Robert Brusca

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Japan had more than a bad hair day as economic reports showed helter-skelter weakness. Industrial output in January fell by 6.6%, an astoundingly weak one month result. Retail sales fell by 1.2% in January. Housing starts in Japan fell by 13.2% year-on-year in January. Welcome to the land of the rising sun and the setting growth rate.

Suddenly, the outlook for Japan is much murkier. The yen has risen vs. the dollar by about 5% this year, too small a gain to account for such widespread and devastating weakness. Some of this may be weather related as Japan was hit in January with some substantial snowfall; economic activity may have been adversely affected in a way that will also create a February rebound. But even if weather is a salient factor in play, the breadth and degree of the weakness seems to speak to a deeper problem.

Japan's growth seems set to slow in 2018. The early manufacturing PMI gauge for February in Japan is now available and it has also turned lower. That suggests that even if there is a February IP rebound in the making, it will not be substantial.

IP trends in Japan show sequentially collapsing trends across all sectors and industry groups except for electric and gas. This is a report for the first month of the quarter and it gets the quarter off to a terrible start with IP falling at a 24% annual rate quarter-to-date.

It is too early for Japan to be experiencing any cycle-related slowing as the IP level of activity is only back to the 85% mark of the previous cycle peak. However, there are suggestions that inventories have begun to be a problem and that may have led to a cutback in production. Still, a 6.6% one-month drop in IP does not seem like the result of some cutting back on output to relieve inventory pressure.


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Japan's retail sales show a 1.2% drop in January (seasonally adjusted). The 'not seasonally adjusted' (NSA) data in the table show the extreme growth rate swings that retailing is experiencing this time of year as December is a huge ramp up month and January is a substantial contraction period. Over three months, seasonally adjusted retail sales still are doing relatively well despite the January drop. Three-month growth is at a 2.9% pace, up from a 0.7% pace over six months and still ahead of its year-on-year pace of 1.7%. On balance, retail sales are off in January which (as we can see from the NSA data) is a light month for (actual) sales anyway and not likely to be a month when sales results would substantially impact inventory levels. If retailers don't sell in December, that's an inventory problem in the making, not January.

Still, there is slowing apparent in retailing and consumer confidence in Japan has gotten sticky. Confidence is up over the past year, having rising by 1.6 points. But it has since flattened out and is off-peak. And this measure of confidence is a diffusion measure so its values below 50 tell us there are more pessimistic responses to the survey than there are optimistic responses. The small gain in confidence over the last 12 month has not remedied that condition.


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In my report of yesterday (Global Monetary Center Action: Money Supply Growth Is Slowing), I flagged the declines in real money balances across major money center countries. I warned that could be an ominous signal. Today we see a small step back in China's manufacturing PMI which has logged a diffusion score of just 50.3, barely above the neutral reading of 50. And we see broad and deep weakness in Japan.

While GDP is still expanding, as a rule inflation is not gaining. Euro area inflation fell to a 14-month low in February. Central bankers seem to be in a state of confusion over what to do as they continue to harbor their worst fears of inflation finally rising and yet that continues not to happen. This could become a much bigger problem where policy is being made on forward-looking assumptions, like in the U.S.

Central bankers are loath to read the absence of inflation as saying anything about the potential for growth to continue. This approach has been fed by the persistence of job growth even though economic activity growth has remained tempered or boosted by some odd-ball facts as in the U.S. Unemployment in Japan remains low and labor market constraints are real, but in Europe and in the U.S., job gains have been strong and unemployment rates also are either low or falling or both. There is something about this period of weak prices and low inflation with 'strong job growth' which has produced of a lot of 'low end jobs' that has not jelled in the minds of policymakers. At the end of the day, they all seem taken in by the low unemployment rates. There is something sophisticated about this particular combination of growth with no inflation that begs for a deeper understanding.

Of course, Japan has special problems. It has a very rapidly aging, and now shrinking, population both of which give it special policy hurdles it must go over. But it still faces the same sorts of problems as other developed nations. Because Japan has also been fighting off deflation and striving harder than anyone else to hit its price objective of 2%, it is even more surprising that amid all the stimulus Japan is having problems getting both activity and prices in gear.

The global recovery is getting rather long in the tooth, but there are not bottlenecks or other capacity issues since growth has been so slow. Also there is so much trade and access to other countries' markets and such rapid capacity growth, especially in Asia, that it is far easier to understand why inflation has not risen. But in the U.S. the recent monetary report from the central bank largely down plays global arguments and clings to the inward-looking and still malfunctioning 'Phillips Curve' as the answer. If the Phillips curve is the answer, what the heck is the question?

What has been most lacking globally has been demand not supply. The German economy that is growing so well is substantially driven in Q4 by export sales. In the U.S., stronger exports are being touted along with a more stimulative fiscal policy as reasons for growth optimism. But surely everyone can't live by export-led growth? There is some sort of economic accounting fallacy in that.

While everyone is so enraptured about the coming growth acceleration, I think we have to be prepared for disappointment. Even in the U.S. where there is fiscal stimulus, there has to be some care taken to consider how this 'stimulus' was bought; it was bought by mortgaging the financial probity of the future. At some point, economic agents are going to take that into account. Japan already is limited in what stimulus it can consider because of its debt-to-GDP ratio. Italy in Europe has another large debt-to-GDP ratio and it has been stuck nearly flat-lining in this recovery without access to a fiscal remedy because of Maastricht rules. I remain concerned about the future and do not take the notion of a ramp-up in growth in 2018 as given for any country or region. As this year begins to unfold, there seems to be more questions than answers and more question marks than exclamation marks. It's a good time to make your investment decisions one step at a time. In fact, this is one reason why U.S. fiscal policy may not be so potent. There is not a tight relationship between the cost of capital and investment. And with that as a background fact, we do not see U.S. capital spending plans going through the roof in the wake of the new Trump fiscal plan. And if U.S. fiscal stimulus is a disappointment, I'm hard-pressed to see demand ramping up elsewhere. Could Japan's disappointing January be the start of a new global trend?

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Japan had more than a bad hair day as economic reports showed helter-skelter weakness. Industrial output in January fell by 6.6%, an astoundingly weak one month result. Retail sales fell by 1.2% in January. Housing starts in Japan [...]

Japan's IP Tanks, Housing Starts Plunge and Retail Sales Drop...What's Next?

Tom Moeller

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The Chicago Purchasing Managers Business Barometer for
February declined to 61.9 following a fall to 65.7 in January. It was the lowest
index level since August 2017 and well below December's peak of 67.8. A decline
to 64.0 had been expected in the Action Economics Forecast Survey. Purchasing
Managers figures are diffusion indexes where readings above 50 indicate growth.
Figures for the last two years were revised.

Based on these figures, Haver Analytics constructs an index
that is comparable to the ISM Composite index. The figure fell to 60.7 from 65.9.
It also was the lowest index level in six months. During the last ten years,
there has been a 63% correlation between the index and the q/q change in real GDP.

The decline in the total index reflected broad-based
component weakness, with new orders, production and inventories each declining
to six-month lows. The order backlog series weakened to a greater degree as it
fell to the lowest point in nine months. The supplier delivery index fell m/m,
but showed only slightly quicker product delivery speeds. The index indicated,
however, much slower product delivery speeds versus early-2016.

The jobs index roughly reversed its January rise, but
remained up sharply from the June 2016 low. During the last ten years, there has
been a 79% correlation between the employment index and the m/m change in
factory sector payrolls.

The prices paid measure declined to 65.0, the lowest level in
six months. Thirty-eight percent (NSA) of respondents reported paying higher
prices while four percent paid less.

The MNI Chicago Report is produced by MNI/Deutsche Borse
Group in partnership with ISM-Chicago. The survey covers a sample of over 200
purchasing professionals in the Chicago area with a monthly response rate of
about 50%. The ISM-Adjusted headline index is calculated by Haver Analytics
using these data to construct a figure with the ISM methodology. Summary data
are contained in Haver's USECON database, with detail, including the
ISM-style index, in the SURVEYS database. The Consensus expectations
figure is available in AS1REPNA.

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 <thead>
 <tr>
 <th class="firstcol" >Chicago Purchasing Managers Index (%, SA)</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Feb '17</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >General Business Barometer</td>
 <td >61.9</td>
 <td >65.7</td>
 <td >67.8</td>
 <td >57.3</td>
 <td >60.8</td>
 <td >53.1</td>
 <td >50.3</td>
 </tr>
 <tr>
 <td class="firstcol" >ISM-Adjusted General Business Barometer</td>
 <td >60.7</td>
 <td >65.9</td>
 <td >65.6</td>
 <td >57.5</td>
 <td >59.0</td>
 <td >52.0</td>
 <td >51.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Production</td>
 <td >67.9</td>
 <td >73.4</td>
 <td >76.9</td>
 <td >60.1</td>
 <td >64.3</td>
 <td >54.7</td>
 <td >52.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;New Orders</td>
 <td >62.9</td>
 <td >66.4</td>
 <td >72.2</td>
 <td >59.7</td>
 <td >63.5</td>
 <td >55.7</td>
 <td >50.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Order Backlogs</td>
 <td >52.0</td>
 <td >55.1</td>
 <td >59.6</td>
 <td >48.7</td>
 <td >55.2</td>
 <td >47.2</td>
 <td >44.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Inventories</td>
 <td >54.9</td>
 <td >63.5</td>
 <td >63.9</td>
 <td >56.8</td>
 <td >54.9</td>
 <td >47.2</td>
 <td >52.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Employment</td>
 <td >56.1</td>
 <td >60.7</td>
 <td >55.3</td>
 <td >56.5</td>
 <td >52.9</td>
 <td >49.4</td>
 <td >50.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Supplier Deliveries</td>
 <td >61.5</td>
 <td >65.3</td>
 <td >59.6</td>
 <td >54.3</td>
 <td >59.4</td>
 <td >52.8</td>
 <td >52.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Prices Paid</td>
 <td >65.0</td>
 <td >72.1</td>
 <td >67.2</td>
 <td >66.2</td>
 <td >64.0</td>
 <td >53.2</td>
 <td >46.8</td>
 </tr>
 </tbody>
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The Chicago Purchasing Managers Business Barometer for February declined to 61.9 following a fall to 65.7 in January. It was the lowest index level since August 2017 and well below December's peak of 67.8. A decline to 64.0 had been [...]

Chicago Purchasing Managers Index Weakens Again

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In the second estimate of Q4'17 real GDP, the U.S. economy grew 2.5%
(AR), slightly less than 2.6% estimated in the advance report. That followed a
3.2% Q3 rise and a 3.1% Q2 gain. Growth picked up, however, from Q4-to-Q4 to
2.5%, its quickest advance in three years. The quarterly gain matched
expectations in the Action Economics Forecast Survey.

Inventories subtracted a slightly increased 0.7 percentage
point from GDP growth last quarter. Deterioration in the foreign trade deficit
subtracted an unchanged 1.1 percentage point. That subtraction was due to a 7.1%
gain (5.0% y/y) in exports which was outpaced by a 14.0% rise (4.6% y/y) in imports.

Domestic final sales increased at an unrevised 4.3% rate
(2.8% y/y), the quickest gain since Q3'14. Personal consumption expenditures
grew 3.8% (2.8% y/y), the quickest rise since Q2'16. It reflected a 13.8% surge
(7.4% y/y) in durable goods spending, prompted by an 18.9% jump (5.0% y/y) in
spending on motor vehicles. That followed a 12.2% rise. Outlays on home
furnishings &amp; appliances strengthened 13.3% (8.9% y/y) after roughly 9.0%
growth during the prior six months. Outlays on recreational products &amp; motor
vehicles surged 13.6% (9.4% y/y) following a 0.8% rise. Nondurable goods
spending improved 4.3% (3.0% y/y) as outlays on apparel strengthened 10.8% (4.0%
y/y) following declines in two of the prior three quarters. Food &amp; beverage
spending gained 7.3% (3.0% y/y), but outlays on gasoline &amp; other energy
products fell 3.7% (-1.1% y/y), the sixth quarterly decline in two years.
Spending on services improved 2.1% (2.0% y/y) following a 1.1% rise. Spending on
housing &amp; utilities improved 2.1% (1.3% y/y) after falling in three of the
prior four quarters. Health care spending strengthened 2.3% (2.5% y/y) after a
4.5% rise. Recreation services outlays eased 0.6% (+1.4% y/y). Food services
&amp; accommodations spending improved 0.9% (1.2% y/y) after a 1.9% rise.

Capital spending increased 6.6% (6.3% y/y), its fourth
consecutive quarter of strong increase. Spending on equipment rose 11.8% (8.9%
y/y) after a 10.8% gain. These increases have been accelerating for five
quarters. Information processing equipment investment improved 8.9% (9.6% y/y)
after a 10.8% gain while intellectual property product outlays rose 2.5%
(4.3% y/y) after a 5.2% increase. Investment in industrial equipment gained 4.8%
(7.9% y/y) following several quarters of strong increase. Investment in new
structures improved 2.5% (4.0% y/y) following strength in two of the last three
quarters and declines in 2016 and 2015.

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Residential investment strengthened 13.1% (2.6% y/y)
following declines in the prior two quarters.

Government spending improved 2.9% (0.7% y/y) after six
straight quarters of near zero growth. Outlays by the federal government
increased 3.3% (1.0% y/y) after two quarters of lesser growth. Defense outlays
surged 5.6% (2.3% y/y), the strongest of three quarterly increases. Nondefense
outlays were flat or declining for all of last year. State &amp; local
government spending improved 2.7% (0.5% y/y) in Q4, the only notable quarterly
gain since Q1'16.

The GDP chain price index increased a little-changed 2.3%
(1.9% y/y), the strongest rise since Q2'16. A 2.4% rise was expected. Growth in
the PCE price index accelerated to 2.7% (1.7% y/y), the strongest rise since
Q2'11. It was powered by a 3.2% jump (2.3% y/y) in the services price index. The
business fixed investment price index rose 0.5%, with the 1.3% y/y increase
following a slight decline in 2016. The residential investment price index
gained 2.8% (3.4% y/y) following strength in three of the last four years. The
government price index rose 2.9% y/y in 2017 after little gain during the prior two years.

The GDP figures can be found in Haver's USECON and USNA
database. USNA contains virtually all of the Bureau of Economic Analysis' detail
in the national accounts, including the integrated economic accounts and the
recently added GDP data for U.S. Territories. The Action Economics consensus
estimates can be found in AS1REPNA.

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 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM" ;>Chained
 2009 $ (%, AR</a>)</th>
 <th scope="col" >Q4'17 (2nd Estimate)</th>
 <th scope="col" >Q4'17 (Advance Estimate)</th>
 <th scope="col" >Q3'17</th>
 <th scope="col" >Q2'17</th>
 <th scope="col" >Q4'17 Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 <tbody>
 <tr>
 <td class="firstcol" >Gross Domestic Product</td>
 <td >2.5</td>
 <td >2.6</td>
 <td >3.2</td>
 <td >3.1</td>
 <td >2.5</td>
 <td >2.3</td>
 <td >1.5</td>
 <td >2.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Inventory Effect</td>
 <td >-0.70</td>
 <td >-0.67</td>
 <td >0.8</td>
 <td >0.12</td>
 <td >0.3</td>
 <td >-0.1</td>
 <td >-0.4</td>
 <td >0.3</td>
 </tr>
 <tr>
 <td class="firstcol" >Final Sales</td>
 <td >3.3</td>
 <td >3.2</td>
 <td >2.4</td>
 <td >2.9</td>
 <td >2.8</td>
 <td >2.4</td>
 <td >1.9</td>
 <td >2.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Foreign Trade Effect</td>
 <td >-1.1</td>
 <td >-1.1</td>
 <td >0.5</td>
 <td >0.2</td>
 <td >0.0</td>
 <td >-0.1</td>
 <td >-0.2</td>
 <td >-0.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Domestic Final Sales</td>
 <td >4.3</td>
 <td >4.3</td>
 <td >1.9</td>
 <td >2.7</td>
 <td >2.8</td>
 <td >2.5</td>
 <td >2.1</td>
 <td >2.3</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" >Demand Components</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Personal Consumption Expenditure</td>
 <td >3.8</td>
 <td >3.8</td>
 <td >2.2</td>
 <td >3.3</td>
 <td >2.8</td>
 <td >2.7</td>
 <td >2.7</td>
 <td >3.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Business Fixed Investment</td>
 <td >6.6</td>
 <td >6.8</td>
 <td >4.7</td>
 <td >6.7</td>
 <td >6.3</td>
 <td >4.7</td>
 <td >-0.6</td>
 <td >2.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Residential Investment</td>
 <td >13.1</td>
 <td >11.7</td>
 <td >-4.7</td>
 <td >-7.3</td>
 <td >2.6</td>
 <td >1.8</td>
 <td >5.5</td>
 <td >10.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Government Spending</td>
 <td >2.9</td>
 <td >2.9</td>
 <td >0.7</td>
 <td >-0.2</td>
 <td >0.7</td>
 <td >0.1</td>
 <td >0.8</td>
 <td >1.4</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" >Chain-Type Price Index</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; GDP&nbsp;&nbsp;&nbsp;</td>
 <td >2.3</td>
 <td >2.4</td>
 <td >2.1</td>
 <td >1.0</td>
 <td >1.9</td>
 <td >1.8</td>
 <td >1.3</td>
 <td >1.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Personal Consumption
 Expenditures</td>
 <td >2.7</td>
 <td >2.8</td>
 <td >1.5</td>
 <td >0.3</td>
 <td >1.7</td>
 <td >1.7</td>
 <td >1.2</td>
 <td >0.3</td>
 </tr>
 <tr>
 <td class="firstcol" >
 &nbsp;&nbsp;&nbsp;&nbsp; Less Food &amp; Energy
 </td>
 <td >1.9</td>
 <td >1.9</td>
 <td >1.3</td>
 <td >0.9</td>
 <td >1.5</td>
 <td >1.5</td>
 <td >1.8</td>
 <td >1.3</td>
 </tr>
 </tbody>
 
 

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In the second estimate of Q4'17 real GDP, the U.S. economy grew 2.5% (AR), slightly less than 2.6% estimated in the advance report. That followed a 3.2% Q3 rise and a 3.1% Q2 gain. Growth picked up, however, from Q4-to-Q4 to 2.5%, its [...]

U.S. GDP Growth Is Slightly Lessened

Gerald D. Cohen

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The National Association of Realtors (NAR) reported that pending home sales fell 4.7% (-3.8% y/y) in January to an index level of 104.6 (2001=100). This is the lowest level since October 2014 and is down 7.5% from its current-cycle peak in April 2016. However, over the last year pending home sales have been bouncing between roughly 110 and 105. The National Association of Realtors noted that January's weakness was hampered by "woefully low supply levels and the sudden increase in mortgage rates".

Pending sales were down in all regions led by a 9.0% (-12.1% y/y) drop in the Northeast. Sales in the Midwest fell 6.6% (-4.1% y/y), while sales in the South and West were down 3.9% (-1.1% y/y) and 1.2%
(-2.5% y/y) respectively. Sales in the Northeast and Midwest hit multiyear lows, suggesting weather affects. January's U.S. population weighted heating degree days was at its highest level since January 2014.

The pending home sales index measures home sales when the
sales contract is signed, analogous to the Census Bureau's new home sales data.
In contrast, the National Association of Realtors' existing home sales data are
recorded when the sale is closed. In developing the pending home sales index,
the NAR found that the level of monthly sales contract activity parallels the
level of closed existing home sales in the following two months. The series
dates back to 2001, and the data are available in Haver's PREALTOR database. United States
Population Weighted Heating and Cooling Degree Days dates back to 1949 and can be
found in the USECON database.

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 <tr>
 <th class="firstcol" scope="col" >Pending Home Sales (SA,
 2001=100)</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Jan Y/Y %</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >104.6</td>
 <td >109.8</td>
 <td >109.8</td>
 <td >-3.8</td>
 <td >108.9</td>
 <td >110.2</td>
 <td >108.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Northeast</td>
 <td >87.0</td>
 <td >95.6</td>
 <td >98.5</td>
 <td >-12.1</td>
 <td >97.1</td>
 <td >96.4</td>
 <td >90.5</td>
 </tr>
 <tr>
 <td class="firstcol" >Midwest</td>
 <td >98.2</td>
 <td >105.1</td>
 <td >105.5</td>
 <td >-4.1</td>
 <td >104.7</td>
 <td >107.9</td>
 <td >107.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >South</td>
 <td >121.9</td>
 <td >126.8</td>
 <td >124.9</td>
 <td >-1.1</td>
 <td >123.6</td>
 <td >123.3</td>
 <td >123.1</td>
 </tr>
 <tr>
 <td class="firstcol" >West</td>
 <td >97.9</td>
 <td >99.1</td>
 <td >99.3</td>
 <td >-2.5</td>
 <td >99.4</td>
 <td >102.7</td>
 <td >102.5</td>
 </tr>
 </tbody>
 </table>
 
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The National Association of Realtors (NAR) reported that pending home sales fell 4.7% (-3.8% y/y) in January to an index level of 104.6 (2001=100). This is the lowest level since October 2014 and is down 7.5% from its current-cycle [...]

U.S. Pending Home Sales Cool

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<title>Texas Factory Index Nears 2005 High by Tom Moeller&nbsp; February 26</title>
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The Conference Board Consumer Confidence Index increased 1.9%
during January (12.4% y/y) to 125.4 following a 4.3% December decline to 123.1,
revised from 122.1. A level of 123.2 had been expected in the Action Economics
Forecast Survey. The indexes are based on 1985=100. During the past thirty
years, there has been a 70% correlation between the level of consumer confidence
and the y/y change in real PCE.
The rise in overall confidence reflected a 4.7% increase
(6.2% y/y) in the expectations index to 105.5 after December's 9.2% decline. The
present situation index reading eased 0.8% (+19.5% y/y) to 155.3 following a
1.0% gain.
The percentage of respondents indicating conditions are
&quot;good&quot; fell to 34.9% this month from December's 35.8%. The percentage
saying business conditions are &quot;bad&quot; edged up to 12.7% from 11.3%. Job
market readings remained firm. Jobs were viewed as &quot;plentiful&quot; by an
expansion high, 37.6% of respondents. Jobs were viewed as &quot;hard to
get&quot; by 16.4%, up slightly from December's expansion low of 16.0%. The net
jobs assessment improved to +21.2, the most favorable since July 2001. The
differential is 97% inversely related to the unemployment rate.
The increase in the overall expectations reading reflected an
increase in the percentage expecting business conditions to improve over the
next six months to 22.0% from 21.6% in December. Those expecting more jobs was
fairly steady at 19.0%, though that was down from the 23.8% expansion high
reached during March of last year. Incomes are expected to improve by a lessened
20.4% of respondents, down from the 22.7% expansion high reached in December.
Expectations for the inflation rate in twelve months fell to
4.6% from 4.8% in December, while the percentage expecting higher interest rates
over the next twelve months increased to 67.8%, a six-month high. Those looking
to buy a home in the next six months plunged to 6.0%, following a significant
strengthening through December.
By age group, confidence increased the most among individuals
over age 55, up 18.7% y/y. Confidence among those aged 35-54 gained 13.5% y/y,
while younger respondents, under age 35, saw confidence decline 1.5% y/y.
The Consumer Confidence data is available in Haver's CBDB
 database. The total indexes appear in USECON, and the market
expectations are in AS1REPNA.
Semiannual Monetary Policy Report to the Congress from
Fed Chairman Jerome H. Powell is available here&nbsp;&nbsp; <a href="https://www.federalreserve.gov/newsevents/testimony/powell20180226a.htm">https://www.federalreserve.gov/newsevents/testimony/powell20180226a.htm</a>
<table width="1767" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="822">Conference Board (SA,
 1985=100)</th>
 <th scope="col" width="134">Feb</th>
 <th scope="col" width="134">Jan</th>
 <th scope="col" width="134">Dec</th>
 <th scope="col" width="134">Y/Y %</th>
 <th scope="col" width="135">2017</th>
 <th scope="col" width="135">2016</th>
 <th scope="col" width="135">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="822">Consumer Confidence Index</td>
 <td align="center" width="134">130.8</td>
 <td align="center" width="134">124.3</td>
 <td align="center" width="134">123.1</td>
 <td align="center" width="134">12.7</td>
 <td align="center" width="135">120.5</td>
 <td align="center" width="135">99.8</td>
 <td align="center" width="135">98.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="822">&nbsp; Present Situation</td>
 <td align="center" width="134"></td>
 <td align="center" width="134">155.3</td>
 <td align="center" width="134">156.5</td>
 <td align="center" width="134">20.8</td>
 <td align="center" width="135">144.8</td>
 <td align="center" width="135">120.3</td>
 <td align="center" width="135">111.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="822">&nbsp; Expectations</td>
 <td align="center" width="134"></td>
 <td align="center" width="134">105.5</td>
 <td align="center" width="134">100.8</td>
 <td align="center" width="134">6.2</td>
 <td align="center" width="135">104.3</td>
 <td align="center" width="135">86.1</td>
 <td align="center" width="135">88.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="822">Consumer Confidence By Age Group</td>
 <td align="center" width="134"></td>
 <td align="center" width="134"></td>
 <td align="center" width="134"></td>
 <td align="center" width="134"></td>
 <td align="center" width="135"></td>
 <td align="center" width="135"></td>
 <td align="center" width="135"></td>
 </tr>
 <tr>
 <td class="firstcol" width="822">&nbsp; Under 35 Years</td>
 <td align="center" width="134"></td>
 <td align="center" width="134">127.2</td>
 <td align="center" width="134">128.7</td>
 <td align="center" width="134">-1.5</td>
 <td align="center" width="135">130.2</td>
 <td align="center" width="135">122.4</td>
 <td align="center" width="135">116.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="822">&nbsp; Aged 35-54 Years</td>
 <td align="center" width="134"></td>
 <td align="center" width="134">129.6</td>
 <td align="center" width="134">126.3</td>
 <td align="center" width="134">13.5</td>
 <td align="center" width="135">123.5</td>
 <td align="center" width="135">106.2</td>
 <td align="center" width="135">103.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="822">&nbsp; Over 55 Years</td>
 <td align="center" width="134"></td>
 <td align="center" width="134">120.1</td>
 <td align="center" width="134">116.5</td>
 <td align="center" width="134">18.7</td>
 <td align="center" width="135">112.9</td>
 <td align="center" width="135">84.6</td>
 <td align="center" width="135">84.1</td>
 </tr>
 </tbody>
</table>
&nbsp;
&nbsp;
U.S. FHFA House Price Index Increases 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;February
27, 2018


The Federal Housing Finance Agency's (FHFA) index of U.S.
house prices rose 6.5% y/y during December. The rate of increase has improved
from 5.3% in 2014 and contrasts to the house price deflation from 2008 to 2011.
In the month of December alone, house prices rose
0.3% m/m, the smallest increase in six months. Over the past three months,
prices have risen at a reduced 5.6% annual rate.

The annual performance of home prices continued to vary
significantly across the country. On the strong side were the Mountain and
Pacific regions where prices rose roughly 9.0% from December-to-December.

These relatively strong y/y gains were followed by the South
Atlantic, West South Central, New England and East North Central regions where
prices increased roughly 6.0% y/y.

Slower annual house price appreciation occurred in the Middle
Atlantic, East South Central and West North Central regions.

The FHFA house price index is a weighted purchase-only index
that measures average price changes in repeat sales of the same property. An
associated quarterly index also includes refinancings on the same kinds of
properties. The indexes are based on transactions involving conforming,
conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.
Only mortgage transactions on single-family properties are included. The FHFA
data are available in Haver's USECON database.

 <thead>
 <tr>
 <th class="firstcol" width="791">FHFA U.S. House Price Index, 
 Purchase Only (SA %)</th>
 <th scope="col" width="138">Dec</th>
 <th scope="col" width="139">Nov</th>
 <th scope="col" width="139">Oct</th>
 <th scope="col" width="139">Dec Y/Y</th>
 <th scope="col" width="139">2017</th>
 <th scope="col" width="139">2016</th>
 <th scope="col" width="139">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="791">Total</td>
 <td align="center" width="138">0.3</td>
 <td align="center" width="139">0.5</td>
 <td align="center" width="139">0.6</td>
 <td align="center" width="139">6.5</td>
 <td align="center" width="139">6.7</td>
 <td align="center" width="139">6.2</td>
 <td align="center" width="139">5.5</td>
 </tr>
 <tr>
 <td class="firstcol" width="791">&nbsp; Mountain</td>
 <td align="center" width="138">0.6</td>
 <td align="center" width="139">0.8</td>
 <td align="center" width="139">0.9</td>
 <td align="center" width="139">9.0</td>
 <td align="center" width="139">8.7</td>
 <td align="center" width="139">8.0</td>
 <td align="center" width="139">7.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="791">&nbsp; Pacific</td>
 <td align="center" width="138">0.4</td>
 <td align="center" width="139">0.7</td>
 <td align="center" width="139">0.1</td>
 <td align="center" width="139">8.6</td>
 <td align="center" width="139">8.8</td>
 <td align="center" width="139">8.1</td>
 <td align="center" width="139">7.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="791">&nbsp; South Atlantic</td>
 <td align="center" width="138">0.8</td>
 <td align="center" width="139">0.7</td>
 <td align="center" width="139">0.3</td>
 <td align="center" width="139">6.7</td>
 <td align="center" width="139">7.0</td>
 <td align="center" width="139">7.1</td>
 <td align="center" width="139">6.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="791">&nbsp; West South Central</td>
 <td align="center" width="138">-0.0</td>
 <td align="center" width="139">0.6</td>
 <td align="center" width="139">0.5</td>
 <td align="center" width="139">6.6</td>
 <td align="center" width="139">6.5</td>
 <td align="center" width="139">6.0</td>
 <td align="center" width="139">6.2</td>
 </tr>
 <tr>
 <td class="firstcol" width="791">&nbsp; New England</td>
 <td align="center" width="138">0.8</td>
 <td align="center" width="139">0.0</td>
 <td align="center" width="139">0.8</td>
 <td align="center" width="139">6.2</td>
 <td align="center" width="139">5.9</td>
 <td align="center" width="139">4.1</td>
 <td align="center" width="139">3.4</td>
 </tr>
 <tr>
 <td class="firstcol" width="791">&nbsp; East North Central</td>
 <td align="center" width="138">0.2</td>
 <td align="center" width="139">0.4</td>
 <td align="center" width="139">0.6</td>
 <td align="center" width="139">5.7</td>
 <td align="center" width="139">6.1</td>
 <td align="center" width="139">5.4</td>
 <td align="center" width="139">4.4</td>
 </tr>
 <tr>
 <td class="firstcol" width="791">&nbsp; Middle Atlantic</td>
 <td align="center" width="138">-0.1</td>
 <td align="center" width="139">0.1</td>
 <td align="center" width="139">1.0</td>
 <td align="center" width="139">5.1</td>
 <td align="center" width="139">4.9</td>
 <td align="center" width="139">3.7</td>
 <td align="center" width="139">2.6</td>
 </tr>
 <tr>
 <td class="firstcol" width="791">&nbsp; East South Central</td>
 <td align="center" width="138">0.1</td>
 <td align="center" width="139">-0.8</td>
 <td align="center" width="139">2.4</td>
 <td align="center" width="139">4.8</td>
 <td align="center" width="139">6.0</td>
 <td align="center" width="139">5.1</td>
 <td align="center" width="139">4.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="791">&nbsp; West North Central</td>
 <td align="center" width="138">-0.7</td>
 <td align="center" width="139">1.1</td>
 <td align="center" width="139">0.2</td>
 <td align="center" width="139">4.6</td>
 <td align="center" width="139">5.5</td>
 <td align="center" width="139">5.7</td>
 <td align="center" width="139">4.1</td>
 </tr>
 </tbody>

&nbsp;
<table width="100%" class="centered" border="0" cellSpacing="0">
 <tbody>
 <tr>
 <td>
 <blockquote>
 Mountain: Montana, Idaho, Wyoming, Nevada, Utah,
 Colorado, Arizona and New Mexico. 
 South Atlantic: Delaware, Maryland, D.C., Virginia, West Virginia,
 North Carolina, South Carolina, Georgia and Florida. 
 Pacific: Alaska, California, Hawaii, Oregon, Washington. 
 West South Central: Oklahoma, Arkansas, Texas and Louisiana. 
 East North Central: Michigan, Wisconsin, Illinois, Indiana and Ohio. 
 East South Central: Kentucky, Tennessee, Mississippi and Alabama. 
 New England: Maine, New Hampshire, Vermont, Massachusetts, Rhode
 Island and Connecticut. 
 Middle Atlantic: New York, New Jersey and Pennsylvania. 
 West North Central: North Dakota, South Dakota, Minnesota, Nebraska,
 Iowa, Kansas and Missouri.
 </blockquote>
 </td>
 </tr>
 </tbody>
</table>
&nbsp;
&nbsp;
U.S. Gasoline Prices Ease; Crude Oil Costs Rise 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;February
27, 2018
Retail gasoline prices slipped to $2.55 per gallon
last week (+10.1% y/y) from $2.56 per gallon during the prior week. Haver
Analytics constructs factors adjusting for the seasonal variation in gasoline
pump prices. The seasonally-adjusted price fell to $2.70 per gallon from $2.77.
WTI crude oil prices rebounded to $62.48 per barrel
last week (15.7% y/y), and more-than-reversed the prior week's decline. Prices
rose further yesterday to $63.91 per barrel. Brent crude oil prices increased to
$65.52 per barrel last week and rose to $67.96 yesterday.
Natural gas prices improved to $2.60/mmbtu last week
(2.7% y/y) and were $2.59/mmbtu yesterday.
In the week ended February 9, gasoline demand
 increased 5.4% y/y, while total petroleum product demand improved 4.3% y/y. Gasoline
inventories declined 2.8% y/y, while inventories of all petroleum products
fell 8.8% y/y. Crude oil input to refineries improved 3.6&nbsp;&nbsp;&nbsp; %
y/y in the last four weeks.
The energy price data are reported by the U.S. Department of
Energy. The petroleum demand and inventory figures are from the Oil &amp; Gas
Journal Weekly. These data can be found in Haver's WEEKLY database. The
daily figures are in DAILY and greater detail on prices, demand and
production, along with regional breakdowns, are in OILWKLY.
<table width="1767" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="752">Weekly Energy Prices</th>
 <th scope="col" width="144">02/26/18</th>
 <th scope="col" width="144">02/19/18</th>
 <th scope="col" width="144">02/12/18</th>
 <th scope="col" width="144">Y/Y %</th>
 <th scope="col" width="145">2017</th>
 <th scope="col" width="145">2016</th>
 <th scope="col" width="145">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="752">Retail Gasoline ($ per Gallon, Regular)</td>
 <td align="center" width="144">2.55</td>
 <td align="center" width="144">2.56</td>
 <td align="center" width="144">2.61</td>
 <td align="center" width="144">10.1</td>
 <td align="center" width="145">2.47</td>
 <td align="center" width="145">2.31</td>
 <td align="center" width="145">2.03</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="752">Light Sweet Crude Oil, WTI ($ per bbl.)</td>
 <td align="center" width="144">62.48</td>
 <td align="center" width="144">60.47</td>
 <td align="center" width="144">62.01</td>
 <td align="center" width="144">15.7</td>
 <td align="center" width="145">50.87</td>
 <td align="center" width="145">43.22</td>
 <td align="center" width="145">48.90</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="752">Natural Gas ($/mmbtu, LA, WSJ)</td>
 <td align="center" width="144">2.60</td>
 <td align="center" width="144">2.52</td>
 <td align="center" width="144">2.72</td>
 <td align="center" width="144">2.7</td>
 <td align="center" width="145">2.96</td>
 <td align="center" width="145">2.49</td>
 <td align="center" width="145">2.62</td>
 </tr>
 </tbody>
</table>





</html>

The Conference Board Consumer Confidence Index increased 1.9% during January (12.4% y/y) to 125.4 following a 4.3% December decline to 123.1, revised from 122.1. A level of 123.2 had been expected in the Action Economics Forecast [...]

U.S. Consumer Confidence Firms

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The Conference Board Consumer Confidence Index increased 5.2%
during February (12.7% y/y) to 130.8, following a 1.0% January rise to 124.3,
revised from 125.4. It was the highest index level since November 2000. A level
of 126.7 had been expected in the Action Economics Forecast Survey. The
indexes are based on 1985=100. During the past thirty years, there has been a
70% correlation between the level of consumer confidence and the y/y change in real PCE.

The rise in overall confidence reflected a 5.5% increase
(5.6% y/y) in the expectations index to 109.7 after January's 3.2% rise. The
present situation index reading rose 5.0% (20.8% y/y) to 162.4 following a 1.2% decline.

The percentage of respondents indicating conditions are
&quot;good&quot; was fairly steady at 35.8% this month. The percentage saying
business conditions are &quot;bad&quot; declined to 10.8%, the least since March
2001. Job market readings remained firm. Jobs were viewed as
&quot;plentiful&quot; by an expansion high, 39.4% of respondents. Jobs were
viewed as &quot;hard to get&quot; by 14.7%, also equaling the 2001 low. The net
jobs assessment improved to +24.7, the most favorable since May 2001. The
differential is 97% inversely related to the unemployment rate.

The increase in the overall expectations reading reflected an
increase in the percentage expecting business conditions to improve over the
next six months. It surged to 25.8% from 21.5% in January. Those expecting more
jobs increased to 21.6%, though that was down from the 23.8% expansion high
reached during March of last year. Incomes are expected to improve by 23.8% of
respondents, up from the full-year 2009 low of 9.9%.

Expectations for the inflation rate in twelve months ticked
higher to 4.7% and has been fairly stable since the 4.8% low during all of
2016.The percentage expecting higher interest rates over the next twelve months
increased to 70.4%, the most since April 2017, and up from the July 2016 low of
52.3%. Those looking to buy a home in the next six months remained depressed at
6.3%, down from December's high of 7.4%.

By age group, confidence increased the most among individuals
over age 55, up 17.5% y/y. Confidence amongst those aged 35-54 gained 15.0% y/y,
while younger respondents, under age 35, saw confidence improve 6.1% y/y.

The Consumer Confidence data is available in Haver's CBDB
 database. The total indexes appear in USECON, and the market
expectations are in AS1REPNA.

Semiannual Monetary Policy Report to the Congress from
Fed Chairman Jerome H. Powell is available <a href="https://www.federalreserve.gov/newsevents/testimony/powell20180226a.htm">here</a>.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Conference Board (SA,
 1985=100)</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Y/Y %</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Consumer Confidence Index</td>
 <td >130.8</td>
 <td >124.3</td>
 <td >123.1</td>
 <td >12.7</td>
 <td >120.5</td>
 <td >99.8</td>
 <td >98.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Present Situation</td>
 <td >162.4</td>
 <td >154.7</td>
 <td >156.5</td>
 <td >20.8</td>
 <td >144.8</td>
 <td >120.3</td>
 <td >111.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Expectations</td>
 <td >109.7</td>
 <td >104.0</td>
 <td >100.8</td>
 <td >5.6</td>
 <td >104.3</td>
 <td >86.1</td>
 <td >88.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Consumer Confidence By Age Group</td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Under 35 Years</td>
 <td >127.9</td>
 <td >128.3</td>
 <td >128.7</td>
 <td >6.1</td>
 <td >130.2</td>
 <td >122.4</td>
 <td >116.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Aged 35-54 Years</td>
 <td >135.7</td>
 <td >127.3</td>
 <td >126.3</td>
 <td >15.0</td>
 <td >123.5</td>
 <td >106.2</td>
 <td >103.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Over 55 Years</td>
 <td >128.7</td>
 <td >119.0</td>
 <td >116.5</td>
 <td >17.5</td>
 <td >112.9</td>
 <td >84.6</td>
 <td >84.1</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The Conference Board Consumer Confidence Index increased 5.2% during February (12.7% y/y) to 130.8, following a 1.0% January rise to 124.3, revised from 125.4. It was the highest index level since November 2000. A level of 126.7 had [...]

U.S. Consumer Confidence Strengthens to 2000 High

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The Federal Housing Finance Agency's (FHFA) index of U.S.
house prices rose 6.5% y/y during December. The rate of increase has improved
from 5.3% in 2014 and contrasts to the house price deflation from 2008 to 2011.
In the month of December alone, house prices rose
0.3% m/m, the smallest increase in six months. Over the past three months,
prices have risen at a reduced 5.6% annual rate.

The annual performance of home prices continued to vary
significantly across the country. On the strong side were the Mountain and
Pacific regions where prices rose roughly 9.0% from December-to-December.

These relatively strong y/y gains were followed by the South
Atlantic, West South Central, New England and East North Central regions where
prices increased roughly 6.0% y/y.

Slower annual house price appreciation occurred in the Middle
Atlantic, East South Central and West North Central regions.

The FHFA house price index is a weighted purchase-only index
that measures average price changes in repeat sales of the same property. An
associated quarterly index also includes refinancings on the same kinds of
properties. The indexes are based on transactions involving conforming,
conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac.
Only mortgage transactions on single-family properties are included. The FHFA
data are available in Haver's USECON database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" >FHFA U.S. House Price Index, 
 Purchase Only (SA %)</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Dec Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >0.3</td>
 <td >0.5</td>
 <td >0.6</td>
 <td >6.5</td>
 <td >6.7</td>
 <td >6.2</td>
 <td >5.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Mountain</td>
 <td >0.6</td>
 <td >0.8</td>
 <td >0.9</td>
 <td >9.0</td>
 <td >8.7</td>
 <td >8.0</td>
 <td >7.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Pacific</td>
 <td >0.4</td>
 <td >0.7</td>
 <td >0.1</td>
 <td >8.6</td>
 <td >8.8</td>
 <td >8.1</td>
 <td >7.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; South Atlantic</td>
 <td >0.8</td>
 <td >0.7</td>
 <td >0.3</td>
 <td >6.7</td>
 <td >7.0</td>
 <td >7.1</td>
 <td >6.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; West South Central</td>
 <td >-0.0</td>
 <td >0.6</td>
 <td >0.5</td>
 <td >6.6</td>
 <td >6.5</td>
 <td >6.0</td>
 <td >6.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; New England</td>
 <td >0.8</td>
 <td >0.0</td>
 <td >0.8</td>
 <td >6.2</td>
 <td >5.9</td>
 <td >4.1</td>
 <td >3.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; East North Central</td>
 <td >0.2</td>
 <td >0.4</td>
 <td >0.6</td>
 <td >5.7</td>
 <td >6.1</td>
 <td >5.4</td>
 <td >4.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Middle Atlantic</td>
 <td >-0.1</td>
 <td >0.1</td>
 <td >1.0</td>
 <td >5.1</td>
 <td >4.9</td>
 <td >3.7</td>
 <td >2.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; East South Central</td>
 <td >0.1</td>
 <td >-0.8</td>
 <td >2.4</td>
 <td >4.8</td>
 <td >6.0</td>
 <td >5.1</td>
 <td >4.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; West North Central</td>
 <td >-0.7</td>
 <td >1.1</td>
 <td >0.2</td>
 <td >4.6</td>
 <td >5.5</td>
 <td >5.7</td>
 <td >4.1</td>
 </tr>
 </tbody>
</table>
&nbsp;

 
 
 
 
 Mountain: Montana, Idaho, Wyoming, Nevada, Utah,
 Colorado, Arizona and New Mexico. 
 South Atlantic: Delaware, Maryland, D.C., Virginia, West Virginia,
 North Carolina, South Carolina, Georgia and Florida. 
 Pacific: Alaska, California, Hawaii, Oregon, Washington. 
 West South Central: Oklahoma, Arkansas, Texas and Louisiana. 
 East North Central: Michigan, Wisconsin, Illinois, Indiana and Ohio. 
 East South Central: Kentucky, Tennessee, Mississippi and Alabama. 
 New England: Maine, New Hampshire, Vermont, Massachusetts, Rhode
 Island and Connecticut. 
 Middle Atlantic: New York, New Jersey and Pennsylvania. 
 West North Central: North Dakota, South Dakota, Minnesota, Nebraska,
 Iowa, Kansas and Missouri.
 
 
 
 
 
</html>

The Federal Housing Finance Agency's (FHFA) index of U.S. house prices rose 6.5% y/y during December. The rate of increase has improved from 5.3% in 2014 and contrasts to the house price deflation from 2008 to 2011. In the month of [...]

U.S. FHFA House Price Index Increases

Sandy Batten

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New orders for durable goods slumped in January, falling a larger-than-expected 3.7% m/m (+8.9% y/y) after having jumped soared 2.6% m/m (revised from a 2.9% m/m gain) in December. The Action Economics Forecast Survey had looked for a 2.0% m/m decline in January. The swing from December to January was due mostly to a wild swing in orders for transportation equipment. They fell 10.0% m/m (+8.4% y/y) in January after having risen 6.4% m/m in December and 4.5% m/m in November.

Aircraft orders were again the primary driver of the swing in transportation orders. Total aircraft orders slumped 32.8% m/m in January after gains of 23.0% m/m and 11.6% m/m in December and November respectively. The ups and downs in total aircraft orders were reflected in both defense and nondefense categories. Defense aircraft orders collapsed 45.6% m/m in January, offsetting a 47.8% m/m surge in December. Nondefense aircraft orders tumbled 28.4% m/m in January, offsetting the 16.1% m/m jump December and the 14.1% m/m rise in November.

Excluding transportation orders, new orders in January were still mediocre and slightly weaker than market expectations, falling 0.3% m/m (+9.1% y/y) following a slightly upwardly revised 0.7% m/m gain in December. Of the major categories, primary metals orders fell 0.9% m/m (+13.3% y/y) in January; fabricated metals orders edged up 0.5% m/m (11.7% y/y); machinery orders slipped 0.4% m/m (+9.8% y/y); orders for computers and electronic products rose 0.6% m/m (9.1% y/y); and orders for electrical equipment and appliances declined 0.8% m/m (+0.8% y/y).

Nondefense capital goods orders and shipments excluding aircraft (core orders and shipments) are the variables in this report that are key indicators of business spending on equipment in the national accounts. They both point to a slow start to Q1. Core capital goods orders slid 0.2% m/m (+8.0% y/y) in January, their second consecutive monthly decline, auguring weaker business spending ahead. Core goods shipments (a good real-time indicator of business spending) edged up 0.1% m/m (10.8% y/y) in January but this was after a solid 0.7% m/m rise in December (revised up from 0.4% initially). This points to continued, though more modest, business spending on equipment in Q1.

Shipments of durable goods increased 0.2% m/m (8.2% y/y) in January with small gains reported across most of the major categories. Unfilled durable goods orders fell 0.3% /m (+2.0% y/y) in January, their first monthly decline in the past five months. Inventories of durable goods rose 0.3% m/m (+4.3% y/y) in January on top of a 0.5% m/m increase in December.


The durable goods figures are available in Haver's USECON
database. The Action Economics consensus forecast figure is in the AS1REPNA database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" height="25" >Durable Goods
 NAICS Classification</th>
 <th height="25" >Jan</th>
 <th height="25" >Dec</th>
 <th height="25" >Nov</th>
 <th height="25" >Jan Y/Y</th>
 <th height="25" >2017</th>
 <th height="25" >2016</th>
 <th height="25" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >New Orders (SA, % chg)</td>
 <td >-3.7</td>
 <td >2.6</td>
 <td >1.7</td>
 <td >8.9</td>
 <td >5.9</td>
 <td >-1.7</td>
 <td >-4.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Transportation</td>
 <td >-10.0</td>
 <td >6.4</td>
 <td >4.5</td>
 <td >8.4</td>
 <td >4.8</td>
 <td >-3.4</td>
 <td >-6.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Total Excluding
 Transportation</td>
 <td >-0.3</td>
 <td >0.7</td>
 <td >0.4</td>
 <td >9.1</td>
 <td >6.5</td>
 <td >-0.7</td>
 <td >-3.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Nondefense Capital
 Goods</td>
 <td >-1.5</td>
 <td >-0.4</td>
 <td >2.1</td>
 <td >12.2</td>
 <td >7.8</td>
 <td >-7.1</td>
 <td >-11.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Excluding
 Aircraft</td>
 <td >-0.2</td>
 <td >-0.6</td>
 <td >0.1</td>
 <td >8.0</td>
 <td >5.3</td>
 <td >-4.6</td>
 <td >-4.3</td>
 </tr>
 <tr>
 <td class="firstcol" >Shipments</td>
 <td >0.2</td>
 <td >0.5</td>
 <td >1.3</td>
 <td >8.2</td>
 <td >4.3</td>
 <td >-1.6</td>
 <td >-0.6</td>
 </tr>
 <tr>
 <td class="firstcol" >Unfilled Orders</td>
 <td >-0.3</td>
 <td >0.6</td>
 <td >0.1</td>
 <td >2.0</td>
 <td >1.9</td>
 <td >-1.7</td>
 <td >-2.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Inventories</td>
 <td >0.3</td>
 <td >0.5</td>
 <td >0.3</td>
 <td >4.3</td>
 <td >4.1</td>
 <td >-0.7</td>
 <td >1.6</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

New orders for durable goods slumped in January, falling a larger-than-expected 3.7% m/m (+8.9% y/y) after having jumped soared 2.6% m/m (revised from a 2.9% m/m gain) in December. The Action Economics Forecast Survey had looked for a [...]

U.S. Durable Goods Orders Post Weak Start to Q1

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

Resilient US economy is pushing up longer-term inflation expectations and interest rates

Positive US economic data surprises leading to upward adjustment of interest rate expectations

Recent aggressive policy easing in China has given a massive boost to equity prices

FOMC expects much more easing now than in June

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The Conference Board's Index of Consumer Confidence fell 7.2% (-9.9% y/y) to 92.9 after a 4.9% decline in February to 100.1, revised from down 6.6%. A reading of 94.0 had been expected in the Action Economics Forecast Survey. The March figure was 17.6% below its November high. Weakness in confidence is widespread amongst components in this latest report.

The Expectations Index slumped 12.8% (-11.9% y/y) to 65.2, after a 9.0% February weakening, revised from a 12.9% decline. This latest figure was the weakest since March 2013. The Present Situation index fell 2.6% (-8.4% y/y) to 134.5, after declining 1.3% in February, revised from down 2.4%, after a 2.8% January fall. The reading was the lowest in six months.

The percentage of respondents assessing business conditions as “good” fell to 17.7% this month after declining to 19.1% in February. The index hit a high of 22.0 in October. The percentage assessing conditions as “bad” rose to 16.6% after falling to 14.8% in February. The appraisal of labor market conditions held steady m/m in March as 33.6% of respondents thought jobs were plentiful, down from 41.7% one year earlier. Jobs were viewed as hard to get by 15.7% of respondents this month, down from 16.0% in February. This measure has risen from 11.0% in January 2024. The labor market differential calculated by Haver Analytics (the percentage of consumers who think jobs are plentiful minus the percentage who believe that jobs are currently hard to get) stood at 17.9% compared to 17.6% in February and remained below a high of 47.1% in March 2022. This series has a 60% correlation with the unemployment rate over the last ten years.

Expectations for business conditions deteriorated in March. A lessened 17.1% of respondents expect conditions to improve over the next six months, down from 20.8% in both February and January, while a higher 27.3% expect them to deteriorate, up from 25.5% in February. On employment, a lessened 16.7% expect the number of jobs to increase over the next six months. The percentage expecting the number of jobs to decline in the next six months rose to 28.5% after surging to 26.6% in February, and increasing to 21.0% in January. A lessened 16.3% expect income to increase in six months. That remained down from a high of 20.7% in November and compares to a higher 15.5% who expect income to decrease.

The expected rate of price inflation over the next twelve months rose to 6.2% in March after increasing to 5.8% in February from 5.2% in January. Interest rates are expected to rise this year by a higher 54.6% of respondents, up from 52.6% in February. The percentage of respondents expecting equity prices to increase over the next twelve months plummeted to 37.4% after dropping to 46.7% in February, while the percentage expecting a decline in stock prices jumped to 44.5% after rising to 34.0% in February.

The percentage of respondents planning to buy a home rose in March to 5.4% from 5.3% in February. Plans to purchase an automobile eased to 10.3% this month from a downwardly revised 10.7% in February.

The Consumer Confidence data are available in Haver’s **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

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- Confidence weakens to lowest level since January 2021.
- Expectations reading plummets to twelve-year low; present situation reading weakens.
- Inflation and interest rate expectations rise further.

U.S. Consumer Confidence Tumbles in March; Inflation Expectations Strengthen

Michael J. Moran

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Sales of new homes rose 1.8% in February, a solid increase on a month-to-month basis, but one that had little influence on the recent trend. The ups and downs of the past two years have traced a sideways path, with the February total of 676 thousand homes (annual rate) nearly identical to the average of 675 thousand in the prior two years.

Results for new home sales in the past two years have been light relative to the burst triggered by low interest rates from mid-2020 to early 2022, and they are well shy of the exuberance seen in the years before the housing-related recession in 2008-09. Otherwise, sales compare favorably with historical norms.

While sales of new homes can be viewed as respectable, more might have been expected given conditions in the market for existing homes. Sales of existing homes have been light in the past two years because of the effects of high interest rates on potential sellers. Many households that might be interested in moving have remained on the sidelines rather than surrender a low-rate mortgage. With a lack of supply, sales of existing homes have been depressed.

The market for new homes is not supply constrained, as the months’ supply is in the upper portion of its historical range. One might expect potential buyers to shift to the new home market given the limited availability in the existing market. However, a slow pace of total sales (new + existing) suggests that the housing market overall is in the doldrums. High interest rates apparently have triggered affordability issues for many buyers.

Despite slow sales, housing prices have not done much to counter affordability issues. The average and median prices of new homes are now drifting lower, but the change has been modest relative to the surge in prices from 2020 to 2022. More notable, the median price of existing homes has continued to move higher, and various indexes of home prices continue to show upward pressure – lighter than it was two to four years ago, but still upward.

New home sales are recorded when the sales contract is signed. New home sales activity and prices are available in Haver's **USECON** database. The consensus expectation figure from Action Economics is available in the **AS1REPNA** database.

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- A Respectable pace of new home sales...
- ...but only a modest counter to soft sales in the existing home market.

New Home Sales: Range Bound Activity in February

Winnie Tapasanun

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U.S. house prices rose 0.2% m/m in January after rises of 0.5% in December (+0.4% initially) and 0.4% in November (unrevised), according to the Federal Housing Finance Agency (FHFA) House Price Index. The January reading was the 10th consecutive m/m gain but the smallest since June 2024. The January HPI at 436.52 was 12.9% above a low of 386.53 in August 2022 and 55.2% above a low of 281.32 in May 2020. The year-on-year rate of increase registered at 4.8% in January and December, the highest since July 2024; nevertheless, having remained lower than 6.7% in January 2024 and well below a high of 18.7% in February 2022.

House prices rose m/m in January (vs. December) in six of the nine census divisions. These included West North Central (1.0% vs. -0.2%), Middle Atlantic (0.7% vs. 0.7%), East North Central (0.5% vs. 0.6%), Pacific (0.5% vs. 0.3%), West South Central (0.4% vs. 0.2%), and East South Central (0.2% vs. 0.5%). To the downside, house prices fell m/m in two census divisions in January (vs. December): South Atlantic (-0.8% vs. 0.3%) and Mountain (-0.6% vs. 1.7%). Meanwhile, house prices in New England were virtually unchanged (+7.3% y/y) in January following six straight m/m increases.

Year-on-year house prices continued to gain in January, with the pace of advance accelerating (vs. December) in four of the nine census divisions. These were Middle Atlantic (8.2% vs. 7.2%), East North Central (6.9% vs. 6.4%), East South Central (4.8% vs. 4.0%), and Pacific (3.6% vs. 2.9%). Meanwhile, house price growth decelerated y/y in January (vs. December) in the following four census divisions: Mountain (3.7% vs. 5.1%), South Atlantic (3.9% vs. 4.4%), West North Central (5.0% vs. 5.2%), and New England (7.3% vs. 7.9%). House price growth in the West South Central region held steady at 2.4% y/y.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The FHFA data are available in Haver’s **USECON** database.

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- FHFA HPI +0.2% m/m (+4.8% y/y) in Jan.; +0.5% m/m (+4.8% y/y) in Dec.
- House prices up m/m in six of nine census divisions but down in South Atlantic and Mountain.
- House prices up y/y in all of the nine regions, w/ the highest rate in Middle Atlantic (8.2%).

U.S. FHFA House Price Growth Decelerates in January

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Retail gasoline prices for all grades rose to a four-week high last week and averaged $3.24 per gallon (-11.0% y/y) after falling to $3.18 in the week ending March 17. Prices have risen from a low of $3.13 in the week of December 9. The recent high was $3.79 in the week ending April 22, 2024. Its all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel improved to $3.57 per gallon (-11.6% y/y) in the week of March 24 after easing to $3.55 in the prior week. The latest diesel price remained well below a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil edged up to $67.64 per barrel (-17.9% y/y) in the week ended March 21, after rising to $66.74 per barrel in the prior week. Prices have fallen from a high of $78.50 where they were nine weeks ago, remaining below a high of $91.45 in the week of September 29, 2023. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $69.11	 per barrel. The price of European Brent crude oil of $72.18 per barrel (-16.0% y/y) in the week of March 21 compared to $71.54 in the prior week and a high of $82.79 nine weeks ago. Prices remained below a recent high of $95.61 in the week of September 29, 2023 and below a peak of $127.40 in the week of June 10, 2022. Yesterday, the price was $73.96 per barrel.

Natural gas prices held last week at an average $4.14 per mmbtu (168.8% y/y) in the week ended March 21 after easing to $4.15/mmbtu in the prior week. Prices remained well above a low of $1.40/mmbtu in the week of March 15, 2024 but below their peak of $9.56 in the week of August 26, 2022. Yesterday, the price was $4.03 per mmbtu.

Gasoline demand held steady y/y in the four weeks ending March 14 after edging 0.1% higher in the prior four weeks. Demand for all petroleum products rose 2.5% y/y in the four weeks ending March 14 after a 3.9% y/y rise in the previous four-week period. Crude oil input to refineries rose 1.8% y/y in the four weeks ending March 14 after a 3.4% y/y increase in the prior four weeks.

Gasoline inventories rose 4.2% y/y in the week ending March 14 after a 3.0% y/y rise in the week ending March 7. Residual fuel oil inventories fell 21.3% y/y in the week of March 14, after an 17.1% y/y fall in the prior week. Crude oil inventories rose 3.2% y/y in the week of March 14 after a 2.8% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories fell to 27.2 days in the week of March 14 from 27.8 days in the prior week. The recent low was 22.9 days in the week of November 8. The supply of crude oil was 28.0 days in the week of March 14 for the third straight week, but remained below a 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** & **USENERGY** database.

- Gasoline costs rise.
- Crude oil prices move higher.
- Natural gas costs stabilize.

U.S. Gasoline Prices Strengthen Last Week

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Germany's all sector climate index improved in March to -19.8 from -24 in February. Still, the index only has a 13.9 percentile standing on data back to the early 1990s. The all-sector climate index, the current index and expectations all improve month-to-month with the scope of improvement for the all-sector climate and expectations indexes greater only about 10% of the time. These are sharp month-to-month improvements. However, the levels of the indexes are so weak that the rankings continue to scrape very low levels. Overall conditions in Germany have hardly changed despite the solid month-to-month improvement concentrated in climate and expectations.

**Climate**
The climate measure shows improvements for the all-sector reading, manufacturing, construction wholesaling, retailing, and services. The highest percentile standing for any sector is for construction at a below-median 41.5 percentile standing. The next highest standing is for retailing at a 24.5 percentile standing, the weakest reading is a standing of 10.3% in manufacturing, and the services sector is at a 13.2 percentile standing, not too much stronger than that. 

**Transition-Ho!**
While climate conditions are still in difficult straits, we find that current conditions standings are largely worse than for climate standings; expectations show uneven comparisons. We know there are big changes coming to Europe, particularly for Germany, because of the new shift to more defense spending. This, obviously, will create improvements in the defense sector but should also have broader multiplier effects for the economy, for the manufacturing sector, but also for the economy in general. We also expect these changes to spread across Europe with similar increases in military spending to be introduced in other countries, as the United States is looking for Europe to carry more of its own security burden. We should continue to see improvements in expectations and in climate in the coming months and those improvements should be translated gradually into improved current conditions as well.

**Current conditions-Manufacturing and Construction lead**
Current conditions in the index show improvement across all sectors with minuscule improvements being posted in wholesaling and in retailing in March. The percentile standing for the current indexes in March show the strongest reading in construction; it is the only sector above its median: above its 50th percentile at 61.6%, with retailing close to its 50th percentile mark at 48.2%. The weakest readings are for manufacturing at an 11.9 percentile standing and then services at a 16.9 percentile standing. But manufacturing has the largest month-to-month gain. The overall standing for current conditions is lower still at its 10.7 percentile standing, indicating a confluence of weakness across sectors, a result that has the overall index at a weaker standing than any for individual sector.

**Expectations – Manufacturing surges**
Expectations show broad improvement and for the most part fairly significant improvement across sectors. The headline improvement shows expectations at -16.1 in March compared to -20.5 in February, which leaves the index at a 16.9 percentile standing overall. Expectation standings are weak, however, with the strongest expectation standing in manufacturing at 21.1%, the second strongest for wholesaling at 19.8%; services rank third with the standing of 15.1%. Construction, the sector that has the strongest current and climate standings, has the weakest expectation-standing at the 8.2 percentile mark.

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**Summing up and looking ahead**
These readings begin to pick up some of the changes in progress with expectations showing still very weak current readings but substantial pickups month-to-month. However, most of this is simply expectations improving; it is not expectations built on actually better performance and jumping off from there, as we can see from the fact that the current indexes or the most part are not much changed month-to-month, with extremely little change in wholesaling and retailing. Still, both of those current/expectations reading are higher; manufacturing is also improved in the current reading but expectations are leading the way ahead, improving faster, not the other way around. German transactors are beginning to look to the future recognizing there is a change afoot on military spending that is going to permeate the economy and we're beginning to see that in different aspects of the IFO survey. Stay tuned and stay alert.

Economy in Brief: February 2018

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