Robert Brusca

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071030g.jpg" width="353"></p>
<p>German real ex-auto wholesale sales fell by 0.3% in September after dropping by 0.8% in August. These declines blunted the sharp 1.3% gain in July that followed a rise of 0.6% in June. Around mid-year German wholesale sales seemed to be breaking out of their early in the year slump believed to have been induced by the turn-of-the year hike in the VAT. However, the past two months have discredited that view. Nonetheless, the mid-year strength was enough to boost real ex-auto wholesales sales to solid positive quarterly rate of growth. Real wholesale sales are up at a 3.3% annual rate in Q3 with nominal sales up at a pace of 3.9%. These readings are up from a year ago by 1.5% in real terms and by 1.8% in nominal terms. It is growth but is far from robust growth. And lest the quarterly result seem too strong recall that this rise in Q3 offsets a similar drop of 3% (annualized) in real ex-auto wholesale sales in Q2. The graph clearly shows no lasting boost to wholesale sales growth.</p>
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<th scope="col" colspan=4><b>Quarter Complete</b></th>
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<th scope="col" colspan="4"><b>Quarterly showing</b></th>
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<td class="firstcol">&nbsp;</td>
<td><b>% Q/Q</b></td>
<td><b>%-Saar</b></td>
<td><b>% Q/Yr Ago</b></td>
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<td class="firstcol">Nominal</td>
<td>1.0%</td>
<td>3.9%</td>
<td>2.1%</td>
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<td class="firstcol">Real</td>
<td>0.8%</td>
<td>3.3%</td>
<td>1.5%</td>
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German real ex-auto wholesale sales fell by 0.3% in September after dropping by 0.8% in August. These declines blunted the sharp 1.3% gain in July that followed a rise of 0.6% in June. Around mid-year German wholesale sales seemed to [...]

German Wholesale Sales Falter Again

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Tom Moeller

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The Consumer Price Index increased 0.2% in February after rising 0.5% in January and 0.4% in December. A 0.3% February rise had been expected in the Action Economics Forecast Survey. The y/y increase in the headline CPI eased to 2.8% y/y from 3.0% in January. It was below the 9.1% peak in June 2022. The CPI excluding food & energy rose 0.2% following increases of 0.4% in January and 0.2% in December. A 0.3% rise had been expected. The 3.1% y/y gain is below the 6.6% peak in September 2022.

Energy prices rose 0.2% (-0.2% y/y) last month after a 1.1% January rise. Gasoline prices declined 1.0% (-3.1% y/y) after a 1.8% gain. Fuel oil prices rose 0.8% (-5.1% y/y) after rising 6.2% in January. Natural gas price jumped 2.5% (6.0% y/y) following a 1.8% gain and electricity prices gained 1.0% (2.5% y/y) after holding steady in January.

Food prices rose 0.2% (2.6% y/y) in February after a 0.4% January increase as egg prices surged 10.4% (58.8% y/y) following a 15.2% gain. Meat, poultry & fish prices rose 0.5% (3.0% y/y), the same as in January, while dairy product prices declined 1.0% (+0.8% y/y) following a 0.3% gain. Cereal & bakery product costs rose 0.4% (0.3% y/y) and reversed January’s increase while fruit & vegetable prices dropped 0.5% (-0.2% y/y), the same as in January. Nonalcoholic beverage prices weakened 0.5% (+2.1% y/y) in February after rising 0.9%.

Services prices less energy increased 0.3% last month following a 0.5% gain. The y/y rate of increase slipped to 4.1%, down from 7.3% y/y two years earlier. Shelter prices rose 0.3% (4.2% y/y) last month after a 0.4% rise as owners equivalent rents increased 0.3% (4.4% y/y) for the fourth consecutive month. Lodging away from home prices gained 0.2% (2.0% y/y) after strengthening 1.4% in January. Rents of primary residences gained 0.3% (4.1% y/y) for the third consecutive month. Transportation service prices rose 0.8% (6.0% y/y) after a 1.8% January increase reflecting a 0.3% rise (11.1% y/y) in the cost of motor vehicle insurance. Public transportation costs declined 3.4% (-0.6% y/y) after rising 0.7% in January. Prices of medical services increased 0.3% (3.0% y/y) after holding steady and the cost of recreation services strengthened 0.8% (4.3% y/y) after increasing 1.4% in January.

Goods prices less food and energy rose 0.2% (-0.1% y/y) in February after rising 0.3% in January. Prices of used cars and trucks rose 0.9% (0.8% y/y) last month after jumping 2.2% in January while new vehicle costs eased 0.1% (-0.3% y/y) after holding steady. Apparel prices increased 0.6% both m/m and y/y after declining 1.4% in January while appliance prices rose 0.5% (-3.1% y/y) following a 0.6% decline. Home furnishings prices rose 0.2% (-0.4% y/y) after easing 0.2% in January. Recreation product costs fell 0.7% (-2.4% y/y) in February after rising 0.3%. Education & communication product costs slipped 0.2% last month (-6.9% y/y) after edging -0.1% higher in January.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Both gauges are roughly half of January increases.
- Core goods & services price gains slow.
- Energy & food price increases weaken.

U.S. Consumer Price Inflation & Core Price Gains Ease in February

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The U.S. Treasury Department reported a U.S. government budget deficit of $1.147 trillion for the first five months of FY 2025 in contrast to a $828.1 billion deficit for the first five months of FY’24. For February alone, the government ran a budget deficit of $307.0 billion, which compared to a deficit of $296.3 billion twelve months earlier. The Action Economics Forecast Survey expected a $287.0 billion deficit in February.

Overall revenues in the first five months of FY’25 increased 2.0% y/y compared to a 7.0% y/y rise in the first five months of last year. Individual income tax receipts rose 3.3% y/y compared to last year’s 5.6% gain. The level of corporate tax receipts fell 17.6% y/y so far this year after a 25.8% y/y rise in the first five months of FY’24. Social insurance revenues increased 3.8% y/y after a 5.7% y/y rise early in FY’24 and excise taxes rose 13.4% y/y so far in FY’25 compared to an 8.8% gain early last year. Customs duties rose 12.0% y/y in the first five months of FY’25 after a 9.8% decline in the first five months of last fiscal year.

Federal government outlays surged 13.2% y/y so far in FY’25 versus a 9.2% rise early in FY’24. Defense spending rose 9.9% y/y versus a 12.0% y/y rise in the first five months of last fiscal year. Social Security outlays rose 6.4% y/y in the first five months of FY’25 versus a 9.7% gain last year. Interest payments rose 13.1% y/y so far in FY’25 after a 49.3% rise one year earlier. Health program spending rose 8.0% y/y after increasing 1.3% early in FY’24 while Medicare payments surged 36.6% y/y versus an 11.9% rise last year. Income security outlays rose 18.4% y/y early this year compared to a 23.0% y/y decline in the first five months of FY’24.

Haver's data on Federal Government receipts & outlays are contained in **USECON**. The expectations figure is in the **AS1REPNA** database.

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- Federal receipt growth improves.
- Outlay growth surges.


U.S. Government Budget Deficit Deepens in FY 2025

Winnie Tapasanun

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Mortgage applications rose 11.2% w/w (33.6% y/y) in the week ending March 7 following a 20.4% jump in the week ending February 28 and two consecutive weekly declines, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The latest reading was the second successive weekly rise to the index level of 269.3, the highest since the October 4 week. Applications for loans to purchase a house increased 7.0% (4.7% y/y) in the March 7 week after a 9.1% rise in the February 28 week and five straight w/w decreases. Applications for loan refinancing gained 16.2% (89.7% y/y) in the March 7 week following a 37.0% surge in the previous week and two consecutive weekly drops.

The effective interest rate on a 30-year fixed-rate loan fell 6bps to 6.85% in the week ending March 7 after declining to 6.91% in the week ending February 28, posting the sixth straight w/w fall and the lowest since the October 18 week; it was up from a low of 6.29% in the September 20 week but down from a high of 8.12% in the week of October 20, 2023. The rate on 15-year fixed-rate mortgages fell 7bps to 6.21% in the March 7 week, the lowest since the October 18 week, from 6.28% in the previous week; it was up from a low of 5.60% in the September 20 week but down from a high of 7.44% in the week of October 27, 2023. The rate on 30-year jumbo loans decreased 15bps to 6.82% in the March 7 week, the lowest since the October 4 week, from 6.97% in the prior week; it was up from a low of 6.57% in the September 13 week but below a high of 7.99% in the week of October 27, 2023. By contrast, the rate on a 5-year ARM rose 6bps to 6.07% in the March 7 week, the first w/w rise since the February 3 week, from 6.01% in the previous week; it was above a low of 5.84% in the September 13 week but down from a high of 7.31% in the week of October 27, 2023.

The share of applications for refinancing an existing loan rose to 45.6% of total applications in the week ending March 7 from 43.8% in the week ending February 28, registering the third successive w/w rise and the highest since the December 13 week; however, that was down from a peak of 55.7% in the September 20 week. Meanwhile, the adjustable-rate mortgage (ARM) share of activity jumped to 7.2% in the March 7 week, the highest since the August 9 week, from 5.8% in the prior week; it was up from its recent low of 4.7% in the January 3 week but below a high of 10.7% in the week of October 27, 2023.

The average size of a mortgage loan advanced 5.1% w/w (7.4% y/y) to $419,700 in the March 7 week, the highest on record, after a 3.7% rise to $399,200 in the February 28 week. The average size of a purchase loan rose 2.8% (3.7% y/y) to $460,800 in the March 7 week, also the highest on record, after a 1.6% increase to $448,300 in the prior week. The average size of a loan to refinance a mortgage gained 10.2% (35.0% y/y) to $370,600 in the March 7 week, the highest since the September 27 week, on top of a 13.4% jump to $336,200 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.

- Purchase applications increase 7.0% w/w; refinancing loan applications gain 16.2% w/w.
- Effective interest rate on 30-year fixed-rate loans declines to a still-elevated 6.85%.
- Average loan size rises to a record high.

U.S. Mortgage Applications Rise 11.2% in the March 7 Week

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**The Cabinet Office:**
**General business conditions**
Japan's Cabinet Office survey of general business conditions shows a diffusion reading of +2 in the first quarter of 2025 compared to a net of +5.7 last quarter. This is the reading for all big companies. The reading for large manufacturers slipped to -2.4 from +6.3, a much sharper drop. Unfortunately, manufacturing is often looked upon as the harbinger for future developments in the economy. Non-manufacturers show their reading slip as well, to +4.1 from +5.4 in the first quarter of 2025 compared to the fourth quarter of last year.

**Smaller company results-** Medium-sized manufacturing companies, posted a decline in the fourth quarter and a bigger decline than this first quarter, logging a reading of -1.5 at the end of last year and the reading of -6.9 in the current quarter. Small manufacturing companies continue to post negative results, and they also saw substantial slippage, falling from a -12.4 reading in the fourth quarter to a -18.3 reading in the first quarter of 2025.

**Rankings**
In the table, I include rank standings for these readings on data that are back to 2004, an approximate 20-year horizon. The overall reading for large companies has a 54.8 percentile standing, which is above its historic median for that timeline. However, large manufacturing companies have a standing only at their 38.1 percentile. Medium-sized manufacturers have a reading at their 34.9 percentile, not too different from large manufacturing enterprises. Small manufacturers, despite their much-weaker negative reading in the first quarter, show a queue percentile standing in their 44.6 percentile. They chronically pose weaker numbers than their larger counterparts; therefore, when ranked relative to their own history, their current weaker diffusion readings don't seem to be quite as weak on a ranking basis. However, none of this puts too much positive spin on the data for the quarter.

**General domestic conditions**
The readings for general business conditions show even a higher percentage of readings that are below their 50th percentile which puts them below their median ranking. The reading for all large companies decreased to 3.1 in the first quarter of 2025 from 4.2 at the end of last year. Large manufacturers slipped from +2 at the end of the year to -1.3 in the current quarter; medium-sized manufacturers slipped to -8.7 in the current quarter from -3.8 in the fourth quarter of last year while small manufacturers slipped to -22.8 from -20.9. The standings show the reading for all big companies at a 45.8 percentile standing; the standing for large manufacturers at 33.7 percentile; the standing for medium-sized manufacturers had a 34.1 percentile standing and for small manufacturers there is a 43.9 percentile standing.

**Number of employees**
The readings for the number of employees conversely improved for large companies, moving to 28.3 in the first quarter of 2025 from 27.4 at the end of the year; for large manufacturers there is an improvement as well to 20 in 2025-Q1 from 19 in the fourth quarter. Medium-sized manufacturers see slight slippage to 32.7 from 33.3 at the end of the year, and small manufacturers see a slippage as well to 21.7 from 24.4 at the end of the year. Large companies and large manufacturers are improving while the smaller firms are falling behind. However, there's a proliferation of rankings for these results in the 90th percentile in fact, in the high 90th percentiles. For all big companies, there's a 98-percentile standing, the same as for large manufacturers. Medium-sized manufacturing companies have an 89.3 percentile standing and small manufacturers have a 79.8 percentile standing. None of these are weak or disappointing readings.

**Quarters ahead...**
Beyond the current quarter, there are also readings in the table for the next quarter and the second quarter ahead. I provide only rankings for these readings and what we see is that for the quarter ahead conditions for large firms and large manufacturers are generally weakening and weakening significantly comparing the queue percentile standings in the current quarter to the standings for the next quarter ahead. However, for the second quarter ahead, there's generally a bounce back from the weakness in the quarter ahead, but that bounce back still does not take the ranking readings back to the levels achieved in the first quarter. For the most part, this is not particularly impressive result. The cabinet report retains a downcast view of the futures as well as a weak – and weakening- assessment of current economic performance. This deteriorated view is not as widespread as it might have been since it seems to have bypassed at least a piece of the job market where readings remain firm to strong in historic comparison.

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Japan

Japan’s Cabinet Office Survey Edges Lower in 2025-Q1