Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124g.jpg" align="right" border="0" height="265" width="312">
Haver Analytics has a number of series that may prove useful
in comparing and contrasting current conditions with those in the Great
Depression.Among them are the annual series of real and nominal gross
domestic product, its components and prices in USNA
that go back to 1929.


The first chart shows real GDP since 1929, plotted on a log
scale to show equal percentage changes. Real GDP declined 26.5% from
1929 to 1933.

Monthly data on the Consumer Price Index are available from
January 1921 and are shown in the second chart. Consumer prices
declined steadily from 51.9 (1967=100) in May 1929 to 39.4 in December
1933, a decline of 24.1%. These data are found in the Prices section of
 USECON.

Long term monthly data are also available for stock prices and
interest rates. The third chart show monthly average prices for the Dow
Jones Industrial Average and for the S&amp;P 500 Index. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124d.jpg" align="right" border="0" height="265" width="312">
The Dow
Jones declined 87.3% from 364.93 in September, 1929 to 46.19 in July,
1932. The S&amp;P 500 declined 84.8% from 31.30 in September 1929
to 4.77 in June, 1933.
The fourth chart shows the interest rate on the Treasury's
long term composite (over ten years) together with the interest rates
on Moody's AAA and BBB corporate bonds.The rate on the Treasury goes
back to January, 1925 and the rates on Moody's corporates go back to
January 1921. Both the stock market data and interest rates are found
in the Financial Section of USECON. 
 
 
 
 

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124e.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124f.jpg" border="0" height="265" width="312">

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Haver Analytics has a number of series that may prove useful in comparing and contrasting current conditions with those in the Great Depression.Among them are the annual series of real and nominal gross domestic product, its [...]

Comparing Current Trends with Those in the Great Depression

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124b.jpg" width="353">
During October, U.S. existing home sales reversed most of the prior month&#39;s rise and fell 3.1% to 4.980 million, according to the National Association of Realtors. The 3.1% decline followed a revised 4.7% September increase and it was slightly greater than Consensus expectations for which were for a selling rate of 5.00M homes. Total sales include sales of condos and co-ops.
The month-to-month volatility in home sales this year has been near a roughly stable trend line at the 5.0 million unit level, down 11.8% from last year&#39;s average.
Median home prices fell 4.2% (NSA) during October for the fourth consecutive monthly drop. That pulled the y/y comparison to -11.3%. Prices have fallen 20.0% since their peak in June 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124c.jpg" width="353">
Sales of existing single-family homes followed a similar pattern as the total and fell 3.3% after a revised 5.3% rise during September. Sales of existing homes are down by one-third from their peak in mid-2005.
By region, home sales in the Midwest led last month&#39;s decline with a 6.0% drop and they were down nearly ten percent from last year. In the South sales fell 2.2% m/m (-10.2% y/y). In the West sales slipped 1.6%, however, they were up one-third from last October. Sales in the Northeast fell 1.2% and they were off 17.7% from last year&#39;s average.
The number of unsold homes (condos &amp; single-family) on the market fell for the third straight month (-4.5% y/y). Nevertheless, at the current sales rate there as a 10.2 months&#39; supply on the market. That was down from the April peak of 11.2 months. For single-family homes the inventory ticked up m/m to a 9.6 months supply at the current sales rate, down from an 11.0 months supply in June.
The House testimony offered by Fed GovernorRandall S. Kroszner titled the Effects of the financial crisis on small business is available <a href="http://www.federalreserve.gov/newsevents/testimony/kroszner20081120a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Home Sales (Thous)</th>
<th scope="col">October</th>
<th scope="col">y/y %</th>
<th scope="col">September</th>
<th scope="col">October &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>4,980</td>
<td>-1.6</td>
<td>5,140</td>
<td>5,020</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>830</td>
<td>-9.8</td>
<td>840</td>
<td>910</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,100</td>
<td>-9.1</td>
<td>1,170</td>
<td>1,220</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,840</td>
<td>-10.2</td>
<td>1,900</td>
<td>2,050</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,210</td>
<td>37.5</td>
<td>1,230</td>
<td>880</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,430</td>
<td>0.0</td>
<td>4,580</td>
<td>4,430</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>183,300</td>
<td>-11.3</td>
<td>191,400</td>
<td>206,700</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>


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During October, U.S. existing home sales reversed most of the prior month's rise and fell 3.1% to 4.980 million, according to the National Association of Realtors. The 3.1% decline followed a revised 4.7% September increase and it was [...]

U.S. Existing Home Sales Slide Along Bottom, Prices Down 20%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124a.jpg" width="353">
The October National Activity Index (CFNAI) from the Chicago Federal Reserve Bank improved last month after Hurricanes depressed economic activity during September. The index, however, remained in recession territory. The latest reading of -1.06 roughly equaled the averages of the first and second quarters of this year but improved from the third quarter average of -2.15.Since 1970 there has been a 75% correlation between the level of the index and the q/q change in real GDP.
The three-month moving average of the index held roughly steady at -2.09. The latest was near its lowest since the last recession, early in 1991.
An index level at or below -0.70 typically has indicated negative U.S. economic growth. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%. During the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_november2008.pdf">here</a> and the historical data are available in Haver&#39;s SURVEYS database.
The production category made a positive contribution to the October index as it recovered from a depressed level the month earlier. Conversely the income, housing, consumption and employment categories had a negative influence on the total.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, manufacturing &amp; trade sales, and inventories &amp; orders.
In a separate survey, the Chicago Fed indicated that its Midwest manufacturing index fell during September to its lowest level since 2003. The auto sector continued to lead the weakness but the steel, machinery and resource sector components also were weak.
The Joint Statement by Treasury, Federal Reserve, and the FDIC on Citigroup can be found <a href="http://www.federalreserve.gov/newsevents/press/bcreg/20081123a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">October &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.06</td>
<td>-3.11</td>
<td>-0.75</td>
<td>-0.41</td>
<td>-0.02</td>
<td>0.28</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.09</td>
<td>-2.16</td>
<td>-0.59</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
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The October National Activity Index (CFNAI) from the Chicago Federal Reserve Bank improved last month after Hurricanes depressed economic activity during September. The index, however, remained in recession territory. The latest [...]

Chicago Fed Index Rose After Hurricanes

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124a.jpg" align="left" border="0" height="265" width="353">
The October National Activity Index (CFNAI) from the Chicago
Federal Reserve Bank improved last month after Hurricanes depressed
economic activity during September. The index, however, remained in
recession territory. The latest reading of -1.06 roughly equaled the
averages of the first and second quarters of this year but improved
from the third quarter average of -2.15.Since 1970 there has been a 75%
correlation between the level of the index and the q/q change in real
GDP.
The three-month moving average of the index held roughly
steady at -2.09. The latest was near its lowest since the last
recession, early in 1991.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. During the last twenty years there has been a 68%
correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_november2008.pdf">here</a>
and the historical data are available in Haver's SURVEYS
database.
The production category made a positive contribution to the
October index as it recovered from a depressed level the month earlier.
Conversely the income, housing, consumption and employment categories
had a negative influence on the total.
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during September to its lowest level
since 2003. The auto sector continued to lead the weakness but the
steel, machinery and resource sector components also were weak.
The Joint Statement by Treasury, Federal Reserve,
and the FDIC on Citigroup can be found <a href="http://www.federalreserve.gov/newsevents/press/bcreg/20081123a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">October '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.06</td>
<td>-3.11</td>
<td>-0.75</td>
<td>-0.41</td>
<td>-0.02</td>
<td>0.28</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Average</td>
<td>-2.09</td>
<td>-2.16</td>
<td>-0.59</td>
<td>--</td>
<td>--</td>
<td>&nbsp;--</td>
</tr>
</tbody>
</table>
U.S. Existing Home Sales Slide
Along Bottom, Prices Down 20% 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124b.jpg" align="left" border="0" height="265" width="353">
During October, U.S. existing home sales reversed
most of the prior month's rise and fell 3.1% to 4.980 million,
according to the National Association of Realtors. The 3.1% decline
followed a revised 4.7% September increase and it was slightly greater
than Consensus expectations for which were for a selling rate of 5.00M
homes. Total sales include sales of condos and co-ops.
The month-to-month volatility in home sales this year has been
near a roughly stable trend line at the 5.0 million unit level, down
11.8% from last year's average.
Median home prices fell 4.2% (NSA) during
October for the fourth consecutive monthly drop. That pulled the y/y
comparison to -11.3%. Prices have fallen 20.0% since their peak in June
2007.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124c.jpg" align="right" border="0" height="265" width="353">
Sales of existing single-family homes followed a similar
pattern as the total and fell 3.3% after a revised 5.3% rise during
September. Sales of existing homes are down by one-third from their
peak in mid-2005.
<blockquote>

By region, home sales in the Midwest led last month's
decline with a 6.0% drop and they were down nearly ten percent from
last year. In the South sales fell 2.2% m/m (-10.2% y/y). In the West
sales slipped 1.6%, however, they were up one-third from last October.
Sales in the Northeast fell 1.2% and they were off 17.7% from last
year's average.
</blockquote>

The number of unsold homes (condos &amp; single-family) on
the market fell for the third straight month (-4.5% y/y). Nevertheless,
at the current sales rate there as a 10.2 months' supply on the market.
That was down from the April peak of 11.2 months. For single-family
homes the inventory ticked up m/m to a 9.6 months supply at the current
sales rate, down from an 11.0 months supply in June.
The House testimony offered by Fed GovernorRandall S. Kroszner
titled the Effects of the financial crisis on small business is
available <a href="http://www.federalreserve.gov/newsevents/testimony/kroszner20081120a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Existing
Home Sales (Thous)</th>
<th scope="col">October</th>
<th scope="col">y/y %</th>
<th scope="col">September</th>
<th scope="col">October '07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>4,980</td>
<td>-1.6</td>
<td>5,140</td>
<td>5,020</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>830</td>
<td>-9.8</td>
<td>840</td>
<td>910</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,100</td>
<td>-9.1</td>
<td>1,170</td>
<td>1,220</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>1,840</td>
<td>-10.2</td>
<td>1,900</td>
<td>2,050</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,210</td>
<td>37.5</td>
<td>1,230</td>
<td>880</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,430</td>
<td>0.0</td>
<td>4,580</td>
<td>4,430</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Price, Total, $</td>
<td>183,300</td>
<td>-11.3</td>
<td>191,400</td>
<td>206,700</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
Comparing CurrentTrends with Those
in the Great Depression&nbsp; 
by <a href="/comment/Curley.html">Louise
Curley</a> November 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124g.jpg" align="right" border="0" height="265" width="312">
Haver Analytics has a number of series that may prove useful
in comparing and contrasting current conditions with those in the Great
Depression.Among them are the annual series of real and nominal gross
domestic product, its components and prices in USNA
that go back to 1929.


The first chart shows real GDP since 1929, plotted on a log
scale to show equal percentage changes. Real GDP declined 26.5% from
1929 to 1933.

Monthly data on the Consumer Price Index are available from
January 1921 and are shown in the second chart. Consumer prices
declined steadily from 51.9 (1967=100) in May 1929 to 39.4 in December
1933, a decline of 24.1%. These data are found in the Prices section of
 USECON.

Long term monthly data are also available for stock prices and
interest rates. The third chart show monthly average prices for the Dow
Jones Industrial Average and for the S&amp;P 500 Index. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124d.jpg" align="right" border="0" height="265" width="312">
The Dow
Jones declined 87.3% from 364.93 in September, 1929 to 46.19 in July,
1932. The S&amp;P 500 declined 84.8% from 31.30 in September 1929
to 4.77 in June, 1933.
The fourth chart shows the interest rate on the Treasury's
long term composite (over ten years) together with the interest rates
on Moody's AAA and BBB corporate bonds.The rate on the Treasury goes
back to January, 1925 and the rates on Moody's corporates go back to
January 1921. Both the stock market data and interest rates are found
in the Financial Section of USECON. 
 
 
 
 
 

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124e.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124f.jpg" border="0" height="265" width="312">

Germany&#8217;s IFO to Sixteen Year Low 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 24. 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081124h.jpg" align="left" border="0" height="265" width="353">IFO: I
Fell, OUCH! 

Germany&#8217;s IFO index, a focal point for early economic signals
in Germany, fell to a 16 year low in November. Manufacturing has fallen
very hard and fast, as the chart above demonstrates. Going back to
January of 1991 the overall IFO sector index stands in the lower 4% of
its range &#8211; in simple terms, it rarely is weaker than this.
Manufacturing is in the bottom 10% of its range. Retailing is in the
bottom 9% of its range. These are extremely weak readings. The service
sector is in the bottom 18% of its range which extends back only to mid
2001. Wholesaling is in the bottom 27% of its range. Construction is
relatively better off standing in the bottom 39% of its range of values
since 1991. In terms of raw readings instead of relative IFO scores we
see a clustering of scores in the -30 region. Wholesaling is a bit
better at -21 and services, a more stable sector overall, registers a
-7.3 net reading. Still for that sector such a raw reading is still in
the bottom 18% of its range. 
 

A fast unravel: Compared to just a month
ago the indices have dropped sharply. The headlines and MFG indices
have shed nearly 10 points in one month. Only in Sept 2001 did the
German sector headline index drop by more. Clearly this downturn is
hitting with lightning speed and a savage punch in Europe where key
policymakers thought they would be spared. Think again. 
 

Headline level is very weak, too -The
headline for the IFO business climate index fell to 85.8 in November
from 90.2 October. This index only fell more sharply than this in Sept
of 2001 after the attack on the US World trade Towers. The current
situation index dropped to a level of 94.8 in November from 99.9 in
October. The expectations index at 81.4 fell to 77.6. The 77.6 reading
is a lifetime low. For current conditions it is a bottom third of the
range reading. For the climate index it&#8217;s a bottom 4% of range reading.
Not only is the index falling fast but it is scrapping very low levels. 
 

Germany: harbinger for Euro-weakness --
Clearly the situation in Germany is fluid and falling fast. For all of
the Euro Area new industrial orders were released today and that series
dropped by 3.9% month to month in September and by 5.2% Yr/Yr. The Q3
drop for EMU-wide orders is 7.4% at an annual rate. Among large
countries Germany&#8217;s -7.0% Yr/Yr drop is one of the largest among EMU
members; while engineering orders in the EU&#8217;s UK are off by 10.7% Yr/Yr. 
 

Autos too - Europe is also having
difficulties in the auto sector as France&#8217;s Sarkozy and Germany&#8217;s
Merkel in a joint statement indicated their interest to support the
ailing sector. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col"> Summary
of IFO Sector Diffusion readings: CLIMATE</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">CLIMATE Sum</td>
<td>Current</td>
<td>Last Mo</td>
<td colspan="6">Since Jan 1991*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>average</td>
<td>Median</td>
<td>Max</td>
<td>Min</td>
<td>range</td>
<td>% range</td>
</tr>
<tr>
<td class="firstcol">All Sectors</td>
<td>-29.0</td>
<td>-20.2</td>
<td>-7.7</td>
<td>-8.4</td>
<td>16.9</td>
<td>-30.9</td>
<td>47.8</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>-29.6</td>
<td>-18.9</td>
<td>-0.2</td>
<td>1.6</td>
<td>27.0</td>
<td>-35.9</td>
<td>62.9</td>
<td>10.0%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-30.2</td>
<td>-27.7</td>
<td>-28.2</td>
<td>-30.3</td>
<td>1.3</td>
<td>-50.5</td>
<td>51.8</td>
<td>39.2%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>-21.8</td>
<td>-15.1</td>
<td>-13.2</td>
<td>-15.7</td>
<td>23.6</td>
<td>-39.3</td>
<td>62.9</td>
<td>27.8%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-33.5</td>
<td>-25.1</td>
<td>-14.2</td>
<td>-14.5</td>
<td>28.7</td>
<td>-39.7</td>
<td>68.4</td>
<td>9.1%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-7.3</td>
<td>-4.3</td>
<td>11.0</td>
<td>9.5</td>
<td>28.5</td>
<td>-15.2</td>
<td>43.7</td>
<td>18.1%</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081121a.jpg" align="left" border="0" height="265" width="353">
The Markit/NTC readings on conditions in services and MFG in
the Euro Area show another chilling story. The indices are down to all
time lows that covers 11-Years for the Manufacturing PMI and 10-years
for services. 
 

The MFG index stands at a level of 36.16 well below the
neutral mark of 50. The services PMI stands at 43.32 a very low reading
for a less volatile sector. The services PMI is only slightly less
volatile than the MFG readings on m/mo levels basis. But the MFG PMI
has a range of variation that is 20% larger. Even so in terms of m/m
changes in the indices services is slightly more volatile. 
 

Compared to the US where the PMIs (ISM) measure MFG and Non
MFG, the MFG and Services sectors in Europe are far more closely
correlated. Their simple correlation is 0.89 compared to 0.78 for the
tow US measures. This suggest the US economy has room for more
independent activity in each sector possibly a better ability to avert
sector contagion, whereas in Europe when one sector does something, the
other is quick to follow. That is bad news when economic growth is
slipping. The US MFG sector is about 25% more volatile than its
European counterpart whereas the US Nonmanufacturing sector is about 4
percent less volatile than its European counterpart. Right now all PMIs
are sinking and are very weak. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="3" scope="col"> FLASH Readings:&nbsp; Market PMIs for the Euro Area 13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Manufacturing</td>
<td> Services</td>
</tr>
<tr>
<td class="firstcol"> Nov-08</td>
<td> 36.16</td>
<td> 43.32</td>
</tr>
<tr>
<td class="firstcol"> Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr>
<td class="firstcol"> Sep-08</td>
<td>44.97</td>
<td>48.44</td>
</tr>
<tr>
<td class="firstcol"> Aug-08</td>
<td>47.55</td>
<td>48.46</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol"> Averages</td>
</tr>
<tr>
<td class="firstcol"> 3-Month</td>
<td>44.54</td>
<td>46.13</td>
</tr>
<tr>
<td class="firstcol"> 6-Month</td>
<td>46.79</td>
<td>47.39</td>
</tr>
<tr>
<td class="firstcol"> 12-Month</td>
<td>49.50</td>
<td>49.66</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol"> 125-Mo Range</td>
</tr>
<tr>
<td class="firstcol"> High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol"> Low</td>
<td>36.16</td>
<td>43.32</td>
</tr>
<tr>
<td class="firstcol"> % Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

The Markit/NTC readings on conditions in services and MFG in the Euro Area show another chilling story. The indices are down to all time lows that covers 11-Years for the Manufacturing PMI and 10-years for services. The MFG index [...]

Euro Area PMIs

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081121a.jpg" align="left" border="0" height="265" width="353">
The Markit/NTC readings on conditions in services and MFG in
the Euro Area show another chilling story. The indices are down to all
time lows that covers 11-Years for the Manufacturing PMI and 10-years
for services. 
 

The MFG index stands at a level of 36.16 well below the
neutral mark of 50. The services PMI stands at 43.32 a very low reading
for a less volatile sector. The services PMI is only slightly less
volatile than the MFG readings on m/mo levels basis. But the MFG PMI
has a range of variation that is 20% larger. Even so in terms of m/m
changes in the indices services is slightly more volatile. 
 

Compared to the US where the PMIs (ISM) measure MFG and Non
MFG, the MFG and Services sectors in Europe are far more closely
correlated. Their simple correlation is 0.89 compared to 0.78 for the
tow US measures. This suggest the US economy has room for more
independent activity in each sector possibly a better ability to avert
sector contagion, whereas in Europe when one sector does something, the
other is quick to follow. That is bad news when economic growth is
slipping. The US MFG sector is about 25% more volatile than its
European counterpart whereas the US Nonmanufacturing sector is about 4
percent less volatile than its European counterpart. Right now all PMIs
are sinking and are very weak. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr> <th colspan="3" scope="col"> FLASH
Readings:&nbsp; Market PMIs for the Euro Area 13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td> Manufacturing</td>
<td> Services</td>
</tr>
<tr>
<td class="firstcol"> Nov-08</td>
<td> 36.16</td>
<td> 43.32</td>
</tr>
<tr>
<td class="firstcol"> Oct-08</td>
<td>41.10</td>
<td>45.76</td>
</tr>
<tr>
<td class="firstcol"> Sep-08</td>
<td>44.97</td>
<td>48.44</td>
</tr>
<tr>
<td class="firstcol"> Aug-08</td>
<td>47.55</td>
<td>48.46</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol"> Averages</td>
</tr>
<tr>
<td class="firstcol"> 3-Month</td>
<td>44.54</td>
<td>46.13</td>
</tr>
<tr>
<td class="firstcol"> 6-Month</td>
<td>46.79</td>
<td>47.39</td>
</tr>
<tr>
<td class="firstcol"> 12-Month</td>
<td>49.50</td>
<td>49.66</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol"> 125-Mo Range</td>
</tr>
<tr>
<td class="firstcol"> High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol"> Low</td>
<td>36.16</td>
<td>43.32</td>
</tr>
<tr>
<td class="firstcol"> % Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120g.jpg" width="353">
For France and Italy new industrial orders continue to sink. France is right now seeing the greater weakness. Foreign orders show consistent weakness across time horizons for both Italy and for France. For France the recent deterioration in foreign orders is a bit worse than for Italy. But one remaining difference between these two countries is that in Italy domestic orders have shown some resiliency. Over three six and twelve months Italian orders have mostly showed increases. Meanwhile for France total and foreign order are down by almost the same percentage amounts over three months, hinting at weakening domestic orders. Italy may just be a step behind however. While Italy&#146;s domestic orders have been resilient, in September they have dropped by a sharp 2.6%. Also Italy&#146;s overall sales trends are deteriorating very rapidly. Both Italy and France seem to be well on their way to a deepening weakness in manufacturing. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Italy Orders
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-1.5%</td>
<td>-0.9%</td>
<td>2.2%</td>
<td>-1.0%</td>
<td>-5.1%</td>
<td>-3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>0.8%</td>
<td>-3.4%</td>
<td>-0.8%</td>
<td>-13.1%</td>
<td>-11.6%</td>
<td>-11.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-2.6%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>5.7%</td>
<td>-1.4%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">Memo</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">Sales</td>
<td>1.7%</td>
<td>-3.1%</td>
<td>-2.6%</td>
<td>-15.1%</td>
<td>-1.6%</td>
<td>-0.6%</td>
</tr>
<tr class="even">
<td colspan="7">French Orders</td>
</tr>
<tr>
<td class="firstcol">Saar except m/m</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7%</td>
<td>-7.6%</td>
<td>4.7%</td>
<td>-10.1%</td>
<td>-3.0%</td>
<td>-4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>2.2%</td>
<td>-8.3%</td>
<td>3.4%</td>
<td>-11.9%</td>
<td>-7.2%</td>
<td>-8.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

For France and Italy new industrial orders continue to sink. France is right now seeing the greater weakness. Foreign orders show consistent weakness across time horizons for both Italy and for France. For France the recent [...]

New Orders for Italy and France Sink

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120e.jpg" width="353">
The Conference Board indicated that the October composite index of leading economic indicators fell by 0.8% after rising a downwardly revised 0.1% during September. The peak for the index was in July of last year and the six-month percent change fell to -4.7%, the largest rate of decline in nearly one year.
Six of the ten components of the leading index fell last month notably consumer expectations, vendor performance, stock prices and building permits.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081120f.jpg" width="353">
The breadth of one-month increase amongst the leaders&#39; 10 components fell back to 35% and over a six-month period the breadth of gain amongst the components picked slightly to 30%.
The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
The coincident indicators rose 0.2% following five consecutive months of decline. Three quarters of the index components rose m/m but over six months none rose. Over the last ten years there has been an 86% correlation between the y/y changes in the coincident indicators and real GDP.
The lagging index ticked up 0.1%, the smallest increase in four months. The ratio of coincident to lagging indicators (a measure of economic excess) also ticked up slightly but remained near its lowest level since 1982.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a> (%)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">July, 6 Month % (AR)</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.8</td>
<td>0.1</td>
<td>-0.9</td>
<td>-4.7</td>
<td>-0.4%</td>
<td>1.3%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-2.4</td>
<td>1.7%</td>
<td>2.4%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.1</td>
<td>0.3</td>
<td>0.4</td>
<td>2.5</td>
<td>2.9%</td>
<td>3.1%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>


</html>

The Conference Board indicated that the October composite index of leading economic indicators fell by 0.8% after rising a downwardly revised 0.1% during September. The peak for the index was in July of last year and the six-month [...]

U.S. Leading Indicators Fell Again

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Crude petroleum prices are having a big impact on inflation expectations

Inflation surprising to upside in the US; by contrast to the downside in the euro area

 Gross Domestic Income is catching up with GDP

FOMC expects GDP growth above trend over the next three years

US core CPI inflation has begun to reaccelerate

Fiscal-policy aided factory building in the U.S. provided an unusually large boost to growth last year

US consumers much more optimistic than those in the Euro area and the UK

  Job openings take a step down in 2024

Fed's super core services inflation measure pushing up core rate

Blue Chip forecasters expect significant monetary easing this year except in Japan

Euro area economy stagnating while US grows above trend

Chinese and Japanese equity markets are diverging markedly

Chinese population declines in 2023 for second consecutive year

Outlook for US GDP growth on the rise; declining in euro area, Japan and China

There are still 1.4 job openings for every unemployed person in the US

US PCE inflation over the past six months has slowed to the Fed's 2% target

FOMC think rate hikes are done and looks for 75bps of decline in 2024

Weaker economic data surprises pushing down US interest rates

Recent disinflation has been widespread across Europe and North America

Recent decline in US inflation expectations helping to lower interest rates

China is losing its luster as foreign direct investment heads out

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Sandy Batten

240516n1.jpg

240516o1.jpg

The Federal Reserve Bank of Philadelphia reported in its May survey of manufacturing activity that the Current Activity Diffusion Index fell to 4.5 this month from 15.5 in April. The Action Economics Forecast Survey had anticipated a decline to 5.0. The Philly Fed survey responses were collected from May 6 to May 13. More than 29% of the firms reported increases in general activity this month (down from 38% last month), while 25% reported decreases (up from 22%); 46% reported no change (up from 40%).

The headline index reflects the answer to a single question on the state of economic activity. Haver Analytics calculates a composite index along the lines of the ISM PMI. That calculated index fell to 46.4 in May from 49.8 in April. This indicates that even though the headline index was above zero, the components pointed to a weaker Philly Fed district manufacturing sector.

The decline in May was led by significant weakness in shipments and orders. The shipments subindex plummeted to -1.2 in May from 19.1 in April while the shipments subindex fell markedly to -7.9 from 12.2. The employment subindex rose slightly in May but remained in negative territory at -7.9. This is the seventh consecutive month that the employment index has been negative, pointing to an ongoing decline in employment. Two-thirds of the firms reported no change in employment levels this month, while the share of firms reporting decreases (20%) exceeded the share reporting increases (12%).

On balance, the firms continued to report overall increases in prices. After rising 19 points last month, the prices paid index declined 4 points to 18.7 in May. Almost 19% of the firms reported increases in input prices, while none reported decreases. The current prices received index ticked up 1 point to 6.6. Almost 13% of the firms reported increases in prices received for their own goods while 6% reported decreases. 

Expectations for business conditions in the next six months deteriorated slightly in May but remained elevated. The May reading was 32.4 versus 34.3 in April and 38.6 in March.

The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease. The Philadelphia Fed data can be found in Haver’s **SURVEYS** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.



240516p1.jpg

240516q1.jpg

- Even with the May decline, the index remains in positive territory, pointing to expansion
- However, both shipments and orders subindexes fell markedly and more worryingly into contraction territory
- The employment subindex rose slightly but remained negative
- Expectations decline slightly but remain elevated


Philly Fed Manufacturing Index Falls in May

Andrew Cates

**Consensus GDP growth forecasts**
There has been a reversal of fortune in the world economy in recent weeks according to the latest Blue Chip survey of economic forecasters. The consensus forecasts for US GDP growth in 2024 was unchanged in May’s survey compared with April, at 2.4%. That’s the first time since July 2023 that US forecasters did not raise their growth expectations for this year. This stands in contrast moreover to the growth forecasts for the euro area and UK, which were lifted in May compared with April. The growth outlook for Japan in the meantime was left unchanged (see chart 1 below). 

240516Z1.jpg

**Outcomes for GDP growth in Q1**
Those observations for Europe, unsurprisingly, chime with the early estimates for GDP growth in Q1. While the US economy still eked out a respectable growth rate of 0.4% q/q, that still marked its weakest pace of quarterly growth since 2022 Q2. The UK and euro area in the meantime chalked up respective growth rates of 0.6% and 0.3%, their fastest pace of growth since 2021 Q4 and 2022 Q3. That said, a bigger-than-expected contraction in Japan’s GDP of 0.5% in Q1, stands in contrast to the stabilization in growth expectations seen above. Weaker momentum in the US and stronger momentum in Europe, to be fair, partly reflect the underlying base from which the economy has shifted – i.e.  a relatively strong base in the US and a weak base in Europe. Even so, these reversals of fortune are clearly worth monitoring in the coming weeks.  

240516Z2.jpg

**Germany’s under-performance**
Within Europe, nonetheless, the lingering under-performance of the German economy is another standout. One reason for this is the under-performance of activity in its industrial sector. In March 2024, for example, Germany’s industrial production was still around 9.5% lower than its pre-COVID level in January 2020. That compares with France, where production in March was some 4.2% lower than Pre-COVID levels, and Italy, where production was some 5.2% lower. Reasons for this under-performance are varied but they focus on the heavy reliance of Germany’s economy on manufacturing, amidst simmering global trade tensions and supply chain disruptions. Germany is also undergoing a major transition in its energy policy, which has led to increased dependence on imported energy, particularly natural gas from Russia. And that became extremely problematic especially after geopolitical tensions escalated.

240516Z3.jpg

**The UK labour market**
Tuning back to the UK where this week’s labour market data have taken some of the shine away from its latest Q1 GDP report. These data showed another big fall in employment, albeit concentrated in the part-time sector, a further decline in job vacancies and another rise in the unemployment rate and accordingly speak to growing slack in the labour market. However, the data on wage growth were the proverbial fly in the ointment for the Bank of England. For instance, private sector regular pay rose by 0.6% month-over-month in March, following a 0.9% increase the previous month. These rates are arguably too strong for those on the BoE’s monetary policy committee who lean towards a more hawkish stance.

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**US immigration**
As for the US, while it might now be underperforming, this follows a period during which, as Chart 1 above suggests, its economy had been significantly outperforming expectations. Various factors have contributed to this, including fiscal activism, technological innovation, and robust corporate balance sheets. However, another factor gaining recognition is immigration. For instance, new data from the CBO suggest that 3.3 million net immigrants arrived in the US in 2023. Through its impact on labour force growth, consumer spending, and housing activity, immigration could have provided far more support to overall economic growth in the US last year than many observers had initially realized.

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**Global inflation**
Finally and taking a step back from the ebb and flow of the monthly inflation cycle, our last chart this week looks at the latest annual inflation data for 2023 from the World Bank. More specifically, we home in on the relatively rapid pace of global food price inflation last year when compared with levels of energy price inflation or broader levels of core (ex food and energy) CPI inflation (see chart 6). Some of the key reasons for these high inflation rates in food prices include supply chain disruption amidst intensifying geopolitical tensions, together with a likely lagged impact from high energy prices in the previous year. But another key source of food price inflation is likely to have been climate change and more extreme weather conditions: Indeed, extreme weather events, including droughts, floods, and heatwaves, affected key agricultural regions around the world last year which, in turn, reduced crop yields and tightened global supplies of food commodities.

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A Fed easing narrative has been re-energized over the past few days largely thanks to a slightly weaker than expected US CPI report this week but, more generally, because of a battery of weaker-than-expected US data over the past couple of weeks. In our charts this week we examine the latest Blue Chip survey of economic forecasters and the corresponding signals suggesting that the light is now shining a little less brightly on the US economy (see chart 1). The same survey suggests the outlook is shining a bit more brightly on Europe’s economies, albeit from a position of relative darkness, and as equally indicated by the GDP growth outcomes for Q1 2024 (Chart 2). Germany, however, continues to be a notable underperformer, which prompts us to examine the latest data on industrial production across several major euro area economies and the persistent evidence of underperformance (Chart 3). Next, we turn our attention to this week's UK labour market data, which increasingly suggest that this market is loosening (Chart 4). We then shift focus back to the US economy, highlighting one of the reasons for its relative strength in recent months —namely, higher levels of immigration (Chart 5). Finally, we address inflation issues, and specifically the relatively rapid pace of global food price inflation in recent years (Chart 6).

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Charts of the Week: Reversal of fortune

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The Consumer Price Index increased 0.3% during April following two consecutive 0.4% increases. A 0.4% rise had been expected in the Action Economics Forecast Survey. The 3.4% y/y rise compared to 3.5% in March, and was increased from a 3.1% January low. It remained below the peak 9.1% y/y increase in June of 2022. The three-month increase of 4.6% (AR) was steady with March and more than double the rise at the end of last year. As expected, prices excluding food & energy also rose 0.3% following three consecutive 0.4% monthly increases. It rose 3.6% y/y last month compared to 3.8% in March; however, during the last three months, core price inflation has accelerated to 4.1% (AR), off the 4.5% March high but higher than the 2.6% low during August of last year.

The CPI less food, energy and shelter, another measure of core pricing power, rose 0.2% after two consecutive 0.3% increases. The 2.1% y/y rise remained below the 7.6% y/y peak in February 2022.

Service costs less energy increased 0.4% in April (5.3% y/y) following two straight 0.5% increases. Transportation services costs strengthened 0.9% (11.2% y/y) following a 1.5% March jump. The cost of shelter rose 0.4% (5.5% y/y) for the fifth month in the last six as owners’ equivalent rent of primary residences increased 0.4% (5.7% y/y) for the third consecutive month. Rents of primary residences increased 0.4% (5.4% y/y) after a 0.4% gain. The cost of lodging away from home fell 0.2% (-0.3% y/y) after two months of 0.1% increase. Education & communication prices rose 0.2% (1.6% y/y) for a second straight month. Recreation services prices rose 0.3% (4.1% y/y) following a 0.1% uptick and medical care service costs rose 0.4% (2.7% y/y) after a 0.6% strengthening.

During April, the CPI for goods less food & energy dipped 0.1% (-1.3% y/y) after falling 0.2% in March. Education & communication goods costs rose 0.1% (-6.0% y/y) following a 1.2% drop in March. Prices for recreation products held steady (-2.2% y/y) after falling 0.5%. Home furnishings prices weakened 0.4% (-2.8% y/y) after a 0.1% slip, while appliance costs fell 0.9% (-5.6% y/y) after two straight months of decline. Apparel prices rose 1.2% (1.3% y/y) after rising 0.7% in March. New vehicle prices eased 0.4% both m/m and y/y after slipping 0.2% in March while used car & truck prices declined 1.4% (-6.9% y/y) after falling 1.1% in March.

Energy prices increased 1.1% (2.6% y/y) in April for a second consecutive month. These gains followed four months of decline. Gasoline prices rose 2.8% (1.2% y/y) after a 1.7% rise. Amongst other energy products, fuel oil prices rose 0.9% (-0.8% y/y) after declining 1.3% in March. Electricity prices slipped 0.1% (+5.1% y/y) after rising 0.9%, while natural gas prices declined 2.9% (-1.9% y/y) after holding steady in March.

Food prices held steady (+2.2% y/y) last month after rising 0.1% in March. Egg prices weakened 7.3% (-9.0% y/y) after five straight months of strong increase. Meat, poultry & fish prices eased 0.1% (+1.9% y/y) after rising 0.6% while cereal & bakery product prices rose 0.6% both m/m and y/y after declining 0.9% in March. Fruit & vegetable prices weakened 0.8% (+1.7% y/y) after edging 0.1% higher, while dairy prices edged up 0.1% (-1.3% y/y) and reversed the March fall. Nonalcoholic beverage prices fell 0.2% (+2.3% y/y) after a 0.3% gain.

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

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- Transportation costs surge, while shelter prices increase steadily.
- Goods price pressure weakens further.
- Energy prices move higher but food prices hold steady.

U.S. CPI Strength Diminishes in April; Core Pricing Pressures Ease

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The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo fell 11.8% during May (-10.0% y/y) to 45 from 51 in April. The reading fell short of expectations for 51 in the Informa Global Markets Survey. The NAHB figures are seasonally adjusted. During the last ten years, there has been a 65% correlation between the y/y change in the home builders index and the y/y change in housing starts.

The May index of present sales conditions in the housing market weakened 10.5% (-8.9% y/y) to 51 after rising 1.8% in April. The index for conditions in the next six months fell 15.0% (-8.9% y/y) in May to 51 after declining 3.2% in April. Home builders reported that the traffic of prospective buyers’ index weakened 11.8% (-9.1% y/y) to 30, down from the recent high of 40 in July 2023.

Amongst the regional indexes for May, the index for the Midwest fell 2.0% from April (+16.7% y/y) while the index for the South declined 10.0% (-19.6% y/y). The index for the Northeast declined 10.8% this month (+28.9% y/y) and the reading for the West dropped 25.0% both m/m and y/y.

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

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- Current & future readings fall meaningfully.
- Prospective home buyer traffic is depressed.
- Regional declines are broad-based.

U.S. Home Builder Index Declines Sharply in May

Winnie Tapasanun

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Total retail sales were virtually unchanged m/m (3.0% y/y) in April after downwardly revised increases of 0.6% in March (+0.7% reported on Apr. 23 & 15) and 0.7% in February (+1.0% reported on Apr. 23 & +0.9% reported on Apr. 15), according to the Census Bureau. The April no change was the worst m/m reading since January’s 1.1% drop (+0.3% y/y). A 0.4% m/m April rise had been expected in the Action Economics Forecast Survey.

Excluding motor vehicles & parts, retail sales rose 0.2% (3.6% y/y) in April, the fourth m/m rise in five months, on top of a 0.9% gain in March. A 0.3% m/m April increase had been expected. Sales of motor vehicles & parts fell 0.8% (+0.8% y/y), the third m/m fall in four months, following a 0.3% March decline.

Sales in the retail control group, which excludes autos, building materials, gasoline stations, and food services, fell 0.3% (+3.5% y/y) in April following a 1.0% rise in March and no change in February. These sales are used in the construction of personal consumption expenditures in NIPA accounts. Nonauto sales excluding gasoline & building materials declined 0.2% (+3.9% y/y) after a 0.8% March increase and no change in February.

Sales by category were mixed in April. Gasoline station sales jumped 3.1% (4.0% y/y) in April, the biggest of three consecutive m/m gains, after a 2.1% rise in March. Clothing & accessory store sales rebounded 1.6% (2.7% y/y) vs. a 2.0% March decline. Electronics & appliance store sales rose 1.5% (0.8% y/y), the third m/m rise in four months, after a 3.1% March drop. Building materials & garden equipment store sales grew 0.5% (-1.0% y/y), the fourth m/m gain in five months, on top of a 0.4% March increase.

To the downside, nonstore retail sales fell 1.2% (+7.5% y/y) in April, the third m/m fall in four months, after a 2.5% rebound in March. Sporting goods, hobby shop, book & music store sales decreased 0.9% (-4.7% y/y) following a 1.3% March drop and a 0.7% February rise. Furniture & home furnishing store sales slid 0.5% (-8.4% y/y), the fourth m/m slide in five months, after a 2.3% March decline. Miscellaneous store sales dropped 0.4% (+6.8% y/y) vs. three successive m/m rises. General merchandise store sales fell 0.3% (+3.7% y/y), the first m/m fall since November, following a 1.3% March gain (however, within this grouping, department store sales grew 0.5% (-1.2% y/y), the first m/m gain since January).

In the nondiscretionary sales categories, food & beverage store sales rose 0.8% (2.2% y/y) in April, the largest of three straight m/m rises, after a 0.5% increase in March. Health & personal care store sales, however, fell 0.6% (-0.3% y/y), the fifth m/m fall in six months, following a 0.2% March rebound.

Consumers continued to eat out despite still-high inflation (April CPI +0.3% m/m, +3.4% y/y). Restaurant & drinking place sales rose 0.2% (5.5% y/y) in April following a 0.1% March downtick and a string of meaningful increases during the March 2023 to November 2023 period.

Retail Sales data can be found in Haver's **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- +0.02% (+3.0% y/y) in Apr.; downward revisions for Mar. and Feb.
- Ex-auto sales up for the fourth month in five.
- Auto sales down for the third month in four.
- Gasoline sales post the largest of three straight m/m increases.
- Nonstore retail sales fall for the third time in four months.

Economy in Brief: November 2008

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