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Economy in Brief

U.S. Light Vehicle Sales Below Expectations
by Tom Moeller February 4, 2004

Unit sales of light vehicles fell 9.1% m/m in January to 16.13M, the lowest level since October. Consensus expectations were for sales of 17.0M. Revised seasonal factors altered the monthly figures for 2003.

Car sales fell 7.4% m/m to 7.06M for the second consecutive monthly decline. The peak for car sales was in 1986 at 11.41M.

Sales of light trucks fell 10.5% to 9.07M and reversed all of the gain in December.

Domestic light vehicle sales fell 10.5% m/m to 13.11M (+1.9% y/y).

Imported vehicle sales fell 3.0% m/m to 3.02M (-8.7% y/y). Imports captured 18.7% of the US market for new vehicles in January versus 19.7% for all of 2003.

Light Vehicle Sales (SAAR, Mil.Units) Jan Dec Y/Y 2003 2002 2001
Total 16.13 17.75 -0.3% 16.69 16.81 17.26
  Autos 7.06 7.63 -12.2% 7.63 8.07 8.48
  Light Trucks 9.07 10.12 11.4% 9.06 8.74 8.78
Mortgage Applications Down Again
by Tom Moeller February 4, 2004

The index of mortgage applications compiled by the Mortgage Bankers Association fell 1.5% last week, adding to the 5.2% decline the prior week. For the month of January applications rose 27.0% from December due to a surge mid-month.

Applications to refinance fell a modest 1.4% after the 0.9% dip the prior week.

Purchase applications fell 1.7% w/w on top of the 10.0% decline the prior week. Purchase applications were up 9.6% in January versus December.

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 effective interest rate on a conventional 30-Year mortgage rose to 5.92% from 5.87% the prior week. The effective rate on a 15-year mortgage rose to 5.26%.

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) 1/30/04 1/23/04 2003 2002 2001
Total Market Index 855.7 868.9 1,067.9 799.7 625.6
  Purchase 444.0 451.6 395.1 354.7 304.9
  Refinancing 3,250.6 3,296.7 4,981.8 3,388.0 2,491.0
ISM Non-Manufacturing Index Surged
by Tom Moeller February 4, 2004

The Business Activity Index for the non-manufacturing sector, reported by the Institute for Supply Management, surged last month to a record high for the series' seven year history. The jump to 65.7 versus 58.0 in December was versus Consensus expectations for a moderate gain to 60.0.

New orders led the increase and jumped to 64.9 from 59.5 in December, a near record for the series.

The employment index fell to 53.4 versus 54.0 in December. It was the sixth month in seven above 50.

Since the series' inception in 1997 there has been a 67% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing and construction industries.

Business activity for the non-manufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index weights the components.

The seasonally adjusted prices index fell to 59.7 from 60.3 in December.

ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.

ISM Nonmanufacturing Survey Jan Dec Y/Y Jan '03 2003 2002 2001
Business Activity Index 65.7 58.0 54.2 58.1 55.1 48.9
Prices Index 59.7 60.3 56.4 56.7 53.9 51.5
Factory Orders and Shipments Up
by Tom Moeller February 4, 2004

Factory orders jumped an unexpected 1.1% in December. The gain was led by a 2.0% (6.7% y/y) surge in orders for non-durables. Gains were logged across most non-durable industries. (Orders for non-durables equal shipments in this report.)

The advance report of a slight decline in durable goods orders in December was revised to a slight 0.3% increase.

Factory shipments jumped 1.5%, reflecting broad based strength, notably for machinery.

Manufacturing inventories fell just slightly for the second consecutive month.

Factory Survey (NAICS) Dec Nov Y/Y 2003 2002 2001
Inventories -0.0% -0.1% -1.4% -1.4% -1.8% -6.1%
New Orders 1.1% -0.9% 8.0% 3.6% -1.9% -6.7%
Shipments 1.5% 0.5% 7.2% 2.5% -2.0% -5.4%
Unfilled Orders 0.4% 0.7% 4.1% 4.1% -6.1% -5.9%
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