U.S. Light Vehicle Sales Fell Sharply

Unit sales of light vehicles in January matched Consensus expectations and gave back all of the prior month's jump with an 11.6% decline to 16.26M.

Sales of light trucks dropped 12.2% as sales of domestics skid 12.8% m/m (-4.2% y/y) and imports fell 8.2% (+1.7% y/y).

Total auto sales fell 10.9% m/m paced by a 14.6% (+6.8% y/y) drop in imports. Sales of domestic autos slid 9.5% (+1.5% y/y).

Imports' share of the US market for new vehicles fell slightly to 19.9% in January, about the same as last year's average.

Challenger, Gray & Christmas reported that job cut announcements in January dropped 15.3% m/m to the lowest level since August.

During the last ten years there has been an 85% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.

Reductions of job cut announcements were widespread across industries last month except in apparel (+86.2% y/y), computers (+167.0% y/y), electronics (+400.9% y/y), financial (-26.0% y/y), services (-0.6% y/y) and government (+81.0% y/y).

Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.

Mortgage applications recovered 7.3% last week but the average level in January remained below the December average by 1.9% according to the Mortgage Bankers Association (MBA) Survey.

Applications to refinance jumped 16.6% w/w and that was enough to pull the January average 8.0% ahead of December.

Purchase applications rose a slight 0.3% w/w and the January average fell 8.6% below December. During the last ten years there has been a 59% 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 slightly to 5.86% versus an average 6.05% during 2004 and 5.95% in December. The effective rate on a 15-year mortgage also rose to 5.42% last week.

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.

As expected the Federal Open Market Committee raised the target rate for federal funds by 25 basis points to 2.50%. The discount rate also was raised 25 basis points to 3.50%.

The decision was unanimous and it was the sixth increase since last June.

Today's press release from the Fed continued to contain a comment suggesting that rates could be raised again. "The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity."

For the complete text of the Fed's latest press release please click here.

A Neutral Fed Funds Rate from the Federal Reserve Bank of St. Louis is available here.

Comparing Forecast-Based and Backward-Looking Taylor Rules: A "Global" Analysis from the Federal Reserve Bank of New York can be found here.