Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326a.jpg" width="353">
Business leaders in France became slightly more optimistic in March. The composite business climate indicator, computed by INSEE (Institut Nationale des Statistisque et Etudes Economique) rose 0.93% to 109 from 108 in February and was 3.81% above March, 2006.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326b.jpg" width="353">
The INSEE indicator is a synthetic index constructed to have an average of 100 and a standard deviation of 10. As such values of the index above 100 indicate above average sentiment while those below 100 indicate below average sentiment. The first chart shows that sentiment among French business leaders reached the 100 mark in mid 2005 and continued to rise reaching a peak of 109 in April, 2006. Since then sentiment has been up and down within a narrow range and has once again reached the 109 level.
Given their special characteristics, the absolute levels of synthetic indexes should not be compared with the absolute values of traditional indexes. In the case of the latter, where 100 represents the value of the index in a base year, values above or below 100 merely indicate that sentiment is above or below the level of the base year.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326c.jpg" width="353">
For comparison among European business confidence indicators, the best source is the EUROSTAT data base. Where indexes like those of INSEE for all the countries in the European Community are found. The INSEE measure is different from the EUROSTAT measure, but is close, as can be seen in the second chart. The EUROSTAT data for the four major European Economies, Germany, France, Italy and the UK, are shown in the third chart. All are currently above their long term averages.Data for the EC countries are published shortly after the INSEE data for France. As of now, February data are the latest.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;EUROPEAN SURVEYS OF BUSINESS CLIMATE</th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Mar 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">INSEE Business Climate Average=100</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/FRANCE/@F09/@F09.HTM">France</a></td>
<td>109</td>
<td>108</td>
<td>105</td>
<td>0.93</td>
<td>3.81</td>
<td>107</td>
<td>101</td>
<td>104</td>
</tr>
<tr class="odd">
<td class="firstcol">EUROSTAT&nbsp;Business Climate Average=100</td>
<td>Feb 06</td>
<td>Mar 06</td>
<td>Feb 05</td>
<td>M/M %</td>
<td>Y/Y %</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/EUROSTAT/@U4/@U4.HTM">France</a></td>
<td>108.7</td>
<td>107.9</td>
<td>105.4</td>
<td>0.74</td>
<td>3.13</td>
<td>106.9</td>
<td>103.3</td>
<td>103.0</td>
</tr>
<tr class="odd">
<td class="firstcol"> <a href="http://www.haverselect.com/dlx/EUROSTAT/@U4/@U4.HTM">Germany</a> </td>
<td>108.5</td>
<td>109.7</td>
<td>102.2</td>
<td>-1.09</td>
<td>6.16</td>
<td>105.9</td>
<td>95.1</td>
<td>95.8</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/EUROSTAT/@U4/@U4.HTM">Italy</a></td>
<td>110.3</td>
<td>106.6</td>
<td>105.5</td>
<td>3.47</td>
<td>4.55</td>
<td>108.6</td>
<td>97.9</td>
<td>98.4</td>
</tr>
<tr class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/EUROSTAT/@U4/@U4.HTM">U.K.</a></td>
<td>109.3</td>
<td>104.3</td>
<td>99.9</td>
<td>5.10</td>
<td>9.41</td>
<td>104.0</td>
<td>99.7</td>
<td>109.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Business leaders in France became slightly more optimistic in March. The composite business climate indicator, computed by INSEE (Institut Nationale des Statistisque et Etudes Economique) rose 0.93% to 109 from 108 in February and was [...]

French Business Confidence Improves Slightly: Synthetic vs Traditional Indexes

Robert Brusca

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<img align="left" border="0" height="287" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/0703261.png" width="460">
New home sales plunged in February and show persistent deceleration but that drop exceeds the weakness in other housing measures (see table on the left).
Many economists are looking at the lag difference between existing and new home sales. AND maybe that is the right way to look at it. That does not, however, explain the revisions to lower PAST new home sales. I would explain it all differently partly since starts have the same timing asymmetry as new home sales relative to existing home sales and Starts actually rebounded in February. It think the lag is a red herring of sorts, although the existence of a timing asymmetry is a real phenomenon. 
It is true that the recording of existing home sales is markedly different from the recording of housing starts and new home sales. Each of the later (New home sales and starts) book at the time of the contract or actual start. But existing home sales are recorded at the end of the transaction when the property legally changes hands &#150; a process that can take one to two months (the gap from sales to closing). Therefore the book on those series in is that new home sales reflect current conditions and existing sales reflected &#145;past&#146; conditions. 
But this is not the only difference in these series. Selling a new house is very different from selling an existing house. And let&#146;s see why. 
Only builders can sell new houses. Once that house passes to the public it is owned and if it is re-sold or if it is &#145;flipped&#146; &#150; even without being lived-in -- it becomes an existing home sale. So any &#145;spec&#146; seller that owns a home is in competition with builders; some might be selling an identical product (but from a smaller inventory). The inventory size is also a key to understanding the builder. The more homes he has built, and ready to sell, the more reluctant he is to cut price. Since each price cut is like a reduction on ALL the houses he has, that can have a huge negative wealth impact on the builder. But it&#146;s not just on these special cases where builders compete with individuals. New homes sales compete with all existing home sales as well, not just specialized cases where individuals may own a few homes in a builder&#146;s tract. 
Next consider existing home sales. These existing home sales do compete with new homes sales. AND for the most part the individuals that are selling houses own only one and are selling it and buying another home (new or used) or renting. They may be motivated sellers or not, for a variety of reasons. But if they are selling with intent to repurchase they are somewhat insulated from weak prices. For example, If you are selling a $400K home to buy a $400K home and if each has a price reduction of 5% how does that hurt you? The answer is that even though there is some balance it does hurt you. For sellers who do not have &#145;excess equity in their house a price cut will cost them built up equity and may preclude them from buying the same &#145;value of house&#146; even at a similar lower price. 
Consider this: you buy a house for $400,000 and put 20% down ($80,000). So you have a mortgage of $320,000. Now your house price falls by 5% to $380,000. Your equity is reduced to $60,000 as a result ($380,000, the new value less $320,000, the mortgage). So if you wanted to move and buy a similar house to the one you now own, that house would also cost $380,000 but a conventional mortgage would require 20% down or $76,000. Even ignoring all the closing costs and such you now have only $60,000 in equity. Only homeowners with excess equity in their homes will be able to move in this environment or they will have to step down in terms of the quality of house they buy or take a more risky mortgage. Still surveys show that about 60% of the population of homeowners hold more that 50% equity in their house. Despite the drop in equity implied by the calculation above many could still afford to move and the drop in the house they purchase is a wealth buffer of sorts for them, the whole transaction costs them out of pocket cash or put another way forces them to realize their decline in equity. 
Even so this is a situation where you get hit on the selling side than helped on the buying side. It is unique to existing homes. Builders are only sellers, so weak prices unambiguously hurt them. This would explain why they would be more reluctant to cut price and why their sales would be hurt more than for existing homes in a downturn. It has nothing to do with the closing Vs the selling lag. <a name="1"></a>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<a href="http://www.haverselect.com/dlx/HOUSING1.HTM">Selected housing ratios</a>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>Permits/Starts</td>
<td>Starts/New Houses</td>
<td>New Houses/Existing Houses</td>
<td>New Houses (-2)/Existing Houses</td>
</tr>
<tr>
<td class="firstcol">Max</td>
<td>1.167</td>
<td>2.054</td>
<td>0.201</td>
<td>0.198</td>
</tr>
<tr>
<td class="firstcol">Min</td>
<td>0.921</td>
<td>1.402</td>
<td>0.127</td>
<td>0.153</td>
</tr>
<tr>
<td class="firstcol">Avg</td>
<td>1.030</td>
<td>1.703</td>
<td>0.172</td>
<td>0.172</td>
</tr>
<tr>
<td class="firstcol">Percentile</td>
<td>34.1%</td>
<td>60.8%</td>
<td>0.0%</td>
<td>7.0%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&middot; Let&#146;s looks at some housing ratios to try and see where we stand. The table above presents three. At the bottom we put the ratios in the percentile of their range of values since May of 2002. A value of 100% would be the strongest reading in the range and zero the lowest. The 50% mark is the mid point of the range. &middot; The first is the ratio of housing permits to starts. It is in the 34th percentile of its range of values going back to May of 2000. That means that permits ratio is below its long term average relative to starts by about 16 percentage points. That says that permits are weak relative to starts. It may be that starts are too strong and due to slowdown.&nbsp;&nbsp; &middot; Next, the ratio of starts to new home sales is in its 60th percentile. Starts are a bit strong relative to home sales but only by about 10 percentage points in terms of the normal ratio (the 50th percentile reading marks the norm). This suggests that starts are now slightly stronger than new home sales would suggest and since you have sell them in order to keep building them, it suggests some slowdown in starts might be in order if sales do not pick up. &middot; The third column is shocking. It shows that the ratio of new home to existing home sales is in the bottom of its range. That says new home sales are exceptionally weak relative to existing sales. This suggests that there is a substantial split between these two series. Which one is more out of alignment and why? Just to test and see if it is the lags at work, I have added a last column to the table that looks at new home sales of two months ago Vs existing home sales of this month. Here we are comparing this month&#146;s &#145;lagging sales&#146; on existing homes to the (better conditions) for New Homes of two months ago. Things still do not improve by much. &nbsp;This ratio that adjusts for the lag still leaves the ratio in the bottom 7 percentile of its range. &middot; We conclude that the lag in existing home sales is not the main factor here. We think builders are under re-pricing pressures and not bearing up well. Existing home sales have had an advantage in this market as we discussed above </th>
</tr>
</thead>

</table>
<table border="0" cellspacing="0" width="100%">
<tr>
<td> <img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326d.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326e.jpg" width="353"> </td>
</tr>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&middot; New homes sales have been the weaker of the two series since early 2006. And that is at least partly because builders have not been cutting prices as much as homeowners have, so new home prices have become relatively more expensive. The ratio of new to existing home prices has risen by 13% since January of 2006.&nbsp;</th>
</tr>
</thead>

</table>
</body>
</html>

New home sales plunged in February and show persistent deceleration but that drop exceeds the weakness in other housing measures (see table on the left). Many economists are looking at the lag difference between existing and new home [...]

U.S New Home Sales Plunge – Will the Rest of the Sector Follow?

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<img align="left" border="0" height="287" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/0703261.png" width="460">
New home sales plunged in February and show persistent deceleration but that drop exceeds the weakness in other housing measures (see table on the left).
Many economists are looking at the lag difference between existing and new home sales. AND maybe that is the right way to look at it. That does not, however, explain the revisions to lower PAST new home sales. I would explain it all differently partly since starts have the same timing asymmetry as new home sales relative to existing home sales and Starts actually rebounded in February. It think the lag is a red herring of sorts, although the existence of a timing asymmetry is a real phenomenon. 
It is true that the recording of existing home sales is markedly different from the recording of housing starts and new home sales. Each of the later (New home sales and starts) book at the time of the contract or actual start. But existing home sales are recorded at the end of the transaction when the property legally changes hands &#150; a process that can take one to two months (the gap from sales to closing). Therefore the book on those series in is that new home sales reflect current conditions and existing sales reflected &#145;past&#146; conditions. 
But this is not the only difference in these series. Selling a new house is very different from selling an existing house. And let&#146;s see why. 
Only builders can sell new houses. Once that house passes to the public it is owned and if it is re-sold or if it is &#145;flipped&#146; &#150; even without being lived-in -- it becomes an existing home sale. So any &#145;spec&#146; seller that owns a home is in competition with builders; some might be selling an identical product (but from a smaller inventory). The inventory size is also a key to understanding the builder. The more homes he has built, and ready to sell, the more reluctant he is to cut price. Since each price cut is like a reduction on ALL the houses he has, that can have a huge negative wealth impact on the builder. But it&#146;s not just on these special cases where builders compete with individuals. New homes sales compete with all existing home sales as well, not just specialized cases where individuals may own a few homes in a builder&#146;s tract. 
Next consider existing home sales. These existing home sales do compete with new homes sales. AND for the most part the individuals that are selling houses own only one and are selling it and buying another home (new or used) or renting. They may be motivated sellers or not, for a variety of reasons. But if they are selling with intent to repurchase they are somewhat insulated from weak prices. For example, If you are selling a $400K home to buy a $400K home and if each has a price reduction of 5% how does that hurt you? The answer is that even though there is some balance it does hurt you. For sellers who do not have &#145;excess equity in their house a price cut will cost them built up equity and may preclude them from buying the same &#145;value of house&#146; even at a similar lower price. 
Consider this: you buy a house for $400,000 and put 20% down ($80,000). So you have a mortgage of $320,000. Now your house price falls by 5% to $380,000. Your equity is reduced to $60,000 as a result ($380,000, the new value less $320,000, the mortgage). So if you wanted to move and buy a similar house to the one you now own, that house would also cost $380,000 but a conventional mortgage would require 20% down or $76,000. Even ignoring all the closing costs and such you now have only $60,000 in equity. Only homeowners with excess equity in their homes will be able to move in this environment or they will have to step down in terms of the quality of house they buy or take a more risky mortgage. Still surveys show that about 60% of the population of homeowners hold more that 50% equity in their house. Despite the drop in equity implied by the calculation above many could still afford to move and the drop in the house they purchase is a wealth buffer of sorts for them, the whole transaction costs them out of pocket cash or put another way forces them to realize their decline in equity. 
Even so this is a situation where you get hit on the selling side than helped on the buying side. It is unique to existing homes. Builders are only sellers, so weak prices unambiguously hurt them. This would explain why they would be more reluctant to cut price and why their sales would be hurt more than for existing homes in a downturn. It has nothing to do with the closing Vs the selling lag. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Selected housing ratios
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>Permits/Starts</td>
<td>Starts/New Houses</td>
<td>New Houses/Existing Houses</td>
<td>New Houses (-2)/Existing Houses</td>
</tr>
<tr>
<td class="firstcol">Max</td>
<td>1.167</td>
<td>2.054</td>
<td>0.201</td>
<td>0.198</td>
</tr>
<tr>
<td class="firstcol">Min</td>
<td>0.921</td>
<td>1.402</td>
<td>0.127</td>
<td>0.153</td>
</tr>
<tr>
<td class="firstcol">Avg</td>
<td>1.030</td>
<td>1.703</td>
<td>0.172</td>
<td>0.172</td>
</tr>
<tr>
<td class="firstcol">Percentile</td>
<td>34.1%</td>
<td>60.8%</td>
<td>0.0%</td>
<td>7.0%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&middot; Let&#146;s looks at some housing ratios to try and see where we stand. The table above presents three. At the bottom we put the ratios in the percentile of their range of values since May of 2002. A value of 100% would be the strongest reading in the range and zero the lowest. The 50% mark is the mid point of the range. &middot; The first is the ratio of housing permits to starts. It is in the 34th percentile of its range of values going back to May of 2000. That means that permits ratio is below its long term average relative to starts by about 16 percentage points. That says that permits are weak relative to starts. It may be that starts are too strong and due to slowdown.&nbsp;&nbsp; &middot; Next, the ratio of starts to new home sales is in its 60th percentile. Starts are a bit strong relative to home sales but only by about 10 percentage points in terms of the normal ratio (the 50th percentile reading marks the norm). This suggests that starts are now slightly stronger than new home sales would suggest and since you have sell them in order to keep building them, it suggests some slowdown in starts might be in order if sales do not pick up. &middot; The third column is shocking. It shows that the ratio of new home to existing home sales is in the bottom of its range. That says new home sales are exceptionally weak relative to existing sales. This suggests that there is a substantial split between these two series. Which one is more out of alignment and why? Just to test and see if it is the lags at work, I have added a last column to the table that looks at new home sales of two months ago Vs existing home sales of this month. Here we are comparing this month&#146;s &#145;lagging sales&#146; on existing homes to the (better conditions) for New Homes of two months ago. Things still do not improve by much. &nbsp;This ratio that adjusts for the lag still leaves the ratio in the bottom 7 percentile of its range. &middot; We conclude that the lag in existing home sales is not the main factor here. We think builders are under re-pricing pressures and not bearing up well. Existing home sales have had an advantage in this market as we discussed above. </th>
</tr>
</thead>

</table>
<table border="0" cellspacing="0" width="100%">
<tr>
<td> <img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326d.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326e.jpg" width="353"> </td>
</tr>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&middot; New homes sales have been the weaker of the two series since early 2006. And that is at least partly because builders have not been cutting prices as much as homeowners have, so new home prices have become relatively more expensive. The ratio of new to existing home prices has risen by 13% since January of 2006.&nbsp;</th>
</tr>
</thead>

</table>
French Business Confidence Improves Slightly:  Synthetic vs Traditional Indexes 
by <a href="/comment/Curley.html">Louise Curley</a> March 26, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326a.jpg" width="353">
Business leaders in France became slightly more optimistic in March. The composite business climate indicator, computed by INSEE (Institut Nationale des Statistisque et Etudes Economique) rose 0.93% to 109 from 108 in February and was 3.81% above March, 2006.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326b.jpg" width="353">
The INSEE indicator is a synthetic index constructed to have an average of 100 and a standard deviation of 10. As such values of the index above 100 indicate above average sentiment while those below 100 indicate below average sentiment. The first chart shows that sentiment among French business leaders reached the 100 mark in mid 2005 and continued to rise reaching a peak of 109 in April, 2006. Since then sentiment has been up and down within a narrow range and has once again reached the 109 level.
Given their special characteristics, the absolute levels of synthetic indexes should not be compared with the absolute values of traditional indexes. In the case of the latter, where 100 represents the value of the index in a base year, values above or below 100 merely indicate that sentiment is above or below the level of the base year.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326c.jpg" width="353">
For comparison among European business confidence indicators, the best source is the EUROSTAT data base. Where indexes like those of INSEE for all the countries in the European Community are found. The INSEE measure is different from the EUROSTAT measure, but is close, as can be seen in the second chart. The EUROSTAT data for the four major European Economies, Germany, France, Italy and the UK, are shown in the third chart. All are currently above their long term averages. Data for the EC countries are published shortly after the INSEE data for France. As of now, February data are the latest.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;EUROPEAN SURVEYS OF BUSINESS CLIMATE</th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Mar 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">INSEE Business Climate Average=100</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>109</td>
<td>108</td>
<td>105</td>
<td>0.93</td>
<td>3.81</td>
<td>107</td>
<td>101</td>
<td>104</td>
</tr>
<tr class="odd">
<td class="firstcol">EUROSTAT&nbsp;Business Climate Average=100</td>
<td>Feb 06</td>
<td>Mar 06</td>
<td>Feb 05</td>
<td>M/M %</td>
<td>Y/Y %</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>108.7</td>
<td>107.9</td>
<td>105.4</td>
<td>0.74</td>
<td>3.13</td>
<td>106.9</td>
<td>103.3</td>
<td>103.0</td>
</tr>
<tr class="odd">
<td class="firstcol"> Germany </td>
<td>108.5</td>
<td>109.7</td>
<td>102.2</td>
<td>-1.09</td>
<td>6.16</td>
<td>105.9</td>
<td>95.1</td>
<td>95.8</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>110.3</td>
<td>106.6</td>
<td>105.5</td>
<td>3.47</td>
<td>4.55</td>
<td>108.6</td>
<td>97.9</td>
<td>98.4</td>
</tr>
<tr class="odd">
<td class="firstcol">U.K.</td>
<td>109.3</td>
<td>104.3</td>
<td>99.9</td>
<td>5.10</td>
<td>9.41</td>
<td>104.0</td>
<td>99.7</td>
<td>109.4</td>
</tr>
</tbody>
</table>
</body>
</html>

New Home Sales Plunge – Will the Rest of the Sector Follow?

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/070323c.jpg" width="353">
Prices of land in Japan rose 0.4% from January 1, 2006, to January 1, 2007, according to a report issued late Thursday in Japan by the Ministry of Land, Infrastructure and Transport. This is the first increase in land prices since the year to January 1, 1991, that is 16 years. Over that period, land values fell by more than half, by 52.1%, to a level last seen in 1982. The latest increase is, of course, hardly anything, but this long, excruciating decline seems to have ended, in still another sign that the Japanese economy, however haltingly, may be making further progress toward sustained expansion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323d.jpg" width="353">
Commercial business sites showed the largest gain, up 2.3%, with a substantial 9.4% rise in the Tokyo market. These prices had also risen last year in Tokyo, by 1.0%. Residential land throughout Japan edged higher in the latest year, this by just 0.1%, with Tokyo up 3.6%, Osaka 1.8% and Nagoya 1.7%. While these three major metropolitan areas are seeing renewed strength, prices of residential sites in &quot;local districts&quot; were still down, by 2.7% on average. Values of so-called &quot;prospective housing land&quot; were also still weak, down 4.3%, implying that not much enthusiasm for new housing development has emerged. And industrial building sites, too, are still declining in value, although the decrease of 1.8% to January 1, 2007, is the smallest reduction since 1992; these values did increase in the latest reading for the three main metro areas that the Land Ministry reports. Further, property values for light industry, or &quot;quasi-industry&quot;, did rise, also due to gains in the big cities.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323e.jpg" width="353">
Back in the 1980s, land prices were skyrocketing, and owing to the organization of Japanese real estate holdings, it was thought that the &quot;tradable&quot; supply of land was so small and demand for land in the vibrant Japanese economy so large that property prices might never fall. But the tight money policies in 1989 and 1990, meant to curb stock speculation as well as that in real estate, did result in a downturn in land values. Over time, it seemed the persistent cuts in property values would then, ironically, never end. But apparently they have. This is uneven, as we have seen, and has yet to pick up in the outlying, &quot;local districts&quot;. But the first forward steps have been taken.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN: &nbsp;% Change as of January 1</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">Average, 2000-2004</th>
<th scope="col">Average, &nbsp;1995-1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Sites: Japan</td>
<td>0.4</td>
<td>-2.8</td>
<td>-5.0</td>
<td>-5.7</td>
<td>-3.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>4.6</td>
<td>-0.7</td>
<td>-3.2</td>
<td>-6.2</td>
<td>-5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential: Japan</td>
<td>0.1</td>
<td>-2.7</td>
<td>-4.6</td>
<td>-5.0</td>
<td>-2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>3.6</td>
<td>-0.9</td>
<td>-3.2</td>
<td>-5.8</td>
<td>-4.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Commercial: Japan</td>
<td>2.3</td>
<td>-2.7</td>
<td>-5.6</td>
<td>-7.8</td>
<td>-8.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>9.4</td>
<td>1.0</td>
<td>-2.5</td>
<td>-7.1</td>
<td>-12.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial: Japan</td>
<td>-1.8</td>
<td>-4.9</td>
<td>-7.4</td>
<td>-7.0</td>
<td>-3.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>0.9</td>
<td>-4.1</td>
<td>-7.4</td>
<td>-9.6</td>
<td>-6.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Prices of land in Japan rose 0.4% from January 1, 2006, to January 1, 2007, according to a report issued late Thursday in Japan by the Ministry of Land, Infrastructure and Transport. This is the first increase in land prices since the [...]

Land Values Increase in Japan First Time in 16 Years: Is Long Drought in Japanese Real Estate Finally Over?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323a.jpg" width="353">
Existing homes sales had been expected to drop in February. Instead they jumped by 3.9% and that was after a gain of 2.7% in January. What&#146;s up? Housing starts were off sharply in January then up in February but existing home sales are subject to different forces as well as some of the same dynamics. Weather was deemed to have been a factor for housing starts. Admittedly weather is more of a factor for house-building than buying. Moreover existing home sales are on a different timeline. Starts and new home sales book at the time of the transaction&#146;s inception. Existing home sales book at the transaction&#146;s completion. Since about 70% of the population owns homes, you probably know what this means, first hand. The lag on existing home sales depends on the length of time from the initial signing of the contract through to the closing, a period that requires appraisals, much document preparation and eventually a bank completing a credit decision and a meeting with all interested parties. So we had expected existing home sales to reveal conditions more like January than like February. WRONG! 
Perhaps the larger surprise was that existing home sales were strong across the nation. Sales were flat in the West and up everywhere else on the month. Over periods of three months and six months, growth rates for existing home sales are firm to strong. Year/year, three of four national regions show sales lower but the Northeast (a region where bad weather is most likely to be a depressing factor at this time of year) oddly is up (3.4%). The Midwest is barely lower at -1.9%. The South is off by 4.4% and the West by a much larger 9.6%. (see table below).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323b.jpg" width="353"> 
 At the same time, prices have been softening. While using February as an end point probably exaggerates the trend decline in prices over the past 20 months, prices are falling at a 3.3% annualized rate for that period. But the point is that prices have been softer and lower prices have not seized up the market but rather lubricated it. 
Existing home prices remain weak across regions. For housing starts and new home sales (the latter not yet available for this month) builders have a cost element and a margin they try to protect and so prices may not have so much flexibility. But with the run-up in house prices over the last 5-6 years or more, homeowners have a lot of equity, in general, and that gives them the flexibility to make deals. And if you are a seller/buyer this does not really hurt you. A seller/buyer is an existing home seller who is also looking to buy somewhere else &#150; as most are. This sort of transactor learns quickly that what you lose on your house sale (compared to the profit you might have made when house prices were at their peak) you make up for when you buy and get a good deal on the &#145;other end&#146;. So the drop in the price for existing homes probably exaggerates the &#145;pain&#146; being inflicted on sellers. <a name="1"></a>
Different strokes for different folks&#133;Diminishing weakness for starts and permits but outright strength for existing home sales.

<table border="0" cellspacing="0" width="100%">
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<td> <img height="287" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/0703231.gif" v:shapes="_x0000_i1028" width="460"></td>
</tr>
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<thead>
<tr>
<th scope="col" class="firstcol">&middot; Since most existing home sellers live in their homes they often can wait out bad markets or decide to bite the bullet and take less and sell. It all depends on individual circumstances. Some houses are sold due to a death in the family and estate needs, some are due to job transfers and location shifts, others are due to pure housing preferences that change or a desire for more/less space related to the natural family cycle and some are unrequested career choices foisted on the individual by his/her former employer, and so on. This makes existing homes an irregular market or to put it another way, a market rife with conflicting opportunities. It is much different from dealing with a builder. &middot; On balance it is difficult to figure out what these robust sales mean for the economy. Existing home sales make little contribution to GDP directly since they are just a market trading around the existing residential housing stock. But we know that house-buying usually triggers a spate of other transactions. For now we add this to the stack of reports that do not add up. And that pile is getting larger. For every weak report it seems we get a strong one. While this is not one of the key reports or even contributors to GDP it tells us something about economic activity and peoples&#146; motivations. They appear to be liquid and mobile and able to transact in a market we thought would be difficult and that is not what we had expected. This report makes the economy seem more resilient, if not strong.</th>
</tr>
</thead>

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Percent Changes: Existing Home Sales
</tr>
</thead>
<tbody>
<tr class="grey11">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey11">
<td class="firstcol">Mo/Mo%</td>
<td>Total</td>
<td>North-East</td>
<td>Mid-West</td>
<td>South</td>
<td>West</td>
</tr>
<tr class="grey10">
<td class="firstcol">Feb.07</td>
<td>3.9%</td>
<td>14.2%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>0.0%</td>
</tr>
<tr class="grey9">
<td class="firstcol">Jan.07</td>
<td>2.7%</td>
<td>-0.9%</td>
<td>4.1%</td>
<td>2.0%</td>
<td>5.6%</td>
</tr>
<tr class="grey8">
<td class="firstcol">Dec.06</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>2.8%</td>
<td>0.8%</td>
<td>-2.3%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Nov.06</td>
<td>-0.3%</td>
<td>4.9%</td>
<td>0.0%</td>
<td>-2.0%</td>
<td>-1.5%</td>
</tr>
<tr class="grey6">
<td class="firstcol">3-Mo: ar</td>
<td>28.2%</td>
<td>48.1%</td>
<td>45.1%</td>
<td>17.8%</td>
<td>12.5%</td>
</tr>
<tr class="grey6">
<td class="firstcol">6-mo: ar</td>
<td>12.0%</td>
<td>28.3%</td>
<td>21.0%</td>
<td>4.8%</td>
<td>4.7%</td>
</tr>
<tr class="grey5">
<td class="firstcol">1-Year</td>
<td>-3.6%</td>
<td>3.4%</td>
<td>-1.9%</td>
<td>-4.4%</td>
<td>-9.6%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Prices:</td>
<td colspan="5">Median Prices</td>
</tr>
<tr class="grey3">
<td class="firstcol">One Mo:</td>
<td>0.9%</td>
<td>1.4%</td>
<td>-2.7%</td>
<td>0.4%</td>
<td>4.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">One Year:</td>
<td>-1.3%</td>
<td>-1.4%</td>
<td>-1.3%</td>
<td>-2.9%</td>
<td>2.2%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Average Prices</td>
</tr>
<tr class="grey1">
<td class="firstcol">One Year:</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>-2.4%</td>
<td>1.5%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

Existing homes sales had been expected to drop in February. Instead they jumped by 3.9% and that was after a gain of 2.7% in January. Whats up? Housing starts were off sharply in January then up in February but existing home sales [...]

US Existing Home Sales Jump – Markets Taken by Surprise

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323a.jpg" width="353">
Existing homes sales had been expected to drop in February. Instead they jumped by 3.9% and that was after a gain of 2.7% in January. What&#146;s up? Housing starts were off sharply in January then up in February but existing home sales are subject to different forces as well as some of the same dynamics. Weather was deemed to have been a factor for housing starts. Admittedly weather is more of a factor for house-building than buying. Moreover existing home sales are on a different timeline. Starts and new home sales book at the time of the transaction&#146;s inception. Existing home sales book at the transaction&#146;s completion. Since about 70% of the population owns homes, you probably know what this means, first hand. The lag on existing home sales depends on the length of time from the initial signing of the contract through to the closing, a period that requires appraisals, much document preparation and eventually a bank completing a credit decision and a meeting with all interested parties. So we had expected existing home sales to reveal conditions more like January than like February. WRONG! 
Perhaps the larger surprise was that existing home sales were strong across the nation. Sales were flat in the West and up everywhere else on the month. Over periods of three months and six months, growth rates for existing home sales are firm to strong. Year/year, three of four national regions show sales lower but the Northeast (a region where bad weather is most likely to be a depressing factor at this time of year) oddly is up (3.4%). The Midwest is barely lower at -1.9%. The South is off by 4.4% and the West by a much larger 9.6%. (see table below).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323b.jpg" width="353"> 
 At the same time, prices have been softening. While using February as an end point probably exaggerates the trend decline in prices over the past 20 months, prices are falling at a 3.3% annualized rate for that period. But the point is that prices have been softer and lower prices have not seized up the market but rather lubricated it. 
Existing home prices remain weak across regions. For housing starts and new home sales (the latter not yet available for this month) builders have a cost element and a margin they try to protect and so prices may not have so much flexibility. But with the run-up in house prices over the last 5-6 years or more, homeowners have a lot of equity, in general, and that gives them the flexibility to make deals. And if you are a seller/buyer this does not really hurt you. A seller/buyer is an existing home seller who is also looking to buy somewhere else &#150; as most are. This sort of transactor learns quickly that what you lose on your house sale (compared to the profit you might have made when house prices were at their peak) you make up for when you buy and get a good deal on the &#145;other end&#146;. So the drop in the price for existing homes probably exaggerates the &#145;pain&#146; being inflicted on sellers. <a name="1"></a>
Different strokes for different folks&#133;Diminishing weakness for starts and permits but outright strength for existing home sales.

<table border="0" cellspacing="0" width="100%">
<tr>
<td> <img height="287" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/0703231.gif" v:shapes="_x0000_i1028" width="460"></td>
</tr>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&middot; Since most existing home sellers live in their homes they often can wait out bad markets or decide to bite the bullet and take less and sell. It all depends on individual circumstances. Some houses are sold due to a death in the family and estate needs, some are due to job transfers and location shifts, others are due to pure housing preferences that change or a desire for more/less space related to the natural family cycle and some are unrequested career choices foisted on the individual by his/her former employer, and so on. This makes existing homes an irregular market or to put it another way, a market rife with conflicting opportunities. It is much different from dealing with a builder. &middot; On balance it is difficult to figure out what these robust sales mean for the economy. Existing home sales make little contribution to GDP directly since they are just a market trading around the existing residential housing stock. But we know that house-buying usually triggers a spate of other transactions. For now we add this to the stack of reports that do not add up. And that pile is getting larger. For every weak report it seems we get a strong one. While this is not one of the key reports or even contributors to GDP it tells us something about economic activity and peoples&#146; motivations. They appear to be liquid and mobile and able to transact in a market we thought would be difficult and that is not what we had expected. This report makes the economy seem more resilient, if not strong.</th>
</tr>
</thead>

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Percent Changes: Existing Home Sales
</tr>
</thead>
<tbody>
<tr class="grey11">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey11">
<td class="firstcol">Mo/Mo%</td>
<td>Total</td>
<td>North-East</td>
<td>Mid-West</td>
<td>South</td>
<td>West</td>
</tr>
<tr class="grey10">
<td class="firstcol">Feb.07</td>
<td>3.9%</td>
<td>14.2%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>0.0%</td>
</tr>
<tr class="grey9">
<td class="firstcol">Jan.07</td>
<td>2.7%</td>
<td>-0.9%</td>
<td>4.1%</td>
<td>2.0%</td>
<td>5.6%</td>
</tr>
<tr class="grey8">
<td class="firstcol">Dec.06</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>2.8%</td>
<td>0.8%</td>
<td>-2.3%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Nov.06</td>
<td>-0.3%</td>
<td>4.9%</td>
<td>0.0%</td>
<td>-2.0%</td>
<td>-1.5%</td>
</tr>
<tr class="grey6">
<td class="firstcol">3-Mo: ar</td>
<td>28.2%</td>
<td>48.1%</td>
<td>45.1%</td>
<td>17.8%</td>
<td>12.5%</td>
</tr>
<tr class="grey6">
<td class="firstcol">6-mo: ar</td>
<td>12.0%</td>
<td>28.3%</td>
<td>21.0%</td>
<td>4.8%</td>
<td>4.7%</td>
</tr>
<tr class="grey5">
<td class="firstcol">1-Year</td>
<td>-3.6%</td>
<td>3.4%</td>
<td>-1.9%</td>
<td>-4.4%</td>
<td>-9.6%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Prices:</td>
<td colspan="5">Median Prices</td>
</tr>
<tr class="grey3">
<td class="firstcol">One Mo:</td>
<td>0.9%</td>
<td>1.4%</td>
<td>-2.7%</td>
<td>0.4%</td>
<td>4.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">One Year:</td>
<td>-1.3%</td>
<td>-1.4%</td>
<td>-1.3%</td>
<td>-2.9%</td>
<td>2.2%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Average Prices</td>
</tr>
<tr class="grey1">
<td class="firstcol">One Year:</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>-2.4%</td>
<td>1.5%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
Land Values Increase in Japan First Time in 16 Years: Is Long Drought in Japanese Real Estate Finally Over? 
by <a href="/comment/Stone.html">Carol Stone</a> March 23, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323c.jpg" width="353">
Prices of land in Japan rose 0.4% from January 1, 2006, to January 1, 2007, according to a report issued late Thursday in Japan by the Ministry of Land, Infrastructure and Transport. This is the first increase in land prices since the year to January 1, 1991, that is 16 years. Over that period, land values fell by more than half, by 52.1%, to a level last seen in 1982. The latest increase is, of course, hardly anything, but this long, excruciating decline seems to have ended, in still another sign that the Japanese economy, however haltingly, may be making further progress toward sustained expansion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323d.jpg" width="353">
Commercial business sites showed the largest gain, up 2.3%, with a substantial 9.4% rise in the Tokyo market. These prices had also risen last year in Tokyo, by 1.0%. Residential land throughout Japan edged higher in the latest year, this by just 0.1%, with Tokyo up 3.6%, Osaka 1.8% and Nagoya 1.7%. While these three major metropolitan areas are seeing renewed strength, prices of residential sites in &quot;local districts&quot; were still down, by 2.7% on average. Values of so-called &quot;prospective housing land&quot; were also still weak, down 4.3%, implying that not much enthusiasm for new housing development has emerged. And industrial building sites, too, are still declining in value, although the decrease of 1.8% to January 1, 2007, is the smallest reduction since 1992; these values did increase in the latest reading for the three main metro areas that the Land Ministry reports. Further, property values for light industry, or &quot;quasi-industry&quot;, did rise, also due to gains in the big cities.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323e.jpg" width="353">
Back in the 1980s, land prices were skyrocketing, and owing to the organization of Japanese real estate holdings, it was thought that the &quot;tradable&quot; supply of land was so small and demand for land in the vibrant Japanese economy so large that property prices might never fall. But the tight money policies in 1989 and 1990, meant to curb stock speculation as well as that in real estate, did result in a downturn in land values. Over time, it seemed the persistent cuts in property values would then, ironically, never end. But apparently they have. This is uneven, as we have seen, and has yet to pick up in the outlying, &quot;local districts&quot;. But the first forward steps have been taken.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN: &nbsp;% Change as of January 1</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">Average, 2000-2004</th>
<th scope="col">Average, &nbsp;1995-1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Sites: Japan</td>
<td>0.4</td>
<td>-2.8</td>
<td>-5.0</td>
<td>-5.7</td>
<td>-3.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>4.6</td>
<td>-0.7</td>
<td>-3.2</td>
<td>-6.2</td>
<td>-5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential: Japan</td>
<td>0.1</td>
<td>-2.7</td>
<td>-4.6</td>
<td>-5.0</td>
<td>-2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>3.6</td>
<td>-0.9</td>
<td>-3.2</td>
<td>-5.8</td>
<td>-4.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Commercial: Japan</td>
<td>2.3</td>
<td>-2.7</td>
<td>-5.6</td>
<td>-7.8</td>
<td>-8.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>9.4</td>
<td>1.0</td>
<td>-2.5</td>
<td>-7.1</td>
<td>-12.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial: Japan</td>
<td>-1.8</td>
<td>-4.9</td>
<td>-7.4</td>
<td>-7.0</td>
<td>-3.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>0.9</td>
<td>-4.1</td>
<td>-7.4</td>
<td>-9.6</td>
<td>-6.0</td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070322b.jpg" width="353">
Retail sales in South Africa grew 9.4% in constant 2000 prices in January from a year ago, a resumption of stronger growth after December&#39;s gain slowed to 6.7%. For all of 2006, sales were up 9.6%. In current prices, they rose 15.6% from January 2006, also similar to the overall 2006 gain of 15.3%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070322c.jpg" width="353">
A breakout of sales into store groups is only available since 2005. Among the various groups, the greatest strength has been in household goods and building materials; these surged 25.5% (current prices) in January from the year-ago amount and were up 20.1% for all of 2006. The push for this growth has come from new construction and remodeling. The accompanying graph of construction data shows the expansion in residential buildings completed and in additions and alterations (some of which can be nonresidential, too, of course). The latter item continues to grow rapidly. The former, new homes, has flattened in recent months after a sustained rise that lasted from the spring of 2004 through last summer. But filling these homes with furniture and appliances and adding various amenities is supporting retail sales.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070322a.jpg" width="353">
People have also been buying cars in good numbers. The index of vehicles sold was up 3.0% in February, following a drop of 9.6% in January, which in turn came after an 8.5% increase n December; these are month-to-month changes in seasonally adjusted data. These erratic monthly swings are still yielding year-to-year advances; for February, it was 5.1%. The last three years have been extraordinary for vehicle sales, up 14.4% for 2006, 25.7% in 2005 and 22.0% in 2004. It&#39;s hardly surprising that some hesitation is developing. But overall, the consumer sector is pulling the South African economy ahead with some vigor.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">South Africa, NSA ex as noted</th>
<th scope="col">Feb 2007</th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Sales, Mil.Rand</td>
<td>--</td>
<td>34,018</td>
<td>49,608</td>
<td>29,440</td>
<td>418,450</td>
<td>362,796</td>
<td>329,238</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr % Chg</td>
<td>--</td>
<td>15.6%</td>
<td>12.2%</td>
<td>12.0%</td>
<td>15.3%</td>
<td>10.2%</td>
<td>13.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Mil.2000.Rand</td>
<td>--</td>
<td>24,126</td>
<td>35,485</td>
<td>22,052</td>
<td>303,535</td>
<td>276,945</td>
<td>259,502</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr % Chg</td>
<td>--</td>
<td>9.4%</td>
<td>6.7%</td>
<td>6.9%</td>
<td>9.6%</td>
<td>6.7%</td>
<td>9.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Furniture,&nbsp; Appliances &amp; Building Matl, Yr/Yr % Chg</td>
<td>--</td>
<td>25.5%</td>
<td>12.4%</td>
<td>19.5%</td>
<td>20.1%</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Vehicles Sold (SA, 2000=100)</td>
<td>192.3</td>
<td>186.7</td>
<td>206.6</td>
<td>182.9</td>
<td>189.5</td>
<td>165.6</td>
<td>131.8</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales in South Africa grew 9.4% in constant 2000 prices in January from a year ago, a resumption of stronger growth after December's gain slowed to 6.7%. For all of 2006, sales were up 9.6%. In current prices, they rose 15.6% [...]

South Africa Retail Sales Pick Up; Construction Activity and Vehicle Sales Also Show Gains

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

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Michael J. Moran

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The Conference Board’s index of Consumer Confidence inched higher in April from an upwardly revised reading in March. The combined changes left the measure 1.1% higher than the preliminary tally in March. Despite the improvement, the index remained in the low end of the range for the current expansion. The index in April totaled 92.8, down from an average of 96.1 in 2025 and an annual cyclical high of 105.4 in 2023.

The Improvement in April reflected a pickup in the expectations component, which rose 1.7%. The current conditions component inched 0.2% lower. Overall views on current conditions slipped despite more favorable assessments of the labor market. The so-called measure of the jobs gap (share of respondents indicating that jobs are plentiful less the share saying that jobs are hard to get) rose 1.4 percentage points higher to 7.5%. The pickup reflected a drop in the share indicating that jobs are hard to get (down 1.5 percentage points to 19.8%). The share indicating that jobs are plentiful eased 0.1 percentage point to 27.3%.

Although expectations improved in April, from a long-term perspective they could be viewed as the more important factor restraining the headline measure of confidence. As shown in the left chart below, the expectations component of confidence shows considerably less volatility than the current conditions component does. The contrasting patterns suggest that individuals realize that the economy will undergo possibly sharp cyclical swings, but they expect conditions at some point to return to an underlying norm.

The current conditions index in the current cycle has indeed dropped noticeably, but it is still above the long run average (123.8 in April versus the average of approximately 108 from 1990 to 2025). The expectations component, as usual, has eased less than the current conditions component, but its shift has pushed the measure to the low end of its long-run range (72.2 in April versus an average of approximately 88).

Interestingly, concern about the labor market seems to be a factor affecting expectations. While current views on the labor market are favorable (plentiful less hard to get jobs gap of 7.5%), Individual are concerned about the future. The survey asks respondents if they expect more jobs or fewer jobs six months hence. The share indicating fewer jobs has moved well into the upper end of the historical range. Such observations in the past were typically seen only during recession (chart, below right). An unfavorable view on interest rates also seems to be playing a role in depressing the expectations component. More than 60% of respondents to the current survey expect higher interest rates 12 months from now.

The results from the Conference Board survey of consumers differ markedly from those of the University of Michigan Survey Research Center. The Michigan results show consumer sentiment at a record low, while the Conference Board index is only slightly below its long-run average. The difference most likely reflects the nature of the questions in the surveys. The Conference Board focuses on business and employment conditions, while Michigan emphasizes personal finances. The focus on finances, along with questions on inflation, probably picks up concerns about affordability.

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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- Expectations improved slightly in April, but are still subdued relative to norms.
- Moderately favorable view of current conditions.

Consumer Confidence: Modest Change in April

Winnie Tapasanun

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U.S. house prices were essentially unchanged m/m in February after rises of 0.2% in January (+0.1% initially) and 0.3% in December (unrevised), according to the Federal Housing Finance Agency (FHFA) House Price Index. February marked the first flat reading since September following four consecutive m/m increases. The HPI was at 441.43 in February, up 14.8% from its August 2022 low of 384.59. The year-on-year growth rate eased to 1.7% in February—the lowest since March 2012—from 1.8% in January (+4.1% in February 2025), down from a high of 6.9% in February 2024 and well below a peak of 18.5% in February 2022.

By region, February FHFA house prices showed a mixed performance. House prices fell m/m in February (vs. January) in four of the nine census divisions. Declines were led by Mountain (-1.1% vs. +0.4%), followed by Pacific (-0.5% vs. +0.6%), West North Central (-0.4% vs. +0.3%), and Middle Atlantic (-0.1% vs. +0.3%). To the upside, house prices rose m/m in four census divisions in February (vs. January): South Atlantic (+0.6% vs. -0.2%), East South Central (+0.2% vs. +1.2%), New England (+0.2% vs. +0.6%), and West South Central (+0.2% vs. -0.3%). Meanwhile, house prices in East North Central were virtually unchanged m/m for the second successive month in February following seven straight m/m gains.

Year-on-year house prices continued to rise in February in most regions, except Mountain, Pacific, and West South Central. The y/y growth rate accelerated in February (vs. January) in only two of the nine census divisions: East South Central (+4.0% vs. +3.2%) and South Atlantic (+0.9% vs. +0.4%). Meanwhile, house price growth decelerated y/y in February (vs. January) in four regions: New England (+3.1% vs. +3.9%), West North Central (+3.1% vs. +3.6%), East North Central (+3.8% vs. +4.5%), and Middle Atlantic (+4.2% vs. +4.5%). To the downside, Mountain (-0.7% vs. 0.0%), Pacific (-0.4% vs. -0.3%), and West South Central (-0.1% vs. -0.4%) posted y/y declines in February.

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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- February FHFA HPI 0.0% m/m; +1.7% y/y, lowest since Mar. ’12.
- House prices down m/m in four of nine census divisions, led by Mountain (-1.1%); up in four, driven by South Atlantic (+0.6%); flat in East North Central.
- House prices up y/y in six of nine regions, led by Middle Atlantic (+4.2%), but down in Mountain (-0.7%), Pacific (-0.4%), and West South Central (-0.1%).

U.S. FHFA House Prices Flat in February After Four Straight M/M Gains

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Early PPI reports in the monetary union show collective pressures building over the past year, with newly emergent pressures popping up strongly in March.

The sequence of monthly inflation observations for these five early reporters in March shows that inflation pressure has not been clearly building but did jump up suddenly in March. In February, before the Iran war, the median monthly PPI gain was -0.5%. In March, that jumped to +3.9% (median month-to-month gain). Monthly pressure does not show steady gains anywhere except moderately in Germany. Finland shows deceleration in progress (!) even through—especially through—March, as its PPI in March fell by 5.3%. But the whole Finish pattern is somewhat upside down, with prices up month-to-month by 6.2% in January and 2.9% in February. It is not a trend that is easy to understand.

However, the March monthly gains are strong enough to drive sequential inflation higher from 12-months, to 6-months, to 3-months across all early-reporting countries. Even the German ex-energy index shows acceleration on that profile.

On a year-on-year basis, two of the early reporters have PPI inflation below 2%. Finland has 12-month PPI inflation at 2.1%, but Italy and Spain have inflation much higher, up by 3.4% over 12 months in Spain and by 5.6% in Italy.

The PPI has been very well-behaved in the last few years. Looking at 12-month changes for the year ended in March, the median change for this group in 2025 was -0.1%, compared to -4.6% in 2024.

The chart shows the PPI flared sharply in 2021 and 2022, then fell quickly into line in 2023. Clearly, the inflation tune now is being called by oil prices, the same as for that spike prices in 2022 and 2023.

The hope is that the oil price bump up will not be as long-lived, that the war will end soon, with the Strait of Hormuz reopened, and that oil prices—and other inflation pressures—will sink back to prerevision norms relatively quickly. That could happen, but so could other outcomes so markets remain wary. One problem this time is the destruction of oil facilities and the shutting of oil fields that could cause high prices to linger longer.

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**A new dynamic**
However, there is now a new dynamic with the UAE leaving OPEC. OPEC has been a vehicle to harness common behavior to control oil prices mostly to keep them higher. While undermining OPEC (UAE pumps about 13% of OPEC capacity) at a time the U.S. oil prowess has risen, this defection will make it much harder for OPEC to control prices. When countries are not bound together, the incentive is for countries to cheat on their production quota. In a cartel arrangement, when many cheat, the output reduction does not hold, and oil prices fall. A cartel arrangement allows for supply control and reduction which raises prices. But once prices are up, each member has an individual incentive to cheat—to sell more than his quota share of oil at the higher price. But that undermines the cartel. So, this move, this exit of UAE from the cartel, will create instability in the OPEC by moving more production outside the OPEC framework, beyond its control. Unless the Saudis are willing to be the ‘swing man’ and cut back their output to keep prices on target—something the Saudis have been increasingly unwilling to do—OPEC will be in less control.

EMU PPIs Show Instant Pressure

Tian Yong Woon

In this week’s Letter, we cover the latest developments and implications of the Middle East conflict for Asia, while also making space for other important themes, including artificial intelligence (AI). The Middle East conflict remains in a no deal state coming out of the weekend, though some early Monday optimism emerged in Asian markets following Iran’s reported offer to reopen the Strait of Hormuz (chart 1). Nonetheless, as the Strait closure drags on, so too do the fiscal costs of domestic fossil fuel subsidies across Asia, which have been shown to move closely with crude oil prices (chart 2). While such measures offer direct relief by cushioning household energy costs, they remain difficult to sustain over the long haul.

Over the week, we also saw a further fraying in regional monetary policy trends, with the Philippines hiking its policy rate for the first time in about two years amid inflation concerns, while Indonesia stood pat on rates (chart 3). Investor attention is likely to remain fixed on monetary policy this week, with the Bank of Japan due to decide on policy. Expectations for an April hike have faded amid the persistent Middle East conflict, though yen weakness continues to present a source of concern (chart 4). The week also brings China’s latest PMI readings (chart 5), adding to the recent run of hard data accompanying the Q1 GDP release.

Beyond the Middle East conflict, the evolution of AI continues to demand close attention. Before geopolitical tensions took centre stage, AI was the dominant market narrative — and that enthusiasm has hardly faded. If anything, recent developments suggest the story is broadening: use cases are expanding, scalability is improving, and access is widening beyond large corporates to the mass market — increasingly spilling into the realm of physical AI. It may well be this persistent wave of optimism that is helping to underpin equity valuations, even as the geopolitical backdrop darkens (chart 6).

**The Middle East conflict**
About two months in, we remain stuck in the limbo of the US-Iran conflict, which has left the Strait of Hormuz largely closed and much of the world starved of the critical oil flows needed to power the global economy. The back and forth between the US and Iran has persisted in recent weeks, with both sides again failing to reach a peace deal over the weekend, though Monday’s news of Iran offering to reopen the Strait has revived some hope in markets. In truth, commodity and market valuations do not hinge so much on a peace deal itself, but rather on the resumption of oil flows through the Strait, something that could materialise even in the absence of a formal deal, though any agreement that includes and credibly delivers such a reopening would likely be warmly received by markets. Until then, market gyrations are likely to persist, with prices fluctuating in response to each new snippet of news. And until then, the world will continue both to be starved of, while gradually adapting to, the drip feed of oil flows emerging from the Strait.

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**The fiscal costs of the Middle East conflict**
As the Middle East conflict drags on, so too does the strain on fiscal resources across parts of Asia, as the costs of energy-related subsidy programmes continue to mount. While such programmes have an immediate, direct, and tangible impact in shielding households from surging energy costs, they are far from sustainable, particularly if oil prices remain well above targeted levels or stay elevated for an extended period. As chart 2 illustrates, the costs of these explicit subsidy programmes tend to rise closely with crude oil prices, as seen in India and Indonesia. Other measures adopted elsewhere, such as drawing down oil reserves, may be less fiscally costly, but are similarly difficult to sustain indefinitely. In both respects, the clock is ticking, and the world continues to hold its breath as the conflict drags on.

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**The latest central bank responses to the conflict**
Over the past week, Asia saw two central bank decisions. The Philippines’ (BSP) opted to deliver its first rate hike in about two years, while Indonesia’s (BI) chose to stand pat on policy rates and instead committed to stepped up FX intervention (chart 3). This latest round of decisions points to a further fraying of what had been a broad regional monetary policy consensus, namely that central banks would delay additional easing while maintaining a high bar for outright tightening. Domestic considerations, however, remain paramount. In the Philippines’ case, the central bank has moved to rein in inflation, which is already showing notable signs of price pass through stemming from disruptions linked to the Strait of Hormuz. That said, BSP is not the first in the region to buck the reluctance to tighten. Singapore’s central bank had already tightened policy in mid-April, albeit through its own distinct framework, given its use of the exchange rate rather than policy rates as the primary channel for monetary policy.

260427T3.jpg

**The week ahead**
Looking to the week ahead, a major central bank decision looms in Japan. Market expectations for the Bank of Japan to deliver a rate hike at its April meeting have ebbed amid the persistence of the Middle East conflict, to which Japan remains particularly vulnerable given its reliance on oil imports flowing through the Strait of Hormuz. At the same time, inflation in Japan has yet to become a major concern, with recent readings having picked up but not yet entering troubling territory. One potential source of concern, however, lies with the Japanese yen, which has remained on a weakening trend since early last year (chart 4). That depreciation has been one of the key arguments underpinning calls for further rate hikes.

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The week also brings China’s latest PMIs into focus. March saw a divergence between China’s official PMI readings, which improved, and the unofficial readings from RatingDog, which instead pulled back. Nonetheless, both official and unofficial gauges remained in expansionary territory (chart 5), with investors now watching closely to see whether that resilience can be sustained amid ongoing stresses from the Middle East, or whether offsetting drivers can continue to keep Chinese business sentiment and prospects buoyant.

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**Beyond the strait**
Moving beyond the Middle East conflict, a whole host of developments continue to unfold globally, many of which have in fact helped offset some of the pessimism wrought by the Strait’s chokehold. One such development is artificial intelligence (AI), which had dominated headlines before the outbreak of the conflict and continues to advance at breakneck pace. AI capabilities are still rapidly evolving, while practical applications, such as physical AI embodied in humanoid robots, are beginning to show broader and stronger use cases. Production of such robots is also becoming increasingly scalable and within reach not just for industrial complexes and healthcare, but for the mass market as well. It is perhaps growing optimism around these prospects that has helped keep equity valuations buoyant, even in the face of the festering conflict in the Middle East. Moreover, while concerns over AI-driven job displacement persist, new opportunities are emerging as well, particularly for AI adopters, with a growing share of job postings in Western economies increasingly referencing AI-related skills, as shown in chart 6.

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Asia

Economic Letter from Asia: Not Just About the Strait

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**The Distributive Trades Survey**

The U.K. Distributive Trades Survey for April 2026 and the look-ahead expectation readings for May paint an extremely soured outlook for the U.K. economy.

**Retail ranking**: Surveys for retail sales compared to a year ago, orders compared to a year ago, and sales evaluated for the time of year all have rankings near zero, which is the worst result on this timeline. This zero distinction applies to retail sales compared to a year ago. The best ranking is 11.6%; that is for sales evaluated for the time of year. Orders compared to a year ago have a 4.2 percentile standing. The stock-to-sales ratio—which is a completely different concept—shows that the inventory-to-sales ratio has a 29.9 percentile standing.

**Retail diffusion**: The raw April diffusion readings (up minus down diffusion) show that sales compared to a year ago slipped to a reading of -68 in April from -52 in March. Orders fell to -46 in April from -26 in March. Sales evaluated for the time of year fell to -32 April from -23 in March. All three measures weakened, and all three weakened decisively, resulting in extremely weak rankings. All of the rankings are executed on data back to 2002.

**Expectations for retailing**: The expectations readings for May show slippage again across all three metrics: expected sales compared to a year ago, expected orders compared to a year ago, and expected sales for the time of year. Expected sales compared to a year ago fell to -60 in May from -49 in April. Orders compared to a year ago declined to -45 in May from -30 in April, and sales for the time of year slipped to -43 from -19. In May, these readings have rankings in a 0.4 percentile standing for sales compared to a year ago, a 1.8 percentile standing for sales evaluated relative to the time of year, and a 4.6 percentile standing for orders compared to a year ago. These two panels on current and expected retail sales volumes are just simply terrible: weak monthly, weak in ranking terms, and showing slipping momentum.

The distributor trade series also provides data on the wholesale sector. While the wholesale sector is not quite as beat up as the retail sector, it's still extremely weak. There is no cause for any kind of hope that things are getting better based on wholesaling trends.

**Wholesaling**: The wholesale survey for sales compared to a year ago edged lower to -32 in April from -31 in March. Orders compared to a year ago remained at a reading of -41 in April. Sales evaluated for the time of year improved to a reading of -20 in April from -39 in March—a significant step up, but still very weak. The percentile standings for these three categories show sales compared to a year ago at the 8.8 percentile, orders compared to a year ago at the 5.6 percentile, and sales evaluated for the time of year at the 14.8 percentile.

**Wholesale Expectations**: The look-ahead observations, which provide expectations for wholesaling in May, show a similar constellation of readings, with sales compared to a year ago falling to -37 in May from -27 in April and orders compared to a year ago falling to -42 from -38, while sales evaluated for the time of year improved to  16 from  37. That category for wholesale sales improved both in April in real time and in May for expectations; however, it continues to have a very weak percentile standing, at the 17.9 percentile in May, while sales for a year ago have a 6.7 percentile standing and orders for a year ago have a 6.0 percentile standing.

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While some of the global PMI data have improved, these survey data for the U.K. are particularly dour. The war in Ukraine drags on, and there's a new conflict in Iran that has shut the Strait of Hormuz, creating energy problems for much of Europe. More broadly, supply chains have been harmed. In addition, the U.K. is undergoing a bout of political instability, as its Prime Minister is under pressure and a good deal of political uncertainty is being worsened by deteriorating economic performance.

Both the U.K. and the European Monetary Union had been showing some progress on inflation until the Iran war hit. Now, as the oil prices are up so sharply, headline inflation is going to be worse everywhere and there will probably be a bit more attention directed to the core inflation rate. However, the U.K. has had inflation too hot for a while, and it has failed to settle down. At its last meeting, the Bank of England’s Monetary Policy Committee warned that if the war was still ongoing at the next meeting, there would be a risk of a rate hike. So, it would seem that a rate hike is going to be in play unless the economy falls off a cliff first, which, based on the distributive trades data, is also something that could happen. The U.K. economy appears to be on very unsound footing, and what happens next is just about anybody's guess.

Economy in Brief

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