Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208f.jpg" width="353">
Consumer credit outstanding rose $3.1B in December to finish out a year of 4.6% growth, about the same as during the prior two years. Growth in consumer credit has remained well below the double digit peaks of several years ago as individuals shifted borrowing to lower interest rate, home equity lines of credit.
In December, revolving credit outstanding rose $0.9B (4.2% y/y) and usage of nonrevolving credit rose $2.2B (4.8% y/y).Total consumer credit accounts for just 15% of total credit owed by individuals.
According to the Federal Reserve&#39;s broader Flow of Funds Accounts, total credit owed by individuals surged 8.9% y/y through 3Q04. Mortgage debt on nonfarm homes rose 11.7% y/y (55% of individuals&#39; total liabilities) and also by 6.1% growth in mortgage debt excluding homes (12% of individuals&#39; total). &quot;Other liabilities&quot; rose 8.2% y/y and are 16% of individuals&#39; liabilities. 
The ratio of individuals&#39; financial assets ($31 trillion) to liabilities ($14 trillion) was 2.22 in 3Q versus 2.33 in 2003 and a peak of 3.37 in 1999. For the last five years, assets grew 2.1% annual rate while liabilities surged at a 9.1% rate.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208g.jpg" width="353"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208e.jpg" width="353">

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E103/@E10308/@E10308.HTM">Consumer Credit Outstanding</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$3.1B</td>
<td>$2.0B</td>
<td>4.6%</td>
<td>4.6%</td>
<td>4.5%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$0.9B</td>
<td>$0.6B</td>
<td>4.2%</td>
<td>4.2%</td>
<td>2.8%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonrevolving</td>
<td>$2.2B</td>
<td>$1.4B</td>
<td>4.8%</td>
<td>4.8%</td>
<td>5.6%</td>
<td>5.9%</td>
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</tbody>
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Consumer credit outstanding rose $3.1B in December to finish out a year of 4.6% growth, about the same as during the prior two years. Growth in consumer credit has remained well below the double digit peaks of several years ago as [...]

Consumer Credit Usage Moderate, Total Liabilities Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208d.jpg" width="353">
Chain store sales recovered all of the prior week&#39;s sharp decline with a 2.2% jump according to the International Council of Shopping Centers (ICSC)-UBS survey.
The rise placed sales in early February 0.6% 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 was unchanged (-0.3% y/y) following two weeks of gain.
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.

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<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">02/05/05</th>
<th scope="col">01/29/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>445.8</td>
<td>436.0</td>
<td>3.0%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
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Chain store sales recovered all of the prior week's sharp decline with a 2.2% jump according to the International Council of Shopping Centers (ICSC)-UBS survey. The rise placed sales in early February 0.6% ahead of the January average [...]

Chain Store Sales Recovered

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208c.jpg" width="353">
The January Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) fell another 2.4% on top of the 1.5% decline in December. The percentage of firms expecting the economy to improve fell another twelve points to 25 and that is nearly half the level of last November.
During the last ten years there has been a 71% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percent of firms planning to raise employment fell moderately for the second month to 15%. During the last ten years there has been a 67% correlation between these hiring plans and the three month growth in nonfarm payrolls. The percentage of firms with one or more job openings rose back to 23%, the highest level since 2001.
Capital spending intentions dipped moderately as the percentage of firms planning to raise capital spending fell from the five year high to 34%.
The percentage of firms raising average selling prices rose to 17% but that percentage was well off last year&#39;s high of 29%.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208a.jpg" width="353"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050208b.jpg" width="353">

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</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>
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<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>103.6</td>
<td>106.1</td>
<td>-2.1%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
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The January Small Business Optimism Index reported by the National Federation of Independent Business (NFIB) fell another 2.4% on top of the 1.5% decline in December. The percentage of firms expecting the economy to improve fell [...]

Small Business Optimism Fell Again

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050207d.jpg" width="353">
Chile&#39;s monthly seasonally unadjusted economic indicator, IMACEC (Indicator Mensual de Activeda Economica)was 134.2 (1996=100) in December, 7.70% above December, 2003. On a quarterly basis the fourth quarter value of the indicator was 133.1 or 6.83% above the fourth quarter of 2003.
The seasonally unadjusted monthly indicator is an excellent indicator of monthly values of the seasonally unadjusted real gross domestic product. As the first chart and the following table show, the year over year change in real GDP is equal to the year over year change in the monthly indicator, aggregated on a quarterly basis. The two series are perfectly correlated. As a result, we are safe to assume that Chile&#39;s real economy grew 6.83% in the fourth quarter from the fourth quarter of 2003 and will show a 5.89% growth for the year 2004, up from 3.27% in 2003 and 2.21% in 2002.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050207e.jpg" width="353">
The acceleration in Chile&#39;s growth has been due in large part to the rising demand for copper, which has led to increased employment and incomes within the mining industry and through secondary effects stimulated the general economy. The second chart shows the growth in the mining industry and in manufacturing.

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<th scope="col" class="firstcol">Chile</th>
<th scope="col">Dec 05</th>
<th scope="col">Nov&nbsp;04</th>
<th scope="col">Dec 04</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y &nbsp;%</th>
<th scope="col">&nbsp;2004&nbsp; %&nbsp;</th>
<th scope="col">&nbsp;2003 %</th>
<th scope="col">&nbsp; 2002 %&nbsp; &nbsp;</th>
<th scope="col">2001 %&nbsp;</th>
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<td class="firstcol">Economic Indicator&nbsp; (NSA 1996=100)</td>
<td>&nbsp;134.2</td>
<td>132.5</td>
<td>124.6</td>
<td>1.30</td>
<td>7.70</td>
<td>5.89</td>
<td>3.27</td>
<td>2.21</td>
<td>3.39</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol">&nbsp;</td>
<td>Q4 04</td>
<td>Q3 04</td>
<td>Q2 04</td>
<td>Q1 04</td>
<td>&nbsp;</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Economic Indicator&nbsp;&nbsp; &nbsp;(NSA 1996=100)</td>
<td>&nbsp;133.1</td>
<td>130.9</td>
<td>132.7</td>
<td>130.8</td>
<td>&nbsp;</td>
<td>131.9</td>
<td>124.5</td>
<td>120.6</td>
<td>118.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Y/Y Percent Change</td>
<td>&nbsp;6.83</td>
<td>6.84</td>
<td>5.26</td>
<td>4.65</td>
<td>&nbsp;</td>
<td>5.89</td>
<td>3.27</td>
<td>2.21</td>
<td>3.39</td>
</tr>
<tr>
<td class="firstcol">Real GDP &nbsp;(NSA Billions 1996 Pesos)</td>
<td>&nbsp;</td>
<td>10.231</td>
<td>10.359</td>
<td>10.217</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>38.900</td>
<td>37.670</td>
<td>36.855</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Y/Y Percent Change</td>
<td>&nbsp;</td>
<td>6.84</td>
<td>5.26</td>
<td>4.65</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>3.27&nbsp;</td>
<td>2.21</td>
<td>3.32</td>
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</tbody>
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Chile's monthly seasonally unadjusted economic indicator, IMACEC (Indicator Mensual de Activeda Economica)was 134.2 (1996=100) in December, 7.70% above December, 2003. On a quarterly basis the fourth quarter value of the indicator was [...]

Chile's Monthly Economic Indicator Predicts 5.9% Growth in GDP in 2004

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050207a.jpg" width="353">
Commodity prices as measured by the JoC-ECRI (Journal of Commerce-Economic Cycle Research Institute) index have fallen in recent weeks despite the back up in petroleum prices. Recent trends amongst the components turned mixed versus last year when they were mostly positive.
During the last ten years there has been a 46% correlation between the JoC-ECRI commodity price index and the six month change in factory sector industrial production.
Despite up ticks during the last two weeks, metals prices are down 3.8% from the high in November. Steel scrap prices have fallen 19.6% from those highs but copper scrap prices have continued trending higher (27.3% y/y). Aluminum prices have backpedaled following a spike late last year (12.4% y/y).
Lumber prices have recovered some of their decline last fall when prices dropped one quarter to one third, but prices remain well off last year&#39;s highs. Textile prices also have risen moderately following the decline early in 2004 that pulled prices down 12%.
Petroleum prices fell slightly last week following a recovery in January when prices rose 11%.
The KR-CRB (Knight Ridder-Commodity Research Bureau) commodity price index differs from the JoC-ECRI Index. Roughly half of the index reflects agricultural prices. The index has moved lower since last year as a result of lower livestock prices (-4.3% y/y) and lower foodstuff prices (-8.5% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050207b.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050207c.jpg" width="353">

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<th scope="col" class="firstcol"><a href="http://www.haver.com/COMMENT/www.haverselect.com/dlx/USECON/@E8/@E803/@E80304/@E80304.HTM">JoC-ECRI Industrial Price Index</a></th>
<th scope="col">02/04/05</th>
<th scope="col">12/31/04</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">All Items</td>
<td>110.90</td>
<td>111.60</td>
<td>1.7%</td>
<td>112.78</td>
<td>91.97</td>
<td>79.53</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Textiles</td>
<td>64.90</td>
<td>64.40</td>
<td>-5.4%</td>
<td>65.83</td>
<td>65.09</td>
<td>59.73</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Metals</td>
<td>122.70</td>
<td>124.60</td>
<td>12.5%</td>
<td>118.15</td>
<td>84.57</td>
<td>75.14</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Miscellaneous</td>
<td>99.30</td>
<td>103.90</td>
<td>-15.8%</td>
<td>114.03</td>
<td>102.89</td>
<td>85.81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Petroleum</td>
<td>239.20</td>
<td>216.50</td>
<td>45.3%</td>
<td>207.13</td>
<td>135.26</td>
<td>110.06</td>
</tr>
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<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
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<td class="firstcol">KR-CRB Spot Commodity Price Index</td>
<td>02/01/05</td>
<td>12/28/04</td>
<td>Y/Y</td>
<td>2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">All Commodities</td>
<td>289.14</td>
<td>293.42</td>
<td>-0.9%</td>
<td>293.42</td>
<td>282.59</td>
<td>244.31</td>
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</tbody>
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Commodity prices as measured by the JoC-ECRI (Journal of Commerce-Economic Cycle Research Institute) index have fallen in recent weeks despite the back up in petroleum prices. Recent trends amongst the components turned mixed versus [...]

Commodity Price Trends Mixed

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050204e.jpg" width="353">
Japan&#39;s leading indicators declined in December, falling 1.1% to 101.8 (1000=100) and ending the year 0.6% below the year&#39;s average. Six of the 10 available components dragged down the month&#39;s results, among them new home construction, consumer confidence and the yield curve. Four indicators had positive contributions, including low inventories of finished goods, new job offers, stock prices and small businesses&#39; sales forecast. Of these, only job offers has been up in previous recent months; others turned up from negative readings in November. Several of the negative components, though, do have longer strings of negative moves, including the yield curve, for four months and home construction for three.
Thus, the picture in these leading indicators is mixed, and this is the fourth straight month in which fewer than half of the items have been positive. Nonetheless, it seems premature to alter one&#39;s view of the Japanese outlook. Such a hesitation in the leaders has occurred before, most recently in 1995, without endangering the general pattern of business growth.
The current uptrend in the coincident indicators started at the beginning of 2002. This, interestingly, coincides with the upturn in the yen against the dollar. Conventional wisdom suggests that the strengthening yen should hurt the economy, but this hasn&#39;t had such an impact yet. Notably, in fact, the correlation of the leading indicators with the foreign exchange value of the yen is positive, albeit somewhat erratic over differing spans. Perhaps then, the higher yen is a reflection of the improved condition of the Japanese economy. Recent gains in the stock market and employment indicators, also including the coincident indicator &quot;effective job offer rate&quot;, may help maintain upward momentum in that important economy.

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Dec &nbsp;2004</th>
<th scope="col">Nov 2004</th>
<th scope="col">Oct &nbsp;2004</th>
<th scope="col">Dec 2003</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
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<td class="firstcol">Leading Indicator Index, 2000=100</td>
<td>101.8</td>
<td>102.9</td>
<td>101.0</td>
<td>100.0</td>
<td>102.4</td>
<td>96.6</td>
<td>93.3</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Chg</td>
<td>1.8</td>
<td>4.5</td>
<td>0.1</td>
<td>5.4</td>
<td>6.0</td>
<td>3.6</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Exchange Rate: Yen/Dollar</td>
<td>104.12</td>
<td>103.18</td>
<td>106.13</td>
<td>107.10</td>
<td>107.79</td>
<td>115.70</td>
<td>124.65</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Chg</td>
<td>-2.8</td>
<td>-5.8</td>
<td>-2.4</td>
<td>-10.7</td>
<td>-6.8</td>
<td>-7.2</td>
<td>2.1</td>
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Japan's leading indicators declined in December, falling 1.1% to 101.8 (1000=100) and ending the year 0.6% below the year's average. Six of the 10 available components dragged down the month's results, among them new home [...]

Japan's Leading Indicators Hesitate, but Strength Remains in Employment, Stock Market Components

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050204c.jpg" width="353">
The University of Michigan&#39;s January index of consumer sentiment fell to 95.5 versus Consensus expectations for little change from the preliminary reading of 95.8. During the last ten years there has been a 74% correlation between the level of consumer sentiment and the y/y change in real PCE.
Consumer expectations fell 5.7% m/m and reversed nearly all of a 6.7% jump in December. The decline in expectations was to the lowest level since last May and due to lower expectations for growth in real income.
The reading of current conditions improved for the fourth consecutive month as sentiment regarding personal finances vs. a year ago improved to the highest level since late 2000. During the last ten years there has been an 81% correlation between the current conditions index and y/y growth in payroll employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050204d.jpg" width="353">
Current conditions for buying large household goods slipped slightly in January but the trend has been improving for nearly two years in large part due to expectations of higher prices.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</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">Consumer Sentiment</td>
<td>95.5</td>
<td>97.1</td>
<td>-8.0%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>110.9</td>
<td>106.7</td>
<td>1.3%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>85.7</td>
<td>90.9</td>
<td>-14.4%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
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The University of Michigan's January index of consumer sentiment fell to 95.5 versus Consensus expectations for little change from the preliminary reading of 95.8. During the last ten years there has been a 74% correlation between the [...]

U.S. Consumer Sentiment Down in January

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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Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped 16,000 to 199,000 in the week ending December 27, from 215,000 in the week of December 20, revised from 214,000. The latest claims represent the third consecutive weekly decline. The four-week moving average of initial claims was 218,750 in the December 27 week, an increase of 1,750 from 217,000 in the prior week, revised from 216,750.

Federal government employees initially filed 812 (NSA) jobless insurance claims in the week ended December 20, after filing 805 claims in the week ended December 13.

Continuing claims for unemployment insurance declined 47,000 to 1.866 million in the week of December 20, from 1.913 million in the week ending December 13, revised from 1.923 million. The four-week moving average was 1.873 million in the December 20 week, a decrease of 17,750 from 1.891 million in the week ending December 13, revised from 1.894 million. The insured unemployment rate stood at 1.2% in the week of December 20, unchanged from previous week of December 13.

Federal government employees’ continuing benefits claims were 13,390 (NSA) in the week ended December 13, up from 12,887 (NSA) in the week ending December 6. 

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 13, the highest unemployment rates were in Washington (2.50%), New Jersey (2.40%), Massachusetts and Minnesota (both 2.20%), and California, Illinois and Rhode Island (all 2.10%). The lowest rates were in Florida (0.30%), and Alabama and North Carolina (both 0.40%). Rates in other notable states include New York (1.80%), Pennsylvania (1.70%), and Texas (1.20%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- Initial claims declined from the prior week.
- Continuing claims declined from the prior week.
- The insured unemployment rate was unchanged.

U.S. Initial Claims for Unemployment Insurance Dropped Again in Latest Week

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).

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- 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

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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%).

Economy in Brief: 2005

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Consumer Credit Usage Moderate, Total Liabilities Strong

Chain Store Sales Recovered

Small Business Optimism Fell Again

Chile's Monthly Economic Indicator Predicts 5.9% Growth in GDP in 2004

Commodity Price Trends Mixed

Commodity Price Trends Mixed

Japan's Leading Indicators Hesitate, but Strength Remains in Employment, Stock Market Components

U.S. Consumer Sentiment Down in January