Robert Brusca

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<img align="left" border="0" height="287" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/0703261.png" width="460">
New home sales plunged in February and show persistent deceleration but that drop exceeds the weakness in other housing measures (see table on the left).
Many economists are looking at the lag difference between existing and new home sales. AND maybe that is the right way to look at it. That does not, however, explain the revisions to lower PAST new home sales. I would explain it all differently partly since starts have the same timing asymmetry as new home sales relative to existing home sales and Starts actually rebounded in February. It think the lag is a red herring of sorts, although the existence of a timing asymmetry is a real phenomenon. 
It is true that the recording of existing home sales is markedly different from the recording of housing starts and new home sales. Each of the later (New home sales and starts) book at the time of the contract or actual start. But existing home sales are recorded at the end of the transaction when the property legally changes hands &#150; a process that can take one to two months (the gap from sales to closing). Therefore the book on those series in is that new home sales reflect current conditions and existing sales reflected &#145;past&#146; conditions. 
But this is not the only difference in these series. Selling a new house is very different from selling an existing house. And let&#146;s see why. 
Only builders can sell new houses. Once that house passes to the public it is owned and if it is re-sold or if it is &#145;flipped&#146; &#150; even without being lived-in -- it becomes an existing home sale. So any &#145;spec&#146; seller that owns a home is in competition with builders; some might be selling an identical product (but from a smaller inventory). The inventory size is also a key to understanding the builder. The more homes he has built, and ready to sell, the more reluctant he is to cut price. Since each price cut is like a reduction on ALL the houses he has, that can have a huge negative wealth impact on the builder. But it&#146;s not just on these special cases where builders compete with individuals. New homes sales compete with all existing home sales as well, not just specialized cases where individuals may own a few homes in a builder&#146;s tract. 
Next consider existing home sales. These existing home sales do compete with new homes sales. AND for the most part the individuals that are selling houses own only one and are selling it and buying another home (new or used) or renting. They may be motivated sellers or not, for a variety of reasons. But if they are selling with intent to repurchase they are somewhat insulated from weak prices. For example, If you are selling a $400K home to buy a $400K home and if each has a price reduction of 5% how does that hurt you? The answer is that even though there is some balance it does hurt you. For sellers who do not have &#145;excess equity in their house a price cut will cost them built up equity and may preclude them from buying the same &#145;value of house&#146; even at a similar lower price. 
Consider this: you buy a house for $400,000 and put 20% down ($80,000). So you have a mortgage of $320,000. Now your house price falls by 5% to $380,000. Your equity is reduced to $60,000 as a result ($380,000, the new value less $320,000, the mortgage). So if you wanted to move and buy a similar house to the one you now own, that house would also cost $380,000 but a conventional mortgage would require 20% down or $76,000. Even ignoring all the closing costs and such you now have only $60,000 in equity. Only homeowners with excess equity in their homes will be able to move in this environment or they will have to step down in terms of the quality of house they buy or take a more risky mortgage. Still surveys show that about 60% of the population of homeowners hold more that 50% equity in their house. Despite the drop in equity implied by the calculation above many could still afford to move and the drop in the house they purchase is a wealth buffer of sorts for them, the whole transaction costs them out of pocket cash or put another way forces them to realize their decline in equity. 
Even so this is a situation where you get hit on the selling side than helped on the buying side. It is unique to existing homes. Builders are only sellers, so weak prices unambiguously hurt them. This would explain why they would be more reluctant to cut price and why their sales would be hurt more than for existing homes in a downturn. It has nothing to do with the closing Vs the selling lag. <a name="1"></a>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<a href="http://www.haverselect.com/dlx/HOUSING1.HTM">Selected housing ratios</a>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>Permits/Starts</td>
<td>Starts/New Houses</td>
<td>New Houses/Existing Houses</td>
<td>New Houses (-2)/Existing Houses</td>
</tr>
<tr>
<td class="firstcol">Max</td>
<td>1.167</td>
<td>2.054</td>
<td>0.201</td>
<td>0.198</td>
</tr>
<tr>
<td class="firstcol">Min</td>
<td>0.921</td>
<td>1.402</td>
<td>0.127</td>
<td>0.153</td>
</tr>
<tr>
<td class="firstcol">Avg</td>
<td>1.030</td>
<td>1.703</td>
<td>0.172</td>
<td>0.172</td>
</tr>
<tr>
<td class="firstcol">Percentile</td>
<td>34.1%</td>
<td>60.8%</td>
<td>0.0%</td>
<td>7.0%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&middot; Let&#146;s looks at some housing ratios to try and see where we stand. The table above presents three. At the bottom we put the ratios in the percentile of their range of values since May of 2002. A value of 100% would be the strongest reading in the range and zero the lowest. The 50% mark is the mid point of the range. &middot; The first is the ratio of housing permits to starts. It is in the 34th percentile of its range of values going back to May of 2000. That means that permits ratio is below its long term average relative to starts by about 16 percentage points. That says that permits are weak relative to starts. It may be that starts are too strong and due to slowdown.&nbsp;&nbsp; &middot; Next, the ratio of starts to new home sales is in its 60th percentile. Starts are a bit strong relative to home sales but only by about 10 percentage points in terms of the normal ratio (the 50th percentile reading marks the norm). This suggests that starts are now slightly stronger than new home sales would suggest and since you have sell them in order to keep building them, it suggests some slowdown in starts might be in order if sales do not pick up. &middot; The third column is shocking. It shows that the ratio of new home to existing home sales is in the bottom of its range. That says new home sales are exceptionally weak relative to existing sales. This suggests that there is a substantial split between these two series. Which one is more out of alignment and why? Just to test and see if it is the lags at work, I have added a last column to the table that looks at new home sales of two months ago Vs existing home sales of this month. Here we are comparing this month&#146;s &#145;lagging sales&#146; on existing homes to the (better conditions) for New Homes of two months ago. Things still do not improve by much. &nbsp;This ratio that adjusts for the lag still leaves the ratio in the bottom 7 percentile of its range. &middot; We conclude that the lag in existing home sales is not the main factor here. We think builders are under re-pricing pressures and not bearing up well. Existing home sales have had an advantage in this market as we discussed above </th>
</tr>
</thead>

</table>
<table border="0" cellspacing="0" width="100%">
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<td> <img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326d.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326e.jpg" width="353"> </td>
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<thead>
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<th scope="col" class="firstcol">&middot; New homes sales have been the weaker of the two series since early 2006. And that is at least partly because builders have not been cutting prices as much as homeowners have, so new home prices have become relatively more expensive. The ratio of new to existing home prices has risen by 13% since January of 2006.&nbsp;</th>
</tr>
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New home sales plunged in February and show persistent deceleration but that drop exceeds the weakness in other housing measures (see table on the left). Many economists are looking at the lag difference between existing and new home [...]

U.S New Home Sales Plunge – Will the Rest of the Sector Follow?

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<img align="left" border="0" height="287" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/0703261.png" width="460">
New home sales plunged in February and show persistent deceleration but that drop exceeds the weakness in other housing measures (see table on the left).
Many economists are looking at the lag difference between existing and new home sales. AND maybe that is the right way to look at it. That does not, however, explain the revisions to lower PAST new home sales. I would explain it all differently partly since starts have the same timing asymmetry as new home sales relative to existing home sales and Starts actually rebounded in February. It think the lag is a red herring of sorts, although the existence of a timing asymmetry is a real phenomenon. 
It is true that the recording of existing home sales is markedly different from the recording of housing starts and new home sales. Each of the later (New home sales and starts) book at the time of the contract or actual start. But existing home sales are recorded at the end of the transaction when the property legally changes hands &#150; a process that can take one to two months (the gap from sales to closing). Therefore the book on those series in is that new home sales reflect current conditions and existing sales reflected &#145;past&#146; conditions. 
But this is not the only difference in these series. Selling a new house is very different from selling an existing house. And let&#146;s see why. 
Only builders can sell new houses. Once that house passes to the public it is owned and if it is re-sold or if it is &#145;flipped&#146; &#150; even without being lived-in -- it becomes an existing home sale. So any &#145;spec&#146; seller that owns a home is in competition with builders; some might be selling an identical product (but from a smaller inventory). The inventory size is also a key to understanding the builder. The more homes he has built, and ready to sell, the more reluctant he is to cut price. Since each price cut is like a reduction on ALL the houses he has, that can have a huge negative wealth impact on the builder. But it&#146;s not just on these special cases where builders compete with individuals. New homes sales compete with all existing home sales as well, not just specialized cases where individuals may own a few homes in a builder&#146;s tract. 
Next consider existing home sales. These existing home sales do compete with new homes sales. AND for the most part the individuals that are selling houses own only one and are selling it and buying another home (new or used) or renting. They may be motivated sellers or not, for a variety of reasons. But if they are selling with intent to repurchase they are somewhat insulated from weak prices. For example, If you are selling a $400K home to buy a $400K home and if each has a price reduction of 5% how does that hurt you? The answer is that even though there is some balance it does hurt you. For sellers who do not have &#145;excess equity in their house a price cut will cost them built up equity and may preclude them from buying the same &#145;value of house&#146; even at a similar lower price. 
Consider this: you buy a house for $400,000 and put 20% down ($80,000). So you have a mortgage of $320,000. Now your house price falls by 5% to $380,000. Your equity is reduced to $60,000 as a result ($380,000, the new value less $320,000, the mortgage). So if you wanted to move and buy a similar house to the one you now own, that house would also cost $380,000 but a conventional mortgage would require 20% down or $76,000. Even ignoring all the closing costs and such you now have only $60,000 in equity. Only homeowners with excess equity in their homes will be able to move in this environment or they will have to step down in terms of the quality of house they buy or take a more risky mortgage. Still surveys show that about 60% of the population of homeowners hold more that 50% equity in their house. Despite the drop in equity implied by the calculation above many could still afford to move and the drop in the house they purchase is a wealth buffer of sorts for them, the whole transaction costs them out of pocket cash or put another way forces them to realize their decline in equity. 
Even so this is a situation where you get hit on the selling side than helped on the buying side. It is unique to existing homes. Builders are only sellers, so weak prices unambiguously hurt them. This would explain why they would be more reluctant to cut price and why their sales would be hurt more than for existing homes in a downturn. It has nothing to do with the closing Vs the selling lag. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Selected housing ratios
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>Permits/Starts</td>
<td>Starts/New Houses</td>
<td>New Houses/Existing Houses</td>
<td>New Houses (-2)/Existing Houses</td>
</tr>
<tr>
<td class="firstcol">Max</td>
<td>1.167</td>
<td>2.054</td>
<td>0.201</td>
<td>0.198</td>
</tr>
<tr>
<td class="firstcol">Min</td>
<td>0.921</td>
<td>1.402</td>
<td>0.127</td>
<td>0.153</td>
</tr>
<tr>
<td class="firstcol">Avg</td>
<td>1.030</td>
<td>1.703</td>
<td>0.172</td>
<td>0.172</td>
</tr>
<tr>
<td class="firstcol">Percentile</td>
<td>34.1%</td>
<td>60.8%</td>
<td>0.0%</td>
<td>7.0%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&middot; Let&#146;s looks at some housing ratios to try and see where we stand. The table above presents three. At the bottom we put the ratios in the percentile of their range of values since May of 2002. A value of 100% would be the strongest reading in the range and zero the lowest. The 50% mark is the mid point of the range. &middot; The first is the ratio of housing permits to starts. It is in the 34th percentile of its range of values going back to May of 2000. That means that permits ratio is below its long term average relative to starts by about 16 percentage points. That says that permits are weak relative to starts. It may be that starts are too strong and due to slowdown.&nbsp;&nbsp; &middot; Next, the ratio of starts to new home sales is in its 60th percentile. Starts are a bit strong relative to home sales but only by about 10 percentage points in terms of the normal ratio (the 50th percentile reading marks the norm). This suggests that starts are now slightly stronger than new home sales would suggest and since you have sell them in order to keep building them, it suggests some slowdown in starts might be in order if sales do not pick up. &middot; The third column is shocking. It shows that the ratio of new home to existing home sales is in the bottom of its range. That says new home sales are exceptionally weak relative to existing sales. This suggests that there is a substantial split between these two series. Which one is more out of alignment and why? Just to test and see if it is the lags at work, I have added a last column to the table that looks at new home sales of two months ago Vs existing home sales of this month. Here we are comparing this month&#146;s &#145;lagging sales&#146; on existing homes to the (better conditions) for New Homes of two months ago. Things still do not improve by much. &nbsp;This ratio that adjusts for the lag still leaves the ratio in the bottom 7 percentile of its range. &middot; We conclude that the lag in existing home sales is not the main factor here. We think builders are under re-pricing pressures and not bearing up well. Existing home sales have had an advantage in this market as we discussed above. </th>
</tr>
</thead>

</table>
<table border="0" cellspacing="0" width="100%">
<tr>
<td> <img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326d.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326e.jpg" width="353"> </td>
</tr>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&middot; New homes sales have been the weaker of the two series since early 2006. And that is at least partly because builders have not been cutting prices as much as homeowners have, so new home prices have become relatively more expensive. The ratio of new to existing home prices has risen by 13% since January of 2006.&nbsp;</th>
</tr>
</thead>

</table>
French Business Confidence Improves Slightly:  Synthetic vs Traditional Indexes 
by <a href="/comment/Curley.html">Louise Curley</a> March 26, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326a.jpg" width="353">
Business leaders in France became slightly more optimistic in March. The composite business climate indicator, computed by INSEE (Institut Nationale des Statistisque et Etudes Economique) rose 0.93% to 109 from 108 in February and was 3.81% above March, 2006.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326b.jpg" width="353">
The INSEE indicator is a synthetic index constructed to have an average of 100 and a standard deviation of 10. As such values of the index above 100 indicate above average sentiment while those below 100 indicate below average sentiment. The first chart shows that sentiment among French business leaders reached the 100 mark in mid 2005 and continued to rise reaching a peak of 109 in April, 2006. Since then sentiment has been up and down within a narrow range and has once again reached the 109 level.
Given their special characteristics, the absolute levels of synthetic indexes should not be compared with the absolute values of traditional indexes. In the case of the latter, where 100 represents the value of the index in a base year, values above or below 100 merely indicate that sentiment is above or below the level of the base year.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070326c.jpg" width="353">
For comparison among European business confidence indicators, the best source is the EUROSTAT data base. Where indexes like those of INSEE for all the countries in the European Community are found. The INSEE measure is different from the EUROSTAT measure, but is close, as can be seen in the second chart. The EUROSTAT data for the four major European Economies, Germany, France, Italy and the UK, are shown in the third chart. All are currently above their long term averages. Data for the EC countries are published shortly after the INSEE data for France. As of now, February data are the latest.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;EUROPEAN SURVEYS OF BUSINESS CLIMATE</th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Mar 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">INSEE Business Climate Average=100</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>109</td>
<td>108</td>
<td>105</td>
<td>0.93</td>
<td>3.81</td>
<td>107</td>
<td>101</td>
<td>104</td>
</tr>
<tr class="odd">
<td class="firstcol">EUROSTAT&nbsp;Business Climate Average=100</td>
<td>Feb 06</td>
<td>Mar 06</td>
<td>Feb 05</td>
<td>M/M %</td>
<td>Y/Y %</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>108.7</td>
<td>107.9</td>
<td>105.4</td>
<td>0.74</td>
<td>3.13</td>
<td>106.9</td>
<td>103.3</td>
<td>103.0</td>
</tr>
<tr class="odd">
<td class="firstcol"> Germany </td>
<td>108.5</td>
<td>109.7</td>
<td>102.2</td>
<td>-1.09</td>
<td>6.16</td>
<td>105.9</td>
<td>95.1</td>
<td>95.8</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>110.3</td>
<td>106.6</td>
<td>105.5</td>
<td>3.47</td>
<td>4.55</td>
<td>108.6</td>
<td>97.9</td>
<td>98.4</td>
</tr>
<tr class="odd">
<td class="firstcol">U.K.</td>
<td>109.3</td>
<td>104.3</td>
<td>99.9</td>
<td>5.10</td>
<td>9.41</td>
<td>104.0</td>
<td>99.7</td>
<td>109.4</td>
</tr>
</tbody>
</table>
</body>
</html>

New Home Sales Plunge – Will the Rest of the Sector Follow?

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323c.jpg" width="353">
Prices of land in Japan rose 0.4% from January 1, 2006, to January 1, 2007, according to a report issued late Thursday in Japan by the Ministry of Land, Infrastructure and Transport. This is the first increase in land prices since the year to January 1, 1991, that is 16 years. Over that period, land values fell by more than half, by 52.1%, to a level last seen in 1982. The latest increase is, of course, hardly anything, but this long, excruciating decline seems to have ended, in still another sign that the Japanese economy, however haltingly, may be making further progress toward sustained expansion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323d.jpg" width="353">
Commercial business sites showed the largest gain, up 2.3%, with a substantial 9.4% rise in the Tokyo market. These prices had also risen last year in Tokyo, by 1.0%. Residential land throughout Japan edged higher in the latest year, this by just 0.1%, with Tokyo up 3.6%, Osaka 1.8% and Nagoya 1.7%. While these three major metropolitan areas are seeing renewed strength, prices of residential sites in &quot;local districts&quot; were still down, by 2.7% on average. Values of so-called &quot;prospective housing land&quot; were also still weak, down 4.3%, implying that not much enthusiasm for new housing development has emerged. And industrial building sites, too, are still declining in value, although the decrease of 1.8% to January 1, 2007, is the smallest reduction since 1992; these values did increase in the latest reading for the three main metro areas that the Land Ministry reports. Further, property values for light industry, or &quot;quasi-industry&quot;, did rise, also due to gains in the big cities.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323e.jpg" width="353">
Back in the 1980s, land prices were skyrocketing, and owing to the organization of Japanese real estate holdings, it was thought that the &quot;tradable&quot; supply of land was so small and demand for land in the vibrant Japanese economy so large that property prices might never fall. But the tight money policies in 1989 and 1990, meant to curb stock speculation as well as that in real estate, did result in a downturn in land values. Over time, it seemed the persistent cuts in property values would then, ironically, never end. But apparently they have. This is uneven, as we have seen, and has yet to pick up in the outlying, &quot;local districts&quot;. But the first forward steps have been taken.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN: &nbsp;% Change as of January 1</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">Average, 2000-2004</th>
<th scope="col">Average, &nbsp;1995-1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Sites: Japan</td>
<td>0.4</td>
<td>-2.8</td>
<td>-5.0</td>
<td>-5.7</td>
<td>-3.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>4.6</td>
<td>-0.7</td>
<td>-3.2</td>
<td>-6.2</td>
<td>-5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential: Japan</td>
<td>0.1</td>
<td>-2.7</td>
<td>-4.6</td>
<td>-5.0</td>
<td>-2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>3.6</td>
<td>-0.9</td>
<td>-3.2</td>
<td>-5.8</td>
<td>-4.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Commercial: Japan</td>
<td>2.3</td>
<td>-2.7</td>
<td>-5.6</td>
<td>-7.8</td>
<td>-8.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>9.4</td>
<td>1.0</td>
<td>-2.5</td>
<td>-7.1</td>
<td>-12.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial: Japan</td>
<td>-1.8</td>
<td>-4.9</td>
<td>-7.4</td>
<td>-7.0</td>
<td>-3.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>0.9</td>
<td>-4.1</td>
<td>-7.4</td>
<td>-9.6</td>
<td>-6.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Prices of land in Japan rose 0.4% from January 1, 2006, to January 1, 2007, according to a report issued late Thursday in Japan by the Ministry of Land, Infrastructure and Transport. This is the first increase in land prices since the [...]

Land Values Increase in Japan First Time in 16 Years: Is Long Drought in Japanese Real Estate Finally Over?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323a.jpg" width="353">
Existing homes sales had been expected to drop in February. Instead they jumped by 3.9% and that was after a gain of 2.7% in January. What&#146;s up? Housing starts were off sharply in January then up in February but existing home sales are subject to different forces as well as some of the same dynamics. Weather was deemed to have been a factor for housing starts. Admittedly weather is more of a factor for house-building than buying. Moreover existing home sales are on a different timeline. Starts and new home sales book at the time of the transaction&#146;s inception. Existing home sales book at the transaction&#146;s completion. Since about 70% of the population owns homes, you probably know what this means, first hand. The lag on existing home sales depends on the length of time from the initial signing of the contract through to the closing, a period that requires appraisals, much document preparation and eventually a bank completing a credit decision and a meeting with all interested parties. So we had expected existing home sales to reveal conditions more like January than like February. WRONG! 
Perhaps the larger surprise was that existing home sales were strong across the nation. Sales were flat in the West and up everywhere else on the month. Over periods of three months and six months, growth rates for existing home sales are firm to strong. Year/year, three of four national regions show sales lower but the Northeast (a region where bad weather is most likely to be a depressing factor at this time of year) oddly is up (3.4%). The Midwest is barely lower at -1.9%. The South is off by 4.4% and the West by a much larger 9.6%. (see table below).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323b.jpg" width="353"> 
 At the same time, prices have been softening. While using February as an end point probably exaggerates the trend decline in prices over the past 20 months, prices are falling at a 3.3% annualized rate for that period. But the point is that prices have been softer and lower prices have not seized up the market but rather lubricated it. 
Existing home prices remain weak across regions. For housing starts and new home sales (the latter not yet available for this month) builders have a cost element and a margin they try to protect and so prices may not have so much flexibility. But with the run-up in house prices over the last 5-6 years or more, homeowners have a lot of equity, in general, and that gives them the flexibility to make deals. And if you are a seller/buyer this does not really hurt you. A seller/buyer is an existing home seller who is also looking to buy somewhere else &#150; as most are. This sort of transactor learns quickly that what you lose on your house sale (compared to the profit you might have made when house prices were at their peak) you make up for when you buy and get a good deal on the &#145;other end&#146;. So the drop in the price for existing homes probably exaggerates the &#145;pain&#146; being inflicted on sellers. <a name="1"></a>
Different strokes for different folks&#133;Diminishing weakness for starts and permits but outright strength for existing home sales.

<table border="0" cellspacing="0" width="100%">
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<td> <img height="287" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/0703231.gif" v:shapes="_x0000_i1028" width="460"></td>
</tr>
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<thead>
<tr>
<th scope="col" class="firstcol">&middot; Since most existing home sellers live in their homes they often can wait out bad markets or decide to bite the bullet and take less and sell. It all depends on individual circumstances. Some houses are sold due to a death in the family and estate needs, some are due to job transfers and location shifts, others are due to pure housing preferences that change or a desire for more/less space related to the natural family cycle and some are unrequested career choices foisted on the individual by his/her former employer, and so on. This makes existing homes an irregular market or to put it another way, a market rife with conflicting opportunities. It is much different from dealing with a builder. &middot; On balance it is difficult to figure out what these robust sales mean for the economy. Existing home sales make little contribution to GDP directly since they are just a market trading around the existing residential housing stock. But we know that house-buying usually triggers a spate of other transactions. For now we add this to the stack of reports that do not add up. And that pile is getting larger. For every weak report it seems we get a strong one. While this is not one of the key reports or even contributors to GDP it tells us something about economic activity and peoples&#146; motivations. They appear to be liquid and mobile and able to transact in a market we thought would be difficult and that is not what we had expected. This report makes the economy seem more resilient, if not strong.</th>
</tr>
</thead>

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Percent Changes: Existing Home Sales
</tr>
</thead>
<tbody>
<tr class="grey11">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey11">
<td class="firstcol">Mo/Mo%</td>
<td>Total</td>
<td>North-East</td>
<td>Mid-West</td>
<td>South</td>
<td>West</td>
</tr>
<tr class="grey10">
<td class="firstcol">Feb.07</td>
<td>3.9%</td>
<td>14.2%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>0.0%</td>
</tr>
<tr class="grey9">
<td class="firstcol">Jan.07</td>
<td>2.7%</td>
<td>-0.9%</td>
<td>4.1%</td>
<td>2.0%</td>
<td>5.6%</td>
</tr>
<tr class="grey8">
<td class="firstcol">Dec.06</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>2.8%</td>
<td>0.8%</td>
<td>-2.3%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Nov.06</td>
<td>-0.3%</td>
<td>4.9%</td>
<td>0.0%</td>
<td>-2.0%</td>
<td>-1.5%</td>
</tr>
<tr class="grey6">
<td class="firstcol">3-Mo: ar</td>
<td>28.2%</td>
<td>48.1%</td>
<td>45.1%</td>
<td>17.8%</td>
<td>12.5%</td>
</tr>
<tr class="grey6">
<td class="firstcol">6-mo: ar</td>
<td>12.0%</td>
<td>28.3%</td>
<td>21.0%</td>
<td>4.8%</td>
<td>4.7%</td>
</tr>
<tr class="grey5">
<td class="firstcol">1-Year</td>
<td>-3.6%</td>
<td>3.4%</td>
<td>-1.9%</td>
<td>-4.4%</td>
<td>-9.6%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Prices:</td>
<td colspan="5">Median Prices</td>
</tr>
<tr class="grey3">
<td class="firstcol">One Mo:</td>
<td>0.9%</td>
<td>1.4%</td>
<td>-2.7%</td>
<td>0.4%</td>
<td>4.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">One Year:</td>
<td>-1.3%</td>
<td>-1.4%</td>
<td>-1.3%</td>
<td>-2.9%</td>
<td>2.2%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Average Prices</td>
</tr>
<tr class="grey1">
<td class="firstcol">One Year:</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>-2.4%</td>
<td>1.5%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

Existing homes sales had been expected to drop in February. Instead they jumped by 3.9% and that was after a gain of 2.7% in January. Whats up? Housing starts were off sharply in January then up in February but existing home sales [...]

US Existing Home Sales Jump – Markets Taken by Surprise

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323a.jpg" width="353">
Existing homes sales had been expected to drop in February. Instead they jumped by 3.9% and that was after a gain of 2.7% in January. What&#146;s up? Housing starts were off sharply in January then up in February but existing home sales are subject to different forces as well as some of the same dynamics. Weather was deemed to have been a factor for housing starts. Admittedly weather is more of a factor for house-building than buying. Moreover existing home sales are on a different timeline. Starts and new home sales book at the time of the transaction&#146;s inception. Existing home sales book at the transaction&#146;s completion. Since about 70% of the population owns homes, you probably know what this means, first hand. The lag on existing home sales depends on the length of time from the initial signing of the contract through to the closing, a period that requires appraisals, much document preparation and eventually a bank completing a credit decision and a meeting with all interested parties. So we had expected existing home sales to reveal conditions more like January than like February. WRONG! 
Perhaps the larger surprise was that existing home sales were strong across the nation. Sales were flat in the West and up everywhere else on the month. Over periods of three months and six months, growth rates for existing home sales are firm to strong. Year/year, three of four national regions show sales lower but the Northeast (a region where bad weather is most likely to be a depressing factor at this time of year) oddly is up (3.4%). The Midwest is barely lower at -1.9%. The South is off by 4.4% and the West by a much larger 9.6%. (see table below).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323b.jpg" width="353"> 
 At the same time, prices have been softening. While using February as an end point probably exaggerates the trend decline in prices over the past 20 months, prices are falling at a 3.3% annualized rate for that period. But the point is that prices have been softer and lower prices have not seized up the market but rather lubricated it. 
Existing home prices remain weak across regions. For housing starts and new home sales (the latter not yet available for this month) builders have a cost element and a margin they try to protect and so prices may not have so much flexibility. But with the run-up in house prices over the last 5-6 years or more, homeowners have a lot of equity, in general, and that gives them the flexibility to make deals. And if you are a seller/buyer this does not really hurt you. A seller/buyer is an existing home seller who is also looking to buy somewhere else &#150; as most are. This sort of transactor learns quickly that what you lose on your house sale (compared to the profit you might have made when house prices were at their peak) you make up for when you buy and get a good deal on the &#145;other end&#146;. So the drop in the price for existing homes probably exaggerates the &#145;pain&#146; being inflicted on sellers. <a name="1"></a>
Different strokes for different folks&#133;Diminishing weakness for starts and permits but outright strength for existing home sales.

<table border="0" cellspacing="0" width="100%">
<tr>
<td> <img height="287" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/0703231.gif" v:shapes="_x0000_i1028" width="460"></td>
</tr>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&middot; Since most existing home sellers live in their homes they often can wait out bad markets or decide to bite the bullet and take less and sell. It all depends on individual circumstances. Some houses are sold due to a death in the family and estate needs, some are due to job transfers and location shifts, others are due to pure housing preferences that change or a desire for more/less space related to the natural family cycle and some are unrequested career choices foisted on the individual by his/her former employer, and so on. This makes existing homes an irregular market or to put it another way, a market rife with conflicting opportunities. It is much different from dealing with a builder. &middot; On balance it is difficult to figure out what these robust sales mean for the economy. Existing home sales make little contribution to GDP directly since they are just a market trading around the existing residential housing stock. But we know that house-buying usually triggers a spate of other transactions. For now we add this to the stack of reports that do not add up. And that pile is getting larger. For every weak report it seems we get a strong one. While this is not one of the key reports or even contributors to GDP it tells us something about economic activity and peoples&#146; motivations. They appear to be liquid and mobile and able to transact in a market we thought would be difficult and that is not what we had expected. This report makes the economy seem more resilient, if not strong.</th>
</tr>
</thead>

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Percent Changes: Existing Home Sales
</tr>
</thead>
<tbody>
<tr class="grey11">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey11">
<td class="firstcol">Mo/Mo%</td>
<td>Total</td>
<td>North-East</td>
<td>Mid-West</td>
<td>South</td>
<td>West</td>
</tr>
<tr class="grey10">
<td class="firstcol">Feb.07</td>
<td>3.9%</td>
<td>14.2%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>0.0%</td>
</tr>
<tr class="grey9">
<td class="firstcol">Jan.07</td>
<td>2.7%</td>
<td>-0.9%</td>
<td>4.1%</td>
<td>2.0%</td>
<td>5.6%</td>
</tr>
<tr class="grey8">
<td class="firstcol">Dec.06</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>2.8%</td>
<td>0.8%</td>
<td>-2.3%</td>
</tr>
<tr class="grey7">
<td class="firstcol">Nov.06</td>
<td>-0.3%</td>
<td>4.9%</td>
<td>0.0%</td>
<td>-2.0%</td>
<td>-1.5%</td>
</tr>
<tr class="grey6">
<td class="firstcol">3-Mo: ar</td>
<td>28.2%</td>
<td>48.1%</td>
<td>45.1%</td>
<td>17.8%</td>
<td>12.5%</td>
</tr>
<tr class="grey6">
<td class="firstcol">6-mo: ar</td>
<td>12.0%</td>
<td>28.3%</td>
<td>21.0%</td>
<td>4.8%</td>
<td>4.7%</td>
</tr>
<tr class="grey5">
<td class="firstcol">1-Year</td>
<td>-3.6%</td>
<td>3.4%</td>
<td>-1.9%</td>
<td>-4.4%</td>
<td>-9.6%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Prices:</td>
<td colspan="5">Median Prices</td>
</tr>
<tr class="grey3">
<td class="firstcol">One Mo:</td>
<td>0.9%</td>
<td>1.4%</td>
<td>-2.7%</td>
<td>0.4%</td>
<td>4.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">One Year:</td>
<td>-1.3%</td>
<td>-1.4%</td>
<td>-1.3%</td>
<td>-2.9%</td>
<td>2.2%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Average Prices</td>
</tr>
<tr class="grey1">
<td class="firstcol">One Year:</td>
<td>-0.4%</td>
<td>-0.4%</td>
<td>0.1%</td>
<td>-2.4%</td>
<td>1.5%</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
Land Values Increase in Japan First Time in 16 Years: Is Long Drought in Japanese Real Estate Finally Over? 
by <a href="/comment/Stone.html">Carol Stone</a> March 23, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323c.jpg" width="353">
Prices of land in Japan rose 0.4% from January 1, 2006, to January 1, 2007, according to a report issued late Thursday in Japan by the Ministry of Land, Infrastructure and Transport. This is the first increase in land prices since the year to January 1, 1991, that is 16 years. Over that period, land values fell by more than half, by 52.1%, to a level last seen in 1982. The latest increase is, of course, hardly anything, but this long, excruciating decline seems to have ended, in still another sign that the Japanese economy, however haltingly, may be making further progress toward sustained expansion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323d.jpg" width="353">
Commercial business sites showed the largest gain, up 2.3%, with a substantial 9.4% rise in the Tokyo market. These prices had also risen last year in Tokyo, by 1.0%. Residential land throughout Japan edged higher in the latest year, this by just 0.1%, with Tokyo up 3.6%, Osaka 1.8% and Nagoya 1.7%. While these three major metropolitan areas are seeing renewed strength, prices of residential sites in &quot;local districts&quot; were still down, by 2.7% on average. Values of so-called &quot;prospective housing land&quot; were also still weak, down 4.3%, implying that not much enthusiasm for new housing development has emerged. And industrial building sites, too, are still declining in value, although the decrease of 1.8% to January 1, 2007, is the smallest reduction since 1992; these values did increase in the latest reading for the three main metro areas that the Land Ministry reports. Further, property values for light industry, or &quot;quasi-industry&quot;, did rise, also due to gains in the big cities.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070323e.jpg" width="353">
Back in the 1980s, land prices were skyrocketing, and owing to the organization of Japanese real estate holdings, it was thought that the &quot;tradable&quot; supply of land was so small and demand for land in the vibrant Japanese economy so large that property prices might never fall. But the tight money policies in 1989 and 1990, meant to curb stock speculation as well as that in real estate, did result in a downturn in land values. Over time, it seemed the persistent cuts in property values would then, ironically, never end. But apparently they have. This is uneven, as we have seen, and has yet to pick up in the outlying, &quot;local districts&quot;. But the first forward steps have been taken.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN: &nbsp;% Change as of January 1</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">Average, 2000-2004</th>
<th scope="col">Average, &nbsp;1995-1999</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Sites: Japan</td>
<td>0.4</td>
<td>-2.8</td>
<td>-5.0</td>
<td>-5.7</td>
<td>-3.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>4.6</td>
<td>-0.7</td>
<td>-3.2</td>
<td>-6.2</td>
<td>-5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential: Japan</td>
<td>0.1</td>
<td>-2.7</td>
<td>-4.6</td>
<td>-5.0</td>
<td>-2.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>3.6</td>
<td>-0.9</td>
<td>-3.2</td>
<td>-5.8</td>
<td>-4.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Commercial: Japan</td>
<td>2.3</td>
<td>-2.7</td>
<td>-5.6</td>
<td>-7.8</td>
<td>-8.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>9.4</td>
<td>1.0</td>
<td>-2.5</td>
<td>-7.1</td>
<td>-12.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial: Japan</td>
<td>-1.8</td>
<td>-4.9</td>
<td>-7.4</td>
<td>-7.0</td>
<td>-3.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tokyo</td>
<td>0.9</td>
<td>-4.1</td>
<td>-7.4</td>
<td>-9.6</td>
<td>-6.0</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/070322b.jpg" width="353">
Retail sales in South Africa grew 9.4% in constant 2000 prices in January from a year ago, a resumption of stronger growth after December&#39;s gain slowed to 6.7%. For all of 2006, sales were up 9.6%. In current prices, they rose 15.6% from January 2006, also similar to the overall 2006 gain of 15.3%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070322c.jpg" width="353">
A breakout of sales into store groups is only available since 2005. Among the various groups, the greatest strength has been in household goods and building materials; these surged 25.5% (current prices) in January from the year-ago amount and were up 20.1% for all of 2006. The push for this growth has come from new construction and remodeling. The accompanying graph of construction data shows the expansion in residential buildings completed and in additions and alterations (some of which can be nonresidential, too, of course). The latter item continues to grow rapidly. The former, new homes, has flattened in recent months after a sustained rise that lasted from the spring of 2004 through last summer. But filling these homes with furniture and appliances and adding various amenities is supporting retail sales.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070322a.jpg" width="353">
People have also been buying cars in good numbers. The index of vehicles sold was up 3.0% in February, following a drop of 9.6% in January, which in turn came after an 8.5% increase n December; these are month-to-month changes in seasonally adjusted data. These erratic monthly swings are still yielding year-to-year advances; for February, it was 5.1%. The last three years have been extraordinary for vehicle sales, up 14.4% for 2006, 25.7% in 2005 and 22.0% in 2004. It&#39;s hardly surprising that some hesitation is developing. But overall, the consumer sector is pulling the South African economy ahead with some vigor.

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<thead>
<tr>
<th scope="col" class="firstcol">South Africa, NSA ex as noted</th>
<th scope="col">Feb 2007</th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Sales, Mil.Rand</td>
<td>--</td>
<td>34,018</td>
<td>49,608</td>
<td>29,440</td>
<td>418,450</td>
<td>362,796</td>
<td>329,238</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr % Chg</td>
<td>--</td>
<td>15.6%</td>
<td>12.2%</td>
<td>12.0%</td>
<td>15.3%</td>
<td>10.2%</td>
<td>13.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Mil.2000.Rand</td>
<td>--</td>
<td>24,126</td>
<td>35,485</td>
<td>22,052</td>
<td>303,535</td>
<td>276,945</td>
<td>259,502</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr % Chg</td>
<td>--</td>
<td>9.4%</td>
<td>6.7%</td>
<td>6.9%</td>
<td>9.6%</td>
<td>6.7%</td>
<td>9.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Furniture,&nbsp; Appliances &amp; Building Matl, Yr/Yr % Chg</td>
<td>--</td>
<td>25.5%</td>
<td>12.4%</td>
<td>19.5%</td>
<td>20.1%</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Vehicles Sold (SA, 2000=100)</td>
<td>192.3</td>
<td>186.7</td>
<td>206.6</td>
<td>182.9</td>
<td>189.5</td>
<td>165.6</td>
<td>131.8</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales in South Africa grew 9.4% in constant 2000 prices in January from a year ago, a resumption of stronger growth after December's gain slowed to 6.7%. For all of 2006, sales were up 9.6%. In current prices, they rose 15.6% [...]

South Africa Retail Sales Pick Up; Construction Activity and Vehicle Sales Also Show Gains

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070321c.jpg" width="353">
Retail trade in Canada eased 0.2% in January after surging 2.2% in December. The result year-on-year was up 4.9%, a bit slower than the overall gains during 2005 and 2006.
However, the January decline was concentrated in the automotive sector, and several other store groups had nice increases. New car dealers and used vehicle and parts dealers saw 2.0% and 1.5% decreases, respectively, and gas station sales were down 3.5%. These had all been strong in November and December, particularly the latter, when the &quot;automotive group&quot; as a whole had sales up 3.8%.
Non-automotive sales (the total less all vehicle and parts dealers and gas stations) were sluggish in November, but came up well in December, by 1.5% and they continued on ahead by 0.9% in January. Several store groups participated, including furniture, consumer electronics and clothing. So the decline in vehicles and fuel seemed to make room for spending on other items.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070321a.jpg" width="353">
On a volume basis, price declines have pushed total volume growth above nominal growth in several recent months. This was especially the case in September, but also in January, when sales in chained 1997 C$ expanded 5.0% year-on-year, compared with the nominal gain of 4.9%.
Sales performance among the Provinces has been uneven. Smaller ones on the East Coast -- Prince Edward Island and Nova Scotia -- showed moderate increases in January and those in the West, from Manitoba on all had sizable rises of more than 1%. But Quebec eked out only a 0.2% rise, while New Brunswick and Ontario had outright declines. A similar pattern holds for the year-to-year performance, with Ontario, which accounts for about one-third of the national total, experiencing just a 1.8% increase from January 2006 in contrast to 11.2% in Alberta. The western provinces are perhaps benefiting from high energy prices, which boost their income, compared with Ontario, where the people have to pay those prices instead.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070321b.jpg" width="353">
The national data for Canada are contained in Haver&#39;s CANSIM database, with that for the Provinces in CANSIMR.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CANADA (SA, % Chg)</th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2007</th>
<th scope="col">Nov 2007</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Trade: All Groups</td>
<td>-0.2</td>
<td>2.2</td>
<td>0.3</td>
<td>4.9</td>
<td>6.2</td>
<td>6.3</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol">All Motor Vehicles &amp; Parts Dealers</td>
<td>-1.9</td>
<td>3.2</td>
<td>0.7</td>
<td>5.6</td>
<td>5.7</td>
<td>5.8</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less MV &amp; P</td>
<td>0.3</td>
<td>1.9</td>
<td>0.1</td>
<td>4.7</td>
<td>6.4</td>
<td>6.5</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">Gasoline Stations</td>
<td>-3.5</td>
<td>4.7</td>
<td>5.3</td>
<td>0.2</td>
<td>9.1</td>
<td>15.4</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less MV &amp; P and Gasoline</td>
<td>0.9</td>
<td>1.5</td>
<td>-0.6</td>
<td>5.4</td>
<td>5.9</td>
<td>5.2</td>
<td>5.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail trade in Canada eased 0.2% in January after surging 2.2% in December. The result year-on-year was up 4.9%, a bit slower than the overall gains during 2005 and 2006. However, the January decline was concentrated in the [...]

Canada's Retail Trade Eases in January after Big December Gain; Western Provinces Show Strength While Ontario Is [...]

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Tom Moeller

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

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Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

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

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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Employment increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

Economy in Brief: March 2007

Jump to:

U.S New Home Sales Plunge – Will the Rest of the Sector Follow?

New Home Sales Plunge – Will the Rest of the Sector Follow?

Land Values Increase in Japan First Time in 16 Years: Is Long Drought in Japanese Real Estate Finally Over?

US Existing Home Sales Jump – Markets Taken by Surprise

US Existing Home Sales Jump – Markets Taken by Surprise

South Africa Retail Sales Pick Up; Construction Activity and Vehicle Sales Also Show Gains

South Africa Retail Sales Pick Up; Construction Activity and Vehicle Sales Also Show Gains

Canada's Retail Trade Eases in January after Big December Gain; Western Provinces Show Strength While Ontario Is [...]