Tom Moeller

The pace of this economic recovery has lagged of late as the strength of inventory rebuilding has disappointed. The National Association of Purchasing Management reported that the November composite index unexpectedly slipped to 53.6 [...]

ISM Factory Index Disappoints As Inventory Rebuilding Lags

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

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

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The Housing Market Index, compiled by the National Association of Home Builders/Wells Fargo, eased 3.0% (-17.9% y/y) to 32 in August, reversing the 3.1% July rise to 33. It remained below the break-even point of 50, where it’s been since May of last year. The index remains below a July 2023 high of 56 and a November 2020 peak of 90.

The rate on a 30-year fixed rate mortgage averaged 6.61% in the first two weeks of August versus 6.72% during all of July. It fell to 6.58% last week and remained below the high of 7.79% in the last week of October 2023, according to Freddie Mac.

The single-family sales measure declined 2.8% (-20.5% y/y) this month to 35, after rising 2.9% in July. The prospective sales in six months measure held steady (-12.2% y/y) at 43, after rising 7.5% in July. The traffic of prospective buyers’ index rose 10.0% (-12.0% y/y) to 22 in August, after declining 4.8% in July.

Housing weakness centered in the Northeast this month with the index declining 18.8% (-15.2% y/y) to 39, after rising 9.1% in July. It was the lowest level since January 2023.  In the West, the index rose 4.0% (-29.7% y/y) to 26, its highest level in three months. The index for the Midwest held steady (+13.2% y/y) at 43, and matched the highest level in four months. The index in the South also held steady at 29 (-25.6% y/y), after falling in each month of this year.

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions which ask builders to rate sales and sales expectations as "good," "fair" or "poor" and traffic as "very high," "average" or "very low." The diffusion indexes with values over 50 indicating a predominance of "good"/"very high" readings. In constructing the composite index, the weights assigned to the individual index components are: 0.5920 for single-family detached sales, present time, 0.1358 for single-family detached sales, next six months, and 0.2722 for traffic of prospective buyers. The regional indexes run back to December 2004.

These data are included in Haver's **SURVEYS** database.

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- Overall reading matches lowest level since December 2022.
- Current sales slip, expectations steady, while traffic improves.
- Lower Northeast reading accounts for overall index decline.

U.S. Home Builders Index Edges Lower in August

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Consumers remain in a spending mood. Total retail sales increased 0.5% (3.9% y/y) during July after rising 0.9% in June, revised from 0.6%, and falling 0.8% in May, revised from down 0.9%. The overall rise matched expectations in the Action Economics Forecast Survey. Sales excluding autos rose an expected 0.3% last month (3.7% y/y) following a 0.8% June gain, revised from 0.5%, and a 0.1% dip during May, revised from -0.2%.

Sales in the retail control group, which excludes autos, building materials, gasoline and food services, rose 0.5% (4.8% y/y) last month after increasing 0.8% in June, revised from 0.5%, and 0.3% in May, revised from 0.2%. These sales are used in the construction of personal consumption expenditures in the NIPA accounts. These sales rose 3.9% (AR) last quarter following a 3.7% Q1 rise.

Light vehicle sales increased 1.6% (4.7% y/y) in July after rising 1.4% in June, following a 3.8% decline in May. This compares to a 7.6% (6.0% y/y) rise in unit sales of motor vehicles last month which followed declines in each of the prior three months. Gasoline service station sales eased 0.7% (-2.9% y/y) during July after a 0.6% rise during June. Gasoline prices fell 1.2% (-9.8% y/y) last month after holding steady in June. Sales of building materials & garden equipment declined 1.0% (-2.6% y/y) after a 1.3% rise during June.

Elsewhere, sales were mixed last month. Furniture & home furnishings sales increased 1.4% (5.1% y/y) after rising 0.1% in June. Nonstore retail sales rose 0.8% (8.0% y/y) after increasing 0.9% in June. Sporting goods & hobby shop sales increased 0.8% (2.3% y/y) following a 0.7% decline. Apparel store sales increased 0.7% (5.0% y/y) during July following a 1.1% gain. General merchandise store sales rose 0.4% (2.3% y/y) after they moved 0.5% higher in June, and department store sales improved 0.9% (-0.8% y/y) after falling 0.6% in June.

Working lower, miscellaneous store sales fell 1.7% (+10.6% y/y) during July after strengthening 2.7% in June. Electronics & appliance store sales eased 0.6% (-2.3% y/y) last month after two consecutive months of moderate decline.

In the nondiscretionary sales sector, food & beverage store sales rose 0.5% (2.5% y/y) last month following a 0.8% rise in June. Health & personal care store sales also rose 0.4% (5.6% y/y) last month after strengthening 1.0% in June.

Restaurant & drinking establishment sales fell 0.4% (+5.6% y/y) in July after rising 0.6% in June.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economic Forecast Survey in **AS1REPNA**.

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- Strong vehicle sales pace the increase.
- Nonauto sales are mixed. 
- Sales in the retail control group (used to estimate PCE) increase.

U.S. Retail Sales Post Solid Increase in July; June Gain Revised Up

Winnie Tapasanun

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Industrial production (IP) dipped 0.1% m/m in July after upwardly revised increases of 0.4% in June (+0.3% initially) and 0.1% in May (0.0% previously), data from the Federal Reserve Board showed. A 0.0% m/m for July had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase accelerated to 1.4% in July from 0.7% in June; it was well above -0.2% y/y in July 2024. The July IP index was at 104.0, marginally down from 104.1 in June (the highest since September 2018) and 2.5% above a low of 101.5 in January 2024.

By **industry groups**, manufacturing production was virtually unchanged (+1.4% y/y) in July following rises of 0.3% in June (+0.1% initially) and 0.2% in May (+0.3% previously). Durable goods production grew 0.3% (2.7% y/y) in July, the second m/m gain in three months, following a 0.1% downtick in June. Within durables, the following categories rose m/m in July, including output increases of 1.7% (8.9% y/y) in aerospace & miscellaneous transportation equipment, 1.3% (-1.7% y/y) in miscellaneous durables goods, 1.0% (-2.0% y/y) in electrical equipment, appliances & components, 1.0% (-0.2% y/y) in furniture & related products, 0.7% (1.7% y/y) in wood products, 0.6% (-1.3% y/y) in nonmetallic mineral products, 0.2% (-0.3% y/y) in fabricated metal products, and 0.1% (5.6% y/y) in computer & electronic products. Notably, aircraft & parts production climbed 1.1% (11.4% y/y) in July, the ninth straight m/m rise, on top of a 2.3% gain in June. To the downside, the following durable goods categories fell for the third time in four months in July, including machinery (-0.3%; +0.9% y/y), motor vehicles & parts (-0.3%; +8.3% y/y), and primary metals (-0.3%; +4.0% y/y).

Nondurable goods production fell 0.4% (+0.6% y/y) in July, down for the third month in four, following a 0.7% rebound in June, reflecting m/m output falls of all nondurable goods categories. These included output declines of 2.1% (-4.7% y/y) in textiles & product mills, 1.7% (-5.5% y/y) in apparel & leather goods, 0.8% (-3.1% y/y) in plastics & rubber products, 0.5% (0.0% y/y) in paper, 0.5% (+0.7% y/y) in petroleum & coal products, 0.4% (+2.5% y/y) in chemicals, 0.2% (+0.3% y/y) in food, beverages & tobacco, and 0.1% (-1.3% y/y) in printing & related support activities.

Mining activity slid 0.4% (+1.9% y/y) in July, the third m/m slide in four months, after an unrevised 0.3% decrease in June. Utilities output declined 0.2% (+0.8% y/y), down for the second month in three, following a downwardly revised 1.8% June gain (+2.8% initially), with a 0.3% decrease (+1.6% y/y) in electric utilities output and a 0.5% rebound (-5.3% y/y) in natural gas utilities output.

By **market groups**, materials production fell 0.3% (+1.8% y/y) in July, the first m/m fall since March, after a 0.5% advance in June. Construction supplies production declined 0.2% (+2.0% y/y) following a 0.3% June increase. To the upside, business equipment output rose 0.5% (3.8% y/y) in July, the ninth consecutive m/m rise, after a 0.1% uptick in June. Consumer goods output edged up 0.1% (0.6% y/y) after a 0.3% June rebound, reflecting increases of 0.1% (2.5% y/y) in durable consumer goods and 0.1% (0.1% y/y) in nondurable consumer goods.

In **special classifications**, factory output of selected high-tech industries rose 1.4% (14.0% y/y) in July on top of an upwardly revised 0.9% gain in June (+0.5% initially), posting the fourth successive m/m rise and the seventh in eight months. Meanwhile, manufacturing production excluding selected high-tech industries dipped 0.1% (+1.1% y/y) in July, the first m/m easing since April, following a 0.3% increase in June; manufacturing production excluding selected high-tech and motor vehicles & parts slipped 0.1% (+0.6% y/y), the third m/m decline in four months, following a 0.5% June rebound.

Capacity utilization fell to 77.5% in July from a three-month-high 77.7% in June (77.6% previously). The Action Economics Forecast Survey forecasted 77.6%. The July reading was 2.1 percentage points below its long-run (1972–2024) average. Manufacturing capacity utilization dipped to 76.8% in July from an unrevised 76.9% in June; the July rate was 1.4 percentage points below its long-run average.

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

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- July IP -0.1% (+1.4% y/y), led by a 0.4% decline in mining activity.
- Mfg. IP unchanged, w/ durables up 0.3% and nondurables down 0.4%.
- Utilities output -0.2%, the second m/m fall in three months.
- Key categories in market groups post mixed results.
- Capacity utilization down 0.2%pt. to 77.5%; mfg. capacity utilization down 0.1%pt. to 76.8%.

U.S. Industrial Production Eases in July

Sandy Batten

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The Empire State Manufacturing Index of General Business Conditions unexpectedly advanced more than 6 points to 11.9 in August after having jumped nearly 22 points to 5.5 in July, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. This is the highest reading since November 2024 and indicates a pickup in the pace of economic activity in New York State. A reading of -1.0 for August had been expected by the Action Economics Forecast Survey. The percentage of respondents reporting an increase in general business conditions rose to 34.7% in August from 32.4% in July while the percentage reporting a decrease fell to 22.8% in August, the lowest reading since February, from 26.9% in July. The August survey was conducted between August 4 and August 11.

The headline index just reflects the answer to a single question concerning the state of economic activity and is not calculated from the components. Haver Analytics calculates a composite index from the five major components, which is comparable to the ISM manufacturing index. This calculated index slipped to 54.3 in August from 54.7 in July, still well above the critical 50 level that separates expansion from contraction but indicating that the components were not quite as strong as the headline index in August. The calculated index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each).

The August increase was led by a more than 13-point increase in the new orders index, to 15.4 from 2.0. Thirty-six percent of respondents reported an increase in orders, up slightly from 35% in July. However, only 20.4% reported a decline in orders, down markedly from 32.9% in July and a recent high of 40.2% in March. The shipments index was little changed in August but remained at a solid 12.2. Inventories reversed course sharply, falling to -6.4, the first negative reading since last August, from 15.6 in July. Employment also slowed with the index falling to 4.4 from 9.2 in July.

Indications of supply-chain disruptions continued to emerge. Delivery times lengthened markedly with the index jumping to 17.4 in August, its highest reading since May 2022, from an already elevated 8.3 in July. Twenty percent of respondents reported an increase in delivery times, up from nearly 15% in July, while only 2.8% reported a shortening versus 6.4% in July. Moreover, the supply availability index remained in negative territory at -5.5 versus -11.0 in July.

Inflation indexes softened a bit in August but remained elevated. The prices paid index edged down to 54.1 from 56.0 in July while the prices received index slid to 22.9 from 25.7 in July. Both remain significantly elevated relative to the beginning of the year.

Firm optimism about the future (the next six months) soured a bit in August. The index for future general business conditions fell eight points to 16.0, suggesting that businesses expect activity to increase in the months ahead, but firms were less optimistic than they were last month. New orders and shipments were expected to increase. Two-thirds of respondents expect input prices to pick up further over the next six months. Of some concern, capital spending plans were soft with the expectations index plunging to -0.9 in August from 9.2 in July.

The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease with zero separating expansion from contraction.

The New York Fed survey data are contained in Haver’s **SURVEYS** database. The expectations series is in Haver’s **AS1REPNA** database.

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- The highest reading since November 2024.
- The August rise was led by stronger new orders and continued gains in shipments.
- More evidence of nascent supply-chain problems.
- Outlook six months ahead faded slightly.

FRBNY Empire State Manufacturing Index Unexpectedly Advances in August

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Import prices unexpectedly increased 0.4% m/m (-0.2% y/y) in July after declines of 0.1% m/m in June and 0.4% m/m in May, according to the Bureau of Labor Statistics. An unchanged reading had been expected by the Action Economics Forecast Survey. Export prices edged up 0.1% m/m (2.2% y/y) in July following a 0.5% monthly gain in June. The Action Economic Forecast Survey had also looked for an unchanged reading.

For imports, prices for imported fuel advanced 2.7% m/m in July following an increase of 0.8% m/m in June and a decrease of 5.0% m/m in May. The July increase was the largest monthly advance since the index rose 3.0% m/m in January 2025. Higher prices for imported petroleum and natural gas drove the July increase, advancing 2.4% m/m and 4.7% m/m, respectively. Imported fuel prices fell 12.1% y/y in July 2025 with imported petroleum prices down 13.7% y/y while imported natural gas prices soared 62.2% y/y.

Apart from imported fuel, prices for nonfuel imports advanced 0.3% m/m percent in July, following a decrease of 0.3% m/m in June. Higher prices for nonfuel industrial supplies and materials (1.0% m/m), consumer goods (0.4% m/m), and capital goods (0.1% m/m) more than offset lower prices for automotive vehicles (-0.2% m/m) and foods, feeds, and beverages (-0.1% m/m). Nonfuel import prices increased 0.9% y/y in July and have not declined on an over-the-year basis since a 0.6% decrease in February 2024. Higher prices for nonfuel industrial supplies and materials; capital goods; and foods, feeds, and beverages contributed to the year-over-year advance.

Higher prices for nonagricultural exports drove the July increase in overall export prices. The price index for agricultural exports was unchanged in July following a 0.8% m/m increase in June. Higher prices for meat (1.1% m/m) and vegetables (3.4% m/m) lower prices for corn (-1.9% m/m) and animal feeds (-1.6% m/m). The price index for agricultural exports increased 3.4% y/y in July, the largest 12-month rise since a 5.3% y/y advance in January 2023. Nonagricultural export prices ticked up 0.1% m/m in July, after rising 0.5% m/m in June and falling 0.8% m/m in May. Higher prices for automotive vehicles (0.7% m/m), capital goods (0.2% m/m), and consumer goods (0.2% m/m) more than offset lower prices for nonagricultural industrial supplies and materials (-0.1% m/m). Prices for nonagricultural exports increased 2.0% y/y in July. Higher prices for nonagricultural industrial supplies and materials, capital goods, and automotive vehicles drove the year-over-year advance.

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Import prices rose 0.4% m/m in July against expectations of no change after declines in both May and June.
- Higher prices for imported petroleum and natural gas drove the July rebound. 
- Export prices ticked up 0.1% m/m, largely reflecting higher prices for nonagricultural exports.

U.S. Import Prices Rebounded in July

Economy in Brief: December 2009

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ISM Factory Index Disappoints As Inventory Rebuilding Lags