Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030822a.jpg" width="353">
The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) slipped the week of August 8th, but the 0.8% w/w decline did little to dent the strong series uptrend in place since the middle of March. During that period the leading index has risen roughly 8%.
The uptrend has raised the six-month growth rate of the weekly index to 13.2%, the highest growth rate since 1983.
Higher stock prices, lower claims for jobless insurance and higher commodity prices figure large in the leader&#39;s uptrend.
During the last five years there has been a 59% correlation between growth in the leading index and next quarter&#39;s growth in real GDP.
Construction of the ECRI Leading Index differs from the Index of Leading Economic Indicators published by the Conference Board. Nevertheless there has been a 77% correlation between the y/y percent change in the two series over the last 20 years.
The components of the ECRI weekly leading index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months. The sideways movement of the leading index in 2002 may or may not signal something about the economy&#39;s growth rate.
For more on ECRI and the Weekly Leading Index go to <a href="http://businesscycle.com">businesscycle.com</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM">ECRI Leading Index</a></th>
<th scope="col">8/08/03</th>
<th scope="col">8/01/03</th>
<th scope="col">Growth Rate</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Weekly</td>
<td>127.5</td>
<td>128.5</td>
<td>13.2%</td>
<td>1.2%</td>
<td>-5.3%</td>
<td>-0.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>July</td>
<td>June</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Monthly</td>
<td>127.2</td>
<td>124.7</td>
<td>10.8%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) slipped the week of August 8th, but the 0.8% w/w decline did little to dent the strong series uptrend in place since the middle of [...]

ECRI Weekly Leading Indicators Slip, Uptrend Strong

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/030821b.jpg" width="353">
The German Federal Statistics Office reported the details of second quarter GDP Thursday. As highlighted in the preliminary release a week ago, adverse developments in exports exerted a major drag on growth. They fell 2.3% following a 0.3% decrease in the first quarter, and stood 1.5% below a year ago. Consumption was virtually flat for the latest quarter, while fixed investment was mixed. Equipment outlays declined slightly, but expenditures on construction projects and other fixed assets turned higher. Nonetheless, three quarters have now passed since GDP in Germany has shown any increase, and commentators are starting to say the country&#146;s economy has fallen back into recession. 

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<tr>
<th scope="col" class="firstcol">GDP &amp; Selected Components (% Changes)</th>
<th scope="col">2nd Quarter 2003 &nbsp;(Q/Q)</th>
<th scope="col">1st Quarter 2003 &nbsp;(Q/Q)</th>
<th scope="col">Year/Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">Total GDP</td>
<td>-0.1</td>
<td>-0.2</td>
<td>-0.6</td>
<td>0.5</td>
<td>0.5</td>
<td>1.9</td>
</tr>
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<td class="firstcol">Household Consumption</td>
<td>0.0</td>
<td>0.5</td>
<td>0.8</td>
<td>-0.6</td>
<td>1.3</td>
<td>1.1</td>
</tr>
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<td class="firstcol">Gross Fixed Capital Formation</td>
<td>.2</td>
<td>-1.2</td>
<td>-2.4</td>
<td>-5.1</td>
<td>-6.0</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>-2.3</td>
<td>-0.3</td>
<td>-1.5</td>
<td>5.4</td>
<td>0.1</td>
<td>15.8</td>
</tr>
</tbody>
</table>
U.K. Industry, Consumer Demand Show Firming Tendencies 
by <a href="/comment/Stone.html">Carol Stone</a> August 21, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030821c.jpg" width="353">
The UK seems to be managing some hesitant improvement. The August Industrial Trends Survey conducted by the Confederation of British Industry (CBI) remains in negative territory, with its order book reading at -24. But that recovered from July&#146;s -37 and achieved the best reading since November of last year. This could well be due to growing retail demand. Retail sales over the three months to July showed a fourth month of decent trend growth after a pause during the winter. These sales decreased 0.4% on a month-to-month basis, but that followed a sizable 2.0% increase in June. The more commonly followed three-month moving average maintained a 0.4% pace, similar to the prior three months.
At the same time, the UK too is suffering a drag from exports, as those orders in the CBI survey for August remained at July&#146;s -32 level, similar to the showings of several recent months. The pound has weakened against the euro, which would ordinarily suggest gains in UK exports. But possibly the slowing impact on the UK&#146;s biggest trading partners of the very strong euro has pulled down their demand curve for UK products at any exchange rate.

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<th scope="col" class="firstcol">U.K.</th>
<th scope="col">August 2003 </th>
<th scope="col"> July 2003 </th>
<th scope="col">August 2002</th>
 Annual Average
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<tbody>
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<td class="firstcol"> 2002 </td>
<td> 2001 </td>
<td> 2000 </td>
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<td class="firstcol">CBI Survey (% Balance)</td>
<td>-24</td>
<td>-37</td>
<td>-24</td>
<td>-27</td>
<td>-26</td>
<td>-15</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Sales Volume (3-Mo % Change)</td>
<td>4.7 (Annual Rate)</td>
<td>9.0 (Annual Rate)</td>
<td>4.4 (Y/Y)</td>
<td>5.4</td>
<td>5.9</td>
<td>4.5</td>
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The German Federal Statistics Office reported the details of second quarter GDP Thursday. As highlighted in the preliminary release a week ago, adverse developments in exports exerted a major drag on growth. They fell 2.3% following a [...]

German GDP Detail Confirms Export Drag

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030821a.jpg" width="353">
Initial claims for unemployment insurance fell to 386,000 but the prior week&#39;s level was revised up slightly to 403,000. Consensus expectations had been for claims of 395,000.
The Labor Department indicated that last week&#39;s power outage had &quot;minimal&quot; effects on the figures.
The latest initial claims figure was for the survey week for August payrolls. Claims were down 29,000 (7.0%) from the July survey period.
The four-week moving average of initial claims fell just slightly to 394,250 (+1.1% y/y).
Continuing claims for unemployment insurance rose 41,000 (1.1%) w/w. The prior week&#39;s level was revised lower. Continuing claims have risen in three of the last four weeks.
The insured rate of unemployment was stable at 2.9%.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">8/16/03</th>
<th scope="col">8/09/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Initial Claims</td>
<td>386.0</td>
<td>403.0</td>
<td>-2.5%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
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<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,673</td>
<td>4.5%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
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</tbody>
</table>
Leading Indicators Rose Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 21, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030821d.jpg" width="353">
The Conference Board reported that the Composite Index of Leading Economic Indicators rose for the fourth consecutive month in July. The 0.4% gain was as expected but the prior month&#39;s increase was revised up to 0.3% from 0.1% reported last month.
Gains amongst the leaders&#39; component series fell to 50% but the diffusion of the prior month&#39;s gain was revised up to 70% from 55%. The percentage of leading components rising over a six month period rose to 60%, the highest level in a year.
A steeper yield curve had the largest positive influence on theJuly leading index. That added to significant positive contributions from a higher money supply and lower claims for unemployment insurance. The largest negative influences came from shorter weekly hours worked, lower building permits and lower consumer expectations.
The Leading index is based on eight previously reported economic data series and two that are estimated.
The coincident indicators rose but just slightly for the second month in three.
The ratio of coincident-to-lagging indicators was unchanged at a record high level. The ratio is an indicator of excess relative to actual economic performance.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.4%</td>
<td>0.3%</td>
<td>1.4%</td>
<td>2.1%</td>
<td>-0.9%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1%</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>-0.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.1%</td>
<td>-0.8%</td>
<td>-2.4%</td>
<td>-4.4%</td>
<td>-1.3%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Surged 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 21, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030821e.jpg" width="353">
The Philadelphia Fed&#146;s August index of general business conditions rose quite a bit more than expected to the highest level since June 1998. The rise to 22.1 from 8.3 in July was versus Consensus expectations for a reading of 10.0.
August was the third consecutive positive reading for the general business conditions index following three months negative.
Gains amongst the sub indexes were broad based except that the employment index retraced virtually all of the prior month&#39;s improvement and returned to negative territory. New orders &amp; shipments were strong and inventories continued to rise for the third consecutive month.
During the last twenty years there has been a 67% correlation between the level of the Philadelphia Fed Business Conditions Index and quarterly growth in real GDP. The correlation with quarterly growth in factory sector industrial production has been 77%.
The business conditions index reflects a separate survey question, not the sub indexes.
A separate survey of expected business conditions in six months rose to 62.0, the highest reading since June 1992.
The prices paid index surged to 16.0, the highest level since April.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0803.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
<tbody>
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<td class="firstcol">General Activity Index</td>
<td>22.1</td>
<td>8.3</td>
<td>-0.3</td>
<td>7.7</td>
<td>-17.2</td>
<td>8.3</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>16.0</td>
<td>-6.5</td>
<td>22.1</td>
<td>12.2</td>
<td>-0.9</td>
<td>27.2</td>
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Initial claims for unemployment insurance fell to 386,000 but the prior week's level was revised up slightly to 403,000. Consensus expectations had been for claims of 395,000. The Labor Department indicated that last week's power [...]

Initial Claims for Jobless Insurance Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030820d.jpg" width="353">
French GDP decreased in the second quarter, dragged down by weakness in business capital spending and exports. Household consumption also declined. Only government consumption and investment showed any notable gains. This sluggish overall result for the quarter cut the year-on-year performance to virtually zero, the first non-positive outcome since the end of 1993.
Forecasters had anticipated a flat result on the quarter, so this number undercut expectations. As in Germany, the weakness in exports suggests that the strong euro is at least partly to blame. In turn, foreign exchange markets have already begun to reflect the associated growth slowdown in Europe; the euro had fallen more than 6% by August 19 to $1.1117 from an early June peak of $1.1870.

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<colgroup><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol">GDP &amp; Selected Components (% Changes)</th>
<th scope="col">2nd Quarter 2003 &nbsp;(Q/Q)</th>
<th scope="col">1st Quarter 2003 &nbsp;(Q/Q)</th>
<th scope="col">Year/Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">Total GDP</td>
<td>-0.3</td>
<td>0.2</td>
<td>0.0</td>
<td>1.4</td>
<td>0.7</td>
<td>3.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Consumption</td>
<td>-0.2</td>
<td>0.5</td>
<td>1.1</td>
<td>1.5</td>
<td>2.6</td>
<td>2.2</td>
</tr>
<tr>
<td class="firstcol">Gross Fixed Capital Formation: &nbsp; Nonfinancial Companies</td>
<td>-0.6</td>
<td>0.0</td>
<td>-3.2</td>
<td>9.5</td>
<td>-0.7</td>
<td>-4.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>-0.6</td>
<td>-1.8</td>
<td>-2.6</td>
<td>3.8</td>
<td>-4.8</td>
<td>13.9</td>
</tr>
</tbody>
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French GDP decreased in the second quarter, dragged down by weakness in business capital spending and exports. Household consumption also declined. Only government consumption and investment showed any notable gains. This sluggish [...]

French Economy Declines Unexpectedly in Second Quarter

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030820b.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association fell another 10.7% last week following the 16.1% drop the week prior. Since the peak in late May mortgage applications are down by almost two-thirds.
Purchase applications have weakened. Last week mortgage applications for home purchase fell 4.9% and that added to a 10.3% decline the week prior. Since the peak in late May purchase applications have fallen 15.4%.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance continued to plummet. They fell 14.9% last week and by nearly one third in just the last two weeks. Refinancings were down 72.4% from the peak in late May.
Interest rates on a conventional 30-Year mortgage moved back up, rising 24 basis points w/w to 6.52%. That was versus a low for 30-Year financing of 5.31% in the second week of June. The effective rate on a 15-year mortgage rose to 5.91%, up 29 basis points w/w.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders.
For the August Senior Loan Officer Survey on Bank Lending Practices from the Federal Reserve Board, click <a href="http://www.federalreserve.gov/boarddocs/snloansurvey/200308/default.htm">here</a>.
Visit the Mortgage Bankers Association site at <a href="http://www.mbaa.org/">www.mbaa.org.</a>

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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">8/15/03</th>
<th scope="col">8/08/03</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>736.7</td>
<td>824.6</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>389.5</td>
<td>409.6</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,756.8</td>
<td>3,238.4</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
</table>
U.S. Budget Deficit Deepened in July 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 20, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030820a.jpg" width="353">
The U.S. Government budget deficit deepened last month to $54.2B. That was versus of deficit of $29.2B in July &#39;02. The deficit was slightly deeper than most analysts had expected.
The Federal government&#39;s deficit totaled $320.4B through the first ten months of this fiscal year. That is versus a deficit of $145.5B through the first ten months of FY2002.
Net receipts for the first ten months of FY03 fell 3.9% versus last year. Individual tax payments fell 6.9% and corporate income taxes were down 14.8%. Social insurance contributions rose 1.7% and excise taxes also rose just slightly. 
Federal net expenditures rose 7.1% versus last fiscal year&#39;s first ten months. Defense spending surged 15.9% to 18.4% of the Federal budget. Spending on health programs was strong as well, up 11.3%, and spending on education surged 17.0% to 3.8% of the budget. Spending on income security rose 8.1% to 16.0% of the Federal budget and Medicare outlays rose 8.3% to 11.5% of the budget. Social Security outlays rose 4.1% to 21.9% of the budget. Interest expense fell 10.0% y/y.
For a report titled &quot;Understanding State Budget Troubles&quot; from the Federal Reserve Bank of San Francisco click <a href="http://www.frbsf.org/publications/economics/letter/2003/el2003-23.html">here</a>.

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">June &#39;02</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
<th scope="col">FY2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-54.2B</td>
<td>$21.2B</td>
<td>$-29.2B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
<td>$236.4B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$123.6B</td>
<td>$193.1B</td>
<td>-8.1%</td>
<td>-6.9%</td>
<td>-1.7%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$177.8B</td>
<td>$171.8B</td>
<td>8.7%</td>
<td>7.9%</td>
<td>4.2%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
</body>
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The index of mortgage applications compiled by the Mortgage Bankers Association fell another 10.7% last week following the 16.1% drop the week prior. Since the peak in late May mortgage applications are down by almost two-thirds. [...]

Mortgage Applications Down

Louise Curley

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The ZEW Center for European Economic Research in Germany reported that its index of investor confidence rose to 52.5 in August, up from 41.9 in July. The increase follows a July increase that almost doubled the June level of 21.3. August was the first month since October, 2002 that the index showed a year-to-year increase.
The index, based on a survey of 310 analysts and institutional investors, tends to forecast business activity six months ahead.
Investors&#39; confidence has been strengthened by the rise in the stock market--the Morgan Stanley Capital Market Index of German Stocks on August 18th, has increased almost 54% since its low on March 12th,--and by corporate earnings reports that have exceeded expectations. In addition, both monetary and fiscal policy have become easier. The European Central Bank reduced its benchmark rate to 2% from 2.5% on June 5.and the Government has brought forward some 22 billion Euros ($25 billion) of tax reductions to early 2004.
Although it is based on a small sample, the ZEW index has a good reputation of anticipating the results of the broader IFO index that is widely regarded as an important leading indicator of the economy. The IFO index will be available later in the month.

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<thead>
<tr>
<th scope="col" class="firstcol"></th>
<th scope="col"></th>
<th scope="col"></th>
<th scope="col"></th>
Percent Change
<th scope="col"></th>
<th scope="col"></th>
<th scope="col"></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>Aug 03</td>
<td>July 03</td>
<td>Aug 02</td>
<td>M/M</td>
<td>Y/Y</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr>
<td class="firstcol">ZEW</td>
<td>52.5</td>
<td>41.9</td>
<td>43.4</td>
<td>10.6</td>
<td>9.1</td>
<td>45.3</td>
<td>2.8</td>
<td>59.1</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
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The ZEW Center for European Economic Research in Germany reported that its index of investor confidence rose to 52.5 in August, up from 41.9 in July. The increase follows a July increase that almost doubled the June level of 21.3. [...]

German Investor Confidence Strengthening

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030819b.jpg" width="353">
Housing starts were stronger than expected last month, rising 1.5% m/m to 1.87 mil. units. Consensus expectations had been for starts of 1.78 mil. July was the highest level of starts since April 1986. Starts had surged in May and June and the June level was revised up.
Single family starts rose 1.9% m/m to the highest level since November 1978. So far this year single family starts are up 4.5% from the 2002 average. June starts were revised up. 
Multi-family starts fell 0.6% last month for the second consecutive monthly decline. June multi family starts were revised up. Multi-family starts this year are down 4.3% versus 2002.
Building permits fell 2.4%, the first m/m decline in four months. Permits for 5 or more structures fell 12.2% (-22.2% y/y) while single family permits were off a slight 0.3% (8.5% y/y).

<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/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,872</td>
<td>1,845</td>
<td>12.4%</td>
<td>1,711</td>
<td>1,601</td>
<td>1,573</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family</td>
<td>1,521</td>
<td>1,492</td>
<td>14.4%</td>
<td>1,364</td>
<td>1,272</td>
<td>1,232</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi Family</td>
<td>351</td>
<td>353</td>
<td>4.2%</td>
<td>347</td>
<td>330</td>
<td>341</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,780</td>
<td>1,823</td>
<td>2.2%</td>
<td>1,750</td>
<td>1,637</td>
<td>1,598</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Dipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 19, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030819a.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index dipped a slight 0.8% in mid-August to 90.2 versus 90.9 in July. A reading of 91.0 had been expected by the Consensus of economists.
A 1.6% decline versus July in the reading for Current Economic Conditions led the dip in the overall Sentiment index. Nevertheless, that reading was up 2.0% y/y.
Consumer Expectations fell by a lesser 0.1% (3.7% y/y) but it was the third consecutive monthly decline.
Over the last ten years there has been a 69% correlation between the level of consumer sentiment and the y/y change in real PCE. The correlation over the last five years has been 82%.
The University of Michigan survey is not seasonally adjusted.It is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

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<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">Mid-August</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Sentiment</td>
<td>90.2</td>
<td>90.9</td>
<td>89.7</td>
<td>89.6</td>
<td>89.2</td>
<td>107.6</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Stall 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 19, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030819c.jpg" width="353">
Chain store sales fell 0.5% last week according to the BTM-UBSW survey. The decline followed a slight uptick the prior week and a 0.8% surge in the opening week of the month.
Despite the latest dip, the level of sales so far this month were 1.0% above the July average. July sales rose 1.4% from June.
During the last five years there has been a 62% correlation between the year-to-year percent change in chain store sales and the change in nonauto retail sales less gasoline.
The BTM-UBSW retail chain-store sales index is constructed from the sales results reported by seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">8/16/03</th>
<th scope="col">8/9/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>426.2</td>
<td>428.3</td>
<td>4.0%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body>
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Housing starts were stronger than expected last month, rising 1.5% m/m to 1.87 mil. units. Consensus expectations had been for starts of 1.78 mil. July was the highest level of starts since April 1986. Starts had surged in May and [...]

Housing Starts Highest Since 1986

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030818d.jpg" width="353">
The National Association of Home Builders (NAHB) reported that their Composite Housing Market Index rose in August to the highest level since January 2000. The index jumped 6 points from July to 71 and was up 29.9% from August of last year.
During the last fifteen years there has been a 68% correlation between the y/y change in the NAHB index and the change in new home sales.
The index of current market conditions for home sales rose to 77 (30.5% y/y) as the percentage of builders indicating &quot;good&quot; conditions rose to 61% from 51%.
The index which measures expected home sales in six months rose modestly to 78 (18.2% y/y) versus an average of 69 during all of last year.
Traffic of prospective buyers again rose sharply to the highest level since July 1999.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the National Association of Home Builders at <a href="http://www.nahb.org/">www.nahb.org</a>.

<table border="0" cellspacing="0" width="100%">
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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">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>71</td>
<td>65</td>
<td>55</td>
<td>61</td>
<td>56</td>
<td>62</td>
</tr>
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The National Association of Home Builders (NAHB) reported that their Composite Housing Market Index rose in August to the highest level since January 2000. The index jumped 6 points from July to 71 and was up 29.9% from August of last [...]

Housing Market Index Much Higher

PMIs showing widespread revival of global economy

Crude oil price has returned to pre-conflict level but traffic through Hormuz still subpar

Surging orders for computers and electronics propelling durable goods orders

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

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

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

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Tian Yong Woon

In this week's Letter, we examine the underbelly of the AI boom, the risks that sit beneath its optimism. Start with the public mood: American concern about AI has grown alongside adoption over the past three to four years (chart 1). Those worries span mass job displacement, misuse of top-end models by bad actors, and fears of being left behind. The first of these is already surfacing: in June, AI was again the most cited reason for announced US layoffs, with year-to-date AI-linked cuts above 100,000 (chart 2). Technology led all sectors in overall cuts, though the data do not isolate how many were AI-driven. Among those hit, the young are arguably the most exposed to these labour effects. They enter a labour pool swollen by displaced professionals, just as AI masters the entry-level tasks where they would start. India and Indonesia illustrate the stakes on youth NEET, the share not in education, employment, or training, both above 20% and among Asia's highest (chart 3). Beyond the labour market, the same optimism reshapes asset prices. The rally has lifted AI-related valuations to historic highs and concentrated a few names in cap-weighted indexes (chart 4). That raises correlation and the risk of a sharper index fall should the rally unravel. The same concentration runs through economies via exports, from Taiwan's advanced chips to South Korea's memory (chart 5). Its footprint is physical too, and cuts both ways: data-centre investment has lifted growth in Johor, Malaysia (chart 6) while straining local power and water. None of this argues against riding the AI wave, which still promises real productivity and welfare gains. Rather, these are caveats that investors and policymakers must keep in view, since the story is not all upside.

**AI-related concerns**
AI adoption has exploded over the past three to four years, and Americans' concerns have risen alongside it (chart 1). That is understandable, given how advanced and broad AI's proven applications have become. They now span everyday tasks and subject-specific work across fields such as finance and production, as well as tech and development, the sector AI was born in. Major concerns run from mass AI-induced job displacement to a more recent fear, that top-end models fall into the wrong hands and are used by bad actors. A further worry is distributional: AI advances are powerful and could deliver leaps in productivity, yet they may also leave many people behind. Those most exposed include workers already displaced from their jobs and people facing scarcer basic resources as AI demand competes for them. Others simply lack equitable access to AI tools or their benefits.

260713T1.jpg

**AI-driven job displacement**
Some of the fears US workers first had about AI-driven job displacement are already playing out. In June, AI was again the most cited reason for announced job cuts in the US (chart 2). That pushed year-to-date job cuts attributed to AI above 100,000, more than half of all AI-tagged cuts since AI became a selectable reason in 2023. The data come from the latest survey by Challenger, Gray & Christmas. This likely reflects AI's disproportionately heavy impact on certain industries such as technology, which again led all sectors in cuts. At the same time, announced hiring plans stayed subdued, leaving laid-off workers with limited opportunities to find new roles. All of this is occurring even as market valuations remain elevated on the broader wave of AI optimism.

260713T2.jpg

**AI and youth unemployment**
Arguably among those bearing the brunt of these labour-related effects are the youth. Many have graduated on a curriculum built largely for a pre-AI era. They now enter a labour pool swollen by experienced professionals whom AI has displaced. At the same time, AI is proving especially capable at the entry-level tasks on which young workers usually start. An elevated youth unemployment rate only intensifies the competition young people face for gainful employment. On the broader NEET measure, which also captures youth who are neither working nor studying, India and Indonesia stand out. On the latest available WDI data, both have youth NEET rates above 20%, among the highest in Asia and above the global average (chart 3). Should employers in these economies adopt AI aggressively across processes and production, including physical AI such as humanoid robots, the problem could worsen. Yet firms that stay purely labour-intensive risk losing out to rivals using more efficient, and perhaps cheaper, AI-driven methods.

260713T3.jpg

**Concentration risk**
The recent wave of AI optimism has pushed the equity valuations of major AI developers and AI-related goods producers to historically high levels. These gains are partly backed by strong earnings and upbeat forward guidance. Most major indexes are weighted by market capitalisation, so a counter's weight tracks its price. As these counters have outperformed their peers (chart 4), their index weight has risen close to mechanically, when holding the number of shares constant. This raises concentration risk, since a small group of counters now carries more of the index and moves it more closely. So, if the rally in these counters were to unravel deeply, it would drag the broader index down more heavily with it.

260713T4.jpg

AI-related concentration risk is not confined to equity indexes; it also shows up in the growth of major economies. In Asia, that risk usually runs through a country's exports. Take Taiwan, the world's largest advanced semiconductor exporter, as an example. As chart 5 shows, its recent export growth has come more than entirely from integrated circuits and from infocomm and audiovisual equipment. Other goods categories have often contributed negatively in recent months. This is good news for the Taiwanese economy, which sits right at the centre of the global AI boom. Yet it is also a source of concentration risk, should AI-related goods demand collapse or substantial alternative supply emerge elsewhere. A similar story applies to South Korea, through its role in supplying high-end memory chips.

260713T5.jpg

**Data centres, energy, and water**
Finally, rapidly advancing AI promises major productivity gains and broad improvements to daily life. Yet AI infrastructure rests on resource-intensive inputs: the energy needed for data centre compute, and the water needed to cool those centres. Both may deprive real people of the very resources they need to survive. One recent hotspot is Malaysia, which has courted a wave of foreign direct investment to expand its data centre footprint in the state of Johor. These capital inflows are welcome, and have lifted state-level growth through the construction sector (chart 6). But they have also raised concerns about straining local grids and water supplies, possibly leaving less for residents. Among estimates, a recent one puts data centres at around 40% of Johor's electricity demand by 2035. That is pressuring the state to expand generation capacity and grid access to match the data centre pipeline already in place. Its neighbour Singapore faced similar strains earlier, and has since repositioned itself as a hub for the most advanced and efficient data centres, partly because of its severe land constraints. 

260713T6.jpg

Asia

Economic Letter from Asia: The AI Underbelly

Robert Brusca

260714E.jpg

Industrial output in Norway fell by 1% in May after rising by 0.6 in April and falling by 1.1% in March. The seesaw act for output continues. Over broader horizons, however, output is falling. It falls by 0.1% over 12 months, falls at a 1.1% annual rate over six months, and falls at a 6.2% annual rate over three months, giving us a clear sequential trend toward falling and decelerating output. Utilities output has chaotic trends, as do mining and quarrying; however, manufacturing shows a clear trend toward output acceleration, with a 2.1% output increase over 12 months, a 2.6% annual rate rise over six months, and a 9% annual rate increase over three months.

Manufacturing sectors show consumer goods output increasing in May, also showing secular acceleration from 12 months to six months to three months. Durable goods, however, are the fly in the ointment, with output up 2.2% over 12 months, accelerating over six months, and then dropping at a 20.4% annual rate over three months. However, consumer nondurables show growth and acceleration, with a 12-month gain of 1.8%, rising to a 3.6% annual rate increase over six months and a 10.9% annual rate increase over three months. Intermediate goods output trends return to more difficult times and show declines over 12 months, six months, and three months, but not a clear path of deceleration. Capital goods output is up 5.4% over 12 months and at an 8.5% annual rate over three months, but there is an intervening soft spot with output up at only a 3.4% annual rate over six months.

Against this background, inflation in Norway showed solid increases in May, rising by 0.2% overall and by 0.3% for the core HICP. However, sequentially inflation gains 3% over 12 months, rises at a 3.8% annual rate over six months, and then backs down to a 1.2% annual rate over three months. The core HICP is steadier, with a 3.4% gain over 12 months, rising to a 3.8% annual rate over six months, and then backing down to 3.2% at an annual rate over three months. That's a set of growth rates that are more stable than either accelerating or decelerating.

In the quarter-to-date (QTD) basis, industrial production is falling 4.6%; this is two months into the second quarter. On the other hand, manufacturing output is rising QTD at a 4.9% annual rate, with consumer nondurables showing strong positive growth along with intermediate goods output. There is a solid gain of 3.1% at an annual rate from capital goods. The QTD inflation trends remain somewhat mixed, with a weak headline showing a 1.6% annual rate, against a core HICP at a 3.4% annual rate rise, the latter gain being well in step with its sequential results.

The far right-hand column compares industrial production over the broad period from just before COVID (in January 2020) looking at the ratio of the level of output in May 2026 to its index value in January 2020. Remember that IP data are inflation-adjusted, so these are real data. Over this span, industrial production excluding construction is up by approximately 10%, with utilities output up at about 21%, mining and quarrying up about 5%, and manufacturing up a little more than 7%. This is a 5½-year period. Consumer goods output is up by 2.7%, led by consumer nondurables which rise 4.1% on the period and against durable goods output where there is a decline of about 13% on that timeline. Intermediate goods output drops slightly on the timeline by less than half a percentage point, while capital goods output is up at a solid and strong 23% gain. Looking at prices over the same period, the headline HICP is higher by 27% while the core is higher by 24%.

The weakened output shows the stresses and strains of the period, with weak gains in place over the last 5½ years and with the consumer showing considerable wear and tear, leaving consumer goods output lower on balance over this 5½-year span. It hasn't been such a bad time for capital goods, where output rose by 23% over the period. Inflation got out-of-the-box and grew quite strongly. The headline HICP grew by 27% since January 2020, a duration of time during which, sticking to its target, would have implied a gain in the price level of only 11.5%.

**Ongoing overshooting**
Even now central banks are trying to decide how to come to grips with the inflation pressures from that. Pressures continue to linger and threaten the economies. Of course, there are some new factors in place, but that's the nature of inflation: if it's not one thing, it's something else. And failing to respond to the one thing means that you're going to get hit even worse when it becomes something else. This is the lesson the central banks haven't learned during this period. 

**Have central banks learned their lesson?**
Noting that inflation is over target and then forecasting that it's going to come back down to target over some period ahead puts the inflation performance at risk to whatever happens between now and the end of that period ‘ahead.’ If that forecast isn't perfectly right and if there's something else that disturbs the path of prices, what will happen is that an inflation that is already over the top of the target will push even farther over the top of the target and the dilemma faced by the central bank will become even worse. This is why kicking the can down the road generally is not a very good strategy, but it's one that virtually all the central banks pursued in the wake of COVID. So, will central bankers come to see inflation that is here and now as a here-and-now problem to be addressed here and now, or as a candidate for tomorrow land? The ECB seems to be changing, and the Fed has formed task forces. What about Norway and the rest of the world? Norway did push its target rate up as the ECB hiked. But what is its plan?

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Norway

Norwegian IP Struggles, but Manufacturing Shows Some Strength

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Manufacturing output in the countries of the European Monetary Union continues to underperform. The median change for the 11 countries reporting on the table is a 0.5% decline in May following a 0.3% increase in April. However, only 41.7% of the reporters are accelerating in May, compared to 25% in April, although in March over half of the reporters had showed some acceleration, with output at 61.5%.

In May, of these eleven early reporters, seven showed month-to-month declines in output. This compares to four showing declines in April and four showing declines in March.

**Sequential trends**
Over 12 months, output is declining in four of these eleven countries: Germany, Luxembourg, Ireland, and Portugal. Over six months, output declines in five of the eleven countries. Over three months, output declines in four of the eleven countries. Over these broader sequential periods, output is increasing in most cases; only one country, Ireland, shows consistent declines in output over three months, six months, and 12 months. However, among EMU countries, only Italy shows output expanding on all three timelines, although Sweden, an EU member country, also shows output increasing in all three periods.

Amid the output weakness in May, the quarter-to-date calculation for industrial production growth is also broadly weak. In May, seven of the eleven quarter-to-date changes in industrial production are negative. Positive results, increases in the quarter-to-date, are registered by Germany, Luxembourg, Greece, and Portugal.

The ranking of the year-over-year growth rates shows seven countries with output growth rate rankings below 50%, marking them as below their respective medians. The comparisons for output growth are taken back to 2006, a period of about 20 years.

Four EMU countries rank above their twenty-year medians: France, Italy, Luxembourg, and Greece.

The snapshot of industry in the monetary union is consistent, showing little momentum, little strength, and relatively low rankings for current growth rates; only a minority of reporters show an acceleration in growth in May compared to April. With the situation in the Strait of Hormuz deteriorating again, the outlook for industrial production has to remain guarded.

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Europe

Industrial Sector Remains Under Pressure in EMU

Andrew Cates

**Growth Surprises Continue to Underpin Equity Resilience**
Global equity markets have proved remarkably resilient in recent weeks, shrugging off intermittent bouts of geopolitical and policy uncertainty to grind higher. Chart 1 below helps explain why: it tracks the relationship between global growth-versus-inflation surprises and world equity markets, and on that measure the recent run of global growth data has continued to surprise on the upside relative to inflation outturns — a combination that has historically been supportive for risk assets. Whether that resilience persists will depend on whether the growth-surprise advantage evident in the chart below can be sustained in the face of the inflationary pressures explored below.

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**PMIs Confirm a Broadly Solid Global Expansion**
This week's final composite PMI readings for June reinforced the broader impression of resilient global growth. As chart 2 below shows, most major economies posted readings comfortably in expansionary territory, with India continuing to lead the pack and the US not far behind. Even the laggards in the sample are hovering close to the expansion threshold rather than falling decisively below it, suggesting stabilisation rather than outright contraction (and with the UK a notable exception).

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**Inflation Surprises Are Creeping Back, and Bond Yields Are Taking Notice**
The US growth picture painted by Haver's surprise indices broadly echoes the message from the global PMI data. Chart 3 below shows the combined growth-and-inflation surprise index drifting higher this week, and closer inspection suggests growth is doing most of that work, with activity data continuing to outperform expectations. That is, on the face of it, good news. But it has not stopped bond markets from taking notice: short-dated Treasury yields have remained elevated in recent weeks, as stronger growth keeps alive the possibility that the Federal Reserve holds rates higher for longer or even lifts them in coming weeks.

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**Supply Chains Are Tightening** 
Latest data show that global supply chain pressures tightened by less in June than they had the month before, likely reflecting the easing of Middle East tensions through much of the period. Chart 4 below shows that pressures troughed in the middle of last year and have been building gradually since, though June's slower pace of tightening suggests that easing had started to feed through. Still, today's flare-up threatens to undo that improvement, particularly if it affects shipping routes or energy flows through the region once again.

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**Extreme Weather: An Old Supply-Side Risk Returns**
Geopolitics is not the only source of supply-side risk currently in play. Large parts of Europe have been gripped this week by another intense and prolonged heatwave, with temperatures in several major cities running well above seasonal norms. Extreme heat of this kind carries real economic costs: it depresses labour productivity, particularly in outdoor and manufacturing-adjacent sectors, strains electricity grids as air-conditioning demand spikes, and can disrupt agricultural output and river-based transport when water levels fall. Episodes like this have become more frequent in recent years, and while any single heatwave rarely shifts the macro picture on its own, the cumulative effect of more frequent and more severe weather events could start showing up in productivity and inflation data across the advanced economies. It is a reminder that the supply side of the global economy faces structural as well as cyclical challenges, and that climate-related disruption deserves a permanent place alongside geopolitics and demographics in any assessment of medium-term inflation risk.

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**AI Investment: The Other Side of the Supply Equation**
Set against these supply-side headwinds is a genuinely positive structural development: the extraordinary scale of private investment now flowing into artificial intelligence. Chart 6 below shows just how sharply that investment has grown in recent years, reaching a fresh high last year. If even a fraction of that investment translates into genuine productivity gains, it could provide a meaningful long-run offset to the energy, climate and geopolitical constraints highlighted elsewhere in this week's charts. The scale of the bet now being placed on AI is large enough that it is beginning to show up in aggregate investment and capital expenditure data across the advanced economies, and it is likely to remain one of the defining structural themes shaping the global growth outlook over the remainder of this decade.

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Global markets head into this week’s closing stages digesting a mixed set of signals. Last week's US non-farm payrolls report undershot expectations, adding to questions about the durability of the US labour market even as broader activity data have continued to hold up well. Compounding that picture, news broke today of renewed instability in the Middle East, reintroducing a geopolitical risk premium into markets just as investors had begun to look past it. Global equity markets have nonetheless remained resilient, continuing to track the broadly encouraging tone of incoming activity data (chart 1). That resilience was reinforced by a solid set of global PMIs across most major economies over the past few days (chart 2). Haver's surprise indices tell a similar story of positive growth momentum in the US, but with an important caveat: incoming inflation data have also been surprising to the upside, driven largely by higher oil prices (chart 3). These inflation risks could persist moreover, as global supply chain pressures have picked up in recent months and today's flare-up in the Middle East threatens to add further strain (chart 4). The world economy remains vulnerable to other supply-side shocks too, such as the extreme heat gripping much of Europe this week (chart 5). Still, on the other side of the ledger the enormous scale of investment now flowing into artificial intelligence could be a genuine source of supply-side potential (chart 6).

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Charts of the Week: Growth Holds Firm

Winnie Tapasanun

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Existing home sales unexpectedly fell 2.4% m/m (+2.8% y/y) to 4.09 million units (SAAR) in June, the first monthly decline since March, following an upwardly revised 3.7% increase to 4.19 million in May (previously +3.2%; 4.17 mil.), according to the National Association of Realtors (NAR). The Action Economics Forecast Survey had expected June sales of 4.20 million units. Sales remained 36.4% below a high of 6.43 million in January 2022 and 38.0% below a peak of 6.60 million in January 2021. The June decline coincided with a rise in the average 30-year fixed mortgage rate to 6.49% in June, the highest since August 2025, after increasing to 6.44% in May, according to Freddie Mac. The sales figures are based on closings of sales contracts signed over the past couple of months.

Existing single-family home sales fell 2.4% (+3.3% y/y) to 3.73 million units in June, the first m/m fall in three months, following a 4.1% gain to 3.82 million in May, remaining 34.6% below a high of 5.70 million in January 2022. Sales of condos and co-ops decreased 2.7% (-2.7% y/y) to 360,000 in June, the lowest level since May 2025, after being unchanged m/m for the third successive month at 370,000, remaining 50.7% below a high of 730,000 in January 2022.

Regionally, June existing home sales declined m/m in all regions except the Northeast. Sales in the South dropped 3.6% (+3.8% y/y) to 1.89 million in June, a three-month low, after a 3.2% rise in May, and sales in the Midwest slid 3.0% (+2.1% y/y) to 980,000 following a 7.4% May advance; both posted the first m/m decrease in three months. Sales in the West fell 1.3% (+2.8% y/y) to 740,000, the lowest level since January, after being flat m/m at 750,000 in May. In contrast, sales in the Northeast increased 2.1% (0.0% y/y) to 480,000 after a 4.4% May gain. Notably, the South remained the dominant region, accounting for 46.2% of total U.S. existing home sales.

The median price of all existing homes (NSA) rose 2.2% (1.8% y/y) to $440,600 in June, the fifth consecutive m/m rise, on top of an upwardly revised 3.3% increase to $431,200 in May ($429,300 previously). Prices were 22.1% above a low of $360,800 in January 2023. The median price of an existing single-family home climbed 2.3% (1.8% y/y) to $446,400 in June, the fifth straight m/m increase, after a 3.4% advance to $436,400 in May. The median price of condos and co-ops, up for the sixth time in seven months, grew 0.6% (1.6% y/y) to $380,000 following a 1.0% May gain to $377,800. Regionally, overall prices rose m/m and y/y in June in the Northeast (+5.6%; +3.9% y/y), Midwest (+2.1%; +2.7% y/y), South (+1.0%; +0.9% y/y), and West (+0.8%; +0.9% y/y). All these price series were at their record highs.

Inventories of homes for sale fell m/m in June for the first time since December. The number of existing homes for sale (NSA) declined 0.6% (+1.3% y/y) to 1.56 million units following an upwardly revised 4.7% May rise to 1.57 million (the highest level since November 2019). The supply of homes on the market at the current selling rate (NSA) increased to 4.6 months in June from 4.5 months in May and April, matching the highest level since August 2025. A record low in supply of 1.6 months was in January 2022.

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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- June sales -2.4% m/m to 4.09 mil., first drop in three mths.; +2.8% y/y, third straight y/y rise.
- Sales m/m down in the South (-3.6%), Midwest (-3.0%), and West (-1.3%); up in the Northeast (+2.1%).
- Sales y/y up in all regions except the Northeast w/ a flat reading.
- Median sales price +2.2% (+1.8% y/y) to $440,600, a record high.
- Unsold inventory -0.6% (+1.3% y/y) to 1.56 mil. units, first m/m decline since Dec.; 4.6 months' supply, highest since Aug. ’25.