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Economy in Brief

Mortgage Applications Eased As Rates Ticked Up
by Tom Moeller March 31, 2004

The index of mortgage applications compiled by the Mortgage Bankers Association eased another 2.1% last week. That followed a 0.2% dip the prior period. Despite these recent backpedals, mortgage applications are up 25.1% in March versus February.

The effective interest rate on a conventional 30-Year mortgage rose to 5.75% from 5.62% during the prior two weeks. The effective rate on a 15-year mortgage rose to 5.08%.

Purchase applications fell 1.1% w/w (+21.7% y/y) for the second weekly decline. March purchase applications are 6.7% ahead of the February average.

During the last ten years there has been a 56% correlation between the y/y change in purchase applications and the change in new plus existing home sales.

Applications to refinance fell 2.6% (-25.1% y/y) following six weeks of gain.

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) 03/26/04 03/19/04 2003 2002 2001
Total Market Index 1,091.3 1,114.9 1,067.9 799.7 625.6
  Purchase 443.8 449.9 395.1 354.7 304.9
  Refinancing 4,857.6 4,988.7 4,981.8 3,388.0 2,491.0
Chicago Purchasing Agents' Index Fell
by Tom Moeller March 31, 2004

The Chicago Purchasing Managers Business Barometer for March fell to 57.6 from 63.6 in February. A lesser decline to 61.0 had been the Consensus expectation.

During the last twenty years there has been a 75% correlation between the level of the Chicago Business Barometer and quarterly growth in factory sector industrial output. There has been a 49% correlation with quarterly growth in real GDP.

The new orders index fell sharply to 60.4, the lowest level since September, and production fell to 59.1, also the lowest level since September. Still, the 1Q averages for orders and production are up versus 4Q03.

Employment fell to 49.2 but the 1Q average is up versus 4Q. During the last twenty years there has been a 71% correlation between the level of the employment index and the y/y change in factory sector payroll employment.

The index of prices paid jumped to 75.7, the highest level since May 1995.

Chicago Purchasing Managers Index, SA Mar '04 Feb '04 Mar  '03 2003 2002 2001
Business Barometer 57.6 63.6 49.9 54.7 52.7 41.4
  New Orders 60.4 67.5 53.9 58.0 56.2 42.3
Prices Paid 75.7 66.9 63.7 55.8 56.9 50.4
Factory Orders & Inventories Rose
by Tom Moeller March 31, 2004

Factory orders rose 0.3% m/m in February but the gain was dominated by a surge in aircraft. Orders for commercial aircraft jumped 33.8% (29.8% y/y) and defense aircraft orders ballooned 61.4% (30.3% y/y). Excluding the transportation sector altogether orders fell 1.2% (7.4% y/y) following several months of strong gain.

Non-durable goods orders which equal shipments fell 2.0% (+4.9% y/y) due to declines in virtually all industries. The advance report of a 2.5% rise in orders for durable goods was unrevised.

Factory inventories rose 0.5% in February and that was the strongest monthly gain since January 2001. The swing to inventory accumulation from decumulation has been scattered across industries with the notable exceptions of the information technology and furniture industries.

Factory shipments fell 0.5% but the January gain was revised away.

Factory Survey (NAICS) Feb Jan Y/Y 2003 2002 2001
Inventories 0.5% 0.3% -0.8% -1.3% -1.8% -6.1%
New Orders 0.3% -0.9% 7.0% 3.7% -1.9% -6.7%
Shipments -0.5% -0.0% 6.5% 2.6% -2.0% -5.4%
Unfilled Orders 0.6% -0.0% 5.0% 4.2% -6.1% -5.9%
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