Carol Stone, CBE

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The market for new homes is continuing to weaken. New single-family home sales fell 8.9% (-12.0% y/y) in October to 544,000 (SAAR). It was the fourth decrease in the last five months and carried sales down to their lowest since March 2016. Revisions to previous months’ sales were positive, however: those in September, originally reported at 553,000, were revised to 597,000, and those in August, which had been reported last month at 585,000, were revised to 591,000. The October result did undershoot the expectations in the Action Economics Forecast Survey, which had estimated 585,000 sales. These sales transactions are recorded when sales contracts are signed or deposits are made.

The median price of a new home fell 3.6% (-3.1% y/y) in October to $309,700 from $321,300 in September. The average price of a new home rose, however, to $395,000 (+0.3% y/y) from $379.000 in September.

By region, the largest percentage decline last month was in the Midwest, where sales fell 22.1% (-16.7% y/y) to 60,000. Those in the Northeast dropped 18.5% m/m (-46.3% y/y) to 22,000. In the South, sales were off 7.7% in October (-11.6% y/y) to 313,000, while those in the West eased 3.2% (-6.3% y/y) to 149,000.

The months' supply of homes on the market increased to 7.4 in October from 6.5 months during September. These figures were up sharply from the recent low of 4.5 months in July 2016. The median number of months a new home was on the market after its completion edged down from 2.9 in September to 2.7 in October; this is the shortest for-sale period in the history of this series, which dates from 1975.

The data in this report are available in Haver's USECON database.
The consensus expectation figure from Action Economics is available in the AS1REPNA database.

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 <a href="/comment/181128d.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181128d.png"></a>

 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >U.S. New Single-Family
 Home Sales (SAAR, 000s)</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Oct Y/Y %</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >544</td>
 <td >597</td>
 <td >591</td>
 <td >-12.0</td>
 <td >616</td>
 <td >560</td>
 <td >502</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Northeast</td>
 <td >22</td>
 <td >27</td>
 <td >33</td>
 <td >-46.3</td>
 <td >40</td>
 <td >32</td>
 <td >25</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Midwest</td>
 <td >60</td>
 <td >77</td>
 <td >67</td>
 <td >-16.7</td>
 <td >72</td>
 <td >69</td>
 <td >61</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; South</td>
 <td >313</td>
 <td >339</td>
 <td >336</td>
 <td >-11.6</td>
 <td >341</td>
 <td >317</td>
 <td >286</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; West&nbsp;</td>
 <td >149</td>
 <td >154</td>
 <td >155</td>
 <td >-1.3</td>
 <td >164</td>
 <td >142</td>
 <td >130</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Median Price (NSA, $) </td>
 <td >309,700</td>
 <td >321,300</td>
 <td >323,800</td>
 <td >-3.1</td>
 <td >321,633</td>
 <td >306,500</td>
 <td >293,733</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The market for new homes is continuing to weaken. New single-family home sales fell 8.9% (-12.0% y/y) in October to 544,000 (SAAR). It was the fourth decrease in the last five months and carried sales down to their lowest since March [...]

U.S. New Home Sales and Prices Remain Sluggish

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The market for new homes is continuing to weaken. New single-family home sales fell 8.9% (-12.0% y/y) in October to 544,000 (SAAR). It was the fourth decrease in the last five months and carried sales down to their lowest since March 2016. Revisions to previous months' sales were positive, however: those in September, originally reported at 553,000, were revised to 597,000, and those in August, which had been reported last month at 585,000, were revised to 591,000. The October result did undershoot the expectations in the Action Economics Forecast Survey, which had estimated 585,000 sales. These sales transactions are recorded when sales contracts are signed or deposits are made.

The median price of a new home fell 3.6% (-3.1% y/y) in October to $309,700 from $321,300 in September. The average price of a new home rose, however, to $395,000 (+0.3% y/y) from $379.000 in September.

By region, the largest percentage decline last month was in the Midwest, where sales fell 22.1% (-16.7% y/y) to 60,000. Those in the Northeast dropped 18.5% m/m (-46.3% y/y) to 22,000. In the South, sales were off 7.7% in October (-11.6% y/y) to 313,000, while those in the West eased 3.2% (-6.3% y/y) to 149,000.

The months' supply of homes on the market increased to 7.4 in October from 6.5 months during September. These figures were up sharply from the recent low of 4.5 months in July 2016. The median number of months a new home was on the market after its completion edged down from 2.9 in September to 2.7 in October; this is the shortest for-sale period in the history of this series, which dates from 1975.

The data in this report are available in Haver's USECON database.
The consensus expectation figure from Action Economics is available in the AS1REPNA database.

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 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >U.S. New Single-Family
 Home Sales (SAAR, 000s)</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Oct Y/Y %</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >544</td>
 <td >597</td>
 <td >591</td>
 <td >-12.0</td>
 <td >616</td>
 <td >560</td>
 <td >502</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Northeast</td>
 <td >22</td>
 <td >27</td>
 <td >33</td>
 <td >-46.3</td>
 <td >40</td>
 <td >32</td>
 <td >25</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Midwest</td>
 <td >60</td>
 <td >77</td>
 <td >67</td>
 <td >-16.7</td>
 <td >72</td>
 <td >69</td>
 <td >61</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; South</td>
 <td >313</td>
 <td >339</td>
 <td >336</td>
 <td >-11.6</td>
 <td >341</td>
 <td >317</td>
 <td >286</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; West&nbsp;</td>
 <td >149</td>
 <td >154</td>
 <td >155</td>
 <td >-1.3</td>
 <td >164</td>
 <td >142</td>
 <td >130</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Median Price (NSA, $) </td>
 <td >309,700</td>
 <td >321,300</td>
 <td >323,800</td>
 <td >-3.1</td>
 <td >321,633</td>
 <td >306,500</td>
 <td >293,733</td>
 </tr>
 </tbody>
 </table>
 
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Tom Moeller

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Real gross domestic product increased 3.5% (AR, 3.0% y/y)
during Q3'18, unrevised from the advance estimate. It followed a 4.2% rise
during the second quarter. A 3.6% advance had been expected in the Action
Economics Forecast Survey.

Accompanying the report was the initial indication of
after-tax corporate profits, which rose 3.3% (19.4% y/y) including adjustments
for inventory valuation and depreciation. The rise followed 2.1% growth in the
second quarter. Profits without inventory &amp; depreciation allowances rose
0.7% (5.9% y/y) following a 3.3% Q2 increase. Domestic nonfinancial sector
earnings grew 5.1% (15.8% y/y) but financial sector earnings eased 1.7% (-9.0%
y/y). Foreign sector profits increased 3.7% (8.7% y/y).

Growth in domestic final sales of 3.1% (3.3% y/y) was
unrevised. Personal consumption expenditures was lessened to 3.6% (3.0% y/y)
from 4.0%. Spending of durable goods was reduced to 3.9% (5.6% y/y) from 6.9% as
motor vehicle purchases fell 1.5% (+1.6% y/y) instead of rising modestly.
Recreational vehicle purchases growth was reduced to 9.1% (9.4% y/y) and
spending growth on home furnishings of 6.8% (6.5% y/y) was revised slightly
lower. Nondurable goods purchases surged 5.3% (3.3% y/y) which was
little-revised. Clothing purchases strengthened 11.2% (5.3% y/y), the quickest
growth since Q4'05, and food &amp; beverages expenditures rose an improved 3.8%
(3.7% y/y). Gasoline &amp; fuel oil buying declined 1.2% (-0.4% y/y). Spending
on services improved a little-revised 3.1% (2.4% y/y). It remained the quickest
growth since early 2015. Outlays at restaurants surged 7.0% (4.2% y/y) which
followed an 8.1% Q2 rise. Together these growth rates are the strongest in 25
years. Health care outlays increased 4.2% (2.5% y/y) and financial services
insurance rose 1.0% (0.4% y/y). Housing &amp; utilities outlays gained 1.1%
(1.5% y/y) but recreation spending eased 0.2% (+0.9% y/y).

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Government sector spending also was reduced to 2.6% (2.3 y/y)
from 3.3%. Federal government outlays grew a steady 3.5% both q/q and y/y.
National defense spending strengthened 4.9% and the 4.2% y/y increase was the
strongest since 2009. Outlays by state &amp; local governments grew a
strengthened 2.0% (1.5% y/y).

Countering the downward revisions was strengthened 2.5%
growth (6.8% y/y) in business fixed investment, initially estimated at 0.8%.
Structures investment is shown to have eased a lessened 1.7% (+6.8% y/y).
Industrial equipment spending advanced 9.8% (4.6% y/y), while information
processing equipment investment grew a strengthened 7.4% (9.7% y/y).
Transportation equipment expenditures declined 3.9% (+5.2% y/y). Investment in
intellectual products was lessened to 4.3% (7.3% y/y).

The fall in residential investment was lessened to 2.6%
(+0.8% y/y) from -4.0%. It remained the third straight quarter of decline.

The chain type GDP prices index was unrevised at an expected
1.7% (2.3% y/y), following a 3.0% increase. The 1.5% rise in the PCE price index
was the weakest in a year, but the business fixed investment price index
remained firm at 1.5% (1.2% y/y), the quickest growth in roughly four years. The
residential investment price index increased 3.6% (5.7% y/y), roughly half the
growth during the prior two quarters.

The GDP figures can be found in Haver's USECON and USNA
database. USNA contains virtually all of the Bureau of Economic Analysis' detail
in the national accounts. Both databases include tables of the newly published
not seasonally adjusted data. The Action Economics consensus estimates can be
found in AS1REPNA.

The Federal Reserve's Framework for Monitoring Financial Stability is the title of today's speech by Fed Chair Jerome H. Powell.
It can be found <a href="https://www.federalreserve.gov/newsevents/speech/powell20181128a.htm">here</a>.

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 <a href="/comment/181128k.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181128k.png"></a>


	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM" ;>Chained
 2012 $ (%, AR</a>)</th>
 <th scope="col" >Q3'18 (Second Estimate)</th>
 <th scope="col" >Q3'18 (Advance Estimate)</th>
 <th scope="col" >Q2'18</th>
 <th scope="col" >Q1'18</th>
 <th scope="col" >Q3'18 Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 <tbody>
 <tr>
 <td class="firstcol" >Gross Domestic Product</td>
 <td >3.5</td>
 <td >3.5</td>
 <td >4.2</td>
 <td >2.2</td>
 <td >3.0</td>
 <td >2.2</td>
 <td >1.6</td>
 <td >2.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Inventory Effect</td>
 <td >2.3</td>
 <td >2.1</td>
 <td >-1.2</td>
 <td >0.3</td>
 <td >0.1</td>
 <td >0.0</td>
 <td >-0.5</td>
 <td >0.3</td>
 </tr>
 <tr>
 <td class="firstcol" >Final Sales</td>
 <td >1.2</td>
 <td >1.4</td>
 <td >5.4</td>
 <td >1.9</td>
 <td >2.9</td>
 <td >2.2</td>
 <td >2.1</td>
 <td >2.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Foreign Trade Effect</td>
 <td >-1.9</td>
 <td >-1.8</td>
 <td >1.2</td>
 <td >0.0</td>
 <td >-0.4</td>
 <td >-0.3</td>
 <td >-0.3</td>
 <td >-0.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Domestic Final Sales</td>
 <td >3.1</td>
 <td >3.1</td>
 <td >4.0</td>
 <td >1.9</td>
 <td >3.3</td>
 <td >2.5</td>
 <td >2.3</td>
 <td >3.3</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" >Demand Components</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Personal Consumption Expenditure</td>
 <td >3.6</td>
 <td >4.0</td>
 <td >3.8</td>
 <td >0.5</td>
 <td >3.0</td>
 <td >2.5</td>
 <td >2.7</td>
 <td >3.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Nonresidential Business Fixed
 Investment</td>
 <td >2.5</td>
 <td >0.8</td>
 <td >8.7</td>
 <td >11.5</td>
 <td >6.8</td>
 <td >5.3</td>
 <td >0.5</td>
 <td >1.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Residential Investment</td>
 <td >-2.6</td>
 <td >-4.0</td>
 <td >-1.4</td>
 <td >-3.4</td>
 <td >0.8</td>
 <td >3.3</td>
 <td >6.5</td>
 <td >10.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Government Spending</td>
 <td >2.6</td>
 <td >3.3</td>
 <td >2.5</td>
 <td >1.5</td>
 <td >2.3</td>
 <td >-0.1</td>
 <td >1.4</td>
 <td >1.9</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" >Chain-Type Price Index</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; GDP</td>
 <td >1.7</td>
 <td >1.7</td>
 <td >3.0</td>
 <td >2.0</td>
 <td >2.3</td>
 <td >1.9</td>
 <td >1.1</td>
 <td >1.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Personal Consumption
 Expenditures</td>
 <td >1.5</td>
 <td >1.6</td>
 <td >2.0</td>
 <td >2.5</td>
 <td >2.2</td>
 <td >1.8</td>
 <td >1.1</td>
 <td >0.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Nonresidential
 Investment</td>
 <td >1.5</td>
 <td >1.5</td>
 <td >2.0</td>
 <td >0.7</td>
 <td >1.2</td>
 <td >0.7</td>
 <td >-0.8</td>
 <td >0.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Residential Investment</td>
 <td >3.6</td>
 <td >4.0</td>
 <td >7.3</td>
 <td >8.8</td>
 <td >5.7</td>
 <td >4.5</td>
 <td >3.6</td>
 <td >2.7</td>
 </tr>
 </tbody>
 
 
</html>

Real gross domestic product increased 3.5% (AR, 3.0% y/y) during Q3'18, unrevised from the advance estimate. It followed a 4.2% rise during the second quarter. A 3.6% advance had been expected in the Action Economics Forecast Survey. [...]

U.S. GDP Growth Is Unrevised; Profits Growth Improves

Robert Brusca

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	 And the Tortured Path that Lies Ahead
 
 
 
 

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Globally, money supplies are decelerating to some extent with nominal M2 growth in the EMU a minor exception. All money growth rates decelerate from three-years to two-years to one-year. Only the U.K. and EMU have stronger growth over three months for money supply than over 12 months, although for neither does that seem very significant. For real money balances, all growth rates decelerate from three-years to two-years to one-year. Again the U.K. and EMU are exceptions for shorter growth rates as the only places where three-month real balance growth is faster than 12-month growth.

EMU Credit Growth 
In the EMU, credit growth has been essentially stable with some technical claim to minor accelerations or short and longer terms horizons. But there is nothing stirring beyond ‘an acceleration’ of several tenths of a percentage point on annualized rates of growth. There is technical acceleration but nothing fundamental that you can build growth on.

The Oil Pulse 
The impulse from rising oil prices is now turning to a negative one as oil prices decelerate from 12-months to six-months to three-months as growth rates drop from 34.7% to -1.3% and more of that is in train.


<a href="/comment/181128e.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181128e.png" align="left"></a>
Nominal Global Money Growth 
Nominal global money supply growth shows a growth rates of 1.8% over 12 months in the U.K. compared to 2.7% in Japan, 3.7% in the U.S., and 4.4% in the EMU. But as noted above, money growth rates have generally been slipping and generally are decelerating from 12-months to three-months. Three-month growth rates range from 5.1% in the EMU, to 3.5% in the U.S., to 3.2% in the U.K. and to 2.7% in Japan.

More on EMU Credit 
In the EMU, credit to residents creeps higher from a pace of 1.6% over 12 months to 1.7% over six months to 1.9% over three months. However, discounted for inflation and recalibrated as growth rates in real money balances and these rates of growth show net declines in credit over 12 months and six months with flat performance over three months. Private credit is only slightly better off, showing an annualized net gain over the recent three months at a 0.5% pace.


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Policy Moves and Economic Trends 
Money and credit stimulus clearly does not amount to much. But globally, growth has been slipping and trade flows have been slowing. The OECD has issued a warning and its collection of leading indicators has been reinforcing the outlook for weaker conditions. In the U.S., the President is complaining about the rapidity of Fed rate increases. In Europe, Mario Draghi has repeated that the policy of QE will come to an end at yearend.

In the U.S. as the Fed stays on its rate hike path, rates are getting higher as the effect of fiscal stimulus is wearing off. Interest sensitive sectors already are showing the strain much to the Fed’s surprise. To compensate, there is less of a drain on consumers and businesses from oil prices. But since the U.S. is also an oil producer, that may have a way of coming out in the wash as the benefit to consumers is a transfer from producers whose importance has grown in the U.S. and whose investment plans could well be curtailed if oil prices fall by enough.

U.S. Policy: As the Global Keystone...or Headstone? 
U.S. policy is at the center of the global policy storm as the Trump pressures over trade have dominated trade talk and are largely responsible for trade flow slowing. The Trump rhetoric continues to ratchet higher. Meanwhile, it is wholly speculative whether or not the U.S. and China will cut a trade deal on the sidelines of the summit being held in Argentina. While global conditions that feature plunging oil prices and weakening stock prices would seem to send a clear message about growth prospects and the state of global demand, central bankers are not making cyclical policy. They are making structural policy. The ECB is going ahead with its plans to terminate QE. And in the U.S., there is no sign that that the central bank has chosen a more moderate rate profile in view of unfolding economic events. All eyes are on the Fed and all are curious as to whether the Fed will hike rates in December and about what its rate guidance will look like at its next meeting.

Brexit...Godot 
Europe and the U.K. await the vote by the U.K. parliament on the pending Brexit plan. Anything goes there and we know that we cannot be reliably guided by opinion polls. So we wait and wait…

Firmness in Pursuit of Fairness – The end of Sugar-Daddy 
Globally, growth ramps down as the U.S. has been demanding more fairness in trade. The rest of the world mostly opposes changes apparently as though the U.S. is expected to remain sugar-daddy to the world. We see plenty of examples of the old post-war alliances dealing with policy rifts. That is to be expected as wartime relationships shift and as national identities are reestablished. And while Germany has been reunited, it has not been reestablished as a military power. Still, it is dominating Europe as an economic power and one whose ‘growth’ model has been oppressive for fellow EMU members. Germany continues to impose its will on Europe while everyone else is screaming about ‘America First’ policies. It is curious how in the Post War period the U.S. could be so generous. But as this process of repair from the war has evolved, everyone thinks it is business as usual to run their own selfish policies but see the U.S. as tyrannical when it begins to put its own interests first or simply to demand equal treatment or that allies pay their own way especially for defense services provided. We are 70 years on…except for the Koreas, of course. When do you stop nursing the baby?

Free Trade or License to Exploit? 
Under free trade, the global economy could have become a perpetual motion machine. But when that machine is jimmied and when countries put up selective barriers or control their exchange rate to determine an outcome and when some countries turn into perpetual surplus countries and others transform into deficit countries, the sustainability of that configuration has been destroyed. RIP Free Trade. Currencies must move and must be able to rebalance current accounts. Trade is a crucial feature of this system and it cannot be hijacked by national objectives. China and other Asian countries have done this to expedite and assure development. At first it was a post-war strategy, but it has become codified and many believe that running a trade surplus is now their right! But it’s wrong. That in fact is a free-trade killer. No country can run deficits forever as part of trade system.

Too Much Too Fast 
The shift of resources from West to East (from deficit to surplus countries) has been too fast and has threatened the economic prosperity and social stability in the West. Too much wealth has been transferred and too many jobs have been lost in too short a period of time. That is largely because China, a massive country, has waited so long to develop then has sought to catch up in a virtual instant. Can China deal with slower growth? Can it deal with more balanced growth? Its ‘Belt and Road’ project is not geared for that. It is a program of old-fashioned trade dominance. China like Germany seems to seek economic dominance more than fairness.

New Watchword: FAIRNESS 
I would say that the U.S. push for trade fairness has come just in time if not too late. But as always, time will tell. I think it is time to rethink who are the bad guys in this international trading system and to put all players on fair and equal footing. Unfortunately, it may be too late to do that with China because of its socioeconomic policies that now preclude a market-determined exchange rate, Chinese political repression and information control have left it with a more affluent population willing and eager to get financial assets - if not themselves- out of the country. And China is so large that such migrations of money or people would burden the economic system and dominate the exchange market. Capital controls in China are probably here to stay and that will be the ultimate roadblock to true free trade. So make no mistake about it. We blew it. We had a chance for free trade, but instead countries co-opted it and used trade to fulfill nationalistic objectives. And now free trade will no longer be an option. We are headed into a new realm of bargained trade. Get ready, ‘cause here it comes… and it is not just Donald Trump. It is the new reality.
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Globally, money supplies are decelerating to some extent with nominal M2 growth in the EMU a minor exception. All money growth rates decelerate from three-years to two-years to one-year. Only the U.K. and EMU have stronger growth over [...]

Little Changed in Paths of EMU Money or Credit

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	 U.K. Retailing Shows Resilience But in the End Not Enough
 
 
 
 

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With the U.K.'s Brexit process in its final deal-or-no-deal stages, the Confederation of British Industry survey turned up some retail optimism. However, despite the bump up in the surveyed components in November, the levels of the readings are still not very inspiring as retailers head into the all-important Christmas selling season. It's sort of like Department Store Santa but without enough stuffing in his belly and a really bad fake beard. No one really is fooled one bit by the costume, but we all go along with the gag.

In the distributive sales survey in November, sales compared to a year ago jumped to a 19 reading from 5 in October. Orders evaluated relative to the time of year also surged to a 15 reading from -10, breaking a four month string of declines. However, sales for this time of year were still assessed with a net negative of -10; nonetheless, that's an improvement from the October reading of -22. The stock-to-sales ratio moved higher, with a 22 net reading in November, up from 9 in October.

Wholesaling also made improvements from one month ago as its November metrics exceeded their October counterparts in all survey categories except for the stock-to-sales ratio.

Expectations in retailing show improvement in most areas. The exception is for orders for this time of year as the reading falls to 15 for December from 23 in November. Still, the last two months both are positive readings and represent a turnaround from a three-month string of negative assessments. Expectations in wholesaling show improvements in all categories for December compared to November.


<img border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181127.png" width="660" height="450">

These comparisons show that there has been an improvement in the month-to-month assessment of retailers with data ordered up in several ways to account for 'seasonality.' We can also assess the absolute response levels instead of just asking if they improved or deteriorated month-to-month. Table 1 presents assessments for that purpose in the far right hand column as rank queue percentile standings. These metrics rank the most recent month's observation against its own historic time series of responses placing this month's observation in a queue designating its relative position as a percentile standing in that queue. A 100% standing is at the head of the line (the strongest reading) while a 0% standing is at the end of the line (the weakest reading). For this assessment, each series' median occurs at its 50th percentile. Data are ranked on observations back to 1995. For convenience in comparison, I have transcribed this data into the table below (Table 2).

In Table 2, several facts jump out immediately. One is that wholesaling this month has the strongest readings of any of the four columns of assessments and consistently so. The next is that retailing has weaker expectations for December sales (on either sales measure) than the reality it is reporting in November. Of course, wholesaling has weaker results for December expectations than for November reality. Also note that despite November differences for retailing and wholesaling for both of them, sales metrics expectations in December are very similar in both retailing and wholesaling.

Having made those points and even in the presence of such strong wholesaling results in November, this report grades out poorly. Orders have a below median position for retailing in November and that weakness even worsens in its December expectation. Expected wholesale orders even fall below their median with a 45.4 percentile standing for December. Sales for this time of year are barely above their median in retailing in November (55.3%) then slip below their median to a 43.3 percentile standing along with wholesaling for December where expectations at 49.6% fall just shy of its own median as well. The next metric that we care about is sales compared to a year ago. For retailing in November that reading is at its 64.2 percentile, a modestly firm reading, that slips to its 57.8 percentile in December expectations alongside a similar 56.7 percentile reading for wholesaling expectations in December. Both retailers and wholesalers are expecting stock-to-sales ratios to be relatively elevated, which could become a problem.


<img border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/181127 2.png" width="660" height="120">


On the whole, the high November standings for wholesaling give the overall report a feeling of lift. But when we look more closely at retailing and at the sales and orders categories we care about the most, we find some of the weakest results and with weakness creeping into the wholesale sector on its December expectations as well. Aggregating all of the readings, wholesaling averages a rank of 85.2% in November, but that drops to a 55.9% for all expectations in December. The average standing in retailing for the three sales and orders categories in November is 51.3% and that falls to 39.7% for retail expectations in December; for wholesaling the same combination falls to a 50.6 percentile standing. Compare that to wholesale's 83.3 percentile standing for all sales and orders in November.

The problem with this report is the peaking of activity in wholesaling in November and the fall off of metrics in their December expectations as well as the overall low percentile standings with the exception of wholesaling in November.

While the headline changes in the CBI offer some hope, the level that these indicators have actually attained and what they aspire to in December are still markers well short of what we would need to call them solid. So in the end, I guess the U.K. will have itself a very Brexit Christmas.

And so what exactly is a Brexit Christmas? According to the National Institute of Economic and Social Research it amounts to the celebration of this:

"If the government's proposed Brexit deal is implemented, then GDP in the longer term will be around 4 percent lower than it would have been had the UK stayed in the EU" <a href="https://www.niesr.ac.uk/sites/default/files/publications/NIESR%20Report%20Brexit%20-%202018-11-26.pdf">(Source here).</a>


The leavers won their Brexit vote. The U.K. voted for a return of the control of its borders and it has paid a steep price for it. What NIESR does not assess is the impact or value of any new trade deals that the U.K. might strike. But it will need to do a lot just to get back lost potential growth let along to make claims that it is better off with the EU-tether to Europe cut.

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With the U.K.'s Brexit process in its final deal-or-no-deal stages, the Confederation of British Industry survey turned up some retail optimism. However, despite the bump up in the surveyed components in November, the levels of the [...]

For the U.K.: A Brexit Christmas

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The Conference Board Consumer Confidence Index declined 1.6%
(+5.5% y/y) during November to 135.7 and reversed its unrevised 1.9% October
increase. The November level compared to expectations for 136.0 in the Action
Economics Forecast Survey. The indexes in the report are based on 1985=100.
During the past 10 years, there has been a 68% correlation between the level of
consumer confidence and the y/y change in real PCE.

Weakness was led this month by a 3.6% decline in the
expectations component, which was unchanged y/y at 111.0. It was the lowest
level in three months. The present situations component improved 0.5% (11.5%
y/y) to 172.7.

Business conditions were viewed as &quot;good&quot; by an
increased 41.2% of respondents and viewed as &quot;bad&quot; by 10.9%. Jobs were
viewed as &quot;plentiful&quot; by an increased 46.6% of respondents, the most
since January 2001. Jobs were viewed as &quot;hard to get&quot; by 12.2% of
respondents, roughly the fewest since November 2000. The net jobs assessment
reading, the difference between plentiful and hard to get, increased to 34.4, a
17-year high. The differential has a 95% correlation with the unemployment rate.

Expectations for business conditions deteriorated m/m as a
lessened 22.5% of respondents thought that conditions would improve. The figure
is below the March 2017 high of 26.9%. Income was expected to increase in six
months by a fewer 21.5% of respondents, down from 25.4% three months ago.
Expectations that there would be more jobs in six months continued to improve to
22.8% of respondents, up from the recent low of 12.2% in February 2016. A fewer
11.1% of respondents thought that there would be lessened employment in six months.

The expected inflation rate in twelve months edged higher m/m
to 4.9%, up from the 4.5% low twelve months ago. The percentage expecting higher
interest rates over the next twelve months rose to 74.4%, the most since
mid-2006. Those looking to buy a home in the next six months held steady m/m at
6.4%, and that was down from the 7.4% high late in 2017.

Confidence amongst respondents under age 35-years-old
improved modestly but remained below the 18-year high reached in September. For
those aged 35-54, confidence backed away from the18-year high reached last
month. For those over 55 years of age, confidence strengthened to the highest
level since February 2000.

The Consumer Confidence data is available in Haver's CBDB
database. The total indexes appear in USECON, and the market expectations
are in AS1REPNA.

Data Dependence and U.S. Monetary Policy is the title
of today's speech by Fed Vice Chairman Richard H. Clarida and it can be found
<a href="https://www.federalreserve.gov/newsevents/speech/clarida20181127a.htm">here</a>

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Conference Board (SA,
 1985=100)</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Nov Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Consumer Confidence Index</td>
 <td >135.7</td>
 <td >137.9</td>
 <td >135.3</td>
 <td >5.5%</td>
 <td >120.5</td>
 <td >99.8</td>
 <td >98.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Present Situation</td>
 <td >172.7</td>
 <td >171.9</td>
 <td >169.4</td>
 <td >11.5</td>
 <td >144.8</td>
 <td >120.3</td>
 <td >111.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Expectations</td>
 <td >111.0</td>
 <td >115.1</td>
 <td >112.5</td>
 <td >0.0</td>
 <td >104.3</td>
 <td >86.1</td>
 <td >88.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Consumer Confidence By Age Group</td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Under 35 Years</td>
 <td >138.6</td>
 <td >133.7</td>
 <td >140.7</td>
 <td >3.4</td>
 <td >130.2</td>
 <td >122.4</td>
 <td >116.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Aged 35-54 Years</td>
 <td >132.0</td>
 <td >143.2</td>
 <td >135.5</td>
 <td >4.1</td>
 <td >123.5</td>
 <td >106.2</td>
 <td >103.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Over 55 Years</td>
 <td >137.0</td>
 <td >134.9</td>
 <td >131.2</td>
 <td >7.0</td>
 <td >112.9</td>
 <td >84.6</td>
 <td >84.1</td>
 </tr>
 </tbody>
 </table>
 
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The Conference Board Consumer Confidence Index declined 1.6% (+5.5% y/y) during November to 135.7 and reversed its unrevised 1.9% October increase. The November level compared to expectations for 136.0 in the Action Economics Forecast [...]

U.S. Consumer Confidence Weakens

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The Federal Housing Finance Agency (FHFA) Price Index for
house purchases rose 0.2% (6.0% y/y) during September following a 0.4% August
rise, revised from 0.3%. Over the last three months, the index rose at a
lessened 4.1% annual rate, down from a 7.8% rate of increase six months earlier.

Prices in the Mountain region strengthened 1.3% (9.5% y/y).
The East North Central region posted a firm 0.6% increase (6.2% y/y) while home
prices in the South Atlantic region rose 0.4% (7.1% y/y). In New England, home
prices also gained 0.4% (5.2% y/y).

A lesser 0.2% increase (4.1% y/y) in home prices was logged
in the Middle Atlantic region. The home price index for the West South Central
region improved 0.1% (4.4% y/y) and prices also ticked 0.1% higher (4.4% y/y) in
the West South Central region.

Weakening by 1.1% (+5.5% y/y) were house prices in the
Pacific region. In the West North Central region prices eased 0.1% (+5.1% y/y).

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 refinancings on the same kinds 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.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" >FHFA U.S. House Price Index, 
 Purchase Only (SA %)</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Sep Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >0.2</td>
 <td >0.4</td>
 <td >0.4</td>
 <td >6.0</td>
 <td >6.7</td>
 <td >6.1</td>
 <td >5.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; New England</td>
 <td >0.4</td>
 <td >0.7</td>
 <td >-0.0</td>
 <td >5.2</td>
 <td >5.9</td>
 <td >4.1</td>
 <td >3.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Middle Atlantic</td>
 <td >0.2</td>
 <td >-0.4</td>
 <td >0.3</td>
 <td >4.1</td>
 <td >4.9</td>
 <td >3.7</td>
 <td >2.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; East North Central</td>
 <td >0.6</td>
 <td >0.3</td>
 <td >0.5</td>
 <td >6.2</td>
 <td >6.1</td>
 <td >5.4</td>
 <td >4.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; West North Central</td>
 <td >-0.1</td>
 <td >0.2</td>
 <td >0.4</td>
 <td >5.1</td>
 <td >5.4</td>
 <td >5.6</td>
 <td >4.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; South Atlantic</td>
 <td >0.4</td>
 <td >0.6</td>
 <td >1.1</td>
 <td >7.1</td>
 <td >7.0</td>
 <td >7.0</td>
 <td >6.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; East South Central</td>
 <td >0.1</td>
 <td >0.6</td>
 <td >-0.2</td>
 <td >6.3</td>
 <td >5.9</td>
 <td >5.1</td>
 <td >4.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; West South Central</td>
 <td >0.1</td>
 <td >0.4</td>
 <td >0.1</td>
 <td >4.4</td>
 <td >6.5</td>
 <td >5.8</td>
 <td >6.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Mountain</td>
 <td >1.3</td>
 <td >0.6</td>
 <td >-0.0</td>
 <td >9.5</td>
 <td >8.8</td>
 <td >7.9</td>
 <td >7.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Pacific</td>
 <td >-1.1</td>
 <td >0.8</td>
 <td >0.4</td>
 <td >5.5</td>
 <td >8.7</td>
 <td >8.0</td>
 <td >7.7</td>
 </tr>
 </tbody>
</table>
&nbsp;

 
 
 
 
 New England: Maine, New Hampshire, Vermont,
 Massachusetts, Rhode Island and Connecticut. 
 Middle Atlantic: New York, New Jersey and Pennsylvania. 
 East North Central: Michigan, Wisconsin, Illinois, Indiana and Ohio. 
 West North Central: North Dakota, South Dakota, Minnesota, Nebraska,
 Iowa, Kansas and Missouri. 
 South Atlantic: Delaware, Maryland, D.C., Virginia, West Virginia,
 North Carolina, South Carolina, Georgia and Florida. 
 East South Central: Kentucky, Tennessee, Mississippi and Alabama. 
 West South Central: Oklahoma, Arkansas, Texas and Louisiana. 
 Mountain: Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona and
 New Mexico. 
 Pacific: Alaska, California, Hawaii, Oregon, Washington.
 
 
 
 
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The Federal Housing Finance Agency (FHFA) Price Index for house purchases rose 0.2% (6.0% y/y) during September following a 0.4% August rise, revised from 0.3%. Over the last three months, the index rose at a lessened 4.1% annual [...]

U.S. FHFA House Price Increase Eases

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West Texas Intermediate crude oil prices fell to an
average of $53.90 per barrel last week (-6.2% y/y) from $56.94 in the prior
week. It was the seventh consecutive weekly decline from the peak of $75.11 in
early-October and the lowest price since October 2017. Yesterday, prices were
$51.63 per barrel. Brent crude oil prices declined to $62.85 per barrel (-0.3%
y/y) last week from $66.89 during the prior week. Yesterday, prices were $60.49 per barrel.

Natural gas prices continued to strengthen last week
to $4.70/mmbtu (56.1% y/y) from $4.23 in the prior week. Prices were up from the
low of $2.52 last February.

Gasoline prices declined to an average $2.54 per
gallon (+0.2% y/y) from $2.61 during last week. Prices have fallen from an
average high of $2.90 early last month, to the lowest level since January.
Haver Analytics constructs factors to adjust for the marked seasonal variation
in prices. The seasonally-adjusted gasoline price fell four cents last week to
$2.63 per gallon.

During the latest four weeks, gasoline demand fell 2.6%
y/y; total petroleum product demand rose 6.9% y/y. Gasoline inventories
strengthened 7.1% y/y, but inventories of all petroleum products declined 1.2%
y/y. Crude oil input to refineries has risen 0.5% y/y in the last four weeks.

These data are reported by the U.S. Department of Energy. The
price data can be found in Haver's WEEKLY and DAILY databases.
Greater detail on prices, as well as the demand, production and inventory data,
along with regional breakdowns, are in OILWKLY.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Weekly Energy Prices</th>
 <th scope="col" >11/26/18</th>
 <th scope="col" >11/19/18</th>
 <th scope="col" >11/13/18</th>
 <th scope="col" >Y/Y %</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Retail Gasoline ($ per Gallon Regular,
 Monday Price)</td>
 <td >2.54</td>
 <td >2.61</td>
 <td >2.69</td>
 <td >0.2</td>
 <td >2.47</td>
 <td >2.31</td>
 <td >2.03</td>
 </tr>
 <tr>
 <td class="firstcol" >Light Sweet Crude Oil, WTI ($ per bbl,
 Previous Week's Average)</td>
 <td >53.90</td>
 <td >56.94</td>
 <td >61.56</td>
 <td >-6.2</td>
 <td >50.87</td>
 <td >43.22</td>
 <td >48.90</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Natural Gas ($/mmbtu, LA, Previous
 Week's Average)</td>
 <td >4.70</td>
 <td >4.23</td>
 <td >3.58</td>
 <td >56.1</td>
 <td >2.96</td>
 <td >2.49</td>
 <td >2.62</td>
 </tr>
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</body></html>

West Texas Intermediate crude oil prices fell to an average of $53.90 per barrel last week (-6.2% y/y) from $56.94 in the prior week. It was the seventh consecutive weekly decline from the peak of $75.11 in early-October and the [...]

U.S. Crude Oil Prices Decline; Natural Gas Costs Surge

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

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

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

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

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

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

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

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Charts of the Week: Tariff Truce, Tenuous Trust

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The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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The value of construction put in place unexpectedly fell 0.5% m/m in March after rises of 0.6% in February (+0.7% initially) and 0.1% in January (-0.5% previously), data from the U.S. Census Bureau showed. The March reading was the first m/m fall following five straight m/m gains. A 0.3% m/m March rise had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase decelerated to 2.8% in March, the lowest since May 2019, after registering at 3.4% in February and January. The latest y/y figure was lower than 8.7% in March 2024; thus, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction slid 0.6% (+2.3% y/y) in March, down for the first time since September, following increases of 0.7% in February (+0.9% initially) and 0.1% in January (-0.7% previously). Residential private construction fell 0.4% (+2.8% y/y) in March, the first m/m fall in six months, after an unrevised 1.3% gain in February. Home improvement building dropped 1.2% (+13.4% y/y), the first m/m decline since December, following a 2.3% February gain; it was 41.1% of the residential private construction. Single-family building edged up 0.1% (-0.8% y/y), the smallest of seven consecutive m/m increases, after a 0.8% February rise; it was 46.6% of the residential private construction. Meanwhile, multi-family building was essentially unchanged m/m (-12.1% y/y) in March following 15 straight m/m decreases; it was 12.3% of the residential private construction.

Nonresidential private construction fell 0.8% (+1.6% y/y) in March after a 0.1% increase in February (+0.4% initially) and a 0.1% easing in January (-0.2% previously). The March fall reflected m/m drops in the following nonresidential private constructions. These included religious (-2.9%; +16.4% y/y), health care (-2.2%; -5.2% y/y), office (-1.8%; +2.7% y/y), educational (-1.7%; -4.2% y/y), lodging (-1.6%; -1.0% y/y), commercial (-1.0%; -5.8% y/y), manufacturing (-0.4%; +3.6% y/y), communication (-0.3%; +2.2% y/y), and utilities (-0.1%; +7.0% y/y). In contrast, private constructions for amusement & recreation (1.5%; 7.0% y/y) and transportation (0.7%; 10.2% y/y) rose m/m in March.

The value of public construction declined 0.2% (+4.7% y/y) in March after holding steady in February (+0.2% initially), reflecting a 0.2% increase (-1.9% y/y) in residential public construction and a 0.2% easing (+4.8% y/y) in nonresidential public construction. The March decline reflected m/m drops in the following nonresidential public constructions. These included utilities (-4.8%; -12.8% y/y), commercial (-1.6%; +40.3% y/y), amusement & recreation (-1.0%; +19.1% y/y), educational (-0.6%; +7.6% y/y), sewage & waste disposal (-0.6%; +10.6% y/y), and health care (-0.4%; +13.0% y/y). Notably, spending on highways & streets, which made up 28.7% of public construction spending, fell 0.5% (-2.4% y/y) in March, the first m/m fall since October, following a 0.9% increase in February. To the upside, the following public constructions rose m/m in March: office (1.6%; 6.0% y/y), transportation (1.4%; 7.3% y/y), public safety (0.7%; 4.1% y/y), conservation & development (0.6%; 4.7% y/y), and water supply (0.6%; 12.2% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- March construction spending -0.5% m/m; +2.8% y/y, the lowest y/y rate since May ’19.
- Residential private construction -0.4% m/m, led by a 1.2% drop in home improvement building.
- Nonresidential private construction -0.8% m/m, down for the second month in three.
- Public sector construction -0.2% m/m, reflecting a 0.2% decline in nonresidential public building.

U.S. Construction Spending Unexpectedly Drops in March, the First M/M Fall Since September

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Initial claims for unemployment insurance rose 18,000 in the week ended April 26 to 241,000, seasonally adjusted.  This is higher by 16,000 than the Action Economics Forecast Survey amount of 225,000 and is the largest amount since the week of February 22. The previous week’s actual count was revised up by 1,000 to 223,000, from 222,000 reported initially.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended April 19 was 1.916 million, up 83,000 from the prior week’s 1.833 million; that earlier amount was revised down by 8,000.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, was 1.3% in the April 19 week, following 1.2% continuously since the week of January 6, 2024.

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) and Texas (1.09%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in U**SECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

U.S. Initial Jobless Claims Rise Notably in April 28 Week

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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.

Economy in Brief

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