Tom Moeller

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Sales of existing homes rose 1.3% during July (-2.5% y/y) to 3.950 million units (SAAR) from 3.90 million in June, revised from 3.89 million units after declining an unrevised 0.7% during May. Sales had fallen for four consecutive months before the July increase. The latest rise came as 30-year fixed rate mortgages averaged 6.85% last month versus 6.92% in June. These rates are below the high of 7.62% averaged last October, according to Freddie Mac. Sales remained up from their low of 3.85 million in October 2023. The Action Economics Forecast Survey expected July sales of 3.91 million units. The sales figures are based on closings of sales signed in earlier months.

The median price of all existing homes (NSA) eased 1.0% in July (+4.2% y/y) to $422,600 after rising to a record $426,900 in June. Prices remained almost double their level of $221,600 ten years earlier. The median price of an existing single-family home fell 1.0% (+4.2% y/y) in July to $428,500 after rising 2.5% to a record $432,900 in June. The median price for condos & co-ops declined 1.1% (+2.7%) to $367,500, after rising 0.7% in June. By region, existing home prices ranged from $629,500 (3.4% y/y) in the West to $505,100 (8.3% y/y) in the Northeast to $372,500 (2.3% y/y) in the South and to $321,300 (4.5% y/y) in the Midwest.

Single-family home sales rose 1.4% (-1.4% y/y) last month to 3.57 million units, after four straight months of decline. Sales were 39.0% below their high of 5.85 million in October 2020. Condo and co-op sales held steady (-11.6% y/y) at 380,000 following a 5.0% June decline. These sales have declined 48.6% since the January 2021 high of 740,000.

During July, sales in the South improved 1.1% (-3.8% y/y) to 1.79 million following four consecutive months of decline. In the Northeast, sales rose 4.3% (2.1% y/y) to 490,000 after falling 2.1% in June. In the West, sales improved 1.4% both m/m and y/y to 750,000 after falling 2.6% in June. Sales in the Midwest held steady (-5.2% y/y) at 920,000 after declining 8.0% in June.
The number of existing homes for sale (NSA) rose 0.8% (19.8% y/y) to 1.33 million in July after rising 3.1% in June. The supply of homes on the market at the current selling rate (NSA) eased to 4.0 months from 4.1 months in June. The record low in supply of 1.6 months was reached in January, 2022. These figures date back to January 1999.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR **database. Mortgage interest rates can be found in the **WEEKLY** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.

Measurement and Theory of Core Inflation from the Federal Reserve Bank of New York can be found [here](https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1115.pdf?sc_lang=en)



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- Sales rise after four months of decline.
- Home prices back away from record.
- Sales rise in most regions of the country.


U.S. Existing Home Sales Edge Higher in July; Prices Decline

Sandy Batten

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The Federal Reserve Bank of Kansas City reported that its index of manufacturing sector activity rose to -3 in August from -13 in July. The headline index has not been positive since September 2022. Haver Analytics calculates an index based on the Kansas City results which is comparable to the ISM PMI series. This index rose to 47.4 (NSA) in August, its third consecutive month below the 50 reading that separates expansion from contraction.

The August survey was open for a six-day period from August 14-19, 2024 and included 92 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

Nondurable manufacturing was essentially flat, while durable goods manufacturing fell somewhat, driven by transportation equipment, fabricated metal, and machinery. The month-over-month indexes were lackluster, but all increased from last month’s readings. Production rebounded from -12 to 6 while the volume of new orders stayed negative at -12 (vs -21 in July) and backlogs posted a reading of -19 (vs -24). The two employment indexes also declined further in August but at a slower pace than in July with the employment index increasing to -7 from -12 and the average workweek index rising to -10 from -17. 

The year-over-year composite index for factory activity ticked down to -14 from -13 as production, shipments, and new orders all continued to fall considerably. Employment levels decreased moderately while capital expenditures stayed steady with a reading of 1 vs 5 in July.

Inflation indicators rose slightly in August. Prices paid for raw materials edged up to 18 from 17 in July. Prices received for finished products jumped to 6, its highest reading in three months, from zero in July.

The composite index of expectations in six months increased to 8 in August, the highest reading since January, from 5 in July. Key components generally increased. Expected production rose to 20 from 13; employment increased to 17 from 13; new orders climbed to 12 from 8. However, expected capital expenditures fell to -4, the first negative reading since November 2023, from 10 in July.

The series dates back to July 2001. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Data for the Kansas City Fed Survey can be found in Haver’s **SURVEYS** database.


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- The index rose to -3 from -13, indicating that the pace of decline had slowed.
- Expectations for future activity remained positive, rising in August from July.
- The production index increased to 6, the first positive reading in six months.
- All other major components of the headline index improved in August but remained at zero or below.


FRB Kansas City Manufacturing Activity Continued to Decline in August

Kathleen Stephansen, CBE

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The Chicago Federal Reserve Bank reported that its National Activity Index (CFNAI) decreased to -0.34 in July from -0.09 in June, revised from 0.05. The recent high of +0.35 was reached in February. The three-month moving average of the index remained unchanged in July at -0.06. During the last 20 years, there has been a 91% correlation between the three-month index level and the q/q change in real GDP.

The report stated that of the four broad categories of indicators used to construct the index decreased from June, and three categories made negative contributions in July. The Production & Income category contributed -0.28 in July, down from -0.02 in June. It remained up from a January low of -0.49. The Employment, Unemployment & Hours series contributed -0.08 from -0.02 in June. It has been trending sideways for a year. The Sales, Orders and Inventories measure was -0.01 in July, a slight improvement from -0.02 in June. It remained higher than the January low of -0.27. The Personal Consumption & Housing series’ contribution was +0.03 last month from -0.02 in June and the highest this year.

The diffusion index of the CFNAI, which measures the breadth of component change, increased to -0.11 in July from -0.13 in June and remained above the low of -0.32 registered in October of last year.

The CFNAI is a weighted average of 85 monthly indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

These figures are available in Haver's **SURVEYS** database.


- Weaker trend sets in.
- Three categories made negative contributions in July.


Chicago Fed National Activity Index decreases in July

Carol Stone, CBE

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Initial claims for unemployment insurance were 232,000 seasonally adjusted, in the week ended August 17, up 4,000 from the previous week’s 228,000; that earlier amount was revised just slightly from 227,000 reported a week ago. The Action Economics Forecast Survey had expected 235,000 in this latest week. The four-week moving average of initial claims was 236,000 in the August 17 week, down from 236,750 the week before.

In the week ended August 10, the total number of beneficiaries of unemployment insurance, also known as “insured unemployment” or “continuing claims,” was 1.863 million, up from 1.859 million in the prior week. That earlier amount was revised from 1.864 million previously reported. The four-week moving average of continuing claims was 1,865,500 as of the August 10 week, up from 1,860,750 the week before.

The insured unemployment rate was still 1.2% in the August 10 week. That is the number of insured unemployed as a percentage of covered employment. It has been steady at 1.2% since the week ended March 11, 2023.

Economic conditions vary widely across individual states and territories, as shown by the insured unemployment rates. In the week ended August 3, the highest rates were in New Jersey (2.75%), Puerto Rico (2.60%), Rhode Island (2.59%), California (2.21%) and Minnesota (2.05%). The lowest rates were in South Dakota (0.26%), Kansas (0.39%), Florida (0.43%), Virginia and North Dakota (each 0.44%) and North Carolina and Kentucky (each 0.46%). Rates in other notable states include Pennsylvania (1.86%), New York (1.72%), Illinois (1.62%), Texas (1.20%) and Ohio (0.82%).

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Initial claims modestly less than forecast.
- Continuing claims up 4,000 in August 10 week.
- Insure unemployment rate still holds at 1.2%.


U.S. Unemployment Insurance Claims Up Just 4,000 in August 17 Week

Andrew Cates

**Copper prices and global growth**
Incoming data for global growth have been frequently missing forecasters’ expectations on the downside over the past few weeks. That’s why Citigroup’s global growth surprise index has lately declined to a near 3 year low (chart 1). Copper prices - often regarded as a good barometer of global growth conditions - have also lost some ground over the past couple of months notwithstanding some solid structural underpinning (e.g. from the global energy transition).

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**Oil prices and interest rates**
Weaker-than-expected global demand may offer one explanation for why oil prices have also been softening over the past few weeks. But inasmuch as this has eased inflation fears and might leave more scope for looser monetary policy, this may have helped to drive US bond yields to lower levels as well (chart 2).

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**China’s property market**
One of the more well-known pockets of global economic fragility concerns China’s property market. Last week’s data certainly suggested that a decline in house prices has continued unabated. Our nominal GDP-weighted index for China’s largest 70 cities, for example, revealed a 4.7% y/y drop in new property prices in July, and an 8.5% decrease in existing prices. This ongoing decline has persisted despite efforts by authorities to boost demand and address a supply glut.

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**Japan’s financial flows and the carry trade**
As noted, financial market conditions have stabilized in recent weeks in part because the unwinding of Japan’s carry trade – a key factor that had amplified the instability in early August - has subsided. Early August data specifically show that Japanese residents' net purchases of foreign assets has picked up, while non-residents' net sales of Japanese assets have declined. Although these flows are not directly tied to carry trade activity, they provide insights into investor sentiment regarding the yen’s underlying funding costs and the impact of changes in interest differentials.

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**The UK housing market and the BoE**
One of the key obstacles that has been hampering efforts to ease monetary policy in recent months is sticky service sector inflation. This has not been helped, at least in the UK, by the big feedback loops that exist between high levels of rental price inflation in the housing market, the wage demands of homeowners, landlords and tenants, and interest rates (chart 5). Still, with the Bank of England having reduced its policy rate in August and potentially now embarking on an easing cycle in the coming months, that vicious cycle between interest rates, wage inflation and services inflation could now move into reverse.

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**Demographic change**
Our final chart below this week illustrates the interplay between demographic factors such as the projected median age in 2025 and population growth (in the 10 years to 2025). The implications of these trends are arguably profound, affecting everything from economic growth and labour markets to social security systems and healthcare. Countries such as Japan and Italy, located at the far right of the chart, will likely experience significant demographic challenges, with ageing populations and shrinking workforces. But on the other end of the scale, Nigeria stands out with a very low median age and extremely high projected population growth. This underscores the demographic dividend that Nigeria ought to benefit from if it can effectively harness this demographic potential.

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_We will not be publishing ‘Charts of the Week’ and our accompanying podcast next week._
Financial markets have remained in much calmer waters in recent weeks following the bout of volatility that earmarked the first week of August. That’s partly thanks to the release of some reassuring inflation data together with some dovish signals from several central banks. However, concerns about the global growth outlook persist. That’s partly because incoming growth data have continued to surprise forecasters on the downside (charts 1, 2 and 3). Lingering uncertainty about how a further unwinding of Japan’s carry trade might amplify financial instability in the period ahead could also be weighing on confidence (chart 4). In the meantime, while incoming inflation data have offered some reassurance that monetary policy will be loosened in the US and Europe in the coming months, still-sticky service sector inflation is generating some doubt about the scope and the scale (chart 5). Finally, and looking beyond these cyclical issues, there remain several structurally-rooted headwinds that could be knocking growth optimism off course, including ageing demographics (chart 6).

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Charts of the Week: Growth Alert

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Mortgage loan applications declined 10.1% (+22.2% y/y) in the week ended August 16, following an unrevised 16.8% rise in the week ended August 9. Applications for home purchase loans fell 5.2% (-8.0% y/y) following a 2.8% rise during the prior week. Applications to refinance a mortgage backpedaled 15.2% (+90.0% y/y) last week after surging 34.5%. These data are from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.

The effective interest rate on 30-year fixed-rate loans was fairly steady at 6.67% in the week ended August 16, but has fallen from a high of 7.48% at the end of April. It was the lowest rate since the first week of May 2023, down from an 8.12% high in the third week of October, 2023. The effective rate on 15-year fixed-rate loans rose to 6.22% in the latest week from 6.13% the week before. The rate on 30-year Jumbo loans slipped to 6.84% from 6.88% in the week of August 9. In contrast, the rate on 5-year ARM loans rose w/w to 6.46% from 6.36%. It remained below the 7.31% high last October.

The share of applications to refinance an existing loan fell to 46.3% in the week of August 16 from 48.6% in the prior week. The latest figures are increased from a low of 27.2% averaged in April 2023. The share of applications for ARMs fell to 5.5% last week from 7.3% in the prior week. A recent low for the ARM share was 5.4% in the week ended January 5.

The average size of mortgage loans declined 7.5% (+2.8% y/y) to $372,600 in the week of August 16 after rising to a record $403,000 during the prior week. The average size of a loan to purchase a home eased 0.2% (+4.6% y/y) to $426,300 last week and has been roughly steady for three weeks. The size of a refinanced loan fell 17.8% (+21.9% y/y) to $310,300 in the week of August 16 after surging to $377,600 during 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.

The minutes of the latest FOMC meeting can be found [here](https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20240731.pdf).

 

- Purchase & refinancing applications decline.
- Interest rate on 30-year fixed-rate loan remains near May 2023 low.
- Average loan size declines.


U.S. Mortgage Applications Fall Sharply Last Week; 30-year Fixed-Rate Steadies

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Online retail sales rose a seasonally adjusted 1.3% in Q2’24 following a 1.6% gain in Q1 and 1.3% growth in Q4’23, according to the U.S. Census Bureau. Sales rose 6.7% y/y after 10.0% growth in 2023 compared to 5.7% growth in 2022. E-Commerce sales accounted for 16.0% of total retail sales last quarter compared to 15.3% last year and 14.4% in 2022. The percentage was 6.4% in 2014.

The following details of the E-Commerce data by sector are not seasonally adjusted.
Sales of nonstore retailers, which accounted for 60.8% of total E-Commerce, rose 7.2% y/y in Q2, following a 15.1% y/y rise in 2023. 

General merchandise store sales rose 12.7% y/y after a 10.2% gain in 2023. Food & beverage store sales improved 8.0% y/y after a 4.8% y/y 2023 rise while sales of building materials & garden equipment rose 3.8% y/y after a 4.2% y/y rise last year. Electronics & appliance store sales rose 7.9% y/y following 2.8% growth in 2023. Sales of motor vehicles & parts rose 1.8% y/y after falling 3.2% in 2023. Clothing accessory store sales improved 0.1% y/y after no change in 2023. Miscellaneous sales, including gasoline stations, rose 8.3% y/y following a 1.9% rise in 2023.

Elsewhere, sales declined. Furniture & home furnishing sales fell 6.6% y/y after declining 16.7% in 2023, while and sporting goods, hobby, musical instrument & book sales weakened 0.6 y/y after rising 0.6% y/y in 2023. Health & personal care store sales fell 4.5% y/y after a 1.0% decline in 2023. 

E-commerce sales are goods and services ordered over an internet, mobile device (M-commerce), extranet, Electronic Data Interchange (EDI) network, electronic mail, or other comparable online system. Payment may or may not be made online and sometimes sale & price are negotiated. Total sales estimates are adjusted for seasonal variation, but not for price changes. They are also adjusted for trading-day differences and moving holidays.

E-Commerce sales data can be found in Haver's **USECON** database.


- Online sales share of total remains high.
- Nonstore retail sales moderate.
- Electronics & general merchandise firm y/y.


U.S. E-Commerce Sales Firm in Q2’24

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Retail gasoline prices for all grades fell to $3.50 per gallon (-12.1% y/y) in the week ended August 19 from $3.53 per gallon in the previous week. Prices were below the late-April high of $3.79 per gallon and at the lowest level since the second week of March. They also stood below the all-time high of $5.11 in the week ended June 13, 2022. Prices have increased, however, and are higher than the low of $3.18 per gallon in the third week of December. Retail prices for on-highway diesel fuel eased to $3.69 per gallon (-16.0% y/y) last week compared to $3.70 in the prior week. The price was $3.87 five weeks ago and $4.11 in early-February.

The average price of West Texas Intermediate crude oil rose to $78.61 per barrel (-2.9% y/y) in the week ended August 16 from $75.75 per barrel in the prior week. Prices remained lower than the $91.45 high in the last week of September 2023. They peaked at $142.46 per barrel in the week of July 4, 2008. Yesterday, the price of West Texas Intermediate crude oil was $74.37 per barrel. The price of European Brent crude oil rose to $82.47 per barrel (-4.0% y/y) in the week ended August 16 compared to $78.84 in the prior week. The price of Brent has recently ranged from a low of $73.55 in the week ended June 30, 2023 to a high of $127.40 in the week ended June 10, 2022. Yesterday, the price was $81.09 per barrel.

Natural gas prices averaged $2.13/mmbtu (-17.8% y/y) in the week ended August 16 compared to $1.88 in the prior week. They remained above the 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 was $2.12/mmbtu.

Gasoline demand increased 2.2% y/y in the four weeks ended August 9 after improving 1.5% y/y in the four weeks ended August 2. Demand for all petroleum products weakened 1.7% y/y in the last four weeks after falling 2.0% y/y in the previous period. Crude oil input to refineries declined 1.4% y/y in the four weeks ended August 9 after a 0.4% y/y easing in the previous four-week period.

Gasoline inventories rose 2.8% y/y in the week of August 9 after increasing 4.0% y/y in the prior week. Inventories of residual fuel oil fell 1.5% y/y after declining 7.3% y/y in the previous week. Crude oil inventories, including the Strategic Petroleum Reserve, rose 2.4% y/y in the week of August 9 following a 1.5% y/y rise in the prior week.

Measured in days’ supply, gasoline inventories were 24.2 days in the week ended August 9 following 24.7 days one week earlier. The recent low was 23.4 days in the week of June 30, 2023. Crude oil inventories edged higher to 26.3 days in the week of August 9 from 26.1 days. These compare to a recent high of 31.9 days in the week of March 3, 2023 and a low of 25.0 days in the week of September 1, 2023.

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 fall to six-month low.
- Crude oil prices increase w/w but decline sharply yesterday.
- Natural gas prices weaken to lowest level since early-May.


 U.S. Gasoline Prices Decline in Latest Week; Crude Oil Prices Rise

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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

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**Global growth**
Latest flash PMI readings reveal a widening gap in manufacturing performance across major economies. Europe remains mired in contraction, with both the UK and euro area registering PMI figures below the 50 threshold. The UK’s manufacturing sector is particularly under pressure, with the PMI dropping to a new low not seen in over a year—reflecting weak output and mounting challenges from both domestic uncertainty and external shocks, including the disruptive impact of recent US trade actions. While the euro area shows tentative signs of stabilization, with PMI readings inching higher, the recovery remains fragile. In sharp contrast, India’s manufacturing sector continues to outperform, with PMI figures climbing further and signalling resilient industrial momentum amidst global headwinds.

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**US capex intentions**
The latest reading from the US Philly Fed survey suggests a sharp drop in capex intentions among manufacturers in the Philadelphia region, likely reflecting growing uncertainty in the wake of the US administration’s surprise announcement of sweeping tariffs on April 2nd, 2025. This abrupt policy shift has rattled business confidence, echoing past episodes—such as during the 2008 financial crisis and early stages of the pandemic—when capex sentiment similarly plunged. The downturn underscores how policy-induced trade disruptions can swiftly chill investment appetite, particularly in manufacturing sectors exposed to global supply chains.

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**South Korean trade**
The fallout from President Trump’s “reciprocal” tariffs and the rapid escalation of the trade dispute with China is also now becoming evident in Asia’s trade data. South Korea’s trade figures for the first 20 days of April—often seen as a bellwether for global trade—fell sharply compared to the same period last year. The drop was led by a steep decline in exports to the United States, where tariffs on Chinese goods have surged to as high as 145%, effectively choking bilateral trade flows outside a narrow band of exemptions for strategic goods like electronics and semiconductors. Even these sectors are feeling the strain: South Korea’s semiconductor exports continued to decelerate in April, highlighting the broader collateral damage of deepening trade tensions.

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**Gold prices**
The latest escalation in US-China trade tensions is reverberating far beyond traditional trade channels. Market sentiment has deteriorated noticeably, weighed down by darkening global growth prospects and deepening uncertainty over the future of relations between the world’s two largest economies. The forced decoupling is also reshaping investor behaviour, particularly among Chinese investors, who are increasingly turning to stateless safe-haven assets like gold. This shift is evident in the surge in trading volumes on the Shanghai Gold Exchange and the steady climb in global gold prices—buoyed further by a weakening US dollar. The trend points to rising concern among Chinese investors about the geographic concentration of their wealth, as Washington’s increasingly hawkish posture prompts a reassessment of cross-border financial exposure.

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**The US dollar and market volatility** 
Recent sweeping US-led trade actions and a broader turn toward protectionism have sharply eroded the goodwill and soft power long associated with the US and its financial assets. As Washington becomes an increasingly prominent source of global instability, investor confidence in the US dollar as a safe-haven currency has weakened. This loss of faith is reflected across asset markets, with the dollar’s persistent and more entrenched decline against major currencies standing out as a clear signal of a broader reassessment of the US’s global economic role. Elevated market uncertainty reinforces this shift, as underscored by still-high—albeit slightly moderated—readings on the VIX volatility index.

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**Asia’s consumption**
Viewed in a broader context, the recent actions by the US may signal an effort to rebalance its economy—though whether this strategy is well-calibrated remains highly contested. As the issuer of the world’s dominant reserve currency, the US has long been ensnared in the so-called Triffin dilemma: global demand for dollar-denominated assets has sustained persistent trade deficits, gradually undermining the competitiveness of its domestic manufacturing and other tradable sectors. China, by contrast, grapples with the mirror image of this problem. Its growth model remains heavily anchored in manufacturing and external surpluses, and it is now under mounting pressure to pivot toward consumption-led growth—an imperative sharpened by the latest wave of US measures designed to curb Chinese export strength.

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Financial market volatility has remained elevated over the past several days as investors attempted to weigh a modest improvement in sentiment—driven by a potential, if partial, retreat by the US administration from its aggressive tariff stance—against a still-cloudy global outlook. Signals from flash PMI surveys on global growth remain mixed: Europe continues to stagnate, with the UK particularly weak, while India stands out with resilient and rising manufacturing activity (chart 1). In the US, most of the incoming data suggest that business confidence has faltered, with capital expenditure intentions plunging particularly sharply in the wake of the April 2nd tariff announcement (chart 2). The drag from trade tensions is, moreover, becoming more evident: South Korea’s exports have slumped, especially to the US, and even sectors granted exemptions—like semiconductors—are showing signs of strain (chart 3). These pressures are reverberating through financial markets as well, where Chinese investors are shifting into gold as a hedge, fuelling record trading volumes on the Shanghai Gold Exchange and lifting global gold prices (chart 4). Meanwhile, a broadly-based decline in the US dollar and persistently high readings on the VIX index arguably reflect a deeper reassessment of US assets as reliable safe havens amid mounting policy unpredictability (chart 5). Beneath these short-term ripples lie more entrenched structural challenges: the US is seeking to rebalance away from external deficits linked to its reserve currency role, while China is under growing pressure to pivot toward consumption-led growth—an imperative sharpened by American efforts to choke off its export strength (chart 6). In short, the latest softening in US trade rhetoric may offer brief relief, but the underlying economic, geopolitical, and structural crosswinds remain very much in play.

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Charts of the Week: Dollar Dips and Trade Trips

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The Federal Reserve Bank of Kansas City reported that its index of manufacturing sector activity declined to -4 during April from -2 in March, indicating a continued decline in factory sector activity. The index has been at zero or below since October 2022. This survey was taken between April 16-21.

Haver Analytics calculates an index based on the Kansas City results which is comparable to the ISM series. This index eased to 50.0 (NSA) from 51.4 in March. It compared to a low of 43.7 last July.

The new orders index of -11 this month compared to -12 in March. Thirty percent (NSA) of respondents reported higher orders while 37% reported a decline. Shipments improved to -2 from -4 and remained above -12 in December. Thirty-three percent (NSA) of respondents reported higher shipments while 28% reported a decline. Employment fell to -11 this month from -4 In March. It has been negative for three straight months. Thirteen percent (NSA) of respondents reported more hiring while 25% reported less. The average workweek index fell to -6 from +6 in March. Supplier delivery times surged to 13 from -1 as a higher 18% (NSA) of respondents reported a quickening of delivery speeds and a lessened 2% indicated a slowdown. Finished goods inventories rose to +5 from -8 in March, indicating the greatest rate of inventory accumulation in four months. Materials inventories weakened to -5 in April from +4 in March.

Inflation indicators strengthened in April. The prices paid index for finished products jumped to 29 from 15 in March. It was the highest reading in almost three years, up from a low of -3 in July 2023. Thirty-four percent (NSA) of respondents reported higher prices while none paid less. The raw materials index held at 42, up from a low of -1 in October 2023.

The composite index of expectations six months ahead fell to 6 in April from 10 in March. It was below a high of 17 in December. Expectations for future shipments fell to 9 this month, down from 31 in December. Orders expectations also weakened significantly, with the index falling to a minimal 3 from 20 in March. The employment reading of 1 compared to zero in March and 19 in December. Expectations continue to be for higher prices. The expectations index for finished goods prices jumped to 59, a roughly three-year high, from 39 in March. Raw material prices jumped to 71 in April, also a three-year high, from 57 in March.

The latest survey was conducted between April 16-21, 2024 and included 97 responses from factories in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

The series dates back to July 2001. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Data for the Kansas City Fed Survey can be found in Haver’s **SURVEYS** database.

The Fed’s latest **Beige Book** covering regional economic conditions is available [here](https://www.federalreserve.gov/monetarypolicy/files/BeigeBook_20250423.pdf).

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- Index has moved sideways for over two years.
- Most components remain negative.
- Prices paid reading surges.

Kansas City Fed Manufacturing Activity Index Declines in April; Expectations Diminish

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Existing home sales declined 5.9% (-2.4% y/y) during March to 4.02 million units after rising 4.4% to 4.270 million units in February, revised from 4.26 million, according to the National Association of Realtors (NAR). The Action Economics Forecast Survey expected 4.15 million unit sales. The March sales decline accompanied an easing in the effective 30-year mortgage interest rate to an average 6.65% in March from 6.84% in February. The sales figures are based on closings of sales signed over the past couple of months.

Existing single-family home sales in March declined 6.4% (-2.2% y/y) to 3.64 million units after a 5.7% increase to 3.89 million in February. Sales of condos and co-ops held steady (-5.0% y/y) at 380,000, following a 7.3% February decline.

Sales declined in all regions in March. Sales in the West fell 9.4% (+1.3% y/y) to 770,000 after a 13.3% strengthening in February. Sales in the South declined 5.7% (-4.2% y/y) to 1.81 million after a 4.9% February increase. Sales in the Northeast were off 2.0%, unchanged y/y to 490,000, down for the third straight month. Sales in the Midwest declined 5.0% (-3.1% y/y) to 950,000 units after holding steady in February.

The median price averaged by all existing homes (NSA) rose 1.7% (2.7% y/y) to $403,700 in March after a 0.9% February increase. Prices remained below a high of $426,900 in June 2024. The median price of an existing single-family home rose 1.8% (2.9% y/y) to $408,000 in March and the median price of condos and co-ops increased 2.3% (1.5% y/y) to $363,000 last month. Prices for all homes rose 2.3% (+3.5 y/y) in the Midwest to $302,100. In the South, prices rose 1.2% (0.6% y/y) to $360,400. Prices in the Northeast prices increased 0.8% (7.7% y/y) to $468,000 while in the West prices rose 1.1% (2.6% y/y) to $621,200.

The number of existing homes for sale (NSA) rose 8.1% (19.8% y/y) to 1.33 million units in March following a 4.2% February increase. The supply of homes on the market at the current selling rate (NSA) increased to 4.0 months. A high of 4.2 months occurred in September 2024. The record low in supply of 1.6 months occurred in January 2022.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. Mortgage interest rates can be found in the **WEEKLY** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.

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- Sales are lowest since September.
- Decline extends throughout the country.
- Median sales price increases.

U.S. Existing Home Sales Fall Sharply in March

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New orders for durable manufactured goods jumped 9.2% (11.9% y/y) during March after increasing 0.9% in February, revised from 1.0%. A 2.0% increase had been expected in the Action Economics Forecast Survey. A 27.0% rise (31.2% y/y) in transportation sector orders accounted for the rise, following a 1.2% gain. Excluding the transportation sector, new orders for durable goods held steady (+2.2% y/y), after a 0.7% rise during February.

The March rise in transportation orders was driven by a more-than-doubling of aircraft & parts orders and a 2.3% increase (0.6% y/y) in motor vehicles & parts, coming on the heels of a 5.1% February gain. Primary metals orders rose 0.7% (4.6% y/y) after rising 1.3% while fabricated metals orders increased 0.2% (2.7% y/y) after a 1.2% rise. Machinery orders edged 0.1% higher (1.1% y/y) after increasing 0.8% in February. Elsewhere, orders declined. Computer & electronic product orders fell 1.2% (+2.7% y/y) following a 0.1% easing while electrical equipment, appliance & component orders declined 0.5% (5.2% y/y) after rising 0.6% in February.

Nondefense capital goods orders surged 29.4% (32.3% y/y), while nondefense capital goods orders excluding aircraft improved 0.1% (1.8% y/y) in March after falling 0.3% in February. Defense capital goods orders fell 9.4% (+3.5% y/y), the sixth straight month of sharp decline.

Factory shipments of durable goods edged 0.1% higher (3.7% y/y) in March following a 1.3% February rise. Transportation sector shipments fell 0.5% (+7.3% y/y) after a 2.4% gain. Shipments excluding the transportation sector improved 0.4% (2.1% y/y) following a 0.8% rise. Machinery shipments gained 0.5% (0.3% y/y) following a 0.9% rise while computer & electronic product shipments eased 0.2% (+4.0% y/y) after rising 1.6%. Shipments of electronics & appliances rose 0.5% (3.7% y/y) after a 0.3% decline. Shipments of all manufactured products eased 0.1% (+2.1% y/y) in March after improving 0.7% in February. Shipments of nondefense capital goods less aircraft rose 0.3% (0.8% y/y) after rising 0.7% in February.

Unfilled orders of durable goods rose 2.0% (2.3% y/y) during March after a 0.1% February gain. Excluding transportation, backlogs eased 0.1% (+0.7% y/y) after no change in February. Inventories of durable goods edged 0.1% higher (1.0% y/y) following no change during both of the prior two months. Less transportation, durable goods inventories rose 0.2% (0.3% y/y) after holding steady in February. Inventories of all manufactured products rose 0.1% (1.0% y/y) during March for the third month in a row.

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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- Increase exceeds expectations after moderate February rise.
- Transportation orders account for all of last month’s gain.
- Nondefense capital goods less aircraft orders are minimally higher.

U.S. Advance Durable Goods Orders Surge During March

Winnie Tapasanun

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The Chicago Fed National Activity Index (CFNAI) was at -0.03 in March, down from +0.24 in February (+0.18 initially) and up from -0.26 in January (-0.08 previously), today’s report from the Federal Reserve Bank of Chicago showed, indicating U.S. economic growth decreased for the month. The March CFNAI registered the second negative reading in three months and the eighth negative in 10 months; it was up from -0.20 in March 2024 but below a high of +0.38 in February 2024.

The index's three-month moving average (CFNAI-MA3), which smooths out the m/m volatility in the index, dropped to -0.01 in March after rising to +0.12 in February (+0.15 initially), posting the first negative reading since December; nevertheless, it was an improvement from -0.21 in March 2024. The CFNAI-MA3 is expressed in standard deviation units from zero (with a value of zero defined as trend real GDP growth). Research at the Chicago Fed indicates that an average reading of -0.70 or below is consistent with the economy being in a recession. Thus, the March reading suggests that the U.S. economy is not currently in a recession.

The March negative reading reflected m/m drops in two of the four CFNAI key components and three negative contributions. The contribution of the Production & Income index decreased to -0.09 in March from +0.25 in February; however, it was up from -0.10 in March 2024 and a low of -0.59 in December 2022. The contribution of the Sales, Orders & Inventories index fell to -0.03 in March from +0.01 in February, but it was up from -0.05 in March 2024 and a low of -0.23 in January 2024. The Employment, Unemployment & Hours index contributed -0.01 in March, slightly up from -0.02 in February and improved from -0.04 in March 2024. Meanwhile, the contribution of the Personal Consumption & Housing index to the CFNAI rose to +0.11 in March, the highest reading since January 2023, after rebounding to a neutral value (0.00) in February; it was also up from -0.01 in March 2024.

The CFNAI Diffusion Index, which measures the breadth of change in the component series and is also a three-month moving average, fell to -0.01 in March after posting +0.12 in February (+0.16 initially) and +0.07 in January (+0.08 previously) and a string of negative readings from March 2023 to December 2024. A reading of zero indicates that all of the indicators are growing at their long-term average. The March reading was up from -0.18 in March 2024 and a low of -0.35 in October 2023; however, having remained below a high of +0.25 in September 2022.

The CFNAI is a weighted average of 85 indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

These figures are available in Haver's **SURVEYS** database.

- CFNAI -0.03 in March vs. +0.24 in February.
- Two of four CFNAI components fall m/m and three make negative contributions.
- Personal Consumption & Housing index rises to the highest since Jan. ’23.
- CFNAI-MA3 declines to -0.01, the first negative reading since Dec.; still above -0.70 (recession signal).