Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081027a.jpg" width="353">
The U.S. Census Department reported that September sales of new single-family homes ticked up 2.7% m/m to 464,000. The rise followed a 12.6% m/m decline during August that was little revised. The level of sales in September was down 66.6% from the July 2005 peak but it was slightly better than Consensus expectations for 450,000 sales.
By region sales in the West accounted for most of last month&#39;s increase in the total with a 22.7% gain. However, the rise did not wholly make up a 30.2% slide during August. In the South sales ticked up 0.7% but that hardly dented a 5.7% August drop. Reflecting the weakness in the auto industry, new home sales in the Midwest sales reversed all of their August rise with a 5.6% slide. Suffering greatly from weakness in the financial industry, new home sales in the Northeast dropped 21.4% m/m after an August slide of 34.9%. September sales in the Northeast were roughly 80% below the peaks in 2004-05.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081027b.jpg" width="353">
The median price for a new single-family home declined a slight 0.9% to $218,400. However, that slip followed a sharp 7.1% m/m drop in August and prices were off 9.1% y/y. New home prices in September were back to where they were late in 2004. The decline in home prices roughly matched the drop reported last week by the Office of Federal Housing Enterprise Oversight (FHFA). The FHFA figures, (formerly the Office of Federal Housing Enterprise Oversight (OFHEO), as well as the Census Dept. figures, are available in Haver&#39;s USECON database. 
The number of new homes for purchase again fell sharply, by 7.3% (-25.4% y/y). That reduced the inventory of unsold homes to the lowest level since late-2004. In each of the country&#39;s regions the inventory is down roughly one-quarter during the last year.
The month&#39;s supply of new homes for sale ticked lower m/m to 10.4, not far from the peak of 11.4 months during August.
Foreclosure prevention efforts and market stability is last week&#39;s Senate testimony given by Fed Governor Elizabeth A. Duke and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/duke20081023a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">US New Homes</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y (%)</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales (SAAR, 000s)</td>
<td>464</td>
<td>452</td>
<td>-33.1</td>
<td>768</td>
<td>1,049</td>
<td>1,279</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>22</td>
<td>28</td>
<td>&nbsp;-65.1</td>
<td>64</td>
<td>64</td>
<td>81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>65</td>
<td>69</td>
<td>-37.5</td>
<td>118</td>
<td>161</td>
<td>203</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>269</td>
<td>267</td>
<td>-23.8</td>
<td>408</td>
<td>559</td>
<td>638</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>108</td>
<td>88</td>
<td>-37.9</td>
<td>178</td>
<td>266</td>
<td>356</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA, $)</td>
<td>218,400</td>
<td>220,400</td>
<td>-9.1</td>
<td>243,742</td>
<td>243,067</td>
<td>234,208</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. Census Department reported that September sales of new single-family homes ticked up 2.7% m/m to 464,000. The rise followed a 12.6% m/m decline during August that was little revised. The level of sales in September was down [...]

September U.S. New-Home Sales Ticked Up but Still Near the Cycle's Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081027a.jpg" width="353">
The U.S. Census Department reported that September sales of new single-family homes ticked up 2.7% m/m to 464,000. The rise followed a 12.6% m/m decline during August that was little revised. The level of sales in September was down 66.6% from the July 2005 peak but it was slightly better than Consensus expectations for 450,000 sales.
By region sales in the West accounted for most of last month&#39;s increase in the total with a 22.7% gain. However, the rise did not wholly make up a 30.2% slide during August. In the South sales ticked up 0.7% but that hardly dented a 5.7% August drop. Reflecting the weakness in the auto industry, new home sales in the Midwest sales reversed all of their August rise with a 5.6% slide. Suffering greatly from weakness in the financial industry, new home sales in the Northeast dropped 21.4% m/m after an August slide of 34.9%. September sales in the Northeast were roughly 80% below the peaks in 2004-05.
The median price for a new single-family home declined a slight 0.9% to $218,400. However, that slip followed a sharp 7.1% m/m drop in August and prices were off 9.1% y/y. New home prices in September were back to where they were late in 2004. The decline in home prices roughly matched the drop reported last week by the Office of Federal Housing Enterprise Oversight (FHFA). The FHFA figures, (formerly the Office of Federal Housing Enterprise Oversight (OFHEO), as well as the Census Dept. figures, are available in Haver&#39;s USECON database. 
The number of new homes for purchase again fell sharply, by 7.3% (-25.4% y/y). That reduced the inventory of unsold homes to the lowest level since late-2004. In each of the country&#39;s regions the inventory is down roughly one-quarter during the last year.
The month&#39;s supply of new homes for sale ticked lower m/m to 10.4, not far from the peak of 11.4 months during August.
Foreclosure prevention efforts and market stability is last week&#39;s Senate testimony given by Fed Governor Elizabeth A. Duke and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/duke20081023a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">US New Homes</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y (%)</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales (SAAR, 000s)</td>
<td>464</td>
<td>452</td>
<td>-33.1</td>
<td>768</td>
<td>1,049</td>
<td>1,279</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>22</td>
<td>28</td>
<td>&nbsp;-65.1</td>
<td>64</td>
<td>64</td>
<td>81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>65</td>
<td>69</td>
<td>-37.5</td>
<td>118</td>
<td>161</td>
<td>203</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>269</td>
<td>267</td>
<td>-23.8</td>
<td>408</td>
<td>559</td>
<td>638</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>108</td>
<td>88</td>
<td>-37.9</td>
<td>178</td>
<td>266</td>
<td>356</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA, $)</td>
<td>218,400</td>
<td>220,400</td>
<td>-9.1</td>
<td>243,742</td>
<td>243,067</td>
<td>234,208</td>
</tr>
</tbody>
</table>
Money Supply Growth Stabilizes 
by <a href="/comment/Brusca.html">Robert Brusca</a> October 27, 2008


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081027e.jpg" width="353">
Europe&#146;s money supply growth and credit growth do not show signs of further slowing in September. Growth is slower that it has been over the past 12months but 3-month growth rates are about the same or a bit higher than 6-month rates of growth. In the US and the UK rates of growth in three months have picked up beyond those for their respective 12-month paces. In Japan money growth rates are very low and continue to ease. The grow rates for real money balances actually look a bit stronger all around except in Japan. 
As the financial problems have gotten worse one thing we have seen is that money supply numbers have bulged. Money demand has three components: precautionary, speculative and transactions demand. We tend to look at increases in money supply as being for transactions demand but in times such as these the precautionary element could be spiking as investors ditch riskier investments and flock to bank deposits. I would not look at the pick up in money growth or in the growth in real money balances as something that is inflationary for that reason. 


<colgroup></colgroup>


<tr><th colspan="8" scope="col">Look at Global and Euro Liquidity Trends </th>
</tr>

<tbody>
<tr class="even">
<td class="firstcol">Saar-all</td>
<td colspan="3">Euro Measures (E13): Money &amp; Credit</td>
<td colspan="3">G-10 Major Markets: Money</td>
<td>Memo</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&#128;&#128;-Supply M2</td>
<td>Credit:Resid</td>
<td>Loans</td>
<td>$US M2</td>
<td>&pound;&pound;UK M4</td>
<td>&yen;&yen;Jpn M2+Cds</td>
<td>OIL:WTI</td>
</tr>
<tr class="odd">
<td class="firstcol">3-MO</td>
<td>10.1%</td>
<td>8.5%</td>
<td>7.2%</td>
<td>7.0%</td>
<td>16.3%</td>
<td>1.2%</td>
<td>-63.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">6-MO</td>
<td>9.2%</td>
<td>8.1%</td>
<td>7.0%</td>
<td>4.0%</td>
<td>14.3%</td>
<td>1.8%</td>
<td>-3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">12-MO</td>
<td>10.1%</td>
<td>10.5%</td>
<td>8.7%</td>
<td>6.2%</td>
<td>11.8%</td>
<td>2.2%</td>
<td>30.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">2Yr</td>
<td>10.2%</td>
<td>10.8%</td>
<td>9.7%</td>
<td>6.2%</td>
<td>12.3%</td>
<td>2.0%</td>
<td>27.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">3Yr</td>
<td>9.6%</td>
<td>11.2%</td>
<td>10.2%</td>
<td>5.7%</td>
<td>13.0%</td>
<td>1.5%</td>
<td>16.4%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Real Balances: deflated by Own CPI. Oil deflated by US CPI</td>
</tr>
<tr class="odd">
<td class="firstcol">3-MO</td>
<td>9.2%</td>
<td>7.5%</td>
<td>6.3%</td>
<td>4.3%</td>
<td>9.7%</td>
<td>0.0%</td>
<td>-64.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">6-MO</td>
<td>6.6%</td>
<td>5.5%</td>
<td>4.4%</td>
<td>-1.2%</td>
<td>7.2%</td>
<td>-0.7%</td>
<td>-8.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">12-MO</td>
<td>6.2%</td>
<td>6.6%</td>
<td>4.9%</td>
<td>1.2%</td>
<td>6.3%</td>
<td>0.0%</td>
<td>24.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">2Yr</td>
<td>7.1%</td>
<td>7.7%</td>
<td>6.6%</td>
<td>2.3%</td>
<td>8.6%</td>
<td>1.0%</td>
<td>22.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">3Yr</td>
<td>6.9%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>2.4%</td>
<td>9.6%</td>
<td>0.6%</td>
<td>12.7%</td>
</tr>
</tbody>

No Surprise: German Ifo's Business
Climate Indicator
Continues To Decline
 
by <a href="/comment/Curley.html">Louise
Curley</a> October 27, 2008



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081027d.jpg" width="353">
It is no surprise, given the world economic turmoil that German firms have become increasingly pessimistic regarding their economic outlook. The IFO Business climate indicator fell 2.9% to 90.2 (2000=100) in October from 92.9 in September. The indicator is now approaching the lows last reached in 2001 and 2002.The Business Climate Indicator is based on the responses of some 7000 firms in the manufacturing, construction, wholesale and retail trade industries to questions regarding current conditions and expected conditions over the next six months. In the current survey, the index for current conditions increased minimally by 0.1%,while the index for expectations declined 5.9%. The indexes for the business climate, current conditions and expectations for the next six months are shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081027c.jpg" width="353">
In addition to the indexes, the data are also shown as percentage balances of good versus poor for current conditions and more favorable versus less favorable for expectations. The percentage balances for the business climate in the manufacturing, construction, wholesale and retail trade industries are shown in the second chart. All the indicators have been declining since the sub prime problem arose in the United States in the Fall of 2007, but the declines in manufacturing and retail trade appear to have accelerated in the past few months.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GERMANY IFO BUSINESS CLIMATE&nbsp;</th>
<th scope="col">Oct 08</th>
<th scope="col">Sep 08&nbsp;</th>
<th scope="col">Oct&nbsp; 07&nbsp;</th>
<th scope="col">M/M %chg&nbsp;</th>
<th scope="col">Y/Y&nbsp; chg&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">INDEXES&nbsp; (2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Climate</td>
<td>90.2</td>
<td>92.9</td>
<td>104.1</td>
<td>-2.91</td>
<td>-13.35</td>
<td>106.2</td>
<td>105.4</td>
<td>95.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>99.9</td>
<td>99.8</td>
<td>109.7</td>
<td>0.10</td>
<td>-8.93</td>
<td>111.2</td>
<td>108.4</td>
<td>94.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Expectations for Next Six Months</td>
<td>81.4</td>
<td>86.5</td>
<td>98.8</td>
<td>-5.90</td>
<td>-17.61</td>
<td>101.4</td>
<td>102.7</td>
<td>96.3</td>
</tr>
<tr class="odd">
<td class="firstcol">PERCENT BALANCES (%)</td>
<td></td>
<td></td>
<td></td>
<td>&nbsp;Pt chg</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Industry</td>
<td>-20.2</td>
<td>-14.9</td>
<td>7.5</td>
<td>-5.3</td>
<td>-27.7</td>
<td>11.6</td>
<td>10.2</td>
<td>-9.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-18.9</td>
<td>-11.9</td>
<td>18.4</td>
<td>-7.2</td>
<td>-37.3</td>
<td>22.4</td>
<td>19.8</td>
<td>1.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction&nbsp;</td>
<td>-27.6</td>
<td>-25.2</td>
<td>-20.3</td>
<td>-2.4</td>
<td>-7.3</td>
<td>-16.1</td>
<td>-15.8</td>
<td>-37.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale Trade</td>
<td>-15.1</td>
<td>-10.3</td>
<td>2.6</td>
<td>-4.8</td>
<td>-17.7</td>
<td>11.1</td>
<td>11.7</td>
<td>-9.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail Trade</td>
<td>-25.0</td>
<td>-24.1</td>
<td>-6.4</td>
<td>-0.9</td>
<td>-18.6</td>
<td>-6.5</td>
<td>-6.0</td>
<td>-28.0</td>
</tr>
</tbody>
</table>


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Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081024c.jpg" align="left" border="0" height="265" width="353">
Europe&#8217;s PMIs are now weak. They are at or near the lows we
have seen since the services PMI was issued in July of 1998. Both
service sand MFG PMIs are below their respective neutral readings of 50
and are thus indicating CONTRACTION.

The MFG PMI is even at its lowest level since June of 1997
when its survey began. 
 

The month to month drop in the MFG index is the largest over
this period while the services drop ranks as about the 18th smallest
&#8216;gain&#8217; in its history of the 63 drops in the 123 observation of the
series. This months&#8217; drop also ranks 45 in size among all drops or as
the eighteenth largest drop when ranked among drops (or the bottom 28
percentile). In relative magnitude this month&#8217;s service sector drop is
a bottom third affair. The MFG sector is taking the relatively larger
hit for this month. It is taking its largest drop on record and falling
to its lowest position in its history.

Europe has been a late comer to weakness but is catching up
with the US. In September the US MFG PMI stood at a level 43.5, below
where Europe was then but above where Europe is now. The US ISM may yet
fall to a lower level in October and be weaker than Europe. But the two
indices are clearly now sharing the same dimension of weakness
regardless of which is the weaker. Last month the US non-MFG PMI stood
at a level of 50 above the service sector reading for EMU. EMU&#8217;s drop
to 46.91 seems clearly a weaker reading than what we get out of the US
Non-MFG PMI (where 44.6 is the weakest reading ever) since sharp
declines have not marked its recent trend. But things are changing fast
and maybe the US non-MFG sector will weaken beyond Europe&#8217;s reading. We
do not yet know how rapidly the economy descended in October. But this
is not a time that has rewarded optimistic projecting. Maybe the
message from Europe is that we should brace ourselves for even worse
news from the US.

One message from Europe is nonetheless clear. Both MFG and
Services indices are quite weak and the MFG sector is falling very hard
right now. Expect the more conventional readings for Europe to start to
look a lot weaker. Since this report is topical and up-to-date as of
October it is a month or two ahead of the release of more conventional
economic reports form Europe. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="3" class="firstcol">Market PMIs for the
E-Zone-13</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Oct-08</td>
<td>41.33</td>
<td>46.91</td>
</tr>
<tr>
<td class="firstcol">Sep-08</td>
<td>44.97</td>
<td>48.44</td>
</tr>
<tr>
<td class="firstcol">Aug-08</td>
<td>47.55</td>
<td>48.46</td>
</tr>
<tr>
<td class="firstcol">Jul-08</td>
<td>47.38</td>
<td>48.32</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>46.63</td>
<td>47.76</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>48.40</td>
<td>48.60</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>50.37</td>
<td>50.52</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">33-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>60.65</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>41.33</td>
<td>46.68</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>0.0%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
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Europe’s PMIs are now weak. They are at or near the lows we have seen since the services PMI was issued in July of 1998. Both service sand MFG PMIs are below their respective neutral readings of 50 and are thus indicating CONTRACTION. [...]

Europe's PMIs Are Weak- Showing Contraction!

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081024a.jpg" width="353">
The level of September existing homes jumped 5.5% from August to 5.180 million, according to the National Association of Realtors. The rise followed an unrevised 2.2% August decline and beat Consensus expectations for a selling rate of 4.95M homes. Total sales include sales of condos and co-ops.
Median home prices fell 5.7% (NSA) last month for the third consecutive monthly drop. That pulled the y/y comparison to -9.0%. Prices have fallen 16.7% since their peak in April 2007.
Sales of existing single-family homes rose 6.2% after an unrevised 1.4% August decline. The y/y gains in both total sales and sales of single family homes turned positive for the first time since November 2005. Sales of existing homes, nonetheless, are down by one-third from their peak in mid-2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081024b.jpg" width="353">
By region, home sales in the West led last month&#39;s increase with a 16.8% m/m gain. That lifted sales by more than one third versus the year ago level. Sales in the Midwest also rose but by a lesser 4.4%; the y/y change is still a negative 2.5%. In the South rose 2.2% (-7.8% y/y) but sales in the Northeast were off 1.2% (-7.7% y/y).
The number of unsold homes (condos &amp; single-family) on the market fell 1.6% during September (-2.4% y/y) after a 5.2% August drop. At the current sales rate, the inventory fell to a 9.9 months supply versus the April peak of 11.2 months. For single-family homes, however, the inventory fell a bit more to a 9.4 months supply at the current sales rate, down from an 11.0 months supply in June.
Subprime Facts: What (We Think) We Know about the Subprime Crisis and What We Don&#146;t from the Federal Reserve Bank of Boston is available <a href="http://www.bos.frb.org/economic/ppdp/2008/ppdp0802.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Home Sales (Thous)</th>
<th scope="col">September</th>
<th scope="col">y/y %</th>
<th scope="col">August</th>
<th scope="col">September &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>5,180</td>
<td>1.4</td>
<td>4,910</td>
<td>5,020</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>840</td>
<td>-7.7</td>
<td>850</td>
<td>910</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,190</td>
<td>-2.5</td>
<td>1,140</td>
<td>1,220</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,900</td>
<td>-7.8</td>
<td>1,860</td>
<td>2,060</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,250</td>
<td>34.4</td>
<td>1,070</td>
<td>930</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,620</td>
<td>3.8</td>
<td>4,350</td>
<td>4,450</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>191,600</td>
<td>-9.0</td>
<td>203,100</td>
<td>210,500</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
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The level of September existing homes jumped 5.5% from August to 5.180 million, according to the National Association of Realtors. The rise followed an unrevised 2.2% August decline and beat Consensus expectations for a selling rate [...]

Lower Prices Spurred U.S. Existing Home Sales

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081024a.jpg" align="left" border="0" height="265" width="353">
The level of September existing homes jumped
5.5% from August to 5.180 million, according to the National
Association of Realtors. The rise followed an unrevised 2.2% August
decline and beat Consensus expectations for a selling rate of 4.95M
homes. Total sales include sales of condos and co-ops.
Median home prices fell 5.7% (NSA) last
month for the third consecutive monthly drop. That pulled the y/y
comparison to -9.0%. Prices have fallen 16.7% since their peak in April
2007.
Sales of existing single-family homes rose 6.2% after an
unrevised 1.4% August decline. The y/y gains in both total sales and
sales of single family homes turned positive for the first time since
November 2005. Sales of existing homes, nonetheless, are down by
one-third from their peak in mid-2005.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081024b.jpg" align="right" border="0" height="265" width="353">
By region, home sales in the West led last month's increase
with a 16.8% m/m gain. That lifted sales by more than one third versus
the year ago level. Sales in the Midwest also rose but by a lesser
4.4%; the y/y change is still a negative 2.5%. In the South rose 2.2%
(-7.8% y/y) but sales in the Northeast were off 1.2% (-7.7% y/y).
The number of unsold homes (condos &amp; single-family) on
the market fell 1.6% during September (-2.4% y/y) after a 5.2% August
drop. At the current sales rate, the inventory fell to a 9.9 months
supply versus the April peak of 11.2 months. For single-family homes,
however, the inventory fell a bit more to a 9.4 months supply at the
current sales rate, down from an 11.0 months supply in June.
Subprime Facts: What (We Think) We Know about the
Subprime Crisis and What We Don&#8217;t from the Federal Reserve
Bank of Boston is available <a href="http://www.bos.frb.org/economic/ppdp/2008/ppdp0802.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous)</th>
<th scope="col">September</th>
<th scope="col">y/y %</th>
<th scope="col">August</th>
<th scope="col">September '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>5,180</td>
<td>1.4</td>
<td>4,910</td>
<td>5,020</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>840</td>
<td>-7.7</td>
<td>850</td>
<td>910</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,190</td>
<td>-2.5</td>
<td>1,140</td>
<td>1,220</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,900</td>
<td>-7.8</td>
<td>1,860</td>
<td>2,060</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,250</td>
<td>34.4</td>
<td>1,070</td>
<td>930</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,620</td>
<td>3.8</td>
<td>4,350</td>
<td>4,450</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>191,600</td>
<td>-9.0</td>
<td>203,100</td>
<td>210,500</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
Europe's PMIs Are Weak- Showing
Contraction! 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081024c.jpg" align="left" border="0" height="265" width="353">
Europe&#8217;s PMIs are now weak. They are at or near the lows we
have seen since the services PMI was issued in July of 1998. Both
service sand MFG PMIs are below their respective neutral readings of 50
and are thus indicating CONTRACTION. 
 

The MFG PMI is even at its lowest level since June of 1997
when its survey began. 
 

The month to month drop in the MFG index is the largest over
this period while the services drop ranks as about the 18th smallest
&#8216;gain&#8217; in its history of the 63 drops in the 123 observation of the
series. This months&#8217; drop also ranks 45 in size among all drops or as
the eighteenth largest drop when ranked among drops (or the bottom 28
percentile). In relative magnitude this month&#8217;s service sector drop is
a bottom third affair. The MFG sector is taking the relatively larger
hit for this month. It is taking its largest drop on record and falling
to its lowest position in its history. 
 

Europe has been a late comer to weakness but is catching up
with the US. In September the US MFG PMI stood at a level 43.5, below
where Europe was then but above where Europe is now. The US ISM may yet
fall to a lower level in October and be weaker than Europe. But the two
indices are clearly now sharing the same dimension of weakness
regardless of which is the weaker. Last month the US non-MFG PMI stood
at a level of 50 above the service sector reading for EMU. EMU&#8217;s drop
to 46.91 seems clearly a weaker reading than what we get out of the US
Non-MFG PMI (where 44.6 is the weakest reading ever) since sharp
declines have not marked its recent trend. But things are changing fast
and maybe the US non-MFG sector will weaken beyond Europe&#8217;s reading. We
do not yet know how rapidly the economy descended in October. But this
is not a time that has rewarded optimistic projecting. Maybe the
message from Europe is that we should brace ourselves for even worse
news from the US. 
 

One message from Europe is nonetheless clear. Both MFG and
Services indices are quite weak and the MFG sector is falling very hard
right now. Expect the more conventional readings for Europe to start to
look a lot weaker. Since this report is topical and up-to-date as of
October it is a month or two ahead of the release of more conventional
economic reports form Europe. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="3" class="firstcol">Market
PMIs for the
E-Zone-13</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Oct-08</td>
<td>41.33</td>
<td>46.91</td>
</tr>
<tr>
<td class="firstcol">Sep-08</td>
<td>44.97</td>
<td>48.44</td>
</tr>
<tr>
<td class="firstcol">Aug-08</td>
<td>47.55</td>
<td>48.46</td>
</tr>
<tr>
<td class="firstcol">Jul-08</td>
<td>47.38</td>
<td>48.32</td>
</tr>
<tr class="odd&quot;">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>46.63</td>
<td>47.76</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>48.40</td>
<td>48.60</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>50.37</td>
<td>50.52</td>
</tr>
<tr class="odd&quot;">
<td colspan="3" class="firstcol">33-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>60.65</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>41.33</td>
<td>46.68</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>0.0%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081023c.jpg" align="left" border="0" height="265" width="353">
Industrial orders in the e-zone fell by a relatively sharp
1.2% in August. Still there has been enough strength recently for the
3-mo growth rate of e-Zone orders to stand at a positive 5.3%. Over six
months and 12-months orders are still declining. And in the quarter-to
date orders are falling as well at a sharp -6% pace. Order weakness
continues to be led by orders from abroad (see table). Domestic orders
are not so much stronger (see chart) as they are more volatile. 

The selected country level reports in the table shows weakness
of a significant magnitude across the group albeit there are timing
differences and volatility in orders within this group. But in
Q3-to-date only Italy shows an order rise. The UK shows an annual rate
of decline at a -40% rate. Italy is posting a gain in the quarter at
nearly a 10% pace. Germany and France are showing quarter-to-date order
drops on the order of 6% to 7%. 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E-zone
and UK Industrial Orders &amp; Sales Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">% m/m</td>
<td>Aug 
08</td>
<td>Aug 
08</td>
<td>Aug 
08</td>
<td>Aug 
07</td>
<td>Aug 
06</td>
<td>Qtr-2 
Date</td>
</tr>
<tr>
<td class="firstcol">Ezone Detail</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>Jun 
08</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Saar</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>0.6%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>4.9%</td>
<td>3.7%</td>
<td>4.6%</td>
<td>6.4%</td>
<td>7.8%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>3.3%</td>
<td>1.9%</td>
<td>1.8%</td>
<td>6.4%</td>
<td>7.8%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>2.2%</td>
<td>3.4%</td>
<td>4.4%</td>
<td>4.2%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>-0.4%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>11.8%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>8.3%</td>
<td>7.1%</td>
<td>5.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Orders</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-1.2%</td>
<td>2.0%</td>
<td>0.5%</td>
<td>5.3%</td>
<td>-5.1%</td>
<td>-1.5%</td>
<td>5.1%</td>
<td>11.6%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-0.4%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>11.8%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>2.6%</td>
<td>7.6%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-2.1%</td>
<td>1.9%</td>
<td>-0.3%</td>
<td>-2.4%</td>
<td>-11.9%</td>
<td>-4.0%</td>
<td>7.1%</td>
<td>16.4%</td>
<td>-5.5%</td>
</tr>
<tr>
<td class="firstcol">Countries:</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>Jun 
08</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Qtr-2 
Date</td>
</tr>
<tr>
<td class="firstcol">Germany:</td>
<td>3.3%</td>
<td>-0.7%</td>
<td>-2.5%</td>
<td>-0.3%</td>
<td>-6.4%</td>
<td>0.1%</td>
<td>5.5%</td>
<td>17.0%</td>
<td>-6.0%</td>
</tr>
<tr>
<td class="firstcol">France:</td>
<td>-7.2%</td>
<td>4.3%</td>
<td>1.4%</td>
<td>-6.9%</td>
<td>-18.5%</td>
<td>-7.8%</td>
<td>8.6%</td>
<td>-5.3%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.3%</td>
<td>2.7%</td>
<td>0.7%</td>
<td>13.2%</td>
<td>-1.4%</td>
<td>1.1%</td>
<td>-0.6%</td>
<td>18.2%</td>
<td>9.8%</td>
</tr>
<tr>
<td class="firstcol">UK(EU)</td>
<td>-15.2%</td>
<td>2.4%</td>
<td>-5.0%</td>
<td>-53.6%</td>
<td>-37.2%</td>
<td>-16.4%</td>
<td>4.2%</td>
<td>-3.3%</td>
<td>-40.7%</td>
</tr>
</tbody>
</table>
</body></html>

Industrial orders in the e-zone fell by a relatively sharp 1.2% in August. Still there has been enough strength recently for the 3-mo growth rate of e-Zone orders to stand at a positive 5.3%. Over six months and 12-months orders are [...]

European Orders Head Sharply Lower In August

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081023a.jpg" width="353">
Initial claims for unemployment insurance rose 15,000 during last week to 448,000. That offset an 18,000 decline during the week prior which was revised slightly shallower.The Labor Department estimates that another 12,000 claims in the latest week were due to Hurricane Ike in Texas, the same as during the week prior but less than the 17,000 and 45,000 lifts during the two prior periods.
The four-week moving average of initial claims fell slightly to 480,250 (46.5% y/y), just barely off the cycle high.
The latest figures are for the survey week for October non-farm payrolls and initial claims rose 20,000 (4.4%) from the September period. During the last ten years there has been a 76% inverse correlation between the level of initial claims and the m/m change in non-farm payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081023b.jpg" width="353">
The largest increases in initial claims for the week ending Oct. 11 were in New York (+5,224), Michigan (+3,383), Florida (+3,007), California (+2,781), and South Carolina (+2,723), while the largest decreases were in Texas (-5,968), Ohio (-4,317), Alabama (-1,534), Louisiana (-828), and Delaware (-827).
Continuing claims for unemployment insurance during the week of October 11 fell 6,000 after a revised 55,000 increase during the prior week, initially reported at up 40,000. The four-week average of claims rose to this cycle&#39;s high of 3,680,000, the highest level since early 2003. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment was stable w/w at 2.8% during the week of October 11, this cycle&#39;s high and the highest since mid-2003. The high in that recessionary period was the 3.0% reached in late June 2003.
What Exactly Is a Recession&#151;and Are We in One? from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/trends/2008/1108/01ecoact.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">10/04/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>478</td>
<td>&nbsp;463</td>
<td>481</td>
<td>43.5%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,720</td>
<td>3,726</td>
<td>46.1</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance rose 15,000 during last week to 448,000. That offset an 18,000 decline during the week prior which was revised slightly shallower.The Labor Department estimates that another 12,000 claims in [...]

U.S. Weekly Initial Claims for Jobless Insurance Ticked Higher

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081023a.jpg" align="left" border="0" height="265" width="353">
Initial claims for unemployment insurance rose 15,000 during
last week to 448,000. That offset an 18,000 decline during the week
prior which was revised slightly shallower.The Labor Department
estimates that another 12,000 claims in the latest week were due to
Hurricane Ike in Texas, the same as during the week prior but less than
the 17,000 and 45,000 lifts during the two prior periods.
The four-week moving average of initial claims fell slightly
to 480,250 (46.5% y/y), just barely off the cycle high.
The latest figures are for the survey week for October
non-farm payrolls and initial claims rose 20,000 (4.4%) from the
September period. During the last ten years there has been a 76%
inverse correlation between the level of initial claims and the m/m
change in non-farm payrolls.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081023b.jpg" align="right" border="0" height="265" width="353">
The largest increases in initial claims for the week ending
Oct. 11 were in New York (+5,224), Michigan (+3,383), Florida (+3,007),
California (+2,781), and South Carolina (+2,723), while the largest
decreases were in Texas (-5,968), Ohio (-4,317), Alabama (-1,534),
Louisiana (-828), and Delaware (-827).
Continuing claims for unemployment insurance during the week
of October 11 fell 6,000 after a revised 55,000 increase during the
prior week, initially reported at up 40,000. The four-week average of
claims rose to this cycle's high of 3,680,000, the highest level since
early 2003. Continuing claims provide some indication of workers'
ability to find employment and they lag the initial claims figures by
one week.
The insured rate of unemployment was stable w/w at 2.8% during
the week of October 11, this cycle's high and the highest since
mid-2003. The high in that recessionary period was the 3.0% reached in
late June 2003.
What Exactly Is a Recession&#8212;and Are We in One? from
the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/trends/2008/1108/01ecoact.cfm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">10/04/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>478</td>
<td>&nbsp;463</td>
<td>481</td>
<td>43.5%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,720</td>
<td>3,726</td>
<td>46.1</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
&nbsp;© 2008&nbsp; HAVER
ANALYTICS. All rights reserved. 
by <a href="/comment/Brusca.html">Robert
Brusca</a> European Orders Head Sharply Lower In August October
23, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081023c.jpg" align="left" border="0" height="265" width="353">
Industrial orders in the e-zone fell by a relatively sharp
1.2% in August. Still there has been enough strength recently for the
3-mo growth rate of e-Zone orders to stand at a positive 5.3%. Over six
months and 12-months orders are still declining. And in the quarter-to
date orders are falling as well at a sharp -6% pace. Order weakness
continues to be led by orders from abroad (see table). Domestic orders
are not so much stronger (see chart) as they are more volatile. 

The selected country level reports in the table shows weakness
of a significant magnitude across the group albeit there are timing
differences and volatility in orders within this group. But in
Q3-to-date only Italy shows an order rise. The UK shows an annual rate
of decline at a -40% rate. Italy is posting a gain in the quarter at
nearly a 10% pace. Germany and France are showing quarter-to-date order
drops on the order of 6% to 7%. 
 
 


<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">E-zone
and UK Industrial Orders &amp; Sales Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">% m/m</td>
<td>Aug 
08</td>
<td>Aug 
08</td>
<td>Aug 
08</td>
<td>Aug 
07</td>
<td>Aug 
06</td>
<td>Qtr-2 
Date</td>
</tr>
<tr>
<td class="firstcol">Ezone Detail</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>Jun 
08</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Saar</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>0.6%</td>
<td>0.4%</td>
<td>0.2%</td>
<td>4.9%</td>
<td>3.7%</td>
<td>4.6%</td>
<td>6.4%</td>
<td>7.8%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.1%</td>
<td>3.3%</td>
<td>1.9%</td>
<td>1.8%</td>
<td>6.4%</td>
<td>7.8%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.6%</td>
<td>2.2%</td>
<td>3.4%</td>
<td>4.4%</td>
<td>4.2%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>-0.4%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>11.8%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>8.3%</td>
<td>7.1%</td>
<td>5.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Orders</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-1.2%</td>
<td>2.0%</td>
<td>0.5%</td>
<td>5.3%</td>
<td>-5.1%</td>
<td>-1.5%</td>
<td>5.1%</td>
<td>11.6%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-0.4%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>11.8%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>2.6%</td>
<td>7.6%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-2.1%</td>
<td>1.9%</td>
<td>-0.3%</td>
<td>-2.4%</td>
<td>-11.9%</td>
<td>-4.0%</td>
<td>7.1%</td>
<td>16.4%</td>
<td>-5.5%</td>
</tr>
<tr>
<td class="firstcol">Countries:</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>Jun 
08</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>12-mo</td>
<td>Qtr-2 
Date</td>
</tr>
<tr>
<td class="firstcol">Germany:</td>
<td>3.3%</td>
<td>-0.7%</td>
<td>-2.5%</td>
<td>-0.3%</td>
<td>-6.4%</td>
<td>0.1%</td>
<td>5.5%</td>
<td>17.0%</td>
<td>-6.0%</td>
</tr>
<tr>
<td class="firstcol">France:</td>
<td>-7.2%</td>
<td>4.3%</td>
<td>1.4%</td>
<td>-6.9%</td>
<td>-18.5%</td>
<td>-7.8%</td>
<td>8.6%</td>
<td>-5.3%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-0.3%</td>
<td>2.7%</td>
<td>0.7%</td>
<td>13.2%</td>
<td>-1.4%</td>
<td>1.1%</td>
<td>-0.6%</td>
<td>18.2%</td>
<td>9.8%</td>
</tr>
<tr>
<td class="firstcol">UK(EU)</td>
<td>-15.2%</td>
<td>2.4%</td>
<td>-5.0%</td>
<td>-53.6%</td>
<td>-37.2%</td>
<td>-16.4%</td>
<td>4.2%</td>
<td>-3.3%</td>
<td>-40.7%</td>
</tr>
</tbody>
</table>
</body></html>

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

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

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250718F5.jpg

250718G5.jpg

Total housing starts increased 4.6% (-0.5% y/y) in June to 1.321 million units (SAAR) after falling a little-revised 9.7% in May to 1.263 million, revised from 1.256 million, and rising 3.2% in April to 1.398 million, revised from 1.392, according to the U.S. Census Bureau. Total starts in June were 27.4% below their peak of 1.820 million units reached in April 2022. The Action Economics Forecast Survey expected 1.30 million starts in June.

Single-family starts in June fell 4.6% (-10.0% y/y) to 883,000 after declining 2.3% in May to 926,000, revised from 924,000, and holding steady at 948,000 in April, revised from 920,000. Multi-family starts rebounded 30.0% in June (26.6% y/y) to 438,000 after declining 25.1% in May to 337,000, revised from 332,000, and increasing 10.6% to 450,000 in April, revised from 472,000.

All of the increase in starts last month was due to a 73.3% surge (52.9% y/y) in the Northeast to 182,000 units, following a decline of 42.6% in May. Offsetting this increase, starts in the South weakened 0.7% (-9.0% y/y) to 674,000 after falling 9.0% in May. Starts in the West declined 1.4% (-1.7% y/y) to 286,000 after rising 22.4% in May. Housing starts in the Midwest declined 5.3% (+1.7% y/y) to 179,000 after falling 18.5% in May.

Building permits improved 0.2% (-4.4% y/y) last month to 1.397 million after falling 2.0% in May and declining 4.0% in April. Single-family permits fell 3.7% (-8.4% y/y) in June to 866,000 after weakening 2.6% in May. Multi-family permits rose 7.3% (+2.9% y/y) after easing 0.8% in May. Building permits fell 11.4% (-7.6% y/y) in the Northeast and in the West, permits fell 5.1% (-9.2% y/y). In the South, building permits rose 4.4% (-4.2% y/y), while in the Midwest, building permits held steady (+4.1% y/y).

The housing starts and building permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

250718H5.jpg

250718I5.jpg

- Increase recovers half of prior month’s drop.
- Multi-family starts surge but single-family starts fall.
- Building permits rise negligibly after two months of decline.

U.S. Housing Starts Rebound in June

250718E.jpg

No one will be critical of Japan’s efforts to free itself of its torpor into disinflation and deflation that it suffered for many years. The Bank of Japan struggled long and hard to remove the contraction in prices from its economy since falling prices can have a pernicious effect on growth and investment. Japan still faces challenges: it has a contracting population and faces dealing with tariff demands from the United States as negotiations on that front continue to drag and have become harder to settle than Japan had expected. Despite the current inflation overshoot, on data back to January 2011, Japan’s to-date inflation is only averaging 1%; that is still well below its 2% target and ample reason for the Bank of Japan to continue to move carefully to corral inflation especially if inflation has stopped accelerating – as it seems to have done. Against this background, we look at Japan’s CPI report.

**Current inflation: June**
Japan has dispatched deflation and currently faces an inflation problem. In June, the BOJ’s preferred gauge for the CPI excluding fresh foods & energy rose 0.4% month-to-month for the second month in a row; it rose by 0.2% in April. Japan’s headline inflation rate seems to have fallen into line A traditional ‘core reading’ excluding all food & energy flies under the BOJ’s target pace. But the BOJ’s preferred inflation gauge shows a 3.4% rise over 12 months and then gains at a pace of 3.7% over both six months and three months. All of those numbers are too hot to handle.

**Line-items**
Education costs in Japan are falling sharply and sequentially. Medical care costs are deescalating too. And while food & beverage prices continue to overshoot, 2% by a wide margin, the pace of total food & beverage inflation has been falling. No broad category has steadily accelerating inflation. But the BOJ’s preferred gauge of inflation, a specialized core measure excluding energy & fresh foods, sees inflation ramping up and staying high over three months and six months.

**Diffusion/breadth**
Among the eight major categories, year-on-year inflation has accelerated compared to where it was one-year ago in four of the eight. Inflation is above the 2% benchmark for four of eight categories as well.

**Acceleration or not...**
The chart on sequential inflation for the BOJ’s preferred core gauge shows that this measure has accelerated since August or December of last year and since then has more or less marked time oscillating without any clear trend.

250718.jpg

**BOJ policy and communication**
With interest rates having been elevated, this may be the peak for inflation rates in the wake of past interest rate increases- but the BOJ moves to-date have been more about communication and signaling than about actual restraint. These sorts of determinations about the impact of policy are always preliminary and never made clear until time passes and we are able to observe how the trend unfolds. Has inflation really peaked or not?

**BOJ actions**
The BOJ has raised its policy rate in very small and careful steps with an eye to not disrupt markets. Until early 2024, the BOJ has promoted a negative policy rate coupled with policy of yield curve control. However, in early 2024 the BOJ switched the -0.1% target rate to +0.1% and then moved it up to 0.25% just after mid-year 2024, then, early in 2025, it hiked it again to 0.5%. These have been cautious step-wise moves that after three hikes leave the official rate higher by less than one percentage point. But it also reversed an eight-year period of having a negative policy rate and one coupled with yield curve control policy. The BOJ’s careful steps may owe to some learning from the Federal Reserve’s SNAFU when it announced a coming end to its policy of QE for the first time creating a ‘taper tantum.’   

**The environment**
While Japan’s economy is growing, it has logged four quarters of negative growth in the past seven quarters (Q/Q). Year-on-year growth is positive for three quarters in a row after two in a row that logged declines. The economy is not strong, but it is growing in Q1; it grew by 1.7% over the past four quarters even though the Q/Q change was -0.2%, annualized.

**Summing up**
The BOJ is taking policy steps slowly with national elections hovering in the background, keeping monetary policy out of the way of election discussions. So far, we would regard the BOJ’s anti-inflation steps as being more about communicating an end to a period of super easy policy than as a frontal-attack on rising inflation. Given that, Japan’s prices declined for many months from August 2020 to March 2020; the BOJ is being careful to try to arrest inflation increases without pummeling prices and restarting deflation. From January 2011 to September 2022, Japan had only 12 (out of 141) months of inflation above 2% on its preferred gauge. It is now on a run of 33 (well 32 out of 33) months in a row with year-on-year inflation at or above 2%. It is understandable that the BOJ is walking on eggshells when it comes to hiking rates. If its inflation requires a monetary brake, the BOJ has more to do. If inflation merely needs to be ‘reminded’ that the period of excess is over, the recent flattening of inflation could be a sign that the message has been heard. A turn lower for inflation may still be achievable without draconian monetary steps.

Japan

Japan’s Ex-Fresh-Food Ex-Energy Inflation Runs Hot

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250717W20.jpg

Total retail sales increased 0.6% (3.9% y/y) during June following an unrevised 0.9% May decline and an unrevised 0.1% April easing. A 0.1% uptick had been expected in the Action Economics Forecast Survey. Sales excluding autos rose 0.5% (3.3% y/y) following a 0.2% May decline, revised from -0.3%, and an unrevised no change in April. A 0.3% rise had been expected.

Sales in the retail control group, which excludes autos, building materials, gasoline and food services, rose 0.5% (4.0% y/y) in June after gaining 0.2% in May, revised from 0.4%, and minimally revised 0.2% April decline. These sales are used in the construction of personal consumption expenditures in the NIPA accounts. These sales rose 3.2% (AR) last quarter following a 3.7% Q1 rise.

Light vehicle sales increased 1.2% (6.5% y/y) in June after declines of 3.8% and 0.7% in the prior two months. This compares to a 0.3% June decline (2.6% y/y) in unit sales of motor vehicles last month which followed an 8.8% May slump. Gasoline station sales eased lightly (-4.4% y/y) during June after a 1.3% drop during May. Gasoline prices held steady (-7.6% y/y) last month. Sales of building materials & garden equipment rose 0.9% (-1.1% y/y) after a 2.7% decline during May.

Apparel store sales increased 0.9% (3.9% y/y) during June following a 0.3% gain. General merchandise store sales rose 0.5% (3.2% y/y) after they edged 0.1% higher in May, but department store sales declined 0.8% (-3.6% y/y) following a 0.3% dip. Nonstore retail sales increased 0.4% (4.5% y/y) following a 0.6% gain. Sporting goods & hobby shop sales improved 0.2% (1.6% y/y) after strengthening 1.0% in May. To the downside, furniture & home furnishings store sales slipped 0.1% (+4.5% y/y) after declining 0.6% in May. Electronics & appliance store sales also eased 0.1% (-0.2% y/y) following a 0.3% May decline.

In the nondiscretionary sales sector, food & beverage store sales rose 0.5% (2.5% y/y) last month following a 0.5% decline in May. Health & personal care store sales also rose 0.5% (8.3% y/y) after easing 0.1% in May.

Restaurant & drinking establishment sales increased 0.6% (6.6% y/y) in June following a 0.1% slip during May.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economic Forecast Survey in **AS1REPNA**.

250717X20.jpg

250717Y20.jpg

- Increase led by surge in sales excluding autos.
- Nonauto sales also improve.
- Sales in the control group (used to estimate PCE) strengthen.

U.S. Retail Sales Rebound in June

250717N2.jpg

250717O2.jpg

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo rose 3.1% to 33 (-19.5% y/y) during July after falling 5.9% to 32 in June. The reading matched expectations in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been a 72% correlation between the y/y change in the home builders index and the y/y change in housing starts.

The index of present sales conditions in the housing market rose 2.9% (-21.7% y/y) to 36 following two straight months of decline. The index for conditions in the next six months increased 7.5% (-10.4% y/y) to 43 following three consecutive monthly declines.

Home builders reported that the traffic of prospective buyers reading fell 4.8% to 20 (-25.9% y/y), the lowest level since December 2024.

Amongst the regional indexes, the index for the Midwest gained 12.8% both m/m and y/y while the index for the West rose 13.6% (-32.4% y/y). The index for the Northeast improved 9.1% (2.1% y/y) but the index for the South fell 3.3% (-32.6% y/y).

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions asking builders to rate market conditions as "good," "fair," "poor" or "very high" to "very low." The figure is thus a diffusion index with numerical results six over 50 indicating a predominance of "good" readings. The weights assigned to the individual index components are .5920 for single-family detached sales, present time, .1358 for single-family detached sales, next months and .2722 for traffic of prospective buyers. The results are included in Haver’s **SURVEYS** database. The expectations figure is available in Haver's **MMSAMER** database.

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- Increase follows two months of decline.
- Two of three components rise.
- Regional indexes are mixed.

U.S. Home Builder Index Improves in July

Sandy Batten

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The Current Activity Diffusion Index from the latest Manufacturing Business Outlook Survey (MBOS) conducted by the Federal Reserve Bank of Philadelphia, jumped nearly 20 points to 15.9 in July from -4.0 in June. This was the first positive reading since March and the highest reading since February. A positive reading points to expansion in activity in the Third Federal Reserve District. A reading of -0.3 for July had been expected by the Action Economics Forecast Survey. Nearly 32% of respondents reported an increase in activity in July versus 24.5% in June while 16% reported a decline, down markedly from 28% in June. Responses to this month's survey were collected from July 7 to July 14.

The headline index reflects the answer to a single question on activity. Haver Analytics calculates an ISM-adjusted current activity diffusion index from five key components using the methodology employed in constructing the national ISM index. That index slipped to 51.2 in July from 51.4 in June, indicating that the outsize jump in the headline index was not widely supported by the components. Still, readings above 50 for the ISM-adjusted index point to continued expansion.

Looking at the component indexes, orders and shipments posted significant gains with new orders jumping to 18.4 in July, the highest reading since February, from 2.3 in June and shipments surging to 23.7 from 8.3 in June. Thirty-five percent of respondents reported an increase in new orders while 17% reported a decline; 32% reported an increase in shipments versus only 9% reporting a decline. Employment returned to positive territory in July, rising to 10.3 from -9.8 in June. In contrast, unfilled orders slipped to 5.7 from 9.3 and delivery times shortened with the index falling to -4.7 from 13.6. Inventories also slid, to -1.3 in July from 3.6 in June.

Inflation indicators picked up in July with the prices paid index jumping to 58.8 from 41.4 in June. Nearly 61% of respondents reported paying higher prices for inputs, up from 41% in June. The prices received index rose to 34.8 from 29.5 in June with nearly 35% reporting that they received higher prices this month, up slightly from 32% reporting increases in June.

The outlook continues to be clouded. The Future Activity Index rebounded slightly to 21.5 in July after having plunged to 18.3 in June from 47.2 in May. Forty-one percent of respondents expect an increase in activity over the next six months, down from 45% in the June survey and 67% in May. Expectations for new orders and inventories improved while expectations for shipments, delivery times and employment fell. Expectations for capital spending rose slightly to 17.1 from 14.5 but are still down meaningfully from a recent high of 39.0 reached in January, likely a response to the marked increase in policy uncertainty generated by the Trump administration.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The series from the survey dating back to May 1968 can be found in Haver's **SURVEYS** database. The expectations forecast figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- The headline index jumped nearly 20 points, led by strong performances by both orders and shipments.
- However, ISM-adjusted composite slipped a bit, indicating that the jump in the headline index was not widely supported by the components.
- Delivery times shortened markedly while both prices paid and prices received indexes posted significant gains.

Economy in Brief: 2008

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