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Economy in Brief

ISM Non-Manufacturing Index Reached Another New High
by Tom Moeller May 5, 2004

The Business Activity Index for the non-manufacturing sector reported by the Institute for Supply Management rose to another series' high of 68.4 in April. Consensus expectations had been for a roughly unchanged reading of 65.0 versus 65.8 in March.

Since the series' inception in 1997 there has been a 59% correlation between the Business Activity Index and the q/q change in GDP services plus construction.

The employment index strengthened to 54.5 as 21% of firms reported higher employment in April, up from 12% in 2002 and 17% last year. April was the highest employment reading since October 2000 and the ninth month in ten above 50.

Since the series' inception in 1997 there has been a 62% 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.

The new orders index improved to 65.6, near the series' high, versus 62.8 in March.

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 again was strong and rose to 68.6 from 65.7 in March. It was the second highest reading on record.

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 April Mar April '03 2003 2002 2001
Business Activity Index 68.4 65.8 53.6 58.1 55.1 48.9
Prices Index 68.6 65.7 56.2 56.7 53.9 51.5
Mortgage Applications Up As Interest Rates Moved Higher
by Tom Moeller May 5, 2004

The index of mortgage applications compiled by the Mortgage Bankers Association rose 4.4% (-37.4% y/y) last week as borrowers acted ahead of potentially more significant increases in interest rates.

Purchase applications jumped 4.1% (+16.0% y/y) following a 6.8% rise the week earlier. Purchase applications for the month of April rose 3.3% versus the March 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 rose 4.7% (-58.6% y/y) following five weeks of sharp decline.

The effective interest rate on a conventional 30-Year mortgage rose further to 6.38% from 6.27% the week prior. The average for April was 6.16% versus 5.65% averaged in March. The effective rate on a 15-year mortgage rose to 5.75% from 5.63% the week prior. The average for April was 5.54% versus 5.00% in March.

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) 04/30/04 04/23/04 2003 2002 2001
Total Market Index 780.9 748.0 1,067.9 799.7 625.6
  Purchase 482.5 463.5 395.1 354.7 304.9
  Refinancing 2,516.0 2,403.0 4,981.8 3,388.0 2,491.0
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