Robert Brusca

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China, the strongest MFG PMI, is also losing momentum the fastest.


The Asia PMI average ticked higher in December to 50.5 from a dead neutral 50,0 in November (and 49.5 in October). There is a mild contour of recovery and only those with a statistically strict view of the PMI data would say that Asian manufacturing is now on the rise. The (unweighted) 50.5 reading is only marginally above the theoretical breakeven value of 50 and is above 50 for only ‘one month in a row’ hardly a strong endorsement of ‘growth.’

For all of the entries in the table (excluding France and Germany since they already are included in EMU) the average December PMI shows bare-bones contraction at 49.9 in December (barely) up from 49.8 in November and from 49.5 in October.

For those of you that remember the Rowan and Martin ‘Laugh-In’ show, the speed of this progress makes Artie Johnson’s tricycle crashes look like high speed events. (here; Artie passed away in 2019).

Regardless of imagery, the progress of growth is slow and in Europe it is still slowly fading. Optimism is coalescing in markets over the US-China Phase-One trade deal that is set for signing in mid-January and in the wake of the PBOC injection of monetary stimulus that was just announced.

However, based on the PMI survey results and momentum the fodder for optimism is not nourishing. Of the seventeen entries in the table (counting all of them) ten are weaker in December than in November. Only two had weakened in November compared to October. But in October seven have weakened month-to-month. Over three months seven weakened compared to the six-month average on balance while twelve weakened over six-months compared to the 12-month average and all but one weakened over 12-months. Momentum is poor but it does show some signs of lesser deterioration.

As for the contraction/expansion line of demarcation seven are below 50 in December compared to ten in November and ten in October. The three-month average shows nine values below 50, the six-month average finds ten below 50 and the 12 month average finds nine below 50.

Meanwhile, there is no evidence of strength. Only Malaysia and South Korea show steady month-to-month improvement in their respective manufacturing PMIs in the last three months. Meanwhile China, Malaysia, Taiwan, S Korea and Turkey show improvements of the 3-month average over the 6-month average and of the six-month average over the 12 month average. But each of these also shows a weaker 12-month average than for 12-months ago. The sense of rebound is stronger in Asia than in Europe where only Germany, France and the UK show improvements over 3-months compared to six months but all are weakening on the broader time lines (…and show no real month-to-month follow-through for improvement).

The ranking of the PMI levels since January of 2015 underline this message as there are only six countries with rankings above their respective medians (a 50% standing) since January of 2015. Of those, China, India, and Malaysia show ‘high relative standings’ but those standings while high relative to the period are still quite pedestrian or weak as China’s high standing corresponds to a PMI value of 51.5, India’s standing corresponds to 52.7 and Malaysia’s standing corresponds to a very weak 50.0. South Korea, with a 75 percentile standing, logs a diffusion value of 50.1 in December. Obviously Asian manufacturing has been weak for so long that relative strength can still refer to quite abject weakness.

But between Europe and the North America, rankings are unequivocally worse with EMU as a 3.3% rank standing, the UK at 1.7% the US at 26.7% and so on.

The charts show some sense of upswing in Asia but it is still an upswing with an upside only near a neutral reading. Beyond the statistics there are some policy developments mentioned above that give rise to hope that the data trend can persist and extend beyond a mere neutral reading.

What makes a New Year? 
The New Year comes in – as always- with its share of optimism after what has been a difficult and contentious 2019. However 2020 does not dispel all the doubts from 2019 and while we may be turning over a new leaf there is no guarantee that its one that will not be imbued with the same issues. After all France has the longest strike of its railways since 1968 and the Hong Kong protests press on. There are 250,000 Syrian refuges headed for Turkey in the wake of the Russia Syrian bombings there. The US is sending troops to defend and protect its embassy in Baghdad after what it alleges were attacks on the embassy by forces loyal to Iran. Kim Jong-un’s new manifesto for 2020 is still awaiting disclosure but it is now believed that the flirtation of rapprochement by him is over. Politicians in the US continue to try to juggle the impeachment game for its best effect to their party. A solution to Brexit awaits. Meanwhile, there is no real new stimulus in place and still disruptive events afoot. There is no real sense of how much uncertainty will be reduced by the US-China trade deal or by settling what Brexit will mean. In short 2020 looks a lot like the mature stage of 2019 it had hoped to leave behind. And that is no surprise because flipping the leaf on a calendar from March to April or December to January rarely has much impact on real world events. Nonetheless, Happy 2020.

And lest you think there will be more certainty because it is 2020 let me remind you that 20/20 vision refers to being able to see at 20 feet what most people can see from 20 feet. While there is a legacy of expressions that treats 20/20 as if it is ‘perfect vision’ it is not; 20/20 is only average. And of late average vision has not been very good. So keep that in mind as well.

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China, the strongest MFG PMI, is also losing momentum the fastest. The Asia PMI average ticked higher in December to 50.5 from a dead neutral 50,0 in November (and 49.5 in October). There is a mild contour of recovery and only those [...]

Asian PMIs Recovering but Many Still Show Mfg Contraction. None Show Strength or Even Firmness

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Tom Moeller

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) rose 0.6% (-3.6% y/y) during the four weeks ended May 9, 2025. The improvement followed sharp declines in April.

Miscellaneous group prices increased 2.4% (5.9% y/y) over the last four weeks. Natural rubber price soared 13.9% (11.7% y/y). The price of tallow (used in the soap industry) rose 10.6% (41.3% y/y) in four weeks but the cost of framing lumber declined 5.6%, but rose 7.3% y/y.

Prices in the Metals group edged 0.2% higher (-7.3% y/y) over the most recent four weeks. Variation in pricing was wide. Copper scrap prices rose 7.4% (-3.3% y/y) while lead costs rose 4.0% in four weeks (-11.1% y/y). The cost of aluminum increased 2.3% in four weeks, off 4.4% y/y. Working lower, the cost of steel scrap declined 8.1% (-11.6% y/) in four weeks while tin prices followed with a 4.9% decline (-2.9% y/y). Zinc prices eased 0.7% in four weeks and declined 10.3% y/y.

Crude Oil & Benzene group prices edged 0.1% higher (-19.4% y/y) in four weeks. The cost of West Texas Intermediate crude oil weakened 4.0% to $58.50 per barrel and was 25.6% lower y/y. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, strengthened 8.5% (-41.8% y/y) in the last four weeks. Excluding crude oil, the industrial commodity price index rose 0.9% (-2.1% y/y) during the last four weeks.

Textile group prices edged 0.9% lower (-0.5% y/y) during the last four weeks. Burlap costs declined 14.3% (+7.4% y/y) but the cost of cotton rose 4.5% (-7.7% y/y) over four weeks.

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

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- Metals prices are mixed.
- Crude oil prices fall sharply.
- Textile prices ease.

FIBER: Industrial Commodity Price Movement Diverges in Latest Four Weeks

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Wholesale trade inventories increased 0.4% (2.2% y/y) during March after rising 0.5% in February, revised from 0.3% after a 0.8% January rise. The increase compared to expectations for a 0.5% rise in the Informa Global Markets Survey and compared to a 0.6% gain in the advance report issued two weeks ago.

Durable goods inventories rose 0.6% in March (1.5% y/y) after rising 0.5% in February. Machinery inventories, the largest sector, increased 0.6% (1.7% y/y) while inventories of motor vehicles & parts, the second largest grouping, rose 1.2% (0.8% y/y). Furniture inventories strengthened 2.7% (6.8% y/y) while electrical equipment inventories declined 1.0% (-3.1% y/y). Inventories of nondurable goods edged 0.1% higher (3.4% y/y). Drug inventories, which make up one-quarter of nondurable inventories, advanced 1.0% (4.6% y/y). Grocery inventories, the second largest category, rose 0.4% (8.3% y/y). Apparel inventories fell 0.8% (-6.5% y/y) and chemical inventories rose 2.1% both m/m and y/y. Petroleum inventories increased 0.7% (0.3% y/y).

Sales at the wholesale level rose 0.6% (6.1% y/y) in March after rising 2.0% in February and falling 0.9% in January. A 0.9% March rise had been expected in the Action Economics Forecast Survey.

Durable goods sales rose 1.0% (8.5% y/y) in March after strengthening 3.2% in February. Sales of electrical equipment & electronic goods, the largest sector, rose 2.5% (20.9% y/y), after a 2.3% rise. Professional and commercial equipment sales, which includes computers, rose 1.2% (11.9% y/y), while vehicle sales declined 1.0% (1.1% y/y). Sales of machinery improved 0.7% (4.2% y/y). Nondurable product sales rose 0.3% (3.9% y/y) in March after gaining 0.9% in February. Drug store sales, the largest category, increased 2.8% (13.4% y/y), while grocery store sales eased 0.2% (+4.3% y/y). Sales of apparel weakened 0.8% (+3.5% y/y) while paper sales declined 1.7% (0.5% y/y). Petroleum product sales fell 4.6% both m/m and y/y.

The inventory-to-sales (I/S) ratio at the wholesale level remained at 1.30 in March and has been moving lower for the last two years.

The wholesale I/S ratio for durable goods eased to 1.69 in March and also has been trending lower. The machinery ratio fell to 2.92 while motor vehicles rose to 1.78. The I/S ratio for nondurable goods slipped to 0.93 and remained down from 1.02 early in 2023. The drug industry ratio eased to 0.94. Apparel's I/S ratio held at 2.06, but remained below its 2.28 level one year earlier, and has been declining since early 2023. The petroleum industry I/S ratio rose to 0.33.

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

**Assessing Maximum Employment** from Federal Reserve Governor Adriana D. Kugler is available [here](https://www.federalreserve.gov/newsevents/speech/kugler20250509a.htm).

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- Inventories trend higher y/y.
- Sales increase broadly.
- Inventory-to-sales ratio steadies.

U.S. Wholesale Inventories & Sales Increase in March

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Nonfarm labor productivity fell 0.8% (SAAR) during Q1’25 after increasing 1.7% in Q4’24, revised from 1.5%. A 0.6% decline had been expected in the Action Economics Forecast Survey. It was the first productivity decline since Q2’22. The y/y increase during Q1 fell to 1.4% from 2.1% in Q4. It was below a 3.3% high in the first quarter of last year. Productivity fell as real value-added output dropped 0.3% last quarter (+2.2% y/y) after increasing 2.5% in Q4, and hours worked lengthened 0.6% (0.8% y/y) following a 0.8% gain.

Compensation per hour increased 4.8% last quarter following a 3.7% Q4 rise. Despite the strength of these last two increases, y/y growth decelerated to 2.7% from a 6.8% high one year earlier. Nevertheless, the productivity decline raised unit labor costs by 5.7% (1.3% y/y) in Q1 versus expectations for a 5.2% increase. It followed a 2.0% gain during Q4 and was the strongest quarterly increase in a year.

Factory sector productivity surged 4.5% (1.5% y/y) during Q1’25 following three consecutive increases of roughly 0.5%. This strength was accompanied by a 6.2% rise (2.2% y/y) in hourly compensation which came after two consecutive increases of approximately 4.1%. The strength in productivity lowered the rise in unit labor costs to 1.6% from 3.8% in Q4. The y/y gain fell to 0.7% from 2.0% in Q4 and stood below the 6.2% y/y increase in Q1’24.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Productivity declines with lower output.
- Compensation surge exacerbates labor market stress.
- Factory sector productivity surge lessens cost pressure.

U.S. Productivity Declines in Q1’25; Unit Labor Costs Surge

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) rose 0.6% (3.2% y/y) in March to 103.2 after rising 0.9% to 102.6 in February and rising 0.8% in January to 101.7. The level of home affordability has risen 14.8% from its low of 89.9 in October 2023. It remains 42.4% below the high of 179.2 in April 2020.

The rise in affordability in March occurred as the median price of an existing single-family home rose 1.8% (2.9% y/y) to $408,000 which was offset by a decline in mortgage rates to 6.73% from 6.92% in February. The price compared to the record $432,900 in June 2024. The decline in mortgage rates compared to a recent low of 6.26% in September of last year and a 7.70% high during October of 2023. It remained well above a December 2020 low of 2.73%. These changes lowered the principal & interest payment by 0.2% (+1.1% y/y) to $2,113 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a lessened 24.2% of income during March. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in March was accompanied by improvement in median family income. It increased 0.4% (4.4% y/y) to a record $104,705 after rising 0.4% in February and 0.7% in January.

Housing affordability improved m/m across the country in March. The index edged 0.1% higher (2.8% y/y) to 134.5 in the Midwest. It remains the most affordable region of the country. In the South, the index 0.9% (5.4% y/y) to 106.6 and the affordability index in the Northeast increased 2.1% (-2.6% y/y) to 95.7. In the West, where homes are the least affordable, the index rose 0.8% (3.3% y/y) to 71.8 in March.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

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- Home prices rise but mortgage rates decline.
- Median income improves.
- Affordability increases across the country.

U.S. Housing Affordability Improves Slightly in March

Carol Stone, CBE

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Initial claims for unemployment insurance were 228,000 seasonally adjusted in the week ended May 3, down from 241,000 in the previous week, which was unrevised. For the latest week, the Action Economics Forecast Survey had expected a smaller decline to 233,000.

In the week ended April 26, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – was 1.879 million, down from 1.908 million in the April 19 week.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, returned to its longstanding rate of 1.2% in the April 26 week; this rate has held that amount since continuously since the week of January 6, 2024, except for the prior week’s 1.3%.

As we do highlight in every week’s discussion, economic conditions vary widely across individual states and territories. In the week ended April 19, the highest unemployment rates were in New Jersey and Rhode Island (both at 2.48%), California (2.26%), Washington (2.14%) and New York (1.85%). The lowest were in Florida (0.36%), South Dakota (0.37%), Alabama (0.41%), Virginia (0.45%) and Nebraska (0.47%). Rates in other notable states include Illinois (1.78%), Pennsylvania (1.53%) and Texas (1.14%). 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. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Continued claims for unemployment insurance decreased 29, 000 in the week ended April 26.
- Insured unemployment rate returns to longstanding 1.2%.
- Across the states, the insured unemployment rate ranges from 0.36% to 2.48%.

U.S. Initial Unemployment Insurance Claims Ease 13,000 in the May 3 Week

Economy in Brief: January 2020

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Asian PMIs Recovering but Many Still Show Mfg Contraction. None Show Strength or Even Firmness