- by New Deal democrat
There is no new noteworthy data today; and the ISM manufacturing index, normally released on the first workday of each month, won’t be released until Monday, so today is an ideal time to check in on the state of the economy in general, and of housing in particular, at the end of 2025.
On Tuesday, both the FHFA and Case Shiller repeat home sales indexes were released for October, with both rising 0.4% month over month on a seasonally adjusted basis. The former index did make a new high, while the latter is still slightly below its February 2023 peak:
On a YoY basis, both are up roughly 1.5%, among the lowest such comparisons of any time outside of recessions:
Thus 2025 closes out on a very weak note for housing, which has been a theme throughout the year.
On a broader scale, it is possible that the October and November government shutdown constituted a brief recession, with July as the peak of the post-pandemic expansion:
As shown in the graph, which norms nonfarm payrolls, industrial production, real manufacturing and trade sales, and real income less government transfers to 100 as of July, only two of the four - real income and payrolls - exceeded their July readings only once, in September, by 0.1%. All other readings since July have been either flat or down, with several not updated yet since the shutdown.
Indeed, taken together, the four series generally show stagnation since March or April.
It is commonly said that expansions don’t die of old age; they are murdered. If so, the combination of T—-p’s tariffs and the government shutdown may have done the trick, at least briefly.
On the other hand, one item which has consistently held up, however, has been consumer spending, best shown by the weekly Redbook index:
This has shown strength throughout the year, typically up by over 5% YoY nominally. This in turn has probably been goosed by the wealth effect from the appreciation in affluent and wealthy peoples’ stock portfolios, with the S&P 500 up 16.4% in 2025:
Indeed, as per the last ISM reports, for November, manufacturing continued to be in contraction, while services, which were oscillating between slight expansion and contraction through summer, picked up some strength in October and November:
This is the “K shaped” economy, where the lower 80% or so are feeling pinched by inflation and a stalling jobs market, while the top 10% can power forward with spending.
I expect that in 2026 the forces of stagflation will continue to conflict, with a politicized Fed lowering rates to please its mob boss, while inflationary pressures mount, and the average household is caught in between.