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Economy in Brief

Producer Prices Rose, Core Index Fell
by Tom Moeller January 14, 2004

Finished producer prices rose 0.3% in December and reversed the prior month's 0.3% decline. Consensus expectations had been for a 0.2% gain. For 2003 the PPI rose 3.2%, the largest increase since 2000.

Core producer prices fell 0.1% in December for the second consecutive month versus expectations for a 0.1% rise. The 0.2% gain in core prices during all of 2003 barely outpaced the prior year's gain of 0.1%.

Finished consumer goods prices rose 0.4% in December (5.1% y/y) and reversed the 0.4% November drop. Less food & energy finished consumer goods prices fell 0.1% (+1.0% Y/Y).

Finished capital goods prices fell by 0.1% for the second consecutive month (+0.9% y/y).

Finished energy prices rose 1.8% (11.4% y/y). Gasoline prices (14.9% y/y) and fuel oil prices (13.9% y/y) were strong. These energy product price series are NSA.

Intermediate goods prices rose 0.5% as energy prices rose. Core intermediate prices rose just 0.1%, but the annual gain of 2.0% reversed the deflation of the prior two years.

Crude goods prices surged 2.0%. Energy prices jumped 4.3% (44.5% for the full year). Core crude prices also were strong, up 3.4%. Iron & steel scrap prices jumped 10.2% (62.5% y/y).

Producer Price Index Dec Nov Y/Y 2003 2002 2001
Finished Goods 0.3% -0.3% 4.0% 3.2% -1.3% 2.0%
  Core -0.1% -0.1% 0.9% 0.2% 0.1% 1.4%
Intermediate Goods 0.5% -0.2% 3.8% 4.7% -1.5% 0.4%
  Core 0.1% 0.2% 2.1% 2.0% -0.5% -0.1%
Crude Goods 2.0% 0.2% 18.6% 25.1% -10.6% 0.3%
  Core 3.4% 4.3% 21.1% 12.2% 3.8% -10.0%
U.S. Trade Deficit Narrowed Unexpectedly
by Tom Moeller January 14, 2004

The U.S. foreign trade deficit narrowed unexpectedly in November to $38.0B, the smallest deficit in over a year.

Exports surged 2.9% (9.3% y/y) for the sixth strong gain in seven months. Exports of capital goods jumped 6.5% (12.0% y/y) and nonauto consumer goods exports surged 7.3% (12.7% Y/Y).

Imports fell unexpectedly the value of petroleum imports dropped 8.3% (+8.5% y/y) on lower volumes. Capital goods imports rose 0.8% (5.3% y/y) but nonauto consumer goods imports fell 0.8% (4.8% y/y).

By country, the US trade deficit with China narrowed sharply to $10.8B as exports surged 53.8% y/y). The US trade deficit with the European Union also narrowed to $7.4B.

Foreign Trade Nov Oct Y/Y 2002 2001 2000
Trade Deficit $38.0B $41.6B $38.6B(11/02) $418.0B $357.8B $375.4B
  Exports - Goods & Services 2.9% 2.8% 9.3% -3.3% -5.8% 10.8%
  Imports - Goods & Services -0.8% 2.1% 5.8% 2.0% -5.5% 17.8%
Mortgage Applications Jumped as Interest Rates Slid
by Tom Moeller January 14, 2004

The index of mortgage applications compiled by the Mortgage Bankers Association jumped 17.1% last week (-39.1% y/y) to the highest level in over a month.

The effective interest rate on a conventional 30-Year mortgage slid to 5.84% from 6.10% the prior week and versus 5.97% averaged last year. The effective rate on a 15-year mortgage also fell to 5.19% from 5.38% averaged during 2003.

Applications to refinance surged 25.1% w/w but were well off last year's level (-62.1% y/y).

Analysis titled "After the Refinancing Boom: Will Consumers Scale Back Their Spending?" from the Federal Reserve Bank of New York is available here.

Purchase applications also surged, by 11.1% w/w (+24.6% y/y).

During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing home sales.

The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site here.

MBA Mortgage Applications (3/16/90=100) 1/09/04 1/02/03 2003 2002 2001
Total Market Index 702.6 599.9 1,067.9 799.7 625.6
  Purchase 445.9 401.3 395.1 354.7 304.9
  Refinancing 2,195.7 1,755.4 4,981.8 3,388.0 2,491.0
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