Tom Moeller

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The Pending Home Sales Index produced by the National Association of Realtors fell 4.6% (-37.0% y/y) to 77.1 in October following an 8.7% September decline. The latest decline was the eleventh in twelve months. Pending home sales have fallen 39.8% since their August 2020 high.

Pending home sales declined in most regions of the country last month. Sales in the Northeast fell 4.3% (-29.5% y/y), following a 6.3% September shortfall. In the South, sales declined 6.4% (-38.2% y/y), after weakening 8.2% in September. Sales in the West declined 11.3% last month (-46.2% y/y), about as they did in September. Working higher were sales in the Midwest by 3.3% (-32.1% y/y), after an 8.7% September decline.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **SURVEYW** database.

- Sales are lowest since April 2020.
- Decline spreads throughout most of country.

U.S. Pending Home Sales Continue to Fall in October

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The ISM Purchasing Managers Index of activity in the manufacturing sector rose to 48.4 during November from 46.5 in October and 47.2 in September. It was the highest level since June, though still below the break-even level of 50.3 reached in March. A level of 47.5 for November had been expected by the Action Economics Forecast Survey.

Performance of the component indexes was mixed last month. The new orders measure rose to 50.4 from 47.1. It was the highest level since March. Twenty-one percent (NSA) of survey respondents reported higher new orders while 24.7% reported declines. The employment index increased to 48.1 from 44.4. It stood at a five-month high as 14.2% indicated job gains and 20.5% reported declines. The inventories reading improved to 48.1 from 42.6 in October. Sixteen percent of respondents raised inventory levels while 21.3% lowered them. The production index edged up to 46.8 after declining to 46.2 in October. It remained below the high of 54.6 in March. Sixteen percent of respondents reported higher production while 20.9% reported declines. Working lower, the supplier delivery index weakened to 48.7 last month from 52.0 during October. Six percent of respondents reported slower delivery speeds and 8.3% reported a speed-up.

The prices index, which is not part of the composite series, fell to 50.3 (NSA) from 54.8 in October. A lessened 12.2% of respondents reported higher prices last month while an increased 11.7% reported lower prices.

In other series, the export order index rose to 48.7 in November from 45.5 in October, but remained down from a March high of 51.6. The imports index fell to 47.6 last month from 48.3, below a March high of 53.0, while the order backlog index declined to 41.8, a four-month low.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- Surprising strength moves index to highest level since June.
- New orders, employment & inventories lead improvement.
- Prices index backpedals.


U.S. ISM Manufacturing Index Increases in November

Winnie Tapasanun

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The value of construction put in place rose a slightly more-than-expected 0.4% m/m in October on top of a 0.1% increase in September (unrevised) and an upwardly revised 0.9% gain in August (+0.1% previously), data from the U.S. Census Bureau showed. The October reading was the third consecutive m/m rise following a 0.04% July downtick and a 1.1% June drop. A 0.3% m/m October increase had been expected in the Action Economics Forecast Survey. The year-on-year rate decelerated to 5.0% in October from 5.3% in September, registering the lowest y/y pace since May 2023’s 4.2%. The latest y/y figure was lower than 8.6% in October 2023, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction increased 0.7% (5.1% y/y) in October following a 0.2% decline in September (+0.03% initially) and a 1.0% increase in August (+0.2% previously). Residential private construction rebounded 1.5% (6.4% y/y) in October, up for the second month in three, following a 0.4% decline in September (+0.2% initially). Home improvement building recovered 2.7% (18.5% y/y), the third m/m gain in four months, following a 1.4% September drop; it was 41.2% of the residential private construction. Single-family building advanced 0.8% (1.3% y/y) after a 0.6% September rebound; it was 45.4% of the residential private construction. Multi-family building grew 0.2% (-6.8% y/y) in October, the first m/m gain since November 2023, reversing a 0.2% decline in September; it was 13.4% of the residential private construction.

Nonresidential private construction fell 0.3% (+3.5% y/y) in October, the first m/m fall since July, following a 0.05% uptick in September (-0.1% initially). The October fall reflected m/m drops in the following nonresidential private constructions. These included health care (-1.4%; -0.1% y/y), educational (-1.3%; +2.9% y/y), amusement & recreation (-1.2%; -0.4% y/y), commercial (-1.1%; -11.2% y/y), and lodging (-0.4%; -7.1% y/y). In contrast, the following private constructions rose m/m in October: religious (4.0%; 0.3% y/y), office (0.5%; 0.4% y/y), utilities (0.2%; 5.3% y/y), and transportation (0.1%; 10.1% y/y). Meanwhile, manufacturing private construction (-0.03%; +16.3% y/y) and communication private construction (+0.01%; -3.0% y/y) were virtually unchanged m/m in October.

The value of public construction fell 0.5% (+4.5% y/y) in October after upwardly revised rises of 1.1% in September (+0.5% initially) and 0.4% in August (+0.04% previously), reflecting declines of 0.5% (+6.4% y/y) in residential public construction and 0.5% (+4.5% y/y) in nonresidential public construction. The October fall reflected m/m drops in the following nonresidential public constructions. These included conservation & development (-3.3%; -10.6% y/y), sewage & waste disposal (-1.5%; +6.1% y/y), utilities (-1.5%; +2.9% y/y), water supply (-0.6%; +17.1% y/y), educational (-0.4%; +0.6% y/y), health care (-0.3%; +8.7% y/y), and transportation (-0.1%; +5.4% y/y). Notably, spending on highways & streets, which made up 28.4% of public construction spending, slid 0.7% (-1.2% y/y) in October, the fist m/m slide in three months, following a 0.9% increase in September. To the upside, the following public constructions rose m/m in October: office (2.0%; 10.3% y/y), public safety (1.1%; 21.4% y/y), amusement & recreation (0.9%; 20.7% y/y), and commercial (0.7%; 34.3% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- October construction spending +0.4% m/m; +5.0% y/y, the lowest y/y rate since May ’23.
- Residential private construction +1.5% m/m, led by a 2.7% rebound in home improvement building.
- Nonresidential private construction -0.3% m/m, the first monthly decline since July.
- Public sector construction -0.5% m/m, reflecting drops in both residential & nonresidential public buildings.

U.S. Construction Spending Rises for the Third Consecutive Month in October

Robert Brusca

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Globally unemployment rates are continuing to move sideways or falling but the main exception is the United States with some recent increase in unemployment; unemployment in the U.S. has recently picked up from its cycle low in the wake of the Covid recession and government policies to deal with it.

In the European Monetary Union, the unemployment rate has had its low and it's been stuck here for several months. Despite some disquieting and weak economic data for the monetary union, unemployment has stayed at an extremely low level- its all-time low.

Among the 12 countries listed in the table, 5 of them have higher unemployment rates month-to-month with only Italy seeing the unemployment rate fall in October compared to a month ago. Countries experiencing a rise in their local unemployment rates are Finland, France, Luxembourg, Ireland, and Greece.

In terms of the monetary union aggregates, total unemployment continues to fall in the union as a whole over 12 months, over six months, and over three months.

Unemployment rates fell in only three of the EMU countries listed in the table one month ago. Two months ago, in August, unemployment rates fell in seven EMU member countries, while unemployment rose month-to-month in only three. The impetus for unemployment rates to drop is running out of steam while the list of countries experiencing higher rates of unemployment is rising.

Over broader periods, trends are less clear as there are the same number of countries with unemployment rates falling over three months as there are over six months. Over 12 months, there's one more country that experiences a decline in its unemployment rate compared to the count over three- and six-month horizons. Over three and six months, unemployment falls compared to the previous period in four countries; over 12 months compared to 12 months ago, unemployment rate falls in five countries. So the process of unemployment reduction has slowed then stabilized, based on comparing these trends.

The overall trend as well as the trend for countries in the EMU as well as for the U.S. and Japan shows mostly tempered unemployment rates with unemployment falling or low but with nine showing 12-month increases. Finland and the U.K. show the sharpest 12-month increases. However, global PMI data, for example, and other global data, continue to show more economic weakness. So far that weakness has not permeated the job market that continues to be strong globally, despite some -so far- not very significant backtracking.

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Europe

EMU Unemployment Rate Continues to Slide Sideways

Tian Yong Woon

In this week’s letter, we look back at and review some of the key trends that have shaped the outlook for Asia this year. While growth picked up in several parts of the region earlier in the year, signs of a slowdown have emerged as we head toward year-end (Chart 1). Disinflationary trends have continued in many economies, welcome news for central banks across the region. However, the growth and inflation landscape remains uneven. Economies like Japan and India have experienced slower growth, while others such as Singapore, Taiwan, Malaysia, and Vietnam have seen improvements, in part driven by strong demand for electronics and semiconductors (Chart 2).

On monetary policy, the anticipated regional alignment with the Fed's easing cycle has not fully materialized. Instead, many central banks in Asia have opted to keep policy rates higher for longer, thanks to the influence of various domestic factors (Chart 3). Touching on semiconductors, key players like Taiwan and South Korea have reaped significant benefits from the AI-driven surge in demand, while China’s pre-emptive purchases of semiconductor equipment have finally started to taper off (Chart 4). Turning to financial markets, Asian equities largely tracked their US counterparts through early October. However, market expectations were disappointed by China’s underwhelming stimulus plans, triggering sell-offs across regional markets, while US equities maintained a broader upward trend (Chart 5).

Lastly, in the political arena, both India and Japan saw their incumbent governments retain power, although with notable losses in parliamentary seats, raising some concerns over future economic policy direction (Chart 6). And as we head into December, uncertainty remains—particularly following President-elect Trump’s recent victory in November. We will continue to explore these developments and their potential impact for 2025 in next week’s publication.

**Growth and inflation**
Asia-Pacific economies had plenty to celebrate this year, as growth strengthened on average while inflation remained well-behaved in many economies. As shown in Chart 1, GDP growth rates rose from the lows of 2023, averaging just under 4% y/y in both Q1 and Q2. That said, while growth momentum persisted in some economies during Q3, it slowed further in many others. Meanwhile, the region experienced further disinflation, with average CPI inflation falling from a peak of 2.9% y/y in May to just 2% in October—a level at which many central banks would likely feel comfortable. However, a deeper dive into economy-specific nuances reveals disparities in the relationship between growth and inflation across the region's economies—an issue we will explore in the next section.

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A closer look at economy-specific developments, as shown in Chart 2, reveals a divergent picture of growth and inflation across Asia-Pacific economies. Starting with growth, economies like Singapore, Taiwan, Malaysia, and Vietnam have seen their growth momentum strengthen in recent quarters. In contrast, economies such as India and Japan have experienced a slowdown in real GDP growth. Singapore’s growth exceeded expectations in Q3, driven by strong demand for electronics and semiconductor-related products—a trend also observed in Taiwan, Malaysia, and Vietnam. As for the slower-growing economies, not all is bleak. India’s Q3 slowdown may have been partly influenced by its ongoing elections. However, Japan continues to face challenges in generating growth drivers. On inflation, the picture is similarly nuanced across the region. While economies like China and Thailand are experiencing relatively low inflation, others, including India and Vietnam, are still grappling with relatively high consumer price increases. 

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**Monetary Policy**
Turning to monetary policy, we have yet to see a widespread shift toward monetary easing in Asia-Pacific economies, despite the Fed beginning its own easing cycle. As a result, the region's average policy rate has only declined slightly, in contrast to the Fed's more significant rate cuts (Chart 3). This runs counter to expectations heading into the year, when many economists anticipated rate cuts in Asia in tandem with the Fed. However, country-specific factors—such as high household debt, rapid property price inflation, and sticky inflation—have led to a "tighter-for-longer" stance rather than rate cuts. Nonetheless, rate cuts have already been implemented in Indonesia, the Philippines, New Zealand, South Korea, and Thailand. Looking ahead, as discussed in our previous publications, Asian central banks may have less scope to ease, especially since the US Fed may not need to cut rates as aggressively as once expected, due to the reflationary impact from some of Trump's proposed fiscal measures.

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**Semiconductors and AI**
Next, we take a closer look at the substantial dividends reaped by certain Asian economies from the AI-driven semiconductor boom. Taiwan and South Korea are among the biggest beneficiaries of this year’s surge in AI demand, as both are key players in the semiconductor industry. South Korea, for instance, continues to see export growth in semiconductors in the high double digits, though the pace has slowed recently (Chart 4). In contrast, Taiwan has experienced a pickup in growth in recent months. On the import side, China’s growth in semiconductor manufacturing equipment imports peaked at 153% y/y in December 2023. This surge was likely driven by concerns over US semiconductor-related controls at that time. However, import growth has slowed considerably this year, and even entered contractionary territory in September.

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**Financial markets**
Turning to financial market developments, Chart 5 shows that while regional equities posted solid total returns earlier this year, their performance was disrupted in October. This downturn was partly driven by Chinese equities, which suffered significant declines after market expectations for stimulus from Chinese authorities fell short. Meanwhile, US equities continued to perform strongly, taking a substantial lead over their Asian counterparts. On the currency front, Asia-Pacific currencies have had a volatile ride against the US dollar. On average, however, they have experienced net depreciation, with the Malaysian ringgit being the only exception, posting a clear net appreciation so far this year. Recent drivers of dollar strength, and thus Asian currency weakness, include expectations of a higher Fed terminal rate in its current easing cycle.

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**Political developments**
Lastly, we review the key political developments in Asia this year, of which there were many. First, India held its general elections in the first half of the year, where Prime Minister Modi retained his position. However, his party, the BJP, lost its parliamentary majority, leading to a sense of policy uncertainty (Chart 6). A similar situation unfolded in Japan, where Prime Minister Ishiba’s party, the LDP, also lost its parliamentary majority in the October elections. Elsewhere, Indonesia held its general elections, and new President Prabowo was sworn in earlier in October, with observers closely watching his ambitious spending plans. In Thailand, a leadership change occurred when former Prime Minister Srettha was removed from office for constitutional violations. Despite this, key policy initiatives, such as the massive digital wallet scheme, continued under the leadership of current Prime Minister Paetongtarn.

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Asia

Economic Letter From Asia: The Year in Review