Tom Moeller

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130c.jpg" width="353"></p>
<p>Chain store sales during the pivotal Thanksgiving week slid 1.5% from the prior week, according to the International Council of Shopping Centers (ICSC)-UBS.</p>
<p>The decline left sales so far in November just 0.4% ahead of October.</p>
<p>The leading indicator of chain store sales from ICSC was unchanged after two weeks of 0.5% decline. The monthly average is up 0.1% from October which rose 0.4% from September.</p>
<p>During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.</p>
<p>The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.</p>
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<th scope="col" class="firstcol"><b><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></b></th>
<th scope="col"><u><b>11/27/04</b></u></th>
<th scope="col"><u><b>11/20/04</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
<th scope="col"><b><u>2001</u></b></th>
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<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>432.9</td>
<td>439.6</td>
<td>2.4%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Chain store sales during the pivotal Thanksgiving week slid 1.5% from the prior week, according to the International Council of Shopping Centers (ICSC)-UBS. The decline left sales so far in November just 0.4% ahead of October. The [...]

Chain Store Sales Very Disappointing During Thanksgiving Week

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) increased 6.5% (13.3% y/y) in September to 105.5 after rising 5.7% to 99.1 in August and 2.4% to 93.8 in July. These increases followed five straight months of decline. The level of home affordability has risen 17.4% from its low of 89.9 in October 2023. It remains 41.1% below the high of 179.2 in April 2020.

The rise in affordability reflected a 2.6% decline (+2.9% y/y) in the median price of an existing single-family home to $409,000. This followed two straight monthly declines from the record $432,900 in June. The price weakening accompanied a drop in the average mortgage rate to 6.26% from 6.58% in August, down from a 7.14% May high. It remained up sharply from the December 2020 low of 2.73%. The declines lowered the principal & interest payment by 5.7% (-7.3% y/y) to $2,017 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged 23.7% of income during September versus 25.2% in August. They remained up from a recent low of 14.0% in April 2020.

The decline in housing costs was accompanied by improvement in median family income. It increased 0.3% in September (5.0% y/y) to a record $102,136 after rising 0.2% in August and 0.4% in July.

Housing affordability increased across the country in September. The index increased 7.0% (11.0% y/y) to 135.6 in the Midwest, remaining the most affordable region of the country to live. In the South, the index rose 5.0% (16.0% y/y) to 109.3 and the affordability index in the Northeast rose 12.3% (8.6% y/y) to 98.7. In the West, where homes are the least affordable, the index rose 4.6% (15.0% y/y) to 74.3 in September.

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 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022 (98.8).

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**.

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- Home prices slip & mortgage rates decline.
- Median income improves.
- Affordability increases throughout the country.

U.S. Housing Affordability Index Surges in September

Robert Brusca

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Industrial production in September was mixed across the 12 early reporting members of the European Monetary Union (EMU). Output fell on the month in Ireland, the Netherlands, Germany, Greece, France, and Finland, a diverse group of EMU members. At the same time, output was reported stronger in Spain, Portugal, Malta, Belgium, Italy, and Austria. The median change in September was for a decline of 0.2 percentage points; that fall follows a median change of zero in August versus an increase of 0.5% in July.

Looking over broader periods from 12-months to six-months to three-months, median output falls over 12 months by 0.5%, it falls by 2.2% over six months, and it falls by 0.5% over three months. The medians of the annual rate changes over those various periods remain consistently negative.

Over 12 months compared to 12-months ago, output is accelerating in 77.8% of the reporters. However, over six months compared to 12-months, output accelerates in only 38.5% of the reporters. Over three months compared to six-months, output accelerates in 55.6% of the reporters. While the statistics on acceleration are mixed, there seems to be more of a tendency for output to accelerate than to decelerate over these various timelines. The monthly data similarly show mixed statistics on output acceleration month-to-month for September, August, and July.

By country, output is accelerating over the three sequential broad periods in Austria and in Spain. However, sequentially, output is decelerating in Germany, the Netherlands, Malta, and Greece.

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In the quarter-to-date, which is for the completed quarter as of September, output is falling in seven of 12 early reporting European Monetary Union countries. It's rising in the quarter only in Ireland, Belgium, Austria, Finland, and France. Half of the 12 reporting countries show output lower in September 2024 than it was in January 2020, just before COVID struck. Countries with weaker output on this comparison are Germany, Portugal, Spain, Malta, France, and Italy. Note that each of the four largest monetary union countries is on that list.

The final column of the table ranks industrial production output growth for manufacturing on data back to December 2006. Over this period, only four countries are showing year-over-year growth rates stronger than their respective medians over the period. Those countries are Portugal, Greece, Belgium, and Malta. All the rest show percentile rankings below their 50-percentile mark, which puts their respective rates of growth below their historic medians. With rankings in their 44th percentile, Finland and Spain come closest to median results while being below them. But for the rest of the countries on the table, the weakness is much worse, with lower rankings. For example, Germany's growth ranks in its 12.6 percentile, France’s growth registers a 31.3 percentile standing, Italy’s growth has an 18.7 percentile standing. The largest countries in the monetary union have not been performing well.

The September report does not show manufacturing turning a corner, and doing better in the monetary union. It continues to show an uneven performance as well as a great deal of weakness in the area. Both short and longer trends are uneven. The future remains as clouded as ever in an environment still rife with geopolitical conflict.

IP Is Mixed across EMU in September

Andrew Cates

**Global equity markets**
The resilience of its economy in recent months and the dominance of its technology sector in particular have been key to the outperformance of the US equity market so far this year. The degree to which sentiment toward broader global equity markets has soured over the past few weeks compared with sentiment toward the US has, nevertheless, been striking (see chart 1). Uncertainty about the potential policy choices of a new US administration is likely a key factor behind this shift.

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**Global uncertainty**
This message from equity markets chimes too with gauges of economic policy uncertainty. As chart 2 below suggests, this gauge has remained relatively low over the past few months in the US compared with the norms of the past 10 years. A gauge of global policy uncertainty, in contrast, has remained relatively high.

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**The consensus view on monetary policy**
Against that backdrop there remains a firm consensus nevertheless that monetary policy in most major economies will continue to be loosened over the next 12 months. The ECB, for example, is expected to lower its key policy rates by 106 basis points over the next 12 months with a next cut in the cycle universally expected in December. Meanwhile, the BoE is expected to lower its Bank rate by 133 bps over the same time frame, with a clear majority having expected a 25bps cut on November 7th. These forecasts contrast with the US where the fed funds rate is expected to be lowered by 132 basis point between now and this time next year.

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**Oil and yields**
Those aforementioned interest rate forecasts are subject to some upside risks if forthcoming policy shifts turn out to be more inflationary. One area to watch will be the energy sector and oil prices in particular. Oil prices have remained relatively low in recent weeks even though market-based gauges of US inflation expectations have shifted higher. A previously tight correlation between oil prices and US Treasury yields has broken down as a result.

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**China’s economy**
Another focal point in the weeks ahead will be the Asian region and China in particular. The latter’s fortunes have, however, improved a little recently, thanks in part to a series of easing measures by the authorities. This is reflected in chart 5 below, which shows stronger composite PMI readings for October, based on both official and private sector indicators. Additionally, recent data surprises—captured by Citigroup’s economic surprise index—suggest positive momentum. Despite this, the Chinese economy may not be out of the woods just yet, not least if this week’s election news signals renewed tensions between China and the US.

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**Japan’s politics**
Japan’s politics has also been grabbing headlines in recent days as the country is now set to elect a new Prime Minister on November 11th. That has led markets to scale back their expectations for further policy easing by the Bank of Japan in the near term. As it stands, market-implied probabilities indicate reduced expectations for a Bank of Japan rate hike in December, with the timing now pushed to January. Furthermore, the result of the US election has also generated a ripple effect across Asia’s financial markets, with the yen, along with several other Asian currencies, having weakened against the US dollar.

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The policy decisions of a new US administration could potentially impact the global economy in a number of ways. Key areas that might be affected include trade and tariffs, geopolitical stability, fiscal policy (US tax cuts), deregulation, and immigration policy. And possibly in anticipation of some economic instability, sentiment toward global equity markets (excluding the US) has soured over the past few weeks (see chart 1). Gauges of global policy uncertainty, in the meantime, have remained relatively high (see chart 2). There remains a strong consensus, nevertheless, that most major central banks will continue to loosen monetary policy over the next 12 months (chart 3). That consensus view, however, might be challenged if prospective US policy decisions prove to be more inflationary (chart 4). One economy that will of course be an immediate area of focus will be China (chart 5). Japan is also in the spotlight at present though that’s more because of some uncertainty surrounding its domestic politics and prospective policy choices in the period ahead (chart 6).

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Charts of the Week: Uncertainty Is the Easy Part

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At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was reduced by 25 basis points to 4.50% to 4.75% following a 50 basis point reduction at the last meeting. The decline matched expectations in the Action Economics Forecast Survey.

The statement following the meeting indicated, “Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated.”

It went on to state, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”

The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities.

Today’s **FOMC** statement can be found [here](https://www.federalreserve.gov/newsevents/pressreleases/monetary20241107a.htm).

Chain Store Sales Very Disappointing During Thanksgiving Week

Summary

Tom Moeller

More Economy in Brief

U.S. Housing Affordability Index Surges in September

IP Is Mixed across EMU in September

Charts of the Week: Uncertainty Is the Easy Part

FOMC Lowers Funds Rate Target by 25 Basis Points