Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724e.jpg" width="353">
For June the level of existing homes fell 2.6% to 4.86 million, reported the National Association of Realtors. The decline reversed all of a 2.0% increase during May and it was to a new low for this cycle. The figure was weaker than the expected selling rate of 4.94M homes. Total sales include sales of condos and co-ops.
Sales of existing single-family homes fell a larger 3.2%. These sales (which have a longer history than the total) were at the lowest level since early-1998.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724f.jpg" width="353">
By region, home sales in the West rose for the fourth straight month and they were up 17.0% from the October &#39;07 low. Elsewhere, sales in the Northeast reversed the increases of the prior four months. In the Midwest total sales fell to near the low for this cycle but sales of single-family homes were at the lowest level since 1997. Sales down South fell to the lowest level since 2000.
Median home prices repeated their May increase and rose 3.5%. Prices were up 10.0% from the February low after a 33% three-month rate of decline in October. However, prices typically firm in the Spring.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724g.jpg" width="353">
The number of unsold homes (condos &amp; single-family) on the market was roughly unchanged m/m (+2.8% y/y). At the current sales rate the inventory rose slightly to an 11.1 months supply which is about the record high for this series. For single-family homes there also was an 11.0 months supply at the current sales rate which was the highest supply since 1985.
The Fed&#39;s latest Beige Book which covers regional economic conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2008/20080723/default.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 Single Family Home Sales (Thous)</th>
<th scope="col">June</th>
<th scope="col">y/y %</th>
<th scope="col">May</th>
<th scope="col">June &#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>4,860</td>
<td>-15.5</td>
<td>4,990</td>
<td>5,750</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>850</td>
<td>-15.8</td>
<td>910</td>
<td>1,010</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,120</td>
<td>-17.6</td>
<td>1,160</td>
<td>1,360</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,850</td>
<td>-18.1</td>
<td>1,910</td>
<td>2,260</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,030</td>
<td>-6.4</td>
<td>1,020</td>
<td>1,100</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr class="odd">
<td class="firstcol">Single-Family</td>
<td>4,270</td>
<td>-14.8</td>
<td>4,410</td>
<td>5,010</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>215,100</td>
<td>-6.1</td>
<td>207,900</td>
<td>229,000</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
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For June the level of existing homes fell 2.6% to 4.86 million, reported the National Association of Realtors. The decline reversed all of a 2.0% increase during May and it was to a new low for this cycle. The figure was weaker than [...]

U.S. Existing Home Sales Drift Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724a.jpg" width="353">
Initial claims for unemployment insurance shot higher last week to 406,000. The latest level compared to an upwardly revised 372,000 during the prior week. It reached a level not seen since this past March which was the highest point since mid-2005. The latest weekly surge surpassed Consensus expectations for a rise to 380,000 claims.
As a result of the latest weekly jump in initial claims the four-week moving average increased, but just modestly, to 382,500 (23.1% y/y). During June claims averaged 391,000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724b.jpg" width="353">
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. Over the longer period of time, the level of claims for jobless insurance has not trended higher with the size of the labor force due to a higher proportion of self-employed workers who are not eligible for benefits.
Initial claims claims for jobless insurance in California are up 34.7% y/y. They also are up 46.0% in New York and by 55.1% in Ohio. In Massachusetts the gain in claims moderated to 10.7% and in Michigan the rise fell to 8.2% after the doubling this past May. In Pennsylvania claims fell 12.1% from last year. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724c.jpg" width="353">
Continuing claims for unemployment insurance during the latest week fell by 9,000 following a little-revised 87,000 worker decline during the prior week. The four-week moving average of continuing claims slipped slightly but remained near the cycle high of 3,142,750. That was roughly a quarter higher than a year ago and the highest level since early 2004.
Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment was unchanged at 2.3%.
The Congressional Budget Office&#39;s Cost Estimate of the Foreclosure Prevention Act of 2008 can be found <a href="http://www.cbo.gov/ftpdocs/95xx/doc9592/hr3221.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">07/19/08</th>
<th scope="col">07/12/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;406</td>
<td>372</td>
<td>31.8%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,107</td>
<td>22.2%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance shot higher last week to 406,000. The latest level compared to an upwardly revised 372,000 during the prior week. It reached a level not seen since this past March which was the highest point [...]

U.S. Initial Unemployment Insurance Claims Shoot Back Up

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724a.jpg" align="left" border="0" height="265" width="353">
Initial claims for unemployment insurance shot higher last
week to 406,000. The latest level compared to an upwardly revised
372,000 during the prior week. It reached a level not seen since this
past March which was the highest point since mid-2005. The latest
weekly surge surpassed Consensus expectations for a rise to 380,000
claims.
As a result of the latest weekly jump in initial claims the
four-week moving average increased, but just modestly, to 382,500
(23.1% y/y). During June claims averaged 391,000.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724b.jpg" align="right" border="0" height="265" width="353">
A claims level below 400,000 typically has been associated
with growth in nonfarm payrolls. During the last ten years there has
been a (negative) 76% correlation between the level of initial claims
and the m/m change in nonfarm payroll employment. Over the longer
period of time, the level of claims for jobless insurance has not
trended higher with the size of the labor force due to a higher
proportion of self-employed workers who are not eligible for benefits.
Initial claims claims for jobless insurance in California are
up 34.7% y/y. They also are up 46.0% in New York and by 55.1% in Ohio.
In Massachusetts the gain in claims moderated to 10.7% and in Michigan
the rise fell to 8.2% after the doubling this past May. In Pennsylvania
claims fell 12.1% from last year. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724c.jpg" align="left" border="0" height="265" width="353">
Continuing claims for unemployment insurance during the latest
week fell by 9,000 following a little-revised 87,000 worker decline
during the prior week. The four-week moving average of continuing
claims slipped slightly but remained near the cycle high of 3,142,750.
That was roughly a quarter higher than a year ago and the highest level
since early 2004.
Continuing claims provide some indication of workers' ability
to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment was unchanged at 2.3%.
The Congressional Budget Office's Cost Estimate of
the Foreclosure Prevention Act of 2008 can be found <a href="http://www.cbo.gov/ftpdocs/95xx/doc9592/hr3221.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">07/19/08</th>
<th scope="col">07/12/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;406</td>
<td>372</td>
<td>31.8%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,107</td>
<td>22.2%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
U.S. Existing Home Sales Drift Down 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724e.jpg" align="left" border="0" height="265" width="353">
For June the level of existing homes fell 2.6%
to 4.86 million, reported the National Association of Realtors. The
decline reversed all of a 2.0% increase during May and it was to a new
low for this cycle. The figure was weaker than the expected selling
rate of 4.94M homes. Total sales include sales of condos and co-ops.
Sales of existing single-family homes fell a larger 3.2%.
These sales (which have a longer history than the total) were at the
lowest level since early-1998.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724f.jpg" align="right" border="0" height="265" width="353">
By region, home sales in the West rose for the fourth straight
month and they were up 17.0% from the October '07 low. Elsewhere, sales
in the Northeast reversed the increases of the prior four months. In
the Midwest total sales fell to near the low for this cycle but sales
of single-family homes were at the lowest level since 1997. Sales down
South fell to the lowest level since 2000.
Median home prices repeated their May
increase and rose 3.5%. Prices were up 10.0% from the February low
after a 33% three-month rate of decline in October. However, prices
typically firm in the Spring.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724g.jpg" align="left" border="0" height="265" width="353">
The number of unsold homes (condos &amp; single-family) on
the market was roughly unchanged m/m (+2.8% y/y). At the current sales
rate the inventory rose slightly to an 11.1 months supply which is
about the record high for this series. For single-family homes there
also was an 11.0 months supply at the current sales rate which was the
highest supply since 1985.
The Fed's latest Beige Book which covers
regional economic conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2008/20080723/default.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
Single Family 
Home Sales (Thous)</th>
<th scope="col">June</th>
<th scope="col">y/y %</th>
<th scope="col">May</th>
<th scope="col">June '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>4,860</td>
<td>-15.5</td>
<td>4,990</td>
<td>5,750</td>
<td>5,672</td>
<td>6,508</td>
<td>7,076</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>850</td>
<td>-15.8</td>
<td>910</td>
<td>1,010</td>
<td>1,008</td>
<td>1,090</td>
<td>1,168</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,120</td>
<td>-17.6</td>
<td>1,160</td>
<td>1,360</td>
<td>1,331</td>
<td>1,491</td>
<td>1,589</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,850</td>
<td>-18.1</td>
<td>1,910</td>
<td>2,260</td>
<td>2,240</td>
<td>2,576</td>
<td>2,704</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,030</td>
<td>-6.4</td>
<td>1,020</td>
<td>1,100</td>
<td>1,093</td>
<td>1,353</td>
<td>1,617</td>
</tr>
<tr class="odd">
<td class="firstcol">Single-Family</td>
<td>4,270</td>
<td>-14.8</td>
<td>4,410</td>
<td>5,010</td>
<td>4,958</td>
<td>5,703</td>
<td>6,181</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>215,100</td>
<td>-6.1</td>
<td>207,900</td>
<td>229,000</td>
<td>216,617</td>
<td>222,000</td>
<td>218,217</td>
</tr>
</tbody>
</table>
The MFG and Services PMIs Simply
are Dropping Rapidly 
by <a href="/comment/Brusca.html">Robert
Brusca</a> July 24, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080724d.jpg" align="left" border="0" height="265" width="353">
There is little let up in the pace of the drop in the Euro
Area MFG and services PMIs. Indeed their rate of decline has picked up
pace. The services PMI has been in existence for 31 months and it is at
its lowest level since its inception. The MFG is at its lowest level
for that period as well. 
 

The MFG index has been in existence much longer. And for that
longer period back to 1996 it stands in the 26th percentile of its
range - a low reading. 
 

Except for January of this year when the services index fell
very sharply, the past two months represent the fastest six month rate
of decline for the services index. For MFG the July decline is the
fastest six month decline in this cycle. This suggests that the
downward pressure on the Euro Area economies is becoming more intense. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
<tr class="even">
<th colspan="3" scope="col">Markit
PMIs for the
Euro-Area-13</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jul-08</td>
<td>47.54</td>
<td>48.26</td>
</tr>
<tr class="grey1">
<td class="firstcol">Jun-08</td>
<td>49.07</td>
<td>49.46</td>
</tr>
<tr>
<td class="firstcol">May-08</td>
<td>50.52</td>
<td>50.59</td>
</tr>
<tr class="grey1">
<td class="firstcol">Apr-08</td>
<td>50.85</td>
<td>51.78</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>49.04</td>
<td>49.44</td>
</tr>
<tr class="grey1">
<td class="firstcol">6-Mo</td>
<td>50.37</td>
<td>50.67</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>51.56</td>
<td>52.54</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">31-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr class="grey1">
<td class="firstcol">Low</td>
<td>47.54</td>
<td>48.26</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080723a.jpg" align="left" border="0" height="265" width="353">
The domestic and foreign orders trend lines now both have
discernable downtrends. Growth rate calculations over the key
sequential periods also show that declines are becoming more intense in
both sectors. Over three months, for example domestic orders are
dropping at an 11% pace while foreign orders are dropping at an 18%
pace. Yr/Yr domestic orders are flat while foreign orders are off by
2.5%. Sales trends are losing momentum as well but only for
intermediate goods is the trend negative over three months (flat Yr/Yr). 
 

The Euro-Area result is the weighted average of the country
results. All thee of the largest Zone countries have orders lower over
three months: Germany France and Italy. Yr/Yr France is down the most
followed by Italy with German orders still up over 12-months but by
less than one-percent. 
 

The slowdown in the e-zone is now undeniable and with orders
turning negative Yr/Yr the potential for something deeper than a
slowdown is in the works. The IMF&#8217;s John Lipsky has said that the euro
is now overvalued. The EMU community is being squeezed by a too &#8211;strong
euro rising interest rates high inflation (due to just a few items with
spiking prices however) and a slowing global economy. Through all of
this, EMU growth has been supported by strength in capital goods
output. That is now fading. Consumption remains weak. Thus there is
little to cushion the economy from the slowdown emanating from the
capital goods side. Europe&#8217;s weakness and slippage is a real phenomenon
and it is echoed by earlier surveys form Zew and the IFO. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">Euro Area
and UK Industrial Orders &amp; Sales Trends </th>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">% m/m</td>
<td>May 
08</td>
<td>May 
08</td>
<td>May 
08</td>
<td>May 
07</td>
<td>May 
06</td>
<td>Qtr-2 
-Date</td>
</tr>
<tr class="grey4">
<td class="firstcol">Euro Area Detail</td>
<td>May 
08</td>
<td>Apr 
08</td>
<td>Mar 
08</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Saar</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>0.6%</td>
<td>0.4%</td>
<td>0.1%</td>
<td>4.2%</td>
<td>8.2%</td>
<td>5.1%</td>
<td>6.4%</td>
<td>7.9%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.2%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>2.4%</td>
<td>6.4%</td>
<td>7.9%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>0.2%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.4%</td>
<td>5.3%</td>
<td>5.2%</td>
<td>4.3%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Intermediate</td>
<td>-5.5%</td>
<td>4.6%</td>
<td>-1.9%</td>
<td>-11.4%</td>
<td>-8.9%</td>
<td>0.0%</td>
<td>8.3%</td>
<td>7.1%</td>
<td>3.4%</td>
</tr>
<tr class="grey4">
<td class="firstcol" colspan="10">MFG
Orders</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-3.5%</td>
<td>2.0%</td>
<td>-1.0%</td>
<td>-9.8%</td>
<td>-8.3%</td>
<td>-1.0%</td>
<td>8.2%</td>
<td>12.1%</td>
<td>-2.2%</td>
</tr>
<tr>
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-5.5%</td>
<td>4.6%</td>
<td>-1.9%</td>
<td>-11.4%</td>
<td>-8.9%</td>
<td>0.0%</td>
<td>3.8%</td>
<td>11.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-3.9%</td>
<td>-0.4%</td>
<td>-0.7%</td>
<td>-18.3%</td>
<td>-14.7%</td>
<td>-2.5%</td>
<td>10.9%</td>
<td>15.2%</td>
<td>-13.6%</td>
</tr>
<tr class="grey4">
<td class="firstcol">Countries:</td>
<td>May 
08</td>
<td>Apr 
08</td>
<td>Mar 
08</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Qtr-2 
-Date</td>
</tr>
<tr>
<td class="firstcol">Germany:</td>
<td>-1.3%</td>
<td>-1.0%</td>
<td>-0.8%</td>
<td>-11.8%</td>
<td>-9.2%</td>
<td>0.7%</td>
<td>12.5%</td>
<td>13.3%</td>
<td>-10.3%</td>
</tr>
<tr>
<td class="firstcol">France:</td>
<td>-4.6%</td>
<td>4.5%</td>
<td>-6.6%</td>
<td>-24.6%</td>
<td>-9.2%</td>
<td>-4.5%</td>
<td>8.8%</td>
<td>4.5%</td>
<td>-8.8%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-3.1%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-13.4%</td>
<td>-8.2%</td>
<td>-1.1%</td>
<td>6.9%</td>
<td>13.6%</td>
<td>-4.4%</td>
</tr>
<tr>
<td class="firstcol">UK (EU)</td>
<td>-9.3%</td>
<td>20.6%</td>
<td>-14.1%</td>
<td>-22.1%</td>
<td>-5.5%</td>
<td>4.8%</td>
<td>3.9%</td>
<td>3.1%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
</body></html>

The domestic and foreign orders trend lines now both have discernable downtrends. Growth rate calculations over the key sequential periods also show that declines are becoming more intense in both sectors. Over three months, for [...]

Euro Area Orders Drop Sharply in May

Euro Area Orders Drop Sharply inMay

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080722f.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s sector indices show that the main all-industry reading
is up in May and stands strongly in the 95th percentile of its range.
The construction index is off sharply and continues to be very weak.
The table plots 12-month changes in the index while the table plots the
index levels. Index levels show construction is still very weak but the
tertiary and over all index are still strong. In terms of momentum all
indices are losing it. On balance the sector indices seem to be holding
up better than other gauges for the Japanese economy. 
 


<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="odd">
<td class="firstcol"></td>
<td colspan="3">Recent Months</td>
<td colspan="3">Moving Averages</td>
<td colspan="3">Extremes: Range</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>May 2008</td>
<td>Apr 2008</td>
<td>Mar 2008</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Max</td>
<td>Min</td>
<td>%-Tile</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>107.5</td>
<td>107.1</td>
<td>106.2</td>
<td>106.9</td>
<td>106.9</td>
<td>107.3</td>
<td>108.1</td>
<td>93.8</td>
<td>95.8%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>70.6</td>
<td>71.8</td>
<td>72.5</td>
<td>71.6</td>
<td>71.8</td>
<td>73.4</td>
<td>124.6</td>
<td>70.6</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Tertiary</td>
<td>110.4</td>
<td>110.6</td>
<td>108.5</td>
<td>109.8</td>
<td>109.7</td>
<td>110.1</td>
<td>110.9</td>
<td>92.0</td>
<td>97.4%</td>
</tr>
<tr>
<td class="firstcol" colspan="10">Ranges, Max, Min since
1993</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s sector indices show that the main all-industry reading is up in May and stands strongly in the 95th percentile of its range. The construction index is off sharply and continues to be very weak. The table plots 12-month changes [...]

Japan’s All-industries Index is Still Very Upbeat

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080722h.jpg" align="left" border="0" height="265" width="353">
The Institute of Studies and Economic Analysis's (ISAE) index
of Italian consumer confidence fell 4.1% from June to 95.8 (1980=100)
in July, the lowest value since May 2004. Consumers' biggest concern
appears to be the general economy, the index for which declined 11.5%
in July, next in line is concern over future prospects, the index for
which declined 9.4%. The indexes for current conditions and personal
economic situation were down 0.1% and 0.9% respectively. These major
components of the consumer confidence index are shown in the first
chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080722g.jpg" align="right" border="0" height="265" width="353">
Although the decline in confidence was not unexpected, its
magnitude was greater than the consensus expected. Among the reasons
advanced for the deterioration in confidence are the increases in food
and oil prices. The second chart plots the food and the electricity and
fuel components of the Consumer Price Index. They are plotted on a log
scale where percentage changes can be compared. The recent acceleration
in the prices of both food and electricity and fuel is evident. Earlier
this month the declines in purchasing power caused by rising food and
fuel costs led to public demonstrations.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">ITALY&nbsp;&nbsp;</th>
<th scope="col">Jul 08</th>
<th scope="col">Jun 08&nbsp;</th>
<th scope="col">Jul 07&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">Consumer Confidence&nbsp;
(1980=100)</td>
<td>95.8</td>
<td>99.9</td>
<td>107.6</td>
<td>-4.10</td>
<td>10.97</td>
<td>108.5</td>
<td>108.7</td>
<td>104.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current Situation</td>
<td>103.0</td>
<td>103.1</td>
<td>115.1</td>
<td>-01.</td>
<td>-10.51</td>
<td>114.3</td>
<td>112.2</td>
<td>106.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Future Conditions</td>
<td>88.4</td>
<td>97.6</td>
<td>98.7</td>
<td>-9.43</td>
<td>-10.44</td>
<td>100.6</td>
<td>104.4</td>
<td>101.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; General Economic
Situation</td>
<td>72.2</td>
<td>81.6</td>
<td>91.2</td>
<td>-11.52</td>
<td>-20.83</td>
<td>93.8</td>
<td>95.6</td>
<td>85.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Economic Situation</td>
<td>108.9</td>
<td>109.9</td>
<td>112.0</td>
<td>-.91</td>
<td>-6.92</td>
<td>115.9</td>
<td>115.3</td>
<td>113.7</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Jun 08</td>
<td>May 08&nbsp;</td>
<td>Jun 07&nbsp;</td>
<td>M/M % chg&nbsp;</td>
<td>Y/Y % chg&nbsp;</td>
<td>2007</td>
<td>2006</td>
<td>2005</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Price Index (1995=100)</td>
<td>137.1</td>
<td>136.5</td>
<td>132.1</td>
<td>0.44</td>
<td>3.79</td>
<td>132.2</td>
<td>129.8</td>
<td>127.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Food&nbsp;</td>
<td>136.2</td>
<td>135.6</td>
<td>129.0</td>
<td>0.44</td>
<td>6.41</td>
<td>128.6</td>
<td>125.0</td>
<td>122.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Electricity
&amp; Fuel</td>
<td>158.8</td>
<td>156.9</td>
<td>140.7</td>
<td>1.21</td>
<td>12.86</td>
<td>141.9</td>
<td>140.0</td>
<td>127.6</td>
</tr>
</tbody>
</table>
</body></html>

The Institute of Studies and Economic Analysis's (ISAE) index of Italian consumer confidence fell 4.1% from June to 95.8 (1980=100) in July, the lowest value since May 2004. Consumers' biggest concern appears to be the general [...]

Italian Consumer Confidence Takes a Dive

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080722e.jpg" width="353">
The index of U.S. house prices from the Office of Federal Housing Enterprise Oversight (OFHEO) fell 0.3% during May and prices were down 4.8% from a year earlier. 
During the latest twelve months OFHEO indicated that the decline in home prices was by far the greatest in the Pacific region where prices fell 14.5% y/y. That followed a 1.0% rise in prices last year and several years of double digit gain.
Elsewhere in the country home prices fell one to five percent y/y except in the West South Central region where they rose slightly. Prices in New England and in the Mountain regions fell 5.0%.
The latest report from OFHEO can be found <a href="http://www.ofheo.gov/media/hpi/MonthlyHPI72208F.pdf"> here</a>.
OFHEO figures are available in Haver&#39;s USECON database.
House Prices and the Stance of Monetary Policy from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/08/07/Jarocinski.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">OFHEO House Price Index (Q1 1991=100, SA)</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Purchase Only</td>
<td>214.2</td>
<td>214.9</td>
<td>-4.8%</td>
<td>1.7%</td>
<td>6.3%</td>
<td>9.5%</td>
</tr>
</tbody>
</table>


</html>

The index of U.S. house prices from the Office of Federal Housing Enterprise Oversight (OFHEO) fell 0.3% during May and prices were down 4.8% from a year earlier.

OFHEO House Price Fell Slightly in May, Down 4.8% Year to Year

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

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Sandy Batten

260331X11.jpg

260331Y11.jpg

Total job openings declined 4.9% m/m (-5.0% y/y) to 6.882 million in February from an upwardly revised 7.240 million in January (previously 6.946 million), according to the Job Openings and Labor Turnover Survey. The job openings rate (the ratio of openings to nonfarm employment plus openings) fell to 4.2% in February from an upwardly revised 4.4% in January (previously 4.2%). In February, the number of unemployed increased while openings declined, meaning that the excess of unemployment over openings rose. The number of unemployed has exceeded the number of openings for seven consecutive months, highlighting the softening of labor market conditions over that period.

Private sector openings fell 3.7% m/m (-307k) in February to 6.181 million in January. Accordingly, the private sector openings rate declined to 4.4% from an upwardly revised 4.6% in January (previously 4.4%). Declines were widespread across major industries, led by 213k decline in leisure and hospitality openings. Manufacturing openings fell 71k, the first decline in three months. Construction openings dropped 28k, their third consecutive monthly decline. Private education and healthcare openings declined 78k, their second decline in the past three months. By contrast, professional and business services openings rose 64k in February, their fifth monthly gain in the past six months. Government openings declined 51k, their first monthly decline in three months, led by a 48k drop in state and local government openings.

Total hiring plunged 9.3% m/m (-498k) to 4.849 million in February, the lowest level since April 2020, from 5.347 million in January (previously 5.294 million). The hiring rate slumped to 3.1%, also the lowest since April 2020, from 3.4% in January. Private sector hiring plummeted 503k to 4.523 million with the private sector hiring rate falling to 3.3% from 3.7%. Declines were widespread across major sectors, led by a 185k drop in hiring in leisure and hospitality, a 154k decline in professional and business services hiring, a 103k drop in private education and healthcare hiring and a 88k decline in construction hiring. By contrast, financial activities hiring rose 40k. Government hiring edged up 5k, accounted completely by an 8k increase in state and local government hiring.

Total separations fell 3.4% m/m (-173k) to 4.971 million in February from 5.144 million in January (previously 5.203 million). The separation rate slipped to 3.1% from 3.2%. The February reading was the lowest separation rate since March 2013. Private separations declined 3.4% m/m (-163k) in February to 4.657 million with the private separation rate falling to 3.4% from 3.6%. Separations varied across major sectors. Separations in professional and business services fell 112k while leisure separations declined 111k. By contrast, separations in trade and transportation rose 66k while private education and healthcare separations increased 15k.

Within private sector separations, quits declined 157k, layoffs rose 62k and other separations fell 67k. Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. Amid the volatility, quits stabilized somewhat last year after having trended down since early 2022. However, they have fallen markedly for two consecutive months, pointing to some recent further softening in labor market conditions. In contrast, layoffs and discharges are involuntary separations initiated by the employer. Even though layoffs have risen in each of the past two months, they have moved little since last fall. Low levels of quits indicate that there is more difficulty finding a new job, while flattish layoffs indicate that firms are less willing to lay off existing workers, a general theme of the current economic environment.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database. 

- Openings fell 4.9% m/m to 6.882 million from an upwardly revised 7.240 million in January.
- Hiring plummeted 9.3% m/m to 4.849 million, the lowest reading since April 2020.
- Separations fell 3.4%% m/m to 4.971 million with a decline in Quits and an increase in Layoffs.

U.S. JOLTS: Openings and Hiring Fell in February

Winnie Tapasanun

260331J17.jpg

260331K17.jpg

U.S. house prices inched up 0.1% m/m in January after rises of 0.3% in December (+0.1% initially) and 0.6% in November (+0.7% previously), according to the Federal Housing Finance Agency (FHFA) House Price Index. January marked the fifth m/m increase in six months and the smallest of four consecutive m/m gains. The HPI reached a record high of 440.99 in January, up 14.6% from its August 2022 low of 384.71. The year-on-year growth rate decelerated to 1.6% in January—the lowest since February 2012 (-0.2%)—from 1.9% in December (+5.2% in January 2025), remaining down from a high of 6.9% in February 2024 and well below a peak of 18.5% in February 2022.

House prices rose m/m in January (vs. December) in six of the nine census divisions. Gains were led by East South Central (+1.7% vs. -0.2%), followed by Mountain (+0.5% vs. +0.7%), New England (+0.5% vs. +0.3%), West North Central (+0.4% vs. +0.3%), Middle Atlantic (+0.3% vs. +0.8%), and Pacific (+0.2% vs. -0.1%). In contrast, house prices fell m/m in three census divisions in January (vs. December): West South Central (-0.7% vs. -0.4%), South Atlantic (-0.4% vs. +0.3%), and East North Central (-0.1% vs. +0.8%).

Year-on-year house prices continued to rise in January across most regions, except West South Central and Pacific. The y/y pace accelerated in January (vs. December) in three of the nine census divisions: East South Central (+3.5% vs. +2.1%), New England (+3.4% vs. +3.2%), and Mountain (+0.1% vs. -0.5%). Meanwhile, house price growth decelerated y/y in January (vs. December) in West North Central (+3.8% vs. +3.9%), Middle Atlantic (+4.3% vs. +4.6%), and East North Central (+4.4% vs. +5.4%). House prices in South Atlantic were unchanged y/y in January. To the downside, West South Central (-0.8% vs. +0.7%) and Pacific (-0.5% vs. -0.4%) posted y/y declines in January.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The FHFA data are available in Haver’s **USECON** database.

260331L17.jpg

260331M17.jpg

- FHFA HPI +0.1% (+1.6% y/y) in Jan., the smallest of four straight m/m gains.
- House prices up m/m in six of nine census divisions, led by East South Central (+1.7%), but down in West South Central (-0.7%), South Atlantic (-0.4%), and East North Central (-0.1%).
- House prices up y/y in six of nine regions, led by East North Central (+4.4%), but down in West South Central (-0.8%) and Pacific (-0.5%).

U.S. FHFA House Price Growth Continues to Decelerate in January

260331E.jpg

Inflation has begun to flash higher in the euro area as the early inflation indicators in March show an increase of 0.7% month-to-month, even as the core sticks to a low reading of 0.1% in March.

**Large economy HICP headlines show pressure**
The month-to-month increases in the large economies and the monetary union are giving off uncomfortable readings, with Germany posting a 0.9% increase month-to-month, France 0.7%, Italy a more subdued 0.3%, and Spain 0.6%. These numbers help to produce excessive 3-month inflation rates of 4.4% annualized for Germany, 4.5% for France, 3.6% for Italy, and 2.7% for Spain—all of them over the top (that expression, of course, refers to European Central Bank’s inflation objective of 2%).

**Year-on-year trends**
What I listed above are the three-month annualized inflation rates. What the ECB is more interested in is the more-subdued and better-behaved year-over-year rate. On that score, the year-over-year rate is 2.8% for Germany, 2% for France, 1.5% for Italy, and 3.2% for Spain. For the European Monetary Union as a whole, it is 2.5%, while for the EMU core, inflation is 2.2%.

In terms of the year-over-year inflation rates, Germany and Spain are clearly excessive. France is basically on the money for target, while Italian inflation is running cool. GDP-weighted inflation in the monetary union is too high at 2.5%, and on a core basis, it is at what is probably an acceptable 2.2% pace—above target but not demonstrably so.

**Core inflation**
Core inflation or ex-energy inflation, for the three countries that report early show the ex-energy inflation rate for Germany at 2.3% over 12 months; in Italy it is 1.8%, and for Spain it is 2.7%. The core inflation rates are on the high side—not extraordinary, but nevertheless elevated—and the headline inflation rates themselves are accelerating. Looking at the 3-month, 6-month and 12-month inflation rates, we see acceleration in play for Germany, France, Italy, and Spain, as well as, for the monetary union as a whole where the 3-month inflation rate has reached 5% annualized (yikes!).

**Oil…no! Don’t blame oil yet—that lies ahead**
We know that oil prices are spurting, but on this timeline ending in March, Brent oil prices measured in euros fell by 2.3%, and year-over-year Brent oil prices are down by 22.6%. So these results are yet to be clobbered by events in the Middle East—events that have lifted oil prices and other energy costs quite dramatically.

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**ECB is on Guard — Christine Lagarde**
It's not surprising that amid these pressures the European Central Bank, as well as the Bank of England, have said that if the war continues at the time of their next meeting, it's likely that they'll hike rates. However, in the United States, the Fed continues to be coy and to give us no guidance and to talk in terms that suggest it is still, in some sense, ‘data dependent’ although this does not seem to be a time to be data dependent. Policymaking now is really a bet on how the war in the Middle East progresses and whether the Strait of Hormuz is going to be opened, and that has very little to do with looking back at past data.

**A new frontier…for some**
Policymaking seems to have moved into a new frontier although it seems clear that all the policymakers have realized this. The Federal Reserve, which usually likes to fancy itself as being on the frontier of what makes good monetary policy, appears to not yet have grasped the realities of this situation. What we have is a situation where a Fed chair has been pursuing a certain policy for a prolonged period—prioritizing the labor market <soft-landing> and downplaying the actual inflation result while portraying himself as following a policy based upon the central bank's forecast for inflation and growth in the future.

**Consistent error and bias**
This unfortunate constellation of events of communication and of poor forecasting has led to five continuous years of inflation overshooting by the Federal Reserve and most other central banks. Let’s admit that when the anchor currency’s policies are adrift, it is harder for others to control their own inflation, rather than giving the Fed ‘a pass’ because global inflation has been high.

**OK…blame events—but blame inaction, too**
While the Fed can look back and blame COVID, blame tariffs, blame the war in Ukraine, and blame problems in the Middle East, it can also look in the mirror and blame itself—time and time again. Through all of these distractions, the Federal Reserve never took its eye off of the job market, always putting priority on jobs while diverting attention from the overshoot of the inflation target. All through this time, the Fed tried to characterize itself as weighting both sides of the dual mandate equally, although with the unemployment rate in the U.S. so low and basically still at a level that could be deemed full employment, and with five years of consistent inflation overshooting and oil prices spurting, the Federal Reserve still isn't ready to say that it's prepared to put its neck on the line to control inflation, or even lean against the wind. What we may be seeing is a replay of the early 1970s, when the Europeans decided that oil price inflation was something they should not ignore, and with the Bundesbank leading the way as interest rates went up, while the Federal Reserve dallied and tried to soften the blow on the economy by raising interest rates less and cutting interest rates early in the process and thereby sealing its own doom in the tomb of excessive inflation.

**Not again**
Christine Lagarde at the ECB has said she does not plan on making the same mistake again. By that, she's referring to the slow rate hikes that the ECB delivered during COVID. To some extent at that time, the ECB, like other central banks, was following the lead of the Federal Reserve that really dragged its feet. Now there is very little evidence that the Fed has learned from that experience.

**The manipulation game**
Between the central bank in the U.S. and the U.S. Treasury, there are serious attempts to try to manipulate inflation expectations to keep them in line and then call them ‘controlled.’ Meanwhile, surveys of inflation expectations, like those from the University of Michigan, show that in some quarters inflation expectations are running wild. Part of the reason for that is noting that central bankers have allowed inflation to overshoot for such a long period of time. So why should they trust the Fed or the ECB over the next 5 or 10 years? They could continue to act this same way for the next five or ten years. The Fed engaged in asset purchases to bring down long-term rates and continues that with ‘QE.’ Now the Treasury has stopped issuing new long-term bonds. This is manipulation.

**What’s next**
Central bankers have a lot to pay attention to, and like the time of the last oil shock in the early 1970s, it looks like—once again—it's the Europeans who want to lead the way toward price stability—not the Americans.

Europe

EMU Inflation Surges; Core Clings to Old Trend

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General business activity in Texas eased in March after expanding in February, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The overall measure—the general business activity index—was at -0.2 this month, compared with +0.2 in February, -1.2 in January, and -16.2 in March 2025. The March reading, while above a low of -35.9 in April 2025, was well below a high of +14.6 in January 2025. The index had been in negative territory since February 2025, with the exception of two positive readings in July 2025 (+1.2) and February (+0.2). In March, 21.0% of respondents reported improved business activity, down from 24.5% in February, while 21.2% of respondents reported worsened business conditions, down from February's 24.3%. The company outlook index fell to -3.5 in March, the lowest reading since December, after increasing to 3.1 in February. A lessened 14.0% of respondents expected improved company outlook this month while 17.5% expected deterioration. Data were collected between March 17 and 25 from 79 Texas manufacturers.

The production index, a key measure of state manufacturing conditions, dropped to 6.8 in March after a 1.3-point increase to 12.5 in February, indicating production expanded for the 12th time in 13 months but at the slowest pace in three months and at a below-average rate. Twenty-two percent of respondents reported higher production this month while 15.2% reported a decline. The capacity utilization index fell to 7.2 in March following a 4.7-point rise to 11.8 in February; it remained above a low of -15.5 in January 2024 but well below a record-high 46.6 in March 2021.

The growth rate of orders index declined to 2.2 in March after a 15.3-point jump to 8.6 in February, marking the second consecutive positive reading following five straight negatives. The index was above lows of -22.4 in April 2025 and -24.7 in November 2023 but significantly below a peak of 30.6 in April 2021. The new orders index fell to 6.1 this month from 11.1 in February, indicating an increase in demand for the fourth time in five months but at the lowest level since December. The index was above lows of -20.4 in April 2025 and -21.8 in November 2022 but well below a high of 22.6 in February 2022 and a record-high 39.9 in April 2021. The shipments index slid to 1.8 this month, the lowest of three successive positive readings, after easing to 9.9 in February. The unfilled orders index fell back into negative territory at -6.1 in March, the 18th negative reading in 19 months, after rising to 2.9 February. The index was below a high of 1.1 in August 2024 but above a low of -26.2 in July 2024. Meanwhile, the delivery time index declined to 2.8 this month after rising to 11.6 in February.

Labor market indexes showed employment growth stalled and workweeks were flat in March. The employment index fell to -1.0 this month from 7.5 in February, marking its first negative reading since December, with the near-zero level indicating little change in employment. The latest reading, while up from a low of -9.9 in January 2024, was far below a high of 17.7 in January 2023 and a record-high 32.3 in April 2021. A reduced 15.0% of respondents reported net hiring in March while a higher 16.0% reported net layoffs. The hours worked index declined to 0.9 this month, the fourth positive reading in five months, after rising to 6.1 in February. Meanwhile, the wages & benefits index decreased to 25.2 in March following a 14.5-point rebound to 31.9 in February, having been trending downward since a peak of 55.1 in March 2022.

Inflationary pressures were little changed this month. The index for prices received for finished goods rose to 18.4 in March following a 0.6-point decline to 17.9 in February; it was up from a low of -6.8 in November 2023 but meaningfully below a high of 47.8 in March 2022 and a peak of 51.6 in October 2021. In March, an increased 24.5% of respondents reported raising prices while only 6.1% reported lowering prices. The index of prices paid for raw materials edged up to 32.7 this month after a 5.4-point drop to 31.7 in February. The index was well above a low of 0.9 in June 2023 but significantly below 72.8 in March 2022 and a record-high 84.4 in November 2021.

Expectations on future manufacturing activity remained positive this month. The future general business activity index fell to 10.6 in March after a 3.9-point decline to 12.7 in February, signaling expansion for the 11th straight month but at the slowest pace since October. The future production index rose to 35.7, the highest level since August, from February’s 34.3. Other indexes of future manufacturing activity also rose in March (vs. February), signaling increased activity six months ahead: new orders (29.2 vs. 25.0), growth rate of new orders (17.5 vs. 14.5), employment (19.5 vs. 16.8), and capital expenditures (24.8 vs. 10.7). Meanwhile, future indexes for company outlook (18.2 vs. 25.7), capacity utilization (27.0 vs. 27.3), shipments (28.8 vs. 31.6), and wages & benefits (38.0 vs. 41.7) declined in March (vs. February), but they remained in positive territory.

Each index is calculated by subtracting the percentage reporting a decrease in activity from the percentage reporting an increase. When all firms report rising activity, an index will register 100. An index will register -100 when all firms report a decrease. An index will be zero when the number of firms reporting an increase equals the number reporting a decrease. Data for the Texas Manufacturing Outlook, conducted by the Federal Reserve Bank of Dallas, can be found in Haver's **SURVEYS** database.

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- General Business Activity -0.2 in Mar. vs. +0.2 in Feb.; negative for the 12th time in 14 mths.
- Company Outlook (-3.5) and Production (6.8) at three-month lows.
- New Orders Growth (2.2) positive for a second mth.; New Orders (6.1) lowest since Dec.
- Employment (-1.0) negative for the first time in three mths.
- Prices Received up 0.5 pt. to 18.4; Prices Paid up 1.0 pt. to 32.7.
- Future General Business Activity down 2.1 pts. to 10.6, still positive for the 11th straight mth.

Texas General Business Activity Slightly Negative in March Amid Uncertainty; Expectations Still Positive

Tian Yong Woon

In this week’s Letter, we focus on the Asian consumer against the backdrop of recent global developments, alongside longer-running structural trends and economy-specific nuances. At a broad level, demographic headwinds are becoming more binding: as economies mature, population growth is slowing and ageing is accelerating, weighing on the expansion of the consumer base. At the same time, several economies are attempting to pivot toward more consumption-driven growth to help offset these forces (chart 1). More recently, while electoral outcomes in some countries have provided a boost to consumer sentiment, the renewed flare-up in the Middle East poses a near-term risk. Higher oil and energy prices threaten to squeeze household purchasing power, potentially weighing on sentiment and spending.

In China, policy efforts to raise the consumption share of GDP have delivered some early gains, reflected in firmer consumer sentiment and retail sales (chart 2). However, the impact of these measures may prove transitory if deeper structural constraints are not addressed. Encouragingly, authorities are increasingly looking to services as a new driver of consumption, given its relative underdevelopment compared to goods and manufacturing, and its potential for more sustained growth (chart 3). In Japan, post-election optimism surrounding Prime Minister Takaichi’s pro-growth agenda—including a proposed removal of the 8% consumption tax—has supported sentiment. However, rising oil prices risk reintroducing inflationary pressures, which could erode real wage gains and weigh on spending (chart 4). 

In South Korea, early signs of such pressures are already emerging (chart 5). Attention is also turning to consumer expectations, particularly around housing prices following recent cooling measures, as well as inflation expectations—especially if they begin to show signs of becoming unanchored. In Thailand, post-election optimism has similarly supported sentiment and consumption (chart 6). Nonetheless, headwinds persist, notably elevated household debt and higher oil prices. While the agreement between Thailand and Iran to allow vessels to transit the Strait of Hormuz is a positive development, it remains uncertain how much relief it will ultimately provide.

**The Asian consumer**
Asia is at a crossroads. On the one hand, as is typical for maturing economies, the region is confronting slowing population growth and rapid ageing. This implies a more slowly expanding—and in some cases shrinking—consumer base, as already evident in economies such as China and Japan. At the same time, consumption patterns are shifting toward goods and services tied to ageing and retirement, as older cohorts account for a larger share of demand. On the other hand, Asia’s household consumption share of GDP has edged higher in recent years. Much of the remaining upside—relative to global averages—is concentrated in a handful of economies, most notably China, which we discuss later. A more decisive rebalancing toward consumption could unlock additional spending power across the region, partly offsetting demographic headwinds, though the net impact remains uncertain.

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**China**
Based on nominal values, China’s residential consumption share of GDP has trended higher in recent years, reaching just under 40% in 2024. However, this remains well below levels seen in most other economies, particularly developed ones. As such, China still has some distance to go in pivoting away from its traditional reliance on exports and investment toward a more consumption-led growth model. To support this shift, authorities have rolled out a range of measures to boost consumption, including subsidies for consumer durable goods trade-ins. However, given the nature of durables, such policies tend to front-load demand, raising questions about the sustainability of any initial consumption boost once replacement cycles are largely exhausted. Indeed, while retail consumption has posted decent growth in recent years, the pace has been gradually moderating, suggesting some loss of momentum.

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At the same time, policymakers are increasingly focusing on services as a potential next driver of consumption growth. This shift is intuitive, given that the services sector remains relatively underdeveloped compared to the goods sector, where years of manufacturing expansion have led to substantial capacity and, in some areas, oversupply. In response, authorities have extended tax incentives and subsidies to selected service industries to stimulate demand. That said, beyond targeted incentives, a more durable rebalancing toward consumption will likely require deeper structural reforms. Economists have long pointed to the need for stronger social safety nets, improvements in healthcare and pension systems, and sustained wage growth to reduce precautionary savings and support household spending. In addition, addressing the prolonged weakness in the property sector could provide a meaningful boost to consumption via wealth effects.

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**Japan**
Turning to Japan, chart 4 suggests the consumer backdrop remains mixed. Growth in retail sales and household spending has struggled to stay consistently in positive territory, while real wage growth has been negative for much of recent years—albeit with a return to positive territory in January. That said, expectations are building around Prime Minister Takaichi’s pro-growth agenda to support consumption, including proposals such as eliminating Japan’s 8% consumption tax. However, questions remain over both the effectiveness of such measures and their fiscal implications More recently, external factors have also come into play. In particular, the inflationary impact of the ongoing Middle East conflict—via higher oil prices—poses a renewed risk. While this year’s Shunto spring wage negotiations have delivered strong nominal wage gains, sustained price pressures could erode real incomes, potentially reversing recent gains. This, in turn, may also prompt further monetary policy tightening, adding another headwind to consumption.

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**South Korea**
Turning to South Korea, retail sales volumes have shown some encouraging growth in recent months. However, as with many Asian economies—particularly oil importers—this momentum risks being undermined by the recent surge in energy prices following the Middle East conflict. Early signs of a softening consumer outlook are already evident. South Korea’s latest consumer survey readings have fallen to a 10-month low, pointing to a deterioration in sentiment. A closer look suggests that domestic factors are also at play. Notably, expectations for housing prices have weakened following recent policy measures aimed at curbing property prices and household debt. At the same time, inflation expectations have edged higher, albeit modestly. Should these expectations become unanchored and rise more sharply, this could increase the likelihood of further monetary policy tightening—adding another potential headwind to consumption.

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**Thailand**
Lastly, we turn to Thailand, where the consumer backdrop has improved in recent months (chart 6), with both sentiment and growth in the central bank’s private consumption measure picking up. This likely reflects, in part, post-election optimism following Prime Minister Anutin’s victory, alongside expectations of supportive stimulus measures and a reduction in prior political uncertainty. That said, headwinds remain. Thai households continue to face elevated, though not identical, indebtedness challenges relative to peers such as South Korea, with household debt-to-disposable income still just above 150% as of Q3 2025. While such levels have been sustained for some time, risks may crystallise further out if households become less able to service their debt burden. More recently, external pressures have also re-emerged via the Middle East conflict and higher oil prices. Although Thailand and Iran have reportedly reached an agreement allowing oil vessels to transit the Strait of Hormuz—an encouraging development—price risks persist amid broader supply constraints that continue to keep energy markets tight.

Economy in Brief: 2008

Jump to:

U.S. Existing Home Sales Drift Down

U.S. Initial Unemployment Insurance Claims Shoot Back Up

U.S. Initial Unemployment Insurance Claims Shoot Back Up

Euro Area Orders Drop Sharply in May

Euro Area Orders Drop Sharply inMay

Japan’s All-industries Index is Still Very Upbeat

Italian Consumer Confidence Takes a Dive

OFHEO House Price Fell Slightly in May, Down 4.8% Year to Year