Haver’s data services are provided through the DLX platform; delivering tools for data management, visualization, modeling and publishing. DLX is designed to increase productivity and integrates with Excel, PowerPoint, and major statistical software packages; MatLab, R, Python, SAS, E-views and Stata. DLX component application DLXVG3 offers precision graphics, publishing, analytic tools, and easy navigation for all Haver databases.

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Chart and compare multiple data series with accompanying data table of values

Advanced functions (growth rates, moving averages, aggregation, seasonal adjustment)

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Excel and PowerPoint direct export and complete integration (dynamic spreadsheets and presentations update on a click)

DLXVG3

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DLX Add-ins for all versions of Excel provide instant data updates of entire workbooks

Use DLXVG3 to locate data series codes from within any file, easily creating new spreadsheets for analysis

Edit date ranges, archive data, apply functions

Excel Spreadsheet Add-ins

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Haver offers timely, accurate, and professionally supported data via an update service, meeting the strictest demands of the institutional research community

AutoUpdate provides fast and reliable data updates within seconds of source releases

Timer service runs continuously on an hourly basis when DLX is running

Manual updates offer clients the independence to update data retrievals on any desired schedule

All database updates retrieve only the data series that have changed and send only the data points that have been updated; including revisions

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Haver supports a DLX API permitting clients to leverage and build processes with DLX data

Database Compatibility

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Data Link Express

Platform Independent site delivering DLX Databases across any workstation or device.

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HaverView

[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:

- Access data from multiple sources including files, spreadsheets, databases, data providers, and the Web
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MATLAB

[Stata Data Analysis and Statistical Software](https://www.stata.com) by StataCorp LP is an integrated statistical package designed for researchers of all disciplines. It provides the ability to do data analysis, data management and graphics and has features such as multiple imputation, factor variables, GMM, competing-risks regression, state-space modeling, predictive margins, and more.

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Stata

[SAS](https://www.sas.com) provides an integrated environment for predictive and descriptive modeling, data mining, text analytics, forecasting, optimization, simulation, experimental design and more. From predictive analytics to model deployment and process optimization, SAS provides a range of techniques and processes for the collection, classification, analysis and interpretation of data to reveal patterns, anomalies, key variables and relationships, leading ultimately to new insights and better answers faster.

[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

Session 1: Bootcamp Part 1

Visualization with GGPlot2 and data analysis

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Session 5: Vector Autoregressions

Session 6: Cointegration and error-correction models

Estimating, evaluating, and forecasting ARIMA models

Understanding the concept of non-stationarity and testing for unit roots

Estimating autoregressions, granger causality tests, and impulse response functions

Understanding the concept of cointegration and testing using the Enger-Granger test

Estimating and forecasting with vector error correction 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.

Daniel L. Jerrett, Ph.D.

Abdel M. Zellou, Ph.D.

Bootcamp and Econometric Tools 1 & 2

Econometrics Training: Applied Time Series in R

Session 5: Multivariate Models Part 1

Session 6: Multivariate Models Part 2

Haver partners with Clear Future Consultants 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

Resilient US economy is pushing up longer-term inflation expectations and interest rates

Tom Moeller

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Pricing pressure from the foreign trade sector eased last month. Import prices weakened 0.4% (-0.1% y/y) in September following a 0.2% August decline, revised from -0.3%. The Action Economics Forecast Survey expected a 0.3% decline. Export prices declined 0.7% (-2.1% y/y) last month after falling 0.9% in August, revised from -0.7%. The Action Economic Forecast Survey expected a 0.6% drop.

The monthly decline in import prices reflected a 7.0% drop (-17.3% y/y) in fuels & lubricants prices which came after a 2.9% decline in August. Nonfuel prices, however, edged 0.1% higher for the third straight month. Their y/y increase has risen to 1.8%, up from -1.9% in April of 2023. Auto import prices improved 0.2% (2.7% y/y), the same as in August. Nonauto consumer goods prices increased 0.2% (0.8% y/y). The gain followed three straight monthly declines. Capital goods prices held steady (+0.4% y/y) after a 0.2% increase. Weakening, however, were foods, feeds & beverage prices which declined 1.5% (+3.8% y/y) after rising 0.2% in August.

The weakening in export prices in September reflected a 0.9% drop (-1.8% y/y) in nonagricultural export prices which was the fourth decline in the last five months. A 0.6% rise (-5.3% y/y) in agricultural product prices offset some of this weakness. Leading the decline, industrial supplies & materials prices fell 2.4% (-6.3% y/y) after a 1.6% August drop. Motor vehicle & parts prices edged 0.1% lower (+2.9% y/y) and reversed the 0.1% rise in August. Offsetting these declines, nonauto consumer goods prices increased 0.3% (0.9% y/y) following a 0.1% improvement in August. Capital goods prices rose 0.2% (1.6% y/y) after a 0.2% dip.

Each of these monthly trade price numbers are not seasonally adjusted. The import and export price series can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPN**A database.

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- Import price decline led by oil; elsewhere most prices firm.
- Export price weakness led by costs of industrial supplies.

U.S. Import and Export Prices Decline in September

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Retail gasoline prices for all grades rose to $3.29 per gallon (-11.1% y/y) in the week ended October 14 after falling to $3.26 per gallon in the prior week. Prices remain below the late-April high of $3.79 per gallon, well under their all-time high of $5.11 in the week ended June 13, 2022. Retail prices for on-highway diesel fuel increased to $3.63 per gallon (-18.3% y/y) from $3.58 per gallon. These prices reached a high of $4.63 per gallon in the third week of September of last year.	

The average price of West Texas Intermediate crude oil strengthened to $75.07 per barrel (-12.0% y/y) in the week ended October 11 after rising to $71.47 per barrel in the prior week. It was the highest price in six weeks but they remained lower than the $91.45 high in the last week of September 2023. Yesterday, the price of West Texas Intermediate crude oil fell to $70.58 per barrel. The price of European Brent crude oil increased to $78.51 per barrel (-10.5% y/y) in the week ended October 11 after rising to $75.16 in the prior week. The price of Brent has recently ranged from a low of $74.31 in the week ended June 30, 2023 to a high of $121.57 in the week ended June 10, 2022. Yesterday, the price weakened to $73.75 per barrel.

Natural gas prices fell to an average $2.40 /mmbtu (-25.0% y/y) in the week ended October 11 from $2.67 in the prior week. Prices recently touched a high of $2.73/ mmbtu in the second week of June and they remained well above their low of $1.40/mmbtu in the second week of March. Prices reached a high of $9.56/mmbtu averaged in the last week of August 2022. Yesterday, the price of natural gas moved lower to $2.37/mmbtu.

These data are reported by the Energy Information Administration of the U. S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** and **USENERGY** databases.

- Gasoline prices edge up, reversing earlier decline.
- Crude oil costs move higher.
- Natural gas prices decline.

U.S. Energy Prices Are Mixed in Latest Week

Kathleen Stephansen, CBE

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Mortgage loan applications plummeted 17.0% (+37.9% y/y) in the week ended October 11, after a decline of 5.1% (+54.8% y/y) in the week ended October 4. Applications for loans to purchase a house dropped 7.2% (+6.6% y/y) in the week ended October 11, after a decline of 0.1% (+8.5% y/y) in the week ended October 4, while applications to refinance an existing mortgage fell 26.3% (+111.3% y/y) following a decline of 9.3% (+158.5% y/y) in the prior week. These data are from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.

The effective interest rate on a 30-year fixed-rate mortgage was 6.71% in the week ended October 11, up 17 bps from 6.54% in the week ended October 4 and up 39 bps over the past two weeks. A recent high of 6.59% was reached in the week ended August 30. The effective rate on a 15-year fixed rate mortgage was 6.10% in the October 11 week, up 22 bps from the 5.88% rate in the October 4 week. The rate on 30-year Jumbo loans rose 17 bps to 6.95% in the October 11 week, from 6.78% in the October 4 week, and the rate on 5-year ARM loans rose 5 bps to 6.33% in the latest week from 6.28%.

The share of loan applications to refinance an existing mortgage was 46.5% in the week ended October 11, down from 52.4% in the week ended October 4. The share of applications for ARMs was 5.9% in the latest week, unchanged from the prior week.

The average size of a mortgage loan application was $389,200 in the week of October 11, down 3.4% w/w from $402,900 in the week ended October 4. The average size of a loan to purchase a house eased 0.9% w/w to $448,600 in the latest week from $452,600 in the October 4 week. The average size of a loan to refinance dropped 10.2% to $321,000 in the October 11 week from $357,600 in the October 4 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.

- Loan applications to purchase and refinance a house plummeted in the latest week.
- Interest rates on all loans rose in the latest week.
- Average loan size declined.

U.S. Mortgage Loan Applications Plunged in the October 11 Week

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The General Business Conditions Index from the Federal Reserve Bank of New York declined to -11.9 in October after surging to 11.5 in September. The decline brought it to the lowest level since a May level of -15.6. A reading of 3.0 had been expected in the Action Economics Forecast Survey. The percentage of respondents reporting an improvement in business conditions fell to 26.6% from 32.7% in September while the percentage reporting a decline in activity rose to 38.5% from 21.2% last month. The headline index reflects the answer to a single question concerning the state of economic activity. The survey responses were collected between October 2 and October 9.

Haver Analytics calculates a composite index, which is comparable to the ISM manufacturing index. That index declined to 48.1 in October from 52.0 in September. A level of 50 is the breakeven point between expansion and contraction. The index is the average of five diffusion indexes; new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each).

The new orders index fell to -10.2 in October from 9.4 in September. A lessened 29.8% of respondents reported higher orders while an increased 40% reported order declines. The shipments index fell to -2.7 from 17.9. The unfilled orders index dropped to -2.2 from 2.1 in September. Delivery times lengthened as the index fell to -3.2 from -1.1. Inventories weakened this month to -7.5 from a break-even level of zero in September.

Labor market conditions were greatly improved in October. The employment index of 4.1 compared to -5.7 in September. It was the first month above the break-even level of 50 in twelve months. An increased 12.7% of respondents reported increases in employment while a lessened 8.6% reported lower employment. The hours-worked index increased to 4.7 after rising to 2.9 in September. It was only the second positive reading following ten months where it stood below zero.

Inflation pressures increased this month. The prices paid index rose to 29.0 after easing to 23.2 in September and falling to 23.4 in August. A higher 33.3% of respondents were paying higher input prices, while a greatly reduced 4.3% reported paying lower input prices. The prices received index also rose to 10.8 from 7.4 in September. It was the highest level since May as 17.2% of respondents reported an increase in prices while 6.5% reported price declines.

Companies grew more optimistic about the outlook in October. The index for future business conditions of 38.7 this month compared to 30.6 in September, and was the highest level since October 2021. The outlook for shipments, unfilled orders, vendor performance and employment improved, but new orders eased. The future prices paid index slipped just slightly from its highest level since February 2023, but capital spending plans rebounded sharply.

The headline index reflects the answer to only one question concerning general business conditions and is not calculated from the components. The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease.

The New York Fed survey data are contained in Haver’s **SURVEYS** database. The expectations series is in Haver’s **AS1REPNA** database.

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- Factory sector indicator declines to five-month low.
- New orders & shipments lead decline, while employment increases.
- Prices paid & received continue to strengthen.

U.S. Empire State Factory Index Returns to Negative Territory in October

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) increased 3.2% (3.7% y/y) during the four weeks ended October 11, 2024, the same as it did four weeks earlier.

Prices in the Metals group led the rise and increased 8.0% (15.8% y/y) over the most recent four weeks. Zinc prices gained 13.4% (25.5% y/y) in four weeks and aluminum prices rose 10.2% (18.2% y/y). Copper scrap prices rose 7.1% in four weeks (21.5% y/y), while tin prices gained 6.7% (35.6% y/y) in four weeks. Also, lead prices firmed 5.8% in four weeks (-4.2% y/y) and steel scrap prices rose 5.9% (6.0% y/y) over four weeks.

Crude Oil & Benzene group prices increased 2.7% (-9.1% y/y) in the latest four weeks. The cost of West Texas Intermediate crude oil rose 10.6	% in four weeks to $74.85 per barrel, but was 11.2% lower y/y. The cost of the petro-chemical benzene, used for making plastics & synthetic fibers, fell 5.6% (-23.1% y/y) in the last four weeks. Excluding crude oil, the industrial commodity price index rose 2.8% (4.6% y/y) in the latest four-week period.

Textile group prices rose 1.3% (-1.3% y/y) over the same four week period. Cotton prices rose 6.3% (-18.0% y/y) in four weeks. The cost of burlap posted a 2.6% rise (18.3% y/y) during the last four weeks.

Prices in the Miscellaneous group improved 0.9% during the last four weeks and were up 4.5% y/y. The cost of natural rubber rose 5.0% in four weeks and jumped 81.0% y/y. Plywood prices improved 3.2% over the last four weeks (5.1% y/y).

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY**, **WEEKLY**, **USECON** and **CMDTY** databases.

**Thoughts on the Economy and Policy Rules at the Federal Open Market Committee** by Fed Governor Christopher J. Waller can be found [here](https://www.federalreserve.gov/newsevents/speech/waller20241014a.htm).

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- Metals prices surge for second consecutive period.	
- Increasing crude oil costs push energy price index higher.
- Textile prices continue to increase.

FIBER: Industrial Commodity Prices Strengthen Broadly in Latest Four Weeks

Tian Yong Woon

In this week’s letter, we examine the reactions of China’s equity markets following the Golden Week holidays, highlighting investors' disappointment over the latest stimulus announcements (see Chart 1). Despite this, forecasters have slightly raised their growth expectations for China (Chart 2), although pessimism lingers regarding the economy's ability to meet its 5% growth target for the year. Turning to monetary policy developments across Asia, several easing cycles have now been initiated across the region. For instance, New Zealand has begun its easing cycle with a 50 bps rate cut, driven by cooling inflation and weak domestic growth (Chart 3). In India, while the central bank kept policy rates unchanged, it made a significant move by officially shifting its stance to neutral, indicating a closer alignment with an easing approach. This comes amid a robust growth outlook, although inflation risks remain (Chart 4). In South Korea, the central bank has also commenced easing with a 25 bps cut, acknowledging cooling inflation and slower household debt growth (Chart 5), while signalling potential for further reductions ahead. Looking to the week ahead, we anticipate more rate decisions across the region, with additional easing moves seen likely (Chart 6).

**Post-Golden Week China**
Chinese equity markets resumed trading last week after the Golden Week holidays, showing a marked repricing of market expectations (Chart 1). Initial optimism over central bank easing measures faced a reality check following government announcements. Specifically, China’s National Development and Reform Commission outlined initiatives for October, including 200 billion yuan ($28.3 billion) in advance budget spending. However, despite the significance of these measures, a larger-scale stimulus package that many had anticipated was not announced. After initial market disappointment, Financial Minister Lan held a press conference last Saturday, pledging to bolster China’s economy. However, some observers were still underwhelmed by the lack of specific numerical commitments. Looking ahead, China will release its Q3 GDP figures on Friday, which are keenly awaited as indicators of the economy's health. This will be accompanied by a range of monthly data, including industrial production, retail sales, fixed asset investment, house prices, and unemployment figures. However, insights from these figures on the impact of the recent easing measures are expected to be limited.

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Against the backdrop of recently unveiled easing measures, Blue Chip panellists have slightly raised their growth projections for 2024 to 4.8%, up from 4.7% in September (Chart 2). Expectations for growth in 2025 have also improved, now at 4.4%, compared to the previous forecast of 4.3%. Meanwhile, inflation expectations remain stable at 0.5% for 2024 and 1.4% for 2025. However, the economic situation in China remains uncertain, with recent data indicating an uneven recovery and the impact of newly announced policy easing initiatives yet to materialize. Amidst a concerning trend of disappointing economic data, doubts persist about the country’s ability to achieve its 5% growth target for the year.

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**The week in rate decisions**
The past week revealed some noteworthy rate decisions across the region. In New Zealand, the Reserve Bank (RBNZ) cut its policy rate by 50 bps as widely expected (Chart 3), following the Fed’s lead in September. This substantial easing decision comes as the RBNZ assessed inflation to be within its 1-3% target range and “converging” on the 2% midpoint. The backdrop of soft economic growth in New Zealand also justified the RBNZ’s action, as the economy struggles to avoid a technical recession following a contraction in real GDP in Q2. Furthermore, the RBNZ noted that the New Zealand economy “is now in a state of excess capacity,” which is expected to dampen inflation on the supply side. While consumer sentiment remains weak compared to historical levels, some recent upticks have been observed.

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Monetary policy developments in India were also notable, as the Reserve Bank of India (RBI) opted to maintain its policy rates last week, as expected. However, the central bank shifted its policy stance from one focusing on a withdrawal of accommodation to “neutral.” This change has led observers to speculate that it could signal potential interest rate cuts in the near term. However, there are currently few strong justifications for the RBI to begin a rate cut cycle soon. For one, India’s economic growth remains robust (Chart 4) and is expected to remain robust in the coming quarters. Additionally, while inflation has eased in recent months, the RBI cautions that it may rise significantly in the near future due to base effects and other factors.

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Last Friday, South Korea's central bank (BoK) initiated its easing cycle by cutting the Base Rate by 25 bps to 3.25%, as widely anticipated. The bank justified this decision by citing recent easing inflation trends (Chart 5), as well as slowing growth in household debt and reduced foreign exchange risks. Looking ahead, the BoK appears open to further easing, with Governor Rhee indicating that there is room for additional rate cuts since the policy rate remains above the neutral interest rate. Observers will likely continue to monitor three key factors—inflation, household debt, and financial market stability—as they assess South Korea's future monetary policy trajectory.

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**The week ahead in rate decisions**
The week ahead will see several important rate decisions in Southeast Asia. Central banks in Indonesia, Thailand, and the Philippines are scheduled to announce their policy rate decisions on Wednesday. In Indonesia, while multi-year lows for CPI inflation could support further rate cuts, recent currency fluctuations—particularly the weakness of the rupiah—may prompt the central bank to hesitate, as maintaining currency stability is part of its mandate. In Thailand, the central bank has not signaled an intention to cut rates following its October meeting, but it continues to face pressure from the government and business groups. Meanwhile, in the Philippines, the possibility of additional rate cuts remains open, aligning with the Fed's adjustments.

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Asia

Economic Letter From Asia: Reality Check

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The Producer Price Index for final demand was unchanged (1.8% y/y) during September after rising 0.2% in August and holding steady in July, according to the Bureau of Labor Statistics. The reading compared to expectations for a 0.1% rise in the Action Economics Forecast Survey. Producer prices excluding food, energy & trade services edged 0.1% higher (3.2% y/y) in September after rising 0.2% in August, revised from 0.3%. The PPI excluding food & energy rose an expected 0.2% (2.8% (y/y) after increasing an unrevised 0.3% in August.

Final demand goods prices excluding food & energy rose 0.2% (2.0% y/y) for the third straight month. Core finished consumer goods prices increased 0.2% (2.2% y/y) after rising 0.4%. The increase in core nondurable goods prices moderated to 0.3% in last month (3.0% y/y), half the August increase. Durable consumer goods prices improved 0.1% (1.1% y/y) after rising 0.2% in August. Capital equipment prices rose 0.2% in September (2.6% y/y), the same as in August, after four straight months of 0.1% increase. Government-purchased goods prices increased	 0.3% (2.1% y/y) following a 0.1% uptick.

Final demand services prices rose 0.2% (3.1% y/y) in September, after increasing 0.4% in August. Trade services prices rose 0.2% (1.5% y/y) after strengthening 0.7%. Trade of finished goods prices improved 0.3% (0.9% y/y) following a 0.7% increase. Prices for final demand transportation and warehousing services gained 0.3% last month (0.4% y/y) after a 0.9% decline. Services prices less these costs edged 0.1% higher in September (4.1% y/y) following a 0.4% August rise.

Food prices strengthened 1.0% (3.2% y/y) during September after moving up 0.2% in August. Fruit & melon prices rose 8.3% (4.6% y/y) following a 2.9% decline. Grain prices rose 4.8% (-18.4% y/y) and processed fruit & vegetable costs improved 0.6% (2.3% y/y). Beef & veal prices rose 1.5% (-0.1% y/y) after falling 7.6% in August. Fresh egg prices fell 6.2% (+121.3% y/y) following a 55.1% jump. Fresh vegetable costs declined by 2.5% (+7.7% y/y) and reversed the August increase.

Final demand energy prices declined 2.7% last month (-13.8% y/y) after falling 1.0% in August. Gasoline prices weakened 5.6% (-25.7% y/y) after a 0.5% rise in August. Home heating oil prices fell 11.1% (-35.1% y/y) following a 3.0% decline. Electric power prices rose 2.0% (2.5% y/y) in September after falling 1.2% in August. Natural gas prices rose 1.6% (1.3% y/y) and reversed a 1.4% August decline.

Construction costs edged 0.1% higher in September (1.3% y/y) after holding steady in August.

Prices for intermediate demand of processed goods eased 0.8% (-2.7% y/y) in September after slipping 0.2% in August. Processed energy goods prices fell 4.7% following a 0.9% fall, while food prices rose 0.9% after a 0.2% decline.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver’s **USECON** database. Further detail is contained in **PPI** and **PPIR**. The expectations figures are available in the **AS1REPNA** database.

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- Core goods prices increase moderately for third straight month.
- Gain in services prices slows.
- Food prices surge while energy costs continue to decline.

U.S. Producer Price Index Holds Steady in September; Core Prices Edge Higher

Robert Brusca

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Money growth has turned positive and the main money center areas show net money growth. Money growth is at 1.9% year-over-year in the European Monetary Union, up by 2% in the U.S., up by 1.8% in the U.K., and by 1.3% in Japan. Comparing the 12-month growth rate to the three- and six-month growth rates in all these countries, we see a progression with money growth becoming stronger. The exception to this observation is Japan, where the M2 plus CDs measure grows 1.3% over 12 months and then reduces its pace over three and six months to 0.3% and 0.4% annualized.

In the European Monetary Union, credit growth is consistently positive and accelerating.

The monetary financial side of the ledger is starting to look very positive from the standpoint of creating growth, however, to the extent that it does that it is also being much less of a factor in terms of restraining inflation.

**Real money balances**
Real money balances over 12 months are still declining in the EMU, in the U.S., in the U.K., and in Japan. However, the situation is in flux; over three months, real money balances are growing in the monetary union- and growing fairly strongly in the U.S.; it is advancing in the U.K. Over three months only Japan shows declines in real money balances.

**EMU credit growth**
The European Monetary Union shows real credit growth contracting over 12 months but at growth rates of 1% or less. These negative growth rates are diminishing over three months. Credit to residents and private credit growth are declining at growth rates less than one-half of 1% as real credit in the monetary union begins to head for inflation-adjusted positive growth.

**A tailwind for growth—at last?**
With these changes in the provision of liquidity and the impact on credit growth, nominal and real GDP growth are going to find more of a tailwind… and so will inflation… 


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**The inflation worm is turning**
The overview for some of the key economic variables in these countries is in the table below. It shows inflation above target and all these major money centers to a greater or lesser extent. The table provides the headline inflation figures, although in most cases core inflation looks much higher than these since oil prices have been weak and falling. The bottom panel of the inflation chart shows changes in the year-over-year inflation rates over six months. There you can see the tendency for inflation to decline is diminishing. Japan is already looking at inflation increasing on balance in each of the last three months when we compare current year-over-year growth and inflation to its result six months ago.

**Industry remains weak but that weakness may be transitioning**
Our statistics are such that we are inundated with data on the industrial side of the economy. The table presents data for industrial production growth year-over-year and on that we have a sea of red figures indicating declines across all these countries and areas for at least the last six months. However, the rate of decline in industrial production has been diminishing.

**Changes in activity broadly**
The second lower panel looks at changes in composite PMI levels year-over-year. There, the story changes significantly, with year-over-year gains reported in the composite activity surveys. The EMU, the U.K., and Japan show increases. The U.S. is the outlier with weaker PMI values compared to a year ago-and in each of the last three months. However, these indicators aren't always the final word. All these countries and areas are continuing to show GDP growth. In the U.S., a popular statistic for tracking GDP known as GDP-Now updated by the Atlanta Fed has been consistently looking for a third quarter growth in the U.S. to be between 2.5% and 3%. That's not too shabby despite the U.S. PMI signals.

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**Are the easing campaigns still in force?**
Meanwhile, central banks have been on easing campaigns but have backed off or slowed the progress of these campaigns as the progress on inflation has slowed as the table above suggests. In the U.S., at least, job growth has come back strongly after a period of some weakness and some downward revisions to past growth rates. In Europe, unemployment rates are still broadly low and for the EMU as a unit, the rate is at an all-time low. Right now, central bankers in the U.S. aren't quite sure what to do with the most recent strong U.S. job growth report and the recent inflation report that has shown more strength than what the Fed had been expecting. Globally the move to less inflation progress is clear in this table and the notion that progress may stay slow, or stop is embedded in the trends for money growth and credit growth in the monetary union.

**Is the inflation turn decisive; will central bank policy change soon?**
All of this raises questions about what happens next and whether this period of inflation deceleration has been brought to an end as money growth turns positive, accelerates, and as real money balances and real credit balances begin to advance. A simple tracking of the inflation data is enough to give inflation-fearing central banker pause. Policy needs are rarely clear cut with unanimous support. U.S. leadership in monetary policy could become more important going forward since the Federal Reserve has just embarked on an easing campaign and launched it with a large rate reduction and - not exactly promises - but with very strong hints of many more cuts to come soon. However, economic data seem to be painting a different picture of the future than the one the Fed expected. Could the Fed easing program start and finish at the same time? That is unlikely but the exuberant expectation for rate cuts will be trimmed. One thing to be aware of is the massive increase in expectations for 5-year ahead and the rise in the expectations for one-year ahead inflation in the U. of Michigan inflation survey. The median rate in that survey (that the Fed prefers) is steady at 3% but the survey mean has shot up over 7% for five-year ahead inflation in the wake of the large Fed rate cut- something I do not think the Fed can continue to ignore.

**A very muddled outlook**
It may be that some of the weaknesses that the Fed thought it saw in economic and job growth was created by hurricane Beryl that hit Houston, Texas. This is significant because the U.S. is currently being blasted by or is cleaning up after two hurricanes: Hurricane Helene and Hurricane Milton. Helene, swept through North Carolina and has done terrible damage and raised a significant death toll. Milton is currently sweeping through Florida; it ripped the roof off the football stadium in Tampa, Florida and it is creating havoc on its own. These hurricanes are going to affect economic data; they're going to affect jobless claims data (already have), job growth data, and they may affect wage and price data as well. This will leave the Federal Reserve with some quandary about what to do with policy. I think it's fair to say in this environment where the Fed has had a bias to cut rates, it gives the Fed a freer hand to ignore economic data that might be strong or on the other hand to embrace weak economic data that are weak even if the reports come out of the distortion of a hurricane. U.S. data may be stepping into a data Twilight Zone; be on guard!

Europe

World Money Growth Is Back on Track...Is Inflation Too?

Andrew Cates

**Oil prices and yields**
Concerns about the global growth outlook, spurred by cuts from the International Energy Agency to their forecasts for demand, have driven oil prices sharply lower over the past few days. Fears about supply disruptions stemming from geopolitical instability in the Middle East have additionally faded, at least for now. Since oil prices have been a key driver of the market’s inflation expectations, as evidenced in chart 1 below, this has been significant in buoying risk appetite in broader financial markets as well.

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**UK inflation**
There was good news on the UK inflation front this week too thanks to a slew of weaker-than-expected data for wages and prices. For example, private sector regular pay growth rose by just 0.2% m/m August, its lowest monthly growth rate for seven months. The September data for both headline and core CPI inflation additionally dropped quite sharply, partly thanks to a big drop in service sector inflation (see chart 2). The Bank of England will almost certainly take comfort in these numbers, given concerns about how a tight labour market had previously been stoking wage inflation and fuelling price pressures in the service sector.

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**China’s PPI inflation** 
Recent data from China also revealed that inflation outcomes for September were lower than expected, with PPI inflation sliding further into deflationary territory, specifically dropping to -2.8% y/y from -1.8% in the previous month. This intensifying pace of deflation might magnify concerns about excess capacity in China's economy, which could potentially spill over into global markets as China seeks to export this surplus. Notably, China’s PPI has historically led global PPI trends, amplifying worries that this deflationary pressure might influence global inflation dynamics in the near future (chart 3).

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**EM portfolio flows**
Recent policy initiatives from China designed to shore up its economy initially generated much enthusiasm from investors. This can be seen in chart 4 below showing a surge in portfolio inflows to emerging markets, and to Asia in particular, in September. The specific spark for this was the introduction of a range of monetary stimulus measures on September 24th which included lower interest rates and cuts in reserve requirement ratios. However, that initial euphoria has since dissipated as the announcement of a number of fiscal policies designed to address local government debt risks and property market instability, have not meet expectations.

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**Banking conditions in the euro area**
On a brighter note the latest ECB bank lending survey suggested that the wheels of credit in the euro area may now be turning more quickly. The latest survey, for example, revealed that euro area banks reported unchanged credit standards for loans to companies in Q3. That follows more than two years of successive tightening. Banks also reported a further net easing of credit standards for loans to households for house purchases. In the meantime net demand for loans by companies increased moderately in Q3 while demand for housing loans rebounded strongly.

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**Global equity sector performance**
Global equity markets have had a good year so far in large part, as noted above, because the world economy appears to be on course for a soft landing and central banks have now begun to ease monetary policy. Structural factors, however, have also been influential, and most notably investor optimism about AI. As chart 6 below suggests, technology stocks have delivered the strongest returns so far in 2024. That’s striking because the technology sector is often perceived to be cyclical. Yet defensive sectors, such as utilities and consumer services, have also performed relatively well so far this year while other cyclical sectors, such as basic materials and consumer goods, have under-performed.

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A soft landing narrative has continued to shape sentiment in financial markets over recent days, supported by several factors. These include upbeat corporate earnings news, a sharp drop in oil prices (see chart 1), and weaker-than-expected inflation data (chart 2). However, concerns about global growth persist, particularly given the underwhelming economic data that’s been emerging from China (chart 3). While the monetary policy initiatives announced in late September were met with enthusiasm from investors (chart 4), subsequent fiscal policy measures have clearly fallen short of expectations. Back to a more positive note, the latest euro area bank lending survey suggests that the ECB's recent easing efforts, including this week’s 25bps rate cut, are starting to reap some benefits (chart 5). Meanwhile, ongoing optimism around the role of AI technology has also contributed to a soft landing narrative, despite the absence of clear productivity gains thus far (chart 6).

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