Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217f.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217g.jpg" height="265" width="312">

Another indicator of trouble in the U.K.'s housing market, the
Rightmove House Price Index, fell 3.2% in December,
the largest month to month decline since its inception in January,
2002, as can be seen in the first chart. This index is based on the
asking prices of properties coming to market at Rightmove Co.'s more
than 11,500 estate agency branches. It is based on actual prices and
actual properties rather than on surveys of opinions about prices. The
sample includes some 200,000 houses each month, representing about 80%
of the market.
In addition to its Index, the Rightmove Co. has been
publishing average prices of various types of houses--detached,
semi-detached, terraced, and apartments. In December, the steepest
declines took place in the terraced houses and apartments. While the
prices of all types of house have declined in recent months, the prices
are still above year ago levels. However, the year to year increases in
the prices of all types of houses have been declining in the last half
of this year, as can be seen in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">U.K.
RIGHTMOVE CO.&nbsp;&nbsp;</th>
<th scope="col">Dec 07</th>
<th scope="col">Nov 07&nbsp;</th>
<th scope="col">Dec 06&nbsp;</th>
<th scope="col">M/M %Chg&nbsp;</th>
<th scope="col">Y/Y %Chg&nbsp;</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">House Price Index (Jan 2002=100)</td>
<td>189.1</td>
<td>195.3</td>
<td>180.4</td>
<td>-3.17</td>
<td>4.82</td>
<td>191.2</td>
<td>172.0</td>
<td>159.4</td>
</tr>
<tr>
<td colspan="6" rowspan="1" class="firstcol">Asking
Prices for Types of Houses (UK Pounds)</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Detached</td>
<td>334039</td>
<td>339675</td>
<td>316003</td>
<td>-1.66</td>
<td>5.71</td>
<td>336295</td>
<td>306255</td>
<td>284840</td>
</tr>
<tr class="odd">
<td class="firstcol">
&nbsp;&nbsp;Semi-detached</td>
<td>205759</td>
<td>208794</td>
<td>196846</td>
<td>-1.45</td>
<td>4.53</td>
<td>205645</td>
<td>189353</td>
<td>178630</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Terraced</td>
<td>180224</td>
<td>187844</td>
<td>173372</td>
<td>-4.06</td>
<td>3.95</td>
<td>182.661</td>
<td>164886</td>
<td>153475</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Apartments</td>
<td>193973</td>
<td>200875</td>
<td>187434</td>
<td>-3.44</td>
<td>3.49</td>
<td>196167</td>
<td>171504</td>
<td>156489</td>
</tr>
</tbody>
</table>
</body></html>

Another indicator of trouble in the U.K.'s housing market, the Rightmove House Price Index, fell 3.2% in December, the largest month to month decline since its inception in January, 2002, as can be seen in the first chart. This index [...]

UK Rightmove House Price Index Has Biggest Month to Month Decline since Beginning of Series

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217e.jpg" width="353">
The December index of manufacturing activity in New York State fell sharply to the lowest level since this past May. The level of 10.31 was half the expected 20. The figures are reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 55% correlation between the index level and the three month change in U.S. factory sector industrial production.
New orders and shipments fell sharply but employment improved slightly.
In the (perhaps too) short six year history of the NY employment index, there has been an 85% correlation between it and the three month growth in overall factory sector employment.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
Pricing pressure also fell to its lowest level since August. Since 2001 there has been an 81% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months improved but only slightly and remained near its lowest in six years.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Dec. &#39;06&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)&nbsp;&nbsp;</td>
<td>10.31</td>
<td>27.37&nbsp;</td>
<td>22.19</td>
<td>17.13</td>
<td>20.33</td>
<td>15.62</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>35.00</td>
<td>42.86</td>
<td>28.09</td>
<td>35.64</td>
<td>41.88</td>
<td>44.74</td>
</tr>
</tbody>
</table>


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The December index of manufacturing activity in New York State fell sharply to the lowest level since this past May. The level of 10.31 was half the expected 20. The figures are reported by the Federal Reserve Bank of New York. Since [...]

U.S. Empire State December Index Fell Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217c.jpg" width="353">
The US current account deficit fell further last quarter to $178.5 billion from $188.9 billion in Q2, a figure that was revised slightly shallower. The Q3 deficit was shallower than Consensus expectations for a deficit of $183.3 billion.
The latest deficit totaled 5.1% of GDP and it peaked as a percentage of GDP nearly two years ago at 6.8% in Q4 2005.
That shrinkage occurred as the deficit on merchandise trade improved slightly $199.7B from Q2&#39;s deficit of $204.2B and from its deepest shortfall a year ago of $219.9B During the last year only, exports grew 10.0% and outpaced the 4.4% y/y growth in imports.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217d.jpg" width="353">
The effects of the lower U.S. dollar and the strength of foreign economies versus the U.S. is apparent most decisively in the surplus in services trade. It improved markedly to a record surplus of $26.5B from $25.8B in 2Q. Exports of services during the last year alone grew 14.3%. Travel exports grew 17.7% y/y, passenger fares were up 10.9% and freight shipping grew 11.3%. Import growth, conversely was contained to 9.2% due to moderate 7.7% growth in travel, 4.8% growth in passenger fares and a slight 1.4% advance in private freight transportation.
Foreign trade zones from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/pubs/fedgaz/07-05/trade.cfm"> 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/@EE/@EE01/@EE01.HTM">US Balance of Payments</a>, &nbsp;Bil.$, SA</th>
<th scope="col">Q3 2007</th>
<th scope="col">Q2 2007</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account Balance ($ Bil.)</td>
<td>-178.5</td>
<td>-188.9</td>
<td>-217.3</td>
<td>-811.5</td>
<td>-754.8</td>
<td>-640.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Deficit % of GDP</td>
<td>-5.1</td>
<td>-5.5</td>
<td>-6.6</td>
<td>-6.2</td>
<td>-6.1</td>
<td>-5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Goods ($ Bil.)</td>
<td>-199.7</td>
<td>-204.2</td>
<td>-218.9</td>
<td>-838.3</td>
<td>-787.1</td>
<td>-669.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports&nbsp;</td>
<td>3.5%</td>
<td>1.2%</td>
<td>11.0%</td>
<td>12.7%</td>
<td>10.9%</td>
<td>13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports&nbsp;</td>
<td>2.4%</td>
<td>0.9%</td>
<td>4.4%</td>
<td>10.4%</td>
<td>12.9%</td>
<td>16.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Balance on Private Services ($ Bil.)</td>
<td>26.5</td>
<td>25.8</td>
<td>19.6</td>
<td>79.8</td>
<td>72.8</td>
<td>57.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>2.4%</td>
<td>5.1%</td>
<td>14.3%</td>
<td>9.9%</td>
<td>10.5%</td>
<td>14.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>2.2%</td>
<td>3.1%</td>
<td>9.2%</td>
<td>9.3%</td>
<td>8.7%</td>
<td>16.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Income ($ Bil.)</td>
<td>20.5</td>
<td>12.7</td>
<td>5.9</td>
<td>36.6</td>
<td>48.1</td>
<td>56.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral Transfers ($ Bil.)</td>
<td>-25.8</td>
<td>-23.2</td>
<td>-23.9</td>
<td>-89.6</td>
<td>-88.5</td>
<td>-88.4</td>
</tr>
</tbody>
</table>
</body>
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The US current account deficit fell further last quarter to $178.5 billion from $188.9 billion in Q2, a figure that was revised slightly shallower. The Q3 deficit was shallower than Consensus expectations for a deficit of $183.3 [...]

U.S. Current Account Deficit Eased Further in Q3

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217b.jpg" align="left" border="0" height="265" width="353">
As we saw earlier, Japan&#8217;s mining and manufacturing index is
holding up after some special factors weakened it earlier in the year.
Now the tertiary index is stabilizing in October. It rose to 110.9 in
October but its 12 month change is still eroding (see chart). Japan&#8217;s
Construction sector (not yet available for Oct) is clearly the weak
sector. Manufacturing is recovering from some weather disasters earlier
in the year. The tertiary index, representing the more stable services
sector is rather plodding along. As a result the overall all industries
index (also not yet available for Oct) has shown small increases but
has been on the positive side of those Yr/Yr changes.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">Up to
date Japan Industry Surveys </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"></td>
<td colspan="3">Recent Months</td>
<td colspan="3">Moving Averages</td>
<td colspan="3">Extremes: Range</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-2007</td>
<td>Sep-2007</td>
<td>Aug-2007</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Max</td>
<td>Min</td>
<td>%-Tile</td>
</tr>
<tr>
<td class="firstcol">Mining and MFG</td>
<td>112.2</td>
<td>110.3</td>
<td>111.9</td>
<td>111.5</td>
<td>109.7</td>
<td>108.9</td>
<td>112.2</td>
<td>87.7</td>
<td>100.0%</td>
</tr>
<tr>
<td class="firstcol">Tertiary</td>
<td>110.4</td>
<td>109.2</td>
<td>111.2</td>
<td>110.3</td>
<td>110.2</td>
<td>109.9</td>
<td>111.2</td>
<td>91.0</td>
<td>96.0%</td>
</tr>
<tr class="grey2">
<td colspan="10" class="firstcol">Ranges,
Max, Min since 1993</td>
</tr>
</tbody>
</table>
</body></html>

As we saw earlier, Japan’s mining and manufacturing index is holding up after some special factors weakened it earlier in the year. Now the tertiary index is stabilizing in October. It rose to 110.9 in October but its 12 month change [...]

Japan Tertiary Index Bounces

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217a.jpg" align="left" border="0" height="265" width="353">
The NTC MFG and Services indices for the E-zone slipped in
December in their flash release. Services are below their three month
and six month and 12-month average values. Manufacturing is too, except
for the three month comparison. The Service index stand in the bottom
of its 24 month range. For the same period Manufacturing is in the
bottom 16 percent of its range. Although the manufacturing index has a
much longer history and in its full sample of observations (back to
June 1997) it resides in the 54th percentile of its range and it is
just 0.5% below its long term average reading. 
 

The Flash data show us that the Euro Area is still weak and
losing momentum. But the chart also shows that the momentum loss is not
accelerating. Services continue to look bad in terms of momentum, but
manufacturing fell and bounced and is now eroding at a much more
moderate pace. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">NTC PMIs
for the E-Zone-13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Dec-07</td>
<td>52.46</td>
<td>53.23</td>
</tr>
<tr>
<td class="firstcol">Nov-07</td>
<td>52.60</td>
<td>53.72</td>
</tr>
<tr>
<td class="firstcol">Oct-07</td>
<td>51.46</td>
<td>55.56</td>
</tr>
<tr>
<td class="firstcol">Sep-07</td>
<td>53.21</td>
<td>54.04</td>
</tr>
<tr class="even">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>52.17</td>
<td>54.17</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>53.12</td>
<td>55.43</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>54.24</td>
<td>56.46</td>
</tr>
<tr class="even">
<td colspan="3" class="firstcol">24-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>51.46</td>
<td>53.23</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>16.3%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

The NTC MFG and Services indices for the E-zone slipped in December in their flash release. Services are below their three month and six month and 12-month average values. Manufacturing is too, except for the three month comparison. [...]

NTC FLASH Indices for E-Zone MFG and Services - Still Struggling

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217c.jpg" align="left" border="0" height="265" width="353">
The US current account deficit fell further last quarter to
$178.5 billion from $188.9 billion in Q2, a figure that was revised
slightly shallower. The Q3 deficit was shallower than Consensus
expectations for a deficit of $183.3 billion.
The latest deficit totaled 5.1% of GDP and it peaked as a
percentage of GDP nearly two years ago at 6.8% in Q4 2005.
That shrinkage occurred as the deficit on merchandise trade
improved slightly $199.7B from Q2's deficit of $204.2B and from its
deepest shortfall a year ago of $219.9B During the last year only,
exports grew 10.0% and outpaced the 4.4% y/y growth in imports.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217d.jpg" align="right" border="0" height="265" width="353">
The effects of the lower U.S. dollar and the strength of
foreign economies versus the U.S. is apparent most decisively in the
surplus in services trade. It improved markedly to a record surplus of
$26.5B from $25.8B in 2Q. Exports of services during the last year
alone grew 14.3%. Travel exports grew 17.7% y/y, passenger fares were
up 10.9% and freight shipping grew 11.3%. Import growth, conversely was
contained to 9.2% due to moderate 7.7% growth in travel, 4.8% growth in
passenger fares and a slight 1.4% advance in private freight
transportation.
Foreign trade zones from the Federal
Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/pubs/fedgaz/07-05/trade.cfm">
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/@EE/@EE01/@EE01.HTM">US
Balance of Payments</a>, 
&nbsp;Bil.$, SA</th>
<th scope="col">Q3 2007</th>
<th scope="col">Q2 2007</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account
Balance ($ Bil.)</td>
<td>-178.5</td>
<td>-188.9</td>
<td>-217.3</td>
<td>-811.5</td>
<td>-754.8</td>
<td>-640.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Deficit % of GDP</td>
<td>-5.1</td>
<td>-5.5</td>
<td>-6.6</td>
<td>-6.2</td>
<td>-6.1</td>
<td>-5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on
Goods ($ Bil.)</td>
<td>-199.7</td>
<td>-204.2</td>
<td>-218.9</td>
<td>-838.3</td>
<td>-787.1</td>
<td>-669.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Exports&nbsp;</td>
<td>3.5%</td>
<td>1.2%</td>
<td>11.0%</td>
<td>12.7%</td>
<td>10.9%</td>
<td>13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imports&nbsp;</td>
<td>2.4%</td>
<td>0.9%</td>
<td>4.4%</td>
<td>10.4%</td>
<td>12.9%</td>
<td>16.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Balance on
Private Services ($ Bil.)</td>
<td>26.5</td>
<td>25.8</td>
<td>19.6</td>
<td>79.8</td>
<td>72.8</td>
<td>57.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Exports</td>
<td>2.4%</td>
<td>5.1%</td>
<td>14.3%</td>
<td>9.9%</td>
<td>10.5%</td>
<td>14.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imports</td>
<td>2.2%</td>
<td>3.1%</td>
<td>9.2%</td>
<td>9.3%</td>
<td>8.7%</td>
<td>16.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on
Income ($ Bil.)</td>
<td>20.5</td>
<td>12.7</td>
<td>5.9</td>
<td>36.6</td>
<td>48.1</td>
<td>56.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral
Transfers ($ Bil.)</td>
<td>-25.8</td>
<td>-23.2</td>
<td>-23.9</td>
<td>-89.6</td>
<td>-88.5</td>
<td>-88.4</td>
</tr>
</tbody>
</table>
U.S. Empire State December Index
Fell Sharply 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 17, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217e.jpg" align="left" border="0" height="265" width="353">
The December index of manufacturing activity in New York State
fell sharply to the lowest level since this past May. The level of
10.31 was half the expected 20. The figures are reported by the Federal
Reserve Bank of New York.
Since the series' inception in 2001 there has been a 55%
correlation between the index level and the three month change in U.S.
factory sector industrial production.
New orders and shipments fell sharply but employment improved
slightly.
In the (perhaps too) short six year history of the NY
employment index, there has been an 85% correlation between it and the
three month growth in overall factory sector employment.
Like the Philadelphia Fed Index of General Business
Conditions, the Empire State Business Conditions Index reflects answers
to an independent survey question; it is not a weighted combination of
the components.
Pricing pressure also fell to its lowest level since August.
Since 2001 there has been an 81% correlation between the index of
prices paid and the three month change in the core intermediate
materials PPI.
The Empire State index of expected business
conditions in six months improved but only slightly and
remained near its lowest in six years.
The Empire State Manufacturing Survey is a monthly survey of
manufacturers in New York State conducted by the Federal Reserve Bank
of New York. Participants from across the state in a variety of
industries respond to a questionnaire and report the change in a
variety of indicators from the previous month. Respondents also state
the likely direction of these same indicators six months ahead. April
2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including
methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>.

 
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire
State Manufacturing Survey</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Dec. '06&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions
(diffusion index)&nbsp;&nbsp;</td>
<td>10.31</td>
<td>27.37&nbsp;</td>
<td>22.19</td>
<td>17.13</td>
<td>20.33</td>
<td>15.62</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>35.00</td>
<td>42.86</td>
<td>28.09</td>
<td>35.64</td>
<td>41.88</td>
<td>44.74</td>
</tr>
</tbody>
</table>
UK Rightmove House Price Index
HasBiggest Month to Month Decline since Beginning of Series 
by <a href="/comment/Curley.html">Louise
Curley</a> December 17, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217f.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217g.jpg" height="265" width="312">

Another indicator of trouble in the U.K.'s housing market, the
Rightmove House Price Index, fell 3.2% in December,
the largest month to month decline since its inception in January,
2002, as can be seen in the first chart. This index is based on the
asking prices of properties coming to market at Rightmove Co.'s more
than 11,500 estate agency branches. It is based on actual prices and
actual properties rather than on surveys of opinions about prices. The
sample includes some 200,000 houses each month, representing about 80%
of the market.
In addition to its Index, the Rightmove Co. has been
publishing average prices of various types of houses--detached,
semi-detached, terraced, and apartments. In December, the steepest
declines took place in the terraced houses and apartments. While the
prices of all types of house have declined in recent months, the prices
are still above year ago levels. However, the year to year increases in
the prices of all types of houses have been declining in the last half
of this year, as can be seen in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">U.K.
RIGHTMOVE CO.&nbsp;&nbsp;</th>
<th scope="col">Dec 07</th>
<th scope="col">Nov 07&nbsp;</th>
<th scope="col">Dec 06&nbsp;</th>
<th scope="col">M/M %Chg&nbsp;</th>
<th scope="col">Y/Y %Chg&nbsp;</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">House Price Index (Jan 2002=100)</td>
<td>189.1</td>
<td>195.3</td>
<td>180.4</td>
<td>-3.17</td>
<td>4.82</td>
<td>191.2</td>
<td>172.0</td>
<td>159.4</td>
</tr>
<tr>
<td colspan="6" rowspan="1" class="firstcol">Asking
Prices for Types of Houses (UK Pounds)</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Detached</td>
<td>334039</td>
<td>339675</td>
<td>316003</td>
<td>-1.66</td>
<td>5.71</td>
<td>336295</td>
<td>306255</td>
<td>284840</td>
</tr>
<tr class="odd">
<td class="firstcol">
&nbsp;&nbsp;Semi-detached</td>
<td>205759</td>
<td>208794</td>
<td>196846</td>
<td>-1.45</td>
<td>4.53</td>
<td>205645</td>
<td>189353</td>
<td>178630</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Terraced</td>
<td>180224</td>
<td>187844</td>
<td>173372</td>
<td>-4.06</td>
<td>3.95</td>
<td>182.661</td>
<td>164886</td>
<td>153475</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Apartments</td>
<td>193973</td>
<td>200875</td>
<td>187434</td>
<td>-3.44</td>
<td>3.49</td>
<td>196167</td>
<td>171504</td>
<td>156489</td>
</tr>
</tbody>
</table>
NTC FLASH Indices for E-Zone MFG
and Services - Still
Struggling 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December 17, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217a.jpg" align="left" border="0" height="265" width="353">
The NTC MFG and Services indices for the E-zone slipped in
December in their flash release. Services are below their three month
and six month and 12-month average values. Manufacturing is too, except
for the three month comparison. The Service index stand in the bottom
of its 24 month range. For the same period Manufacturing is in the
bottom 16 percent of its range. Although the manufacturing index has a
much longer history and in its full sample of observations (back to
June 1997) it resides in the 54th percentile of its range and it is
just 0.5% below its long term average reading. 

The Flash data show us that the Euro Area is still weak and
losing momentum. But the chart also shows that the momentum loss is not
accelerating. Services continue to look bad in terms of momentum, but
manufacturing fell and bounced and is now eroding at a much more
moderate pace. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
<tr>
<th colspan="3" scope="col">NTC PMIs
for the E-Zone-13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Dec-07</td>
<td>52.46</td>
<td>53.23</td>
</tr>
<tr>
<td class="firstcol">Nov-07</td>
<td>52.60</td>
<td>53.72</td>
</tr>
<tr>
<td class="firstcol">Oct-07</td>
<td>51.46</td>
<td>55.56</td>
</tr>
<tr>
<td class="firstcol">Sep-07</td>
<td>53.21</td>
<td>54.04</td>
</tr>
<tr class="even">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>52.17</td>
<td>54.17</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>53.12</td>
<td>55.43</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>54.24</td>
<td>56.46</td>
</tr>
<tr class="even">
<td colspan="3" class="firstcol">24-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>51.46</td>
<td>53.23</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>16.3%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
Japan Tertiary Index
Bounces 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December 17, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071217b.jpg" align="left" border="0" height="265" width="353">
As we saw earlier, Japan&#8217;s mining and manufacturing index is
holding up after some special factors weakened it earlier in the year.
Now the tertiary index is stabilizing in October. It rose to 110.9 in
October but its 12 month change is still eroding (see chart). Japan&#8217;s
Construction sector (not yet available for Oct) is clearly the weak
sector. Manufacturing is recovering from some weather disasters earlier
in the year. The tertiary index, representing the more stable services
sector is rather plodding along. As a result the overall all industries
index (also not yet available for Oct) has shown small increases but
has been on the positive side of those Yr/Yr changes.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">Up to
date Japan Industry Surveys </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"></td>
<td colspan="3">Recent Months</td>
<td colspan="3">Moving Averages</td>
<td colspan="3">Extremes: Range</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-2007</td>
<td>Sep-2007</td>
<td>Aug-2007</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Max</td>
<td>Min</td>
<td>%-Tile</td>
</tr>
<tr>
<td class="firstcol">Mining and MFG</td>
<td>112.2</td>
<td>110.3</td>
<td>111.9</td>
<td>111.5</td>
<td>109.7</td>
<td>108.9</td>
<td>112.2</td>
<td>87.7</td>
<td>100.0%</td>
</tr>
<tr>
<td class="firstcol">Tertiary</td>
<td>110.4</td>
<td>109.2</td>
<td>111.2</td>
<td>110.3</td>
<td>110.2</td>
<td>109.9</td>
<td>111.2</td>
<td>91.0</td>
<td>96.0%</td>
</tr>
<tr class="grey2">
<td colspan="10" class="firstcol">Ranges,
Max, Min since 1993</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/071214a.jpg" width="353">
The consumer price index (CPI-U) rose 0.8% last month due to the surge in energy prices. The gain was the quickest since September of 2005, a month when higher energy prices similarly raised the index.A 0.6% rise in the November CPI had been expected by a Consensus of economists. The y/y gain in prices of 4.3% was its quickest since June of last year.
Core consumer price inflation picked up slightly to 0.3% after five months of 0.2% increase. A 0.2% gain was the general expectation. The y/y increase of 2.3% was its quickest in six months and the three month rise, to 2.6% (AR), has shown acceleration this year.
Energy prices soared 5.7%, the fastest rise since a 5.9% increase during March of this year. Those two gains were the quickest since an 11.8% surge in 2005. That was subsequently followed by m/m declines and/or more moderate gains in energy prices. Gasoline prices jumped 9.3% (37.1% y/y) last month but the weekly data already indicate a slight m/m decline in December. Prices for fuel oil &amp; other fuels surged 11.9% (28.4% y/y) but natural gas &amp; electricity prices rose just 0.7% (4.4% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071214b.jpg" width="353">
Food &amp; beverage prices rose 0.3% (4.7% y/y) but that was enough to lift the y/y increase to its fastest since 1991. Prices of dairy products were notably strong and rose 0.6% (14.0% y/y). Prices for fruits &amp; vegetable jumped 1.6% (4.5% y/y) but prices for meats, poultry &amp; fish fell 0.1% (5.4% y/y).
Core goods prices rose 0.2% after slight declines during each of the prior three months. Apparel prices surged 0.8% (-0.4% y/y) after having been unchanged in October. New &amp; used motor vehicle prices were unchanged (-0.4% y/y) after two months of decline. Prices of household furnishings &amp; operation rose a slight 0.1% (-0.7% y/y) after four straight months of decline.Tobacco prices increased 0.2% (8.2% y/y) for the second month but the y/y gain was its strongest since early 2003. The core CPI less tobacco rose 0.3% (2.3%).
Core services prices rose 0.3% (3.2% y/y). Shelter prices increased 0.3% (3.1% y/y) and that y/y change was its slowest since early this year. Owners equivalent rent of primary residence, a measure not equivalent to other house price measures, rose 0.3%, reducing the y/y gain to 2.8% y/y. Since a low several months ago of 1.8%, the three month change has picked up to 3.4%, its firmest since January. Public transportation prices rose 1.8% (6.1% y/y) and medical care services prices rose 0.3% (5.8% y/y). Education service prices rose 0.6% (5.5% y/y) after a firm 0.7% October gain but communication prices fell (-0.1% y/y) for the second consecutive month.
The chained CPI, which adjusts for shifts in the mix of consumer purchases rose 0.4% (3.6% y/y) but the core measure was unchanged. This latter measure is similar to the core PCE price index but its treatment of housing price differs
A Comparison of Measures of Core Inflation from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/epr/07v13n3/0712rich.pdf"> 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"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.8%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>4.3%&nbsp;</td>
<td>3.2%</td>
<td>3.4%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.3%&nbsp;</td>
<td>2.5%</td>
<td>2.2%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods less Food &amp; Energy</td>
<td>0.2%</td>
<td>-0.0%</td>
<td>-0.0%</td>
<td>0.0%&nbsp;</td>
<td>0.2%</td>
<td>0.5%</td>
<td>-0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.3%</td>
<td>3.2%&nbsp;</td>
<td>3.4%</td>
<td>2.8%</td>
<td>2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Energy</td>
<td>5.7%</td>
<td>1.4%</td>
<td>0.3%</td>
<td>21.3%&nbsp;</td>
<td>11.1%</td>
<td>16.9%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food &amp; Beverages</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>4.8%&nbsp;</td>
<td>2.3%</td>
<td>2.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td>&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a>&nbsp;</td>
<td>0.4%</td>
<td>0.2%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy&nbsp;</td>
<td>0.0%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.0%</td>
<td>2.3%</td>
<td>1.9%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>


</html>

The consumer price index (CPI-U) rose 0.8% last month due to the surge in energy prices. The gain was the quickest since September of 2005, a month when higher energy prices similarly raised the index.A 0.6% rise in the November CPI [...]

U.S. CPI Total & Core Slightly Above Expectations

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071214e.jpg" width="353">
Industrial production rose 0.3% last month but the increase recovered less than half of the downwardly revised 0.7% drop in October. The Consensus expectation had been for a 0.2% rise.
Factory output also recovered from an October drop that was revised deeper. The 0.4% November increase left the three month change in output at -0.3%.
Output gains were broad based. Production in the motor vehicle &amp; parts industries rose 1.6% and recovered all of the prior month&#39;s 1.5% drop. However that still left output down 1.6% from a year earlier. Output of furniture &amp; related products bounced 0.4% (-2.0% y/y) following two months of sharp decline and output of construction supplies was unchanged (1.0% y/y).
Also in the consumer goods sector, production of computers &amp; electronics rose 1.5% (+13.4% y/y). Output of apparel was unchanged (-3.8% y/y) but output of chemical products was down for the fourth straight month (-0.5% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071214f.jpg" width="353">
Output of business equipment rose a solid 1.0% (4.0% y/y). Output of information &amp; processing equipment surged 2.3% (9.3% y/y). Three month growth amounted to 11.9% (AR). Production of industrial equipment inched up 0.2% after a 0.9% October shortfall. Three month growth recovered to 2.7% (AR), well below the 6.7% growth of last year.
In the materials category output rose 0.5% and recovered all of the prior month&#39;s decline. Production of durable consumer parts rose 0.9% (5.0 y/y). Production of durable equipment parts surged 1.4% (7.4% y/y) but consumer durable parts output only rose 0.5% (-0.5% y/y) after three months of sharp decline.
Capacity utilization inched up to 81.5% from a revised 81.4% in October. Utilization in the factory sector also rose slightly m/m to 79.8% and averaged 80.2% last year. Capacity rose 0.1% (1.8% y/y).
The Macroeconomics of Oil Shocks from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/br/2007/br_q1-2007-3_oil-shocks.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">INDUSTRIAL PRODUCTION (SA)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>2.2%</td>
<td>4.0%</td>
<td>3.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.4%</td>
<td>-0.7%</td>
<td>2.3%</td>
<td>5.0%</td>
<td>4.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mining</td>
<td>1.2%</td>
<td>-0.7%</td>
<td>2.2%</td>
<td>2.7%</td>
<td>-1.6%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Utilities</td>
<td>-1.4%</td>
<td>-1.4%</td>
<td>1.2%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>


</html>

Industrial production rose 0.3% last month but the increase recovered less than half of the downwardly revised 0.7% drop in October. The Consensus expectation had been for a 0.2% rise. Factory output also recovered from an October [...]

U.S. Industrial Production Rose 0.3% and Recouped Half of the October Decline

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

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

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

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

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

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

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

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

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

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

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

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

Michael J. Moran

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

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

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

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

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

Personal Income, Consumption, and Prices in March

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

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

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

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

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

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

U.S. Pending Home Sales Surge in March

Sandy Batten

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

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

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

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

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

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

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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

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

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

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

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

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

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

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

Economy in Brief: 2007

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