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/041112d.jpg" width="353">
Japan&#39;s GDP barely moved in Q3, gaining a bit less than 0.1%. Press reports asserted that this was a disappointing figure, as forecasters had expected 0.5%, stronger than in Q2, not weaker as seen in the actual result.
However, there are several signs of vigor in this report. Private consumption was able to maintain its recent strong trend through a fourth quarter, the most vigorous sustained pace since early 1997. Several other components, although weaker in Q3 than in prior periods, need not be interpreted as pointing to a general weakening in activity. There were outright declines in private fixed capital formation, inventory building and public expenditures and a slowing in export growth. Imports picked up. A rise in imports takes away from GDP, but that can also be seen as a sign of firm domestic demand. The smaller contributions from private investment and from exports need also to be viewed in the context of the two prior quarters, in which those items experienced very large increases. Thus, while Q3 was slow overall, there still appears to be good forward momentum in the Japanese economy.
These data are contained in Haver&#39;s extensive JAPAN database. This release marks the first major Japanese report we have posted to our databases in &quot;real time&quot;, that is, within moments of its release. An &quot;Asian shift&quot; with a database manager and assistants began work this week in the evening hours on the East Coast. Timely updating of more Asian data will ensue. We are pleased to be able to bring data users this enhanced service. It joins our &quot;European shift&quot;, which started about a year-and-a-half ago in New York&#39;s pre-dawn hours to bring early processing of key European reports.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"></th>
<th scope="col">3 Qtr 2004</th>
<th scope="col">2 Qtr 2004</th>
<th scope="col">1 Qtr 2004</th>
<th scope="col">Year/ Year</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Japan: GDP</td>
<td>0.1</td>
<td>0.3</td>
<td>1.5</td>
<td>3.9</td>
<td>2.4</td>
<td>-0.2</td>
<td>0.6</td>
</tr>
<tr>
<td class="firstcol">Private Consumption</td>
<td>0.9</td>
<td>0.8</td>
<td>1.1</td>
<td>3.9</td>
<td>0.8</td>
<td>1.0</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Private Fixed Investment</td>
<td>-0.2</td>
<td>0.6</td>
<td>1.8</td>
<td>7.4</td>
<td>7.5</td>
<td>-6.4</td>
<td>0.4</td>
</tr>
<tr>
<td class="firstcol">Exports</td>
<td>0.4</td>
<td>3.6</td>
<td>4.8</td>
<td>13.9</td>
<td>10.1</td>
<td>8.1</td>
<td>-6.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>2.7</td>
<td>2.3</td>
<td>3.2</td>
<td>11.5</td>
<td>5.0</td>
<td>2.0</td>
<td>0.1</td>
</tr>
<tr>
<td class="firstcol">Public Demand</td>
<td>-0.4</td>
<td>-1.4</td>
<td>-0.5</td>
<td>-2.2</td>
<td>-2.1</td>
<td>-0.0</td>
<td>-0.6</td>
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Japan's GDP barely moved in Q3, gaining a bit less than 0.1%. Press reports asserted that this was a disappointing figure, as forecasters had expected 0.5%, stronger than in Q2, not weaker as seen in the actual result. However, there [...]

Japanese GDP Slower with 0.1% Increase. Haver Databases Updated Faster with New "Asian Shift"

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041112c.jpg" width="353">
The University of Michigan&#39;s mid-month November consumer sentiment reading of 95.5 rose 4.1% m/m from October, adding to the improvement during October&#39;s second half. Consensus expectations had been for a reading of 93.0.
During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.
The consumer expectations index jumped 5.8% m/m (0.7% y/y) while the current economic conditions index rose 2.1% (3.6% y/y).
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.
&quot;Consumer Sentiment and the Media&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-29.pdf"> 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/USECON/@EF/@EF14/@EF1402/@EF1402.HTM"> University of Michigan</a></th>
<th scope="col"> Oct</th>
<th scope="col"> Sept</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>91.7</td>
<td>94.2</td>
<td>2.3%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>104.0</td>
<td>103.7</td>
<td>4.1%</td>
<td>97.2</td>
<td>97.5</td>
<td>100.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>83.8</td>
<td>88.0</td>
<td>1.0%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
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The University of Michigan's mid-month November consumer sentiment reading of 95.5 rose 4.1% m/m from October, adding to the improvement during October's second half. Consensus expectations had been for a reading of 93.0. During the [...]

U.S. Consumer Sentiment Recovered Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041112b.jpg" width="353">
US retail sales rose an expected 0.2% (7.6% y/y) last month, the gain held back by lower auto sales. September sales were revised up slightly. During the last twenty years there has been a 60% correlation between the y/y change in retail sales and the change in payroll employment.
Motor vehicle &amp; parts dealers sales fell 2.2% after a 4.3% jump in September as unit sales of light vehicles fell 3.1% m/m.
Sales excluding motor vehicles surged 0.9%, nearly double the Consensus expectation, following an upwardly revised 0.8% jump in September.
Discretionary spending was led by a 3.0% (6.7% y/y) surge in clothing &amp; accessory store sales on top of a 1.0% September increase.Sales at general merchandise stores added 0.9% (7.4% y/y) to the 1.3% September spike but sales of furniture/home furnishings &amp; electronics/appliances rose just 0.1% (4.1% y/y) which left sales down slightly over the last three months. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041112a.jpg" width="353">
Sales at gasoline service stations surged 4.3% (23.8% y/y) as the retail price of gasoline rose 6.9% m/m to $2.00/gallon. Nonauto retail sales less gasoline rose 0.5% (6.9% y/y).
Building materials, garden equipment &amp; supply dealers&#39; sales slid 1.1% (9.5% y/y) following a like gain in September.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM"> Retail Sales &amp; Food Services</a></td>
<td>0.2%</td>
<td>1.6%</td>
<td>7.6%</td>
<td>5.4%</td>
<td>2.5%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.9%</td>
<td>0.8%</td>
<td>8.5%</td>
<td>5.2%</td>
<td>3.2%</td>
<td>3.1%</td>
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US retail sales rose an expected 0.2% (7.6% y/y) last month, the gain held back by lower auto sales. September sales were revised up slightly. During the last twenty years there has been a 60% correlation between the y/y change in [...]

U.S. Retail Sales Gain

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041112b.jpg" width="353">
US retail sales rose an expected 0.2% (7.6% y/y) last month, the gain held back by lower auto sales. September sales were revised up slightly. During the last twenty years there has been a 60% correlation between the y/y change in retail sales and the change in payroll employment.
Motor vehicle &amp; parts dealers sales fell 2.2% after a 4.3% jump in September as unit sales of light vehicles fell 3.1% m/m.
Sales excluding motor vehicles surged 0.9%, nearly double the Consensus expectation, following an upwardly revised 0.8% jump in September.
Discretionary spending was led by a 3.0% (6.7% y/y) surge in clothing &amp; accessory store sales on top of a 1.0% September increase.Sales at general merchandise stores added 0.9% (7.4% y/y) to the 1.3% September spike but sales of furniture/home furnishings &amp; electronics/appliances rose just 0.1% (4.1% y/y) which left sales down slightly over the last three months. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041112a.jpg" width="353">
Sales at gasoline service stations surged 4.3% (23.8% y/y) as the retail price of gasoline rose 6.9% m/m to $2.00/gallon. Nonauto retail sales less gasoline rose 0.5% (6.9% y/y).
Building materials, garden equipment &amp; supply dealers&#39; sales slid 1.1% (9.5% y/y) following a like gain in September.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM"> Retail Sales &amp; Food Services</a></td>
<td>0.2%</td>
<td>1.6%</td>
<td>7.6%</td>
<td>5.4%</td>
<td>2.5%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.9%</td>
<td>0.8%</td>
<td>8.5%</td>
<td>5.2%</td>
<td>3.2%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Recovered Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 12, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041112c.jpg" width="353">
The University of Michigan&#39;s mid-month November consumer sentiment reading of 95.5 rose 4.1% m/m from October, adding to the improvement during October&#39;s second half. Consensus expectations had been for a reading of 93.0.
During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.
The consumer expectations index jumped 5.8% m/m (0.7% y/y) while the current economic conditions index rose 2.1% (3.6% y/y).
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.
&quot;Consumer Sentiment and the Media&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-29.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
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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"> Oct</th>
<th scope="col"> Sept</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>91.7</td>
<td>94.2</td>
<td>2.3%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>104.0</td>
<td>103.7</td>
<td>4.1%</td>
<td>97.2</td>
<td>97.5</td>
<td>100.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>83.8</td>
<td>88.0</td>
<td>1.0%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041111a.jpg" width="353">
German economic growth slowed in Q3 to almost flat. At &#128;503.15 billion, GDP was up just 0.1% from Q2. Both Q2 and Q1 had 0.4% gains. These stronger periods helped to maintain the year-on-year advance at 1.3%, down just a bit from Q2&#39;s 1.4%. The German Federal Statistical Office did not report any detail, but stated in their press release that better domestic demand in Q3 was able to offset a decline in exports to keep growth even slightly positive. Components and other details will be published on November 23.The same combination held in Spain. In what is evidently a new practice, the Spanish National Institute of Statistics (&quot;INE&quot;) today published an &quot;anticipated&quot; growth report, citing the total GDP growth for Q3 relative to Q2 and to the year-ago period. A more &quot;dynamic domestic sector&quot; supported growth of 0.6% in the latest quarter, while external demand was more negative than before. The year-on-year pace was 2.6%. The Spanish economy is thus maintaining a robust growth pace compared with other European countries. The details of the Spanish national accounts will be reported on November 24. The new &quot;anticipated&quot; percentage change series have already been added to Haver&#39;s Spain database in the national accounts section.The Netherlands, in contrast, experienced weaker domestic demand. Private consumption and private investment both fell in Q3. But stronger exports generated positive GDP growth of 0.2%, a turnaround from the marginal 0.1% decline in Q2. The yearly pace is 1.4%, slightly firmer than in the two prior quarters and the best stretch of growth since early 2001.Yesterday, we described here how the reunified Germany seems to be progressing more slowly than the former Soviet-Bloc nations to its east. It will be some weeks before those countries issue their Q3 GDP data. But today&#39;s report for Germany is disappointing after four quarters of fairly good gains and indicates that the country&#39;s economy is unable to keep up a steady trend. Stay tuned for more on this story. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GDP % Changes</th>
<th scope="col">3 Qtr 2004</th>
<th scope="col">2 Qtr 2004</th>
<th scope="col">1 Qtr 2004</th>
<th scope="col">Year/ Year</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.1</td>
<td>0.4</td>
<td>0.4</td>
<td>1.3</td>
<td>-0.1</td>
<td>0.1</td>
<td>1.0</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.6</td>
<td>0.5</td>
<td>0.7</td>
<td>2.6</td>
<td>2.5</td>
<td>2.2</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands</td>
<td>0.2</td>
<td>-0.1</td>
<td>0.8</td>
<td>1.4</td>
<td>-0.9</td>
<td>0.6</td>
<td>-1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic Demand</td>
<td>-0.6E</td>
<td>0.2</td>
<td>0.9</td>
<td>-0.3</td>
<td>-0.5</td>
<td>0.5</td>
<td>1.8</td>
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German economic growth slowed in Q3 to almost flat. At 503.15 billion, GDP was up just 0.1% from Q2. Both Q2 and Q1 had 0.4% gains. These stronger periods helped to maintain the year-on-year advance at 1.3%, down just a bit from Q2's [...]

German Growth Slows in Q3; Netherlands and Spain See Improvement

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041111c.jpg" width="353">
New home price appreciation across the US varies widely; by what is measured and by region.
The average price of a new home rose 8.4% through 3Q, a slowdown from the peak rate of appreciation of 13.7%. Median prices through 3Q rose 9.7%, down from a 15.4% peak in 1Q04.
Adjusted for quality improvements, the Census Bureau estimates that new home prices rose a lesser 6.4% through 3Q.
Older existing single family home prices rose a median 7.7% y/y through 3Q. That, however, reflects a 10.6% rise through 1Q04 in improvements (+14.2%) and repairs (2.3%).
Location, Location, Location: Home price appreciation in the Western region of the US during 2003 was roughly triple that in the Midwest, a comparison driven at least in part by 0.8% growth in employment in the West (2.5% in &#39;04) versus 0.1% growth in the Midwest (0.9% in &#39;04).
Are Home Prices the Next &quot;Bubble&quot;? from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/epr/04v10n2/mccarthy/mccarthy.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> New Single Family Home Prices</th>
<th scope="col"> 1 Year Chg.</th>
<th scope="col"> 2 Year Chg. (AR)</th>
<th scope="col">5 Year Chg. (AR)</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">US (Average)</td>
<td>8.4%</td>
<td>11.0%</td>
<td>6.9%</td>
</tr>
<tr>
<td class="firstcol">Quality Adjusted</td>
<td>6.4%</td>
<td>6.9%</td>
<td>5.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;By Region Thru 2003:</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>8.9%</td>
<td>7.9%</td>
<td>6.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>7.8%</td>
<td>5.9%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>4.4%</td>
<td>3.6%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>3.3%</td>
<td>3.8%</td>
<td>3.4%</td>
</tr>
</tbody>
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New home price appreciation across the US varies widely; by what is measured and by region. The average price of a new home rose 8.4% through 3Q, a slowdown from the peak rate of appreciation of 13.7%. Median prices through 3Q rose [...]

Home Price Appreciation Varies

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041110e.jpg" width="353">
Last night was the 15th anniversary of the fall of the Berlin Wall. Yesterday&#39;s (November 9) Wall Street Journal included a major article arguing that the resulting reunification of Germany had not brought the anticipated surge of economic benefits to that nation, but that other Central and Eastern European countries had done better.
Some recent measures of economic activity tend to bear this out, although the evidence is not clear. Most simply, data histories are short for many of these nations, rendering exact comparisons virtually impossible. Tomorrow, November 11, Germany will report its 3rd quarter GDP and the &quot;newer&quot; nations will come some weeks from now. Through the second quarter, it was certainly the case that over recent years, these other countries -- the Czech Republic, Poland, Hungary, and so on -- have had faster growth rates than Germany; we can comment more tomorrow on this development.
Today, though, we have employment data through September for Slovakia, so we can make some limited comparisons about job growth. Data for &quot;industry&quot;, which includes manufacturing, mining and utilities, extend back to 2000. For some other categories of business, they begin in 2001. Over the last year, &quot;industry&quot; jobs have grown at about a 1-1/4% pace. Total &quot;registered employment&quot;, encompassing &quot;industry&quot; and private services, is expanding at about 1-1/2%. In Germany, jobs in the &quot;total economy&quot; are increasing, but only at about 0.2% in the second and third quarters over respective year-ago periods. Jobs in Germany&#39;s industrial sector, &quot;Industry excluding Construction&quot;, have been declining noticeably, through the 2nd quarter by 2.2% from a year ago.
These partial data indicate that Slovakia has a more vigorous economy at present than Germany. But this is not the whole story. As seen in the table below, there was a notable slump in total jobs in Slovakia during 2002 and 2003 which was more severe than in Germany. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041110f.jpg" width="353"> A similar pattern is evident in neighboring Poland, a country held up in the Wall Street Journal as the more vigorous counter-example to Germany&#39;s unexpected post-Unification slowness. Through the second quarter, total employment in Poland is barely increasing from year-earlier levels; however, private sector jobs have been advancing at about a 2.5% pace. This is quite favorable, but it also follows a deep decline in the private sector during 2002 and most of 2003.
These jobs data suggest that economic progress in the recently freed Soviet bloc is occurring, but in fits and starts. Such swings are hardly surprising as those nations work to restructure their economic systems and their incentive structures. No one said this would be easy.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Millions</th>
<th scope="col">Sept 2004</th>
<th scope="col">2nd Qtr 2004</th>
<th scope="col">Year/Year</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Slovakia: Total </td>
<td>1.248</td>
<td>&nbsp;</td>
<td>1.5</td>
<td>-4.3</td>
<td>-1.3</td>
<td>NA</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; &quot;Industry&quot; </td>
<td>0.571</td>
<td>&nbsp;</td>
<td>1.1</td>
<td>0.5</td>
<td>0.2</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Poland: Total</td>
<td>&nbsp;</td>
<td>13.682</td>
<td>0.2</td>
<td>-1.2</td>
<td>-3.0</td>
<td>-2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Private Sector</td>
<td>&nbsp;</td>
<td>9.458</td>
<td>2.4</td>
<td>-0.8</td>
<td>-3.7</td>
<td>2.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany: Total</td>
<td>38.543*</td>
<td>38.338</td>
<td>0.3*</td>
<td>-1.0</td>
<td>-0.6</td>
<td>0.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; &quot;Industry ex Construction&quot;</td>
<td>&nbsp;</td>
<td>7.953</td>
<td>-2.2</td>
<td>-2.7</td>
<td>-2.2</td>
<td>0.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Last night was the 15th anniversary of the fall of the Berlin Wall. Yesterday's (November 9) Wall Street Journal included a major article arguing that the resulting reunification of Germany had not brought the anticipated surge of [...]

Slovakia Employment Firms in September; Former Soviet-Bloc Nations Show Irregular Progress 15 Years Later

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

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

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The **Industrial Materials Price Index** from the Foundation for International Business and Economic Research (FIBER) declined 1.7% during the last four weeks, after easing 0.4% in the prior four weeks. Together, these declines left prices unchanged during the last twelve months. During July, factory sector production rose an improved 1.4% y/y.

**Crude Oil & Benzene** group costs led the overall price weakening as they moved 3.3% lower (-12.6% y/y) in the latest four week period. The price of West Texas Intermediate crude oil declined 5.0% to $62.94 per barrel and remained 14.7% lower y/y. It had fallen to a low of $58.50 per barrel in the second week of May. The cost of the petrol-chemical benzene, used for making plastics & synthetic fibers, weakened 7.0% (-32.3% y/y). Excluding crude oil, the industrial commodity price index weakened 1.5% (+1.0% y/y) during the last four weeks.

Lower **Miscellaneous** group prices followed with a 2.9% weakening in the latest four week period, but prices remained up 4.0% y/y. Lumber prices fell 9.9% (+15.2% y/y) during the last four weeks. Natural rubber prices also were fairly weak as they fell 6.9% (-11.5% y/y) in four weeks. Working higher, tallow costs (used in the soap industry) improved 0.6% (32.9% y/y) over the last four weeks.

**Metals** group prices fell 1.2% (+1.1% y/y) over four weeks. Lead prices declined 2.6% (-4.3% y/y) while copper scrap prices weakened 1.6% (+5.9% y/y). Aluminum prices were off 1.5% in four weeks (+7.5% y/y), and the cost of zinc declined 1.4% (+0.5% y/y). Tin prices eased 0.4% (+4.4% y/y), but steel scrap costs edged 0.2% higher (-6.7% y/y) over four weeks.

Prices in the **Textile** group moved 0.3% higher (2.0% y/y) during the last four weeks. Burlap costs improved 3.9% (15.9% y/y), but cotton prices fell 0.9% (+2.3% y/y) in 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.

**Monetary Policy and the Fed’s Framework Review** is the title of today’s speech by Fed Chair Jerome H. Powell, and it can be found [here](https://www.federalreserve.gov/newsevents/speech/powell20250822a.htm).

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- Decline reverses earlier strength.
- Crude oil costs lead the weakening.
- Lumber & metals prices follow, but textile costs rise.

FIBER: Industrial Commodity Prices Decline Sharply in Latest Four Weeks

Andrew Cates

**The US housing market**
This first chart below highlights the growing downside risks to the US economic outlook stemming from the housing market. The S&P Case-Shiller home price index has slowed sharply from the pandemic-era surge, while the NAHB (National Association of Homebuilders) housing market index has weakened to levels historically associated with falling home prices. Housing matters because it is not just a cyclical sector but also a key transmission channel for the broader economy: consumer confidence, household balance sheets and credit conditions are all heavily influenced by shifts in the housing market.

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**China’s economy**
The latest run of data from China has also reinforced downside risks for the broader world economy. As the Citigroup Economic Surprise Indices show below, China-specific data have more consistently undershot expectations in recent days. China’s July releases in particular disappointed: retail sales growth slowed to just 3.7% y/y, with weakness in autos and furniture hinting that earlier policy-driven boosts are fading. Industrial output and fixed-asset investment also came in below consensus, while property prices continued to fall and retail sector investment contracted by double digits. Even the labour market showed strain, with unemployment edging higher. The worry is not just China’s slowdown in isolation, but the spillovers. Softer Chinese demand feeds directly into global supply chains, commodity markets, and regional trade partners. Combined with tariff and non-tariff headwinds from the US, the risk is that China’s structural challenges spill into weaker global growth momentum.

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**UK inflation** 
Persistently high services inflation remains one of the biggest headaches for UK monetary policy - and the UK is far from unique in that regard. Services are wage- and demand-sensitive, and their stickiness complicates the calibration of monetary policy even as broader disinflation takes hold. This week’s July upside surprise to UK services inflation was driven in no small part by airfares, which spiked 30% month-on-month – the largest July rise on record. While such volatility may prove temporary, it nonetheless lifted year-on-year services inflation to 5.0%, well above comfort levels. Still, the offsets are important: stripping out airfares and other volatile components, underlying services momentum appears to have eased, while broader data on wages, employment, and activity point to cooling demand. Nevertheless, this tension – headline stickiness versus softer underlying trends – underscores why the Bank of England is treading carefully.

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**Inflation expectations and energy**
US medium-term inflation expectations have been unusually decoupling from oil prices in recent weeks. Normally, falling oil prices would help anchor breakevens, yet the 5-year forward inflation rate has edged higher of late even as WTI has slipped. This probably reflects US tariff policies that are shifting inflation dynamics away from energy and toward trade-related costs. At the same time, a weaker dollar has lifted imported prices, and the upward creep in expectations suggests markets may be more actively questioning whether the Fed’s “higher for longer” stance is sufficient to contain medium-term inflation risks.

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**Clean energy**
Pivoting to more structural issues, the stark divergence between the global clean energy equity market index and the broader S&P 500 underlines the mounting challenges facing the renewables sector at present. While US equities have pushed to record highs, clean energy stocks have languished, weighed down by policy uncertainty, higher financing costs, and a more sceptical public mood. In the US, shifting political winds and uneven implementation of green subsidies have clouded the outlook for investment, while globally, resistance to renewables has grown as consumers and businesses grapple with high energy bills. Rising interest rates have further undermined the economics of capital-intensive clean energy projects, eroding returns and delaying investment pipelines. At the same time, bottlenecks in transmission infrastructure, permitting delays, and questions over the pace of the net-zero transition have all dented confidence. The result is a sector underperforming dramatically even as the urgency of the climate challenge grows.

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**Renewables versus non-renewables**
Global energy consumption data show how limited—and in some respects, stalled—the transition away from fossil fuels has become. Oil, gas, and coal still dominate the energy mix, with shares that have proven remarkably resilient over the past several years. In fact, coal use has ticked higher of late as countries turned back to cheaper, more secure supplies amid energy price spikes and supply disruptions. While renewables have grown rapidly in percentage terms, their absolute contribution remains small compared with the scale of fossil fuel demand. Nuclear and hydro have also struggled to gain ground, leaving the overall mix looking more like a story of continuity than transformation. The result is a global transition that has not just slowed but, in key areas, has partially reversed—highlighting the gulf between climate ambitions and energy realities.

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Recent financial market gains have been underpinned by resilient global data, AI-fuelled optimism, and hopes that most central banks will continue to loosen monetary policy. Yet beneath the surface, a more complicated picture may be emerging. In the US, housing indicators are flashing warnings about household balance sheets and credit channels (chart 1), while China’s latest data—covering retail sales, industrial output, and property—underscore persistent weakness (chart 2). In the UK, this week’s data showing sticky services inflation is complicating the Bank of England’s easing path (chat 3), while back in the US, medium-term inflation expectations have been rising despite softer oil prices (chart 4), hinting at a more disruptive role for trade policy. Against this cyclical backdrop sit deeper structural challenges: global energy consumption remains overwhelmingly dependent on fossil fuels, the clean energy sector has lost momentum amid high costs and policy uncertainty, and equity markets have punished renewables even as climate imperatives intensify (charts 5 and 6). Together, these dynamics suggest that while markets continue to trade on optimism, the mix of weak housing signals, patchy Chinese demand, sticky inflation, and an uneven energy transition potentially leaves the global outlook more fragile than headline performance implies.

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/1GqSlFq3gfZuMYDWhif8Ht?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Cracks Beneath The Shine

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Existing home sales rose 2.0% (0.8% y/y) to 4.01 million (SAAR) in July after falling 2.7% in June to an unrevised to 3.93 million and rising 1.0% to 4.04 million in May, according to the National Association of Realtors (NAR). The Action Economics Forecast Survey expected 3.91 million unit sales in July. Last month’s sales decline accompanied a decline in the effective 30-year mortgage interest rate to 6.72% from 6.82% in June. The sales figures are based on closings of sales signed over the past couple of months.

Existing single-family home sales rose 2.0% (1.1% y/y) during July to 3.64 million units after a 3.0% decline to 3.57 million in June and a 1.4% May rise to 3.68 million. Sales of condos and co-ops rose 2.8% (-2.6% y/y) to 370,000 after holding steady in June.

Sales were mixed across the country last month. Sales in the Northeast increased 8.7% (2.0% y/y) to 500,000 following an 8.0% June decline. Sales in the South improved 2.2% both m/m and y/y to 1.85 million, after falling 2.2% in June. Sales in the West rose 1.4% (-4.0% y/y) to 720,000 after a 1.4% June gain. Falling by 1.1% (+1.1% y/y) to 940,000 were sales in the Midwest after falling 4.0% in June.

The median price of all existing homes (NSA) in July weakened 2.4% (+0.2% y/y) from the June record to $422,400. The median price of an existing single-family home fell 2.3% (+0.3% y/y) to $428,500 in July, and the median price of condos & co-ops declined 3.1% (-1.2% y/y) to $362,600 last month. Prices for homes in the West declined 1.1% (-1.4% y/y) to $620,700 while prices in the Northeast fell 6.3% (+0.8% y/y) to $509,300. In the South, prices were off 1.8% (-0.6% y/y) to $367,400 while in the Midwest, home prices fell 1.1% (+3.9% y/y) to $333,800.

The number of existing homes for sale (NSA) rose 0.6% (15.7% y/y) to 1.55 million units in July. The supply of homes on the market at the current selling rate (NSA) slipped to 4.6 months, still nearly the highest level in nine years, up from a low of 1.6 months in January 2022.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. Mortgage interest rates can be found in the **WEEKLY** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.

The minutes to the latest **FOMC** meeting can be found [here](https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20250730.pdf).

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- Home sales remain below recent high in December.
- Sales are slightly higher m/m in most of country.
- Median sales price slips from record high.

U.S. Existing Home Sales Rise Slightly in July; Home Prices Decline

Sandy Batten

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The Current Activity Diffusion Index from the latest Manufacturing Business Outlook Survey (MBOS) conducted by the Federal Reserve Bank of Philadelphia, fell more than 16 points to -0.3 in August from 15.9 in July. The index has posted negative readings, which indicate that activity is declining, in four of the previous five months. A reading of +5.0 for August had been expected by the Action Economics Forecast Survey. Nearly 30% of respondents reported an increase in activity in August, down from 31.7% in July, while 30% reported a decline, up markedly from 16% in July. Responses to this month's survey were collected from August 11 to August 18.

The headline index reflects the answer to a single question on activity. Haver Analytics calculates an ISM-adjusted current activity diffusion index from five key components using the methodology employed in constructing the national ISM index. That calculated index fell to 49.1 in August, the first reading below the critical 50 level that separates expansion from contraction since April, from 51.2 in July.

Looking at the component indexes, both new orders and shipments posted significant declines in August with orders plummeting into negative territory at -1.9 versus 18.4 in July. This was the first negative reading for new orders since the tariff-induced plunge in April. Thirty-four percent of respondents reported an increase in orders in August, little changed from 35% in July. In contrast, 36% reported a decline in orders in August, up markedly from 17% in July. Shipments also declined significantly in August although they remained in positive territory at 4.5 versus 23.7 in July. Twenty-nine percent of respondents reported an increase in shipments, down slightly from 32% in July. In contrast, 24% reported a decline, up markedly from 9% in July.

Firms continued to report overall increases in employment, but at a slower pace. The employment index fell 4 points to 5.9 in August from 10.3 in July. Most firms continued to report no change in employment levels (74%), while the share of firms reporting increases (16%) exceeded the share reporting decreases (10%, up from 7% in July). The average workweek index rose from 0.4 in July to 4.7 in August, its highest reading since March.

There was still no indication that increased tariffs have damaged supply chains. The delivery times index slipped further below zero to -5.4 in August, the fourth negative reading in five months indicating that delivery times are shortening, from -4.7 in July. Thirteen percent of respondents reported an increase in delivery times in August, up from 8% in July, while 18% reported a decrease versus 13% in July.

Inflation indicators continued to rise in August. The prices paid index jumped to 66.8 in August, its highest reading since May 2022, from an already elevated 58.8 in July. Nearly 67% of respondents reported an increase in input prices while no respondent reported a decline. The prices received index edged up to 36.1 in August, its highest reading in three months, from 34.8 in July. In the answer to a special question, firms expected a 4.1% increase in the prices of their own products over the coming year, up from 3.8% when this question was last asked in the May survey.

The outlook for the next six months brightened marginally in August with the Future Activity Index rising to 25.0 following an increase to 21.5 in July. Forty-one percent of respondents expect activity to increase over the coming six months, the same as in July, while 16% expect it to decline, down from 20% in July. The pace of increase in both new orders and shipments is expected to pick up. Delivery times are expected to increase only slightly. Employment growth is expected to slow. The outlook for capital expenditures rose markedly to 38.4 in August, the highest reading since January.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The series from the survey dating back to May 1968 can be found in Haver's **SURVEYS** database. The expectations forecast figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- The headline index fell more than 16 points to -0.3, led by outsized declines in both new orders and shipments.
- The ISM-adjusted composite fell below the critical 50 level for the first time in four months, also pointing to a decline in activity.
- Delivery times shortened further while both prices paid and prices received indexes posted gains.

U.S. Philly Fed Manufacturing Index Dipped Below Zero in August

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Initial claims for unemployment insurance rose to 235,000 during the week ended August 16 after falling to an unrevised 224,000 in the prior week. The Action Economics Forecast Survey expected 226,000 initial claims for last week. The four-week moving average of initial claims increased to 226,250 from 221,750. It was the highest level since the second week of July.

In the week ended August 9, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – rose to 1.972 million from 1.942 million in the prior week, revised from 1.953 million. The four-week moving average rose to 1.955 million, the highest level in five weeks.

In the week ending August 9, the insured rate of unemployment (the number of beneficiaries as a percent of covered employment) was 1.3% for the eleventh straight week.

The insured unemployment rate varied greatly across individual states and territories. In the week ended August 2, the highest unemployment rates were in New Jersey (2.74%), Puerto Rico (2.62%), Rhode Island (2.52%), California (2.14%), Minnesota (2.20%) and Massachusetts (2.15%). The lowest were in South Dakota (0.27%), Florida (0.39%), North Carolina (0.47%), Kansas (0.58%), Georgia (0.59%) and Louisiana (0.61%). Rates in other notable states include Pennsylvania (1.90%), Illinois (1.72%), New York (1.73%), Texas (1.25%) and Michigan (1.17%). 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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- Initial claims surge to highest level in eight weeks.
- Continuing claims extend upward trend.
- Insured unemployment rate holds steady.

Economy in Brief: 2004

Jump to:

Japanese GDP Slower with 0.1% Increase. Haver Databases Updated Faster with New "Asian Shift"

U.S. Consumer Sentiment Recovered Further

U.S. Retail Sales Gain

U.S. Retail Sales Gain

German Growth Slows in Q3; Netherlands and Spain See Improvement

Home Price Appreciation Varies

Home Price Appreciation Varies

Slovakia Employment Firms in September; Former Soviet-Bloc Nations Show Irregular Progress 15 Years Later