Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030903a.jpg" width="353">
Prices for existing homes rose last quarter by the smallest degree since 1998 according to the government&#39;s Office of Federal Housing Enterprise Oversight. Prices rose 0.8% q/q and 5.6% y/y.
Reports for recent quarters of that dramatic a slowdown subsequently have been revised to show less deceleration.
The data cover only home mortgages repurchased by Fannie Mae and Freddie Mac and therefore do not cover high priced homes with mortgages over roughly $300,000 (roughly 25% of the market).
The data correct for &quot;mix shifts&quot;, i.e., changes in home quality, size and location.
The full press release from the Office of Federal Housing Enterprise Oversight can be viewed <a href="http://www.ofheo.gov/media/pdf/2q03hpi.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E911/@E911.HTM">House Price Index</a></th>
<th scope="col">2Q 03</th>
<th scope="col">1Q 03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
<tbody>
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<td class="firstcol">US Total, Q/Q %</td>
<td>0.8%</td>
<td>1.2%</td>
<td>5.6%</td>
<td>7.3%</td>
<td>8.0%</td>
<td>7.2%</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Rose Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 3, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030903d.jpg" width="353">
The value of total construction put in place rose just 0.2% in July following a 0.7% June gain, revised up from the initial report of no change. A 0.5% July gain had been expected by the Consensus.
Private residential building activity picked up in the last three months following three months of decline. These were accompanied by lower levels of office building, down 3.7% last month and down 18.3% y/y. Manufacturing building also fell 4.9% (-20.5% y/y) in July following a like decline in June.
Public sector building fell last month following three months of strong gain.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
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<tr class="odd">
<td class="firstcol">Total</td>
<td>0.2%</td>
<td>0.7%</td>
<td>2.5%</td>
<td>1.1%</td>
<td>2.7%</td>
<td>8.3%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.5%</td>
<td>0.0%</td>
<td>2.5%</td>
<td>-0.2%</td>
<td>1.4%</td>
<td>8.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.6%</td>
<td>0.4%</td>
<td>6.1%</td>
<td>8.6%</td>
<td>3.3%</td>
<td>7.4%</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>-0.4%</td>
<td>2.7%</td>
<td>2.5%</td>
<td>5.3%</td>
<td>7.4%</td>
<td>9.5%</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Up Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 3, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030903b.jpg" width="353">
Chain store sales rose 0.1% last week according to the BTM-UBSW survey following a 0.2% gain the week earlier.
The level of sales in August rose 0.9% from the July average. July sales rose 1.4% from June.
During the last five years there has been a 62% correlation between the year-to-year percent change in chain store sales and the change in nonauto retail sales less gasoline.
The BTM-UBSW retail chain-store sales index is constructed from the sales results reported by 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">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">8/30/03</th>
<th scope="col">8/23/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>427.3</td>
<td>426.9</td>
<td>4.0%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
Mortgage Applications for Refinance Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 3, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030903c.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association fell last week as applications to refinance plummeted further. Total applications fell 1.6% last week and are down by two-thirds from the weekly peak in late May.
Applications to refinance fell 8.6% w/w. For the month of August refis were about half the level of the month prior and were down 80% from the weekly peak in late May.
Purchase applications have been relatively firm, rising 5.5% last week. For August purchase applications fell 6.3% from the July average which was the peak.
During the last ten years there has been a 55% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Interest rates on a conventional 30-Year mortgage again were steady last week with the effective rate at 6.50%, about where it has been for three weeks. That was versus a low for 30-Year financing of 5.31% in the second week of June. The effective rate on a 15-year mortgage was 5.89%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders.
Visit the Mortgage Bankers Association site at <a href="http://www.mbaa.org/">www.mbaa.org.</a>

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">8/29/03</th>
<th scope="col">8/22/03</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
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<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>628.7</td>
<td>638.6</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>396.1</td>
<td>375.5</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,981.5</td>
<td>2,169.0</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
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Prices for existing homes rose last quarter by the smallest degree since 1998 according to the government's Office of Federal Housing Enterprise Oversight. Prices rose 0.8% q/q and 5.6% y/y. Reports for recent quarters of that [...]

Home Price Inflation Slowed

Louise Curley

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030904g.jpg">
After devaluing its currency 50% from 5.8 to 8.7 yuan to the dollar on December 1993 China&#146;s yuan appreciated slightly to approximately 8.2 yuan to the dollar by mid 1995. (The Yuan is the internationally traded currency. The renminbi is its local counterpart.) It has since remained essentially unchanged, holding steady even in late 1997 and early 1998 when massive devaluations took place among other countries in the Pacific Rim, notably Indonesia, Thailand and Korea.
In recent years, China&#146;s trade surplus and inflows of foreign investment have climbed with the result that its holdings of foreign exchange have increased more than 15 fold from $22, billion to $345 billion from the end of 1993 to the present. The increase in reserves tends to add to the money supply and is causing concern over potential inflationary pressures. In addition, the U. S., in particular, is pressuring China to float the Yuan. China&#146;s trade surplus with the U.S. rose to $9.6 billion in March of this year and exceeded that of Japan for the first time.
The Chinese authorities recognize that exchange rate flexibility is inevitable as China increases its participation in world economic fora, such as the WTO (World Trade Organization), but they are reluctant to act quickly. They do appear, however, to be taking steps to increase the demand for dollars within China. The limit on dollars that Chinese citizens are allowed to take abroad was recently raised to $5000 from $2000. In addition consideration is being given to allowing insurance and some other companies to invest in U.S. bonds and to allowing exporters to keep a greater proportion of their dollar earnings.

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<th scope="col" class="firstcol">China</th>
Billions of US Dollars
Year over Year Change&nbsp;&nbsp;&nbsp;
</tr>
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<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">Reserves (May)</td>
<td>344,979</td>
<td>241,896</td>
<td>182,044</td>
<td>160,071</td>
<td>42.6%</td>
<td>32.9%</td>
<td>13.3%</td>
<td>6.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports to the U.S. (March)</td>
<td>9,803</td>
<td>4,749</td>
<td>4,395</td>
<td>3,992</td>
<td>106.4%</td>
<td>8.1%</td>
<td>10.1%</td>
<td>29.4%</td>
</tr>
<tr>
<td class="firstcol">Direct Investment (Year)</td>
<td>n.a.</td>
<td>49,308</td>
<td>44,241</td>
<td>38,399</td>
<td>n.a.</td>
<td>11.5%</td>
<td>15.2%</td>
<td>-0.9%</td>
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After devaluing its currency 50% from 5.8 to 8.7 yuan to the dollar on December 1993 Chinas yuan appreciated slightly to approximately 8.2 yuan to the dollar by mid 1995. (The Yuan is the internationally traded currency. The renminbi [...]

Pressure on China's Currency

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030902a.jpg" width="353">
The Purchasing Managers&#146; Composite Index (PMI) released by the Institute of Supply Management&#146;s rose in August by nearly three points to 54.7, the highest level since December. Consensus expectations had been for a more moderate rise to 53.5.
Production surged with the index rising to 61.6, the highest level since June 1999. New orders also surged to the highest level since January.
Again, a notable laggard was the employment index which fell slightly to 45.9. This index has not been above 50, the dividing line between rising and falling activity, since September 2000. The low for the employment index was 35.3 in October 2001. There has been a 68% correlation during the last ten years between the ISM employment index and the one-month change in factory sector payrolls.
The prices paid index was unchanged last month at 53.0. The price index has improved from the deflationary levels of late-2001 but it&#39;s current level does not suggest much pending inflationary pressure.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Aug &#39;02</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
<tbody>
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<td class="firstcol">Composite Index</td>
<td>54.7</td>
<td>51.8</td>
<td>50.3</td>
<td>52.4</td>
<td>44.0</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">New Orders Index</td>
<td>59.6</td>
<td>56.6</td>
<td>49.6</td>
<td>56.7</td>
<td>46.2</td>
<td>52.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>53.0</td>
<td>53.0</td>
<td>63.0</td>
<td>57.6</td>
<td>42.9</td>
<td>64.8</td>
</tr>
</tbody>
</table>
Challenger Layoffs Eased 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 2, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030902b.jpg" width="353">
According to Challenger, Gray &amp; Christmas, announced job cuts fell last month following a sharp m/m jump in July. Layoff announcements fell 6.1% in August versus July.
The three month moving average of job cut announcements ticked up slightly but was down by nearly 50% from a recent high late last year. The three month average is down more than two-thirds from the recession high in late-2001.
Job cut announcements differ from layoffs in that many are achieved through attrition or just never occur.
During the last nine years there has been a 71% correlation between the y/y change in announced job cuts and the y/y percent change in initial claims for jobless insurance. Like initial claims, job cut announcements indicate little about new hiring activity.
Job cut announcements were mixed m/m across industries.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>79,925</td>
<td>85,117</td>
<td>-32.3%</td>
<td>1,431,052</td>
<td>1,956,876</td>
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The Purchasing Managers Composite Index (PMI) released by the Institute of Supply Managements rose in August by nearly three points to 54.7, the highest level since December. Consensus expectations had been for a more moderate rise [...]

ISM Factory Index Powered by Output & Orders

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/030829d.jpg" width="353">
Industrial production in Japan rose 0.5% in July, turning up after a 1.2% decline in June. Analysts and market participants in Japan were encouraged with the July performance; they had, on average, projected a smaller 0.2% increase. The July gain was led by nonferrous metals, electronics, ceramics and &quot;other&quot; manufacturing. Most machinery and transport equipment segments saw declining output.
Month-to-month swings in Japan&#146;s industrial production are wide, making it problematical to analyze the rigor in two or three month movements, let alone a single month. Some trend becomes discernible at four months, though, as seen in the accompanying chart. That shows an 0.11% average increase in the four months to July, the first positive reading in that moving average since January, carrying the suggestion that the industrial sector is at least stabilizing in Japan, if not actually starting to grow again.
Separately, two more GDP reports for the second quarter appeared today, 29 August. These too showed mixed performances. Canada saw growth slip into negative territory, at -0.1% (quarterly rate from first quarter). Domestic demand was firm, however, with a 0.7% increase. The trade accounts saw an influx of imports, which grew 1.4% on the quarter, swamping a 0.6% rise in exports to make a net drag on total GDP. In Hong Kong, GDP dropped by a sizable 3.4%, pushed lower by declines in private consumption, fixed investment and net exports. This last resulted from a 2.8% drop in exports after a sustained five-quarter advance; imports also fell, by 1.9%, shrinking the trade balance to HK$28.2 billion from HK$33.5 billion.

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<th scope="col" class="firstcol">Japan: Industrial Production, %Changes</th>
<th scope="col">July 2003</th>
<th scope="col">June 2003</th>
<th scope="col">May 2003</th>
Dec/Dec
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">Month/Month</td>
<td>0.5</td>
<td>-1.2</td>
<td>2.6</td>
<td>5.5</td>
<td>-13.7</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">4-Month Moving Avg</td>
<td>0.1</td>
<td>0.0</td>
<td>-0.1</td>
<td>n.a.</td>
<td>n.a.</td>
<td>n.a.</td>
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Industrial production in Japan rose 0.5% in July, turning up after a 1.2% decline in June. Analysts and market participants in Japan were encouraged with the July performance; they had, on average, projected a smaller 0.2% increase. [...]

Volatile Japanese Industrial Production Appears to Turn Positive

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030829b.jpg" width="353">
Tax cuts and rebate checks lowered personal tax payments by 9.3% (-10.3% y/y) last month. That decline raised disposable personal income by 1.5% m/m and by 5.2% y/y.
The surge in disposable income fueled an expected 0.8% gain in personal consumption expenditures. Spending on durable goods jumped 2.1% as sales of light vehicles surged 5.5% to 17.34M units, the highest selling rate since December. Lower prices added to the incentive to buy. The durables&#39; price deflator fell 0.2% (-3.1% y/y). Constant dollar durables spending rose 2.4% (6.1% y/y).
Personal consumption of services rose 0.5% (4.6% y/y) while services prices rose a moderate 0.3% (3.0% y/y), the same as in the prior two months. Nondurables spending rose 0.8% (5.5% y/y) following a like gain in June.
In contrast to the strong gains in after tax income, wages and salaries were down slightly (2.5% y/y) after two months of 0.3% gain. That weakness was behind only a slight 0.2% rise in personal income, the weakest gain since April and slightly lower than Consensus expectations for a 0.3% uptick. Proprietors&#39; income rose 1.1% (9.1% y/y) but personal interest income was unchanged (0.1% y/y).
The saving rate jumped to 3.8% on the strength in disposable income. That was the highest savings rate since February.
Less food &amp; energy the chain price index for PCE rose 0.2% (1.4% y/y), a slight uptick from the 0.0-0.1% gains of the prior nine months.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Personal Income</td>
<td>0.2%</td>
<td>0.4%</td>
<td>3.3%</td>
<td>2.7%</td>
<td>3.3%</td>
<td>8.0%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.8%</td>
<td>0.6%</td>
<td>4.6%</td>
<td>4.5%</td>
<td>4.5%</td>
<td>7.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>3.8%</td>
<td>3.1%</td>
<td>3.2%</td>
<td>3.7%</td>
<td>2.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">PCE Price Deflator</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.0%</td>
<td>2.5%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Lower Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 29, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030829a.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index fell somewhat more than expected for the full month of August. The decline to 89.3 implied that sentiment deteriorated throughout the month and was versus Consensus expectations for a reading of 90.5.
The mid-month reading of sentiment reported earlier this month fell to 90.2 from 90.9 in July.
The Index of Consumer Expectations added to a slight decline reported mid-month and fell 1.4% (2.4% y/y). It was the third consecutive monthly drop.
The read of Current Economic Conditions fell 2.4% from July but was up 1.2% y/y. That decline was slightly larger than the 1.6% drop reported mid-month.
Over the last ten years there has been a 70% correlation between the level of consumer sentiment and the y/y change in real PCE. The correlation over the last five years has been 82%.
The University of Michigan survey is not seasonally adjusted.It 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.

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<thead>
<tr>
<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">August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Sentiment</td>
<td>89.3</td>
<td>90.9</td>
<td>89.7</td>
<td>89.6</td>
<td>89.2</td>
<td>107.6</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Rose Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 29, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030829c.jpg" width="353">
The Chicago Purchasing Managers &#147;Business Barometer&#148; rose another 3.0 points in August to 58.9. That was the highest reading since May of last year and beat the Consensus estimate of 56.0.
Higher production led the gain in the total barometer, up to 61.6 versus a low of 49.1 in March. Employment also rose strongly to 51.2, the highest level since January 2000. New orders fell slightly to a still high 60.5.
During the last twenty years there has been a 59% correlation between the level of the Chicago PMI and quarterly growth in real GDP.
The index of prices paid moved up to 52.4, the first month over 50 since May.
View the latest release from the Chicago Purchasing Managers <a href="http://www.napm-chicago.org/current.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>58.9</td>
<td>55.9</td>
<td>54.0</td>
<td>52.7</td>
<td>41.4</td>
<td>51.8</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>60.5</td>
<td>61.7</td>
<td>54.0</td>
<td>56.3</td>
<td>42.3</td>
<td>53.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>52.4</td>
<td>47.9</td>
<td>65.1</td>
<td>56.9</td>
<td>50.4</td>
<td>65.6</td>
</tr>
</tbody>
</table>
ECRI Weekly Leading Indicators Tread Water 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 29, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030829e.jpg" width="353">
The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) ticked up the week of August 22nd. That was enough to keep strong series&#39; growth rate, but since second week of July the index has been roughly unchanged.
A report titled &quot;How Did Leading Indicator Forecasts Perform During the 2001 Recession?&quot; by James H. Stock &amp; Mark W. Watson from the Federal Reserve Bank of Richmond can be found <a href="http://www.rich.frb.org/pubs/eq/search.cfm/article=185.">here</a> .
The six-month growth rate of the weekly leading index stood at 12.4%. That&#39;s about where it&#39;s been for the last six weeks.
Mortgage loan applications slipped due to anxiety over increasing long-term interest rates and that offset gains in the stock market and higher oil prices.
During the last five years there has been a 59% correlation between growth in the leading index and next quarter&#39;s growth in real GDP.
Construction of the ECRI Leading Index differs from the Index of Leading Economic Indicators published by the Conference Board. Nevertheless there has been a 77% correlation between the y/y percent change in the two series over the last 20 years.
The components of the ECRI weekly leading index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months. The sideways movement of the leading index in 2002 may or may not signal something about the economy&#39;s growth rate.
For more on ECRI and the Weekly Leading Index go to this <a href="http://businesscycle.com">link</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM">ECRI Leading Index</a></th>
<th scope="col">8/22/03</th>
<th scope="col">8/15/03</th>
<th scope="col">Growth Rate</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Weekly</td>
<td>127.8</td>
<td>127.6</td>
<td>12.4%</td>
<td>1.2%</td>
<td>-5.3%</td>
<td>-0.1%</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>
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<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Aug</td>
<td>July</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Monthly</td>
<td>127.8</td>
<td>127.2</td>
<td>13.0%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
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Tax cuts and rebate checks lowered personal tax payments by 9.3% (-10.3% y/y) last month. That decline raised disposable personal income by 1.5% m/m and by 5.2% y/y. The surge in disposable income fueled an expected 0.8% gain in [...]

U.S. After Tax Income Spiked, Personal Spending Surged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030828e.jpg" width="353">
The last few days have brought an on-rush of second quarter GDP reports from various countries around the world. Large countries have shown a mixed performance. Even as US growth was revised higher for that period, growth in Europe has slowed or turned negative. And, like the large economies, smaller economies have had a similar pattern. Of six recent GDP releases, three have been positive and three negative. In Europe, the Netherlands, much like neighboring Germany, saw its third noticeable decrease in a row, and in a &quot;flash&quot; estimate, Belgium reported a 0.1% decrease (quarterly rate), a downturn after five consecutive quarters of growth.
We noted here several days ago the contraction developing in the South Korean economy. Others in Asia are faring better, however, with the Philippines expanding 0.5% in the second quarter, a partial rebound from a first quarter drop. Growth in the Philippines was strong through much of last year, and the whipsaw in the first two quarters of 2003 seems mainly due to a wide swing in imports. Exports from this nation are rising, unlike many of the larger nations. Malaysia, too, had good growth in the second quarter, 1.7%, with strong consumption gains and an upturn in exports. Investment flattened, however, after three quarters of firm advances.
Elsewhere among emerging markets, Brazil saw a second consecutive quarter of decline as its economic woes continued through the spring. Domestic consumption and investment both suffered, although the trade accounts, exports and imports, provided some cushion. In South Africa, growth was modest; that nation reports its GDP on an industry basis, and agriculture and manufacturing exerted some drag, while service industries continued expanding.
This compilation of recent growth reports indicates that world economies are performing unevenly. There seems to be slight bias toward slowing, although outside Europe, this is due less to the declines in exports that plague that region.

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<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GDP in Various Nations (% Changes)</th>
<th scope="col">2nd Qtr 2003 (Q/Q)</th>
<th scope="col">1st Qtr 2003 (Q/Q)</th>
<th scope="col">Year/-Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">2002</td>
<td>2001</td>
<td>2000</td>
</tr>
</tbody>
</table>
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<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Netherlands</th>
<th scope="col"><center></center></th>
<th scope="col">-0.5</th>
<th scope="col">-0.3</th>
<th scope="col">-0.9</th>
<th scope="col">0.3</th>
<th scope="col">0.3</th>
<th scope="col">2.4</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Belgium</td>
<td><center></center></td>
<td>-0.1</td>
<td>0.2</td>
<td>0.9</td>
<td>1.7</td>
<td>-0.8</td>
<td>2.4</td>
</tr>
<tr>
<td class="firstcol">Philippines</td>
<td><center></center></td>
<td>0.5</td>
<td>-1.2</td>
<td>3.2</td>
<td>5.7</td>
<td>3.8</td>
<td>5.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Malaysia</td>
<td><center></center></td>
<td>1.7</td>
<td>0.3</td>
<td>4.5</td>
<td>5.3</td>
<td>-0.8</td>
<td>6.8</td>
</tr>
<tr>
<td class="firstcol">Brazil</td>
<td><center></center></td>
<td>-1.6</td>
<td>-0.6</td>
<td>-1.3</td>
<td>3.2</td>
<td>-0.9</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">South Africa</td>
<td><center></center></td>
<td>0.3</td>
<td>0.4</td>
<td>2.0</td>
<td>3.0</td>
<td>2.5</td>
<td>3.5</td>
</tr>
</tbody>
</table>
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The last few days have brought an on-rush of second quarter GDP reports from various countries around the world. Large countries have shown a mixed performance. Even as US growth was revised higher for that period, growth in Europe [...]

Economic Fortunes Mixed Around the World

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030828a.jpg" width="353">
The US economy grew faster than estimated in the advance report issued last month. The upward revision to a 3.1% rate of growth was slightly greater than Consensus expectations for a revision to 2.9%. 2Q was the fastest rate of real GDP growth since 3Q 2002.
The upward revision reflected less of drag from the foreign trade sector and faster domestic demand. Exports were revised up to only a 0.5% rate of decline in 2Q versus the 3.1% drop estimated initially. Import growth was revised down modestly to 7.9%.
Domestic final demand grew at a 5.0% annual rate versus the 4.6% rate estimated initially. Growth in Federal defense spending was raised slightly to 45.9% and that accounted for over half of the economy&#39;s growth last quarter.
Personal consumption expenditures growth was raised to 3.8% that reflected a 33.5% spike in purchases of motor vehicles and a 17.5% surge in buying of furniture &amp; household equipment. Growth in fixed investment was revised up slightly to 6.9% due to an 8.2% rise in expenditures for equipment and software which was nearly double the initially estimated gain. Residential investment grew at a 4.5% (6.2% y/y) rate.
Corporate profits with adjustment for depreciation (CCA) and inventory valuation (IVA) rose at a 50.8% (15.3% y/y) annual rate. The spike reflected a huge surge in the depreciation allowance. These &quot;operating profits&quot; rose at an 80.6% rate after tax. Reported corporate profits after tax fell at a 13.0 rate (6.5% y/y). Operating profits after tax at nonfinancial corporations rose at a 64.7% (20.0% y/y) rate. The gain in operating profits contrasts with an 18.8% (11.9% y/y) gain in S&amp;P profits
Inflation was revised down slightly to 0.9%, the slowest rate of price gain since a decline in prices in 4Q 2001. Deflation was widespread in the prices for consumer durables and nondurables as well as for residential and nonresidential investment.

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<colgroup><col><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained &#39;96 $, % AR</a></th>
<th scope="col">2Q&#39;03 (Prelim)</th>
<th scope="col">2Q&#39;03 (Advance)</th>
<th scope="col">1Q&#39;03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>3.1%</td>
<td>2.4%</td>
<td>1.4%</td>
<td>2.5%</td>
<td>2.4%</td>
<td>0.3%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.9%</td>
<td>-0.8%</td>
<td>-0.8%</td>
<td>-0.2%</td>
<td>0.6%</td>
<td>-1.2%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>4.0%</td>
<td>3.2%</td>
<td>2.3%</td>
<td>2.7%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-1.2%</td>
<td>-1.6%</td>
<td>0.8%</td>
<td>-0.4%</td>
<td>-0.7%</td>
<td>-0.2%</td>
<td>-0.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>5.0%</td>
<td>4.6%</td>
<td>1.4%</td>
<td>3.1%</td>
<td>2.4%</td>
<td>1.6%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Deflator</td>
<td>0.9%</td>
<td>1.0%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>2.4%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Up Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 28, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030828b.jpg" width="353">
Initial claims for unemployment insurance rose to 394,000 and the prior week&#39;s level was revised up slightly to 391,000. Consensus expectations had been for claims of 395,000.
The Labor Department indicated that the blackout two weeks ago in the Northeast accounted for about 2,000 to 3,000 new claims, delayed because they could not be filed during the power failure.
The four-week moving average of initial claims rose slightly to 396,250 (+0.8% y/y).
Continuing claims for unemployment insurance rose 26,000 (0.7%) w/w) but a 41,000 gain the prior week was revised down to only 3,000.
The insured rate of unemployment was stable at 2.9%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">8/23/03</th>
<th scope="col">8/16/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>394.0</td>
<td>391.0</td>
<td>-2.0%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,657</td>
<td>2.8%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Still Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 28, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030828c.jpg" width="353">
The Conference Board&#146;s National Index of Help-Wanted Advertising was unchanged last month at 38. The last two months represented slight improvement from a low of 35 in May.
During the last ten years there has been a 92% correlation between the level of help-wanted advertising and the year-to-year % change in nonfarm payrolls.
The proportion of labor markets with rising want-ad volume nearly halved to 37% in July versus 75% in June.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;02</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>38</td>
<td>38</td>
<td>44</td>
</tr>
</tbody>
</table>
Chicago Fed National Activity Index Up Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 28, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030828d.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) again rose slightly in July to &#150;0.20 versus -0.32 in June. The gain represented the third month of improvement from an April low.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of over 3%.
The three-month moving average of the CFNAI improved to &#150;0.29 from -0.59 in June.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
For a complete discussion of the latest Chicago Fed&#39;s National Activity Index click <a href="http://www.chicagofed.org/economicresearchanddata/national/index.cfm">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;02</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-0.20</td>
<td>-0.32</td>
<td>-0.01</td>
<td>-0.33</td>
<td>-1.19</td>
<td>-0.13</td>
</tr>
</tbody>
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The US economy grew faster than estimated in the advance report issued last month. The upward revision to a 3.1% rate of growth was slightly greater than Consensus expectations for a revision to 2.9%. 2Q was the fastest rate of real [...]

2Q U.S. GDP Growth Revised Up, Profits Surged

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Operating profits of Canadian companies fell 7.3% in the second quarter after five consecutive quarters of gains. Thus, even with this latest quarterly decrease, they were still 11.2% ahead of a year earlier. Within the nonfinancial sector, net profits after taxes showed the same general pattern &#150; down on the quarter, but well ahead of last year &#150; and also reveal a differential performance of manufacturing and non-manufacturing firms.
As noted in the chart below, manufacturers&#146; earnings rebounded sharply in the second half of 2002 after their recession-related downtrend in 2001. They remain, however, subdued relative to prior peaks. Non-manufacturing firms (calculated as a simple difference between total nonfinancial profits and those of manufacturing companies) also saw significant gains late last year and in the first quarter of 2003, although by contrast, the profits of these industries &#150; trade, travel, nonfinancial business services, health care and so on &#150; reached new highs early this year. Their recessionary decline was not so protracted nor extensive as that of the factory sector, so their subsequent rebound has been able to surpass its previous magnitudes.

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<colgroup><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol">Percent Changes</th>
<th scope="col">&nbsp;Q2 2003 </th>
<th scope="col">Q1 2003 </th>
<th scope="col">Year/Year </th>
 4th Qtr/4th Qtr 
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<tbody>
<tr class="odd">
<td class="firstcol"> 2002 </td>
<td> 2001 </td>
<td> 2000 </td>
</tr>
<tr>
<td class="firstcol">Nonfinancial companies</td>
<td>-10.2</td>
<td>19.2</td>
<td>30.4</td>
<td>69.8</td>
<td>-44.0</td>
<td>1.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>-9.7</td>
<td>49.8</td>
<td>22.0</td>
<td>28.4</td>
<td>-33.9</td>
<td>-37.9</td>
</tr>
<tr>
<td class="firstcol">Non-Manufacturing</td>
<td>-10.4</td>
<td>8.6</td>
<td>34.8</td>
<td>91.0</td>
<td>-48.0</td>
<td>35.4</td>
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Operating profits of Canadian companies fell 7.3% in the second quarter after five consecutive quarters of gains. Thus, even with this latest quarterly decrease, they were still 11.2% ahead of a year earlier. Within the nonfinancial [...]

Canadian Business See Quarterly Profit Decline after Strong Recovery

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

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

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Retail gasoline prices for all grades slipped to $3.15 per gallon (-1.3% y/y), on average, in the week ended November 3 after rising to $3.16 in the previous week. The recent high was $3.79 in the week ending April 22, 2024. Their all-time high of $5.11 occurred in the week ending June 13, 2022. Haver Analytics seasonally adjusts the retail prices of regular grade gasoline. That price held at $3.05 last week versus $3.05 in the previous week.

The price of West Texas Intermediate crude oil rose to $60.70 per barrel (-11.2% y/y) in the week ended October 31 after improving to $59.43 per barrel in the prior week. It was the highest price in three weeks but prices remained below a recent high of $74.17 during the third week of June. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $61.05 per barrel. The price of European Brent crude increased to $65.02 per barrel (-10.5% y/y) in the week of October 31 after rising to $63.22 in the prior week. Prices remained below a recent high of $95.61 in the week of September 29, 2023 and below a peak of $127.40 in June 2022. Yesterday, the price was $65.79 per barrel.

Natural gas prices rose to an average $3.43/mmbtu (88.5% y/y) in the week ended October 31 after rising to $3.25/mmbtu in the prior week. The rise left prices at the highest level since the second week of April and well above the low of $1.40/mmbtu in the week of March 15, 2024. Yesterday, the price was $3.37 per mmbtu.

Gasoline demand declined 4.2% y/y in the four weeks ending October 24, following a 3.6% y/y decline in the prior four weeks. Demand for all petroleum products weakened 0.9% y/y in the four weeks ending October 24, after slipping 0.1% y/y in the previous four-week period. Crude oil input to refineries declined 1.7% y/y in the four weeks ending October 24, after a 0.3% y/y gain in the prior four weeks.

Gasoline inventories ease 0.1% y/y in the week ending October 24 following a 1.5% y/y gain in the prior week. Residual fuel oil inventories fell 10.0% y/y in the October 24 week after falling 13.0% y/y in the prior week. Working higher, crude oil inventories rose 1.7% y/y in the week of October 24 after rising 2.6% y/y in the previous week.

Measured in days’ supply, gasoline inventories fell to 24.3 days in the week of October 24. The recent low was 22.9 days in the week of November 8, 2024. The supply of crude oil held steady at 26.7 days in the week of October 24. The supply remained below a recent high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** and **USENERGY** databases.

- Gasoline prices are minimally changed.
- Crude oil costs rise further.
- Natural gas prices strengthen.

U.S. Energy Prices Are Mixed in Latest Week

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U.S. light vehicle sales dove 6.9% (-4.5% y/y) in October to 15.48 million units (SAAR) after holding steady at 16.62 million units in September. Sales fell broadly. 

Light truck sales slid 6.9% (-1.4% y/y) in October to 12.90 million units, after rising 0.9% in September. Purchases of domestically-made light trucks fell 7.9% (+1.4% y/y) to 10.10 million units, the lowest level since February, after rising 3.4% in September. Sales of imported light trucks fell 2.8% (-10.3% y/y) to 2.80 million units, following a 7.4% September decline.

Trucks’ 83.3% share of the light vehicle market last month was steady with September and compared to 82.6% in August, and to 80.7% in October of last year. The share has averaged 82.4% so far this year versus 56.5% ten years earlier.

Passenger car sales declined 6.9% (-17.6% y/y) last month to 2.58 million, after falling 4.8% in September. Purchases of domestically-produced cars fell 7.2% (-16.5% y/y) last month to 1.93 million units, after weakening 7.1% in September. Imported auto sales declined 4.5% (-22.0% y/y) to 0.64 million units after holding steady in September.

Imports' 22.2% share of the U.S. light vehicle market rose from 21.4% in September. These compared to a high of 26.3% in November of 2023. Imports' share of the passenger car market edged up to 24.8% last month from 24.2% in September. It reached a high of 38.1% in September 2021. Imports' share of the light truck market increased to 21.7% last month from 20.8% in September.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the **INDUSTRY** database.

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- Light truck sales and auto purchases decline m/m.
- Total sales decline sharply y/y.
- Imports' market share declines.

U.S. Light Vehicle Sales Fall Sharply in October

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Factory sector activity remains under pressure. The ISM U.S. manufacturing PMI declined to 48.7 in October after rising to 49.1 during September from 48.7 in August, according to the Institute for Supply Management. These figures are below the 50 expansion-contraction dividing line. As a result, they continue to indicate that the U.S. manufacturing sector weakened for the eighth consecutive month. The reading remained remain above, however, a low of 46.9 in October of last year. A November index of 49.4 had been expected in the Action Economics Forecast Survey.

The production component declined to 48.2 last month after rising to 51.0 in September. It remained increased from an April low of 44.0. A lessened 27.3% (NSA) of respondents reported higher production while an increased 22.0% reported lower output levels. The inventory reading fell to a 12-month low of 45.8 from 47.7 in September. A lessened 13.2% (NSA) of respondents raised inventories while a higher 21.7% shed them.

Working higher, the new orders index rose to 49.4 during October from 48.9 in September. An increased 20.4% (NSA) of respondents reported new orders improvement while 26.0% reported a decline. The employment index increased to a five-month high of 46.0 last month after rising to 45.3 in September. An increased 13.1% (NSA) of respondents more hiring while 22.3% reported less. The supplier delivery index rose to 54.2 in October from 52.6 in September. Twelve percent (NSA) of respondents reported slower product delivery speeds while 3.2% reported a quickening.

The prices index weakened to 58.0 (NSA) during October from 61.9 in September. It was below a high of 69.8 in April, and well above its low of 39.4 in December 2022. A lessened 27.3% of respondents reported higher prices, a nine month low, while an increased 8.7% reported lower.

In other series, the export orders index rose to a seasonally adjusted 44.5 in October after falling sharply to 43.0 in September. It remained up from 40.1 May low. The imports index edged up to 45.2 last month from 44.7 in September. The index is below a high of 52.6 in February.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- Decline reverses all of September increase.					
- Lower production offsets new orders rise.
- Price index falls to nine-month low.

U.S. ISM Manufacturing PMI Eases in October; Price Index Declines Sharply

Tian Yong Woon

This week, we review a wave of key developments across Asia following US President Trump’s tour of the region last week. A central theme concerned countries courting closer ties with the US to avoid harsher actions, while also boosting regional cooperation amid trade barriers and scrutiny of China. This push for closer ties has manifested through new and updated trade agreements—ironically driven by ongoing uncertainty in global trade and supply chains, with US–China relations at the core. A major outcome of Trump’s trip was the new US–China trade agreement, which included the US halving tariffs on Chinese fentanyl-related products to 10%, while China suspended rare earth export controls and resumed soybean purchases vital to the US (chart 1). Perhaps more importantly, the deal signalled a small conciliatory shift and avoided a potentially worse outcome. Beyond the US–China agreement at the APEC Summit in South Korea, the US–South Korea trade deal also gained more clarity. Under the deal, US auto tariffs on South Korea has fallen to 15%, matching the rate applied to Japan and likely providing relief for South Korean automakers (chart 2).

Trump’s visit to Japan was another highlight. Relations with new Prime Minister Takaichi got off to a strong start, and further details emerged on Japan’s previously cited $550 billion investment commitment in the US—substantial even relative to Japan’s existing direct investment there (chart 3). However, specifics on the timing and implementation of the investment remain limited. Meanwhile, at the ASEAN Summit earlier in the week, aside from Trump’s engagements, the bloc officially welcomed its 11th member—Timor-Leste—the first new member in decades—granting it access to the bloc’s mechanisms and potentially supporting a catch-up in economic development (chart 5). Looking ahead, the focus on China and Japan is likely to continue, with China set to release its October trade (chart 6) and CPI data, and Japan scheduled to report employee wages and household spending.

**The APEC summit**
The US and China made a modest but meaningful step forward on trade following the Trump–Xi meeting at the APEC Summit in South Korea. The US lowered tariffs on Chinese fentanyl-related products to 10% from 20% and suspended enforcement of rules targeting subsidiaries of blacklisted firms—previous points of contention for Beijing. In return, China pledged stronger efforts to curb fentanyl flows, paused rare earth export controls for a year, and resumed purchases of US soybeans—significant given its historically large share of US export demand (chart 1). While not a comprehensive reset, these moves eased immediate tensions and helped avert more severe outcomes, including Trump’s previously threatened 100% tariff hike. The tone of the meeting also suggests a more conciliatory shift, though relations remain fragile and the risk of renewed escalation is still material.

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Beyond the headline-grabbing US–China trade deal, the APEC Summit in South Korea also saw the US reach a trade agreement with South Korea. Under the deal, US tariffs on South Korean autos and auto parts have fallen to 15% from 25%, matching the US tariff rate on Japanese autos and providing relief to South Korea’s sizable automotive export sector (chart 2). The agreement also clarified South Korea’s supposed $350 billion investment in the US: $200 billion in cash, capped at $20 billion per year to avoid currency market distortions, with the remaining $150 billion directed toward shipbuilding cooperation. While also not a major breakthrough, the deal represents incremental progress, addressing prior uncertainties and signalling steps toward a more favourable trade framework.

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**US President Trump’s Japan Visit**
Turning to US President Trump’s visit to Japan last week, new Prime Minister Takaichi appears to have gotten off to a strong start, with Trump hailing US–Japan relations as entering a “NEW GOLDEN AGE.” The two countries signed several agreements, including a Technology Prosperity Deal, and deepened cooperation on critical minerals and rare earths. Japan’s previously vague $550 billion investment commitment in the US is now somewhat clearer: up to $332 billion will support critical US infrastructure, $30 billion will target AI, and $15 billion will go toward electronics and supply chains, among other areas. While the headline figure is substantial—even relative to Japan’s already significant direct investment assets in the US (chart 3)—the open-ended nature of the commitment and the lack of a clear timeline leave its actual impact uncertain.

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**The ASEAN summits**
Whilst US President Trump’s attendance at the ASEAN–US Summit in Malaysia dominated headlines, there were also several other notable developments at last week’s ASEAN meetings in Kuala Lumpur. Most prominently, Timor-Leste was officially admitted as ASEAN’s eleventh member, following a two-decade accession process during which the country actively aligned its political and economic frameworks with ASEAN standards. Membership grants Timor-Leste access to the bloc’s broader security and economic mechanisms and could open further avenues for trade, investment, and development cooperation. Nonetheless, the country still has considerable ground to make up relative to its new ASEAN peers, particularly in terms of both GDP and GDP per capita (chart 4).

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The accession of Timor-Leste into ASEAN aside, last week’s summits also brought a number of economic developments for the bloc. More concretely, ASEAN and China signed an upgrade to their free trade agreement last week, bringing the deal to so-called version 3.0. The upgraded deal (ACFTA 3.0) introduces commitments in new areas such as Digital Economy, Green Economy, and Supply Chain Connectivity, among other themes. And notably, just as the US and ASEAN have found common ground to collaborate in fields such as those relating to rare earths, given how the US has seen vulnerabilities arising from this space given China’s dominance in the field, China has taken the year’s US-China frictions to foster closer ties with its neighbours in the region, including the collectively sizable ASEAN bloc. Just by the trade dimension alone, China-ASEAN-11 trade has growth significantly this year (chart 2), although the economies’ total trade with the US also rose, and at a more significant pace, despite tariff measures.

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Looking ahead, investors will focus on a series of China-related releases this week, notably the Caixin PMI readings, as well as October trade and CPI inflation data. These indicators will help gauge the economy’s performance under ongoing US tariffs and assess domestic demand and supply conditions, all in the broader context of recent US–China interactions during Trump’s Asia tour. In Japan, attention will turn to updated data on employee wages and household spending, which—together with developments in the external environment—will shape expectations for the Bank of Japan’s future policy stance. Elsewhere in the region, investors will watch interest rate decisions from Australia and Malaysia, where rates are expected to remain unchanged, as well as GDP readings from Indonesia and the Philippines.

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Asia

Economic Letter from Asia: Come Together

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) improved 0.3% during the four weeks ended October 31, 2025 after holding steady in the prior four week period. The index increased 0.8% y/y.

**Metals** group prices increased 4.3% (6.1% y/y) in the last four weeks as the cost of aluminum rose 7.0% (9.5% y/y). Copper scrap prices improved 6.5% (16.4% y/y) while zinc prices strengthened 6.8% in four weeks (3.0% y/y). Steel scrap prices rose 2.3% (-6.6% y/y) and tin prices increased 2.2% (16.1% y/y). Lead prices improved 1.1% (unchanged y/y) in four weeks.

Prices in the **Textile** group increased 1.2% during the last four weeks, and rose 2.4% y/y. The cost of burlap strengthened 14.5% in the last four weeks while surging 37.6% over the last year. Offsetting this rise, cotton prices fell 1.2% and declined 5.8% y/y.

**Miscellaneous** group prices weakened 3.0% in the last four weeks, unchanged y/y, as framing lumber prices fell 6.5% (+4.1% y/y). The cost of tallow, used for frying & baking, declined 13.1% (+11.2% y/y) in four weeks. Offsetting this weakness, natural rubber prices held steady (-10.1% y/y).

Prices in the **crude oil & benzene** group declined 1.7% (-9.3% y/y) in the last four weeks. The cost of West Texas Intermediate crude oil fell 3.1% in four weeks to $60.80 per barrel and declined 11.7% y/y. The price was increased from a low of $58.47 in the third week of the month. The price of the petro-chemical benzene fell 2.9% (-23.3% y/y) in four weeks.

**Excluding crude oil**, the industrial commodity price index rose 0.5% (1.6% y/y) over the last four weeks, the same as during the prior 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 and textile prices strengthen.
- Framing lumber costs backpedal.
- Crude oil prices weaken.

Economy in Brief: 2003

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