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/050323b.jpg" width="353"></p>
<p>The Mortgage Bankers Association reported that mortgage applications dropped 9.5% last week and pulled the average level in March 4.1% below February.</p>
<p>Applications to refinance plummeted 16.5% leaving the February average off 13.5% from February.</p>
<p>Purchase applications fell for the first week in the last four. The 3.5% decline still left purchase applications 5.1% higher than in February.</p>
<p>The effective interest rate on a conventional 30-year mortgage rose to 6.19% from 6.16% the prior week and from 5.85% in February. The effective rate on a 15-year mortgage also rose to 5.81%.</p>
<p>The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.</p>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"><b>MBA Mortgage Applications (3/16/90=100)</b></a></th>
<th scope="col"><u><b>03/18/05</b></u></th>
<th scope="col"><u><b>03/11/05</b></u></th>
<th scope="col"><u><b>Y/Y</b></u></th>
<th scope="col"><b><u>2004</u></b></th>
<th scope="col"><u><b>2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
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<td class="firstcol">Total Market Index</td>
<td>658.8</td>
<td>727.6</td>
<td>-40.9%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
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<td class="firstcol">&nbsp; Purchase</td>
<td>446.4</td>
<td>462.8</td>
<td>-0.6%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
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<td class="firstcol">&nbsp; Refinancing</td>
<td>1,894.4</td>
<td>2,267.5</td>
<td>-62.0%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
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The Mortgage Bankers Association reported that mortgage applications dropped 9.5% last week and pulled the average level in March 4.1% below February. Applications to refinance plummeted 16.5% leaving the February average off 13.5% [...]

Mortgage Applications Lower

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New orders for durable goods declined 0.8% (-2.1% y/y) during September after falling by the same amount in August, revised from no change. Orders rose a little-revised 9.8% in July, according to the U.S. Census Bureau. The Action Economics Forecast Survey expected a 0.7% decline last month. The decline in orders reflected a 3.1% drop (-7.9% y/y) in orders for transportation equipment after they were off 3.4% in August. Orders outside the transportation sector rose 0.4% (1.1% y/y) in September after increasing 0.6% in August.

Last month’s weakness in transportation orders reflected fewer aircraft & parts bookings. They fell 22.9% due to a 22.7% decline in nondefense aircraft orders. Defense sector aircraft orders fell 3.2%. Motor vehicle & parts orders rose 1.1% (0.1% y/y) after edging 0.1% lower in August. Elsewhere, primary metals orders rose 0.5% (0.9% y/y) while fabricated metals orders jumped 2.1% (3.2% y/y). Machinery orders slipped 0.2% (-0.7% y/y), the third month of slight decline, while computer & electronics fell 0.3% (+1.4% y/y) following a 0.7% rise. Electrical equipment orders were little changed (1.4% y/y) following a 2.4% rise. Orders for other durable goods rose 0.2% (0.7% y/y) following a 0.3% August increase.

Capital goods orders declined 2.8% in September (-6.3% y/y) after falling 2.6% in August. Nondefense capital goods orders declined 4.5% (-13.1% y/y) after a 4.4% decline while nondefense capital goods orders excluding aircraft rose 0.5% (0.1% y/y) after easing 0.3% in August. Defense capital goods orders jumped 6.4% and by one-half y/y, following an 8.4% increase.

Shipments from all manufacturing industries eased 0.4% (+0.2% y/y) during September after falling 0.7% in August. Durable goods shipments fell 0.6% (+1.6% y/y) last month, the same as in August. Transportation product shipments fell 2.4% (+4.3% y/y) after a 2.3% decline. Shipments excluding the transportation sector rose 0.3% both m/m and y/y after rising 0.2% in August. Machinery shipments held steady (-0.4% y/y) after rising 0.4% while computer & equipment shipments improved 0.4% (-0.1% y/y) after holding steady in August. Electrical equipment & appliance shipments rose 0.9% (1.3% y/y) following a 0.5% increase. Nondurable goods shipments fell 0.2% (-1.1% y/y) after falling 0.7% in August.

Unfilled orders for durable goods rose 0.2% (3.1% y/y) in September for the third straight month. Unfilled orders in transportation sector rose 0.1% (5.0% y/y) after rising 0.2% in August. Excluding transportation, unfilled orders rose 0.2% (-0.2% y/y), the same as they did in August. Unfilled orders for durable goods less transportation rose 0.2% (-0.2% y/y) and have been trending sideways since 2022.

Inventories of all manufactured products eased 0.2% in September (+0.2% y/y) after a 0.1% August rise. Durable goods inventories slipped 0.2% (+0.9% y/y) after holding roughly three straight months. Nondurable goods inventories slipped 0.1% (-0.9% y/y) after rising 0.2% in August, though petroleum inventories fell 1.4% (-6.2% y/y in September after rising 0.4% in August.

Manufacturers’ orders and shipments of durable and nondurable goods, along with unfilled orders and inventories, are compiled by the U.S. Census Bureau. They are available in Haver’s **USECON** database. The Action Economics forecast data are in the **AS1REPNA** database.

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- Transportation orders decline with falloff in aircraft orders; excluding  transportation, orders rise modestly.
- Shipments ease for second month. Outside of transportation, shipments rise slightly.
- Unfilled orders rise negligibly for third straight month while inventories slip.

U.S. Durable Goods Orders Fall in September

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During FY 2024, the U.S. Treasury Department reported a U.S. government budget deficit of $1.833 trillion compared to a $1.695 trillion deficit in FY 2023. It was the third largest deficit on record. For September alone, the government actually ran a budget surplus of $64.3 billion, which compared to a deficit of $170.7 billion twelve months earlier. The Action Economics Forecast Survey expected a $16 billion surplus in September.

Overall revenues last fiscal year increased 10.8% y/y as individual income tax receipts rose 11.5% y/y. The level of corporate tax receipts increased 26.3% y/y for the full fiscal year. Social insurance revenues increased a lessened 5.9% y/y and excise taxes increased 33.8% y/y in FY’24. Customs duties fell 4.1% y/y, continuing the decline since late-2022.

Federal government outlays increased 10.1% y/y in FY’24 after a 2.2% decline in FY’23. Defense spending rose 6.5% y/y, about as it did in FY’23. Social Security outlays rose 7.9% y/y after rising 11.1% y/y in FY’23. Interest payments soared 33.7% y/y in FY’24 after a 38.7% rise a year earlier. Health program spending rose 2.5% y/y after declining 2.8% y/y in FY’23 while Medicare payments rose 3.1% y/y. Income security outlays fell 13.3% y/y compared to a 10.6% y/y decline in FY’23.

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

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- Personal income tax receipts remain strong.
- Corporate tax payments surge.
- Social Security spending fuels outlay growth.

U.S. Government Budget Deficit Deepens in FY 2024

Andrew Cates

**The IMF’s Economic Outlook**
The IMF expects global growth to remain broadly flat – decelerating marginally from 3.3% y/y in 2023 to 3.2% in both 2024 and 2025. This outlook is largely unchanged from the forecasts that were published in April 2024 and October 2023. But there were some nuances beneath the surface, with upward revisions to the outlook for the US offset by downward revisions to the euro area, and to Germany in particular, in 2025.

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**Policy Uncertainty**
The IMF’s relative optimism about the outlook for the US and the pessimism about Germany can be traced to a number of factors, though the latter’s high energy costs along with the plight of its manufacturing sector - and its auto sector in particular - have been key. These have combined to generate very high levels of policy uncertainty in Germany relative to its European peers and particularly compared to the US (see chart 2).

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**Global trade**
Weak global demand, particularly from key markets like China, has also hit Germany’s economy. And this week’s latest data from South Korea have additionally underscored the fragility of that demand. For instance export growth in the first 20 days of October slowed to a 14 month low of -4.2% y/y on a working-day adjusted basis after +3.1% in September. PPI inflation also weakened, to 0.9%y/y in September from 1.6% in the previous month.

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**The Energy Transition (and the UK)**
There are a number of downside risks to the outlook that the IMF – and other economic forecasters – have been citing in recent months. One of the most critical is climate change and the energy transition and how this is amplifying instability in energy and food markets. Ahead of next week’s Budget announcement from the new Labour government, there has been an active debate about the provision of electricity, amidst a dearth of public investment in nuclear energy sources. This is notwithstanding a relatively impressive shift away from fossil fuels toward more sustainable renewable energy sources over the past few years (see chart 4).

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**The Policy Mix**
How policymakers now calibrate both monetary and fiscal policy will also clearly be key for the evolution of the broader world economy and financial markets in the period ahead. As the IMF additionally noted in its latest report, monetary policy has tightened considerably over the past two years and with respect to current levels of real policy rates, remains restrictive at present (with the notable exception of Japan). When measured with reference to shifts in cyclically-adjusted primary balances, fiscal policy is also now a little tighter in most major economies compared with two years ago.

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**Structural Reforms**
Supply side rigidities stemming from reform fatigue, lacklustre investment and broader global challenges (including climate change) are additional threats to global economic stability. On the reform front it is certainly of note that Infrastructure Ratings from the Economist Intelligence Unit for several major advanced economies have, on the whole, declined over the past 10 years, albeit from a relatively high base. And even in fast growing developing economies, those ratings have also often either declined a little (e.g. for China) or edged only marginally higher (e.g. for India) even though the underlying base of these ratings is usually much weaker.

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In the absence of incoming data that might have influenced the economic outlook, the financial press has been dominated by other factors, including Q3 corporate earnings reports and US political shenanigans. This week’s IMF meetings in Washington have additionally grabbed headlines and particularly the accompanying reports on the global economic outlook and financial market stability. While the IMF’s projections for global growth for 2024 and 2025 were little-changed compared with the previous full report in April (see chart 1), there were some notable revisions beneath the surface. Upgrades to the US growth outlook, for example, were offset by downgrades to Europe. And downside risks were additionally emphasised amidst elevated policy uncertainty in a number of countries (chart 2). These risks stem from a range of issues, including geopolitical stress in the Middle East, China’s imbalances and their reverberations (chart 3), high levels of debt together with other supply-side challenges such as climate change, the energy transition (chart 4) and ageing populations. Against that backdrop, policy decisions concerning the calibration of monetary and fiscal policy will be crucial (chart 5), as will the ability to implement supply-side reforms (chart 6).

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Charts of the Week: Revisions, Risks, Reforms, Repeat

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The Census Bureau reported that new single-family home sales rose 4.1% (6.3% y/y) during September to 738,000 (SAAR) after falling 2.3% in August to 709,000, revised from 716,000. Sales rose 8.0% in July to 726,000, revised from 751,000. The Action Economics Forecast Survey expected new home sales of 718,000 for September. Sales were 42.2% higher than the 519,000 low in July 2022, but remained 28.4% below their peak of 1.031 million in October 2020. The rise in September sales accompanied a decline in the average 30-year fixed-rate mortgage to 6.18% last month from 6.50% in August. It has since risen to 6.44% last week according to Freddie Mac.

The median sales price of a new home rose 3.7%, unchanged y/y, in September to $426,300 (NSA) after falling 3.8% to $410,900 in August. The median sales price was 7.4% below its October 2022 peak of $460,300. The average sales price of a new home increased 3.0% (-2.7% y/y) to $501,000 in September after falling 4.6% to $486,500 in August. The average price was 7.4% below its peak of $541,200 in July 2022. These sales price data are not seasonally adjusted.

New home sales were mixed m/m throughout the country in September. New home sales in the Northeast rose 21.7% (-22.2% y/y) to 28,000 after falling 30.3% in August. In the South, sales increased 5.8% (14.7% y/y) last month to 477,000 after rising 7.1% in August. Holding steady (-10.9% y/y) at 156,000 were new home sales in the West after they declined 17.9% in August. Working lower, new home sales in the Midwest weakened 2.5% (+14.9% y/y) to 77,000 after falling 3.7% in August.

The number of unsold new homes on the market in September rose 0.4% (8.0% y/y) to 470,000 following a 1.5% August increase. The seasonally adjusted months' supply of new homes for sale fell to 7.6 months in September from 7.9 months in August. It remained up from a low of 6.9 months in May 2023.

The median number of months a new home stayed on the market edged up to 2.5 months in September from 2.2 months in both August and July. The reading remained up from the record low of 1.5 months in both September and October of 2022 but down from a high of 5.1 months in March 2021. These figures date back to January 1975.

New home sales are recorded when the sales contract is signed. New home sales activity and prices are available in Haver's **USECON** database. The consensus expectation figure from Action Economics is available in the **AS1REPNA** database.

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- Sales rise to highest level since May 2023.
- Median sales price increase reverses earlier decline.
- Sales performance is mixed regionally.

Mortgage Applications Lower

Summary

Tom Moeller

More Economy in Brief

U.S. Durable Goods Orders Fall in September

U.S. Government Budget Deficit Deepens in FY 2024

Charts of the Week: Revisions, Risks, Reforms, Repeat

U.S. New Home Sales & Prices Post Firm Gains in September

MBA Mortgage Applications (3/16/90=100)	03/18/05	03/11/05	Y/Y	2004	2003	2002
Total Market Index	658.8	727.6	-40.9%	735.1	1,067.9	799.7
Purchase	446.4	462.8	-0.6%	454.5	395.1	354.7
Refinancing	1,894.4	2,267.5	-62.0%	2,366.8	4,981.8	3,388.0