Tom Moeller

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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>
</table>
</body>
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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>
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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>
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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>
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>
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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>
</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%">
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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>
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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Louise Curley

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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%">
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<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

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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>
Big Business in Japan Becomes More Optimistic  
by <a href="/comment/Curley.html">Louise Curley</a> September 26, 2005


<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>


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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050923a.jpg" width="353">
A recent focus in commodity markets has been on the damage to petroleum drilling &amp; refining facilities caused by Hurricane Katrina and potentially from Hurricane Rita as well as the resultant price effects. Indeed, versus before Katrina the Journal of Commerce (JoC)-ECRI index of industrial commodity prices was up 6.0% through last week and likely rose further this week. Much of the rise was caused by a 8.7% rise in petroleum products&#39; prices.
Though crude oil prices rose only 2.5% (45.2% y/y), spot gasoline prices tacked on another 5.2% (49.5% y/y) in September vs. the August average. Daily prices for unleaded regular gasoline rose 6 cents yesterday after an 8 cent rise on Wednesday but, at $2.08 per gallon, the price was well below the late August high of $3.13. Natural gas prices in September have risen more than one quarter versus August (123% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050923b.jpg" width="353">
Elsewhere in commodities markets, prices have not been quiet. Reflecting the strong metals market, the JoC metals price index rose 3.6% in September vs. August (4.1% y/y) bolstered by an 18% (-3.5% y/y) gain in steel scrap prices, a 7.5% (39.6% y/y) rise in zinc prices and a 2.2% (41.9% y/y) increase in copper scrap. During the last twenty years there has been a 43% correlation between the six month change in metal prices and the change in factory sector industrial production
Textile prices in September have risen just 0.7% (3.4% y/y) led by a 2.1% (-3.0% y/y) gain in cotton prices, but there have been fireworks in the miscellaneous category. Down year to year, prices for &quot;miscellaneous&quot; commodities rose 10% in September versus August. Structural composite panel prices rose more than one third vs. August (-5.0% y/y), framing lumber prices increased 2.7% (-13.3% y/y) while rubber prices bounced 8.2% (36.5% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050923c.jpg" width="353">
Foodstuff market prices have been generally quiet as indicated by a little change year to date in the Commodity Research Bureau&#39;s food price index. Despite volatility in livestock markets, prices are 10% lower than last year reflecting lower pork costs and beef prices which have stabilized after earlier declines.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050923d.jpg" width="353">
Ever the barometer of inflation expectations, gold prices surged more than 10% during the last two months to over $460/oz. in London. That&#39;s still slightly below the 20 Year high of just under $500/oz., but the elevated level of gold prices during the last few years clearly reflects a worry that the strength in energy prices will spill further into underlying inflation. In the latest University of Michigan survey, expectations for price inflation during the next five to ten years rose to 3.8% versus an expectation during 2004 of 3.2%.
Gold Prices, a 1999 article from the Federal Reserve Bank of Cleveland is available <a href="http://www.clevelandfed.org/research/com98/0301.pdf"> here</a>.
Forecasts, Indicators, And Monetary Policy is a 1999 study from the Federal Reserve Bank of Philadelphia and can be found <a href="http://www.phil.frb.org/files/br/brmj99ks.pdf"> 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/WEEKLY/@W4/@W401/@W40104/@W40104.HTM">JoC-ECRI Industrial Price Index</a>&nbsp;</th>
<th scope="col">09/16/05</th>
<th scope="col">12/31/04</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">All Items</td>
<td>120.50</td>
<td>111.60</td>
<td>3.3%</td>
<td>112.78</td>
<td>91.97</td>
<td>79.53</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Textiles</td>
<td>66.70</td>
<td>64.40</td>
<td>&nbsp;3.4%</td>
<td>65.83</td>
<td>65.09</td>
<td>59.73</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Metals</td>
<td>122.40</td>
<td>124.60</td>
<td>4.1%</td>
<td>118.15</td>
<td>84.57</td>
<td>75.14</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Miscellaneous</td>
<td>115.9</td>
<td>113.7</td>
<td>-4.0%</td>
<td>114.0</td>
<td>102.9</td>
<td>85.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Petroleum Products</td>
<td>285.7</td>
<td>279.5</td>
<td>22.4%</td>
<td>207.1</td>
<td>135.3</td>
<td>110.1</td>
</tr>
</tbody>
</table>
</body>
</html>

A recent focus in commodity markets has been on the damage to petroleum drilling & refining facilities caused by Hurricane Katrina and potentially from Hurricane Rita as well as the resultant price effects. Indeed, versus before [...]

Before The Storms: Commodity Prices On The Rise

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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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

Charts of the Week: Tariff Truce, Tenuous Trust

250430N1.jpg

250430O1.jpg

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.

250430P1.jpg

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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.

Economy in Brief: September 2005

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

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

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