Robert Brusca

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Manufacturing in Europe has come up lame again in October. The sector has decelerated for the second month in a row and holds to a reading of 52.0, not much elevated from the neutral reading of 50.0. Still, Europe has been so weak that at a reading of 52.0 in that index stands in the 59th percentile its historic queue of data. That is not a very strong standing, but it is higher than a reading of 52 should generate. In contrast, Germany's manufacturing PMI reading of 51.7 is a three-month low with a 47th percentile standing. For Germany, a reading of 51.7 in manufacturing is below its median (which occurs at the 50th percentile). France, on the other hand, has a persistently lethargic manufacturing sector and its reading 50.7 - just 0.7 points above the neutral reading of `50' - has a 73rd percentile standing. Manufacturing in France is better than this only 27% of the time. For France, lethargy is bliss.

Manufacturing in the EMU is simply stuck at a low level. Yet, this is the high productivity sector of every modern economy. With underperformance in manufacturing, productivity gains will be limited as well as overall economic growth. But for now that is Europe's lot. Europe's growth is being driven by services. And how long can that last?

Fortunately, Europe is still highly competitive. The euro exchange rate is dropping. While global growth is too weak to allow Europe to exploit its competitive advantage and too weak to rev-up its manufacturing sector, it allows Europe to maintain a positive balance of trade which avoids any erosion of wealth.

Europe's services sector advanced in October to a 76th percentile standing in its historic queue of data. Germany's services sector advanced to 55.2 in October from 54.1 in September. The German series stands in its 71st percentile, a much higher relative standing than for German manufacturing. Cleary services are carrying Germany forward. In France, services rose for the second month in a row to a level of 52.3, leaving it only in its 67th percentile. While France's diffusion standing for services is higher than for manufacturing, the relative position of manufacturing is stronger. Neither reading is impressive.

For EMU overall services stand in their 76th percentile while the manufacturing sector stands only in its 59th percentile. And the raw score for services is a diffusion reading of 54.2 compared to 52.0 for manufacturing. Services are driving growth in the EMU.

An economy propelled by its services sector is simply not going to be as dynamic as one that relies more on manufacturing. Few services are tradeable thereby limiting the ability to tap foreign demand to expand the sector. Services productivity is low, hampering the ability of the sector to advance GDP very far. Services are not storable so the sector is always hand-to-mouth. When economic times get tough, a lot of what the services sector provides is a set of services that can be postponed or done by one's self instead of being purchased. The sector is vulnerable.

Although the EMU has advanced itself in October, it is not doing so in a way that contributes to the idea that strength in building. The reliance on services and the setback to manufacturing growth are troubling phenomena. For now growth in services is helping to preserve and advance growth in the euro area. But it is doing so in a way that is not reassuring about the future. And this is why the ECB is preparing to up its invention with more monetary stimulus. Europe is simply not kicking into high gear or even into a gear that is sustainable.


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Manufacturing in Europe has come up lame again in October. The sector has decelerated for the second month in a row and holds to a reading of 52.0, not much elevated from the neutral reading of 50.0. Still, Europe has been so weak [...]

Can Europe Prosper on Services Alone?

Tom Moeller

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Sales of existing homes increased 4.7% (8.8% y/y) during September to 5.550
million and recouped the August decline to 5.300 million, revised from 5.310
million. The latest figure beat expectations for 5.35 million sales in the
Action Economics Forecast Survey. Single-family home sales recovered 5.3% last
month to 4.930 million (9.6% y/y). Condo and co-op sales remained unchanged (3.3%
y/y) following two months of decline.
The median sales price of an existing home fell 2.9% to $221,900 (+6.1% y/y)
and was down from June's record $236,300. The average sales price fell 2.3% to
$265,000 (3.9% y/y).
By region, sales in the Northeast were strongest m/m and rose 8.6% to 0.760
million (11.8% y/y) after remaining unchanged in August. Sales in the West
improved 6.7% (9.5% y/y) to 1.270 million following a 7.8% fall. In the South,
sales rose 3.8% (5.7% y/y) to 2.210 million after a 7.0% August decline. In the
Midwest, sales rose 2.3% (12.0% y/y) to 1.310 million and recovered the August
drop.
The composite index of home affordability rose 2.1% to 157.7 (-1.6% y/y) in
August but remained near its low for the economic recovery. Payments as a
percent of income eased to 15.9%, up from 11.7% in January 2013.
The inventory of unsold homes declined 3.1% y/y to 2.210 million. The months'
supply of homes on the market declined to 4.8 months, down from the 11.9 month
high in July 2010.
The data on existing home sales, prices and affordability can be found in
Haver's USECON database. The regional price, affordability and inventory
data are available in the REALTOR database. The expectations figure is
from the Action Economics survey, reported in the AS1REPNA database.
<table class="centered" border="0" cellspacing="0" width="1871">
 <colgroup>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 <col>
 </colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="717">Existing Home Sales (SAAR,
 000s)</th>
 <th scope="col" width="164">Sep</th>
 <th scope="col" width="164">Aug</th>
 <th scope="col" width="164">Jul</th>
 <th scope="col" width="164">Y/Y %</th>
 <th scope="col" width="164">2014</th>
 <th scope="col" width="165">2013</th>
 <th scope="col" width="165">2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="717">Total</td>
 <td align="center" width="164">5,550</td>
 <td align="center" width="164">5,300</td>
 <td align="center" width="164">5,580</td>
 <td align="center" width="164">8.8</td>
 <td align="center" width="164">4,920</td>
 <td align="center" width="165">5,074</td>
 <td align="center" width="165">4,657</td>
 </tr>
 <tr class="even">
 <td class="firstcol" width="717">&nbsp;&nbsp; Northeast</td>
 <td align="center" width="164">760</td>
 <td align="center" width="164">700</td>
 <td align="center" width="164">700</td>
 <td align="center" width="164">11.8</td>
 <td align="center" width="164">640</td>
 <td align="center" width="165">658</td>
 <td align="center" width="165">596</td>
 </tr>
 <tr>
 <td class="firstcol" width="717">&nbsp;&nbsp; Midwest</td>
 <td align="center" width="164">1,310</td>
 <td align="center" width="164">1,280</td>
 <td align="center" width="164">1,300</td>
 <td align="center" width="164">12.0</td>
 <td align="center" width="164">1,131</td>
 <td align="center" width="165">1,194</td>
 <td align="center" width="165">1,063</td>
 </tr>
 <tr class="even">
 <td class="firstcol" width="717">&nbsp;&nbsp; South</td>
 <td align="center" width="164">2,210</td>
 <td align="center" width="164">2,130</td>
 <td align="center" width="164">2,290</td>
 <td align="center" width="164">5.7</td>
 <td align="center" width="164">2,048</td>
 <td align="center" width="165">2,032</td>
 <td align="center" width="165">1,834</td>
 </tr>
 <tr>
 <td class="firstcol" width="717">&nbsp;&nbsp; West</td>
 <td align="center" width="164">1,270</td>
 <td align="center" width="164">1,190</td>
 <td align="center" width="164">1,290</td>
 <td align="center" width="164">9.5</td>
 <td align="center" width="164">1,102</td>
 <td align="center" width="165">1,190</td>
 <td align="center" width="165">1,163</td>
 </tr>
 <tr class="even">
 <td class="firstcol" width="717">Single-Family Sales</td>
 <td align="center" width="164">4,930</td>
 <td align="center" width="164">4,680</td>
 <td align="center" width="164">4,950</td>
 <td align="center" width="164">9.6</td>
 <td align="center" width="164">4,334</td>
 <td align="center" width="165">4,473</td>
 <td align="center" width="165">4,125</td>
 </tr>
 <tr>
 <td class="firstcol" width="717">Median Price Total ($, NSA)</td>
 <td align="center" width="164">221,900</td>
 <td align="center" width="164">228,500</td>
 <td align="center" width="164">231,800</td>
 <td align="center" width="164">6.1</td>
 <td align="center" width="164">206,708</td>
 <td align="center" width="165">195,667</td>
 <td align="center" width="165">175,433</td>
 </tr>
 </tbody>
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Sales of existing homes increased 4.7% (8.8% y/y) during September to 5.550 million and recouped the August decline to 5.300 million, revised from 5.310 million. The latest figure beat expectations for 5.35 million sales in the Action [...]

U.S. Existing Home Sales Rebound as Prices Fall Again

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 Sales of existing homes increased 4.7% (8.8% y/y) during September to 5.550
	 million and recouped the August decline to 5.300 million, revised from 5.310
	 million. The latest figure beat expectations for 5.35 million sales in the
	 Action Economics Forecast Survey. Single-family home sales recovered 5.3% last
	 month to 4.930 million (9.6% y/y). Condo and co-op sales remained unchanged (3.3%
	 y/y) following two months of decline.

	 The median sales price of an existing home fell 2.9% to $221,900 (+6.1% y/y)
	 and was down from June's record $236,300. The average sales price fell 2.3% to
	 $265,000 (3.9% y/y).

	 By region, sales in the Northeast were strongest m/m and rose 8.6% to 0.760
	 million (11.8% y/y) after remaining unchanged in August. Sales in the West
	 improved 6.7% (9.5% y/y) to 1.270 million following a 7.8% fall. In the South,
	 sales rose 3.8% (5.7% y/y) to 2.210 million after a 7.0% August decline. In the
	 Midwest, sales rose 2.3% (12.0% y/y) to 1.310 million and recovered the August drop.

	 The composite index of home affordability rose 2.1% to 157.7 (-1.6% y/y) in
	 August but remained near its low for the economic recovery. Payments as a
	 percent of income eased to 15.9%, up from 11.7% in January 2013.

	 The inventory of unsold homes declined 3.1% y/y to 2.210 million. The months'
	 supply of homes on the market declined to 4.8 months, down from the 11.9 month
	 high in July 2010.

	 The data on existing home sales, prices and affordability can be found in
	 Haver's USECON database. The regional price, affordability and inventory
	 data are available in the REALTOR database. The expectations figure is
	 from the Action Economics survey, reported in the AS1REPNA database.

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	 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

	 <thead>
	 <tr>
	 <th class="firstcol" scope="col" >Existing Home Sales (SAAR,
	 000s)</th>
	 <th scope="col" >Sep</th>
	 <th scope="col" >Aug</th>
	 <th scope="col" >Jul</th>
	 <th scope="col" >Y/Y %</th>
	 <th scope="col" >2014</th>
	 <th scope="col" >2013</th>
	 <th scope="col" >2012</th>
	 </tr>
	 </thead>
	 <tbody>
	 <tr>
	 <td class="firstcol" >Total</td>
	 <td >5,550</td>
	 <td >5,300</td>
	 <td >5,580</td>
	 <td >8.8</td>
	 <td >4,920</td>
	 <td >5,074</td>
	 <td >4,657</td>
	 </tr>
	 <tr class="even">
	 <td class="firstcol" >&nbsp;&nbsp; Northeast</td>
	 <td >760</td>
	 <td >700</td>
	 <td >700</td>
	 <td >11.8</td>
	 <td >640</td>
	 <td >658</td>
	 <td >596</td>
	 </tr>
	 <tr>
	 <td class="firstcol" >&nbsp;&nbsp; Midwest</td>
	 <td >1,310</td>
	 <td >1,280</td>
	 <td >1,300</td>
	 <td >12.0</td>
	 <td >1,131</td>
	 <td >1,194</td>
	 <td >1,063</td>
	 </tr>
	 <tr class="even">
	 <td class="firstcol" >&nbsp;&nbsp; South</td>
	 <td >2,210</td>
	 <td >2,130</td>
	 <td >2,290</td>
	 <td >5.7</td>
	 <td >2,048</td>
	 <td >2,032</td>
	 <td >1,834</td>
	 </tr>
	 <tr>
	 <td class="firstcol" >&nbsp;&nbsp; West</td>
	 <td >1,270</td>
	 <td >1,190</td>
	 <td >1,290</td>
	 <td >9.5</td>
	 <td >1,102</td>
	 <td >1,190</td>
	 <td >1,163</td>
	 </tr>
	 <tr class="even">
	 <td class="firstcol" >Single-Family Sales</td>
	 <td >4,930</td>
	 <td >4,680</td>
	 <td >4,950</td>
	 <td >9.6</td>
	 <td >4,334</td>
	 <td >4,473</td>
	 <td >4,125</td>
	 </tr>
	 <tr>
	 <td class="firstcol" >Median Price Total ($, NSA)</td>
	 <td >221,900</td>
	 <td >228,500</td>
	 <td >231,800</td>
	 <td >6.1</td>
	 <td >206,708</td>
	 <td >195,667</td>
 <td >175,433</td>
 </tr>
 </tbody>
 </table>
 
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The Conference Board's Leading Economic Index declined 0.2% during September
following two months of remaining unchanged. The August figure was revised from
0.1%. The Action Economics Forecast Survey had anticipated no change in
September. Three-month growth in the index deteriorated to -0.6% (AR) and was
down from 6.7% in June. The largest positive contributions to the latest rise
came from a steeper interest rate yield curve, the leading credit index and
fewer initial claims for unemployment insurance. These were offset by lower
stock prices, fewer building permits, a shorter average workweek and a lower ISM
new orders diffusion index.

The coincident economic index improved 0.2% after an unrevised 0.1% uptick.
The three-month growth rate held steady at 2.2%, up from 0.7% in May. As in
August, nonfarm payroll employment, personal income less transfers and
manufacturing &amp; trade sales made positive contributions to the index while
industrial production contributed negatively.

The lagging indicators series increased 0.5% after a 0.1% uptick, revised
from 0.2%. Three-month growth in the index eased to 4.1%. A longer average
duration of unemployment, a stronger services CPI and a firmer consumer
installment/income ratio had the largest positive contributions to the index.
Fewer commercial &amp; industrial loans outstanding had an offsetting negative
contribution.

The ratio of coincident-to-lagging indicators is a measure of how the economy
is performing versus its excesses. As lagging indicators increased more than the
coincident series in September, the ratio fell to another six-year low.

The Conference Board figures are available in Haver's BCI database;
the components are available there, and most are also in USECON. The
forecast figures for the Consensus are in the AS1REPNA database. Visit
the Conference Board's <a href="http://www.conference-board.org/">site</a> for
coverage of leading indicator series from around the world.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Business Cycle Indicators (%)</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Sep Y/Y</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Leading</td>
 <td >-0.2</td>
 <td >0.0</td>
 <td >0.0</td>
 <td >3.4</td>
 <td >5.8</td>
 <td >3.3</td>
 <td >2.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Coincident</td>
 <td >0.2</td>
 <td >0.1</td>
 <td >0.3</td>
 <td >2.2</td>
 <td >2.5</td>
 <td >1.9</td>
 <td >2.6</td>
 </tr>
 <tr>
 <td class="firstcol" >Lagging</td>
 <td >0.5</td>
 <td >0.1</td>
 <td >0.4</td>
 <td >4.0</td>
 <td >3.8</td>
 <td >3.8</td>
 <td >3.1</td>
 </tr>
 </tbody>
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The Conference Board's Leading Economic Index declined 0.2% during September following two months of remaining unchanged. The August figure was revised from 0.1%. The Action Economics Forecast Survey had anticipated no change in [...]

U.S. Leading Economic Index Declines

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U.S. FHFA home prices slowed in August, rising by just 0.3% after a 0.5% July increase, data from the Federal Housing Finance Agency showed. Also year-over-year prices slowed, rising by 5.5% in August after a 5.8% July rise. The July gain of 5.8% was a recent cycle peak and the largest year-over-year gain since May of this year. The year-over-year gain was last stronger in April 2014. House prices are no longer accelerating.

Regional prices decelerated month-to-month in five of 12 regions. Three month changes show decelerations in seven of 12 regions compared to their six-month pace. Six-month percent changes show decelerations in six regions out of 12 regions. Clearly prices are no longer accelerating on any road front. The overall data confirm this and actually show price decelerations in train as the 12-month rise at a 5.5% pace gives way to a deceleration and a 4.5% pace over six months and slows further to a three-month pace of 3.8%.

In the chart, we compare FHFA prices to the median price series for single family homes complied by the NAR (National Association of Realtors). The series, while using very different methodologies, are very similar in terms of the major trends. The FHFA house price index is a weighted repeat sales index. It measures average price changes in repeat sales. The NAR index is simply the median price of all homes sold in a one-month period without any attempt to adjust for home size/quality. However, FHFA prices are - and have been- showing stronger price gains than is the NAR (existing home) series recently. Perhaps the NAR index is picking up more sales of lower quality or small-sized units.

Outlook for Prices

Housing activity is currently undergoing an upswing. Housing starts jumped this past month and existing home sales are rising briskly to a new local high for the three-month moving average of sales. The NAHB index (homebuilders' index) has risen strongly, too. And rising activity often pressures home prices higher. But house prices are nonetheless under downward pressure from other sources. Housing affordability has been slipping. Mortgage rates have moved up and there are concerns that they could rise further as the Federal Reserve is able to raise interest rates. Affordability is also pressured by the combination of flat wages and rising home prices. Rising home prices are actually a negative for the outlook for prices since they cause affordability to fall in this environment. In a high inflation environment, this might not be true, but in this environment with low inflation and constrained wages, rising home prices make homes less affordable and that eventually will stand in the way of further home price increases.


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U.S. FHFA home prices slowed in August, rising by just 0.3% after a 0.5% July increase, data from the Federal Housing Finance Agency showed. Also year-over-year prices slowed, rising by 5.5% in August after a 5.8% July rise. The July [...]

U.S. FHFA Prices Slow

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 Sales of existing homes increased 4.7% (8.0% y/y) during September to
 5.550 million and recouped the August decline to 5.300 million, revised
 from 5.310 million. The latest figure beat expectations for 5.35 million
 sales in the Action Economics Forecast Survey. Single-family home sales
 recovered 5.3% last month to 4.930 million (8.6% y/y). Condo and co-op
 sales remained unchanged (3.8% y/y) following two months of decline.

 The median sales price of an existing home fell 2.9% to $221,900 (+6.1%
 y/y) and was down from June's record $236,300. The average sales price
 fell 2.3% to $265,000 (3.9% y/y).

 By region, sales in the Northeast were strongest m/m and rose 8.6% to
 0.760 million (10.2% y/y) after remaining unchanged in August. Sales in
 the West improved 6.7% (8.5% y/y) to 1.270 million following a 7.8% fall.
 In the South, sales rose 3.8% (5.5% y/y) to 2.210 million after a 7.0%
 August decline. In the Midwest, sales rose 2.3% (10.9% y/y) to 1.310
 million and recovered the August drop.

 The composite index of home affordability rose 2.1% to 157.7 (-1.6%
 y/y) in August but remained near its low for the economic recovery.
 Payments as a percent of income eased to 15.9%, up from 11.7% in January 2013.

 The inventory of unsold homes declined 3.1% y/y to 2.210 million. The
 months' supply of homes on the market declined to 4.8 months, down from
 the 11.9 month high in July 2010.

 The data on existing home sales, prices and affordability can be found
 in Haver's USECON database. The regional price, affordability and
 inventory data are available in the REALTOR database. The expectations
 figure is from the Action Economics survey, reported in the AS1REPNA
 database.

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 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Existing
 Home Sales (SAAR, 000s)</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Y/Y %</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 <th scope="col" >2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >5,550</td>
 <td >5,300</td>
 <td >5,580</td>
 <td >8.0</td>
 <td >4,935</td>
 <td >5,087</td>
 <td >4,656</td>
 </tr>
 <tr class="even">
 <td class="firstcol" >&nbsp;&nbsp; Northeast</td>
 <td >760</td>
 <td >700</td>
 <td >700</td>
 <td >10.2</td>
 <td >645</td>
 <td >658</td>
 <td >596</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; Midwest</td>
 <td >1,310</td>
 <td >1,280</td>
 <td >1,300</td>
 <td >10.9</td>
 <td >1,136</td>
 <td >1,201</td>
 <td >1,068</td>
 </tr>
 <tr class="even">
 <td class="firstcol" >&nbsp;&nbsp; South</td>
 <td >2,210</td>
 <td >2,130</td>
 <td >2,290</td>
 <td >5.5</td>
 <td >2,051</td>
 <td >2,040</td>
 <td >1,834</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; West</td>
 <td >1,270</td>
 <td >1,190</td>
 <td >1,290</td>
 <td >8.5</td>
 <td >1,103</td>
 <td >1,188</td>
 <td >1,158</td>
 </tr>
 <tr class="even">
 <td class="firstcol" >Single-Family Sales</td>
 <td >4,930</td>
 <td >4,680</td>
 <td >4,950</td>
 <td >8.6</td>
 <td >4,334</td>
 <td >4,473</td>
 <td >4,125</td>
 </tr>
 <tr>
 <td class="firstcol" >Median Price Total ($,
 NSA)</td>
 <td >221,900</td>
 <td >228,500</td>
 <td >231,800</td>
 <td >6.1</td>
 <td >206,708</td>
 <td >195,667</td>
 <td >175,433</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Sales of existing homes increased 4.7% (8.0% y/y) during September to 5.550 million and recouped the August decline to 5.300 million, revised from 5.310 million. The latest figure beat expectations for 5.35 million sales in the Action [...]

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<html><head>
</head>
<body>
	 
 
 
 

 <a href="/comment/151022f_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/151022f.png"></a>
 <a href="/comment/151022g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/151022g.png"></a>

 The Chicago Federal Reserve reported that its National Activity Index
 (CFNAI) during September remained fairly constant at -0.37. The last two
 months were down sharply, however, from July. For Q3 as a whole, the index
 remained steady with Q2 at -0.09. During the last ten years, there has
 been a 77% correlation between the Chicago Fed Index and the q/q change in
 real GDP.

 The Production &amp; Income component improved to -0.18 following its
 sharp August deterioration to -0.21. The Sales, Orders &amp; Inventories
 series rose to neutral from -0.03. Moving lower, the Personal Consumption
 &amp; Housing series eased slightly to -0.08 from -0.06. The Employment,
 Unemployment &amp; Hours was much weaker as it declined to its lowest
 point since February 2010. The Fed reported that 26 of the 85 component
 series made positive contributions to the total while 59 made negative
 contributions.

 The CFNAI is a weighted average of 85 indicators of national economic
 activity. It is constructed to have an average value of zero and a
 standard deviation of one. Since economic activity tends toward trend
 growth rate over time, a positive index reading corresponds to growth
 above trend and a negative index reading corresponds to growth below trend.

 The Chicago Federal Reserve figures are available in Haver's SURVEYS
 database. 

 <a href="/comment/151022h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/151022h.png"></a>
 <a href="/comment/151022i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/151022i.png"></a>

 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col">Chicago Federal Reserve Bank</th>
 <th scope="col">Sep</th>
 <th scope="col">Aug</th>
 <th scope="col">Jul</th>
 <th scope="col">Sep '14</th>
 <th scope="col">2014</th>
 <th scope="col">2013</th>
 <th scope="col">2012</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol">CFNAI</td>
 <td>-0.37</td>
 <td>-0.39</td>
 <td>0.49</td>
 <td>0.19</td>
 <td>0.21</td>
 <td>0.01</td>
 <td>-0.05</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp;3-Month Moving Average</td>
 <td>-0.09</td>
 <td>0.01</td>
 <td>0.03</td>
 <td>0.12</td>
 <td>--</td>
 <td>--</td>
 <td>--</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp;&nbsp;Personal Consumption &amp; Housing</td>
 <td>-0.08</td>
 <td>-0.06</td>
 <td>-0.06</td>
 <td>-0.14</td>
 <td>-0.11</td>
 <td>-0.14</td>
 <td>-0.20</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp;&nbsp;Employment, Unemployment &amp;
 Hours</td>
 <td>-0.11</td>
 <td>-0.08</td>
 <td>0.13</td>
 <td>0.18</td>
 <td>0.18</td>
 <td>0.10</td>
 <td>0.09</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp;&nbsp;Production &amp; Income</td>
 <td>-0.18</td>
 <td>-0.21</td>
 <td>0.40</td>
 <td>0.15</td>
 <td>0.11</td>
 <td>0.03</td>
 <td>0.06</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp;&nbsp;Sales, Orders &amp; Inventories</td>
 <td>0.00</td>
 <td>-0.03</td>
 <td>0.02</td>
 <td>0.01</td>
 <td>0.04</td>
 <td>0.03</td>
 <td>-0.00</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The Chicago Federal Reserve reported that its National Activity Index (CFNAI) during September remained fairly constant at -0.37. The last two months were down sharply, however, from July. For Q3 as a whole, the index remained steady [...]

Chicago Fed National Activity Index Suggests Moderate Economic Growth

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

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

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The PCE chain price index increased 0.3% in September after rising 0.3% in August. The y/y gain rose to 2.8 from 2.7% in August and was the largest gain since April 2024, up from 2.3% growth in April of this year. The PCE price index excluding food and energy prices rose 0.2% for the third straight month. The y/y rise eased to 2.8% from 2.9%.

Goods prices increased 0.5% (1.4% y/y) after a 0.1% rise but durable goods eased 0.1% (+0.9% y/y) for the third straight month. Home furnishings prices rose 0.4% (2.2% y/y) but recreational goods & vehicle prices fell 0.4% (-1.8% y/y). Nondurable goods prices strengthened 0.7% (1.7% y/y) Gasoline & other energy goods prices jumped 3.6% (-0.2% y/y), the largest increase since December of last year, while clothing prices surged 0.8% (-0.2% y/y). Prices of services increased 0.2% (3.4% y/y) after rising 0.3% for two months. Transportation services prices strengthened 1.0% (4.2% y/y) while housing & utility costs edged 0.1% higher, 4.0% y/y. Prices of services excluding energy & healthcare, increased 0.2% (3.6% y/y) in September.

Personal consumption expenditures in September improved 0.3% (5.0% y/y) after increasing 0.5% for three consecutive months. A 0.4% rise had been expected in the Action Economics Forecast Survey. After adjusting for inflation, PCE held steady, the weakest increase in four months. Real PCE growth of 2.1% y/y compared to a 3.6% rise during 2024.

Real spending on durable goods fell 0.6% (+2.1% y/y) during September as real sales of motor vehicles declined 1.1% (-0.6% y/y) after falling 1.6% in August. Home furnishings sales, adjusted for inflation, declined 0.3% (+0.3% y/y) while real sales of recreational & vehicles fell 0.5% (+6.7% y/y). Constant dollar sales of nondurable goods eased 0.3% (+2.1% y/y) in September as apparel spending fell 1.5% (+6.6% y/y). Real consumption of services gained 0.2% (2.2% y/y) for the fourth month in the last five. Spending on housing & utilities rose 0.3% (1.0% y/y) while real outlays on recreation services declined 0.4% (+1.4% y/y).

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Personal income increased an expected 0.4% (5.2% y/y) in September, the same as in August. Growth of wages & salaries also was steady at 0.4% (5.0% y/y). Proprietors income eased 0.1% (+3.7% y/y) but asset earnings rose 0.6% (2.6% y/y). Disposable personal income increased 0.3% (4.8% y/y) in September following two months of 0.4% increase. Real disposable income rose 0.1% (1.9% y/y) for a second straight month. The saving rate held steady m/m at 4.7%, below the 5.7% high this past April. Personal saving rose 2.1% y/y.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Total PCE price index drifts up even as core price gain dips.
- Real PCE gain slips as goods outlays fall.
- Personal income gain steadies.

U.S. PCE Core Price Index Gain Eases; Personal Spending Growth Slows & Income Steadies in September

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Growth in the euro area came in a little bit stronger in the third quarter as growth is up 1.1% compared to 0.6% in the second quarter and 2.3% in the first quarter. These are annualized quarter-to-quarter results. Ranked on growth rate data back to 1997, the EMU 1.4% GDP growth rate has a 41.3 percentile standing which puts it below its median growth rate for this period. 

Among the countries in the table that includes 16 European countries, Japan, as well as the European Monetary Union aggregate, only 6 countries have growth rates above their medians in 2025-Q3. One of them, Denmark, is not a monetary union member; it has a standing in its 90.2 percentile. Ireland has a rank standing in its 83.7 percentile. Portugal has a growth standing in its 66.3 percentile. Greece's growth rate is in its 60.9 percentile. Cyprus’ standing is in its 57.6 percentile. The median growth rate among reporting members has year-over-year growth at 2.0% and that's a 41.3 percentile standing.

Quarterly growth in the third quarter decelerates in four of the reporting monetary union countries. This is down from 9 decelerations in the second quarter. Growth also decelerates in the third quarter in six countries when measured on a year-over-year basis. Monetary union growth decelerates year-over-year as well.

There's not a particular pattern to the median growth rate, which was at 2.2% on the fourth quarter of 2024, slipped to 1.7% in 2025-Q1 and then to 1.6% in in 2025-Q2, and it has picked up to a 2% pace in the third quarter of 2025. The monetary union overall growth rate which is weighted for the size of the underlying economies, shows 1.3% growth in the fourth quarter of 2024, stepping up to 1.6% in the first quarter, remaining at 1.6% in the second quarter, and then slipping slightly to 1.4% in the third quarter of 2025.

Growth is favored in the smaller economies in the European Monetary Union as the four largest economies have a year-on-year growth rate that is below the growth rate for the rest of the European Monetary Union in each of the last four quarters. The year-over-year growth rate for the third quarter shows the largest four EMU economies are growing at a 0.9% year-over-year pace compared with 2.7% pace for the rest of the monetary union. This strength is also reflected in the growth standings with the four largest economies having a growth rate standing at their 37th percentile, compared to a 57.6 percentile for the rest of the monetary union.

We have no comparison for the United States right now because U.S. GDP has been delayed by the U.S. shutdown dynamics. But both Japan and Switzerland are logging relatively weak growth rates in the third quarter of 2025, with Japan at 1.1% year-over-year and Switzerland at 0.5%. Japan's growth rate is still a 50th percentile ranking while Switzerland's growth rate is a 13.6 percentile ranking against its historic results.

The growth rate for the monetary union is revised lightly higher than it was; still, it shows growth slowing quarter-to-quarter on an annualized basis. Only three of the monetary union reporting countries in the third quarter show quarterly growth actually falling; German growth is dead flat at zero. The overall monetary union growth rate is still quite moderate on a quarterly as well as annual basis. However, growth is still in train; inflation remains moderate. Growth in the monetary union is generally supported more by the smaller countries than by the large countries.

251205.jpg

Europe

GDP in EMU Is Firmer Quarter-to-Quarter, But Slowing

Andrew Cates

**The global policy rate consensus**
Blue Chip forecasters continue to mark down the path for global policy rates over the next twelve months, but with a striking divergence at the core. The US remains the standout on the downside: expectations for the Fed have shifted decisively toward deeper easing amid cooling inflation readings, softer labour-market signals, and a meaningful tightening in financial conditions as equity markets have turned choppier and long-term yields have retreated. Japan sits firmly at the opposite end of the spectrum. Markets now anticipate further incremental tightening by the Bank of Japan as it continues its slow-motion normalisation—supported by firmer wage settlements, persistent services inflation, and a strategic push to lock in a durable exit from the deflationary era. Elsewhere, the modest expected cuts for the euro area and Australia and the absence of any change from Canada largely reflect the fact that much of the heavy lifting has already been done. Policy rates in these economies are no longer meaningfully restrictive, and in some cases are arguably drifting toward neutral or even slightly loose territory. The result is a global policy map that is gently tilting toward accommodation, but with one unmistakable fault line: a widening Fed–BoJ divergence that looks set to define the macro narrative over the coming year.

251204Z1.jpg

**The US labour market**
US labour-market conditions continue to soften at the margin, and this week’s latest ADP data offer an even more critical guide than usual given the US government’s recent shutdown and the absence of official payroll numbers. November’s ADP report specifically showed a 32,000 decline in private employment—far weaker than expectations, which were centred on a modest 5,000 gain. Both ADP’s three-month change in private employment and the BLS series have eased markedly from last year’s highs, underscoring a loss of hiring momentum across private industries. In the near term—and with the official BLS data for November unavailable until December 16th—the ADP numbers will carry disproportionate weight in shaping market expectations and the narrative around the Fed’s next steps.

251204Z2.jpg

**Inflation in the euro area**
The euro area’s disinflation trend has continued to progress, but the latest data underline why the ECB remains cautious about endorsing a more aggressive easing path. Composite output price pressures from the PMI survey have settled into a narrow band consistent with only modest disinflation, while the flash HICP estimate, though dramatically lower than its 2022 peak, appears to be levelling off rather than pushing decisively back toward target. This combination of sticky underlying inflation and still-fragile growth keeps the ECB in a delicate position: policy is no longer restrictive, but not clearly loose either, and the Governing Council has been careful to stress that further meaningful rate cuts will require clearer evidence that price dynamics are on a sustained downward trajectory. For now, the data suggest a eurozone economy that has stabilised, but with inflation still just firm enough to prevent the ECB from moving more decisively.

251204Z3.jpg

**Japan’s JGB yields**
Japan’s upward drift in government bond yields has become one of the more consequential global market developments in recent weeks, and this chart helps explain why. While nominal JGB yields have been rising, the underlying driver is increasingly real yields rather than inflation expectations. That shift reflects a meaningful pickup in private non-residential investment, which has gained momentum alongside stronger corporate balance sheets, tighter labour markets, and an improving outlook for productivity-enhancing capex. The new prime minister has reinforced this narrative by signalling policy continuity on structural reforms and a renewed focus on incentivising domestic investment, helping to anchor expectations that the recent rise in real rates is part of a more durable normalisation process. For global capital markets, the implications are significant: higher real JGB yields increase Japan’s relative appeal as a destination for domestic savings, potentially reducing outward capital flows and exerting upward pressure on global real rates at the margin. After years in which Japan exported excess savings to the rest of the world, even a modest reversal of that pattern is being watched closely.

251204Z4.jpg

**UK government debt**
The spread between 10-year UK gilts and US Treasuries has narrowed notably in recent weeks, unwinding part of the sharp premium that had built up through the summer and early autumn. This spread effectively represents the additional compensation investors demand for holding UK sovereign debt, and its further modest decline since the UK Budget last week suggests some easing of the political and fiscal risk premia that had accumulated earlier in the year. However, rather than reflecting improved confidence or clearer fiscal signalling, this move arguably appears driven more by the Budget’s explicit fiscal tightening and the associated downgrade to the UK’s growth prospects. Markets have interpreted the consolidation package—mainly through higher taxes—as dampening future demand, reducing inflationary pressure at the margin, and thereby lowering the expected path for UK gilt yields relative to Treasuries.

251204Z5.jpg

**South Korea’s trade**
South Korea’s semiconductor export rebound continues to highlight how strongly the AI investment boom is feeding into global manufacturing. Chip exports, long a bellwether for the broader tech cycle, have swung firmly back into positive territory, historically a sign of improving global factory activity. The global manufacturing PMI has edged higher alongside this upswing, but it is worth noting that the PMI is still only pointing to very mediocre growth overall. In that context, the resurgence of semiconductor trade stands out even more clearly as one of the few genuine tailwinds in an otherwise subdued industrial landscape. For export-oriented Asian economies in particular, the AI-driven demand for advanced processors and memory chips is providing an important counterweight to broader global softness.

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Global financial markets have been navigating a more unsettled backdrop in recent weeks, with choppier risk sentiment and shifting rate expectations reshaping the macro narrative. US assets have been particularly sensitive to signs of cooling labour-market momentum and the temporary loss of official payroll data during the government shutdown, while rising real yields in Japan and renewed fiscal tightening in the UK have added further cross-currents. Against this backdrop, Blue Chip forecasts point to a world edging gradually toward easier monetary policy, but with a striking divergence between a more dovish Fed and a still-normalising Bank of Japan (chart 1). The softening in US private payroll growth, captured by the ADP data, reinforces the case for Fed easing at a time when official data are unavailable (chart 2). In the euro area, sticky underlying inflation could leave the ECB wary of further meaningful cuts (Chart 3). Japan’s climb in real JGB yields, underpinned by stronger capex and supportive policy signals, continues to reverberate through global rate markets (chart 4). In the UK, the gilt–Treasury spread has widened over the year but narrowed slightly post-Budget as investors priced the growth-dampening effects of fiscal tightening (chart 5). And in the global goods sector, while the manufacturing PMI still points to only mediocre growth, the revival in South Korean semiconductor exports underscores the extent to which AI-related demand remains one of the few clear bright spots in an otherwise subdued industrial landscape (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/2j2VZSImVD31Psz5shi4Sy?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Diverging Paths, Converging Risks

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New orders to all manufacturing industries rose 0.2% (3.6% y/y) during September after increasing 1.3% in August. A 0.8% decline had been expected in the Action Economics Forecast Survey.

As in the advance report, new orders for durable goods rose 0.5% (7.2% y/y) in September after a 3.0% August jump, which followed a 2.8% July decline. A 0.4% rise (15.9% y/y) in transportation sector orders followed an 8.0% August surge, which was led by commercial aircraft orders. Motor vehicle & parts orders rose 0.2% (4.3% y/y) after falling 0.3% in August. Orders excluding transportation rose 0.2% (1.2% y/y) after a 0.1% decline. Machinery orders eased slightly (+5.9% y/y) in September after a 2.1% rise. Total orders for computers & electronic products rose 0.5% (3.3% y/y) following a 1.1% decline while electrical equipment & appliance orders strengthened 1.7% (6.8% y/y), the strongest of six consecutive increases.

Nondurable goods orders, which equal shipments, eased 0.1% both m/m and y/y. Food product shipments rose 0.1% (0.5% y/y) after easing 0.1%. Textile product shipments rose 0.3% (1.9% y/y) following a 0.2% gain. Apparel shipments held steady (-0.4% y/y) after rising 0.6% in August. Paper product shipments rose 0.3% both m/m and y/y. Chemical shipments held steady (3.1% y/y) after a 0.2% gain while shipments from petroleum refineries fell 1.1% (-6.8% y/y) following a 2.2% decline.

Shipments of all manufacturing industries were little changed in September (+2.3% y/y) after falling 0.3% in August. Shipments of durable goods edged 0.1% higher (4.8% y/y) after easing 0.1%. Machinery shipments increased 1.3% (4.5% y/y) after easing 0.1% while computer & electronic product shipments were off 0.1% (+4.9% y/y) following a 0.2% dip. Electronic equipment, appliances & components shipments rose 0.6% (4.3% y/y) after rising 0.1%.

Unfilled durable goods orders increased 0.7% (8.2% y/y) in September for the second month in a row. Excluding a 1.0% increase in transportation, unfilled orders increased a steady 0.2% (0.9% y/y). Unfilled machinery orders edged 0.1% higher (-0.2% y/y) following a 0.5% rise. Unfilled orders for computers & electronic products eased 0.1% (-0.9% y/y) for the second straight month. Unfilled orders for electrical equipment & appliances rose 0.6% (2.1% y/y) after a 0.2% rise. Unfilled orders for furniture rose 0.2% (1.3% y/y) after rising 0.4% in August.

Total factory sector inventories slipped 0.1% (+1.4% y/y) for the second consecutive month. Excluding transportation, inventories rose 0.1% (1.5% y/y) also for a second month. Durable goods inventories slipped 0.1% (+1.9% y/y) for the second consecutive month. Machinery inventories rose 0.4% (3.2% y/y) after easing 0.1%. Computer & electronic product inventories rose 0.2% (1.0% y/y) after gaining 0.1%. Electrical equipment & appliance inventories rose 0.2% (2.8% y/y), the same as in August.  

Nondurable goods inventories eased 0.1% (+0.5% y/y) after holding steady in August. Food product inventories eased 0.2% (-1.6% y/y) for a second month. Textile product inventories rose 0.3% (3.2% y/y) following a 0.4% rise.  Apparel inventories rose 0.7% (-0.8% y/y) after rising 0.3%. Paper product inventories rose 0.3% (3.2% y/y) following a 0.4% gain. Chemical product inventories eased 0.1% (+1.1% y/y) after holding steady in August while petroleum inventories held steady (-0.5% y/y) after rising 0.3%.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Shipments are steady.
- Order backlogs post firm increase.
- Both durable & nondurable goods inventories slip.

U.S. Factory Orders Unexpectedly Increase in September

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Initial claims for unemployment insurance declined to 191,000 (-15.1% y/y) during the week of November 29 after easing to 218,000 during the prior week, revised from 216,000. The four-week moving average of initial claims fell to 214,750 from 224,250. It was the lowest level since January 2025, down from a high of 245,750 in the second week of June.

Federal government employees initially filed 1,125 (NSA) jobless insurance claims in the week ended November 22 after 1,724 in the prior week. These figures are increased from 588 at the end of September.

Continuing claims for unemployment insurance eased to 1.939 million (+3.6% y/y) in the week ended November 22 from 1.943 million in the prior week. The four-week moving average fell to 1.945 million from 1.951 million. It was the lowest level in five weeks.

Federal government employees continuing benefits fell to 17,851 in the week ended November 15 from 33,085 in the prior week. These figures are increased from 8,678 at the end of September.

The insured unemployment rate varied greatly across individual states and territories. In the week ended November 15, the highest unemployment rates were in New Jersey (2.26%) and Washington (2.26%), California (2.01%), Massachusetts (1.98%), the District of Columbia (1.76%) and Connecticut (1.75%). The lowest were in South Dakota (0.32%), Florida (0.33%), Louisiana (0.42%), Nebraska (0.46%) and Virginia (0.48%). Rates in other notable states include New York (1.65%), Illinois (1.53%), Pennsylvania (1.45%), and Texas (1.12%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- Decline in initial claims at lowest level since January.
- Continuing claims edge lower; jobless rate steadies.
- State unemployment rates vary.

Economy in Brief: 2015

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Can Europe Prosper on Services Alone?

U.S. Existing Home Sales Rebound as Prices Fall Again

U.S. Existing Home Sales Rebound as Prices Fall Again

U.S. Leading Economic Index Declines

U.S. FHFA Prices Slow

U.S. Existing Home Sales Rebound as Prices Fall Again

U.S. Existing Home Sales Rebound as Prices Fall Again

Chicago Fed National Activity Index Suggests Moderate Economic Growth