Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919c.jpg" width="353">
Housing starts in August fell hard for the sixth month this year to 1.665M units. The 6.0% m/m decline outpaced Consensus expectations for a drop to 1.75M, lowered starts 19.8% below last August and left the latest level 26.5% below the series&#39; peak reached this past January.
Single-family starts fell 5.9% last month to 1.36M, off 25.0% from the January peak while multi family starts dropped 6.7% for the third straight monthly decline.
By region single family housing starts in the West fell 4.4% m/m (-33.4% y/y) and in the Midwest starts fell 12.9% (-28.7% y/y). Single family starts in the South also fell by 6.1% (-9.9% y/y) but in the Northeast starts rose for the second consecutive month after a one-third drop during June (-19.3% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919d.jpg" width="353">
Building permits fell for the seventh consecutive month, off 2.3%. Permits to start singe family homes were even weaker and fell 3.5% (-25.0% y/y).
Beyond Neighborhood Revitalization from the Federal Reserve Bank of Boston can be found <a href="http://www.bos.frb.org/commdev/c&amp;b/2006/winter/beyond.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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<td class="firstcol">Total</td>
<td>1,665</td>
<td>1,772</td>
<td>-19.8%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
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<td class="firstcol">&nbsp; Single-family</td>
<td>1,360</td>
<td>1,445</td>
<td>-20.6%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>305</td>
<td>327</td>
<td>-15.7%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,722</td>
<td>1,763</td>
<td>-21.9%</td>
<td>2,159</td>
<td>2,058</td>
<td>1,888</td>
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Housing starts in August fell hard for the sixth month this year to 1.665M units. The 6.0% m/m decline outpaced Consensus expectations for a drop to 1.75M, lowered starts 19.8% below last August and left the latest level 26.5% below [...]

Housing Starts Off 20% Y/Y

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919a.jpg" width="353">
The finished goods producer price index increased 0.1% in August, the same as in July and below Consensus expectations for a 0.2% rise.Excluding food &amp; energy finished producer prices were similarly under control last month and unexpectedly fell 0.4% after a 0.3% drop in July. Expectations had been for a 0.2% increase in the core PPI. 
Finished consumer goods prices less food &amp; energy dropped 0.5% (+0.7% y/y) as passenger car prices dropped 2.6% (-5.4% y/y). Capital equipment prices also fell by 0.3% (+1.0% y/y) for the second consecutive monthly decline as light truck prices fell 3.4% (-7.5% y/y). Prices of pumps, compressors &amp; equipment were, however, strong and posted a 0.6% (3.7% y/y) increase. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919b.jpg" width="353">
Finished energy goods prices posted a 0.3% (13.1% y/y) August gain as . residential natural gas prices rose 1.6% (5.2% y/y) and residential electric power costs increased 1.3% (7.4% y/y). Gasoline prices fell 2.2% (+20.9% y/y) though fuel oil prices rose 0.7% (25.1% y/y). 
Intermediate goods prices posted another strong increase and rose 0.4%. The gain reflected a like 0.4% rise in prices less food &amp; energy. 
The crude materials PPI again was strong posting a 2.2% increase led by a 15.7% (NSA, -9.2% y/y) gain in natural gas. Less food &amp; energy crude goods prices fell 2.8% led lower by a 14.7% (+20.1% y/y) drop in iron &amp; steel scrap prices. Aluminum base scrap prices also were weak last month and fell 4.6% (+30.1% y/y).
The Internationalization of the Dollar and Trade Balance Adjustment from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr255.pdf"> here</a>. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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</thead>
<tbody>
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<td class="firstcol">Finished Goods</td>
<td>0.1%&nbsp;</td>
<td>0.1%</td>
<td>&nbsp; 3.6%&nbsp;</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>&nbsp;0.9%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
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<td class="firstcol">Intermediate Goods</td>
<td>0.4%</td>
<td>0.5%</td>
<td>8.7%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.7%</td>
<td>8.3%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
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<td class="firstcol">Crude Goods</td>
<td>&nbsp;2.2%&nbsp;</td>
<td>3.1%</td>
<td>&nbsp;5.4%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-2.8%</td>
<td>1.3%</td>
<td>&nbsp;25.2%</td>
<td>4.8%</td>
<td>&nbsp;26.5%</td>
<td>12.4%</td>
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The finished goods producer price index increased 0.1% in August, the same as in July and below Consensus expectations for a 0.2% rise.Excluding food & energy finished producer prices were similarly under control last month and [...]

PPI Up 0.1%, Core Prices Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919a.jpg" width="353">
The finished goods producer price index increased 0.1% in August, the same as in July and below Consensus expectations for a 0.2% rise.Excluding food &amp; energy finished producer prices were similarly under control last month and unexpectedly fell 0.4% after a 0.3% drop in July. Expectations had been for a 0.2% increase in the core PPI. 
Finished consumer goods prices less food &amp; energy dropped 0.5% (+0.7% y/y) as passenger car prices dropped 2.6% (-5.4% y/y). Capital equipment prices also fell by 0.3% (+1.0% y/y) for the second consecutive monthly decline as light truck prices fell 3.4% (-7.5% y/y). Prices of pumps, compressors &amp; equipment were, however, strong and posted a 0.6% (3.7% y/y) increase. 
Finished energy goods prices posted a 0.3% (13.1% y/y) August gain as . residential natural gas prices rose 1.6% (5.2% y/y) and residential electric power costs increased 1.3% (7.4% y/y). Gasoline prices fell 2.2% (+20.9% y/y) though fuel oil prices rose 0.7% (25.1% y/y). 
Intermediate goods prices posted another strong increase and rose 0.4%. The gain reflected a like 0.4% rise in prices less food &amp; energy. 
The crude materials PPI again was strong posting a 2.2% increase led by a 15.7% (NSA, -9.2% y/y) gain in natural gas. Less food &amp; energy crude goods prices fell 2.8% led lower by a 14.7% (+20.1% y/y) drop in iron &amp; steel scrap prices. Aluminum base scrap prices also were weak last month and fell 4.6% (+30.1% y/y).
The Internationalization of the Dollar and Trade Balance Adjustment from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr255.pdf"> here</a>. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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</thead>
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<td class="firstcol">Finished Goods</td>
<td>0.1%&nbsp;</td>
<td>0.1%</td>
<td>&nbsp; 3.6%&nbsp;</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>&nbsp;0.9%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
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<td class="firstcol">Intermediate Goods</td>
<td>0.4%</td>
<td>0.5%</td>
<td>8.7%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.7%</td>
<td>8.3%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
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<td class="firstcol">Crude Goods</td>
<td>&nbsp;2.2%&nbsp;</td>
<td>3.1%</td>
<td>&nbsp;5.4%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-2.8%</td>
<td>1.3%</td>
<td>&nbsp;25.2%</td>
<td>4.8%</td>
<td>&nbsp;26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
Housing Starts Off 20% Y/Y 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919c.jpg" width="353">
Housing starts in August fell hard for the sixth month this year to 1.665M units. The 6.0% m/m decline outpaced Consensus expectations for a drop to 1.75M, lowered starts 19.8% below last August and left the latest level 26.5% below the series&#39; peak reached this past January.
Single-family starts fell 5.9% last month to 1.36M, off 25.0% from the January peak while multi family starts dropped 6.7% for the third straight monthly decline.
By region single family housing starts in the West fell 4.4% m/m (-33.4% y/y) and in the Midwest starts fell 12.9% (-28.7% y/y). Single family starts in the South also fell by 6.1% (-9.9% y/y) but in the Northeast starts rose for the second consecutive month after a one-third drop during June (-19.3% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919d.jpg" width="353">
Building permits fell for the seventh consecutive month, off 2.3%. Permits to start singe family homes were even weaker and fell 3.5% (-25.0% y/y).
Beyond Neighborhood Revitalization from the Federal Reserve Bank of Boston can be found <a href="http://www.bos.frb.org/commdev/c&amp;b/2006/winter/beyond.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,665</td>
<td>1,772</td>
<td>-19.8%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,360</td>
<td>1,445</td>
<td>-20.6%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>305</td>
<td>327</td>
<td>-15.7%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,722</td>
<td>1,763</td>
<td>-21.9%</td>
<td>2,159</td>
<td>2,058</td>
<td>1,888</td>
</tr>
</tbody>
</table>
Chain Store Sales Fell Hard Along With Gasoline Prices 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919e.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey indicated that chain store sales fell a hard 1.1% last week. The second consecutive w/w drop pulled the average sales level in September about even with August.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The retail price for a gallon of regular unleaded gasoline dropped twelve cents w/w to an average $2.50 (-10.4% y/y), the lowest level since early March.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS increased 0.8% (1.0% y/y) in the latest week and raised the y/y gain into positive territory for the first time since April.
Household Energy Expenditures, 1982-2005 from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cfljune2006_227.pdf">here</a>
The latest Short-Term Energy Outlook from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">09/16/06</th>
<th scope="col">09/09/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
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</thead>
<tbody>
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<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>466.8</td>
<td>471.8</td>
<td>4.9%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
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</tbody>
</table>
German Investors and Analysts Confident of the Present but Wary of the Future 
by <a href="/comment/Curley.html">Louise Curley</a> September 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919f.jpg" width="353">
More German investors and analysts participating in the ZEW surveys continue to attest to improved economic conditions, but have grave doubts concerning economic conditions six months ahead.
The balance between those saying current conditions were improving and those saying current conditions were deteriorating rose from 33.6% in August to 38.9% in September and was 92.0 percentage points above the -58.1% of September, 2005. It has only been since April of this year that more people believed that current conditions were improving than those who believed they were deteriorating. The current balance is close to the most recent peak of 45.8% in September, 2000 as can be seen n the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919g.jpg" width="353">
While feeling better about the current situation, the participants in the September ZEW survey have become decidedly more wary about the future. The balance between optimists and pessimists went from -5.6% in August to -22.2% in September and was 60.8 percentage points lower than that of September, 2005 when the balance favored the optimists to the extent of 38.6%. The sharp decline in sentiment is probably a reflection of the increasing probability of a slowdown in the United States economy and hence a reduced demand for German exports, plus the likely negative effect on consumer spending with the three point scheduled increase on January 1, 2007 of the VAT, and the uncertainty of other reforms. The contrast between opinions of current conditions and the future are shown in the second chart.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919h.jpg" width="353">
While the ZEW measure of expectations has often been an indicator of the future trend of the economy, it has not been a particularly good indicator of the magnitude of change in the economy. In the third chart we show the quarterly values of the expectations balances and the year to year change in real, seasonally unadjusted Gross National Product. As can be seen, there is only a small correlation (0.26) between the expectations balances and the year to year change in GDP. Moreover, the R2 suggests that only 6.76% of the change in the year to year GDP is accounted for by the expectations balance.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/@D8/@D82/@D82.HTM">Germany ZEW Survey</a></th>
<th scope="col">Sep&nbsp; 06</th>
<th scope="col">Aug 06</th>
<th scope="col">Sep 05</th>
<th scope="col">M/M&nbsp; dif&nbsp;</th>
<th scope="col">Y/Y&nbsp; dif &nbsp;&nbsp;</th>
<th scope="col">2005&nbsp;&nbsp;</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Balance on Current Situation (%)&nbsp;</td>
<td>38.9</td>
<td>33.6</td>
<td>-58.1</td>
<td>5.3</td>
<td>92.0</td>
<td>-34.8</td>
<td>44.6</td>
<td>38.4</td>
</tr>
<tr>
<td class="firstcol">Balance on Situation Six Months Ahead&nbsp;(%)</td>
<td>-22.2</td>
<td>-5.6</td>
<td>38.6</td>
<td>-16.6</td>
<td>-60.8</td>
<td>34.8</td>
<td>44.6</td>
<td>38.4</td>
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</tbody>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060918c.jpg" width="353">
The National Association of Home Builders (NAHB) indicated that the September Composite Housing Market Index fell to 30 from a slightly revised 33 in August. The latest level is down by more than one half from last year. 
During the last twenty years there has been a 75% correlation between the y/y change in the Composite Index and the change in single family housing starts. 
The sub-indexes covering current sales of single family homes (-13.5% m/m, -55.6% y/y) and sales in the next six months (-9.8% m/m, -47.1% y/y) both fell sharply. 
Traffic of prospective home buyers was stable m/m but down 55.1% y/y and was at the lowest since January, 1991. 
Housing markets in all regions of the U.S. weakened this month. The index in the Northeast was down -58.8% y/y). In the Midwest the index fell 61.9% y/y and in the West fell 54.2% y/y. In the South the index fell 46.5%. 
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Sept. &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>30</td>
<td>33</td>
<td>65</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Home Builders (NAHB) indicated that the September Composite Housing Market Index fell to 30 from a slightly revised 33 in August. The latest level is down by more than one half from last year. During the [...]

NAHB Housing Market Index Down By One Half

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060918a.jpg" width="353">
The US current account deficit in 2Q&#39;06 deepened to $218.4B versus a revised and deepened deficit of $213.2B during 1Q. The deficit last quarter equaled 6.6% of GDP, greater than the 6.35% during all of last year .
Consensus expectations had been for a 2Q deficit of $213.0B.
The deficit in merchandise trade deteriorated to $210.6B versus $208.0 during 1Q. Exports grew 3.4% (13.6% y/y) although that strong gain was offset by a 2.4% gain in imports (12.8% y/y). Higher oil prices last quarter caused the value of crude oil imports to surge 20.0% (34.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060918b.jpg" width="353">
The surplus in services trade remained about unchanged at $16.8B. Exports of services grew 3.1% (9.5% y/y) while imports grew 3.8% (10.7% y/y).
From the capital account, net US foreign direct investment abroad improved modestly to 47.1B, a still-reduced figure versus last year. Foreign direct investment in the US, however, rose again to $48.4B.
Going Global: The Changing Pattern of U.S. Investment Abroad from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/3Q06mma.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Int&#39;l Balance of Payments</a></th>
<th scope="col">2Q &#39;06</th>
<th scope="col">1Q &#39;06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account Deficit</td>
<td>$218.4</td>
<td>$213.2B</td>
<td>$193.3B (2Q&#39;05)</td>
<td>$791.5B</td>
<td>$665.3B</td>
<td>$527.5B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Goods/Services/Income Deficit</td>
<td>$198.0</td>
<td>$193.7B</td>
<td>$170.1B</td>
<td>$705.4B</td>
<td>$583.7B</td>
<td>$458.3B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>5.3%</td>
<td>4.8%</td>
<td>18.8%</td>
<td>14.6%</td>
<td>15.7%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>4.4%</td>
<td>2.8%</td>
<td>18.1%</td>
<td>16.3%</td>
<td>18.7%</td>
<td>7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unilateral Transfers Deficit</td>
<td>$20.4B</td>
<td>$19.5B</td>
<td>$23.2B (2Q&#39;05)</td>
<td>$86.1B</td>
<td>$81.6B</td>
<td>$69.2B</td>
</tr>
</tbody>
</table>
</body>
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The US current account deficit in 2Q'06 deepened to $218.4B versus a revised and deepened deficit of $213.2B during 1Q. The deficit last quarter equaled 6.6% of GDP, greater than the 6.35% during all of last year . Consensus [...]

U.S. Current Account Deficit Deeper: Oil Imports Surged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060918a.jpg" width="353">
The US current account deficit in 2Q&#39;06 deepened to $218.4B versus a revised and deepened deficit of $213.2B during 1Q. The deficit last quarter equaled 6.6% of GDP, greater than the 6.35% during all of last year .
Consensus expectations had been for a 2Q deficit of $213.0B.
The deficit in merchandise trade deteriorated to $210.6B versus $208.0 during 1Q. Exports grew 3.4% (13.6% y/y) although that strong gain was offset by a 2.4% gain in imports (12.8% y/y). Higher oil prices last quarter caused the value of crude oil imports to surge 20.0% (34.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060918b.jpg" width="353">
The surplus in services trade remained about unchanged at $16.8B. Exports of services grew 3.1% (9.5% y/y) while imports grew 3.8% (10.7% y/y).
From the capital account, net US foreign direct investment abroad improved modestly to 47.1B, a still-reduced figure versus last year. Foreign direct investment in the US, however, rose again to $48.4B.
Going Global: The Changing Pattern of U.S. Investment Abroad from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/3Q06mma.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Int&#39;l Balance of Payments</a></th>
<th scope="col">2Q &#39;06</th>
<th scope="col">1Q &#39;06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account Deficit</td>
<td>$218.4</td>
<td>$213.2B</td>
<td>$193.3B (2Q&#39;05)</td>
<td>$791.5B</td>
<td>$665.3B</td>
<td>$527.5B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Goods/Services/Income Deficit</td>
<td>$198.0</td>
<td>$193.7B</td>
<td>$170.1B</td>
<td>$705.4B</td>
<td>$583.7B</td>
<td>$458.3B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>5.3%</td>
<td>4.8%</td>
<td>18.8%</td>
<td>14.6%</td>
<td>15.7%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>4.4%</td>
<td>2.8%</td>
<td>18.1%</td>
<td>16.3%</td>
<td>18.7%</td>
<td>7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unilateral Transfers Deficit</td>
<td>$20.4B</td>
<td>$19.5B</td>
<td>$23.2B (2Q&#39;05)</td>
<td>$86.1B</td>
<td>$81.6B</td>
<td>$69.2B</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index Down By One Half 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 18, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060918c.jpg" width="353">
The National Association of Home Builders (NAHB) indicated that the September Composite Housing Market Index fell to 30 from a slightly revised 33 in August. The latest level is down by more than one half from last year. 
During the last twenty years there has been a 75% correlation between the y/y change in the Composite Index and the change in single family housing starts. 
The sub-indexes covering current sales of single family homes (-13.5% m/m, -55.6% y/y) and sales in the next six months (-9.8% m/m, -47.1% y/y) both fell sharply. 
Traffic of prospective home buyers was stable m/m but down 55.1% y/y and was at the lowest since January, 1991. 
Housing markets in all regions of the U.S. weakened this month. The index in the Northeast was down -58.8% y/y). In the Midwest the index fell 61.9% y/y and in the West fell 54.2% y/y. In the South the index fell 46.5%. 
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

<table border="0" cellspacing="0" width="100%">

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<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Sept. &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>30</td>
<td>33</td>
<td>65</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
</body>
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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/060915f.jpg" width="353">
Earlier this week, Louise Curley highlighted the fragility of recent gains in the Japanese economy. She described new weakness in manufacturing orders and some deterioration in consumer confidence. Today, data on flow of funds in the financial system for Q2 2006 add more to the ambiguity about the outlook. For instance, the move by the Bank of Japan away from its zero-interest-rate monetary policy in mid-July was based partly on renewed growth in bank lending. This continues, but other liabilities in the domestic economy have started to weaken again.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060915g.jpg" width="353">
The Japanese flow of funds data are not seasonally adjusted, and Q2 is a generally a period of contraction in credit as an old fiscal year has just been closed out and a new one begun. So negative reports for this period are unremarkable in and of themselves. In fact, a striking aspect of these new flow-of-funds data is a quarterly increase in lending to private corporations; at +&yen;1.89 trillion, it&#39;s not large, but it&#39;s the first Q2 increase in the nine years history of this style of Flow of Funds accounts. Q3 and Q4 often see sizable increases in credit transactions. So a 4-quarter total might give us a good idea of the overall strength of lending; indeed, there has been a dramatic upturn in financial institution lending to business on this basis, which reached +&yen;11.35 trillion through Q2, compared to a contraction of &yen;6.02 trillion in Q2 2005 and progressively larger declines going back to early 2003.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060915h.jpg" width="353">
But other private-sector uses of credit remain sluggish or erratic. Total liabilities of the domestic nonfinancial sector excluding government fell &yen;32.52 trillion in Q2, yielding a 4-quarter total of -&yen;35.82 trillion -- that is, net paydowns -- actually much worse than the -&yen;5.97 trillion of a year ago. Even total private corporation borrowing was weaker in Q2 2006, -&yen;21.81 trillion, than in Q2 2005, -&yen;18.05 trillion, although the 4-quarter total was positive.
Households have the same pattern, a drop in Q2 2006 that is larger than Q2 2005, but an outright increase in the more recent 4-quarter total contrasting with the liquidation in the year-ago period.
So credit data, as well as real-sector business and consumer indicators, suggest that the economic gains we were all so pleased about earlier this year in Japan are hardly on sure footing.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/@J1/@J109/@J109.HTM">Japan: Flow of Funds, Tril.&yen;</a></th>
<th scope="col">2Q 2006</th>
<th scope="col">1Q 2006</th>
<th scope="col">2Q 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Liabilities, Domestic Nonfin Sector ex Govt</td>
<td>-32.52</td>
<td>+37.12</td>
<td>-25.57</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 4-Qtr Total</td>
<td>-35.82</td>
<td>-28.87</td>
<td>-5.97</td>
<td>+46.83</td>
<td>+53.10</td>
<td>+25.59</td>
</tr>
<tr class="odd">
<td class="firstcol">Private Nonfin Corporations</td>
<td>-21.81</td>
<td>-1.17</td>
<td>-18.05</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 4-Qtr Total</td>
<td>+7.37</td>
<td>+11.14</td>
<td>-6.07</td>
<td>+6.17</td>
<td>+2.04</td>
<td>-23.14</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Loans</td>
<td>+1.89</td>
<td>-0.48</td>
<td>-7.00</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; 4-Qtr Total</td>
<td>+11.35</td>
<td>+2.45</td>
<td>-6.02</td>
<td>+2.70</td>
<td>-10.14</td>
<td>-21.84</td>
</tr>
<tr class="odd">
<td class="firstcol">Households</td>
<td>-11.43</td>
<td>+7.45</td>
<td>-7.56</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 4-Qtr Total</td>
<td>+4.09</td>
<td>+7.96</td>
<td>-1.30</td>
<td>+4.74</td>
<td>-4.36</td>
<td>-1.24</td>
</tr>
</tbody>
</table>
</body>
</html>

Earlier this week, Louise Curley highlighted the fragility of recent gains in the Japanese economy. She described new weakness in manufacturing orders and some deterioration in consumer confidence. Today, data on flow of funds in the [...]

Japan's Flow-of-Funds Data for Q2 Add to Questions about Economic Progress

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060915i.jpg" width="353">
Consumer sentiment in early September added to the gains of late August, according to the University of Michigan. The mid-month reading rose 2.9% to 84.4 on top of the late-August rise which limited that month&#39;s decline to 3.2%. Consensus expectations for an increase to 84.0.
During the last ten years there has been a 77% correlation between the level of consumer sentiment and the y/y change in real consumer spending and during those ten years sentiment has a 68% correlation with the change in nonfarm payrolls.
Expectations for the economy surged 13.4% m/m to the highest level since January. Expected business conditions next year and over the next five years improved sharply. The expected change in personal finances, however, improved just moderately. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060915j.jpg" width="353">
The reading of current economic conditions fell sharply m/m to the lowest level since last October. The current read of personal finances and perceived buying conditions for large household goods both fell.
Consumers&#39; opinion about gov&#39;t economic policy was unchanged for the third month (0.0% y/y). Expected inflation during the next year fell sharply to 3.6%, its lowest level since February. The five to ten year expected rate of inflation also fell to 3.2%, reversing all of the rise during August.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Sept. (Prelim.)</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>84.4</td>
<td>82.0</td>
<td>9.8%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>95.7</td>
<td>103.8</td>
<td>-2.4%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>77.1</td>
<td>68.0</td>
<td>21.8%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer sentiment in early September added to the gains of late August, according to the University of Michigan. The mid-month reading rose 2.9% to 84.4 on top of the late-August rise which limited that month's decline to 3.2%. [...]

U.S. Consumer Sentiment Improved Further, Expectations Up

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

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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The Consumer Price Index increased 2.7% y/y during November, down from 2.8% in October. The 0.2% m/m increase fell short of the 0.3% gain expected in the Action Economics Forecast Survey. The y/y gain in the headline CPI was the weakest since April. It was down from September’s high of 3.0% and compared to 2.9% during 2024. The CPI excluding food & energy increased 0.1% (2.6% y/y) in November. Its y/y rise compared to 2.8% y/y in October and was the weakest rise since March 2021.	

Energy prices rose 1.6% (4.1% y/y in November. Gasoline prices strengthened 3.0% (0.9% y/y). Fuel oil prices increased 3.1% (11.3% y/y). Natural gas prices fell 2.1% (+9.1% y/y), and electricity prices strengthened 1.1% (6.9% y/y). 
Food prices rose 0.1% (2.6% y/y) during November. Egg prices declined 6.4% (-13.2% y/y). Meat, poultry & fish prices strengthened 0.8% (6.8% y/y), while dairy product prices fell 0.9% (-1.6% y/y). Cereal & bakery product costs held steady (+1.9% y/y). Fruit & vegetable prices fell 0.4% and were little changed y/y. Nonalcoholic beverage prices increased 0.9% and 4.3% y/y in November.

Goods prices less food and energy rose 0.2% and rose a steady 1.4% y/y during November. Prices of used cars and trucks increased 0.3% (3.6% y/y), and new vehicle costs rose 0.2% (0.6% y/y). Appliance prices fell 0.6% (+0.5% y/y) while home furnishings prices rose 0.4% (2.6% y/y). Recreation product costs fell 0.3% but increased 0.7% y/y in November. Apparel prices increased 0.6% (0.1% y/y) in November. Education & communication product costs declined 0.3% (-3.1% y/y). Medical care goods prices rose 0.1% (1.1% y/y) in November. 

Services prices less energy edged 0.1% higher but increased 3.0% y/y in November, down from 7.0% y/y in 2022. Shelter prices (35.5% of the CPI) rose 0.1% (3.0% y/y), as owners’ equivalent rent of primary residences also rose 0.1% (3.4% y/y). Transportation service prices fell 0.3% (1.7% y/y). The cost of medical services edged 0.1% and rose 3.3% y/y, and the cost of recreation services fell 0.3% (+2.4% y/y). Education & communication services prices increased 0.4% m/m and 2.2% y/y.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

For the release of CPI on December 18, 2025, the BLS was able to retroactively acquire most nonsurvey data for October and will publish October 2025 values where possible. However, the majority of the CPI series rely on survey data which was not collected for October 2025 due to the government shutdown. Accordingly, the BLS will not publish October values for those series. Haver Analytics has created a second set of CPI indexes and relative importance series in **USECON**. These series will contain any published BLS values for October and interpolated values for unpublished detailed indexes. We will then calculate higher aggregate series such as the All Items index and All Items less food and energy using any published indexes along with our interpolated indexes and relative importance. 


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- Year-to-year comparison is slowest in four months.
- Core price gain exhibits weakest y/y increase since 2021. 
- Services price inflation tumbles y/y; core goods price gain is stable.


U.S. Consumer Price Inflation Moderates in November

Sandy Batten

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Existing home sales rose 0.5% m/m (-1.0% y/y) in November to 4.13 million homes (SAAR) following a 1.5% monthly gain in October and a 1.3% monthly rise in September, according to the National Association of Realtors (NAR). It was the highest level of sales since February and matched expectations in the Action Economics Forecast Survey. The average effective 30-year mortgage interest rate was unchanged at 6.54% last month, but this is down markedly from 7.10% in May and accounts for some of the revival in home sales over the past several months. The sales figures are based on closings of sales contracts signed over the past couple of months.

Existing single-family home sales rose 0.8% m/m (-0.8% y/y) in November to 3.75 million units after a 1.1% m/m rise in October and a 1.4% monthly gain in September. Sales of condos and co-ops slumped 2.6% m/m (-2.6% y/y) to 380,000 in November following a 5.4% monthly jump in October.

Compared to a month ago, sales rose 4.1% m/m in the Northeast, increased 1.1% m/m in the South, were unchanged in the West and fell 2.0% m/m in the Midwest. Compared to a year ago, sales were unchanged in both the Northeast and the South, fell 3.0% y/y in the Midwest and declined 1.3% y/y in the West.

The median price of all existing homes (NSA) declined 1.4% m/m (+1.2% y/y) to $409,200 in November. The median price of an existing single-family home fell 1.4% m/m (+1.2% y/y) to $414,300 in November. Prices of single-family homes in the Northeast edged up 0.9% from a year ago. Prices in the Midwest jumped 5.8% y/y; prices in the South rose 1.0% y/y. In contrast, prices in the West declined 0.8% from a year ago.

Inventories of homes for sale continued to weaken in November. The number of existing homes for sale (NSA) slumped 5.9% m/m (+7.5% y/y) to 1.43 million units in November. The supply of homes on the market at the current selling rate (NSA) slid to 4.2 months, its lowest reading since March.

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


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- Existing home sales increased 0.5% m/m in November, the third consecutive monthly gain.
- Month-over-month sales increased in the Northeast and South, were unchanged in the West, and fell in the Midwest.
- Year-over-year sales were unchanged in the Northeast and South and decreased in the Midwest and West.


U.S. Existing Home Sales Edged Up in November

Robert Brusca

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The new UK Confederation of British Industry (CBI) survey on the distributive trades sector shows a sharp weakening of an already weak survey for December and for the outlook into January of 2026. 

The month-to-month deterioration from November was widespread across metrics for retailing as well as for wholesaling for the current month as well as for the outlook. The monthly degradation is without exception across the board - omitting the inventory metric which is a different animal in any event since inventory building is sometimes involuntary. 

**The Retail survey**
Current conditions: In December, the retail survey for sales compared to a year ago, orders compared to year ago, and sales for the time of year (a seasonal adjustment metric), all worsened month-to-month. The November readings were weak and in December sales compared to a year-ago worsened by 12 points, Orders compared to a year ago worsened by 17 points month-to-month and sales for the time of year worsened by 11 points. These metrics for December are below their respective 12-month average by 6 to 13 points, as well for these categories. The rankings tell a stark story, year-on-year sales have been lower only 5.3% of the time, Year-on-year orders have been weaker only 5.6% of the time, while time of the year sales have been lower only 13% of the time. These are all extremely low-ranking metrics.

Expected Conditions: In January expected conditions have weakened month-to-month by amounts ranging from 33 points to 16 points depending on the metric. And sales and orders compared to a year ago as well as sales for the time of year each are weaker than their respective 12-month average readings by amounts ranging from 4 points to 23 points. The rankings on expectations are even worse than for the current metrics. Expected sales compared to a year ago rank lower less than 1% of the time, the same is true of orders. While sales for the time of year have been weaker 7.7 percent of the time. 
 
**Wholesale survey** 
The rankings for wholesaling are even lower than for retailing across the current and expected metrics. The month-to-month degradation for the current readings ranges from 7 points to 17 points weaker while the reading degradation monthly ranges from 5 points to 16 points. Wholesale sales and orders compared to a year ago and sales for the time of year each rank below the 5% mark. The expectations for January shows expectations for the three categories each are at a 2.5 percentile standing or lower. 

**Summing up**
The distributive trades survey has all but crashed and burned in December. Over the last 26 years the average of the three current metrics’ rankings has been lower only 18 times. The average outlook ranking for the month ahead has been weaker only 5 times in the last 26 years (over 313 months). On a relative basis the expected sales/orders performance is more depressed than the Current results for January. The pooled rankings show current ranking over the past 26-years weaker only 5.8 percent of the time with expectations lower only 1.6 percent of the time. These are very weak metrics. It is surprising that the BOE is walking on eggshells to cut rates with mixed support for rate cuts amid such weakness. There is already a GDP decline in the monthly data for October. UK and inflation is still too high, but it is breaking lower at a relatively fast pace. Will the UK be the first economy down after Covid? 




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United Kingdom

CBI’s Distributive Trades Survey Weakens Sharply in December

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Belgian consumer confidence has been on the rise since early this year, however, in December the index has taken a step backwards with a reading of -1 compared to a November reading of +2 and then an October reading of zero. The confidence indicator, on data back to 1991 has a ranking in its 78.5 percentile, marking it as a reasonably strong reading on confidence compared to its values over that period. On the whole the trend is still solid, the month’s step-back is small. 

**The Economic Situation** 
Economic situation for the next 12 months is weaker in December on a reading of -28 compared to -26 in November. The assessment of the previous 12-months is weaker in December at -42 compared to a reading of -38 in November. The outlook is weaker and the recent legacy is assessed as being slightly weaker as well, than it was in November. The assessment of the economic situation for the next 12 months is weak at a 9.7 percentile standing and the assessment of the previous 12 months is also weak at a 23.4 percentile standing.

**Price Trends**
Price trends are seen as higher over the next 12-months at a reading of 38 compared to 27 in November. The backward-looking assessment of price trends also has them stronger in December than 
in November at a reading of 58 compared to 56 in November. Both of these price trend assessments 
are high with the outlook reading at its 94th percentile and the backward-looking assessment in its 81st percentile. Price expectations hit their low mid 2023-late 2023 and have been on the rise steadily ever since. The price metric of ‘12-months ahead’ was at zero in April of 2024 but climbed to +19 by February 2025 and currently sits at a level of 38. Price expectations are well in gear to the upside in Belgium despite relative price stability in the Euro-Area. 

**Unemployment**
Concerns about unemployment elevated slightly in December to -9 from -10 in November but these are significant readings compared to, say, the 12-month-ago reading which is at a level of +32. The sense of backtracking here is extremely weak. The sense of progress on the part of survey respondents becoming more confident about the future is clearly the prevalent feature here. The December reading for unemployment in fact has only a 2.5 percentile standing, indicating extremely weak concerns about the prospects of unemployment ahead despite the minor month-to-month step-back.

**Major Household purchase environment**
The environment for making major household purchases deteriorates slightly in December at -15 compared to -13 in November. This only puts the index back to where it was in October. The response to the question, ‘is it favorable to buy at present’ is unchanged from its November value at -19 and it has been stuck there for three months in a row. The outlook to make major household purchases in the next 12-months logs a weaker reading at -15 than its 12-month value of -13but is stronger than its 12-month level of -18. The reading for the ‘favorable to buy at present’ question, however, is weaker at a -19 compared to -14, logged 12-months ago. The environment for making a household purchase over the next 12-months has a 55.6 percentile ranking which is above its median, however, the assessment of ‘favorable to buy at present’ has only a 20th percentile standing significantly below its median reading (median readings occur at a ranking of 50%)..

**The Financial situation**
The financial situation for the next 12-months is assessed weaker at -3 in December, compared to zero in November; it compares to a - 2 in October. The assessment 12-months ago was also -2 so this is a very minor deterioration comparing the financial situation of households with the last 12-months produces another deterioration at -8 in December compared to -6 in November and that compares to 12-months ago at -5 another deterioration. However, the backward-looking assessment has a 52-percentile standing which is above its median while the outlook reading of -3 has a 23-percentile standing which puts it in the lower quarter of all expectations on data back to 1991. The current situation is appraised at 20 a step-back from November and October levels as well as from 12-months ago. But the current appraisal also has a queue standing in its 65.7 percentile which has a comfortable margin above its median reading. Households clearly have concerns about their financial situation even though their outlook for making household purchases is above median and their concerns about unemployment are low. Currently, conditions appear to be construed as solid.

**Savings**
Household savings over the next 12-months are weaker in December at a reading of 20 compared to 26 in November; they are closer to their 12-month ago reading of 21. December is still a relatively high reading, in any event, with a 91-percentile standing. The question, ‘is it favorable to save at present’ is unchanged in November compared to December at a reading of -28 although it is weaker than it was 12-months ago and the percentile standing at its 78th percentile, again, a firm reading for this metric.

**Summing up - assessment** 
The consumer confidence reading from the Belgian National Bank this month shows a slight set back month-to-month, however, there is a significant an improvement that has been underway that is quite clear from the chart. The concerns that consumers have seemed to be about their financial situation haven't translated into concerns about unemployment or their willingness to make major household purchases, with unemployment concerns very low and their willingness to make household purchases for the period ahead at essentially normal levels. Still, there is more concern about inflation that is percolating, which is interesting considering that overall inflation has been relatively stable and muted in the European monetary area. 




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Belgium

Belgian Consumer Confidence - On the Rise, but Weaker Month-to-Month

Andrew Cates

**Faster-than-Expected Monetary Easing**
Our first potential upside risk for 2026 is that monetary policy across most major advanced economies is loosened further and by more than markets and forecasters currently anticipate. Monetary policy cycles have a history of being underestimated in both length and magnitude—in large part because of the powerful feedback loops between interest rates, inflation, and economic behaviour. On the way up, higher policy rates feed into mortgage costs, debt-service burdens, rents, and the general cost of doing business, reinforcing wage pressures and inflation persistence. But these same channels work in reverse on the way down. As rates fall, debt servicing eases, housing and rental inflation softens, and cost pressures across the economy unwind more rapidly than expected—allowing inflation to decelerate faster and creating scope for further easing. A risk, therefore, is that if disinflation becomes self-reinforcing, central banks find themselves cutting rates more aggressively than currently priced, not because of economic distress, but because restrictive policy proves increasingly unnecessary.

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**Energy Supply Dynamics Prove More Supportive**
The second chart reinforces the message from the first: easing monetary policy may be accompanied—and amplified—by a more benign energy backdrop. Recent projections from the EIA point to a renewed build-up in OECD crude oil and liquids inventories over the year ahead, a dynamic that has historically been associated with downward pressure on oil prices. If inventories continue to rise as supply growth outpaces demand, spot prices for crude could undershoot current forecasts, keeping energy inflation subdued. That, in turn, would reinforce disinflationary forces already in play—lowering headline CPI, easing cost pressures for firms and households, and giving central banks greater confidence to loosen policy further. In that sense, softer oil prices would not just be a standalone positive shock, but part of a reinforcing feedback loop alongside rate cuts, supporting real incomes, financial conditions, and global growth into 2026.


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**AI-Driven Productivity Gains Materialise More Quickly** 
The third chart shows a clear pickup in US nonfinancial productivity growth, reviving the debate around whether AI-driven efficiency gains may arrive sooner than many forecasters expect. While the longer-term productivity potential of AI remains uncertain and uneven across sectors, there are reasons to think that at least some near-term gains could prove more tangible than currently assumed. Rather than transformative breakthroughs, early benefits are likely to come from incremental improvements—automation of routine processes, better scheduling and logistics, more efficient use of capital and labour, and modest reductions in overhead costs—areas where US firms are already well positioned to implement new technologies quickly. If these gains accumulate and diffuse more broadly, the implications would still be meaningful. Even a modest, sustained uplift in productivity would help contain unit labour costs, support real income growth, and raise the economy’s speed limit without generating renewed inflation pressure. In that scenario, productivity would not need to “revolutionise” the economy to matter: incremental efficiency gains could nonetheless provide a supportive backdrop for growth, earnings, and policy easing into 2026—representing a genuine upside risk to the outlook.


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**The US Economy Proves Resilient Again**
The next chart highlights a further upside risk to the 2026 outlook: the possibility that the US economy once again outperforms its peers. Unlike the typical pre-recession backdrop, there is little evidence of meaningful financial stress in the US private sector. After a prolonged period of balance-sheet repair, private-sector debt ratios have been trending lower in recent years, while the sector as a whole is running a healthy financial surplus. This stands in stark contrast to previous late-cycle episodes, which were characterised by rising leverage, widening deficits, and growing dependence on credit expansion. The absence of private-sector excesses reduces the economy’s vulnerability to higher rates and external shocks, and helps explain why growth has remained more durable than expected. If households and firms continue to prioritise balance-sheet strength rather than forced deleveraging, the usual mechanisms that tip the economy into recession may fail to materialise. In that environment, even modest easing in financial conditions could translate into renewed spending and investment, allowing the US to sustain above-trend growth into 2026—representing another upside risk to the global outlook.


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**India’s Growth Engine Accelerates Further** 
Chart 5 points to another potential upside risk for 2026 emanating from India’s economy. After a period of relative pessimism earlier in the year, consensus growth forecasts for 2026 have been revised modestly higher, even as inflation projections have continued to drift lower. This combination—firmer growth expectations alongside easing inflation pressures—creates scope for a more supportive policy backdrop than markets currently assume. With real interest rates no longer rising and financial conditions stabilising, India’s investment cycle, already underpinned by public infrastructure spending and improving corporate balance sheets, could prove more durable than forecast. If these trends persist, India may deliver growth that is both stronger and more internally driven than expected, providing a meaningful demand impulse to the broader global economy. Given India’s increasing weight in global growth, even small upside surprises would have outsized effects on trade, commodity demand, and regional activity—reinforcing the case that the global outlook for 2026 may be skewed to the upside.


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**The Global South Becomes a More Independent Source of Demand** 
The final chart points to a broader upside risk for the global economy in 2026: that economies across the so-called Global South generate more durable momentum than currently assumed. With a few notable exceptions—such as China and Thailand—many emerging economies continue to benefit from stronger growth in their working-age populations and/or faster real GDP per capita growth than their advanced-economy counterparts. These demographic and income dynamics are helping to underpin domestic consumption, support labour-force expansion, and attract capital inflows, as reflected in the pattern of net FDI across countries. In contrast, much of the advanced world faces binding demographic constraints and lower steady-state growth rates, limiting the scope for demand to re-accelerate organically. If growth in the Global South proves more resilient and internally driven—rather than overly dependent on exports to advanced economies—it could provide a more stable and geographically diversified source of global demand. In that scenario, global growth in 2026 would be less reliant on a narrow set of advanced economies, reinforcing the case that risks to the outlook may be skewed to the upside.


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_This marks our final Charts of the Week publication for 2025 The next edition will be released on Thursday 8 January._

Last week’s Charts of the Week focused on the darker tail risks hanging over the 2026 outlook: the possibility of monetary policy mis-calibration, that geopolitics and trade fragmentation further disrupt supply chains, and that elevated debt levels—particularly in the public sector—reassert themselves as a drag on growth. This week’s charts take a deliberately different tack. Taken together, they highlight a set of upside risks that are possibly underappreciated in current forecasts. For example, policy easing across advanced economies may extend further than expected as disinflation feeds on itself (chart 1); oil prices could surprise on the downside as inventories rebuild (chart 2); US productivity may deliver incremental but meaningful gains sooner than assumed (chart 3); the US economy itself could continue to benefit from an absence of private-sector financial stress (chart 4); India’s growth momentum might firm again as inflation pressures recede (chart 5); and, more broadly, parts of the Global South appear increasingly capable of generating their own demand impulse, supported by favourable demographics and income growth (chart 6). None of these forces is guaranteed, and each carries its own caveats—but together they suggest that, having spent much of the past year fixated on downside risks, the risks to global growth in 2026 may be more evenly balanced than is widely assumed.

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Economy in Brief

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Housing Starts Off 20% Y/Y

PPI Up 0.1%, Core Prices Fell

PPI Up 0.1%, Core Prices Fell

NAHB Housing Market Index Down By One Half

U.S. Current Account Deficit Deeper: Oil Imports Surged

U.S. Current Account Deficit Deeper: Oil Imports Surged

Japan's Flow-of-Funds Data for Q2 Add to Questions about Economic Progress

U.S. Consumer Sentiment Improved Further, Expectations Up