Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050928a.jpg" width="353">
US durable goods orders in August recouped much of the prior month&#39;s decline with a 3.3% rise that far exceeded Consensus expectations for a 0.8% increase.
The volatility of orders in the transportation sector recently has been extreme. In August, a 10.4% rise in aircraft orders followed an 18.8% July decline. Less transportation altogether, durable goods orders rose 4.2% last month to a record high.
Strength in nondefense capital goods orders also has been somewhat masked by the volatility in the transportation sector. Overall nondefense capital goods orders last month recovered most of the prior month&#39;s decline with a 4.3% increase but less aircraft these orders rose 3.6% to the highest level since 2000.
Electrical equipment orders rose a notable 8.1% (10.6% y/y) last month while machinery orders increased 3.5% (8.2% y/y). Computer &amp; electronic products orders increased 5.5% (14.7% y/y) goosed by a 10.7% (26.4% y/y) gain in computers.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050928b.jpg" width="353">
Orders for fabricated metals products rose 4.6% (3.1% y/y) to a record high while primary metal orders surged 9.2% (2.5% y/y), also a record.
Shipments of durable goods rose 1.7% (4.3% y/y) in August but less transportation shipments rose a stronger 1.2% (5.4% y/y).
Order backlogs surged 1.7%(10.3% y/y). Backlogs excluding transportation also were firm and rose 1.9% (9.1% y/y) due to broad based strength. The ratio of backlogs to shipments excluding transportation rose to the highest since last year.
Durable inventories fell 0.2% (+5.6% y/y) following an upwardly revised 0.8% rise in July.
Chairman Greenspan&#39;s comments to the National Association for Business Economists titled Economic Flexibility can be found <a href="http://www.federalreserve.gov/boarddocs/speeches/2005/20050927/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>3.3%</td>
<td>-5.3%</td>
<td>7.9%</td>
<td>9.5%</td>
<td>4.1%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>4.2%</td>
<td>-3.7%</td>
<td>7.5%</td>
<td>11.7%</td>
<td>3.1%</td>
<td>-6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>4.3%</td>
<td>-7.1%</td>
<td>21.2%</td>
<td>11.0%</td>
<td>4.2%</td>
<td>-9.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>3.6%</td>
<td>-3.3%</td>
<td>12.4%</td>
<td>9.5%</td>
<td>4.8%</td>
<td>-10.5%</td>
</tr>
</tbody>
</table>
Mortgage Applications Down Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 28, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050928c.jpg" width="353">
The total number of mortgage applications fell a sharp 6.6% last week, according to the Mortgage Bankers Association, and left applications so far in September 1.4% above August.
Mortgage applications to refinance plummeted 10.5% w/w and for the month are a slight 0.6% above August which fell 10.6% from July.
Purchase applications fell hard for the second consecutive week. The 3.4% decline lowered the gain in September to 2.0% versus August. During the last ten years there has been a 49% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The effective interest rate on a conventional 30-year mortgage rose slightly to 6.09% and the effective rate on a 15-year mortgage rose to 5.75%. The interest rate on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

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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">09/23/05</th>
<th scope="col">09/16/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>721.2</td>
<td>772.2</td>
<td>-0.5%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>483.1</td>
<td>500.3</td>
<td>3.0%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,106.6</td>
<td>2,353.7</td>
<td>-4.7%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Lackluster Expectations for European Business Managers 
by <a href="/comment/Stone.html">Carol Stone</a> September 28, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050928d.jpg" width="353">
Business surveys for four European countries reported today for September and August show a largely stagnant picture for European companies. Signs of life that had appeared earlier seem to have dissipated.
In France, for example, the INSEE synthetic climate indicator (a composite of current and expected production and order trends) sits at 100, an absolutely neutral result. Last year, it averaged 104 and reached a peak of 108 in October, but this modest optimism was not sustained. The best it seems possible to glean about French industry is that some slight weakness this past spring -- an average of 98 in Q2 -- was also not long-lasting.
Italy&#39;s ISAE business confidence indicator rose in September to 89.5 from 87.8 in August (index, 2000=100). As can be seen in the first graph, the index has oscillated in a narrow range for sometime, and this latest increase only maintains the recent average. Since the beginning of 2002, the indicator has averaged 88.6, and the average for August and September is 88.7. Such unexciting movement is also evident in Italian factories&#39; order books, which have a negative balance of 12 for this month, better than the prior couple of months, but no firmer than the same period a year ago.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050928e.jpg" width="353">
Sweden&#39;s manufacturers also were looking better in 2004, but have retreated since. Their overall confidence indicator moved into positive territory temporarily, but right at the turn of 2005, it dropped back once again. This is reflected in the pattern of orders received, which were quite vigorous last year, reaching +28 in August 2004, but then sagging into single digits in recent months. In Slovakia, business confidence gained for September, but the most significant fact about its movement is how much it swings up and down from month to month, so the latest increase is hardly a suggestion of genuine improvement. In fact, a broader measure of &quot;economic sentiment&quot;, which includes consumers, declined, as did managers&#39; perceptions of their order books.
In looking at European data, we keep coming back to energy cost as one reason for the unsatisfying performance of European business. For a time, the strengthening euro shielded most countries from a heavy burden of rising energy, which is priced in US dollars. But this pattern has been broken, and now oil is rising sharply in euro terms as well as dollars, making a greater drag on European manufacturers. Other commentators speak of regulatory rigidities in Europe, and this too limits the ability of manufacturers to respond quickly to changing circumstances, probably also accounting for the lackluster trend in business sentiment.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol">European Business Surveys: +/- balance, except where noted</th>
<th scope="col">Sept 2005</th>
<th scope="col">Aug 2005</th>
<th scope="col">July 2005</th>
<th scope="col">Year Ago</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">France: Climate Indicator (100=neutral)</td>
<td>100</td>
<td>101</td>
<td>101</td>
<td>106</td>
<td>105</td>
<td>95</td>
<td>97</td>
</tr>
<tr>
<td class="firstcol">Manufacturers&#39; Order Books&nbsp;</td>
<td>-18</td>
<td>-17</td>
<td>-15</td>
<td>-10</td>
<td>-14</td>
<td>-26</td>
<td>-22</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy: ISAE Business Confidence (2000=100)</td>
<td>89.5</td>
<td>87.8</td>
<td>86.5</td>
<td>90.2</td>
<td>89.5</td>
<td>87.9</td>
<td>90.1</td>
</tr>
<tr>
<td class="firstcol">Manufacturers&#39; Order Books&nbsp;&nbsp;</td>
<td>-12</td>
<td>-16</td>
<td>-19</td>
<td>-12</td>
<td>-15</td>
<td>-21</td>
<td>-16</td>
</tr>
<tr class="odd">
<td class="firstcol">Sweden: Manufacturing Confidence Indicator</td>
<td>--</td>
<td>-9</td>
<td>-6</td>
<td>+6</td>
<td>+3</td>
<td>-7</td>
<td>-11</td>
</tr>
<tr>
<td class="firstcol">Orders Received</td>
<td>--</td>
<td>+10</td>
<td>+4</td>
<td>+28</td>
<td>+21</td>
<td>+4</td>
<td>-1</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovakia: Industry Confidence</td>
<td>+5.7</td>
<td>-1.3</td>
<td>-3.3</td>
<td>+11.0</td>
<td>+6.8</td>
<td>+4.6</td>
<td>+4.6</td>
</tr>
</tbody>
</table>
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US durable goods orders in August recouped much of the prior month's decline with a 3.3% rise that far exceeded Consensus expectations for a 0.8% increase. The volatility of orders in the transportation sector recently has been [...]

U.S. Durable Goods Orders Rebounded

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050927e.jpg" width="353">
The IFO&#39;s overall measure of business confidence in Germany, the Business Climate Index, rose unexpectedly in September to 96.0 (2000=100) from 94.6 in August. Most analysts had expected the index to weaken in view of the spike in energy prices and the indecisive results of the September 18th election. Indeed the I FO reported that the 20 percent of the replies received after the election were more pessimistic than those received earlier. In addition, the ZEW measure of business confidence, published last week, had shown a drop to 38.6% in September in the balance of those expecting conditions to be better in the next six months and those expecting conditions to be worse from 50.0% in August.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050927d.jpg" width="353">
The ZEW measure is frequently a good predictor of the IFO measure, but by no means a sure fire one as indicated by the degree of correlation (R) between the two series, which is 69%. The R-Squared, which measures the degree to which variations in one variable explain variations in the other is only 48%. The first chart shows the ZEW percentage balance between those expecting better conditions in the next six months and those expecting worse conditions and the IFO diffusion index for expectations of conditions six month ahead.
The rise in confidence in the IFO measure was due largely to the respondents&#39; appraisal of current conditions with the index rising 2.77% from 93.8 in August to 96.4 in September. The rise in expectations for the economy six month ahead was only one-tenth of one percent. The indexes of current conditions and expectations of conditions six month ahead are shown in the second chart. Much of the satisfaction with current conditions has been attributed to the decline in the Euro. The Euro averaged around 1.22 to the dollar during the survey period, down from 1.36 at the end of 2004.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol">IFO Indexes 2000=100</th>
<th scope="col">Sep 05&nbsp;</th>
<th scope="col">Aug&nbsp; 05</th>
<th scope="col">Sep 04</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
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<td class="firstcol">Business Climate</td>
<td>96.0</td>
<td>94.6</td>
<td>95.1</td>
<td>1.4</td>
<td>0.9</td>
<td>95.7</td>
<td>91.6</td>
<td>89.4</td>
</tr>
<tr>
<td class="firstcol">Current Conditions</td>
<td>96.4</td>
<td>93.8</td>
<td>94.6</td>
<td>2.6</td>
<td>2.0</td>
<td>94.0</td>
<td>88.4</td>
<td>85.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations (next 6 months)</td>
<td>95.5</td>
<td>95.4</td>
<td>95.6</td>
<td>0.1</td>
<td>-0.1</td>
<td>97.4</td>
<td>95.1</td>
<td>93.9</td>
</tr>
<tr>
<td class="firstcol">&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 class="odd">
<td class="firstcol">Expectations (next 6 months)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td> DIF</td>
<td> DIF</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">ZEW&nbsp; (% balance)</td>
<td>38.6</td>
<td>50.0</td>
<td>38.6</td>
<td>-11.4</td>
<td>0.0</td>
<td>44.6</td>
<td>38.4</td>
<td>45.3</td>
</tr>
<tr class="odd">
<td class="firstcol">IFO (diffusion index)</td>
<td>-5.7</td>
<td>-5.8</td>
<td>-5.4</td>
<td>0.10</td>
<td>-3.0</td>
<td>-1.8</td>
<td>-6.5</td>
<td>-9.0</td>
</tr>
</tbody>
</table>
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The IFO's overall measure of business confidence in Germany, the Business Climate Index, rose unexpectedly in September to 96.0 (2000=100) from 94.6 in August. Most analysts had expected the index to weaken in view of the spike in [...]

German Business Confidence Measure (IFO) Surprises on the Up Side

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050927a.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey indicated that chain store sales inched 0.1% higher last week, depressed again by the Hurricane effect which lowered sales 2.1% the prior week. So far this month sales are 1.6% below the August average which fell 0.1% from July. 
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The weak rise in sales last week accompanied a slight 0.6% up tick in gasoline prices to $2.80 per gallon (46.2% y/y).
The leading indicator of chain store sales from ICSC fell another 0.5% (-2.9% y/y) after the 2.0% decline the prior week and it was the fourth decline in the last five weeks.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">09/24/05</th>
<th scope="col">09/17/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>445.5</td>
<td>445.0</td>
<td>2.8%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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The International Council of Shopping Centers (ICSC)-UBS survey indicated that chain store sales inched 0.1% higher last week, depressed again by the Hurricane effect which lowered sales 2.1% the prior week. So far this month sales [...]

Weekly Chain Store Sales Inch Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050927c.jpg" width="353">
New single-family home sales dropped 9.9% m/m last month to 1.237M following a 5.3% gain in July that was slightly weaker than estimated initially. Consensus expectations had been for stability in August near 1.35M.
The latest decline reflected widespread, sharp declines of 22.0% (+16.4% y/y) in the Northeast, 10.6% (-10.6% y/y) in the Midwest and 17.9% (+3.9% y/y) out West. Sales in the South managed to fall only 2.2% (+13.1% y/y).
With a 2.5% rise, the median price of a new single family home reversed most of the prior month&#39;s revised 3.0% decline which was half the decline reported initially.
The figures from the Census Department reflect home sales counted at the time of sales contract or deposit.
Yesterday&#39;s speech by Federal Reserve Board Chairman Alan Greenspan titled Mortgage Banking can be found <a href="http://www.federalreserve.gov/boarddocs/speeches/2005/200509262/default.htm"> here</a>.
Estimates of Home Mortgage Originations, Repayments, and Debt on One-to-Four-Family Residences by Alan Greenspan and James Kennedy is available <a href="http://www.federalreserve.gov/pubs/feds/2005/200541/200541abs.html"> 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/@E9/@E904/@E90401/@E90401.HTM">Homes Sales (000s, AR)</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">New Single-Family</td>
<td>1,237</td>
<td>1,373</td>
<td>6.2%</td>
<td>1,200</td>
<td>1,091</td>
<td>976</td>
</tr>
</tbody>
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New single-family home sales dropped 9.9% m/m last month to 1.237M following a 5.3% gain in July that was slightly weaker than estimated initially. Consensus expectations had been for stability in August near 1.35M. The latest decline [...]

New Home Sales Decline Surprising

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050927b.jpg" width="353">
The Conference Board&#39;s September index of Consumer Confidence fell 17.9% m/m to 86.6 following a 1.8% gain during August that was little revised.
Consensus expectations had been for a shallower decline to 94.7. Last week, the University of Michigan reported that its measure of consumer sentiment fell 13.7% m/m (-18.4% y/y).
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
The index of consumers&#39; expectations fell 23.2% m/m (-26.6% y/y) while the assessment of the present situation dropped 12.0% (+14.3% y/y). Jobs were viewed as hard to get by 25.4% of survey participants, a rise to the highest level this year though the 25.2% of participants who thought that business conditions were good was the lowest since February.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Sept</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>86.6</td>
<td>105.5</td>
<td>-10.4%</td>
<td>96.1</td>
<td>79.8</td>
<td>96.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The Conference Board's September index of Consumer Confidence fell 17.9% m/m to 86.6 following a 1.8% gain during August that was little revised. Consensus expectations had been for a shallower decline to 94.7. Last week, the [...]

Consumer Confidence Down Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050927b.jpg" width="353">
The Conference Board&#39;s September index of Consumer Confidence fell 17.9% m/m to 86.6 following a 1.8% gain during August that was little revised.
Consensus expectations had been for a shallower decline to 94.7. Last week, the University of Michigan reported that its measure of consumer sentiment fell 13.7% m/m (-18.4% y/y).
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
The index of consumers&#39; expectations fell 23.2% m/m (-26.6% y/y) while the assessment of the present situation dropped 12.0% (+14.3% y/y). Jobs were viewed as hard to get by 25.4% of survey participants, a rise to the highest level this year though the 25.2% of participants who thought that business conditions were good was the lowest since February.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Sept</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>86.6</td>
<td>105.5</td>
<td>-10.4%</td>
<td>96.1</td>
<td>79.8</td>
<td>96.6</td>
</tr>
</tbody>
</table>
New Home Sales Decline Surprising 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 27, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050927c.jpg" width="353">
New single-family home sales dropped 9.9% m/m last month to 1.237M following a 5.3% gain in July that was slightly weaker than estimated initially. Consensus expectations had been for stability in August near 1.35M.
The latest decline reflected widespread, sharp declines of 22.0% (+16.4% y/y) in the Northeast, 10.6% (-10.6% y/y) in the Midwest and 17.9% (+3.9% y/y) out West. Sales in the South managed to fall only 2.2% (+13.1% y/y).
With a 2.5% rise, the median price of a new single family home reversed most of the prior month&#39;s revised 3.0% decline which was half the decline reported initially.
The figures from the Census Department reflect home sales counted at the time of sales contract or deposit.
Yesterday&#39;s speech by Federal Reserve Board Chairman Alan Greenspan titled Mortgage Banking can be found <a href="http://www.federalreserve.gov/boarddocs/speeches/2005/200509262/default.htm"> here</a>.
Estimates of Home Mortgage Originations, Repayments, and Debt on One-to-Four-Family Residences by Alan Greenspan and James Kennedy is available <a href="http://www.federalreserve.gov/pubs/feds/2005/200541/200541abs.html"> here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E90401/@E90401.HTM">Homes Sales (000s, AR)</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">New Single-Family</td>
<td>1,237</td>
<td>1,373</td>
<td>6.2%</td>
<td>1,200</td>
<td>1,091</td>
<td>976</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Inch Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 27, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050927a.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey indicated that chain store sales inched 0.1% higher last week, depressed again by the Hurricane effect which lowered sales 2.1% the prior week. So far this month sales are 1.6% below the August average which fell 0.1% from July. 
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The weak rise in sales last week accompanied a slight 0.6% up tick in gasoline prices to $2.80 per gallon (46.2% y/y).
The leading indicator of chain store sales from ICSC fell another 0.5% (-2.9% y/y) after the 2.0% decline the prior week and it was the fourth decline in the last five weeks.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">09/24/05</th>
<th scope="col">09/17/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>445.5</td>
<td>445.0</td>
<td>2.8%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
German Business Confidence Measure (IFO) Surprises on the Up Side 
by <a href="/comment/Curley.html">Louise Curley</a> September 27, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050927e.jpg" width="353">
The IFO&#39;s overall measure of business confidence in Germany, the Business Climate Index, rose unexpectedly in September to 96.0 (2000=100) from 94.6 in August. Most analysts had expected the index to weaken in view of the spike in energy prices and the indecisive results of the September 18th election. Indeed the I FO reported that the 20 percent of the replies received after the election were more pessimistic than those received earlier. In addition, the ZEW measure of business confidence, published last week, had shown a drop to 38.6% in September in the balance of those expecting conditions to be better in the next six months and those expecting conditions to be worse from 50.0% in August.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050927d.jpg" width="353">
The ZEW measure is frequently a good predictor of the IFO measure, but by no means a sure fire one as indicated by the degree of correlation (R) between the two series, which is 69%. The R-Squared, which measures the degree to which variations in one variable explain variations in the other is only 48%. The first chart shows the ZEW percentage balance between those expecting better conditions in the next six months and those expecting worse conditions and the IFO diffusion index for expectations of conditions six month ahead.
The rise in confidence in the IFO measure was due largely to the respondents&#39; appraisal of current conditions with the index rising 2.77% from 93.8 in August to 96.4 in September. The rise in expectations for the economy six month ahead was only one-tenth of one percent. The indexes of current conditions and expectations of conditions six month ahead are shown in the second chart. Much of the satisfaction with current conditions has been attributed to the decline in the Euro. The Euro averaged around 1.22 to the dollar during the survey period, down from 1.36 at the end of 2004.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">IFO Indexes 2000=100</th>
<th scope="col">Sep 05&nbsp;</th>
<th scope="col">Aug&nbsp; 05</th>
<th scope="col">Sep 04</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Climate</td>
<td>96.0</td>
<td>94.6</td>
<td>95.1</td>
<td>1.4</td>
<td>0.9</td>
<td>95.7</td>
<td>91.6</td>
<td>89.4</td>
</tr>
<tr>
<td class="firstcol">Current Conditions</td>
<td>96.4</td>
<td>93.8</td>
<td>94.6</td>
<td>2.6</td>
<td>2.0</td>
<td>94.0</td>
<td>88.4</td>
<td>85.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations (next 6 months)</td>
<td>95.5</td>
<td>95.4</td>
<td>95.6</td>
<td>0.1</td>
<td>-0.1</td>
<td>97.4</td>
<td>95.1</td>
<td>93.9</td>
</tr>
<tr>
<td class="firstcol">&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 class="odd">
<td class="firstcol">Expectations (next 6 months)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td> DIF</td>
<td> DIF</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">ZEW&nbsp; (% balance)</td>
<td>38.6</td>
<td>50.0</td>
<td>38.6</td>
<td>-11.4</td>
<td>0.0</td>
<td>44.6</td>
<td>38.4</td>
<td>45.3</td>
</tr>
<tr class="odd">
<td class="firstcol">IFO (diffusion index)</td>
<td>-5.7</td>
<td>-5.8</td>
<td>-5.4</td>
<td>0.10</td>
<td>-3.0</td>
<td>-1.8</td>
<td>-6.5</td>
<td>-9.0</td>
</tr>
</tbody>
</table>


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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050926b.jpg" width="353">
Large Corporations (corporations with capital of 1 billion or more) in Japan have become more optimistic according to the Business Outlook Survey conducted by the Ministry of Finance (MOF) and the Cabinet Office&#39;s Economic and Social Research Institute.The percentage of all large corporations reporting better rather than worse current conditions in the third quarter rose to 9.7% from 0.9% in the second quarter. This was below the estimate of 11.3% for the third quarter made in the second quarter. However, the current estimate for the next quarter--the fourth of 2005--is 10.7%, which suggests that the optimists continue to outweigh the pessimists. As for large manufacturing corporation, while the mood has become more optimistic, the excess of better over worse conditions for the current quarter is only 6.4%. In looking ahead, however, large manufacturers have been estimating steady improvement
The latest survey shows that optimists outweighed pessimists in medium sized corporations (corporations with capital of 100 million to 1 billion yen) in the current quarter. and are expected to continue to do so. Small sized corporations (corporations with capital between 10 and 100 million yen) continue to be pessimistic, but their degree of pessimism had begun to diminish.The excess of pessimists fell from 21.4% to 15.1% in the current survey.
Some analysts have come to look upon the MOF&#39;s Business Outlook Survey as an indicator of the business conditions indicator for large enterprises in the more widely known Tankan Survey that tends to be released about a week or so after the MOF survey. (The next Tankan results are due on October 3, 2005.) The attached chart showing the next quarter estimate of the Business Outlook Survey and the forecast of business conditions for large enterprises in the Tankan Survey seems to bear out this hypothesis, but it should be kept in mind that as it is based on only a small number of data points it significance is yet to be tested. 

<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/JAPAN/@J8/@J805/@J805.HTM">Ministry of Finance Business Outlook Survey</a></th>
<th scope="col">Current&nbsp;</th>
<th scope="col">Quarter</th>
<th scope="col">Estimate</th>
<th scope="col">&nbsp;</th>
<th scope="col">Next</th>
<th scope="col">Quarter&nbsp;</th>
<th scope="col">Estimate</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;of Change</td>
<td>Q3 05&nbsp;</td>
<td>Q2 05</td>
<td>Q1 05</td>
<td>&nbsp;</td>
<td>Q4 05</td>
<td>Q3 05&nbsp;</td>
<td>Q2 05</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Large Corporations</td>
<td>9.7</td>
<td>0.9</td>
<td>0.6</td>
<td>&nbsp;</td>
<td>10.7</td>
<td>11.3</td>
<td>3.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Medium Corporations</td>
<td>5.5</td>
<td>-5.0</td>
<td>-9.7</td>
<td>&nbsp;</td>
<td>7.5</td>
<td>7.5</td>
<td>3.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Small Corporations</td>
<td>-15.1</td>
<td>-21.4</td>
<td>-24.3</td>
<td>&nbsp;</td>
<td>-3.8</td>
<td>-12.6</td>
<td>-11.1</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Large Corporations</td>
<td>6.4</td>
<td>-2.4</td>
<td>-7.6</td>
<td>&nbsp;</td>
<td>11.1</td>
<td>10.9</td>
<td>1.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Medium Corporations</td>
<td>-5.1</td>
<td>-6.9</td>
<td>-18.7</td>
<td>&nbsp;</td>
<td>8.1</td>
<td>8.2</td>
<td>7.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Small Corporations</td>
<td>-11.9</td>
<td>-19.9</td>
<td>-24.6</td>
<td>&nbsp;</td>
<td>-1.7</td>
<td>-10.5</td>
<td>-9.1</td>
</tr>
</tbody>
</table>
</body>
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Large Corporations (corporations with capital of 1 billion or more) in Japan have become more optimistic according to the Business Outlook Survey conducted by the Ministry of Finance (MOF) and the Cabinet Office's Economic and Social [...]

Big Business in Japan Becomes More Optimistic

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050926a.jpg" width="353">
The National Association of Realtors reported that with a 2.0% m/m rise in August to 7.29 million, total existing home sales recovered nearly all of the prior month&#39;s downwardly revised 2.7% decline. Consensus expectations had been for 7.12M sales. 
Single-family sales rose a similar 1.9% to 6.35 million while condo &amp; co-op sales increased 2.2% to 940,000 (14.6% y/y). The data cover sales closed in the latest and previous months, and contrast to the new home sales data which count sales at the signing of a contract. 
The median price of an existing single-family home increased 1.7% to $219,400 (16.2% y/y) following a downwardly revised 0.5% dip in July.Prices are not seasonally adjusted. Prices tend to soften following the peak Spring-Summer selling season. 
By region, single family home sales rose everywhere except in the South where they were unchanged (7.3% y/y) for the second consecutive month.Out West single family sales rose 7.7% y/y, in the Midwest sales rose 5.8% y/y and in the Northeast sales rose 4.9% y/y. 
Housing Markets and Demographics from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-21.pdf"> here</a>.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Home Sales</td>
<td>7,290</td>
<td>7,150</td>
<td>7.8%</td>
<td>6,723</td>
<td>6,170</td>
<td>5,653</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>6,350</td>
<td>6,230</td>
<td>6.9%</td>
<td>5,913</td>
<td>5,441</td>
<td>4,995</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price ($,000) </td>
<td>$219.4 </td>
<td>$215.7 </td>
<td>16.2% </td>
<td>$182.8 </td>
<td>$169.1 </td>
<td>$157.6 </td>
</tr>
</tbody>
</table>


</html>

The National Association of Realtors reported that with a 2.0% m/m rise in August to 7.29 million, total existing home sales recovered nearly all of the prior month's downwardly revised 2.7% decline. Consensus expectations had been [...]

U.S. Existing Home Sales Still Near Record in August

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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Sandy Batten

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Industrial production fell 0.1% m/m in October but rose 0.2% m/m (2.5% y/y) in November. The Action Economics Forecast Survey expected 0.1% monthly gains in both months. Manufacturing activity was tepid with manufacturing production falling 0.4% m/m in October and unchanged in November. Manufacturing output has not posted a monthly gain since July. Mining output fell 0.8% m/m in October but rebounded 1.7% m/m in November. Utilities output surged 2.6% m/m in October but fell 0.4% m/m in November. Compared to a year ago, manufacturing production is up 1.9%; mining output is up 3.9%; and utilities output is up 4.8%.

By market group, output of durable consumer goods plunged 2.6% m/m in October and fell another 0.2% in November. Production of durable consumer goods has declined in five of the previous six months. Production of nondurable consumer goods rose 0.5% m/m in both October and November. Compared to a year ago, durable consumer goods production has fallen 5.9% while nondurable consumer goods output has risen 2.7%. Business equipment production fell 0.3% m/m in October but rebounded 0.3% m/m in November and is up 11.2% y/y. Production of nonindustrial supplies fell 0.3% m/m in both October and November.

By industry group, output of durable goods fell 0.5% m/m in October and declined 0.1% m/m in November but were up 3.2% from a year ago. Motor vehicle and parts production slumped 5.1% m/m in October and declined 1.0% m/m in November to be down 5.6% from a year ago. Monthly motor vehicle output has declined in five of the previous six months. In contrast, production of computers and electronic products increased 1.5% m/m in October and rose 0.8% m/m in November. Aerospace production continued to rise, increasing 2.0% m/m in October and 1.1% m/m in November to be up 25.2% from a year ago. Output of nondurable goods fell 0.2% m/m in October and edged up 0.1% m/m in November. Their output is up 0.9% from a year ago. Apparel output fell 1.3% m/m in October but recovered in November, rising 2.3% m/m. Food and beverage output rose 0.3% m/m in October and another 1.2% in November.

Output of selected high-technology industries rebounded in October and November. After having declined 1.0% m/m in both August and September, production jumped 1.9% m/m in October and 1.1% m/m in November to stand 11.8% higher than a year ago. Manufacturing output excluding selected high-tech industries fell 0.4% m/m in October and was unchanged in November. It has risen only 1.6% over the past year. Manufacturing excluding motor vehicle production was unchanged in October and edged up 0.1% m/m in November; it is up 2.6% y/y.

Total industry capacity utilization edged down to 75.9% in October from 76.0% in September and then recovered the decline in November, edging up to 76.0%. In the manufacturing sector, the utilization rate slumped to 75.4% in October from 75.8% in September and remained at 75.4% in November. The October/November reading is the lowest since January.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.



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- Today’s release contained figures for both October and November that had been delayed by the federal government shutdown.
- IP fell in October but recovered in November.
- Manufacturing output was tepid, falling in October and unchanged in November.
- A surge in utilities output in October prevented a larger decline in total production.
- A jump in mining output in November accounted for all of the increase in total production.


U.S. Industrial Production Fell in October and Recovered in November

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New orders for durable goods fell a more-than-expected 2.2% (+4.8% y/y) in October following an upwardly revised 0.7% m/m rise in September (previously +0.5% m/m) and a 3.0% monthly jump in August. The Action Economics Forecast Survey expected a 1.5% m/m decline. A 23.7% m/m drop in aircraft orders more than accounted for the overall decline. Orders excluding aircraft increased 0.2% m/m (4.0% y/y) in October on top of a 0.5% monthly increase in September.

More generally, transportation orders fell 6.5% m/m (+7.3% y/y) in October following a 0.6% m/m increase in September and an 8.0% monthly jump in August. In addition to the drop in aircraft orders, orders for motor vehicles and parts edged up 0.1% m/m in October, their sixth consecutive monthly increase. Across other sectors, orders for primary metals fell 0.7% m/m, their first monthly decline in ten months. Orders for electrical equipment and appliances slumped 1.5% m/m, their first monthly decline in seven months. In contrast, orders for fabricated metal products rose 0.5% m/m, their fourth consecutive monthly gain. Machinery orders increased 0.8% m/m, their eighth consecutive monthly rise. Orders for computers and electronic products increased a solid 1.0% m/m on top of a 1.2% monthly increase in September.

Shipments of core capital goods (nondefense capital goods shipments excluding aircraft) are a reliable coincident indicator of business spending on equipment in the national accounts. They rose 0.7% m/m in October following an upwardly revised 1.2% monthly gain in September (previously +0.9%). The was the second consecutive monthly increase and the fifth in the past six months. The strong end to Q3 and the continued rise in the first month of Q4 provides a solid starting point for all of Q4. The October shipments figure was 5.9% at an annual rate above the Q3 average. Core capital goods orders rose 0.5% m/m in October on top of an upwardly revised 1.1% m/m increase in September (previously +0.9%). This was the fourth consecutive monthly rise.

Total manufacturing shipments edged up 0.1% m/m (+2.8% y/y) in October after having been essentially unchanged in September. Shipments of durable goods increased 0.6% m/m (5.9% y/y), led by 1.4% monthly jump in transportation shipments. However, apart from a 0.1% m/m decline in shipments of other durable goods, all of the other major sectors posted monthly gains in October. In contrast, shipments of nondurable goods fell 0.4% m/m (-0.3% y/y) in October for their third consecutive monthly decline. The monthly decline was led by a 2.4% m/m fall in shipments of petroleum and coal products although it was relatively widely spread across major sectors. The one exception was a 2.1% m/m increase in leather product shipments, but this came after four consecutive sizeable monthly declines.

Unfilled durable goods orders increased 0.2% m/m (7.9% y/y) in October for their third consecutive monthly gain following a 0.8% m/m rise in September and a 0.7% m/m increase in August. Total factory inventories were unchanged in October (+1.4% y/y) following 0.1% monthly declines in both August and September. Durable goods inventories edged up 0.1% m/m in October while inventories of nondurable goods fell 0.2% m/m, the third consecutive monthly decline.

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



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- New orders for durable goods slumped 2.2% m/m in October following increases in both August and September
- A 24% monthly drop in aircraft orders drove the overall decline
- Orders excluding aircraft rose 0.2% m/m in October
- Core capital goods shipments and orders continued to rise in October with small upward revisions to September


Weak Aircraft Orders Pushed Down U.S. Durable Goods Orders in October

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The Chicago Fed National Activity Index (CFNAI) increased to -0.21 during September from a four-month low of -0.31 in August. It remained below a high of 0.42 during February. 

The employment, unemployment & hours measure led the improvement and rose to 0.01 during September from -0.11 in August. The employment readings had been negative in each month since February. The weakest occurred in July which equaled August. The production & income reading edged up to -0.10 in September from -0.13 in August. It remained below February’s high of 0.36. 

Moving lower, the personal consumption & housing measure fell to -0.06 in September from -0.03 in August. It was the weakest reading in four months. The sales, orders & inventories reading declined to -0.07 during September from -0.05 in August. It was the lowest figure since April, and down from a 0.16 high during March.  

The index's three-month moving average, which smooths out the m/m volatility in the index, fell to -0.21 in September after increasing to -0.18 in August. It was the fifth consecutive negative reading, but above its -0.24 June low. It remained below its recent high of 0.11 in February.

The CFNAI Diffusion Index, which measures the breadth of change in the component series and is also a three-month moving average, fell to -0.32 in September from -0.20 in both July and August. It was the weakest reading in three months. Negative for seven straight months, it was below the February high of 0.10. A reading of zero indicates that all of the indicators are growing at their long-term average. 

The CFNAI is a weighted average of 85 indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

These figures are available in Haver's **SURVEYS** database.


- The CFNAI is negative for sixth straight month.
- Three of four index components remain negative
- Improvement in labor market reading leads m/m gain.

The Federal Reserve Bank of Chicago indicated that the December 22, 2025, release of the CFNAI was originally scheduled to cover data through November 2025. However, because of the delay in data releases from government statistical agencies due to the federal government shutdown, this CFNAI release will instead only cover data through September 2025.

Chicago Fed National Activity Index Improves Slightly in September

Robert Brusca

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Canadian retail sales and other growth metrics appear to be weakening as the year draws to a close. Inflation has firmed up as well. Retail sales in October saw a month-to-month drop of 0.2% as supermarket sales fell 0.7%, month-to-month, clothing store sales fell 1.2%, and retail excluding motor vehicle sales fell by 0.6%. Overall real retail sales fell by 0.6% in October from September. This is the second consecutive month in which total nominal retail sales and retail sales in real terms both dropped month-to-month. Total retail sales and real retail sales both are declining over three months. Total retail sales at a -0.6% annual rate real retail sales-3.2% annual rate. Real retail sales are decelerating from a 2% growth rate over 12 months to a -1.7% annual rate over six months to a - 0.6% annual rate over three months. Real retail sales show more severe deceleration, growing by merely 0.1% over 12-months shrinking at a 3.8% annual rate over six-months and declining at a 3.2% annual rate over three-months.

**Other indicators weaken**
Over three months housing starts show a sharp contraction, falling at a 60.6% annual rate, a clear ongoing deceleration from a -5.2% drop over 12-months. However other metrics show slightly more upbeat results: employment, for example, yields job growth still at 1.2% at an annual rate over three-months although it slowed from a 1.4% year-over-year gain. The all-encompassing leading economic index shows an actual step up to a pace of 2.9% over 3 months from 2.6% over 6-months and 1.9% over 12-months. Manufacturing and mining output also show gains and a sharp acceleration from their year ago pace; for manufacturing output fell 1.4% year-over-year then rose at a 12.1% annual rate over the three-months ended in September; mining and oil production speeded up from a 4.7 percent 12-month gain to an 8.1% annual rate over three-months.  The manufacturing and mining statistics lag by one-month. Another positive sign for the economy is unemployment as the number of unemployed declines at a 0.7% annual rate over three months even though it rises by 5.5% over 12 months.

**Ranking metrics**
We can also vet these various sector results by looking at the growth rates year over year and comparing that pace to what has happened historically back to 2014. These individual category ranking statistics provide better relative comparisons across components. On that basis, the weak sector is retailing with real retail sales having 11.3 percentile standing and overall nominal retail sales having a 22.5 percentile standing. The next lowest year-over-year ranking is from manufacturing at a 22.7 percentile standing, that compares to a 26.1 percentile standing for housing starts. The performance of employment fares relatively better at a 38.7 percentile standing, but that's still below the 50% mark, putting job growth below its median for the period. The number unemployed, however, has a 67.6 percentile standing which is above its median and, of course, not a good result because here we would prefer to see leaner numbers on unemployment changes. The year-over-year growth rate for unemployment is solid, in the top one-third of all of the growth rates of the employed that we've seen since January of 2014. For unemployment, at least the sequential growth rates show that the process of unemployment creation is not accelerating. On the positive side the leading economic index has a 78.9 percentile standing which is quite strong and the mining and oil production have a 61.7 percentile standing which is above their median for the period. 

**Further context?**
And, when we consider the ranking of these growth rates, we can also look at the progression of growth in the table, such as the mention I made above for unemployment. For example, housing starts have a weak year-over-year standing but they have a much weaker growth rate over three months Compared to 12-months…on the other hand, manufacturing has a weak year-over-year standing but over three months manufacturing output has stepped up growth considerably. No one statistic can create a profile of these industries which live in the real world and have multiple dimensions and where the trends may be dynamic, in flux, and hard to singularly characterize.

**Got inflation?** 
As of October, Canadian inflation had picked up to some extent, inflation in Canada had dipped below the 2% mark from April through August of 2025. In September and October, the year-over-year growth of headline inflation was in the 2.3 to 2.2% region. The CPIx which didn't get quite that low, that recently got down to 1.5% and 1.6% in late 2024 and was as low as 2.2% and 2.5% from March to May of 2025 has moved up. September and October price growth rate is up to the 2.8 to 2.9% pace with the core rate running in the neighborhood of 2.6% toward the end of the year after reaching a low just below 2% in November of last year.

**Nothing dramatic but a tilt to more of what Canada wants less of**
Oh no there's nothing dramatic going on in Canada, the economy appears to be weakening to some extent, the retail sales numbers show the largest deceleration. Of course, Canada and the US continue to have a spat over tariffs, and their two leaders still appear to be somewhat antagonistic about how that process is unfolding. Some Canadian stores have even taken the action of removing form the shelves some goods from the US, particularly US alcoholic products. The step up of inflation is something to watch and does not pair well with the weakening in economic activity. 
  




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Canadian Retail Sales Drop and Growth Falters

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

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

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

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

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

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


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


Economy in Brief: 2005

Jump to:

U.S. Durable Goods Orders Rebounded

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Weekly Chain Store Sales Inch Higher

New Home Sales Decline Surprising

Consumer Confidence Down Sharply

Consumer Confidence Down Sharply

Big Business in Japan Becomes More Optimistic

U.S. Existing Home Sales Still Near Record in August