Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090218c.jpg" align="left" border="0" height="265" width="353">
The UK MFG sector weakened further in February. The total
orders index is at its lowest since 2000 as is the export order
reading. Stocks of finished goods have never had a higher reading.
Looking ahead the expected outlook over the next three months is lowest
in this period. Average price expectations are in the bottom 36% of
their historic range. 
 

The UK MFG sector continues to be very weak. The pace of the
deterioration is slightly less than last month&#8217;s 13 point drop at -8.
But that is still a rapid month to month deceleration. There is little
in the February survey to suggest that the weakness is playing out. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">UK
Industrial volume data CBI Survey</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Reported:</td>
<td>Feb 09</td>
<td>Jan 09</td>
<td>Dec 08</td>
<td>Nov 08</td>
<td>Oct 08</td>
<td>12 MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-56</td>
<td>-48</td>
<td>-35</td>
<td>-38</td>
<td>-39</td>
<td>-16</td>
<td>0%</td>
<td>9</td>
<td>-48</td>
<td>57</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>-49</td>
<td>-39</td>
<td>-33</td>
<td>-31</td>
<td>-32</td>
<td>-16</td>
<td>0%</td>
<td>3</td>
<td>-39</td>
<td>42</td>
</tr>
<tr>
<td class="firstcol">Stocks:FinGds</td>
<td>27</td>
<td>27</td>
<td>21</td>
<td>25</td>
<td>24</td>
<td>16</td>
<td>100%</td>
<td>27</td>
<td>-2</td>
<td>29</td>
</tr>
<tr style="font-weight: bold;" class="even">
<td class="firstcol" colspan="11">Looking
ahead</td>
</tr>
<tr>
<td class="firstcol">Output Volume:Nxt 3M</td>
<td>-44</td>
<td>-43</td>
<td>-42</td>
<td>-42</td>
<td>-31</td>
<td>-11</td>
<td>0%</td>
<td>28</td>
<td>-43</td>
<td>71</td>
</tr>
<tr>
<td class="firstcol">Avg Prices 4Nxt 3m</td>
<td>-12</td>
<td>0</td>
<td>0</td>
<td>10</td>
<td>23</td>
<td>21</td>
<td>36%</td>
<td>34</td>
<td>-19</td>
<td>53</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="11">From
end 2000</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Compare
to NTC MFG</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>Jan 09</td>
<td>Dec 08</td>
<td>Nov 08</td>
<td>Oct-08</td>
<td>12 MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">UK MFG</td>
<td>&nbsp;</td>
<td>35.78</td>
<td>34.91</td>
<td>34.48</td>
<td>40.67</td>
<td>43.65</td>
<td>6%</td>
<td>56.28</td>
<td>34.48</td>
<td>22</td>
</tr>
</tbody>
</table>
</body></html>

The UK MFG sector weakened further in February. The total orders index is at its lowest since 2000 as is the export order reading. Stocks of finished goods have never had a higher reading. Looking ahead the expected outlook over the [...]

CBI Finds Further Weakening

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Tom Moeller

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At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was left unchanged at 4.25% to 4.50%. This followed reductions at three consecutive meetings in the fall of 2024. Rates remain below the high of 5.25% to 5.50% in place in mid-September. Today’s target range matched expectations in the Action Economics Forecast Survey.

The statement following the meeting indicated that, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”

“The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”

The Fed continued, “The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities.”

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- FOMC holds funds rate target at late-December level.
- Risk assessments include higher unemployment & inflation.

FOMC Targeted Funds Rate Range Is Unchanged; Increased Risks Acknowledged

Kathleen Stephansen, CBE

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Consumer credit outstanding rose $10.2 billion (1.9% y/y) during March after declining by $0.6 billion (+1.7% y/y) during February, revised from a decline of $0.8 billion (+1.7% y/y. A $10.0 billion rise had been expected in the Action Economics Forecast Survey. As a percentage of disposable personal income, consumer credit was 22.4% in March, compared to 22.9% one year earlier.

Nonrevolving credit outstanding rose $8.3 billion (1.5% y/y) in March after easing $0.3 billion (1.3% y/y) in February. Nonrevolving credit held by depository institutions declined 7.8% y/y in March after declining 9.0% y/y in February. Finance company debt holdings rose 0.8% y/y, while credit union holdings eased 1.9% y/y in March. Nonrevolving debt held by the federal government rose 3.4% y/y.

In March, revolving credit outstanding, which includes credit cards, rose $1.9 billion (2.9% y/y) following a decline of $0.3 billion (2.9% y/y) in February. Revolving credit outstanding held by depository institutions fell 1.5% y/y. Revolving credit held by finance companies dropped 12.2% y/y, while that held by credit unions rose 3.7% y/y.

The consumer credit figures from the Federal Reserve Board are break-adjusted and calculated by Haver Analytics. The breaks in the series in 2005, 2010 and 2015 are the result of the incorporation of data from the Census and the Survey of Finance Companies, as well as changes in the seasonal adjustment methodology. The consumer credit data are available in Haver’s **USECON** database. The Action Economics forecast figures are contained in the **AS1REPNA** database.

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- Consumer credit rises close to expectations.
- Nonrevolving and revolving credit rise.


U.S. Consumer Credit Rebounded in March

Andrew Cates

**The global business cycle** 
The recent sharp decline in the Future Output Balance in the global composite PMI survey reflects a sudden deterioration in global business expectations. The sweeping tariffs, introduced in April 2025, have generated heightened uncertainty around trade policy and sparked fears of retaliatory actions from key trading partners. As a result, businesses worldwide are scaling back their expectations for future output, wary of rising costs, disrupted demand flows, and a broader shift toward protectionism that could undermine global economic momentum.

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Note: The extreme declines in the Future Output Balance that were recorded in the early months of 2020 (at the height of the COVID pandemic) have been removed from this chart.

**Global supply chain pressures**
Still, despite the marked deterioration in global business expectations, this second chart below provides a reassuring counterpoint: as of now, there is little evidence that global supply chain pressures have materially intensified. Both the New York Fed’s Global Supply Chain Pressure Index and the Baltic Exchange Dry Index remain relatively subdued, especially compared to the pandemic-era spikes of 2020–2022. While there has been heightened concern following the April 2025 US tariff announcements, these trade policy shifts have yet to translate into measurable physical disruption in logistics or freight rates. The stability of these indices suggests that although sentiment has taken a hit, global shipping networks and supply flows are, for now, absorbing the shock. However, this calm may prove fragile if the policy environment hardens further or retaliatory trade actions begin to compound the strain.

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**Expectations for central banks’ policy rates** 
Adding to the picture of mounting economic caution, the latest Blue Chip Financial Forecasts survey reveals that expectations for policy easing over the next 12 months have become even more pronounced than in previous months. While earlier surveys had already pointed to a further extension of the global rate-cutting cycle, the latest results suggest forecasters now anticipate a deeper and more aggressive round of monetary easing—most notably from the US Federal Reserve, which is now expected to deliver nearly a full percentage point in rate cuts over the next 12 months. The sharp deterioration in business sentiment is reshaping the macro narrative: central banks are no longer simply guiding inflation lower, but are instead preparing to confront the risk of a deeper, demand-driven slowdown.

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**Energy prices and inflation** 
Adding further context to the growing expectations for policy easing, oil prices have dropped sharply in recent weeks—driven by mounting concerns over global growth, as reflected in weakening business sentiment and softer demand indicators. The chart below provides a longer-run perspective on why this matters: energy prices have historically played a central role in shaping the global inflation trajectory. The strong positive correlation (r = 0.83) between median world energy price inflation and median core consumer price inflation underscores the powerful pass-through effects energy costs can have on broader price dynamics. While core inflation tends to be stickier, this historical relationship makes clear that sustained declines in energy prices often foreshadow broader disinflationary trends.

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**Intangibles versus tangibles** 
Shifting focus from short-term cyclical risks to longer-term structural dynamics, the next chart below underscores a fundamental transformation in the composition of US investment: the economy has increasingly been built on intangibles. Over the past several decades, investment in intangible assets—such as software, intellectual property, R&D, and brand equity—has steadily climbed and, since the mid-2010s, has overtaken investment in both structures and equipment as a share of GDP. This shift reflects the rise of a knowledge-based, innovation-driven economy, but it also introduces new forms of vulnerability. Unlike physical capital, intangible assets rely heavily on trust, reputation, legal protections, and global openness. In this context, escalating trade frictions and a more confrontational US economic stance—as signalled by the recent tariff wave—risk eroding the goodwill and institutional credibility that underpin much of the value created by intangibles. If geopolitical uncertainty undermines the perceived reliability of US intellectual property protections or weakens global collaboration, it could pose a deeper structural challenge to future growth than any immediate cyclical downturn.

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**Investment in Artificial Intelligence**
The centrality of intangibles to the US growth model is nowhere more evident than in the explosion of private investment in artificial intelligence. As this chart illustrates, global AI investment has surged over the past decade—reaching new highs in 2024—and the United States has consistently accounted for the lion’s share of that spending. This reflects not only America’s previous leadership in frontier technologies but also its dependence on intangible capital, from algorithms and data infrastructure to human expertise and institutional trust. However, this dominance also underscores the strategic stakes of current policy choices. In an environment of rising trade tensions and potential fragmentation, the foundations of US leadership in AI—cross-border collaboration, data openness, and global market access—could be at risk.

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Financial market sentiment has rebounded in recent weeks, buoyed by signs of de-escalation in the US-led trade war and growing confidence that central banks—particularly the Federal Reserve—will step in with more rate cuts to cushion any fallout. Yet beneath the surface, a more sobering picture of the global economy persists. For example, latest PMI surveys reveal that global business expectations have slumped to their lowest levels since the pandemic, reflecting widespread unease about the growth outlook (chart 1). While supply chain pressures have so far remained contained, suggesting no repeat of the logistical chaos seen during the pandemic (chart 2), the latest Blue Chip Financial Forecasts survey reveals that forecasters are now pencilling in deeper and more widespread monetary easing than previously anticipated—an acknowledgment that demand is faltering (chart 3). Falling oil prices further reinforce this view: they are both a symptom of weakening global demand and a potential source of disinflation, reducing the urgency for central banks to maintain tight policy (chart 4). At the structural level, the US economy's increasing reliance on intangible assets—ranging from intellectual property to reputation—has made it more vulnerable to geopolitical frictions and the erosion of global trust (chart 5). This risk is compounded by America's dominant role in AI investment, a sector symbolic of both its economic strengths and its exposure to international perceptions (chart 6). The longer-term challenge, then, is not just navigating the current downturn, but ensuring that the institutional goodwill and cross-border openness that support the modern US economy are not sacrificed in a more fragmented and uncertain global order.

Charts of the Week: Relief Rally Meets Recession Risk

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Mortgage applications increased 11.0% (26.0% y/y) in the week ended May 2, after declining 4.2% in the week ended April 25, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications to purchase a home rose 11.1% (12.9% y/y) in the week ended May 2 after declining 4.4% in the previous week. Loan applications to refinance a home loan also increased 11.1% (51.0% y/y) in the latest week after falling 3.7% in the prior week.

The effective interest rate on a 30-year fixed rate loan of 7.03% in the week ended May 2 compared to 7.08% in the prior week. The effective rate on a 15-year fixed rate loan of 6.34% in the week ended May 2 followed 6.36% in the prior week. The rate on a 30-year jumbo loan declined to 6.99% in the latest week from 7.06% in the prior week, while the rate on a 5-year ARM eased	to 6.08% in the week ended May 2 from 6.12% in the prior week.

The share of applications to refinance an existing mortgage slipped to 37.1% in the week ended May 2 from 37.3% in the prior week. The share of loans with an adjustable rate rose to 8.3% in the latest week from 7.4% one week earlier.

The average size of a mortgage loan rose 4.2% (3.8% y/y) to $400,200 in the week ended May 2, after slipping 0.7% to $384,100 in the prior week. The average size of a loan to purchase a home increased 1.0% (0.2% y/y) to $444,300 in the latest week from $440,100 in the week prior. The average size of a loan to refinance an outstanding mortgage increased 12.3% (27.6% y/y) last week to $325,400 from $289,800 one week earlier.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Purchase & refinancing loan applications jump.
- Effective interest rates remain range-bound.
- Average loan size increases.

CBI Finds Further Weakening

Summary

Robert Brusca

More Economy in Brief

FOMC Targeted Funds Rate Range Is Unchanged; Increased Risks Acknowledged

U.S. Consumer Credit Rebounded in March

Charts of the Week: Relief Rally Meets Recession Risk

Mortgage Applications Surge as Interest Rates Ease Last Week

UK Industrial volume data CBI Survey
Reported:	Feb 09	Jan 09	Dec 08	Nov 08	Oct 08	12 MO Avg	Pcntle	Max	Min	Range
Total Orders	-56	-48	-35	-38	-39	-16	0%	9	-48	57
Export Orders	-49	-39	-33	-31	-32	-16	0%	3	-39	42
Stocks:FinGds	27	27	21	25	24	16	*100%*	27	-2	29
Looking ahead
Output Volume:Nxt 3M	-44	-43	-42	-42	-31	-11	0%	28	-43	71
Avg Prices 4Nxt 3m	-12	0	0	10	23	21	*36%*	34	-19	53
From end 2000
Compare to NTC MFG
		Jan 09	Dec 08	Nov 08	Oct-08	12 MO Avg	Pcntle	Max	Min	Range
UK MFG		35.78	34.91	34.48	40.67	43.65	6%	56.28	34.48	22