CMP Associates Regulation Blog

Chart IV-5A provides the export corporate goods price index on the basis of the contract currency. The export corporate goods price index on the basis of the contract currency increased from 105.9 in Jun 2009 to 111.5 in Apr 2012 or 5.3 percent but dropped to 98.9 in Sep 2019 or minus 11.3 percent relative to Apr 2012 and fell 6.6 percent to 98.9 in Sep 2019 relative to Jun 2009.

Chart IV-5A, Japan, Export Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2019

Source: Bank of Japan

Japan imports primary commodities and raw materials. As a result, the import corporate goods price index on the yen basis in Chart IV-6 shows an upward trend after declining from the increase during the global recession in 2008 driven by carry trades from fed funds rates. The index increases with carry trades from zero interest rates into commodity futures and declines during risk aversion from late 2008 into beginning of 2008 originating in doubts about soundness of US bank balance sheets. Measurement that is more careful should show that the terms of trade of Japan, export prices relative to import prices, declined during the commodity shocks originating in unconventional monetary policy. The decline of the terms of trade restricted potential growth of income in Japan (for the relation of terms of trade and growth see Pelaez 1979, 1976a). The import corporate goods price index on the yen basis increased from 82.4 in Jun 2009 to 99.6 in Apr 2012 or 20.9 percent and to 92.3 in Sep 2019 or decrease of 7.3 percent relative to Apr 2012 and increase of 12.0 percent relative to Jun 2009.

Chart IV-6A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2019

Source: Bank of Japan

Chart IV-6A provides the import corporate goods price index on the contract currency basis. The import corporate goods price index on the basis of the contract currency increased from 95.0 in Jun 2009 to 131.6 in Apr 2012 or 38.5 percent and to 101.1 in Sep 2019 or minus 23.2 percent relative to Apr 2012 and increase of 6.4 percent relative to Jun 2009. There is evident deterioration of the terms of trade of Japan: the export corporate goods price index on the basis of the contract currency decreased 6.6 percent from Jun 2009 to Sep 2019 while the import corporate goods price index increased 6.4 percent. Prices of Japan’s exports of corporate goods, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while imports of corporate goods, mostly commodities and raw materials increased 38.5 percent. Unconventional monetary policy induces carry trades from zero interest rates to exposures in commodities that squeeze economic activity of industrial countries by increases in prices of imported commodities and raw materials during periods without risk aversion. Reversals of carry trades during periods of risk aversion decrease prices of exported commodities and raw materials that squeeze economic activity in economies exporting commodities and raw materials. Devaluation of the dollar by unconventional monetary policy could increase US competitiveness in world markets but economic activity is squeezed by increases in prices of imported commodities and raw materials. Unconventional monetary policy causes instability worldwide instead of the mission of central banks of promoting financial and economic stability.

Chart IV-6A, Japan, Import Corporate Goods Price Index, Monthly, Contract Currency Basis, 2008-2019

Source: Bank of Japan

http://www.boj.or.jp/en/statistics/index.htm/

Table IV-6B provides the Bank of Japan’s Corporate Goods Price indexes of exports and imports on the yen and contract bases from Jan 2008 to Sep 2019. There are oscillations of the indexes that are shown vividly in the four charts above. For the entire period from Jan 2008 to Sep 2019, the export index on the contract currency basis decreased 7.8 percent and decreased 11.3 percent on the yen basis. For the entire period from Jan 2008 to Sep 2019, the import price index decreased 8.8 percent on the contract currency basis and decreased 11.9 percent on the yen basis. During significant part of the expansion period, prices of Japan’s exports of corporate goods on the contract currency, mostly industrial products, increased only 5.3 percent from Jun 2009 to Apr 2012, while prices of imports of corporate goods on the contract currency, mostly commodities and raw materials, increased 38.5 percent. The charts show sharp deteriorations in relative prices of exports to prices of imports during multiple periods. Price margins of Japan’s producers are subject to periodic squeezes resulting from carry trades from zero interest rates of monetary policy to exposures in commodities.

Table IV-6B, Japan, Exports and Imports Corporate Goods Price Index, Contract Currency Basis and Yen Basis

	X-CC	X-Y	M-CC	M-Y
2008/01	107.3	103.3	110.9	104.8
2008/02	107.9	103.9	112.8	106.2
2008/03	108.7	100.7	115.1	103.4
2008/04	109.9	103.2	121.3	110.3
2008/05	110.7	105	124.9	114.9
2008/06	111.9	108	131.6	123.6
2008/07	113.2	109.2	135	126.8
2008/08	112.1	109.2	135.6	129.5
2008/09	111	105.8	129	120.8
2008/10	108.3	98.1	120.2	107
2008/11	106.6	93.5	107.7	93.2
2008/12	105.9	90	98.4	81.9
2009/01	106	89	94.3	77.9
2009/02	105.4	89.6	94.4	79
2009/03	105.2	93.2	93.8	81.9
2009/04	105.5	94.5	93	81.9
2009/05	105.4	92.9	92.5	80
2009/06	105.9	93.9	95	82.4
2009/07	105.4	92.2	98.3	83.7
2009/08	106.3	93.4	98.7	84.4
2009/09	106.3	91.4	100.2	83.4
2009/10	106	90.5	100.2	82.8
2009/11	106.4	90.2	102.2	83.5
2009/12	106.3	90.1	105.1	85.9
2010/01	107.5	91.4	106.8	88.1
2010/02	107.8	90.9	107.5	87.9
2010/03	107.8	91.1	106.8	87.4
2010/04	108.7	93.6	110	92.1
2010/05	108.9	92.1	112	92.4
2010/06	108.2	90.9	110.2	90.1
2010/07	107.5	88.6	110	87.9
2010/08	107.2	87.1	109.6	85.9
2010/09	107.5	86.8	110.2	85.6
2010/10	108.2	86.3	110.7	84.4
2010/11	108.9	87.1	113	86.5
2010/12	109.4	88	115	88.6
2011/01	110.4	88.2	118.1	90.4
2011/02	111.3	89	120.1	91.9
2011/03	111.9	89.1	123.2	93.6
2011/04	112.6	91	127.7	98.6
2011/05	112.3	89.4	130.9	99
2011/06	112.2	88.8	129.4	97.3
2011/07	112	88	130.3	97.1
2011/08	112	86.4	130.6	95.2
2011/09	112.1	86	128.9	93.6
2011/10	111.4	85.2	128.4	93
2011/11	110.2	84.8	127.1	92.8
2011/12	109.7	84.6	127.9	93.6
2012/01	110.1	84.1	126.7	91.8
2012/02	110.7	85.7	127.6	93.7
2012/03	111.3	88.8	130.3	99.5
2012/04	111.5	88.3	131.6	99.6
2012/05	110.6	86.2	130.1	96.7
2012/06	109.6	85	126.9	94
2012/07	108.8	84.1	123.4	91.2
2012/08	109.1	84.2	123.8	91.3
2012/09	109.2	84.2	126.3	92.7
2012/10	109.3	84.7	125.4	92.7
2012/11	109.1	85.8	124.7	93.8
2012/12	108.9	87.7	124.9	96.5
2013/01	109.2	91.6	125.4	101.7
2013/02	109.7	94.8	126.5	105.9
2013/03	109.5	95.4	126.8	107.5
2013/04	108.3	96.2	125.7	109.1
2013/05	107.7	97.6	124	110.4
2013/06	107.3	94.9	123.4	106.8
2013/07	107.2	96.2	122.9	108.2
2013/08	107	94.9	123.2	106.9
2013/09	107	95.9	124.5	109.2
2013/10	107.3	95.5	124.6	108.3
2013/11	107.2	96.6	124.6	110
2013/12	107.2	98.8	125.4	113.6
2014/01	107.3	99	126	114.6
2014/02	106.9	97.7	125.4	112.5
2014/03	106.6	97.6	124.9	112.2
2014/04	106.3	97.5	124.1	111.8
2014/05	106.2	96.8	123.8	110.9
2014/06	105.9	96.7	123.9	111.2
2014/07	106	96.5	123.9	110.9
2014/08	106.1	97.3	123.7	111.6
2014/09	105.9	99.3	122.8	114
2014/10	105.2	99.1	120.7	112.7
2014/11	104.8	103.4	117.8	115.9
2014/12	103.8	104.1	113.8	114
2015/01	102.2	101.2	108.2	106.6
2015/02	101.2	100.1	102.1	100.7
2015/03	101.3	100.9	103.1	102.6
2015/04	101.1	100.2	102	101
2015/05	101.4	101.4	101.6	101.5
2015/06	101.3	102.9	102.5	104.3
2015/07	100.6	101.7	101.5	102.9
2015/08	99.8	100.9	99	100.4
2015/09	98.6	98.2	96.6	96.2
2015/10	97.9	97.3	95.5	95
2015/11	97.5	98	94.9	95.7
2015/12	97.1	97.3	92.9	93.2
2016/01	96.4	94.7	89.9	88.3
2016/02	95.9	92.7	87.5	84.4
2016/03	96.1	92	87.3	83.2
2016/04	96.4	91	88.2	82.4
2016/05	96.5	90.6	88.6	82.4
2016/06	96.5	88.8	89.9	81.6
2016/07	96.9	88.2	90.8	81.5
2016/08	96.9	87.1	90.7	79.9
2016/09	97	87.5	91.1	80.7
2016/10	97.4	88.6	91.1	81.6
2016/11	98.1	91.2	93.8	86.3
2016/12	98.7	95.5	93.7	90.5
2017/01	99.4	95.6	96.1	92.1
2017/02	99.8	95.3	97.6	92.5
2017/03	100.3	95.7	98.4	93.3
2017/04	99.8	93.7	98.3	91.4
2017/05	99.4	94.6	98.1	92.6
2017/06	99.2	93.9	97.1	91
2017/07	99.3	94.9	96.3	91.2
2017/08	99.9	94.4	96.5	90.1
2017/09	100.5	95.5	97.8	91.8
2017/10	101.2	97.2	99.2	94.3
2017/11	101.5	97.4	100.3	95.4
2017/12	101.7	97.7	102.1	97.1
2018/01	101.9	97.1	102.9	96.7
2018/02	102.4	96.1	104.9	96.6
2018/03	102.6	95.2	104.4	94.9
2018/04	102.2	95.5	104.7	96.1
2018/05	102.7	96.9	106.3	98.8
2018/06	102.7	97	108.3	100.8
2018/07	102.4	97.4	108.3	101.8
2018/08	102.3	97	108	101.2
2018/09	102.2	97.4	108	101.8
2018/10	102.4	98	109.2	103.5
2018/11	102.1	97.9	109.7	104.3
2018/12	100.8	96.2	105.8	100.1
2019/01	100	93.7	102.6	94.8
2019/02	100.2	94.6	102.7	95.9
2019/03	100.4	95.3	103.7	97.2
2019/04	100.7	95.7	103.7	97.6
2019/05	100.5	94.4	104.4	96.9
2019/06	99.8	93	103.5	95
2019/07	99.4	92.6	101.4	93.2
2019/08	99.4	91.5	102.3	92.7
2019/09	98.9	91.6	101.1	92.3

Note: X-CC: Exports Contract Currency; X-Y: Exports Yen; M-CC: Imports Contract; M-Y: Imports Yen

Source: Bank of Japan

Chart IV-7, Japan, Domestic Corporate Goods Price Index, Monthly, 1960-2019

Source: Bank of Japan

Further insight into inflation of the corporate goods price index (CGPI) of Japan is in Table IV-7. The increase in the tax on value added of consumption caused sharp increases in prices across all segments. Petroleum and coal with weight of 6.0 percent decreased 0.1 percent in Sep 2019 and decreased 11.9 percent in 12 months. Japan exports manufactured products and imports raw materials and commodities such that the country’s terms of trade, or export prices relative to import prices, deteriorate during commodity price increases. In contrast, prices of production machinery, with weight of 4.1 percent, decreased 0.1 percent in Sep 2019 and increased 1.3 percent in 12 months. In general, most manufactured products had been experiencing negative or low increases in prices while inflation rates have been high in 12 months for products originating in raw materials and commodities. The reversal of carry trades in commodity futures caused decrease in prices of commodities and raw materials while prices of manufactures stabilized. Ironically, unconventional monetary policy of zero interest rates and quantitative easing that intended to increase aggregate demand and GDP growth deteriorated the terms of trade of advanced economies with adverse effects on real income (for analysis of terms of trade and growth see Pelaez (1979, 1976a). There are now inflation effects of the intentional policy of devaluing the yen and recent collapse of commodity prices followed by increases.

The producer price index of the US from 1960 to 2019 in Chart IV-8 shows various periods of more rapid or less rapid inflation but no bumps. The major event is the decline in 2008 when risk aversion because of the global recession caused the collapse of oil prices from $148/barrel to less than $80/barrel with most other commodity prices also collapsing. The event had nothing in common with explanations of deflation but rather with the concentration of risk exposures in commodities after the decline of stock market indexes. Eventually, there was a flight to government securities because of the fears of insolvency of banks caused by statements supporting proposals for withdrawal of toxic assets from bank balance sheets in the Troubled Asset Relief Program (TARP), as explained by Cochrane and Zingales (2009). The bump in 2008 with decline in 2009 is consistent with the view that zero interest rates with subdued risk aversion induce carry trades into commodity futures.

Chart IV-8, US, Producer Price Index Finished Goods, Monthly, 1960-2019

Source: US Bureau of Labor Statistics

http://www.bls.gov/ppi/

Table IV-7, Japan, Corporate Goods Prices and Selected Components, % Weights, Month and 12 Months ∆%

Sep 2019	Weight	Month ∆%	12 Month ∆%
Total	1000.0	0.0	-1.1
Food, Beverages	141.6	0.0	0.7
Petroleum & Coal	59.5	-0.1	-11.9
Production Machinery	41.1	-0.1	1.3
Electronic Components	24.5	0.2	-0.1
Electric Power, Gas & Water	67.1	-0.7	0.3
Iron & Steel	51.7	0.0	1.2
Chemicals	89.2	0.0	-4.8
Transport Equipment	140.7	-0.1	-0.5

Source: Bank of Japan

http://www.boj.or.jp/en/statistics/index.htm/

Percentage point contributions to change of the corporate goods price index (CGPI) in Sep 2019 are in Table IV-8, divided into domestic, export and import segments. In the domestic CGPI, changing 0.0 percent in Sep 2019, the energy shock is evident in the deduction of 0.05 percentage points by electric power, gas and water products in reversal carry trades of exposures in commodity futures. The exports CGPI decreased 0.5 percent on the basis of the contract currency with deduction of 0.05 percentage points by electric and electronic products. The imports CGPI decreased 1.2 percent on the contract currency basis. Petroleum, coal and natural gas deducted 1.23 percentage points. Shocks of risk aversion cause unwinding carry trades that result in declining commodity prices with resulting downward pressure on price indexes. The volatility of inflation adversely affects financial and economic decisions worldwide.

Table IV-8, Japan, Percentage Point Contributions to Change of Corporate Goods Price Index

Groups Sep 2019	Contribution to Change Percentage Points
A. Domestic Corporate Goods Price Index	Monthly Change: 0.0%
Agriculture, Forestry & Fishery Products	0.04
Metal Products	0.02
Electric Power, Gas & Water	-0.05
Scrap & Waste	-0.03
Information & Communications Equipment	-0.01
B. Export Price Index	Monthly Change: -0.5 % contract currency
Chemicals & Related Products	-0.15
Metals & Related Products	-0.14
Other Primary Products & Manufactured Goods	-0.11
Electric & Electronic Products	-0.05
General Purpose, Production & Business Oriented Machinery	-0.03
C. Import Price Index	Monthly Change: -1.2% contract currency basis
Petroleum, Coal & Natural Gas	-1.23
Chemicals & Related Products	-0.06
Other Primary Products & Manufactured Goods	-0.04
Electric & Electronic Products	-0.03
Metals & Related Products	0.11
Beverages & Foods and Agriculture Products for Food	0.04
Transportation Equipment	0.02

Source: Bank of Japan

http://www.boj.or.jp/en/statistics/index.htm/

There are two categories of responses in the Empire State Manufacturing Survey of the Federal Reserve Bank of New York (https://www.newyorkfed.org/survey/empire/empiresurvey_overview.html): current conditions and expectations for the next six months. There are responses in the survey for two types of prices: prices received or inputs of production and prices paid or sales prices of products. Table IV-5 provides indexes for the two categories and within them for the two types of prices from Dec 2010 to Oct 2019. The index of current prices paid or costs of inputs moved from 16.1 in Dec 2012 to 23.1 in Oct 2019 while the index of current prices received or sales prices moved from 1.1 in Dec 2012 to 6.3 in Oct 2019. The farther the index is from the area of no change at zero, the faster the rate of change. Prices paid or costs of inputs at 23.1 in Oct 2019 are expanding at faster pace than prices received or of sales of products at 6.3. The index of future prices paid or expectations of costs of inputs in the next six months moved from 51.6 in Dec 2012 to 42.5 in Oct 2019 while the index of future prices received or expectation of sales prices in the next six months moved from 25.8 in Dec 2012 to 21.3 in Oct 2019. Prices paid or of inputs at 42.5 in Oct 2019 are expected to increase at a faster pace in the next six months than prices received or prices of sales products at 21.3 in Oct 2019. Prices of sales of finished products are less dynamic than prices of costs of inputs during waves of increases. Prices of costs of costs of inputs fall less rapidly than prices of sales of finished products during waves of price decreases. As a result, margins of prices of sales less costs of inputs oscillate with typical deterioration against producers, forcing companies to manage tightly costs and labor inputs. Instability of sales/costs margins discourages investment and hiring.

Table IV-5, US, FRBNY Empire State Manufacturing Survey, Diffusion Indexes, Prices Paid and Prices Received, SA

	Current Prices Paid	Current Prices Received	Future Prices Paid	Future Prices Received
12/31/2010	28.4	3.4	58	38.6
1/31/2011	35.8	15.8	60	42.1
2/28/2011	45.8	16.9	55.4	27.7
3/31/2011	53.2	20.8	71.4	36.4
4/30/2011	57.7	26.9	56.4	38.5
5/31/2011	69.9	28	68.8	35.5
6/30/2011	56.1	11.2	55.1	19.4
7/31/2011	43.3	5.6	51.1	30
8/31/2011	28.3	2.2	42.4	15.2
9/30/2011	32.6	8.7	53.3	22.8
10/31/2011	22.5	4.5	40.4	18
11/30/2011	18.3	6.1	36.6	25.6
12/31/2011	24.4	3.5	57	36
1/31/2012	26.4	23.1	53.8	30.8
2/29/2012	25.9	15.3	62.4	34.1
3/31/2012	50.6	13.6	66.7	32.1
4/30/2012	45.8	19.3	50.6	22.9
5/31/2012	37.3	12	57.8	22.9
6/30/2012	19.6	1	34	17.5
7/31/2012	7.4	3.7	35.8	16
8/31/2012	16.5	2.4	31.8	14.1
9/30/2012	19.1	5.3	40.4	23.4
10/31/2012	17.2	4.3	44.1	24.7
11/30/2012	14.6	5.6	39.3	15.7
12/31/2012	16.1	1.1	51.6	25.8
1/31/2013	22.6	10.8	38.7	21.5
2/28/2013	26.3	8.1	44.4	13.1
3/31/2013	25.8	2.2	50.5	23.7
4/30/2013	28.4	5.7	44.3	14.8
5/31/2013	20.5	4.5	29.5	14.8
6/30/2013	21	11.3	45.2	17.7
7/31/2013	17.4	1.1	28.3	12
8/31/2013	20.5	3.6	41	19.3
9/30/2013	21.5	8.6	39.8	24.7
10/31/2013	21.7	2.4	45.8	25.3
11/30/2013	17.1	-3.9	42.1	17.1
12/31/2013	15.7	3.6	48.2	27.7
1/31/2014	36.6	13.4	45.1	23.2
2/28/2014	25	15	40	23.8
3/31/2014	21.2	2.4	43.5	25.9
4/30/2014	22.4	10.2	33.7	14.3
5/31/2014	19.8	6.6	31.9	14.3
6/30/2014	17.2	4.3	36.6	16.1
7/31/2014	25	6.8	37.5	18.2
8/31/2014	27.3	8	42	21.6
9/30/2014	23.9	17.4	43.5	32.6
10/31/2014	11.4	6.8	42	26.1
11/30/2014	10.6	0	41.5	25.5
12/31/2014	10.4	6.3	40.6	32.3
1/31/2015	12.6	12.6	33.7	15.8
2/28/2015	14.6	3.4	27	5.6
3/31/2015	12.4	8.2	32	12.4
4/30/2015	19.1	4.3	38.3	13.8
5/31/2015	9.4	1	26	7.3
6/30/2015	9.6	1	24	5.8
7/31/2015	7.4	5.3	27.7	6.4
8/31/2015	7.3	0.9	34.5	10.9
9/30/2015	4.1	-5.2	28.9	7.2
10/31/2015	0.9	-8.5	27.4	7.5
11/30/2015	4.5	-4.5	29.1	11.8
12/31/2015	4	-4	27.3	20.2
1/31/2016	16	4	31	12
2/29/2016	3	-5	14.9	4
3/31/2016	3	-5.9	19.8	7.9
4/30/2016	19.2	2.9	27.9	5.8
5/31/2016	16.7	-3.1	28.1	6.3
6/30/2016	18.4	-1	29.6	7.1
7/31/2016	18.7	1.1	26.4	7.7
8/31/2016	15.5	2.1	25.8	9.3
9/30/2016	17	1.8	41.1	20.5
10/31/2016	22.6	4.7	35.8	30.2
11/30/2016	15.5	2.7	39.1	20.9
12/31/2016	22.6	3.5	42.6	22.6
1/31/2017	36.1	17.6	50.4	27.7
2/28/2017	37.8	19.4	38.8	25.5
3/31/2017	31	8.8	41.6	19.5
4/30/2017	32.8	12.4	37.2	25.5
5/31/2017	20.9	4.5	38.1	22.4
6/30/2017	20	10.8	33.1	13.8
7/31/2017	21.3	11	30.7	15.7
8/31/2017	31	6.2	33.3	21.7
9/30/2017	35.8	13.8	42.3	18.7
10/31/2017	27.3	7	41.4	25
11/30/2017	24.6	9.2	48.5	23.8
12/31/2017	29.7	11.6	50	27.5
1/31/2018	36.2	21.7	52.9	31.2
2/28/2018	48.6	21.5	52.1	25.7
3/31/2018	50.3	22.4	55.9	28
4/30/2018	47.4	20.7	54.8	31.1
5/31/2018	54	23	54	29.5
6/30/2018	52.7	23.3	51.2	27.1
7/31/2018	42.7	22.2	48.7	28.2
8/31/2018	45.2	20	53.3	26.7
9/30/2018	46.3	16.3	56.1	30.9
10/31/2018	42	14.3	52.9	23.5
11/30/2018	44.5	13.1	59.1	31.4
12/31/2018	39.7	12.8	51.9	27.6
1/31/2019	35.9	13.1	47.6	28.3
2/28/2019	27.1	22.9	37.1	30.7
3/31/2019	34.1	18.1	40.6	23.9
4/30/2019	27.3	14	37.1	16.1
5/31/2019	26.2	12.4	33.1	17.2
6/30/2019	27.8	6.8	36.8	12.8
7/31/2019	25.5	5.8	39.4	18.2
8/31/2019	23.2	4.5	38.1	12.9
9/30/2019	29.4	9.2	42.5	17
10/31/2019	23.1	6.3	42.5	21.3

Source: Federal Reserve Bank of New York

http://www.ny.frb.org/survey/empire/empiresurvey_overview.html

Price indexes of the Federal Reserve Bank of Philadelphia Outlook Survey are in Table IV-5A. As in inflation waves throughout the world (https://cmpassocregulationblog.blogspot.com/2019/10/dollar-depreciation-fluctuating.html and earlier https://cmpassocregulationblog.blogspot.com/2019/09/uncertain-fomc-outlook-of-monetary.html) indexes of both current and expectations of future prices paid and received were quite high until May 2011. Prices paid, or inputs, were more dynamic, reflecting carry trades from zero interest rates to commodity futures. All indexes softened after May 2011 with even decline of prices received in Aug 2011 during the first round of risk aversion. Current and future price indexes have increased again but not back to the intensity in the beginning of 2011 because of risk aversion frustrating carry trades even induced by zero interest rates. The index of prices paid or prices of inputs moved from 21.1 in Dec 2012 to 16.8 in Oct 2019. The index of current prices received was minus 2.4 in Apr 2013, indicating decrease of prices received. The index of current prices received decreased from 9.1 in Dec 2012 to minus 4.8 in Sep 2015, decreasing to minus 3.4 in Feb 2016. The index of current prices received was 16.4 in Oct 2019. The farther the index is from the area of no change at zero, the faster the rate of change. The index of current prices paid or costs of inputs at 16.8 in Oct 2019 indicates faster expansion than the index of current prices received or sales prices of production in Oct 2019, showing 16.4. Prices paid indicate faster expansion than prices received during most of the history of the index. The index of future prices paid moved to 36.2 in Oct 2019 from 42.0 in Dec 2012 while the index of future prices received moved from 21.7 in Dec 2012 to 29.7 in Oct 2019. Expectations are incorporating faster increases in prices of inputs or costs of production, 36.2 in Oct 2019, than of sales prices of produced goods, 29.7 in Oct 2019, forcing companies to manage tightly costs and labor inputs. Volatility of margins of sales/costs discourages investment and hiring.

Table IV-5A, US, Federal Reserve Bank of Philadelphia Business Outlook Survey, Current and Future Prices Paid and Prices Received, SA

	Current Prices Paid	Current Prices Received	Future Prices Paid	Future Prices Received
Dec-10	42.7	5.3	56.3	24.2
Jan-11	48.3	12.6	58.8	34.6
Feb-11	61.4	13.7	68.1	31.6
Mar-11	59.2	17.9	61.5	33.5
Apr-11	52.7	22.9	56.4	36.4
May-11	51.2	20.6	54.8	28.5
Jun-11	36	6.1	40.7	6.8
Jul-11	34.1	5.7	48.2	17.2
Aug-11	23.5	-3.2	42.7	22.8
Sep-11	30.1	6.4	38.4	20.5
Oct-11	22.8	1.7	41.4	27.6
Nov-11	21.8	5.2	34.5	26.2
Dec-11	25	5.6	42.8	21.1
Jan-12	26.1	9.3	47.9	21.8
Feb-12	33.4	10.4	50.9	26.4
Mar-12	17.4	6.9	38.7	24.8
Apr-12	21.8	9.6	37	25.2
May-12	10.1	1.1	40.4	9.2
Jun-12	1.1	-6.4	32.8	16.9
Jul-12	8.1	3.3	27.3	20.3
Aug-12	16.3	6.9	35	23.9
Sep-12	13	2.8	38.4	24.7
Oct-12	17.4	4.8	44.3	14.9
Nov-12	22.2	4.8	45.9	10.6
Dec-12	21.1	9.1	42	21.7
Jan-13	13	0.8	35.2	21.7
Feb-13	12.9	0.3	34.8	23.2
Mar-13	13.3	1.1	35.3	20.4
Apr-13	11.6	-2.4	31	16.8
May-13	12.5	0.4	35.4	19.4
Jun-13	16.7	11.2	29.6	24.2
Jul-13	18.9	5.6	40.2	24.7
Aug-13	17.8	12.8	34.2	23.1
Sep-13	22.3	11.8	37.4	27.1
Oct-13	18.1	9.3	41.8	34.1
Nov-13	23.5	6.7	41.1	36.1
Dec-13	17.6	9.2	40.2	28.1
Jan-14	20.1	8.4	37.7	13.7
Feb-14	16.3	10.2	28.6	19.8
Mar-14	21.1	6.8	33.7	20.6
Apr-14	20.9	10	37.8	21.4
May-14	26.5	17.2	39.2	29.6
Jun-14	25.7	9.3	42.3	30
Jul-14	30.4	14.1	36.6	21.7
Aug-14	21.8	6.1	45	27.7
Sep-14	21.9	7.9	39.3	25.7
Oct-14	24.7	17.4	31.3	21.2
Nov-14	14.5	8.8	32.9	18.1
Dec-14	16.2	12.4	25.5	19.7
Jan-15	12	2.2	31	20.9
Feb-15	6	3.3	34	22.6
Mar-15	1.1	-5.7	30.2	9.7
Apr-15	0.5	-3.4	18.8	14.2
May-15	-14.2	-7.4	24	20.4
Jun-15	9.1	-0.4	39	12.2
Jul-15	17.3	0.4	33.8	16.1
Aug-15	3.3	-3.4	35	8
Sep-15	-2.2	-4.8	26.3	5.1
Oct-15	0.1	-0.5	18	8.2
Nov-15	-6.7	-1.6	23.8	9.4
Dec-15	-7.2	-4.5	24.5	13.7
Jan-16	-1.2	-3.7	19.6	11.5
Feb-16	-3.3	-3.4	12.2	4.6
Mar-16	-1.8	1.3	23.7	14.3
Apr-16	11.5	4	33.7	22.2
May-16	13.6	10.6	25.7	14.6
Jun-16	20.4	1.6	35.8	17.6
Jul-16	12.5	1.3	28.4	22.6
Aug-16	19.4	6.8	31.8	12.7
Sep-16	21.8	10.7	42.7	32.8
Oct-16	11.2	-0.7	41.6	27
Nov-16	27.5	19.3	38.6	28.6
Dec-16	30.8	11.2	45.1	29.6
Jan-17	33.2	24.7	48.5	27.9
Feb-17	29.4	12.3	46.2	24.5
Mar-17	39.2	18.9	53.5	38.4
Apr-17	30.3	14	33	29
May-17	24.6	13.1	43.9	26.4
Jun-17	23.4	17.9	42.3	28.8
Jul-17	19.2	8.6	48.1	30.3
Aug-17	21.9	13.3	37.5	36.6
Sep-17	35.9	24.4	50.4	34
Oct-17	41.3	16.2	59.9	39.6
Nov-17	38.7	12.3	54.7	42
Dec-17	28.2	15	56.6	41.5
Jan-18	35	24.1	55	44.6
Feb-18	44.7	24.5	63.5	48.7
Mar-18	42.6	21.1	62	50.3
Apr-18	53.1	28.3	63.7	47
May-18	51	33.5	62.1	36.4
Jun-18	50.7	31.9	62.1	54.8
Jul-18	60	35	60.1	50.8
Aug-18	55.2	31.9	60.3	58
Sep-18	42.6	22.6	53.1	44.9
Oct-18	42	26.5	56.3	51.1
Nov-18	41.2	25.3	60.3	57.6
Dec-18	38.9	29	60.9	47.9
Jan-19	32.7	24.8	39.9	34.1
Feb-19	21.8	27.7	39.8	29.7
Mar-19	19.7	24.7	47.3	32.4
Apr-19	21.6	20	26	25.4
May-19	23.1	17.5	42.3	38.6
Jun-19	12.9	0.6	30.2	24.4
Jul-19	16.1	9.5	35.3	34.1
Aug-19	12.8	13	39	27.8
Sep-19	33	20.8	48.7	36.3
Oct-19	16.8	16.4	36.2	29.7

Source: Federal Reserve Bank of Philadelphia

Chart IV-1 of the Business Outlook Survey of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices paid or prices of inputs from 2006 to 2019. Recession dates are in shaded areas. In the middle of deep global contraction after IVQ2007, input prices continued to increase in speculative carry trades from central bank policy rates falling toward zero into commodities futures. The index peaked above 70 in the second half of 2008. Inflation of inputs moderated significantly during the shock of risk aversion in late 2008, even falling briefly into contraction territory below zero during several months in 2009 in the flight away from risk financial assets into US government securities (Cochrane and Zingales 2009) that unwound carry trades. Return of risk appetite induced carry trade with significant increase until return of risk aversion in the first round of the European sovereign debt crisis in Apr 2010. Carry trades returned during risk appetite in expectation that the European sovereign debt crisis was resolved. The various inflation waves originating in carry trades induced by zero interest rates with alternating episodes of risk aversion are mirrored in the prices of inputs after 2011, in particular after Aug 2012 with the announcement of the Outright Monetary Transactions Program of the European Central Bank (http://www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html). Subsequent risk aversion and flows of capital away from commodities into stocks and high-yield bonds caused sharp decline in the index of prices paid followed by another recent rebound with marginal decline and new increase. The index falls, rebounds and falls again in the final segment but there are no episodes of contraction after 2009 with exception of minus 14.2 in May 2015, minus 2.2 in Sep 2015, 0.1 in Oct 2015, minus 6.7 in Nov 2015 and minus 7.2 in Dec 2015. The reading for the index in Jan 2016 is minus 1.2 and minus 3.3 for Feb 2016. The index is minus 1.8 in Mar 2016 and 11.5 in Apr 2016, increasing at 13.6 in May 2016 and 20.4 in Jun 2016. The index reached 12.5 in Jul 2016, 19.4 in Aug 2016 and 21.8 in Sep 2016. The index was 11.2 in Oct 2016 and 16.8 in Oct 2019.

Chart IV-1, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2 of the Federal Reserve Bank of Philadelphia Outlook Survey provides the diffusion index of current prices received from 2006 to 2019. The significant difference between the index of current prices paid in Chart IV-1 and the index of current prices received in Chart IV-2 is that increases in prices paid are significantly sharper than increases in prices received. There were several periods of negative readings of prices received from 2010 to 2016. Prices paid increased at 1.1 in Mar 2015 while prices received contracted at 5.7. There were several contractions of prices paid: 7.4 in May 2015 for prices received with faster contraction of 14.2 of prices paid; minus 2.2 for prices paid in Sep 2015 with minus 4.8 for prices received; and 0.1 for prices paid in Oct 2015 with minus 0.5 for prices received. The index of prices received fell to minus 1.6 in Nov 2015 with minus 6.7 for prices paid and to minus 4.5 in Dec 2015 with minus 7.2 for prices paid. The index of prices received fell to minus 3.4 in Feb 2016 with minus 3.3 for prices paid. The index of prices paid decreased at 1.8 in Mar 2016 with increase at 1.3 for prices received. Prices paid moved to 16.8 in Sep 2019 while prices received moved to 16.4. Prices received relative to prices paid deteriorate most of the time largely because of the carry trades from zero interest rates to commodity futures. Profit margins of business are compressed intermittently by fluctuations of commodity prices induced by unconventional monetary policy of zero interest rates, frustrating production, investment and hiring decisions of business, which is precisely the opposite outcome pursued by unconventional monetary policy.

Chart IV-2, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2A of the Federal Reserve Bank of Philadelphia shows current prices paid and current prices received from Jan 2007 to Mar 2017. Current prices paid jumped ahead of current prices received during the contraction from IVQ2007 to IIQ2009 through the carry trade from zero interest rates to exposures in commodity derivatives. There is the same behavior during most of the cyclical expansion after IIIQ2009. Rebalancing of financial investment portfolios away from commodities into equities explains the recent weakness of prices paid. There is a new ongoing carry trade into commodity futures.

Chart IV-2A, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Current Prices Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2B of the Federal Reserve Bank of Philadelphia shows Current and Future Prices Received of the Business Outlook Survey from 2007 to Jun 2017. There is correlation in the direction of the indexes. The six-month forecast is typically above current prices received. There is upward trend in both indexes in the final segment with wide fluctuations.

Chart IV-2B, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Received and Future Prices Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2C of the Federal Reserve Bank of Philadelphia shows Current and Future Prices Received of the Business Outlook Survey from 2007 to Jul 2017. There is correlation in the direction of the indexes. The six-month forecast is typically above current prices received. There is upward trend in both indexes in the final segment with wide fluctuations.

Chart IV-2c, Federal Reserve Bank of Philadelphia Business Outlook Survey Current and Future Prices Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2D of the Federal Reserve Bank of Philadelphia shows Current Prices Paid and Current Prices Received of the Business Outlook Survey from 2007 to Sep 2017. Current prices paid are typically above prices received.

Chart IV-2d, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Current Prices Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2DE of the Federal Reserve Bank of Philadelphia shows Current Prices Paid and Current Prices Received of the Business Outlook Survey from 2007 to Oct 2017. Current prices paid are typically above prices received.

Chart IV-2de, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2DEf of the Federal Reserve Bank of Philadelphia shows current prices paid and received of the Business Outlook Survey from 2007 to Dec 2017.Current prices paid are mostly above current prices received. There is upward trend in both indexes in the final segment with wide fluctuations.

Chart IV-2DEf, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices and Future Prices Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2Def1 of the Federal Reserve Bank of Philadelphia shows current prices paid and received of the Business Outlook Survey from 2007 to Jan 2018. There is correlation in the direction of the indexes. The six-month forecast is typically above current prices received. There is upward trend in both indexes in the final segment with wide fluctuations.

Chart IV-2dEf1, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices and Future Prices Paid Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2Def2 of the Federal Reserve Bank of Philadelphia shows current prices paid and received of the Business Outlook Survey from 2007 to Feb 2018. There is correlation in the direction of the indexes. Prices paid are typically above prices received.

Chart IV-2df2, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Piad and Future Prices Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2DEF3 of the Federal Reserve Bank of Philadelphia Business Outlook survey provides current prices paid and received from 2007 to Mar 2018 with prices paid typically above prices received. The Business Outlook survey of the FRB of Philadelphia states: “Price increases for purchased inputs were reported by 44 percent of the manufacturers this month. The prices paid diffusion index fell 2 points to 42.6 but remains near last month’s reading, which was the highest since 2011 (see Chart 2). The current prices received index, reflecting the manufacturers own prices, declined 3 points to a reading of 20.7” (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0318).

Chart IV-2dEf3, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2DEF4 of the Federal Reserve Bank of Philadelphia Business Outlook survey provides current prices paid and received from 2007 to Apr 2018 with prices paid typically above prices received. The Business Outlook survey of the FRB of Philadelphia states: “Price increases for purchased inputs were reported by 59 percent of the manufacturers this month, up notably from 44 percent in March. The prices paid diffusion index increased 14 points to the highest reading since Mar 2011 (see Chart 2). The current prices received index, reflecting the manufacturers own prices, increased 9 points to a reading of 29.8, its highest reading since May 2008” (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0418).

Chart IV-2dEf4, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2DEF5 of the Federal Reserve Bank of Philadelphia Business Outlook survey provides current prices paid and received from 2007 to May 2018 with prices paid typically above prices received. The Business Outlook survey of the FRB of Philadelphia states: “Price increases for purchased inputs were reported by 55 percent of the manufacturers this month, down slightly from 59 percent in April. The prices paid diffusion index fell 4 points but remains at an elevated level (see Chart 2). The current prices received index, reflecting the manufacturers’ own prices, increased 7 points to a reading of 36.4, its second consecutive month of increase and highest reading since February 1989.” (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0518).

Chart IV-2dEf5, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2DEF5 of the Federal Reserve Bank of Philadelphia Business Outlook survey provides current prices paid and received from 2007 to Jun 2018 with prices paid typically above prices received. The Business Outlook survey of the FRB of Philadelphia states: “The firms continued to report higher prices for both purchased inputs and their own manufactured goods, although the survey’s price indicators fell modestly from their May readings. Price increases for purchased inputs were reported by 54 percent of the manufacturers this month, but the prices paid diffusion index edged 1 point lower (see Chart 2). The current prices received index, reflecting the manufacturers’ own prices, decreased 3 points but remains at a high reading of 33.2. Nearly 34 percent of the firms reported higher prices for their manufactured goods.” (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0618).

Chart IV-2dEf5, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Chart IV-2DEF5 of the Federal Reserve Bank of Philadelphia Business Outlook survey provides current prices paid and received from 2007 to Jul 2018 with prices paid typically above prices received. The Business Outlook survey of the FRB of Philadelphia states: “The manufacturers continued to report higher prices for both purchased inputs and their own manufactured goods. Price increases for purchased inputs were reported by 63 percent of the manufacturers this month, up from 54 percent last month. The index has now risen 30 points since January (see Chart 2). The current prices received index, reflecting the manufacturers’ own prices, increased 3 points. Over 36 percent of the firms reported higher prices for their manufactured goods this month.” (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0718).

Chart IV-2dEf6, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

The Business Outlook survey of the FRB of Philadelphia for Aug 2018 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0818): “The survey’s current price measures moderated slightly but remain elevated, indicating that price increases for both purchased inputs and the firms’ own manufactured goods remain widespread. The prices paid index fell 8 points. Price increases for purchased inputs were reported by 63 percent of the manufacturers this month. Nearly 35 percent of the firms reported higher prices for their own manufactured goods this month, although the prices received index fell 3 points. In this month’s special questions, the firms were asked to forecast the changes in the prices of their own products and for U.S. consumers over the next four quarters. Regarding their own prices, the firms’ median forecast was for an increase of 3.0 percent, the same as when the same question was last asked in May. The firms expect their employee compensation costs (wages plus benefits on a per employee basis) to rise 3.0 percent over the next four quarters, the same as the previous forecast. When asked about the rate of inflation for U.S. consumers over the next year, the firms’ median forecast was 3.0 percent, slightly higher than the 2.5 percent projected in the previous survey. The firms’ forecast for the long-run (10-year average) inflation rate was also 3.0 percent.”

The Business Outlook survey of the FRB of Philadelphia for Sep 2018 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0918): “The survey’s diffusion indexes for prices remained positive but decreased from their readings in August (see Chart 2). On the cost side, 44 percent of the firms reported increases in the prices paid for inputs, down from 63 percent in August, and the prices paid index decreased 15 points to 39.6. With respect to prices received for firms’ own manufactured goods, 25 percent of the firms reported higher prices compared with 35 percent last month. The prices received index decreased 14 points.”

Chart IV-2dEf6, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

The Business Outlook survey of the FRB of Philadelphia for Oct 2018 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos1018): “The survey’s diffusion indexes for prices remained positive but lower than their readings for most of this year (see Chart 2). On the cost side, 42 percent of the firms reported increases in the prices paid for inputs, and the prices paid index, which had fallen 15 points last month, decreased 1 point to 38.2. With respect to prices received for firms’ own manufactured goods, 27 percent of the firms reported higher prices compared with 3 percent that reported decreases. The prices received index increased 5 points.”

Chart IV-2Oct18, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

The Business Outlook survey of the FRB of Philadelphia for Nov 2018 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos1118): “The survey’s diffusion indexes for prices remained positive but lower than their readings for most of this year (see Chart 2). With respect to prices received for firms’ own manufactured goods, 24 percent of the firms reported higher prices compared with 2 percent that reported decreases. The prices received index decreased 2 points. On the cost side, 41 percent of the firms reported increases in the prices paid for inputs. The prices paid index edged up 1 point but remains 24 points lower than its peak in July.”

Chart IV-2Nov18, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

The Business Outlook survey of the FRB of Philadelphia for Dec 2018 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos1218): “The survey’s diffusion indexes for prices remained positive, suggesting continued increases in firms’ input prices and the prices for their own manufactured goods. On the cost side, 42 percent of the firms reported increases in the prices paid for inputs. The prices paid index edged down 1 point and remains 25 points below its peak in July (see Chart 2). The prices received index increased 4 points to 26.2, its highest reading in four months, but 10 points below its peak in May.”

Chart IV-2Dec18, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

The Business Outlook survey of the FRB of Philadelphia for Jan 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0119): “The survey’s diffusion indexes for prices remained positive but decreased from their readings in December. On the cost side, the prices paid index decreased 6 points to 32.7. The index has been trending down since last July and is at its lowest reading in 13 months (see Chart 2). With respect to prices received for firms’ own manufactured goods, 29 percent of the firms reported higher prices, and 4 percent reported lower prices. The prices received index decreased 4 points to 24.8.”

Chart IV-2Jan19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

The Business Outlook survey of the FRB of Philadelphia for Feb 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0219): “Price pressures originating from purchased inputs continued to abate. The prices paid index decreased 11 points to 21.8. The index has been trending down since last July and is now at its lowest reading since July 2017 (see Chart 2). Over 28 percent of the firms reported higher input prices this month, down from 40 percent last month. With respect to prices received for firms’ own manufactured goods, almost 33 percent of the firms reported higher prices, and 5 percent reported lower prices. The prices received index increased 3 points to 27.7.”

Chart IV-2Feb19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

The Business Outlook survey of the FRB of Philadelphia for Mar 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0319): “Price pressures arising from purchased inputs continued to ease. The prices paid index decreased 2 points to 19.7. The prices paid index declined for the eighth consecutive month and is at its lowest reading since July 2017 (see Chart 2). Nearly 24 percent of the firms reported higher input prices this month, down from 28 percent last month. With respect to prices received for firms’ own manufactured goods, 26 percent of the firms reported higher prices, down from 33 percent last month. The prices received index decreased 3 points to 24.7.”

Chart IV-2Mar19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

The Business Outlook survey of the FRB of Philadelphia for Apr 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0419): “With respect to prices received for firms’ own manufactured goods, the prices received index decreased 5 points to 20.0, its lowest reading since December 2017. Nearly 23 percent of the firms reported higher prices, down from 26 percent last month. The prices paid index increased 2 points to 21.6, its first increase in 9 months (see Chart 2). Over 26 percent of the firms reported higher input prices this month, while 5 percent reported lower input prices.”

Chart IV-2Apr19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

The Business Outlook survey of the FRB of Philadelphia for May 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0519): “In this month’s special questions, the firms were asked to forecast the changes in the prices of their own products and for U.S. consumers over the next four quarters. Regarding their own prices, the firms’ median forecast was for an increase of 2.8 percent, about the same as when the question was last asked in February. The firms expect their employee compensation costs (wages plus benefits on a per employee basis) to rise 3.0 percent over the next four quarters, the same as the previous forecast. When asked about the rate of inflation for U.S. consumers over the next year, the firms’ median forecast was 2.5 percent, an increase from 2.3 percent in the previous quarter. The firms’ median forecast for the long-run (10-year average) inflation rate remained steady at 2.5 percent.”

The Business Outlook survey of the FRB of Philadelphia for Jun 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0619): “The current prices received index, reflecting the manufacturers’ own prices, declined nearly 17 points to a reading of 0.6, its lowest reading since October 2016 (see Chart 2). Price increases for manufacturers’ own goods were reported by 10 percent of the firms this month, down from 23 percent last month. Price increases for purchased inputs were reported by 28 percent of the manufacturers this month, and the prices paid diffusion index decreased 10 points to 12.9, also its lowest reading since October 2016.”

Chart IV-2Jun19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

The Business Outlook survey of the FRB of Philadelphia for Jul 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0719): “The prices paid and prices received indexes both increased this month but remained well below their readings over the past few years. The current prices received index, reflecting the manufacturers’ own prices, increased 9 points to a reading of 9.5. Price increases for manufacturers’ own goods were reported by 16 percent of the firms this month, up from 10 percent last month. Price increases for purchased inputs were reported by 29 percent of the manufacturers this month, but 13 percent reported price decreases. The prices paid diffusion index increased 3 points to 16.1.”

The Business Outlook survey of the FRB of Philadelphia for Aug 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0819): “The firms continued to report increases in the prices paid for inputs. The percentage of firms reporting increases in input prices (25 percent) remained higher than the percentage reporting decreases (12 percent). The prices paid diffusion index decreased 3 points and remains well below readings over the past two and a half years. The current prices received index, reflecting the manufacturers’ own prices, increased 4 points to a reading of 13.0 but is also still well below readings of the past few years.”

The Business Outlook survey of the FRB of Philadelphia for Sep 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos0919): Price increases were more widespread this month. On the cost side, nearly 38 percent of the firms reported increases in the prices paid for inputs this month, up from 25 percent in August. The prices paid index increased 20 points to 33.0, its highest reading since December 2018 (see Chart 2). With respect to prices received for firms’ own manufactured goods, 26 percent of the firms reported higher prices, up from 16 percent in August. The diffusion index for prices received increased 8 points to 20.8, its highest reading since March.

Chart IV-2Sep19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

The Business Outlook survey of the FRB of Philadelphia for Sep 2019 states (https://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2019/bos1019): “The firms continued to report overall increases in the prices paid for inputs, but the prices paid index fell 16 points to 16.8. Nearly 24 percent of the respondents reported higher input prices, down from 38 percent in September (see Chart 2). The current prices received index, reflecting the manufacturers’ own prices, decreased 4 points to a reading of 16.4.”

Chart IV-2Oct19, Federal Reserve Bank of Philadelphia Business Outlook Survey Current Prices Paid and Received Diffusion Index SA

Source: Federal Reserve Bank of Philadelphia

Table IIB-1, US, Sales of New Houses at Seasonally Adjusted (SA) Annual Equivalent Rate, Thousands and %

II I United States Housing Collapse. Data and other information continue to provide depressed conditions in the US housing market in a longer perspective, with recent improvement at the margin. Table IIB-1 shows sales of new houses in the US at seasonally adjusted annual equivalent rate (SAAR). The US Census Bureau revised all seasonally-adjusted new house sales from 2014 to 2019 with the report for Apr 2019 on May 23, 2019 (https://www.census.gov/construction/nrs/pdf/newressales.pdf). House sales fell in 45 of 105 months from Jan 2011 to Sep 2019 with monthly declines of 5 in 2011, 4 in 2012, 5 in 2013, 6 in 2014, 4 in 2015, 6 in 2016, 4 in 2017, 7 in 2018 and 4 in 2019. In Jan-Apr 2012, house sales increased at the annual equivalent rate of 11.8 percent and at 22.3 percent in May-Sep 2012. There was significant strength in Sep-Dec 2011 with annual equivalent rate of 48.4 percent. Sales of new houses fell at 7.0 percent in Oct 2012 with increase of 9.5 percent in Nov 2012. Sales of new houses rebounded 11.8 percent in Jan 2013 with annual equivalent rate of 55.7 percent from Oct 2012 to Jan 2013 because of the increase at 11.8 percent in Jan 2013. New house sales decreased at annual equivalent 3.0 percent in Feb-Mar 2013. New house sales weakened, decreasing at 3.1 percent in annual equivalent from Apr to Dec 2013 with significant volatility illustrated by decline of 20.2 percent in Jul 2013 and increase of 10.2 percent in Oct 2013. New house sales fell 2.9 percent in Dec 2013. New house sales increased 2.3 percent in Jan 2014 and fell 5.2 percent in Feb 2014, decreasing 3.6 percent in Mar 2014. New house sales decreased 0.5 percent in Apr 2014 and increased 11.9 percent in May 2014. New house sales fell 7.3 percent in Jun 2014 and decreased 3.8 percent in Jul 2014. New house sales increased at 8.0 percent in Jan-Aug 2014. New house sales jumped 13.4 percent in Aug 2014 and increased 3.1 percent in Sep 2014. New House sales increased 1.3 percent in Oct 2014 and fell 7.1 percent in Nov 2014. House sales fell at the annual equivalent rate of 11.4 percent in Sep-Nov 2014. New house sales increased 12.4 percent in Dec 2014 and increased 4.2 percent in Jan 2015. Sales of new houses increased 5.0 percent in Feb

2015 and fell 11.8 percent in Mar 2015. House sales increased 4.4 percent in Apr 2015. The annual equivalent rate in Dec 2014-Apr 2015 was 34.8 percent. New house sales decreased 0.2 percent in May 2015 and fell 4.0 percent in Jun 2015, increasing 4.0 percent in Jul 2015. New house sales fell at annual equivalent 1.4 percent in May-Jul 2015. New house sales increased 4.4 percent in Aug 2015 and fell 12.1 percent in Sep 2015. New house sales decreased at annual equivalent 40.3 percent in Aug-Sep 2015. New house sales increased 5.0 percent in Oct 2015 and increased 5.0 percent in Nov 2015, increasing 7.9 percent in Dec 2015. New house sales increased at the annual equivalent rate of 100.3 percent in Oct-Dec 2015. New house sales decreased 5.7 percent in Jan 2016 at the annual equivalent rate of minus 50.6 percent. New house sales increased 0.8 percent in Feb 2016 and increased 1.5 percent in Mar 2016. New house sales jumped at 7.2 percent in Apr 2016. New house sales increased at the annual equivalent rate of 44.7 percent in Feb-Apr 2016. New house sales decreased 1.4 percent in May 2016 and increased 1.3 percent in Jun 2016. New house sales jumped 12.1 percent in Jul 2016. New house sales increased at the annual equivalent rate of 57.2 percent in May-Jul 2016. New house sales fell 7.1 percent in Aug 2016 and decreased 2.9 percent in Sep 2016, increasing 1.9 percent in Oct 2016. New house sales fell at the annual equivalent rate of minus 28.6 percent in Aug-Oct 2016. New house sales decreased at 1.6 percent in Nov 2016 and fell at 1.9 percent in Dec 2016. New house sales fell at 19.1 percent annual equivalent in Nov-Dec 2016. New house sales increased at 5.5 percent in Jan 2017 and increased at 2.0 percent in Feb 2017. New house sales increased at 55.3 percent in Jan-Feb 2017. New house sales increased at 4.0 percent in Mar 2017 and fell at 6.5 percent in Apr 2017. New house sales decreased at annual equivalent 15.5 percent in Mar-Apr 2017. New house sales increased at 3.1 percent in May 2017 and increased at 3.3 percent in Jun 2017. New house sales increased at annual equivalent 45.9 percent in May-Jun 2017. New house sales decreased at 10.4 percent in Jul 2017 and increased at 1.1 percent in Aug 2017, increasing at 13.6 percent in Sep 2017. New house sales increased at annual equivalent 12.1 percent in Jul-Sep 2017. New house sales decreased at 1.7 percent in Oct 2017. New house sales increased at 13.3 percent in Nov 2017. New house sales increased at annual equivalent 90.9 percent in Oct-Nov 2017. New house sales decreased at 8.3 percent in Dec 2017 and decreased at 4.3 percent in Jan 2018. New house sales decreased at annual equivalent 54.3 percent in Dec 2017-Jan 2018. New house sales increased at 2.5 percent in Feb 2018, increasing at 1.6 percent in Mar 2018. New house sales increased at 27.6 percent in Feb-Mar 2018. New house sales decreased at 3.8 percent in Apr 2018 and increased at 3.3 percent in May 2018. New House sales decreased at annual equivalent 3.7 percent in Apr-May 2018. New house sales decreased at 4.9 percent in Jun 2018 and decreased at 1.5 percent in Jul 2018. New House sales decreased at annual equivalent 32.4 percent in Jun-Jul 2018. New house sales decreased at 0.8 percent in Aug 2018 and increased at 0.5 percent in Sep 2018. New house sales decreased at annual equivalent 1.8 percent in Aug-Sep 2018. New house sales fell at 8.2 percent in Oct 2018 and increased at 10.4 percent in Nov 2018. New house sales increased at annual equivalent 8.4 percent in Oct-Nov 2018. New house sales decreased at 8.3 percent in Dec 2018 and increased at 14.2 percent in Jan 2019. New House sales increased at annual equivalent 31.9 percent in Dec 2018-Jan 2019. New house sales increased at 3.9 percent in Feb 2019 and increased at 3.6 percent in Mar 2019. New house sales increased at annual equivalent 55.5 percent in Feb-Mar 2019. New house sales fell at 5.3 percent in Apr 2019 and fell at 8.8 percent in May 2019. New house sales decreased at annual equivalent 58.5 percent in Apr-May 2019. New house sales increased at 21.9 percent in Jun 2019 and decreased at 8.8 percent in Jul 2019. New house sales increased at annual equivalent 88.8 percent in Jun-Jul 2019. New house sales increased at 6.2 percent in Aug 2019 and decreased at 0.7 percent in Sep 2019. New house sales increased at annual equivalent 37.5 percent in Aug-Sep 2019. There are wide monthly oscillations. Robbie Whelan and Conor Dougherty, writing on “Builders fuel home sale rise,” on Feb 26, 2013, published in the Wall Street Journal (http://professional.wsj.com/article/SB10001424127887324338604578327982067761860.html), analyze how builders have provided financial assistance to home buyers, including those short of cash and with weaker credit background, explaining the rise in new home sales and the highest gap between prices of new and existing houses. The 30-year conventional mortgage rate increased from 3.40 on Apr 25, 2013 to 4.58 percent on Aug 22, 2013 (http://www.federalreserve.gov/releases/h15/data.htm), which could also be a factor in recent weakness with improvement after the rate fell to 4.26 in Nov 2013. The conventional mortgage rate rose to 4.48 percent on Dec 26, 2013 and fell to 4.32 percent on Jan 30, 2014. The conventional mortgage rate increased to 4.37 percent on Feb 26, 2014 and 4.40 percent on Mar 27, 2014. The conventional mortgage rate fell to 4.14 percent on Apr 22, 2014, stabilizing at 4.14 on Jun 26, 2014. The conventional mortgage rate stood at 3.93 percent on Aug 20, 2015 and at 3.91 percent on Sep 17, 2015. The conventional mortgage rate was at 3.79 percent on Oct 22, 2015. The conventional mortgage rate was 3.97 percent on Nov 20, 2015. The conventional mortgage rate was 3.97 percent on Dec 18, 2015, and 3.92 percent on Jan 14, 2016. The conventional mortgage rate was 3.65 percent on Feb 19, 2016. The commercial mortgage rate was 3.73 percent on Mar 17, 2016 and 3.59 percent on Apr 21, 2016. The conventional mortgage rate was 3.58 on May 19, 2016. The conventional mortgage rate was 3.54 percent on Jun 19, 2016 and 3.45 percent on Jul 21, 2016. The conventional mortgage rate was 3.43 percent on Aug 18, 2016 and 3.48 percent on Sep 22, 2016. The conventional mortgage rate was 3.94 on Nov 17, 2016 and 4.30 percent on Dec 22. The conventional mortgage rate was 4.19 percent on Jan 26, 2017 and 4.15 percent on Feb 17, 2017. The conventional mortgage rate was 4.1 percent on Mar 16, 2017. The conventional mortgage rate was 3.97 percent on Apr 20, 2017. The conventional mortgage rate was 4.05 percent on May 18, 2017. The conventional mortgage rate was 3.90 percent on Jun 22, 2017. The conventional mortgage rate was 3.96 percent on Jul 20, 2017. The conventional mortgage rate was 3.90 percent on Aug 18, 2017. The conventional mortgage rate was 3.83 percent on Sep 21, 2017. The conventional mortgage rate was 3.88 percent on Oct 20, 2017. The conventional mortgage rate was 3.92 percent on Nov 22, 2017 and 3.94 on Dec 21, 2017. The conventional mortgage rate was 4.04 percent on Jan 18, 2018. The conventional mortgage rate was 4.40 percent on Feb 22, 2018. The conventional rate was 4.43 percent on Mar 1, 2018. The conventional mortgage rate was 4.45 percent on Mar 22, 2018. The conventional mortgage rate was 4.47 on Apr 19, 2018. The conventional mortgage rate was 4.87 percent in May 31, 2018. The conventional mortgage rate was 4.57 percent on Jun 21, 2018. The conventional mortgage rate was 4.52 percent on Jul 19, 2018. The conventional mortgage rate was 4.53 percent on Aug 16, 2018. The conventional mortgage rate was 4.65 percent on Sep 20, 2018. The conventional mortgage rate was 4.85 percent on Oct 18, 2018. The conventional mortgage rate was 4.81 percent on Nov 21, 2018. The conventional mortgage rate was 4.35 percent in Feb 2019. The conventional mortgage rate was 4.41 percent on Mar 7, 2019. The conventional mortgage rate was 4.06 percent on Mar 28, 2019. The conventional mortgage rate was 4.12 percent on Apr 5, 2019. The conventional mortgage rate was at 4.06 percent on May 23, 2019. The conventional mortgage rate was 3.84 percent on Jun 20, 2019. The conventional mortgage rate was at 3.81 percent on Jul 18, 2019. The conventional mortgage rate was 3.60 on Aug 22, 2019. The conventional mortgage rate measured in a survey by Freddie Mac (http://www.freddiemac.com/pmms/ http://www.freddiemac.com/pmms/abtpmms.htm) is the “interest rate a lender would charge to lend mortgage money to a qualified borrower.

	SA Annual Rate Thousands	∆%
Sep 2019	701	-0.7
Aug	706	6.2
AE ∆% Aug-Sep		37.5
Jul	665	-8.8
Jun	729	21.9
AE ∆% Jun-Jul		88.8
May	598	-8.8
Apr	656	-5.3
AE ∆% Apr-May		-58.5
Mar	693	3.6
Feb	669	3.9
AE ∆% Feb-Mar		55.5
Jan	644	14.2
Dec 2018	564	-8.3
AE ∆% Dec-Jan		31.9
Nov	615	10.4
Oct	557	-8.2
AE ∆% Oct-Nov		8.4
Sep	607	0.5
Aug	604	-0.8
AE ∆% Aug-Sep		-1.8
Jul	609	-1.5
Jun	618	-4.9
AE ∆% Jun-Jul		-32.4
May	650	3.3
Apr	629	-3.8
AE ∆% Apr-May		-3.7
Mar	654	1.6
Feb	644	2.5
AE ∆% Feb-Mar		27.6
Jan	628	-4.3
Dec 2017	656	-8.3
AE ∆% Dec-Jan		-54.3
Nov	715	13.3
Oct	631	-1.7
AE ∆% Oct-Nov		90.9
Sep	642	13.6
Aug	565	1.1
Jul	559	-10.4
AE ∆% Jul-Sep		12.1
Jun	624	3.3
May	604	3.1
AE ∆% May -Jun		45.9
Apr	586	-6.5
Mar	627	4.0
AE ∆% Mar-Apr		-15.5
Feb	603	2.0
Jan	591	5.5
AE ∆% Jan-Feb		55.3
Dec 2016	560	-1.9
Nov	571	-1.6
AE ∆% Nov-Dec		-19.1
Oct	580	1.9
Sep	569	-2.9
Aug	586	-7.1
AE ∆% Aug-Oct		-28.6
Jul	631	12.1
Jun	563	1.3
May	556	-1.4
AE ∆% May-Jul		57.2
Apr	564	7.2
Mar	526	1.5
Feb	518	0.8
AE ∆% Feb-Apr		44.7
Jan	514	-5.7
AE ∆% Jan		-50.6
Dec 2015	545	7.9
Nov	505	5.0
Oct	481	5.0
AE ∆% Oct-Dec		100.3
Sep	458	-12.1
Aug	521	4.4
AE ∆% Aug-Sep		-40.3
Jul	499	4.0
Jun	480	-4.0
May	500	-0.2
AE ∆% May-Jul		-1.4
Apr	501	4.4
Mar	480	-11.8
Feb	544	5.0
Jan	518	4.2
Dec 2014	497	12.4
AE ∆% Dec-Apr		34.8
Nov	442	-7.1
Oct	476	1.3
Sep	470	3.1
AE ∆% Sep-Nov		-11.4
Aug	456	13.4
Jul	402	-3.8
Jun	418	-7.3
May	451	11.9
Apr	403	-0.5
Mar	405	-3.6
Feb	420	-5.2
Jan	443	2.3
AE ∆% Jan-Aug		8.0
Dec 2013	433	-2.9
Nov	446	0.5
Oct	444	10.2
Sep	403	5.8
Aug	381	1.6
Jul	375	-20.2
Jun	470	9.8
May	428	-2.9
Apr	441	-0.7
AE ∆% Apr-Dec		-3.1
Mar	444	-0.7
Feb	447	0.2
AE ∆% Feb-Mar		-3.0
Jan	446	11.8
Dec 2012	399	1.8
Nov	392	9.5
Oct	358	-7.0
AE ∆% Oct-Jan		55.7
Sep	385	2.7
Aug	375	1.6
Jul	369	2.5
Jun	360	-2.7
May	370	4.5
AE ∆% May-Sep		22.3
Apr	354	0.0
Mar	354	-3.3
Feb	366	9.3
Jan	335	-1.8
AE ∆% Jan-Apr		11.8
Dec 2011	341	4.0
Nov	328	3.8
Oct	316	3.9
Sep	304	1.7
AE ∆% Sep-Dec		48.4
Aug	299	1.0
Jul	296	-1.7
Jun	301	-1.3
May	305	-1.6
AE ∆% May-Aug		-10.3
Apr	310	3.3
Mar	300	11.1
Feb	270	-12.1
Jan	307	-5.8
AE ∆% Jan-Apr		-14.2
Dec 2010	326	13.6

AE: Annual Equivalent

Source: US Census Bureau

Table IIB-2, US, New House Stocks and Median and Average New Homes Sales Price

There is additional information of the report of new house sales in Table IIB-2. The stock of unsold houses fell from rates of 6 to 8 percent of sales in 2011 to 4 to 5 percent in 2013 and 5.5 percent in Sep 2019. Robbie Whelan and Conor Dougherty, writing on “Builders fuel home sale rise,” on Feb 26, 2013, published in the Wall Street Journal (http://professional.wsj.com/article/SB10001424127887324338604578327982067761860.html), find that inventories of houses have declined as investors acquire distressed houses of higher quality. Median and average house prices oscillate. In Sep 2019, median prices of new houses sold not seasonally adjusted (NSA) decreased 7.9 percent after increasing 5.7 percent in

Aug 2019. Average prices decreased 8.1 percent in Sep 2019 and increased 5.9 percent in Aug 2019. Between Dec 2010 and Sep 2019, median prices increased 24.1 percent, with increases of 6.0 percent in Feb 2016, 4.9 percent in Nov 2015, 2.2 percent in Sep 2015, 13.6 percent in Oct 2014, 4.0 percent in Aug 2014, 4.0 percent in May 2014 and 5.2 percent in Mar 2014. Average prices increased 24.3 percent between Dec 2010 and Sep 2019, with increases of 5.1 percent in Mar 2016, 4.0 percent in Sep 2015, 4.4 percent in Jul 2015 and 18.3 percent in Oct 2014. Between Dec 2010 and Dec 2012, median prices increased 7.1 percent and average prices increased 2.6 percent. Price increases concentrated in 2012 with increase of median prices of 18.2 percent from Dec 2011 to Dec 2012 and of average prices of 13.8 percent. Median prices increased 16.7 percent from Dec 2012 to Dec 2014, with increase of 13.6 percent in Oct 2014, while average prices increased 24.7 percent, with increase of 18.3 percent in Oct 2014. Median prices decreased 1.5 percent from Dec 2014 to Dec 2015 while average prices fell 5.5 percent. Median prices increased 10.1 percent from Dec 2015 to Dec 2016 while average prices increased 8.5 percent. Median prices increased 5.0 percent from Dec 2016 to Dec 2017 while average prices increased 5.3 percent. Median prices decreased 4.0 percent from Dec 2017 to Dec 2018 while average prices decreased 5.2 percent. Median prices decreased 8.8 percent from Sep 2018 to Sep 2019 while average prices decreased 6.1 percent. Robbie Whelan, writing on “New homes hit record as builders cap supply,” on May 24, 2013, published in the Wall Street Journal (http://online.wsj.com/article/SB10001424127887323475304578500973445311276.html?mod=WSJ_economy_LeftTopHighlights), finds that homebuilders are continuing to restrict the number of new homes for sale. Restriction of available new homes for sale increases prices paid by buyers.

	Unsold* Stocks in Equiv. Months of Sales SA %	Median New House Sales Price USD NSA	Month ∆%	Average New House Sales Price USD NSA	Month ∆%
Sep 2019	5.5	299,400	-7.9	362,700	-8.1
Aug	5.5	325,200	5.7	394,800	5.9
Jul	5.9	307,600	-1.3	372,900	3.0
Jun	5.4	311,800	-0.3	361,900	-4.5
May	6.7	312,700	-7.8	379,100	-1.6
Apr	6.1	339,000	9.1	385,400	3.4
Mar	5.8	310,600	-3.2	372,700	-2.8
Feb	6.1	320,800	5.0	383,600	6.2
Jan	6.5	305,400	-7.4	361,100	-5.4
Dec 2018	7.4	329,700	6.9	381,800	4.0
Nov	6.5	308,500	-6.0	367,100	-7.0
Oct	7.2	328,300	0.0	394,900	2.2
Sep	6.4	328,300	2.1	386,400	1.4
Aug	6.3	321,400	-1.9	380,900	-2.9
Jul	6.2	327,500	5.5	392,300	6.0
Jun	6.0	310,500	-2.0	370,100	-0.7
May	5.6	316,700	0.7	372,600	-3.2
Apr	5.7	314,400	-6.3	385,100	4.3
Mar	5.4	335,400	2.5	369,200	-1.2
Feb	5.6	327,200	-0.7	373,600	-1.1
Jan	5.6	329,600	-4.0	377,800	-6.2
Dec 2017	5.3	343,300	0.0	402,900	3.7
Nov	4.8	343,400	7.5	388,500	-1.4
Oct	5.4	319,500	-3.6	394,000	3.9
Sep	5.3	331,500	5.5	379,300	2.7
Aug	6.0	314,200	-2.7	369,200	-0.9
Jul	6.0	322,900	2.4	372,400	0.5
Jun	5.3	315,200	-2.6	370,600	-2.1
May	5.4	323,600	4.0	378,400	3.4
Apr	5.5	311,100	-3.3	365,800	-4.8
Mar	5.1	321,700	8.0	384,400	3.8
Feb	5.2	298,000	-5.5	370,500	3.6
Jan	5.2	315,200	-3.6	357,700	-6.5
Dec 2016	5.4	327,000	3.8	382,500	5.3
Nov	5.2	315,000	4.0	363,400	3.2
Oct	5.1	302,800	-3.8	352,200	-3.8
Sep	5.1	314,800	5.3	366,100	3.1
Aug	4.9	298,900	0.5	355,100	0.6
Jul	4.5	297,400	-4.4	353,000	-1.3
Jun	5.2	311,200	5.4	357,800	2.3
May	5.2	295,200	-7.3	349,700	-5.3
Apr	5.2	318,300	5.0	369,300	2.9
Mar	5.5	303,200	-0.9	359,000	5.1
Feb	5.5	305,800	6.0	341,700	-5.4
Jan	5.5	288,400	-2.9	361,200	2.5
Dec 2015	5.1	297,100	-5.0	352,500	-5.5
Nov	5.4	312,600	4.9	373,200	1.2
Oct	5.6	298,000	-0.5	368,900	3.3
Sep	5.9	299,500	2.2	357,200	4.0
Aug	5.0	293,000	0.2	343,300	0.6
Jul	5.2	292,300	2.5	341,200	4.4
Jun	5.4	285,100	-0.8	326,900	-2.8
May	5.0	287,500	-2.4	336,200	-1.2
Apr	5.0	294,500	2.8	340,400	-2.5
Mar	5.1	286,600	0.0	349,300	0.9
Feb	4.5	286,600	-1.8	346,300	-0.6
Jan	4.8	292,000	-3.2	348,300	-6.7
Dec 2014	5.1	301,500	1.1	373,200	7.0
Nov	5.7	298,300	0.4	348,900	-7.6
Oct	5.3	297,000	13.6	377,500	18.3
Sep	5.4	261,500	-10.4	319,100	-10.4
Aug	5.4	291,700	4.0	356,200	3.2
Jul	6.2	280,400	-2.3	345,200	2.1
Jun	5.7	287,000	0.5	338,100	4.5
May	5.2	285,600	4.0	323,500	-0.5
Apr	5.7	274,500	-2.8	325,100	-1.9
Mar	5.6	282,300	5.2	331,500	1.7
Feb	5.3	268,400	-0.5	325,900	-3.4
Jan	5.1	269,800	-2.1	337,300	5.0
Dec 2013	5.2	275,500	-0.6	321,200	-4.3
Nov	5.0	277,100	4.8	335,600	0.0
Oct	4.9	264,300	-2.0	335,700	4.4
Sep	5.4	269,800	5.7	321,400	3.4
Aug	5.5	255,300	-2.6	310,800	-5.8
Jul	5.5	262,200	0.9	329,900	7.8
Jun	4.1	259,800	-1.5	306,100	-2.5
May	4.6	263,700	-5.6	314,000	-6.8
Apr	4.4	279,300	8.5	337,000	12.3
Mar	4.2	257,500	-2.9	300,200	-3.9
Feb	4.1	265,100	5.4	312,500	1.8
Jan	4.0	251,500	-2.6	306,900	2.6
Dec 2012	4.5	258,300	5.4	299,200	2.9
Nov	4.6	245,000	-0.9	290,700	1.9
Oct	4.9	247,200	-2.9	285,400	-4.1
Sep	4.5	254,600	0.6	297,700	-2.6
Aug	4.6	253,200	6.7	305,500	8.2
Jul	4.6	237,400	2.1	282,300	3.9
Jun	4.8	232,600	-2.8	271,800	-3.2
May	4.7	239,200	1.2	280,900	-2.4
Apr	4.9	236,400	-1.4	287,900	1.5
Mar	4.9	239,800	0.0	283,600	3.5
Feb	4.8	239,900	8.2	274,000	3.1
Jan	5.3	221,700	1.4	265,700	1.1
Dec 2011	5.3	218,600	2.0	262,900	5.2
Nov	5.7	214,300	-4.7	250,000	-3.2
Oct	6.0	224,800	3.6	258,300	1.1
Sep	6.3	217,000	-1.2	255,400	-1.5
Aug	6.5	219,600	-4.5	259,300	-4.1
Jul	6.7	229,900	-4.3	270,300	-1.0
Jun	6.6	240,200	8.2	273,100	4.0
May	6.6	222,000	-1.2	262,700	-2.3
Apr	6.7	224,700	1.9	268,900	3.1
Mar	7.2	220,500	0.2	260,800	-0.8
Feb	8.1	220,100	-8.3	262,800	-4.7
Jan	7.3	240,100	-0.5	275,700	-5.5
Dec 2010	7.0	241,200	9.8	291,700	3.5

*Percent of new houses for sale relative to houses sold

Source: US Census Bureau

The depressed level of residential construction and new house sales in the US is evident in Table IIB-3 providing new house sales not seasonally adjusted in Jan-Sep of various years. New house sales increased 7.1 percent from Jan-Sep 2018 to Jan-Sep 2019. New house sales increased 12.4 percent from Jan-Sep 2017 to Jan-Sep 2019. Sales of new houses are higher in Jan-Sep 2019 relative to Jan-Sep 2016 with increase of 20.9 percent. Sales of new houses are higher in Jan-Sep 2019 relative to Jan-Sep 2015 with increase of 35.8 percent. Sales of new houses in Jan-Sep 2019 are substantially lower than in many years between 1971 and 2019 except for the years from 2008 to 2018. There are several other increases of 57.3 percent relative to 2014, 59.7 percent relative to Jan-Sep 2013, 85.6 percent relative to Jan-Sep 2012, 126.2 percent relative to Jan-Sep 2011, 105.9 percent relative to Jan-Sep 2010, and 81.1 percent relative to Jan-Sep 2009. New house sales in Jan-Sep 2019 are 31.8 percent higher than in Jan-Sep 2008. Sales of new houses in Jan-Sep 2019 are lower by 16.3 percent relative to Jan-Sep 2007, 37.0 percent relative to 2006, 47.6 percent relative to 2005 and 43.6 percent relative to 2004. The housing boom peaked in 2005 and 2006 when increases in fed funds rates to 5.25 percent in Jun 2006 from 1.0 percent in Jun 2004 affected subprime mortgages that were programmed for refinancing in two or three years on the expectation that price increases forever would raise home equity. Higher home equity would permit refinancing under feasible mortgages incorporating full payment of principal and interest (Gorton 2009EFM; see other references in http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html). Sales of new houses in Jan-Sep 2019 relative to the same period in 2003 fell 37.9 percent and 29.9 percent relative to the same period in 2002. Similar percentage declines are also for 2019 relative to years from 2000 to 2004. Sales of new houses in Jan-Sep 2019 decreased 11.7 per cent relative to the same period in 1996. The population of the US was 179.3 million in 1960 and 281.4 million in 2000 (Hobbs and Stoops 2002, 16). Detailed historical census reports are available from the US Census Bureau at (http://www.census.gov/population/www/censusdata/hiscendata.html). The estimate of the US population is 418.8 million in 2015. The US population increased by 133.6 percent from 1960 to 2015. The final row of Table IIB-3 reveals catastrophic data: sales of new houses in Jan-Sep 2019 of 527 thousand units are lower by 5.0 percent relative to 555 thousand units of houses sold in Jan-Sep 1973, which is the tenth year when data become available in 1963. The civilian noninstitutional population increased from 122.416 million in 1963 to 257.791 million in 2018, or 110.6 percent (http://www.bls.gov/data/). The Bureau of Labor Statistics (BLS) defines the civilian noninstitutional population (http://www.bls.gov/lau/rdscnp16.htm#cnp): “The civilian noninstitutional population consists of persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities and homes for the aged) and who are not on active duty in the Armed Forces.”

Table IIB-3, US, Sales of New Houses Not Seasonally Adjusted, Thousands and %

Jan-Sep 2019	527
Jan-Sep 2018	492
∆% Jan-Sep 2019/Jan-Sep 2018	7.1
Jan-Sep 2017	469
Jan-Sep 2019/Jan-Sep 2017	12.4
Jan-Sep 2016	436
∆% Jan-Sep 2019/Jan-Sep 2016	20.9
Jan-Sep 2015	388
∆% Jan-Sep 2019/Jan-Sep 2015	35.8
Jan-Sep 2014	335
∆% Jan-Sep 2019/Jan-Sep 2014	57.3
Jan-Sep 2013	330
∆% Jan-Sep 2019/Jan-Sep 2013	59.7
Jan-Sep 2012	284
∆% Jan-Sep 2019/Jan-Sep 2012	85.6
Jan-Sep 2011	233
∆% Jan-Sep 2019/ Jan-Sep 2011	126.2
Jan-Sep 2010	256
∆% Jan-Sep 2019/ Jan-Sep 2010	105.9
Jan-Sep 2009	291
∆% Jan-Sep 2019/ Jan-Sep 2009	81.1
Jan-Sep 2008	400
∆% Jan-Sep 2019/ Jan-Sep 2008	31.8
Jan-Sep 2007	630
∆% Jan-Sep 2019/Jan-Sep 2007	-16.3
Jan-Sep 2006	836
∆% Jan-Sep 2019/Jan-Sep 2006	-37.0
Jan-Sep 2005	1005
∆% Jan-Sep 2019/Jan-Sep 2005	-47.6
Jan-Sep 2004	935
∆% Jan-Sep 2019/ Jan-Sep 2004	-43.6
Jan-Sep 2003	849
∆% Jan-Sep 2019/ Jan-Sep 2003	-37.9
Jan-Sep 2002	752
∆% Jan-Sep 2019/ Jan-Sep 2002	-29.9
Jan-Sep 2001	710
∆% Jan-Sep 2019/ Jan-Sep 2001	-25.8
Jan-Sep 2000	678
∆% Jan-Sep 2019/Jan-Sep 2000	-22.3
Jan-Sep 1996	597
∆% Jan-Sep 2019/ Jan-Sep 1996	-11.7
Jan-Sep 1972	555
∆% Jan-Sep 2019/ Jan-Sep 1973	-5.0

*Computed using unrounded data

Source: US Census Bureau

https://www.census.gov/construction/nrs/img/c25_curr.gif

The revised level of 306 thousand new houses sold in 2011 is the lowest since 560 thousand in 1963 in the 53 years of available data while the level of 368 thousand in 2012 is only higher than 323 thousand in 2010. The level of sales of new houses of 437 thousand in 2014 is the lowest from 1963 to 2009 with exception of 412 thousand in 1982 and 436 thousand in 1981. The population of the US increased 129.4 million from 179.3 million in 1960 to 308.7 million in 2010, or 72.2 percent. The estimate of the US population is 418.8 million in 2015. The US population increased 133.6 percent from 1960 to 2015. The civilian noninstitutional population increased from 122.416 million in 1963 to 257.791 million in 2018, or 110.6 percent (http://www.bls.gov/data/). The Bureau of Labor Statistics (BLS) defines the civilian noninstitutional population (http://www.bls.gov/lau/rdscnp16.htm#cnp): “The civilian noninstitutional population consists of persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities and homes for the aged) and who are not on active duty in the Armed Forces.”

Table IIB-4, US, New Houses Sold, NSA Thousands

Period	Sold During Period
1963	560
1964	565
1965	575
1966	461
1967	487
1968	490
1969	448
1970	485
1971	656
1972	718
1973	634
1974	519
1975	549
1976	646
1977	819
1978	817
1979	709
1980	545
1981	436
1982	412
1983	623
1984	639
1985	688
1986	750
1987	671
1988	676
1989	650
1990	534
1991	509
1992	610
1993	666
1994	670
1995	667
1996	757
1997	804
1998	886
1999	880
2000	877
2001	908
2002	973
2003	1,086
2004	1,203
2005	1,283
2006	1,051
2007	776
2008	485
2009	375
2010	323
2011	306
2012	368
2013	429
2014	437
2015	501
2016	561
2017	613
2018	617

Source: US Census Bureau http://www.census.gov/construction/nrs/

Chart IIB-1 of the US Bureau of the Census shows the sharp decline of sales of new houses in the US. Sales rose temporarily until about mid 2010 but then declined to a lower plateau followed by increase, stability and new oscillating increase. There is decrease in the final segment followed by marginal increase.

Chart IIB-1, US, New One-Family Houses Sold in the US, SAAR (Seasonally Adjusted Annual Rate)

Source: US Census Bureau

Between 1991 and 2001, sales of new houses rose 78.4 percent at the average yearly rate of 6.0 percent, as shown in Table IB-5. Between 1995 and 2005 sales of new houses increased 92.4 percent at the yearly rate of 6.8 percent. There are similar rates in all years from 2000 to 2005. The boom in housing construction and sales began in the 1980s and 1990s. The collapse of real estate culminated several decades of housing subsidies and policies to lower mortgage rates and borrowing terms (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009b), 42-8). Sales of new houses sold in 2018 fell 7.5 percent relative to the same period in 1995 and 51.9 percent relative to 2005.

Table IIB-5, US, Percentage Change and Average Yearly Rate of Growth of Sales of New One-Family Houses

	∆%	Average Yearly % Rate
1963-2018	10.2	0.2
1991-2001	78.4	6.0
1995-2005	92.4	6.8
2000-2005	46.3	7.9
1995-2018	-7.5	NA
2000-2018	-29.6	NA
2005-2018	-51.9	NA

NA: Not Applicable

Source: US Census Bureau

Chart IIB-2 of the US Bureau of the Census provides the entire monthly sample of new houses sold in the US between Jan 1963 and Sep 2019 without seasonal adjustment. The series is almost stationary until the 1990s. There is sharp upward trend from the early 1990s to 2005-2006 after which new single-family houses sold collapse to levels below those in the beginning of the series.

Chart IIB-2, US, New Single-family Houses Sold, NSA, 1963-2019

Source: US Census Bureau

The available historical annual data of median and average prices of new houses sold in the US between 1963 and 2018 is in Table IIB-6. On a yearly basis, median and average prices reached a peak in 2007 and then fell substantially. There is recovery in 2012-2018.

Table IIB-6, US, Median and Average Prices of New Houses Sold, Annual Data

Period	Median	Average
1963	$18,000	$19,300
1964	$18,900	$20,500
1965	$20,000	$21,500
1966	$21,400	$23,300
1967	$22,700	$24,600
1968	$24,700	$26,600
1969	$25,600	$27,900
1970	$23,400	$26,600
1971	$25,200	$28,300
1972	$27,600	$30,500
1973	$32,500	$35,500
1974	$35,900	$38,900
1975	$39,300	$42,600
1976	$44,200	$48,000
1977	$48,800	$54,200
1978	$55,700	$62,500
1979	$62,900	$71,800
1980	$64,600	$76,400
1981	$68,900	$83,000
1982	$69,300	$83,900
1983	$75,300	$89,800
1984	$79,900	$97,600
1985	$84,300	$100,800
1986	$92,000	$111,900
1987	$104,500	$127,200
1988	$112,500	$138,300
1989	$120,000	$148,800
1990	$122,900	$149,800
1991	$120,000	$147,200
1992	$121,500	$144,100
1993	$126,500	$147,700
1994	$130,000	$154,500
1995	$133,900	$158,700
1996	$140,000	$166,400
1997	$146,000	$176,200
1998	$152,500	$181,900
1999	$161,000	$195,600
2000	$169,000	$207,000
2001	$175,200	$213,200
2002	$187,600	$228,700
2003	$195,000	$246,300
2004	$221,000	$274,500
2005	$240,900	$297,000
2006	$246,500	$305,900
2007	$247,900	$313,600
2008	$232,100	$292,600
2009	$216,700	$270,900
2010	$221,800	$272,900
2011	$227,200	$267,900
2012	$245,200	$292,200
2013	$268,900	$324,500
2014	$288,500	$347,700
2015	$294,200	$352,700
2016	$307,800	$360,900
2017	$323,100	$384,900
2018	$326,400	$385,000

Source: US Census Bureau

Prices rose sharply between 2000 and 2005 as shown in Table IIB-7. In fact, prices in 2018 are higher than in 2000. Between 2006 and 2018, median prices of new houses sold increased 32.4 percent and average prices increased 25.9 percent. Between 2017 and 2018, median prices increased 1.0 percent and average prices changed 0.0 percent.

Table IIB-7, US, Percentage Change of New Houses Median and Average Prices, NSA, ∆%

	Median New Home Sales Prices ∆%	Average New Home Sales Prices ∆%
∆% 2000 to 2003	15.4	19.0
∆% 2000 to 2005	42.5	43.5
∆% 2000 to 2018	93.1	86.0
∆% 2005 to 2018	35.5	29.6
∆% 2000 to 2006	45.9	47.8
∆% 2006 to 2018	32.4	25.9
∆% 2009 to 2018	50.6	42.1
∆% 2010 to 2018	47.2	41.1
∆% 2011 to 2018	43.7	43.7
∆% 2012 to 2018	33.1	31.8
∆% 2013 to 2018	21.4	18.6
∆% 2014 to 2018	13.1	10.7
∆% 2015 to 2018	10.9	9.2
∆% 2016 to 2018	6.0	6.7
∆% 2017 to 2018	1.0	0.0

Source: US Census Bureau

Chart IIB-3 of the US Census Bureau provides the entire series of new single-family sales median prices from Jan 1963 to Sep 2019. There is long-term sharp upward trend with few declines until the current collapse. Median prices increased sharply during the Great Inflation of the 1960s and 1970s and paused during the savings and loans crisis of the late 1980s and the recession of 1991. Housing subsidies throughout the 1990s caused sharp upward trend of median new house prices that accelerated after the fed funds rate of 1 percent from 2003 to 2004. There was sharp reduction of prices after 2006 with recovery recently above earlier prices.

Chart IIB-3, US, Median Sales Price of New Single-family Houses Sold, US Dollars, NSA, 1963-2019

Source: US Census Bureau

Chart IIB-4 of the US Census Bureau provides average prices of new houses sold from the mid-1970s to Sep 2019. There is similar behavior as with median prices of new houses sold in Chart IIB-3. The only stress occurred in price pauses during the savings and loans crisis of the late 1980s and the collapse after 2006 with recent recovery.

Chart IIB-4, US, Average Sales Price of New Single-family Houses Sold, US Dollars, NSA, 1975-2019

Source: US Census Bureau