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[Matlab](http://matlab.com) by The MathWorks lets you access, visualize, and analyze historic time-series data to identify patterns or uncover complex relationships. From within a single environment you can:

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MATLAB

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[SASEHAVR](http://support.sas.com/documentation/cdl/en/etsug/67525/HTML/default/viewer.htm#etsug_sasehavr_gettingstarted01.htm) is a seamless interface between Haver and SAS data processing that enables SAS users to read economic and financial time series data that reside in a Haver Analytics DLX (Data Link Express) database. [SASEHAVR](http://support.sas.com/documentation/cdl/en/etsug/67525/HTML/default/viewer.htm#etsug_sasehavr_gettingstarted01.htm) requires both SAS/ETS and Base SAS Software.

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[RATS (Regression Analysis of Time Series) Econometric Software](https://estima.com) by Estima is a leading econometrics and time-series analysis software package. It provides ability to do linear and non-linear least squares, forecasting, SUR and ARIMA models and in addition, supports advanced techniques such as GMM, ARCH and GARCH models, state space models, and more.

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RATS

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A popular open source option for statistical computing and graphics that is available on many UNIX platforms, Windows and MacOS

Estimating, evaluating, and forecasting ARIMA models

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Teaches econometrics and forecasting at the University of Colorado Denver. He has over 15 years of econometric experience in both the private and public sector.

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Abdel M. Zellou, Ph.D.

Bootcamp and Econometric Tools 1 & 2

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Haver partners with SmartMacro Labs to offer a two week immersive online course introducing participants to the power of the Python programming language. This applied hands-on training develops statistical economics skills with a concentration on economics and finance.

Gain proficiency in building modern time-series models in Python through real-world applications. Designed for professionals in both the public and private sector, the course does not require prior experience, assuming only that participants have a basic understanding of regression and statistical concepts.

Proficiency working in Jupyter notebooks and the Python environment

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Remote Training: Applied Time Series in Python

AI boosting US investment in data centers

Tom Moeller

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The National Association for Business Economics expects that following 2.8% growth in 2024, real GDP growth will slow to 1.8% this year, revised from 1.3% in the June survey, and 1.7% in 2026, revised from 1.4%. Growth from Q4-to-Q4 is expected to slow to 1.3% in 2025 from 2.4% in 2024, then improve to an 1.9% next year. Quarterly GDP is expected to grow 1.0% in Q4’25, 1.5% in Q1’26, by 1.9% in Q2 then by 2.0% in both Q3’26 and Q4’26.

Expected real growth in personal consumption expenditures in 2025 was lessened to 2.0% from 2.3%, and raised to 1.6% from 1.4% in 2026. The projection for business fixed investment growth was increased to 3.8% this year from 1.9%, followed by 1.7% growth in 2026, revised from 0.9%. An expected 1.6% decline in residential fixed investment this year was reduced from +0.5%, followed by 0.4% growth in 2026, which was little revised. Government spending growth of 1.3% this year was unchanged, and 0.9% growth in 2026 was little changed from the 0.5% improvement expected earlier.

The net export deficit is expected to widen to $1.113 trillion in 2025, revised from $1.204, then narrow to $1.024 trillion in 2026, revised from $1.085 trillion expected earlier. Exports should increase 0.9% this year, revised from 1.1% expected earlier, then 1.1% in 2026, revised from 1.6%. Imports are projected to rise 2.8% in 2025, revised from 1.1%, then fall 1.2% in 2026, down sharply from +1.6% as expected earlier. Inventory accumulation should ease this year to $40 billion, revised from $55.0 billion, down from $43.5 billion in 2024, then slow to $34.0 billion in 2026, revised from $40.0 billion in 2026 expected earlier.

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Housing starts are expected to ease to 1.35 million this year, revised from 1.36 million, then hold steady at 1.35 million in 2026 in 2026, revised from 1.39 million. They have been trending lower since the 2021 peak of 1.60 million. Light vehicle sales should stabilize this year at 16.0 million units, revised from 15.5 million, then ease to an unrevised 15.5 million next year. The average gain in payroll employment should weaken to 62,000 per month in the current year, revised from 91,000, then rise to 74,000 in 2026, revised from 99,000. The unemployment rate expectation in 2025 has been reduced to 4.2% from 4.4% projected earlier, but is now expected to rise to 4.5% in 2026, revised from 4.7%.

Inflation pressures are expected to eventually abate. After falling in 2024 to 2.7% (Q4/Q4), the increase in the CPI is forecast to first rise to 3.0% this year, revised from 3.4%, then stabilize at an unrevised 2.6% in 2026. These increases compare to a 7.1% rise in 2022. Price inflation, as measured by the PCE chain price index, is expected to rise to 3.0% in 2025, revised from 3.1%, then fall to 2.5% in 2026, revised from 2.3%. It hit 6.0% in 2022. The gain in the chain PCE price index excluding food & energy is projected to rise to an unrevised 3.1% this year, then fall to 2.5% in 2026, revised from 2.4%. The index rose to its high of 5.2% in 2022. The projected cost of crude oil of $64 per barrel at the end of this year is little changed from the last projection. The $64 per barrel at the end of next year compares to $68 expected earlier versus $70 per barrel at the end of 2024.

Interest rates on a 10-year Treasury note are expected to ease. The forecast of 4.14% for the ten year Treasury note at the end of this year compares to 4.19% expected earlier, and with 4.08% at the end of next year, compared to 4.00% previously projected. The Fed is expected to continue its easing of monetary policy. The Federal funds rate is forecast to be 3.87% at the end of 2025 versus 4.38% at the end of 2024, then fall to 3.13%, revised from 3.38%, by the end of 2026. After-tax corporate profits are predicted to rise 3.9% this year, revised from 2.1%, and 2.9% next year, revised from 3.3%.

The figures from the latest NABE report can be found in Haver's **SURVEYS** database.

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- Consumer spending growth increased.
- Business investment growth also increased.
- Price inflation expectations reduced.


NABE GDP Forecasts In 2025 & 2026 Are Raised

Tian Yong Woon

This week, we highlight recent developments in China and Japan, alongside movements in gold and their relevance to Asia. Investors remained broadly unfazed after China’s “super golden week” holidays, with equities buoyed by AI optimism despite recent weak economic data (chart 1). US President Trump’s Friday threats of additional 100% tariffs, however, dented sentiment, with the escalation underscoring China’s delicate external environment. This week’s trade figures show a continued divergence, with exports to Asia still growing while those to the US slumped further (chart 2), amid a backdrop of subdued domestic inflation. Attention is also on the IMF’s upcoming economic forecasts for China. Past projections, including the IMF’s July WEO and the World Bank’s recent report, suggest sub-5% growth, though late-year stimulus has sometimes lifted growth above expectations (chart 3).

In Japan, Sanae Takaichi’s victory in the LDP leadership race positions her to become the country’s first female Prime Minister. Yet, the exit of long-time coalition partner Komeito has left much uncertain. Nonetheless, markets have priced in Takaichi’s pro-growth stance, with a weaker yen and rallying equities (chart 4), though rising inflation (chart 5) may constrain policy ambitions. As for gold, the precious metal continues to attract attention, with prices surpassing $4,000 per ounce. The rally has strengthened Asian currencies that are usually correlated with the precious metal, such as the Thai baht. A slower-moving but significant driver of the gold rally remains the accumulation of reserves by major Asian central banks, including China and India (chart 6), likely reflecting efforts to diversify away from the US dollar.

**China**
China has just come out of its “super golden week”, an eight-day stretch of consecutive holidays from October 1st to 8th, resulting from the overlap of the National Day and Mid-Autumn Festival breaks. This extended holiday period was closely watched for a potential spike in domestic tourism, retail spending, and broader growth momentum. Preliminary data show that key retail and catering firms recorded a 2.7% y/y increase in sales, a notable slowdown from the 6.3% growth seen during the Labour Day break earlier this year. This suggests that consumer spending was more restrained during the recent holiday period. Given Beijing’s increasing emphasis on consumption-led growth over traditional drivers such as exports and investment, the health of Chinese consumers has become an ever more critical barometer of the economy. Nonetheless, following the reopening of financial markets after the holidays, equity market enthusiasm — buoyed in part by AI optimism — initially appeared undimmed, despite a weaker run of economic data (chart 1).

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With that said, Chinese equity markets experienced a more recent dent in sentiment following US President Trump’s Friday threat to impose an additional 100% tariff on imports from China. The announcement also included new export controls on critical software, effective November 1st. President Trump cited recent Chinese actions — including sweeping curbs on exports of rare earths and critical minerals — as justification for the move. The flare-up in tensions, however, appeared to ease over the weekend after the US signalled openness to a potential deal on Sunday. These events serve as a reminder that external headwinds for China persist. The latest trade data show a continued divergence, with overall exports rising on stronger trade with Asia, while exports to the US continued to slump. Meanwhile, inflation in China remains subdued (chart 2), reflecting weak domestic demand and persistent oversupply.

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This prolonged lack of inflation has prompted calls from IMF Chief Kristalina Georgieva for a fiscal package aimed at boosting private consumption and reflating the economy. Her remarks come ahead of the IMF’s updated World Economic Outlook, due for release on Tuesday, October 14th. Even before this October update, the IMF (via its July WEO update) and the World Bank (via its October East Asia and Pacific Economic Update) had revised their China GDP forecasts. Both institutions raised their projections for the year from about 4% to 4.8%. Barring the IMF’s forecast update this week, these prior projections suggest that China is unlikely to hit its 5% growth target this year. That said, it is worth noting that China has previously defied expectations of missing its growth target, thanks to late-year stimulus measures that can lift economic growth.

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**Japan**
Following Prime Minister Ishiba’s resignation announcement, Sanae Takaichi won the ruling Liberal Democratic Party’s (LDP) leadership race, positioning her to become Japan’s first female Prime Minister. A slim risk remains, however, that this may not occur. Attention now turns to an extraordinary parliamentary session, expected from October 20th, to formally elect the country’s next leader. Much remains in flux — from the composition of Japan’s new cabinet to the shape of its ruling coalition — amid competing policy priorities among potential partners. The latest uncertainty stems from the withdrawal of Komeito, the LDP’s coalition partner for 26 years, leaving the structure and direction of the government less certain. Nonetheless, markets have already begun pricing in potential shifts under Takaichi’s leadership. The yen has weakened sharply, while Japanese equities have rallied (chart 4), reflecting expectations that she will continue the late former Prime Minister Shinzo Abe’s “Abenomics” strategy of fiscal stimulus, loose monetary policy, and structural reform.

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Eyes are also on the shape and scope of a potential supplementary budget that Takaichi may introduce to advance her policy agenda. This could include support grants for local governments and the abolition of fuel levies on gasoline and diesel, among other measures, although delays in forming a cabinet could slow progress. Externally, investors are watching Takaichi’s early engagements with major world leaders, given her stated openness to revisiting the US–Japan trade agreement, even as Japan’s relationship with China continues to evolve. Meanwhile, assessments of the Bank of Japan’s policy path are also likely to shift. Markets may perceive greater resistance to additional tightening if fiscal and monetary policies are aligned to further stimulate growth. However, the desire to maintain loose policy for longer could face constraints if inflation resumes its upward trend following the implementation of more accommodative measures (chart 5).

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**Gold**
Turning to gold, the recent US government shutdown left policymakers and investors largely in the dark due to the absence of key data releases such as nonfarm payrolls. The disruption has also pushed gold prices to record highs, surging past $4,000 per ounce, with multiple implications for Asia. For instance, the Thai baht–gold correlation has driven the currency to appreciate sharply. This poses a challenge for Thai policymakers, as a stronger domestic currency weighs on tourism and exports, two of Thailand’s key growth drivers. More broadly, another factor underpinning gold’s gradual price appreciation over time has been central bank buying. Major central banks, including those of China and India, have been steadily expanding their gold reserves in recent years (chart 6). This trend is likely motivated by a desire to reduce reliance on US Treasuries, among other strategic considerations. Looking ahead, this trend of central bank accumulation is expected to continue, providing ongoing support for gold prices.

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Asia

Economic Letter from Asia: Gotta be Golden

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) increased 2.7% (1.4% y/y) during August to 100.5 after increasing 2.9% in July, revised from 4.0% and falling 2.1% in June. The index was at the highest level in four months, but remained 4.1% below the recent high of 104.8 in September of last year. The level of home affordability was 11.8% higher than its low of 89.9 in October 2023, but the latest level was 43.9% below the high of 179.0 in April 2020.

The rise in affordability in August occurred as the median price of an existing single-family home fell 1.0% (+1.9% y/y) to $427,800, and mortgage rates fell to 6.67% after declining to 6.80% in July. The price compared to the record $432,900 in June 2024. The fall in mortgage rates left them above their a low of 6.26% in September of last year, though below a 7.70% high in October of 2023. They remained well above a December 2020 low of 2.73%. In August, the principal & interest payment fell 2.3% (+2.9% y/y) to $2,202 per month, down 4.7% from June’s record high of $2,311, but still well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a lessened 24.9% of income during August, down from 25.5% in July and a high of 26.3% in June, but increased from a low of 14.0% of income in April 2020.

The decline in housing costs in August was accompanied by a rise in median family income, up 0.3% (4.4% y/y) to $106,243 after rising 0.3% in July. Qualifying income declined 2.3% (+2.9% y/y) to $105,696 after falling 2.5% during July. 

Housing affordability improved m/m across the country in August. The index rose in the Midwest, the country’s most affordable region, by 2.6% (-1.1% y/y) to 125.2.  In the South, the index increased 3.0% (3.3% y/y) to 107.5, while the affordability index in the Northeast improved 1.9% (-3.5% y/y) to 84.7. In the West, where homes are the least affordable, the index improved 1.5% (2.7% y/y) to 72.9 in August.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990. It reached an all-time high of 213.3 in January 2013.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

**The Economic Outlook and Monetary Policy** from Fed Governor Michael S. Barr is available [here](https://www.federalreserve.gov/newsevents/speech/barr20251009a.htm).

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- Home prices & mortgage rates decline for second straight month.
- Median income continues to edge higher.
- Affordability increases across country.

U.S. Housing Affordability Increases in August

Robert Brusca

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Manufacturing trends in the European Monetary System in August were mixed. Among the 13 countries reporting early industrial production data, six reported output declines.

Looking at the three most recent months of data, June, July, and August, there are four countries that are showing growing weakness month-to-month for each of those three months. Those are Austria, Belgium, France, and Greece. Only two countries are showing steady acceleration over the span; those are Ireland and Portugal.

Looking at sequential data, growth over 12 months, six months and three months, progressive weakening is seen in four countries Germany, Spain, Ireland, and Portugal that compares to acceleration in Belgium, France, and the Netherlands. In terms of Monetary Union nonmember countries, Sweden is showing persistent acceleration while Norway is showing persistent but very moderate deceleration.

These data are rife with contradictions as no accelerating/decelerating trend sequentially persists over the next three months in the same direction. The European Monetary Union is clearly in a period of transition in terms of growth and conditions have been weak and are not yet breaking out to the upside. What this tells us is that a period of acceleration has not yet stepped up and weakness, even deceleration has lingered. Quarter-to-date data show us that there are output declines in most of these economies with only five EMU Members showing output growing in the quarter-to-date period.

This continues to be part of an extended period in which industrial output has been extremely weak: we can support that with the numbers. Looking at these 13 members, we assess the ratio of industrial production today compared to where it was in January of 2020 before COVID struck and before the Russian invasion of Ukraine. This comparison goes back 5 1/2 years; Germany, France, Italy, Spain, Luxembourg, and Portugal all have levels of output today in terms of manufacturing output that are lower than they were in January 2020. This is a very long period to go without having output recover to its level in January 2020.

Separately the table ranks countries on growth rates, This ranking is a ranking of output growth on 12-months rates over data since 2007. On that basis, seven of the countries in the table have year-over-year growth rates below the median growth that they had during this period back to 2007. That's slightly over half of the monetary union countries in the table that are reporting growth rates below their median for this extended period of 20 years, much of it delivering very weak growth.

Hope springs eternal, for a manufacturing rebound. Central banks right now are trying to run relatively accommodative policies and are tolerating some inflation overshooting to do that; however, it doesn't appear to have been enough to excite any acceleration in manufacturing output. Europe continues to be challenged in terms of manufacturing growth. There is really nothing in these data that make us optimistic that conditions are getting better.

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Europe

Another Mixed Month for EMU IP Trends

Andrew Cates

**US labour market data**
With the federal government shut down, several key US data releases have been suspended, including the Department of Labor’s national jobless‐claims reports that normally anchor weekly readings on labour-market momentum. To maintain visibility, the chart uses Haver Analytics’ state-sum methodology—adding up the figures published by individual state agencies to create a near-real-time proxy for the national series. The dark line shows the 4-week moving average of initial claims derived from this state-level aggregation, while the shaded bars plot the corresponding state-summed continued claims. Although not an official federal release, this construction provides an updated snapshot of layoffs and ongoing benefit rolls during the shutdown period, helping analysts track any softening or resilience in labour demand until the Department of Labor’s headline numbers resume.

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**Labour productivity trends**
As the next chart below indicates the US has outpaced peer economies on labour productivity in recent years. That’s a function of a number of factors including faster capital deepening and - arguably - a quicker diffusion of digital technologies. Surging investment in software, cloud and data-centre infrastructure—bolstered by deep capital markets and policy supports—has lifted output per hour in tech-heavy sectors and spilled over into business services. A flexible labour market has also arguably reallocated workers toward higher-productivity firms more rapidly than in Europe or Japan. Sector mix and energy costs matter too: the US has a much larger footprint in high-value services and enjoyed a relative energy-price advantage since 2022, while Germany and the UK faced an energy-intensive manufacturing slump that depressed measured productivity.

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**Electricity prices**
That linkage shows up starkly in electricity costs. The two-year average electricity price has been far lower in the US than in Europe or Japan, with France and Spain higher, Japan higher still, and Germany and the UK at the top end. The mapping to productivity is almost one-for-one: cheaper power supports capex, keeps energy-intensive inputs and data-centre compute affordable, and sustains margins in high-value services; expensive power squeezes manufacturers, curtails utilisation, and drags on measured output per hour. In other words, the same energy-price wedge that has undercut Germany and the UK since 2022 has amplified the US edge—helping explain why recent productivity gains have clustered where electricity is cheapest.

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**Natural capital**
The split in the next chart is telling: while produced capital per capita across the G7 economies has marched higher, natural capital per capita has drifted lower for most of the past decade. That erosion has arguably become central to the more active debate about why global productivity has struggled—depleted natural assets and tighter environmental constraints tend to raise real (inflation-adjusted) energy costs, increase maintenance and mitigation spending, and divert investment from expansion to replacement and resilience. In practice, more capex goes into hardening grids, meeting environmental standards, remediating land and water, and sourcing costlier energy inputs—outlays that protect activity but add less to measured output per hour. The result is a thinner productivity fabric: higher operating costs, slower diffusion of new capacity, and weaker multiplier effects from investment. In short, the gains in produced capital are increasingly offset by the drawdown of natural capital.

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**Japan’s politics**
Turning to Japan, politics has become the market driver. The leadership change in Tokyo over the past few days has been read as a green light for a more stimulative fiscal stance—and, by extension, a slower or softer path for Bank of Japan normalization of monetary policy. That mix has pushed domestic risk assets higher while taking some of the support out of the yen. In the chart, the Nikkei 225 has surged to fresh highs as investors price stronger nominal growth and policy backstops, whereas the yen has slipped against the dollar, reflecting expectations of wider policy differentials. The combination of easier fiscal, a still-accommodative BOJ, and a weaker currency has reinforced the equity rally—especially in exporters and cyclicals—even as it raises questions about the durability of yen weakness if inflation proves sticky.

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**Vietnam’s economy**
Vietnam has been in the headlines this week with Q3 GDP showing a steady re-acceleration. As the final chart below indicates, real GDP growth is pushing back toward the top of its post-pandemic range, with year-to-date household consumption firming alongside it—signs that the recovery is broadening beyond exports. Tailwinds include a rebound in electronics orders, ongoing supply-chain diversification into Vietnam, tourism’s return, and earlier monetary easing. But the outlook is not without hazards: escalating US tariff policies—both broad measures and sector-specific actions on tech and green goods—could disrupt export demand and complicate rules-of-origin strategies that currently favour Vietnam as a “China-plus-one” hub. Add lingering property-sector repair and infrastructure bottlenecks, and the near-term growth path remains constructive but sensitive to US trade developments.

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Financial markets have been navigating a US government shutdown that has frozen key data releases and muddied the macro picture, while political cross-currents in Europe and Asia have added to the noise—France has seen yet another prime minister resign, while Japan’s leadership change is being read as a tilt toward easier fiscal policy. With official US data dark, investors are leaning on proxies—such as Haver’s state-sum jobless-claims series—to keep tabs on labour market  momentum (chart 1). From there, our remaining charts this week point to an uneven global macroeconomic story: US labour productivity has remained well ahead of peers, a lead that maps closely to cheaper electricity—where power costs are low, capex and margins hold up; where they’re high, manufacturing strains and measured productivity sag (charts 2 and 3). Yet produced capital continues to climb even as natural capital per capita erodes, helping to keep real energy costs sticky and weighing on the world’s productivity fabric (chart 4). In markets, Japanese equities have surged on policy-support hopes even as yen softness lingers (chart 5), and in emerging Asia, Vietnam’s Q3 GDP shows re-acceleration and firming domestic demand, though exposure to evolving US tariff policies is keeping the export outlook uncertain (chart 6). Net-net: growth pockets persist, but high real energy costs, policy shifts, and patchy visibility argue for a choppy, bifurcated path ahead.

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Charts of the Week: Shutdowns and Shake-Ups

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Germany shows signs of withering domestic demand in the face of weaker foreign demand. German exports weakened in August, falling by 0.5% month-to-month. The drop in German exports to the U.S. was being highlighted at a 2.5% month-to-month decline, but its exports to EMU members were down by 2.2% as well and exports to non-EMU members of the EU were lower by 3.1%. In fact, German exports outside the EU area rose by 2.2% largely on exports to China.

**Exports to the U.S. vs. European trends**
The German website highlights a large drop in German exports to the U.S. from August 2024, a period over which German exports to the U.S. are off by some 20%. This is a much sharper drop than the German overall result that shows a decline of less than 1% over the past year for total exports. However, on the near-term comparison, German exports to the U.S. seem to be behaving a lot like German exports to its closer European neighbors.

**World trade**
The Baltic dry goods index shows a sharp recovery in world trade volume (in dry goods; excluding tanker volumes) from a dip in early-2025. From early 2025 to date, trade volume readings on the Baltic index are among some of the stronger readings since 2022.

**German orders imports, demand**
German orders data had also flagged weakness in external orders. Overall orders show weakness, but domestic orders remain strong and are accelerating. Still, the recent (August) IP report showed declines on the month and growing output weakness - despite strong domestic real orders. In today’s trade report, we are seeing some weakness in Europe and among the EU’s non-EMU members plus trade weakness with the United States. This is partly compensated for by strength elsewhere and a part of that is German exports finding some demand in China. All the geographical references are up to date through August.

**Overall German trade patterns**
However, German overall trade showing German domestic import strength with real and nominal imports rising solidly and even strongly over 12 months and six months but giving some ground over three months. German nominal and real export trends are showing some growth except over three months but at that, the pace generally is weaker than the pace for imports.

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**Prospects:**
Looking ahead, prospects are uncertain. We have not seen a full year of U.S. tariffs yet and trade flows over the past year are distorted by lead and lag effects as exporters saw the U.S. tariffs coming and generally tried to squeeze as much into the U.S. ahead of the tariff imposition as possible. That activity beefed up pre-tariff growth and has sapped strength from post-tariff growth rates. Firms in the U.S. are now saying they have mostly run down their pre-tariff inventories. So in the U.S., we should begin to see pricing based in where tariffs are and we should also begin to see trade flows settle into new longer-run patterns. One caveat is that in the wake of all this tariff gyration and other U.S. policy shifts the dollar has gotten weaker. A weaker dollar could weigh against German export recovery in the future as well as weigh on the rest of the EMU.

**The German economic scene**
The German trade, orders and industrial productions reports all seem to tell a common story of some new weakness in demand for German exports that incudes much of Europe and the United States. Germany’s own domestic demand, as revealed by real orders and imports, seems to be still stable. But Germany is an economy that relies on its international sales. Weakness in foreign orders and in German exports are not to be brushed off lightly. As a testament to that, industrial production is declining and showing progressive weakness despite solid German exports and strong real domestic orders. During this stretch ahead, we will watch export and demand trends closely in Germany and in Europe; we will also monitor closely what central banks are doing.

**Fed policy will set the tone**
The Fed may be in a broader easing mode, but then there are also signs of growing restiveness or resistance to the notion of further Fed rate cuts because of stubborn U.S. inflation. Inflation became entrenched above target and stopped falling even when the Fed funds rate was higher, so some are wary of further cutting- especially with the brunt of tariff effects lying ahead.

While many are poised for a Fed easing cycle ahead, and that is one thing weighing on the dollar, that cycle is something that may not develop. Another rate cut from the Fed seems to be in the cards. After that, I think all bets are off. That could change the dynamics and the outlook for ECB policy as well. Global policy is in flux and much of it centers on policy in the U.S. But Europe, with a war on its doorstep and an increasingly adventuresome Russia, also faces important challenges and decisions. Nothing from here on out will be simple.

Germany

German Exports Wither and Imports Drop

Sandy Batten

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Mortgage applications fell 4.7% w/w (+16.4% y/y) in the week ended October 3 on top of a 12.7% weekly drop in the previous week, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications are on a modest uptrend but are still correcting from the 29.7% w/w surge in the week of September 12. Purchase applications slid 1.2% w/w (+14.3% y/y) following a 1.0% weekly decline in the previous week. Applications for refinancing dropped 7.7% w/w (+18.3% y/y) on top of a 20.6% weekly decline in the previous week.

Mortgage interest rates were mixed in the latest week. The effective interest rate on a 30-year fixed-rate loan fell 4bps to 6.60% in the week ending October 3 while the 15-year rate edged up 3bps to 5.96% in that week. These two interest rates have generally trended down since the beginning of this year with the 30-year rate down nearly 70bps and the 15-year rate down more than 65bps over this period. The rate on a 30-year Jumbo mortgage increased 6bps to 6.72% in the week ended October 3 while the rate on a 5-year ARM fell 15bps to 5.76%, almost reversing the 20bps jump in the previous week, and is close to levels last seen in May 2023. 

The share of applications for refinancing an existing loan fell further to 53.5% in the week ended October 3 from 55.0% of total applications in the week ending September 26 and 60.2% in the week ending September 19. The adjustable-rate mortgage (ARM) share of activity rebounded to 9.5% in the October 3 week from 8.4% in the September 26 week.

The average size of a mortgage loan declined by 2.4% w/w (-1.2% y/y) to $398,100 in the week ended October 3 from $408,000 in the week ending September 26. The average size of a purchase loan fell 1.0% w/w (-3.3% y/y) to $437,500 in the latest week, its first weekly decline in four weeks, after a 0.2% w/w increase in the previous week. The average size of a refinancing loan declined 4.4% w/w (+1.6% y/y) to $363,400 in the latest week, its third consecutive weekly decline, following a 9.9% weekly drop in the previous week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

The minutes to the latest **FOMC** meeting are available [here](https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20250917.pdf).

- Mortgage applications fell 4.7% w/w in the week ended October 3.
- Applications are on a modest uptrend but are still correcting from the outsize jump in mid-September.
- Fixed mortgage rates were mixed with the 15-year rate up a bit and the 30-year rate down slightly.

U.S. Mortgage Applications Fell in Latest Week

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Japan's economy watchers index in September advanced to 47.1 with the future index rising to 48.5. The current index rose month-to-month by four-tenths of a percentage point while the future index rose by a full diffusion point.

**The Current Index**
In September, among the 9 detailed categories, all but three of them improved in the current index, in August all but two had improved, and in July all but four had improved.

**Sequential changes-** The sequential changes on the current index shows that over three months the headline and all components improved, over six months the headline and all components also improved, but over 12 months only two components improved and the headline falls back by about nine-tenths of one-point. Improving over 12 months are only the assessments for services and for housing

**Rankings-** The ranking statistics for the current index show only two components below a rank-value of 50%, which means only two components are below their respective medians on data back to 2004. However, the current readings show the headline and all components below diffusion values of 50 in September, indicating contraction both overall as well as in each category. This combination of observations is a stark reminder of how weak Japan’s economy has been, that contracting diffusion values are above their medians.  In the case of housing with a 73.5 percentile standing – a standing that, on its own seems quite solid, corresponds to a monthly diffusion value at 49. Housing diffusion has been stronger than a diffusion value of 49 only about 27% of the time (over the past 21-years).

**The Future Index**
The future responses are similar in nature to the current responses. Recent diffusion values have mostly been improving monthly. Only two were weaker in September, compared to four in August and none in July. The future index, however, has two September readings above diffusion values of 50: for eating & drinking places and for nonmanufacturers. In August services read above a 50 diffusion value (even as the weaken month-to-month) and in July three component responses are above 50.

**Sequential changes-** Over three months all components improve except employment; that result is replicated over six months. Over 12 months only three categories are improving: eating & drinking, housing, and nonmanufacturing.

**Rankings-** Only two sectors rank below 50% (below their respective medians) in September; those two are services and employment expectations). The headline standing is above 50% at 50.2%, unlike for the current reading where the headline standing is at 48.2%. However, we once again see that 5 sector readings in the future survey have diffusion values in September below 50 but are above their respective medians. The same is true of the headline for the future index. The median phenomenon has been a moderate contraction over the last 21 years.

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**A new PM? A new path ahead?**
The economy watchers index is a curious report this month showing a nice upswing in gear over six months and three months with improved performance compared to recent history but also with many still-contracting sectors. With the LDP party election settled, a New Prime Minister is set to be installed. Policy may be put in firmer hands. Sanae Takaichi, is expected to be more pro-growth and to slow the Bank of Japan’s path to higher rates. Still, the lessened grip of the LDP on Japan politics with minorities in both houses means she will have to scale back some of her plans and re-set her previous rhetoric for stimulus. That is already in progress. A period of moderate stimulus and relative BOJ restraint is believed to lie ahead.

Japan

Japan’s Economy Watchers Index Advances

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The Housing Market Index, compiled by the National Association of Home Builders/Wells Fargo, jumped 15.6% (-14.0% y/y) to 37 in October, after holding steady at 32 in September, and falling 3.0% to 32 in August. The latest reading was the highest since April, but remained below the break-even point of 50 where it’s been since May of last year. The index also remains under a July 2023 high of 56 and a November 2020 peak of 90.

The rate on a 30-year fixed rate mortgage averaged 6.30% in the first three weeks of October versus 6.35% during all of September. It fell to 6.27% last week and remained below the high of 7.79% in the last week of October 2023, according to Freddie Mac.

The single-family home sales measure rose 11.8% (-19.1% y/y) this month to 38, a six-month high, after holding steady in September. The prospective sales in six months measure jumped 20.0% (-5.3% y/y) to 54, after rising 4.7% in September. The latest was the highest level since January. The traffic of prospective buyers’ index increased 19.0% (-13.8% y/y) to 25 in October, after falling 4.5% in September, also a six-month high.

Housing improvement occurred throughout the country last month. The sales index in the Northeast jumped 25.0% (5.8% y/y) to 55 after rising 12.8% in September. In the Midwest, the sales index rose 2.4% (-2.3% y/y) to 42 after declining 2.4% in September. In the South, the index rose 20.7% (-18.6% y/y) to 35 after holding steady in September. In the West, the index rose 15.4% (-31.8% y/y) to 30 after falling 3.7% in September.

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions which ask builders to rate sales and sales expectations as "good," "fair" or "poor" and traffic as "very high," "average" or "very low." The diffusion indexes with values over 50 indicating a predominance of "good"/"very high" readings. In constructing the composite index, the weights assigned to the individual index components are: 0.5920 for single-family detached sales, present time, 0.1358 for single-family detached sales, next six months, and 0.2722 for traffic of prospective buyers. The regional indexes run back to December 2004.

These data are included in Haver's **SURVEYS** database.



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- Overall reading is highest level since April.
- Current sales rise, expectations surge, while traffic improves.
- Index improves throughout the country.


U.S. Home Builders Index Strengthens in October

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