Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021218a.jpg" width="353">
The U.S. foreign trade deficit improved more than expected in October. September&#39;s deficit was revised lower due to lessened imports. Consensus expectations had been for a October deficit of $36.5B. Declines in exports and imports likely were influenced by the dock workers strike.
Exports fell for the third consecutive month due to across the board component declines. Capital goods exports plunged 2.5% (5.4% AR, YTD). Exports of foods, feeds and beverages fell a hefty 4.0%, the third consecutive monthly decline. Auto exports fell for the fourth month in five. Nonauto consumer goods exports rose following two months of decline (1.1% AR, YTD).
Imports fell for the third month in four also due to across the board component declines. Capital goods imports fell a huge 6.0% (-1.7% AR, YTD), the fourth consecutive monthly decline. Imports of nonauto consumer goods also plunged, down 4.9% for the third monthly decline in four. Imports of industrial supplies and materials rose despite a decline in the refiner&#39;s acquisition cost of imported crude oil. The cost of crude oil fell to $26.74 in October from $27.14 in September.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$35.1B</td>
<td>$37.1B</td>
<td>$30.8B(10/01)</td>
<td>$358.3B</td>
<td>$378.7B</td>
<td>$262.2B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>-1.0%</td>
<td>-0.4%</td>
<td>5.7%</td>
<td>-6.2%</td>
<td>11.2%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>-2.4%</td>
<td>-1.1%</td>
<td>8.0%</td>
<td>-6.0%</td>
<td>18.3%</td>
<td>10.9%</td>
</tr>
</tbody>
</table>
Mortgage Applications Back Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 18, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021218b.jpg" width="353">
The index of mortgage applications, compiled by the Mortgage Bankers Association, last week recovered all of the prior week&#39;s sharp decline.
Mortgage applications to refinance surged as interest rates fell for the second consecutive week.
The recent contract rate on a conventional 30 year mortgage was 5.91% versus 6.09% at the end of November.
Mortgage applications for home purchase surged and recovered most of the prior week&#39;s decline.

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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">12/13/02</th>
<th scope="col">11/08/02</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>985.5</td>
<td>992.3</td>
<td>625.6</td>
<td>322.7</td>
<td>352.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>379.9</td>
<td>333.3</td>
<td>304.9</td>
<td>302.7</td>
<td>275.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>4,507.6</td>
<td>4,825.6</td>
<td>2,491.0</td>
<td>438.8</td>
<td>795.2</td>
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</tbody>
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The U.S. foreign trade deficit improved more than expected in October. September's deficit was revised lower due to lessened imports. Consensus expectations had been for a October deficit of $36.5B. Declines in exports and imports [...]

U.S. Trade Deficit Improved

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021217f.jpg" width="353">
Inflation in the United Kingdom as measured by the Retail Price index rose 2.7% in November from a year ago, the sharpest rise since January 2001. Prices of housing expenditures, which rose 6.4%, and gasoline and oil, which rose 4.1%, accounted for much of the increase. 
In conducting its monetary policy, the Bank of England focuses on the less volatile &#147;all items less mortgage interest&#148; component of the index. The Bank&#146;s current target rate for this measure is 2.5%. The &#147;all items less mortgage interest&#148; index rose 2.8% in November from a year ago and was the sharpest rise since November 1997. It was also the first time since January 2002 that the rise exceeded the target rate. In its latest quarterly report on inflation, the Bank predicted that inflation would remain above its target for most of next year, suggesting that any changes in the current base rate of 4% are more likely to be on the upside.

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<th scope="col" class="firstcol">Retail Price Index (Annual % Changes)</th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">All items</td>
<td>2.0%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>1.8%</td>
<td>2.9%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">All items ex mortgage interest</td>
<td>2.8%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>2.3%</td>
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Inflation in the United Kingdom as measured by the Retail Price index rose 2.7% in November from a year ago, the sharpest rise since January 2001. Prices of housing expenditures, which rose 6.4%, and gasoline and oil, which rose 4.1%, [...]

Inflation in the U.K. and Implications for Monetary Policy

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021217b.jpg" width="353">
The Consumer Price Index (CPI-U) rose just 0.1% last month. The gain was as expected. Excluding food and energy, prices also rose as expected and the rise was equal to the YTD average.
Tobacco prices (-0.0%) fell for the second consecutive month. The core CPI less tobacco rose 0.2% (2.0% y/y).
Price discounting was widespread last month. Household furnishings and operation prices fell 0.1%, the sixth monthly decline this year. Apparel prices also fell (-0.4%) after being unchanged the month prior. New and used vehicle prices were down for the second consecutive month.
Services prices were mixed. Shelter prices rose 0.3% following the 0.2% gain in the prior month. Public transportation prices rose 0.9% following two months of decline. Medical care services prices rose 0.6%, just below the elevated October reading. Education prices were flat for the second month. Recreation prices were flat for the second month in three.
Energy prices fell last month led by a 0.2% decline in gasoline prices, the first since May. Fuel and utility prices were unchanged owing to a decline in piped gas &amp; electricity prices
For analysis of health care costs and coverage by the St. Louis Federal Reserve click <a href="http://research.stlouisfed.org/publications/net/2002/cover11.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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</thead>
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<td class="firstcol">Total&nbsp;</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.3%</td>
<td>2.8%</td>
<td>3.4%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.3%</td>
<td>-0.1%</td>
<td>-1.6%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.5%</td>
<td>3.7%</td>
<td>3.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-0.2%</td>
<td>1.9%</td>
<td>8.1%</td>
<td>3.7%</td>
<td>16.9%</td>
<td>3.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.2%</td>
<td>3.1%</td>
<td>2.3%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&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"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.9%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>NA</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.2%</td>
<td>1.5%</td>
<td>1.9%</td>
<td>&nbsp;1.4%</td>
<td>NA</td>
</tr>
</tbody>
</table>
Housing Starts Rose More Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 17, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021217d.jpg" width="353">
Housing starts rose slightly more than expected last month. The 2.4% m/m rise partially recouped an 8.4% October decline that was revised slightly shallower. Total starts were up 7.2% versus last December.
Single family starts rose a modest 0.9% m/m following a 5.1% October decline. Year to date, single family starts were up 7.4% versus last December. 
Multi-family starts rose 10.0% following two months of sharp decline. Year to date, multi family starts were up 6.2% versus last December.
Building permits reversed all of the prior month&#39;s gain and fell 2.7% m/m. The decline was all due to lower multi family permits. Single family permits rose a slight 0.1% following three months of strong gain. The level of single family permits was near the record high of this past February.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,697</td>
<td>1,657</td>
<td>5.8%</td>
<td>1,603</td>
<td>1,573</td>
<td>1,647</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family</td>
<td>1,390</td>
<td>1,378</td>
<td>12.0%</td>
<td>1,273</td>
<td>1,232</td>
<td>1,306</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi Family</td>
<td>307</td>
<td>279</td>
<td>-15.4%</td>
<td>330</td>
<td>341</td>
<td>341</td>
</tr>
</tbody>
</table>
Industrial Production Up Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 17, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021217c.jpg" width="353">
Industrial production rose just slightly last month versus Consensus expectations for a 0.2% gain. It was the first monthly rise in output since July. October&#39;s decline was lessened and prior month&#39;s figures were revised up. Production was up 2.5% (AR) year to date.
Output in the manufacturing sector rose 0.1% following two months of decline. Factory production was up 2.3% (AR) year to date.
Output of motor vehicles and parts (5.2% AR, YTD) rose 3.9% for the first gain in four months. Output of appliance, furniture &amp; carpeting rose 0.8%, but it was only the second monthly rise since May. Apparel output rose 0.4% but was down 4.2% (AR) year to date. 
Output of business equipment fell 0.5% (-3.0% AR, YTD), the fourth decline in five months. Output of information processing equipment rose for the second consecutive month (-1.1% AR, YTD). 
Capacity utilization rose slightly and is off the lows of late last year, but remains down considerably from prior years. Capacity again rose 0.1%(1.1% AR, YTD) as it has since early last year.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Industrial Production</td>
<td>0.1%</td>
<td>-0.6%</td>
<td>1.8%</td>
<td>-3.5%</td>
<td>4.7%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>75.6%</td>
<td>75.5%</td>
<td>75.1%(11/01)</td>
<td>77.3%</td>
<td>82.7%</td>
<td>82.4%</td>
</tr>
</tbody>
</table>
Chain Store Sales Recovered Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 17, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021217a.jpg" width="353">
Chain store sales surged 1.9% last week according to the BTM-UBSW survey. The gain recovered most, but not all, of the prior week&#39;s 2.3% plunge.
Since early October, weekly sales have been volatile but essentially have moved sideways.
December sales so far were 1.0% below the November average.
The BTM Leading Indicator of chain store sales collapsed in early December and was 1.6% (-1.2% y/y) below November.
During the last ten years there has been a 48% correlation between the year-to-year percent change in monthly chain store sales and the change in GAF retail sales. That correlation rose to 63% during the last five years.

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<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">12/14/02</th>
<th scope="col">12/07/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>400.1</td>
<td>392.8</td>
<td>4.5%</td>
<td>2.1%</td>
<td>3.4%</td>
<td>6.7%</td>
</tr>
</tbody>
</table>
Crude Oil Prices Surge to $30.00 per Barrel 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 17, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021217e.jpg" width="353">
Prices have surged $5.00/bbl for West Texas Intermediate crude oil since the mid-November lows. A labor strike in Venezuela has crippled the country&#39;s oil output.
Wholesale gasoline prices have similarly surged, rising nearly $0.15 per gallon, or 19%, since late November. Fuel oil prices also have risen sharply.
Wholesale natural gas prices have more than doubled this year.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/daily/@D3/@D306/@D30604/@D30604.HTM">Daily Crude Oil Prices</a></th>
<th scope="col">12/16/02</th>
<th scope="col">11/18/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">West Texas Intermediate Crude Oil</td>
<td>$30.13</td>
<td>$26.73</td>
<td>56.7%</td>
<td>$25.97</td>
<td>$30.34</td>
<td>$19.34</td>
</tr>
</tbody>
</table>
</body>
</html>

The Consumer Price Index (CPI-U) rose just 0.1% last month. The gain was as expected. Excluding food and energy, prices also rose as expected and the rise was equal to the YTD average. Tobacco prices (-0.0%) fell for the second [...]

CPI Weak, As Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021216a.jpg" width="353">
The Empire State Manufacturing Survey reported that the index of general business conditions improved in December and was positive for a second month. Modest deterioration had been expected by some forecasts.
Diffusion indexes for new orders, shipments and the length of the average employee workweek improved sharply. The index of prices paid fell for the second month.
The survey includes measures of business expectations, six months ahead. The diffusion index for general business conditions fell to the lowest level since January. Expectations for orders and shipments fell sharply.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question, not the components.
For the latest Empire State Manufacturing Survey report, click <a href="http://www.newyorkfed.org/rmaghome/regional/mfg_survey/12_2002.pdf">here</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/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General business conditions (diffusion index)</td>
<td>10.60</td>
<td>9.70</td>
<td>-1.83</td>
<td>6.96</td>
<td>-14.97</td>
</tr>
</tbody>
</table>
NAHB Housing Index Firm Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 16, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021216b.jpg" width="353">
The National Association of Home Builders index of new home sales rose for December although the strong reading for November was revised slightly lower. The latest rise was to the highest level since November 2000.
Surveys of market conditions for current sales rose slightly but expected conditions in six months fell slightly. 
Traffic of prospective buyers fell moderately to the midpoint of the range prevailing this year.
For a description of the housing market index from the National Association of Home Builders, visit the <a href="http://www.nahb.org/generic.aspx?sectionID=134&amp;genericContentID=532">NAHB website</a>.

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</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>65</td>
<td>64</td>
<td>57</td>
<td>61</td>
<td>56</td>
<td>62</td>
</tr>
</tbody>
</table>
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The Empire State Manufacturing Survey reported that the index of general business conditions improved in December and was positive for a second month. Modest deterioration had been expected by some forecasts. Diffusion indexes for new [...]

Empire State Factory Survey Improved Further in December

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021213b.jpg" width="353">
Finished producer prices were weaker than expected last month and fell 0.4%. Consensus expectations were for no change. It was the first decline in prices since July.
Excluding food and energy prices also were weaker than expectations for no change. The 0.3% decline similarly was the first drop since July. Core producer prices were down 0.1% (AR, YTD).
Finished energy prices fell for the first month since June (11.6% AR, YTD). Gasoline prices fell 11.6% (54.1% AR), reversing all of the prior month&#39;s jump, and fuel oil prices slumped 10.7% (45.1% AR, YTD). Residential gas prices also were strong for the second consecutive month (8.1% AR, YTD). These energy product price series are NSA.
Core finished consumer goods prices fell 0.3% (0.2% AR, YTD). Consumer durables prices fell 0.7% and reversed all of the October jump as prices for passenger cars and household appliances fell. Other consumer durables prices were tame. Core nondurable goods prices rose 0.1% (1.3% AR, YTD. Capital goods prices fell 0.2% (-0.5% AR, YTD) as computer prices continued to decline.
Food prices rose 0.3%, but it was only the second monthly rise since mid-year.
Intermediate goods prices fell for the first month since February as energy prices fell. Core intermediate prices rose just 0.1% for the third consecutive month (1.8% AR, YTD). 
Crude goods prices were again strong (26.0% AR, YTD) reflecting higher energy prices. Other commodities prices reflected in the core crude price measure were strong reflecting higher scrap copper and aluminum prices. Steel scrap prices fell sharply for the second consecutive month.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>0.9%</td>
<td>2.0%</td>
<td>3.7%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.3%</td>
<td>0.5%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>1.3%</td>
<td>1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.1%</td>
<td>0.7%</td>
<td>2.4%</td>
<td>0.4%</td>
<td>4.9%</td>
<td>0.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>-0.1%</td>
<td>2.6%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>5.1%</td>
<td>3.4%</td>
<td>14.7%</td>
<td>0.3%</td>
<td>22.8%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.9%</td>
<td>11.6%</td>
<td>-9.9%</td>
<td>7.3%</td>
<td>-4.7%</td>
</tr>
</tbody>
</table>
Business Inventory Accumulation Continued 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 13, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021213c.jpg" width="353">
Total business inventories rose as expected in October. September&#39;s gain in inventories was revised up slightly due to raised figures for retail inventories.
Retail inventories (7.4% YTD, AR) were strong for the second consecutive month led by a 3.0% jump in motor vehicle inventories, the second strong gain in a row.
Nonauto retail inventories (1.8% YTD, AR) fell for the first monthly decline since March. Inventories of furniture &amp; home furnishings were unchanged following earlier strength (10.1% YTD, AR). Inventories at apparel stores slumped 1.2% (1.7% YTD, AR). At general merchandise stores inventories rose a modest 0.2% (-0.9% YTD, AR) for the second consecutive month.
Overall business sales rose 0.4% (4.2% YTD, AR).
The inventory-to-sales ratio fell slightly to 1.36 from an upwardly revised September level. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.2%</td>
<td>0.6%</td>
<td>-0.6%</td>
<td>-6.3%</td>
<td>5.6%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.7%</td>
<td>1.3%</td>
<td>5.3%</td>
<td>-5.0%</td>
<td>6.1%</td>
<td>7.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>-0.4%</td>
<td>0.7%</td>
<td>0.7%</td>
<td>-2.0%</td>
<td>4.1%</td>
<td>5.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>-3.0%</td>
<td>-5.5%</td>
<td>6.6%</td>
<td>6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.0%</td>
<td>0.2%</td>
<td>-4.4%</td>
<td>-8.0%</td>
<td>4.5%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
Consumer Sentiment Up in Early December 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 13, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021213a.jpg" width="353">
The preliminary December reading of Consumer Sentiment from the University of Michigan rose more than Consensus expectations for a rise to 85.0. Sentiment has rebounded 7.9% during the last two months.
Indexes of current conditions and expectations both rose.
Over the last 10 years there has been a 40% correlation between the annual change in consumer sentiment and the change in stock prices.That correlation rose to 62% during the last five years
The University of Michigan survey is not seasonally adjusted.

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<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">Prelim. Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Sentiment</td>
<td>87.0</td>
<td>84.2</td>
<td>-2.0%</td>
<td>89.2</td>
<td>107.6</td>
<td>105.8</td>
</tr>
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Finished producer prices were weaker than expected last month and fell 0.4%. Consensus expectations were for no change. It was the first decline in prices since July. Excluding food and energy prices also were weaker than expectations [...]

Producer Prices Fall

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021212a.jpg" width="353">
Retail sales rose last month in line with Consensus expectations for a 0.4% gain. October sales were revised up due to slightly stronger gains in auto and nonauto sales. Total retail sales were up at a 2.7% annual rate YTD through November.
Sales excluding motor vehicles and parts dealers rose quite a bit more than expectations for a 0.2% gain. Year to date nonauto retail sales were up at a 4.9% annual rate through November.
Furniture and home furnishing store sales rose 1.6% (3.4% YTD, AR) following strong results in the prior four months which were revised higher. The November gain reflected a huge 2.3% rise in furniture sales and a 0.9% rise in electronics and appliances sales.
Sales at general merchandise stores rose 0.3% adding to a 1.2% gain in October. Year to date sales were up at a 4.5% rate through November.
Apparel store sales fell a sharp 1.3% (1.1% AR, YTD) following a huge 5.5% gain in October.
Motor vehicle dealers&#39; sales fell a slight 0.1%, the third monthly decline in a row. The decline may have reflected price discounting. Unit sales of light vehicles rose 3.8% last month to 16.04 mil.
Sales at gasoline service stations rose 0.4%.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.4%</td>
<td>0.1%</td>
<td>2.1%</td>
<td>3.9%</td>
<td>6.7%</td>
<td>8.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.5%</td>
<td>0.8%</td>
<td>5.0%</td>
<td>3.4%</td>
<td>7.3%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">

</table>
Import Prices Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 12, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021212c.jpg" width="353">
Prices for imported commodities fell much more than Consensus expectations for a 0.1% decline. October figures were little revised.
Petroleum import prices fell sharply and by the most since back to back double digit declines last Fall. Still, petroleum prices are up at a 51.6% rate since December. So far in December the price of Arab Light crude oil has run slightly higher than the $22.20/bbl averaged in November.
Nonpetroleum import prices rose slightly following the slight October drop (0.3% YTD, AR).
Prices of imported capital goods were unchanged following two down months. Nonauto consumer goods prices fell for the second month in three and imported motor vehicle prices also were down.
Export prices rose slightly (1.3% YTD, AR). Food prices rose strongly, reversing the prior month&#39;s steep drop. Other export prices either fell or were tame.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>-1.0%</td>
<td>0.0%</td>
<td>2.4%</td>
<td>-3.5%</td>
<td>6.5%</td>
<td>0.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-10.0%</td>
<td>0.3%</td>
<td>37.5%</td>
<td>-17.2%</td>
<td>66.5%</td>
<td>34.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-1.5%</td>
<td>1.0%</td>
<td>-1.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>-0.8%</td>
<td>1.6%</td>
<td>-1.3%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Surged 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 12, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021212b.jpg" width="353">
Initial claims for unemployment insurance surged more than expected last week. Aberrant seasonal adjustment factors were cited by the Labor Department as the reason for recent volatility.
The four-week moving average of initial claims rose to 387,250, down 10.9% y/y.
Continuing claims for unemployment insurance fell a sharp 4.8% w/w following a like decline the prior week.
The insured rate of unemployment fell to 2.6%, the lowest level since September 2001.

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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">12/07/02</th>
<th scope="col">11/30/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>441.0</td>
<td>358.0</td>
<td>7.3%</td>
<td>405.8</td>
<td>299.8</td>
<td>297.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,284</td>
<td>-10.2%</td>
<td>3,021</td>
<td>2,114</td>
<td>2,186</td>
</tr>
</tbody>
</table>
3Q Current Account Deficit Narrowed 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 12, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021212d.jpg" width="353">
The US current account deficit came in slightly below expectations last quarter, but remained near a record level. The deficit in 2Q was revised shallower. 
The deficit in goods, services and income trade eased slightly but remained near the record. The deficit in goods and services trade deteriorated to a new record. The deficit in the income balance eased slightly.
Foreign ownership of assets in the US rose by $148.5B versus a gain of $204.3B in 2Q and a peak rate of $302.5B early last year. Direct investment into the US improved slightly last quarter but remained at a level not seen since the mid-1990s.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Int&#39;l Balance of Payments</a></th>
<th scope="col">3Q &#39;02</th>
<th scope="col">2Q &#39;02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account Deficit</td>
<td>$127.0B</td>
<td>$127.6B</td>
<td>$91.3B</td>
<td>$393.4B</td>
<td>$410.3B</td>
<td>$292.9B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % of GDP</td>
<td>4.8%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.8%</td>
<td>4.5%</td>
<td>3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Deficit on Gds, Serv &amp; Income</td>
<td>$113.8B</td>
<td>$114.6B</td>
<td>$79.0B</td>
<td>$343.9B</td>
<td>$356.9B</td>
<td>$244.1B</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>2.5%</td>
<td>4.8%</td>
<td>1.1%</td>
<td>-9.6%</td>
<td>13.6%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>1.6%</td>
<td>8.3%</td>
<td>9.8%</td>
<td>-8.4%</td>
<td>18.9%</td>
<td>10.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral Transfers Deficit</td>
<td>$13.2B</td>
<td>$13.0B</td>
<td>$12.4B</td>
<td>$49.5B</td>
<td>$53.4B</td>
<td>$48.8B</td>
</tr>
</tbody>
</table>
Mortgage Refinancing Drops 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 12, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021212e.jpg" width="353">
The index of mortgage applications, compiled by the Mortgage Bankers Association, plunged last week. The decline reversed the run-up in early November and dropped total applications 35% below the early October high.
Mortgage applications to refinance collapsed, leaving them 45% below the early October high yet still up versus last year.
Mortgage applications for home purchase have remained relatively firm.. The recent contract rate on a conventional 30 year mortgage was 5.95%, up modestly from the low.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">12/06/02</th>
<th scope="col">11/01/02</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>862.7</td>
<td>1,030.5</td>
<td>625.6</td>
<td>322.7</td>
<td>352.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>358.8</td>
<td>369.5</td>
<td>304.9</td>
<td>302.7</td>
<td>275.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,793.8</td>
<td>4,875.1</td>
<td>2,491.0</td>
<td>438.8</td>
<td>795.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales rose last month in line with Consensus expectations for a 0.4% gain. October sales were revised up due to slightly stronger gains in auto and nonauto sales. Total retail sales were up at a 2.7% annual rate YTD through [...]

Retail Sales Rose Moderately

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021211a.jpg" width="353">
The Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) rose 1.5% last month, more than recovering the prior two month&#39;s declines.
At the end of last month, the level of the weekly leading index was up to its highest level since July. The indicator&#39;s six-month growth rate rose to-1.8% versus -4.5% hit in October.
Construction of the ECRI Leading Index differs from the Index of Leading Economic Indicators published by the Conference Board. Nevertheless there has been an 80% correlation between the annual percent change in the two over the last 20 years.
The components of the 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 click <a href="http://www.businesscycle.com/">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM">ECRI</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Leading Index</td>
<td>118.8</td>
<td>117.0</td>
<td>1.8%</td>
<td>-5.1%</td>
<td>0.9%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) rose 1.5% last month, more than recovering the prior two month's declines. At the end of last month, the level of the weekly leading index [...]

ECRI Leading Indicators Recover

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021210b.jpg" width="353">
The Federal Reserve left the Federal Funds Target Rate unchanged at 1.25%. The action was as expected by most economists at the 22 primary dealers, bond firms that trade directly with the central bank. 
The brief press release which accompanied the Fed&#146;s action contained the following statement. &quot;The Committee continues to believe that this accommodative stance of monetary policy, coupled with still robust underlying growth in productivity, is providing important ongoing support to economic activity.&quot;
The complete text of the Fed&#39;s latest press release can be viewed <a href="http://www.federalreserve.gov/BoardDocs/Press/monetary/2002/20021210/default.htm.">here</a>.
A review of US monetary policy from 1987 to 2001 by the Federal Reserve Bank of Richmond can be viewed at the <a href="http://www.rich.frb.org/pubs/eq/search.cfm/article=170">Richmond Fed website</a>.
Further discussion by the Richmond Fed of expectations and the term structure of interest rates can be found <a href="http://www.rich.frb.org/pubs/eq/search.cfm/article=173">here</a>.

Chain Store Sales Weak Post Thanksgiving 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 10, 2002


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/021210a.jpg" width="353">
Chain store sales fell 2.3% last week according to the BTM-UBSW survey. The post Thanksgiving plunge may have been exacerbated by the late timing of the holiday. Icing and snow in the Northeast also have been cited by some retailers as factors behind weak sales.
The one week decline in sales was the largest in two years. In 2000, sales similarly collapsed post Thanksgiving and only recovered when aggressive price discounts at Christmas salvaged the season.
The drop followed a 0.3% rise the prior week and lowered the sales index to its lowest in a year. December sales began the month 1.9% below the November average.
The BTM Leading Indicator of chain store sales rose late last month and the November monthly average was 0.7% (0.8% y/y) above October.
During the last ten years there has been a 48% correlation between the year-to-year percent change in monthly chain store sales and the change in GAF retail sales. That correlation rose to 63% during the last five years.

<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/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">12/07/02</th>
<th scope="col">11/30/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>392.8</td>
<td>402.0</td>
<td>2.0%</td>
<td>2.1%</td>
<td>3.4%</td>
<td>6.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Reserve left the Federal Funds Target Rate unchanged at 1.25%. The action was as expected by most economists at the 22 primary dealers, bond firms that trade directly with the central bank. The brief press release which [...]

FOMC Leaves Interest Rates Unchanged

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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Factory sector activity remains under pressure. The ISM U.S. manufacturing PMI declined to 48.7 in October after rising to 49.1 during September from 48.7 in August, according to the Institute for Supply Management. These figures are below the 50 expansion-contraction dividing line. As a result, they continue to indicate that the U.S. manufacturing sector weakened for the eighth consecutive month. The reading remained remain above, however, a low of 46.9 in October of last year. A November index of 49.4 had been expected in the Action Economics Forecast Survey.

The production component declined to 48.2 last month after rising to 51.0 in September. It remained increased from an April low of 44.0. A lessened 27.3% (NSA) of respondents reported higher production while an increased 22.0% reported lower output levels. The inventory reading fell to a 12-month low of 45.8 from 47.7 in September. A lessened 13.2% (NSA) of respondents raised inventories while a higher 21.7% shed them.

Working higher, the new orders index rose to 49.4 during October from 48.9 in September. An increased 20.4% (NSA) of respondents reported new orders improvement while 26.0% reported a decline. The employment index increased to a five-month high of 46.0 last month after rising to 45.3 in September. An increased 13.1% (NSA) of respondents more hiring while 22.3% reported less. The supplier delivery index rose to 54.2 in October from 52.6 in September. Twelve percent (NSA) of respondents reported slower product delivery speeds while 3.2% reported a quickening.

The prices index weakened to 58.0 (NSA) during October from 61.9 in September. It was below a high of 69.8 in April, and well above its low of 39.4 in December 2022. A lessened 27.3% of respondents reported higher prices, a nine month low, while an increased 8.7% reported lower.

In other series, the export orders index rose to a seasonally adjusted 44.5 in October after falling sharply to 43.0 in September. It remained up from 40.1 May low. The imports index edged up to 45.2 last month from 44.7 in September. The index is below a high of 52.6 in February.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- Decline reverses all of September increase.					
- Lower production offsets new orders rise.
- Price index falls to nine-month low.

U.S. ISM Manufacturing PMI Eases in October; Price Index Declines Sharply

Tian Yong Woon

This week, we review a wave of key developments across Asia following US President Trump’s tour of the region last week. A central theme concerned countries courting closer ties with the US to avoid harsher actions, while also boosting regional cooperation amid trade barriers and scrutiny of China. This push for closer ties has manifested through new and updated trade agreements—ironically driven by ongoing uncertainty in global trade and supply chains, with US–China relations at the core. A major outcome of Trump’s trip was the new US–China trade agreement, which included the US halving tariffs on Chinese fentanyl-related products to 10%, while China suspended rare earth export controls and resumed soybean purchases vital to the US (chart 1). Perhaps more importantly, the deal signalled a small conciliatory shift and avoided a potentially worse outcome. Beyond the US–China agreement at the APEC Summit in South Korea, the US–South Korea trade deal also gained more clarity. Under the deal, US auto tariffs on South Korea has fallen to 15%, matching the rate applied to Japan and likely providing relief for South Korean automakers (chart 2).

Trump’s visit to Japan was another highlight. Relations with new Prime Minister Takaichi got off to a strong start, and further details emerged on Japan’s previously cited $550 billion investment commitment in the US—substantial even relative to Japan’s existing direct investment there (chart 3). However, specifics on the timing and implementation of the investment remain limited. Meanwhile, at the ASEAN Summit earlier in the week, aside from Trump’s engagements, the bloc officially welcomed its 11th member—Timor-Leste—the first new member in decades—granting it access to the bloc’s mechanisms and potentially supporting a catch-up in economic development (chart 5). Looking ahead, the focus on China and Japan is likely to continue, with China set to release its October trade (chart 6) and CPI data, and Japan scheduled to report employee wages and household spending.

**The APEC summit**
The US and China made a modest but meaningful step forward on trade following the Trump–Xi meeting at the APEC Summit in South Korea. The US lowered tariffs on Chinese fentanyl-related products to 10% from 20% and suspended enforcement of rules targeting subsidiaries of blacklisted firms—previous points of contention for Beijing. In return, China pledged stronger efforts to curb fentanyl flows, paused rare earth export controls for a year, and resumed purchases of US soybeans—significant given its historically large share of US export demand (chart 1). While not a comprehensive reset, these moves eased immediate tensions and helped avert more severe outcomes, including Trump’s previously threatened 100% tariff hike. The tone of the meeting also suggests a more conciliatory shift, though relations remain fragile and the risk of renewed escalation is still material.

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Beyond the headline-grabbing US–China trade deal, the APEC Summit in South Korea also saw the US reach a trade agreement with South Korea. Under the deal, US tariffs on South Korean autos and auto parts have fallen to 15% from 25%, matching the US tariff rate on Japanese autos and providing relief to South Korea’s sizable automotive export sector (chart 2). The agreement also clarified South Korea’s supposed $350 billion investment in the US: $200 billion in cash, capped at $20 billion per year to avoid currency market distortions, with the remaining $150 billion directed toward shipbuilding cooperation. While also not a major breakthrough, the deal represents incremental progress, addressing prior uncertainties and signalling steps toward a more favourable trade framework.

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**US President Trump’s Japan Visit**
Turning to US President Trump’s visit to Japan last week, new Prime Minister Takaichi appears to have gotten off to a strong start, with Trump hailing US–Japan relations as entering a “NEW GOLDEN AGE.” The two countries signed several agreements, including a Technology Prosperity Deal, and deepened cooperation on critical minerals and rare earths. Japan’s previously vague $550 billion investment commitment in the US is now somewhat clearer: up to $332 billion will support critical US infrastructure, $30 billion will target AI, and $15 billion will go toward electronics and supply chains, among other areas. While the headline figure is substantial—even relative to Japan’s already significant direct investment assets in the US (chart 3)—the open-ended nature of the commitment and the lack of a clear timeline leave its actual impact uncertain.

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**The ASEAN summits**
Whilst US President Trump’s attendance at the ASEAN–US Summit in Malaysia dominated headlines, there were also several other notable developments at last week’s ASEAN meetings in Kuala Lumpur. Most prominently, Timor-Leste was officially admitted as ASEAN’s eleventh member, following a two-decade accession process during which the country actively aligned its political and economic frameworks with ASEAN standards. Membership grants Timor-Leste access to the bloc’s broader security and economic mechanisms and could open further avenues for trade, investment, and development cooperation. Nonetheless, the country still has considerable ground to make up relative to its new ASEAN peers, particularly in terms of both GDP and GDP per capita (chart 4).

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The accession of Timor-Leste into ASEAN aside, last week’s summits also brought a number of economic developments for the bloc. More concretely, ASEAN and China signed an upgrade to their free trade agreement last week, bringing the deal to so-called version 3.0. The upgraded deal (ACFTA 3.0) introduces commitments in new areas such as Digital Economy, Green Economy, and Supply Chain Connectivity, among other themes. And notably, just as the US and ASEAN have found common ground to collaborate in fields such as those relating to rare earths, given how the US has seen vulnerabilities arising from this space given China’s dominance in the field, China has taken the year’s US-China frictions to foster closer ties with its neighbours in the region, including the collectively sizable ASEAN bloc. Just by the trade dimension alone, China-ASEAN-11 trade has growth significantly this year (chart 2), although the economies’ total trade with the US also rose, and at a more significant pace, despite tariff measures.

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Looking ahead, investors will focus on a series of China-related releases this week, notably the Caixin PMI readings, as well as October trade and CPI inflation data. These indicators will help gauge the economy’s performance under ongoing US tariffs and assess domestic demand and supply conditions, all in the broader context of recent US–China interactions during Trump’s Asia tour. In Japan, attention will turn to updated data on employee wages and household spending, which—together with developments in the external environment—will shape expectations for the Bank of Japan’s future policy stance. Elsewhere in the region, investors will watch interest rate decisions from Australia and Malaysia, where rates are expected to remain unchanged, as well as GDP readings from Indonesia and the Philippines.

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Asia

Economic Letter from Asia: Come Together

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) improved 0.3% during the four weeks ended October 31, 2025 after holding steady in the prior four week period. The index increased 0.8% y/y.

**Metals** group prices increased 4.3% (6.1% y/y) in the last four weeks as the cost of aluminum rose 7.0% (9.5% y/y). Copper scrap prices improved 6.5% (16.4% y/y) while zinc prices strengthened 6.8% in four weeks (3.0% y/y). Steel scrap prices rose 2.3% (-6.6% y/y) and tin prices increased 2.2% (16.1% y/y). Lead prices improved 1.1% (unchanged y/y) in four weeks.

Prices in the **Textile** group increased 1.2% during the last four weeks, and rose 2.4% y/y. The cost of burlap strengthened 14.5% in the last four weeks while surging 37.6% over the last year. Offsetting this rise, cotton prices fell 1.2% and declined 5.8% y/y.

**Miscellaneous** group prices weakened 3.0% in the last four weeks, unchanged y/y, as framing lumber prices fell 6.5% (+4.1% y/y). The cost of tallow, used for frying & baking, declined 13.1% (+11.2% y/y) in four weeks. Offsetting this weakness, natural rubber prices held steady (-10.1% y/y).

Prices in the **crude oil & benzene** group declined 1.7% (-9.3% y/y) in the last four weeks. The cost of West Texas Intermediate crude oil fell 3.1% in four weeks to $60.80 per barrel and declined 11.7% y/y. The price was increased from a low of $58.47 in the third week of the month. The price of the petro-chemical benzene fell 2.9% (-23.3% y/y) in four weeks.

**Excluding crude oil**, the industrial commodity price index rose 0.5% (1.6% y/y) over the last four weeks, the same as during the prior four weeks.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

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- Metals and textile prices strengthen.
- Framing lumber costs backpedal.
- Crude oil prices weaken.

FIBER: Industrial Commodity Price Index Edges Higher in Latest Four Weeks

Andrew Cates

**US monetary policy**
This first chart shows that Chair Powell’s cautious tone in the aftermath of this week’s FOMC meeting led markets to scale back expectations for further near-term easing. Fed funds futures for late 2025 through mid-2026 rose slightly, signalling that investors now expect a shallower and slower easing cycle than before. While the rate cut itself confirmed the Fed’s gradual pivot toward easier policy, markets interpreted Powell’s remarks as suggesting that a December move is not guaranteed and that the central bank remains wary of declaring victory on inflation too soon.

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**The global business cycle**
The latest flash PMI surveys for October highlight a still-divergent global picture, with services-led resilience offsetting persistent manufacturing weakness. Activity remains strongest in India and the United States, both comfortably in expansion territory, while Germany has shown one of the clearest signs of improvement within the euro area after a long period of contraction. The broader euro area and UK readings point to modest but positive momentum, suggesting that growth is stabilising rather than accelerating. In contrast, France remains mired below the 50 threshold, signalling continued contraction, and Japan and Australia are treading water with only marginal gains.

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**Consumer confidence in the US and Europe** 
Consumer confidence trends have diverged across major economies in 2025. In the UK, sentiment has improved gradually, supported by easing inflation and lower interest rates. In the euro area, confidence has stabilised after a prolonged downturn, though households remain wary. By contrast, US confidence has slipped further, probably reflecting a softening labour market, slowing wage growth, and heightened concern about job security. Overall, global consumer sentiment remains fragile and uneven, suggesting that household spending could stay subdued even if price pressures recede and monetary policy becomes more accommodative.

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**Credit conditions in the euro area** 
The latest data on Euro Area M3 growth underline that monetary conditions remain mildly restrictive, even after the ECB’s recent rate reductions. Money growth has decelerated sharply over the past year, with only a limited contribution from private-sector credit and little net support from lending to government. The ECB’s Q4 Bank Lending Survey, released this week, suggests that while financing conditions are beginning to ease, credit dynamics remain weak. Banks reported a further net tightening of credit standards for firms, reflecting continued risk aversion, even as loan demand from businesses and households picked up modestly thanks to lower interest rates and improving sentiment.

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**The UK manufacturing sector**
Turning to the UK, the latest CBI Industrial Trends Survey offers little sign of improvement in manufacturing conditions. The balance of firms reporting excess stocks of finished goods has fallen further into negative territory, consistent with efforts to run down inventories amid weak demand and high uncertainty. And on that score, the share of firms citing uncertainty about demand over the next year as a constraint on capital expenditure has shifted up, highlighting persistent caution in investment planning. Together, these indicators point to a sector still struggling to regain momentum after a protracted slowdown—one where firms are prioritising cost control and liquidity preservation over expansion, despite an easing in headline inflation and gradual monetary policy support.

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**Traded goods price inflation**
The Drewry Container Index, which tracks global shipping costs for a standard 40-foot container, has fallen back in recent months from the elevated levels seen in 2024, reflecting softer global trade volumes and a partial unwinding of last year’s supply-chain pressures. Even so, concerns have re-emerged that new US tariff measures and associated logistical bottlenecks could push freight rates and producer price inflation (PPI) higher in the coming months. The final chart below illustrates how closely traded goods price inflation, represented by Haver’s aggregation of PPI inflation for advanced economies, has tended to move with swings in container shipping costs. While traded goods inflation remains subdued for now, any renewed disruptions to global shipping routes or tariff-driven frictions could quickly feed through to higher input costs—especially in manufacturing sectors reliant on long and complex supply chains.

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Global equity markets are once again flirting with record highs, buoyed by renewed optimism that the global economy can achieve a soft landing—and by persistent enthusiasm over the potential productivity gains from AI-related investment. The Federal Reserve’s decision to cut rates by 25bps this week—its second this autumn—initially reinforced expectations that global monetary policy is shifting toward a more accommodative stance. However, Chair Powell’s reminder that a further cut in December was “not inevitable” tempered that optimism and was met with some disappointment in financial markets (chart 1). Even so, the broader tone remains constructive, though it contrasts with a still-fragile macro environment. Renewed conflict in Gaza, the ongoing US government shutdown, and intensifying trade tensions have kept risk sentiment uneven and underscored the fragility of the recovery. The latest flash PMIs (chart 2) show modest global expansion led by services, while manufacturing continues to struggle. Consumer confidence (chart 3) tells a similar story: sentiment has weakened in the US as the labour market softens, stabilised in the euro area, and improved slightly in the UK. In the euro area, sluggish money and credit growth (chart 4) and the ECB’s latest bank-lending survey confirm that financial conditions remain mildly restrictive despite recent rate cuts. The UK CBI Industrial Trends Survey (chart 5) points to manufacturers reducing inventories and deferring investment plans amid demand uncertainty. Externally, the Drewry Container Index (chart 6) has fallen back from 2024’s elevated levels, signalling easing supply-chain pressures and subdued traded-goods inflation—though tariff realignments remain a potential source of friction.

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Charts of the Week: Optimism with Caveats

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Initial claims for unemployment insurance increased 11,892 during the week ended October 18 to 232,163. The increase reversed most of the earlier week’s decline of 14,839. The four-week moving average of initial claims edged up to 227,953 and have trended higher this year, after weakening late in 2024. The four- week average hit a low of 200,323 in January 2024.

Continuing claims for unemployment insurance fell to 1.947 million in the week ended October 11 from 1.928 million in the prior week. The four-week moving average edged up to 1.931 million, the highest level since early September and up 3.3% y/y, less than half the peak rate of growth in April 2023.

The insured unemployment rate varied greatly across individual states and territories. In the week ended October 11, the highest unemployment rates were in New Jersey (2.12%), Washington (1.99%), California (1.88%), Massachusetts (1.84%), District of Columbia (1.75%) and Connecticut (1.71%). The lowest were in South Dakota (0.24%), Florida (0.36%), North Carolina (0.41%), Louisiana (0.42%), Nebraska (0.48%) and Virginia (0.52%). Rates in other notable states include New York (1.46%), Illinois (1.49%), Pennsylvania (1.37%), and Texas (1.14%). These state data are not seasonally adjusted.

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

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- Rise in initial claims reverses earlier decline.
- Continuing claims jump.
- State unemployment rates vary.

Economy in Brief: December 2002

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