>0.99</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.64</td>
<td>0.64</td>
<td>-0.02</td>
<td>0.70</td>
<td>2.40</td>
<td>0.56</td>
<td>1.10</td>
<td>2.10</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.54</td>
<td>0.35</td>
<td>0.43</td>
<td>-0.31</td>
<td>1.14</td>
<td>0.36</td>
<td>0.37</td>
<td>1.67</td>
</tr>
<tr>
<td class="firstcol">The Netherlands</td>
<td>0.88</td>
<td>-0.14</td>
<td>0.34</td>
<td>-0.08</td>
<td>1.35</td>
<td>-0.88</td>
<td>0.57</td>
<td>1.43</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>0.73</td>
<td>0.47</td>
<td>0.54</td>
<td>0.80</td>
<td>2.65</td>
<td>2.50</td>
<td>2.23</td>
<td>2.80</td>
</tr>
<tr>
<td class="firstcol">Euro-Zone</td>
<td>0.64</td>
<td>0.47</td>
<td>0.27</td>
<td>0.20</td>
<td>1.55</td>
<td>0.52</td>
<td>0.86</td>
<td>1.60</td>
</tr>
<tr class="odd">
<td class="firstcol">United States</td>
<td>1.10</td>
<td>0.88</td>
<td>0.94</td>
<td>0.78</td>
<td>4.39</td>
<td>3.04</td>
<td>1.86</td>
<td>0.75</td>
</tr>
</tbody>
</table>
</body>
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Preliminary estimates of the growth of Gross Domestic Product in the Euro-Zone reveal a disappointing rise of 0.2% in the fourth quarter of 2004, about one-half of what the consensus was looking for. Not all of the twelve countries [...]

Preliminary Estimates of Euro-Zone's 2004 GDP Growth are below Consensus Estimates

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050215c.jpg" width="353">
The Empire State Index of General Business Conditions in New York&#39;s manufacturing industries added another point in February to the seven point decline in January and fell to 19.19. The index has fallen twenty points from its level one year ago.
The new orders component fell for the fourth month in the last five and also is down twenty points from its peak. The employment measure fell to its lowest since late 2003. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The prices paid index eased modestly.
Expectations for business conditions in six months again fell for the fifth consecutive month to the lowest level since March 2003.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.
 The Predictive Abilities of the New York Fed&#39;s Empire State Manufacturing Survey from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/newsevents/news/research/2005/rp050203.html"> here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>19.19</td>
<td>20.08</td>
<td>39.57</td>
<td>28.76</td>
<td>16.17</td>
<td>7.19</td>
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</tbody>
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The Empire State Index of General Business Conditions in New York's manufacturing industries added another point in February to the seven point decline in January and fell to 19.19. The index has fallen twenty points from its level [...]

Empire State Index Eased Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050215d.jpg" width="353">
Total business inventories rose another 0.2% after the 1.1% surge in November. The full year increase of 7.8% was the strongest since 1988.
Retail inventories rose 0.3% in December following a 1.1% increase the prior month. Accumulation of non-auto retail inventories jumped for the second month, up 1.0%, and the year&#39;s accumulation was the strongest in ten led by a 16.9% y/y gain in building materials. Inventories of furniture (6.8% y/y) and general merchandise (6.4% y/y) also rose strongly though apparel accumulation slowed to just 1.0%.
Wholesale inventories rose another 0.4% and the yearly gain of 11.2% was a record. During the last ten years there has been a 64% correlation between the y/y change in wholesale inventories and the change in imports of merchandise.
Overall business sales jumped 1.0% (+10.6% y/y) on the strength of yearend auto sales.
The ratio of inventories-to-sales fell slightly back to the record low of 1.30. Moreover, though the rate of inventory accumulation more than quadrupled last year, it lagged the double digit gain in sales.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.2%</td>
<td>1.1%</td>
<td>7.8%</td>
<td>1.9%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.3%</td>
<td>1.1%</td>
<td>6.0%</td>
<td>5.0%</td>
<td>6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>1.0%</td>
<td>1.1%</td>
<td>6.4%</td>
<td>2.9%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.4%</td>
<td>1.2%</td>
<td>11.2%</td>
<td>2.2%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>7.3%</td>
<td>-1.3%</td>
<td>-1.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

Total business inventories rose another 0.2% after the 1.1% surge in November. The full year increase of 7.8% was the strongest since 1988. Retail inventories rose 0.3% in December following a 1.1% increase the prior month. [...]

U.S. Inventory Accumulation Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050216h.jpg" width="353">
Chain store sales inched up another 0.1% last week following the 2.2% spike the prior week according to the International Council of Shopping Centers (ICSC)-UBS survey.
The rise lifted sales in early February 0.7% ahead of the January average which rose 0.9% from December.
During the last ten years there has been a 58% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department.
The leading indicator of chain store sales from ICSC rose 0.3% in early February (+0.7% y/y).
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">02/12/05</th>
<th scope="col">02/05/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>446.2</td>
<td>445.8</td>
<td>1.7%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body>
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Chain store sales inched up another 0.1% last week following the 2.2% spike the prior week according to the International Council of Shopping Centers (ICSC)-UBS survey. The rise lifted sales in early February 0.7% ahead of the January [...]

Chain Store Sales Up Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050214e.jpg" width="353">
Retail sales in value terms in Japan are beginning to show some signs of life. While total retail sale in Japan declined almost 1% in December from November, spending on (1) fabrics, accessories and apparel, (2) motor vehicles, and (3) household machinery and equipment in December, 2004 were up, respectively 2.9%, 2.6% and 2.5% over November and 4.0%, 0.7% and 1.6% over December, 2003. For the year as a whole motor vehicle spending was up 2.7%, the second year of positive change.It should be noted that the level of purchases of both Fabrics, apparel &amp; accessories and Household machinery and equipment are still almost 20% below levels reached in 2000.
Deflation still plays a role in the decline of retail sales value, but its role is diminishing as can be seen in the first chart, showing the year-to-year changes in the value of retail sales and the year-to-year changes in the Consumer Price Index excluding imputed rent.<img align="right" border="0" height="287" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/0502141.gif" width="379">
Not only have Japanese consumers been spending a bit more freely on selected items, but they are also becoming less pessimistic. While the second chart shows that there has been a slight decline in the year over year change in consumer confidence in recent quarters, the year over year growth remains impressive.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Dec 04</th>
<th scope="col">Nov&nbsp;04</th>
<th scope="col">Dec 03</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp; 2002&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Sales (SA, 2000=100)</td>
<td>91.0</td>
<td>91.7</td>
<td>91.9</td>
<td>-0.76</td>
<td>-0.98</td>
<td>-0.88</td>
<td>-1.69</td>
<td>-4.26</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; General merchandise</td>
<td>86.7</td>
<td>98.5</td>
<td>89.4</td>
<td>-3.13</td>
<td>-3.02</td>
<td>-2.81</td>
<td>-2.87</td>
<td>-2.83</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Fabrics, apparel &amp; accessories</td>
<td>81.2</td>
<td>78.9</td>
<td>78.1</td>
<td>2.92</td>
<td>3.97</td>
<td>-1.71</td>
<td>-5.49</td>
<td>-8.10</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Food and beverages</td>
<td>92.2</td>
<td>96.3</td>
<td>98.1</td>
<td>-4.26</td>
<td>-6.01</td>
<td>-1.33</td>
<td>0.45</td>
<td>-1.95</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Motor vehicles</td>
<td>99.9</td>
<td>97.4</td>
<td>99.2</td>
<td>2.57</td>
<td>0.70</td>
<td>2.67</td>
<td>1.19</td>
<td>-4.97</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Household machinery and equipment</td>
<td>81.1</td>
<td>79.1</td>
<td>79.8</td>
<td>2.53</td>
<td>1.63</td>
<td>-3.17</td>
<td>-4.93</td>
<td>-9.15</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Other</td>
<td>93.2</td>
<td>94.2</td>
<td>90.2</td>
<td>-1.06</td>
<td>3.33</td>
<td>-0.39</td>
<td>-2.76</td>
<td>-4.74</td>
</tr>
<tr>
<td class="firstcol">Consumer Prices Index (2000=100)</td>
<td>98.1</td>
<td>98.6</td>
<td>92.9</td>
<td>0.51</td>
<td>0.20</td>
<td>-0.01</td>
<td>-0.26</td>
<td>-0.92</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q4 04</td>
<td>Q3&nbsp;04</td>
<td>Q4 03</td>
<td>Q/Q %</td>
<td>Y/Y %</td>
<td>&nbsp;2004&nbsp;&nbsp;</td>
<td>&nbsp;2003</td>
<td>&nbsp; 2002&nbsp; &nbsp;</td>
</tr>
<tr>
<td class="firstcol">Retail Sales (NSA 2000=100)</td>
<td>96.9</td>
<td>90.0</td>
<td>97.4</td>
<td>7.67</td>
<td>-0.48</td>
<td>-0.60</td>
<td>-1.90</td>
<td>-3.96</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence % Balance</td>
<td>45.6</td>
<td>45.8</td>
<td>40.5</td>
<td>-0.44</td>
<td>12.59</td>
<td>17.84</td>
<td>2.03</td>
<td>1.30</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales in value terms in Japan are beginning to show some signs of life. While total retail sale in Japan declined almost 1% in December from November, spending on (1) fabrics, accessories and apparel, (2) motor vehicles, and [...]

Signs of Increased Spending by Japanese Consumers and Less Pessimism

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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Winnie Tapasanun

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U.S. house prices rose 0.4% m/m in October following a 0.1% dip in September (0.0% initially) and a 0.4% rise in August (unrevised), according to the Federal Housing Finance Agency (FHFA) House Price Index. October marked the second m/m increase in three months after no change in July. The HPI reached a record high of 436.75 in October, up 13.4% from its August 2022 low of 384.98. The year-on-year rate of increase eased to 1.7% in October from 1.8% in September—the slowest pace since March 2012—down from 4.7% in October 2024 and well below a high of 18.6% in February 2022.

House prices increased m/m in October (vs. September) across seven of the nine census divisions. Gains were led by West South Central (+1.0% vs. -1.6%), followed by New England (+0.9% vs. -0.3%), East North Central (+0.6% vs. +0.7%), Mountain (+0.6% vs. -0.8%), West North Central (+0.6% vs. +0.6%), Middle Atlantic (+0.4% vs. +0.2%), and Pacific (+0.2% vs. +0.3%). In contrast, house prices fell m/m in two census divisions in October (vs. September): East South Central (-0.4% vs. +0.7%) and South Atlantic (-0.2% vs. -0.2%).

Year-on-year house prices continued to rise in October across most regions, except West South Central and South Atlantic. The y/y pace accelerated in October (vs. September) in four of the nine census divisions: West North Central (+3.8% vs. +3.2%), New England (+3.7% vs. +3.2%), Mountain (+0.3% vs. -0.8%), and Pacific (+0.2% vs. -0.6%). Meanwhile, house price growth decelerated y/y in October (vs. September) in East South Central (+1.5% vs. +2.7%), East North Central (+5.1% vs. +5.4%), and Middle Atlantic (+5.3% vs. +5.4%). To the downside, West South Central (-0.7% vs. -1.0%) and South Atlantic (-0.5% vs. +0.4%) were the only regions posting y/y declines in October (vs. September).

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.

The minutes to the December 9–10 **FOMC** meeting can be found [here](https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20251210.pdf).

251230L46.jpg

251230M46.jpg

- FHFA HPI +0.4% m/m (+1.7% y/y) in Oct.; second m/m gain in three months.
- House prices up m/m in seven of nine census divisions but down in East South Central (-0.4%) and South Atlantic (-0.2%).
- House prices up y/y in seven of nine regions, led by Middle Atlantic (+5.3%), but down in West South Central (-0.7%) and South Atlantic (-0.5%).

U.S. FHFA House Prices Rebound in October Following September’s Easing

Robert Brusca

251230E.jpg

When inflation numbers come hot off the griddle, some part of them might stick to the pan. That's the case this month with Spain’s release of inflation in December. It provides us with the headline for the HICP measure, a headline to the domestic measure, and the domestic measure excluding energy. But it does not release the sector detail for the rest of the report.

However, based upon what's been released, it’s clear that inflation in Spain has picked up. The part of the core that we have in-hand, which is just the portion excluding energy, still appears to be fairly well behaved; however, its gain is still slightly excessive.

**HICP trend**
Spain’s HICP measure in December rose 0.4% after rising by 0.5% in both October and November; those are hot numbers. That translates into a 5.7% annual rate over three months which is hotter than its pace of 4.5% over six months which in turn is hotter than the 12-month increase of 3%. The HCP headline for Spain has clearly been accelerating, the year-over-year rise is too-hot, and the shorter-term metrics are hotter still. This is not good news, and this is not a welcome progression.

**Domestic inflation**
Looking at Spain’s domestic CPI conditions, we find that they are still on the hot side with December showing a headline gain of 0.3% but gains in October and November of 0.5% each, producing a three-month annual rate of 5.4%, which is hotter than its 4.2% over six months, which, in turn, is hotter than the year-over-year gain at 2.9%. And these patterns/results are very similar to the pattern and the readings for the HICP. The domestic inflation picture is too hot over 12 months and accelerating over the shorter periods.

**Domestic inflation ex-energy:** The CPI excluding energy is not as bloated as the HICP or the domestic headline, but it is still a reading on rough terrain. Over 12 months, inflation excluding energy rises at a 2.6% annual rate; that's above the 2% pace sought by the ECB for the community as a whole. Over six months, the reading ramps up to a 3.1% annual rate, again moving the wrong direction and a reading at 3.1% is simply too hot. Over three months, there's a slight deceleration compared to six months but still a rate that is too hot, at 2.9%, and stronger than the 12-month pace. Core inflation is better behaved than headline inflation and both the domestic and the HICP frameworks, but inflation is unruly overall and, for the most part, showing either acceleration or at least a 3-month pace stronger than its 12-month pace. None of this is what the ECB is looking for or trying to achieve.

**Beyond the missing details**
The details of the Spanish report are missing for December because the data are too preliminary for the authorities to post. However, if we look at the sequential pace of inflation over 12 months, six months, and three months on a lagged basis, it is looking at data that are up-to-date through November rather than through December what's the numbers that are generally excessive and they show too much acceleration moving from 12-months to 6-months to 3-months. Over 12 months compared to a year ago, five of nine categories show inflation accelerating. Over 6 months compared to 12 months, four categories are accelerating. Over 3 months compared to 6 months, six of the nine categories are accelerating. These acceleration tendencies are worrisome.

In addition, over 12 months, six of nine categories have a pace above 2%. Over 6 months, six of nine categories have annualized gains above 2%, and over 3 months, the lagged data show six of nine categories with gains above 2%. Only apparel shows inflation tempered on all horizons (at or below 2%). Food, housing, transport, education and other all show above 2% inflation on all horizons.

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**Summing up-challenging times ahead?**
Is Spain past its best inflation performance? Is the inflation worm going to begin to turn more broadly? These are trends we will need to watch. Inflation broadly has slowed or stopped its declines and largely done that in Europe as well as in the United States. Inflation is now hovering at a pace that is too strong- maybe tolerable or maybe not. Central banks need to decide and tell us what a 2% target means. Then, the question of what’s next hangs in the air. U.K. inflation remains excessive but has stepped down as the economy has begun to experience some significantly weaker economic data. Is that the future? Is it stagflation? Is it recovering from a slowdown and higher rates of interest and inflation? Or will there be continued inflation progress? Open the door on 2026…the envelope… please.

Spain

Spanish Inflation Flares at Year-End

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General business activity in Texas declined further in December, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The overall measure, the general business activity index, fell to -10.9 in December, the lowest level since June, from -10.4 in November and -5.0 in October. The index, while above a low of -35.8 in April, was well below a high of +14.1 in January and +4.5 in December 2024. The index had been in negative territory from February through December 2025, except for a one-month positive reading of +0.9 in July. In December, 12.7% of respondents reported improved business activity, down from 18.9% in November, while 23.6% of respondents reported worsened business conditions, down from November's 29.3%. The company outlook index dropped to -11.9 in December, the fourth consecutive negative reading and the lowest since April, from -6.3 in November. Just 10.8% of respondents expected improved company outlook this month while 22.7% expected deterioration. Data were collected between December 15 and 23 from 74 Texas manufacturers.

The production index, a key measure of state manufacturing conditions, plunged to -3.2 in December after a 15.3-point jump to 20.5 in November, indicating production contracted for the first time since February. A lessened 17.2% of respondents reported higher production this month while an increased 20.4% reported a decline. The capacity utilization index plummeted to -4.5 in December, the lowest reading since February, following a four-year-high 19.4 in November; it was up from a low of -15.0 in January 2024 but well below a record-high 46.3 in March 2021.

The growth rate of orders index declined steeply to -16.0 in December from -1.3 in November, marking the weakest of four successive negative readings and the lowest level since June. The index was above a low of -22.0 in April and a low of -24.3 in November 2023 but significantly below a peak of 29.6 in April 2021. The new orders index fell to -6.4 this month after rising to 4.8 in November, indicating a decline in demand for the third time in four months and the lowest level since June. The index was above a low of -20.0 in April and a low of -21.8 in November 2022 but well below a high of 22.6 in February 2022 and a record-high 38.6 in April 2021. The shipments index plunged to -10.6 this month after jumping to 15.1 in November, marking its first negative reading since June and the lowest since July 2024. The unfilled orders index dropped to -13.5 in December from -6.6 in November, registering the 16th straight negative reading and the lowest since November 2024. The index was below a high of 1.4 in August 2024 but above a low of -26.3 in July 2024. Meanwhile, the delivery time index increased to 3.3 this month, the highest reading since March, from -8.4 in November.

Labor market indexes showed flat employment conditions and shorter workweeks in December. The employment index slipped to -1.1 this month from 1.2 in November, marking its first negative reading since September, with the near-zero level indicating little change in employment. The latest reading, while up from a low of -9.7 in January 2024, was far below a high of 17.9 in January 2023 and a record-high 31.8 in April 2021. A lessened 12.3% of respondents reported net hiring in December while 13.4% reported net layoffs. The hours worked index fell sharply to -7.5 this month, the lowest reading since June, after rising to 9.9 in November. Meanwhile, the wages & benefits index climbed to 21.8 in December, the highest level since October 2024 and near its series average of 21.0, up from 15.4 in November; nevertheless, having been trending downward since a peak of 55.0 in March 2022.

Inflationary pressures were little changed this month. The index for prices received for finished goods declined to 8.2 in December following a 3.1-point rise to 10.8 in November; it was up from a low of -7.0 in November 2023 but meaningfully below a high of 47.4 in March 2022 and a peak of 51.4 in October 2021. In December, 13.1% of respondents reported raising prices while only 4.9% reported lowering prices. The index of prices paid for raw materials rose to 36.0 this month, the highest reading since September, after a 1.9-point increase to 35.3 in November. The index was well above a low of 1.0 in June 2023 but significantly below 73.2 in March 2022 and a record-high 83.8 in November 2021.

Expectations on future manufacturing activity remained positive this month. The future general business activity index dipped to 10.8 in December after rising to 11.0 in November, registering the eighth straight positive reading. The future production index rose to a four-month-high 34.2 from November’s 33.7. Other indexes of future manufacturing activity also rose in December (vs. November), signaling increased activity six months ahead: company outlook (16.5 vs. 16.2), shipments (33.9 vs. 27.0), wages & benefits (42.5 vs. 39.1), and capital expenditures (17.7 vs. 12.9). Meanwhile, future indexes for capacity utilization (28.9 vs. 34.0), new orders (30.5 vs. 39.2), growth rate of new orders (24.9 vs. 27.8), and employment (20.9 vs. 22.3) declined in December (vs. November), but they remained in positive territory.

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

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- General Business Activity down in Dec. to -10.9, lowest level since June.
- Company Outlook (-11.9) negative for the fourth straight mth. and at an eight-month low; Production (-3.2) negative for the first time since Feb.
- New Orders Growth (-16.0) and New Orders (-6.4) at a six-month low.
- Employment (-1.1) negative for the first time since Sept.
- Prices Received down 2.6 pts. to 8.2; Prices Paid up 0.7 pts. to a three-month-high 36.0.
- Future General Business Activity down to 10.8, still positive for the eighth consecutive mth.

Texas General Business Activity Still Negative in December, But Expectations Remain Positive

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The Pending Home Sales Index, a forward-looking measure of home sales based on contract signings, rose 3.3% m/m to 79.2 in November after increases of 2.4% in October (+1.9% initially) and 0.1% in September (unrevised), according to the National Association of Realtors (NAR). The November reading registered the fourth consecutive m/m gain after declining in July and June. The year-on-year growth rate accelerated to 2.6% in November, the highest since August, from 0.1% in October, though still below +6.0% y/y in November 2024. Despite recent gains, the PHSI had fallen 36.7% since its October 2021 high of 125.1.

The m/m rise in November pending home sales coincided with a decline in the average 30-year mortgage rate to 6.24% in November, the lowest since September 2024, down from 6.25% in October and 6.35% in September. These rates, while below a peak of 7.62% in October 2023, had remained higher than a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales rose m/m in November across all four major regions. Sales in the West recovered 9.2% (2.4% y/y) in November, the first m/m increase since August, following a 1.4% decline in October. Sales in the South rose 2.4% (3.3% y/y), the fourth straight m/m rise, on top of a 2.7% October advance. Sales in the Northeast grew 1.8% (1.8% y/y), the third successive m/m increase, after a 2.3% October gain. Sales in the Midwest rose 1.3% (2.2% y/y), up for the third time in four months, after a 5.3% November rebound.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- PHSI +3.3% (+2.6% y/y) in Nov., driven by lower mortgage rates.
- Home sales m/m up in all four major regions, w/ the highest rate in the West (+9.2%).
- Home sales y/y up across all regions, w/ the highest rate in the South (+3.3%).

U.S. Pending Home Sales Rise for the Fourth Straight Month in November

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Swedish exports advanced month-to-month for the second month in a row while imports continued on a losing streak declining by 0.9% in November.

Exports have gradually been firming with exports falling by 6.1% over 12 months, rising at an annual rate of 4.8% over six months, and then rising at a 3.9% annual rate over three months. Exports are not on a steady acceleration path, but they have transitioned from a year-over-year growth rate that's negative to moderate positive short-term rates of growth.

Swedish imports, on the other hand, are weakening relatively sharply. Imports were down 4.4% over 12 months, down at a 1.2% annual rate over six months, and falling at a 17% annual rate over three months.

The global trade picture remains somewhat mixed. The Baltic Dry goods index, which is an indicator of global trade volume, has backed off of its highs but continues to post relatively steady volume indications. However, the S&P global manufacturing survey has been showing weakness; when manufacturing is weak, typically international trade is weak as well. Swedish trade may be picking up some of that weakness as well.

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On balance, Sweden's trade surplus has continued to recover and hold to a relatively high level over recent months as exports have maintained momentum better than imports.

Swedish domestic barometers of economic growth have remained relatively upbeat including orders and industrial production as well as employment growth and GDP. There is no reason there to expect weak imports based on the recent data we have seen. But then sometimes trade data show economic weakness first.   

At this time, the yearend weakness in Sweden’s imports is without a specific cause. Year-end flows can be surprising. Domestic demand, however, does not appear to be weak. But there is a good deal of weakness in Europe and the Ukraine-Russia war is still a nagging factor – a cloud that hangs over all of Europe with no certain end date or result in sight.

Economy in Brief: 2005

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NAHB Housing Market Index Fell Again

Housing Starts At A New High in January

Housing Starts At A New High in January

Preliminary Estimates of Euro-Zone's 2004 GDP Growth are below Consensus Estimates

Empire State Index Eased Again

U.S. Inventory Accumulation Strong

Chain Store Sales Up Further

Signs of Increased Spending by Japanese Consumers and Less Pessimism