Tom Moeller

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Initial unemployment insurance claims eased to 190,000 (+4.4% y/y) in the week ended February 25 from an unrevised 192,000 in the prior week. Expectations had been for a rise to 197,000 in the Action Economics Forecast Survey. The four-week moving average of initial claims of 193,000 compared to 191,250 in the prior week. 

In the week ended February 18, the number of continuing weeks claimed for unemployment insurance eased to 1.655 million (2.0% y/y) from 1.660 million in the prior week. The four-week moving average of continuing claims edged higher to 1.672 million from 1.670 million.

The insured rate of unemployment held steady at 1.1%, below the 1.2% rate in the prior two weeks. It remained above the record low range of 0.9% and 1.0% in place since mid-April.
   
In the week ended February 11, the total number of continued weeks claimed in all unemployment insurance programs fell 1.0% (-0.6% y/y) to 1.959 million from 1.979 million in the prior week. This total includes federal employees, newly discharged veterans, extended benefits and other specialized programs and is not seasonally adjusted. Claims in the Pandemic Unemployment Assistance program and Pandemic Emergency Unemployment Compensation are no longer included in the main Labor Department press release, as both programs have expired.

The insured rates of unemployment in regular programs vary across states. The highest insured unemployment rates in the week ending February 11 were in New Jersey (2.68%), Massachusetts (2.33%) California (2.28%), Illinois (2.11%), Alaska (2.07%) and New York (1.93%). The lowest rates were in Alabama (0.27%), Virginia (0.31%), Kansas (0.40%), Nebraska (0.62%) and South Dakota (0.63%). Other major state rates include Pennsylvania (1.76%), Texas (0.97%) and Florida (0.41%). These state rates are not seasonally adjusted.

Data on weekly unemployment claims going back to 1967 are contained in Haver's **WEEKLY** database, and they are summarized monthly in **USECON**. Data for individual states are in **REGIONW**. The expectations figure is from the Action Economics Forecast Survey, carried in the **AS1REPNA** database.

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- Initial claims at four-week low.
- Continuing claims slip, also to four-week low.
- Insured unemployment rate steady.

U.S. Unemployment Insurance Claims Slip

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The Autodata Corporation reported that February light vehicle sales fell 6.3% (+8.8% y/y) to 15.19 million units (SAAR) after increasing 19.2% to 16.21 million in January. Sales remain below the April 2021 peak of 18.37 million but the two months together stood at the highest level since June 2021. Vehicle sales comprise about four percent of real consumer expenditures.

Sales of light trucks fell 6.1% last month (+9.6% y/y) to 12.09 million after surging 22.1% in January to 12.87 million units. Purchases of domestically-produced light trucks weakened 5.3% (+11.3% y/y) to 9.46 million after rising 24.6% in January to 9.99 million units. Sales of imported light trucks declined 9.0% (+3.6% y/y) to 2.62 million after strengthening 14.3% to 2.88 million in January.

Trucks' share of the light vehicle market rose to 79.6% in February from 79.4% in January, and roughly matched a 79.7% high in March 2022.

Auto sales declined 7.2% in February (+6.2% y/y) to 3.10 million units after increasing 9.2% during January to 3.34 million units. Sales have been moving sideways since mid-2021. Purchases of domestically-made autos declined 7.8% (+10.4% y/y) to 2.13 million units and reversed all of the 7.9% January increase to 2.31 million units. Sales of imported autos weakened 6.8% (-3.0% y/y) to 0.96 million units after rising 12.0% to 1.03 million units in January.

Imports' total share of the U.S. vehicle market fell to 23.6% last month after falling to 24.1% in January. It was the lowest share since July of 2022 and below a high of 28.0% in September 2021. Imports' share of the passenger car market improved to 31.0% last month from 30.8% in January, but remained down from the September 2021 high of 37.9%. Imports' share of the light truck market fell to 21.7% in February from 22.4% in January.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the **INDUSTRY** database.

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- Total sales reverse just half of January surge.
- Light truck sales backpedal; car sales trend sideways.
- Imported vehicle sales fall sharply.

U.S. Light Vehicle Sales Retreat in February

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The U.S. ISM manufacturing index improved to 47.7 in February from 47.4 in January. It was below the reading of 48.4 in December, according to the Institute for Supply Management. The latest figure was the fourth consecutive month below the break-even level of 50 and it remained below the peak of 63.8 in March 2021. The figure remained near the lowest level since May 2020. The Action Economics Forecast Survey expected 47.9 for February.

Movement amongst the component series was mixed last month. The new orders index rose to 47.0 from 42.5 and stood at its highest level since October. It was, nevertheless, the sixth consecutive month below the break-even level of 50. An improved 21.3% (NSA) of respondents reported higher new orders in February while a lessened 24.1% reported a decline. Working the other way, the production index fell to 47.3 last month from 48.0, remaining well below its high of 67.0 in March 2021. Seventeen percent (NSA) of respondents reported higher production while 21.1% indicated a decline. February’s inventory index eased to 50.1 from 50.2, remaining beneath the most recent high of 56.6 in July. The supplier delivery index edged down to 45.2 but is down roughly one-third y/y, indicating much faster product delivery speeds.

The employment index declined to 49.1 in February from 50.6 in January. It was the first month below the break-even level of 50 in three months. A lessened 13.8% (NSA) of respondents reported higher employment last month while an also reduced 15.2% reported less hiring.

The prices index rose to 51.3 (NSA) in February from 44.5 in January. It stood well below its high of 92.1 in June of 2021, though it was above the December low of 39.4. A higher 24.7% (NSA) of respondents reported higher prices while a lessened 22.1% reported price declines.

In other ISM series, the new export orders index edged higher to 49.9 in February from 49.4 in January. It remained down, however, from its recent high of 57.1 in February 2022. The imports index increased to 49.9 in February from 47.8 in January, but it also was below its high of 61.0 in June 2021. The order backlog index rose to 45.1 from 43.4 and stood at the highest level in four months.

The ISM figures are based on responses from over 400 manufacturing purchasing executives from 20 industries, which correspond to their contribution to GDP in 50 states. These data are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver's **AS1REPNA** database.

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-	Index remains near three-year low.
-	Component changes are mixed.
-	Pricing power improves again.

U.S. ISM Manufacturing Index Edges Higher in February

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The Conference Board's Index of Consumer Confidence Index fell 2.9% (-2.6% y/y) to 102.9 during February after declining 2.8% to 106.0 in January, revised from -1.7%. A reading of 108.5 had been expected in the Action Economics Forecast Survey for February.

The Expectations Index fell 8.3% (-13.7% y/y) to 69.7 following an 8.9% January drop, revised from -6.7%. The Present Situation Index rose 1.1% (6.9% y/y) to 152.8, the highest level in ten months.

Consumers' assessment of current business conditions deteriorated m/m as 17.8% of respondents characterized conditions as good, the least in three months. Labor market readings improved sharply this month. The jobs gap, representing the difference between respondents indicating that jobs are plentiful versus those saying jobs are hard to get, rose to 41.5% in February, the highest level since April of last year. Calculated by Haver Analytics, this series has a 67% correlation with the unemployment rate over the last ten years. The jobs plentiful measure rose to 52.0, up 7.2% in the last four months. The jobs hard-to-get measure fell to the lowest level since April of last year.

A lessened 14.2% of respondents felt that business conditions would get better in six months. Fifteen percent of respondents felt there would be more jobs in six months, the fewest since October 2016. A lessened 13.4% expected income to increase in six months, the least since August 2020.

The expected inflation rate in twelve months declined to 6.3% from 6.7% in January. It remained below the 7.9% high in June of last year but remained higher than the 4.4% low in January 2020.

Sixty-three percent of respondents felt that interest rates would be higher in twelve months while 11.5% thought they would be lower. Thirty-one percent of respondents thought that stock prices would be higher in twelve months and 31.6% thought they would be lower.

The share of respondents planning to buy a home within six months plunged to 5.0% in February from 6.3% in January, still higher than its 4.5% July low. Those planning to buy a major appliance weakened to 41.8% of respondents this month after surging to 52.4% in October. It remained above its 41.1% July low.

The Consumer Confidence data are available in Haver's **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

**The Role of Immigration in U.S. Labor Market Tightness** from the Federal Reserve Bank of San Francisco can be found [here](https://www.frbsf.org/wp-content/uploads/sites/4/el2023-06.pdf).

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-	Expectations weaken again.
-	Present situation index improves.
-	Inflation expectations fall sharply.

U.S. Consumer Confidence Declines in February

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The Federal Housing Finance Agency reported that home prices eased 0.1% during December, the same as in November. Prices fell in four of the last six months and were stable in one. Prices increased 6.6% y/y versus a peak of 19.2% y/y reached in February of 2022. 
	
Seasonally adjusted monthly house price changes were mixed amongst Census regions with the largest decline occurring in the Middle Atlantic area, off 0.8% (+6.8% y/y). Following closely behind was a 0.7% decline (+7.4% y/y) in the West South Central region and a 0.3% drop (+3.4%) in the Mountain region. Prices also fell 0.3% (+5.4%) in New England and dipped 0.	2% (+6.3% y/y) in West North Central region. Home prices in the Pacific region eased slightly (+0.6% y/y).

Increasing in December were home prices in the East South Central Region by 0.9% (9.5% y/y) and the East North Central region where they rose 0.2% (6.7% y/y). Home prices also improved 0.1% (10.6% y/y) in the South Atlantic region of the country. Year-to-year price increases in each of the regions of the country were well below the gains reached in 2021 or 2022.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The **FHFA** data are available in Haver’s **USECON** database.

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- FHFA Home Price Index slips for second straight month.
- House prices are down in six of the nine census regions.

U.S. FHFA House Prices Edge Lower in December

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<i>The National Association for Business Economics forecast for real GDP growth in 2024 of 1.9% (Q4/Q4) compares to 0.3% estimated earlier. For 2023, expected growth of 0.3% was unchanged. These gains follow a 0.9% rise in 2022.</i> Quarterly, GDP is expected to hold steady in Q1’23 then rise 0.1% in Q2'23, increase 0.2% in Q3 and 1.1% in Q4.

Personal consumption expenditures are forecast to grow 1.3% this year and 1.3% in 2024, after a 2.8% gain in 2022. Business fixed investment is expected to rise 0.9% this year and 1.4% in 2024, following a 3.8% rise in 2022. An expected decline in residential investment this year of 14.2% should be followed by a 1.9% rise in 2024; all coming after a 10.7% decline in 2022. After falling 0.6% in 2022, government spending should rise 1.8% in 2023 then increase 1.0% in 2024.

The net export deficit is expected to shrink to $1.231 trillion in 2023 from the record $1.357 trillion in 2022, then marginally narrow to $1.217 trillion in 2024. Exports should rise 3.0% this year, then gain 3.6% in 2024. Imports are expected to decline 1.0% this year then rise 2.9% in 2024. Inventories are expected to rise $37 billion in 2023 after a $125 billion 2022 gain, then rise $40 billion in 2024.

Housing starts are forecasted to decline to 1.31 million in 2023 from 1.55 million in 2022, then rise to 1.35 million units in 2024. Light vehicle sales are projected to rise to 14.8 million this year from 13.8 million in 2022, then improve to 15.5 million in 2024. Sales will remain below the 2016 peak of 17.5 million. An average monthly gain in payroll employment of 61,000 in 2023 compares to 401,000 in 2022; it should then rise to 102,000 in 2024. Expectations for the unemployment rate place it at 3.9% this year compared to 3.6% in 2022; then it is expected to rise further to 4.4% in 2024.

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Inflation pressures should ease. After rising 7.1% (Q4/Q4) in 2022, the gain in the Consumer Price Index should moderate to 3.0% in 2023 and 2.3% in 2024. Price inflation, as measured by the PCE price index, is expected to slow to 2.8% in 2023 and 2.2% in 2024, after surging to 5.7% in 2022. The chain PCE price index excluding food & energy is projected to slow to 3.0% in 2023 and 2.2% in 2024, after rising 4.8% in 2022. The cost of crude oil is expected to be $79 at the end of this year and stay at $79 per barrel by the end of 2024.

Interest rates are expected to decline. The forecasted 3.55% rate on a ten-year Treasury note at the end of this year compares to 3.88% at the end of 2022. The rate should decline further to 3.42% by the end of 2024. The Federal funds rate is projected to rise, however, to 4.88% by the end of 2023 from 4.375% at the end of 2022. The funds rate is forecasted to decline to 3.50% at the end of 2024.

After-	tax corporate profits are predicted to decline 1.6% this year after rising 7.8% in 2022, then improve 2.5% next year. The expected Federal government budget deficit should fall to $1.185 trillion this year from $1.375 trillion in 2022, then total $1.250 trillion in 2024. The deficit hit a peak of $3.132 trillion in 2020.

The figures from the latest NABE report can be found in Haver's **SURVEYS** database.

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-	Growth in consumer spending should be slow & steady.
-	Housing starts are predicted to decline this year then rise next year.
-	Vehicle sales should improve this year and next.
-	Price inflation is expected to slow.

NABE Forecast Lifts U.S. Economic Growth in 2024 after Minimal Gain in 2023

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The Pending Home Sales Index from the National Association of Realtors (NAR) surged 8.1% (-24.1% y/y) to 82.5 in January after increasing 1.1% in December, revised from 2.5%. The index stood at the highest level since August. The pending home sales index remained 35.5% below its August 2020 high of 128.0.

Sales in the West increased 10.1% (-29.3% y/y) in January following a 5.8% December gain. Sales in the South improved 8.3% (-24.7% y/y) after rising 2.9% in December. In the Midwest, home sales increased 7.9% (-21.1% y/y) in January after easing 0.9% in the prior month. Following seven straight months of decline, sales in the Northeast improved 6.0% (-19.8% y/y) after a 5.8% December drop.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **SURVEYW** database.

-	Sales rise to five-month high.
-	Monthly strength logged in all regions.

U.S. Pending Home Sales Surge in January

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New single-family home sales during January increased to 670,000 (-19.4% y/y) after rising to 625,000 in December, revised from 616,000. November sales were revised to 583,000 from 602,000. The Action Economics Forecast Survey expected sales of 619,000 new homes for last month.

January’s gain in new home sales reflected varied movement amongst the regions of the country. In the South, sales rose 17.1% (-2.2% y/y) to 451,000 after rising 5.5% in December. This increase was offset by a 19.4% decline (-13.8% y/y) in sales in the Northeast to 25,000 following a 6.1% December weakening. New home sales in the West fell 7.3% (-46.9% y/y) to 127,000 after rising 0.7% in December. Also declining last month, new home sales in the Midwest fell 6.9% (-34.3% y/y) to 67,000 following a 46.9% December surge.

The median price of a new home fell 8.2% last month (-0.7% y/y) to $427,500 after rising 1.6% in December. The price has fallen 13.9% since its October peak of $496,800. The average sales price of a new home weakened 12.8% (-5.3% y/y) to $474,400 following a 3.9% December rise. These sales price data are not seasonally adjusted.

The number of unsold new homes on the market fell 2.9% (+11.4% y/y) to a seasonally adjusted 439,000 units, up from a low of 142,000 in July 2012. The seasonally adjusted months' supply of new homes for sale fell to 7.9 months from a high of 10.1 months in September, but remained up from a low of 3.3 months in August 2020. The median number of months a new home stayed on the market rose to 2.4 from the record low of 1.5 months in both September & October. These figures were down from a high of 5.1 months in March 2021. These data date back to January 1975.

New home sales activity and prices are available in Haver's **USECON** database. The consensus expectation figure from Action Economics is available in the **AS1REPNA** database.

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- Home sales rise for second straight month.
- Sales changes are mixed regionally.	
- Median sales price falls sharply.

U.S. New Home Sales Increase in January

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Personal consumption expenditures (PCE) increased 1.8% (7.9% y/y) during January after easing 0.1% in December, revised from -0.2%. Spending fell 0.2% in November. A 1.3% rise had been expected in the Action Economics Forecast Survey.

In January, real PCE increased 1.1% (2.4% y/y) after falling 0.3% in both of the prior two months.  Real spending on durable goods increased 5.2% (0.5% y/y) last month after a 1.7% decline. Spending on motor vehicle & parts surged 11.9% (-1.7% y/y) after falling 3.3% in December. Real spending on furniture & appliances gained 2.0% (0.6% y/y) last month after falling 1.1% December. Real spending on recreational goods & vehicles improved 2.1% (2.8% y/y) following a 0.2% easing.

Real spending on nondurable goods rose 0.5% (-1.4% y/y) in January after declining in each of the prior three months. Real apparel spending increased 3.0% (3.5% y/y) last month after weakening 1.6%. Outlays on gasoline & other energy products declined 2.2% (-0.9% y/y) following a 0.3% fall and real food & beverage outlays eased 0.1% (-5.7% y/y) after falling 0.5% in December.

Real spending on consumer services improved 0.6% last month (4.1% y/y) after holding steady in December. Recreation services buying strengthened 1.4% (7.9% y/y) in January, double the prior month’s gain while real restaurant and hotel spending surged 4.6% (14.0% y/y), after falling 0.7% in December. Real transportation services outlays rose 0.9% (4.1% y/y) after rising 0.4% in December, while real housing & utilities expenditures fell 0.6% (-0.2% y/y) after a 0.1% uptick. Real healthcare spending gained 0.4% last month (4.0% y/y) after rising 0.6%. Financial services & insurance expenditures improved 0.3% (2.9% yy) in January after easing 0.1% in December.

Personal income rose 0.6% (6.4% y/y) during January, half the expected 1.2% rise, after increasing 0.3% in December, revised from 0.2%. The gain reflected a 0.9% increase (7.9% y/y) in wages & salaries after two consecutive 0.4% gains. Proprietors' income rose 0.4% (6.6% y/y), the same as in December. Rental income strengthened 1.5% (12.1% y/y) in January following a 1.0% December rise. Receipts on assets rose 0.5% (5.3% y/y) as interest income edged 0.1% higher (8.3% y/y), but dividend income increased 0.9% (2.1% y/y). Personal transfer receipts eased slightly (+3.5% y/y) after a 0.1% uptick.

Disposable income rose 2.0% (8.4% y/y) in January following a 0.4% December rise. Taxes fell 7.9% (-5.1% y/y). Real disposable earnings rose 1.4% (2.8% y/y) after a 0.2% December rise.

The personal saving rate rose to 4.7% in January, the highest level in twelve months. The level of personal savings increased 7.1% last month and increased 8.7% y/y.

The PCE chain price index increased 0.6% (5.4% y/y) following a 0.2% December rise, revised from 0.1%. The index excluding food & energy also rose 0.6% (4.7% y/y), the largest increase since August as it followed a 0.4% December rise. Goods prices rose 0.6% (4.7% y/y) while services prices also gained 0.6% (5.7% y/y). The core services price index excluding energy & housing increased 0.6% (4.6% y/y), the same as in December. Energy prices rose 2.0% (9.6% y/y) after falling 3.6% in December while food prices rose 0.4% (11.1% y/y), the same as in December.

The personal income and consumption figures are available in Haver's **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Real spending gain led by goods. 
- Personal income increase disappoints.
- Price index growth accelerates.

U.S. Personal Spending Strengthens in January

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Real GDP grew 2.7% at an annual rate (0.9% y/y) during Q4'22, revised from the advance report of 2.9% growth. It followed 3.2% growth in Q3. The latest figure compares to expectations for a 3.0% rise in the Action Economics Forecast Survey.

Faster inventory accumulation added an unrevised 1.5 percentage point to growth last quarter following a 1.2 percentage point subtraction in Q3. Improvement in the foreign trade deficit added 0.5 percentage point to growth, revised from 0.6, last quarter after a 2.9 percentage point addition in Q3. The gain occurred as exports fell 1.6% (+5.2% y/y), revised from 1.3%, after rising 14.6% in Q3. Imports weakened 4.2% (+1.8% y/y), revised from -4.6%, following a 7.3% decline.

Growth in domestic final demand slowed to a minimally revised 0.7% (+0.9% y/y) following a 1.5% Q3 rise. Real personal consumption expenditure growth of 1.4% last quarter (+1.8% y/y) was revised from 2.1% and followed 2.3% growth in Q3. Durable goods outlays fell 1.9% (+0.5% y/y), revised from 0.5% growth. Spending on motor vehicles & parts gained a downwardly revised 3.8% (-1.5% y/y), and furniture & appliance outlays declined 0.8% (-0.5% y/y), revised from a 0.4% gain. The decline in spending on recreational goods & vehicles was deepened to a 3.9% (+4.2% y/y). In the nondurable goods sector, spending rose 0.2% (-1.7% y/y), revised from 1.5%. Outlays on food & beverages eased 0.3% (-5.2% y/y), revised from a 1.1% gain, following three straight quarters of decline. Clothing outlays slipped 0.1% (+1.2% y/y), revised from a 0.8% gain while gasoline & oil expenditures rose a downwardly revised 1.1% (-3.6% y/y), also following three straight quarters of decline. Purchases of services strengthened a little-changed 2.4% (3.2% y/y) after stronger growth in the prior two quarters. Housing & utilities outlays gained 1.8% (1.4% y/y) and health care outlays increased a strengthened 5.9% (2.8% y/y), about the same as in Q3. Spending on recreation increased a steady 3.4% (4.5% y/y) while spending at restaurants & hotels rose 1.9% (5.6% y/y), the weakest rise in three quarters.

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Business fixed investment rose 3.3% (4.3% y/y) in Q4’22, revised from 0.7% after strengthening 6.2% in Q3. Structures investment strengthened 8.5% (-3.3% y/y), revised from 0.4%, but had been falling since the end of 2019.  Equipment investment fell 3.2% (+4.0% y/y), revised from -3.8%, reflecting an unchanged 23.3% decline (-2.1% y/y) in information processing equipment and a downwardly revised 30.4% rise (27.9% y/y) in transportation equipment. Investment in industrial equipment rose an upwardly revised 6.2% (-0.1% y/y) while investment in intellectual property products rose an upwardly revised 7.4% (8.5% y/y), remaining strong since the end of the 2020 recession.

Residential investment declined for the seventh consecutive quarter, tumbling a little-revised 25.9% (-19.0% y/y) in Q4, about the same as in Q3.

Government spending increased a little-changed 3.6% (0.8% y/y) in Q4’22, about the same as in Q3. Federal government spending surged a little-changed 5.9% (0.1% y/y) as defense spending rose 2.2% (-0.2% y/y). Nondefense outlays jumped 10.9% (0.5% y/y) following a 2.5% increase. State & local government spending rose an unrevised 2.3% (1.3% y/y) after increasing 3.7% in Q3.

The GDP chain price index increased 3.9% (6.4% y/y), revised from 3.5%, last quarter, remaining the weakest increase in two years. It was down from a 9.0% rise in Q2. The Action Economics Forecast Survey expected a 3.5% increase. The PCE price Index rose 3.7% (5.7% y/y), revised from 3.2%, after increasing 4.3% in Q3. The PCE price index less food & energy gained 4.3% (4.8% y/y), revised from 3.9%, down from 5.6% in Q1. The nonresidential investment price index rose a minimally changed 3.4% (6.6% y/y). The equipment price index improved 6.0% (7.2% y/y). The intellectual property products price index slipped 0.6% (+2.2% y/y) after firm increases in the prior six quarters. The residential investment price index rose 6.7% (12.1% y/y), the weakest increase in two years. The government spending price index rose 3.5% (6.8% y/y), also the weakest increase in two years.

The GDP figures can be found in Haver's **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis' detail in the national accounts. Both databases include tables of the newly published not seasonally adjusted data. The Action Economics consensus estimates can be found in **AS1REPNA**.


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- Consumer spending growth reduced but capital investment raised.
- Inventories & trade deficit improvement add to growth. 
- Q4 price gain revised higher but trend remains lower.

U.S. GDP Growth Revised Slightly Lower in Q4’22

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The Federal Reserve Bank of Kansas City reported that their manufacturing sector business activity index of zero in February compared to modestly negative readings between -1 and -4 in the prior four months. The Kansas City measure is a diffusion index with positive readings indicating more respondents reporting increases than decreases in business activity. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes.

The ISM-Adjusted Index (NSA) of 49.6 compared to 49.7 in January but was increased from 44.5 in December. These readings were down from a high of 68.9 in March 2022.

A modest improvement in the current conditions measure reflected uneven changes amongst the component series. The new orders measure rose to its least negative reading since September while the supplier delivery time measure also improved. Deteriorating sharply m/m was the shipments measure along with materials inventories, production and orders backlogs.

The employment index rose sharply to 11, the highest level since August. An improved 29% of survey respondents reported more hiring while a lessened 16% reported a decline. Moving in the opposite direction, however, was the employee workweek reading which fell to the lowest level in nearly three years.

On the inflation front, the prices received index for finished products rose slightly to 17 but remained well below the high of 60 in August 2021. Twenty-six percent of respondents reported higher prices while a lessened 10% reported a decline.  The raw materials price measure rose to its highest level since October.

The future composite index (expectations in six months) fell sharply to 1, its lowest level since 	May 2020. Expected orders, shipments, employment and delivery times each declined, but expected production and inventories improved. Expectations for finished goods prices received also improved to the highest level in three months. The expected raw materials price measure similarly rose.

The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The September survey was conducted during the third week of the month and included 95 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri. Data for the Kansas City Fed Survey can be found in Haver's **SURVEYS** database.

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- Expectations continue to deteriorate.
- Pricing power remains weak.

Kansas City Fed Factory Index Is Unchanged in February

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Mortgage applications declined 13.3% (-57.2% y/y) in the week ended February 17 following a 7.7% fall during the prior week. The decline brought them to the lowest level since the first week of January, down 21.7% during the last four weeks. These data are from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.

Applications for home purchase loans plunged 18.1% (-41.3% y/y) in the latest week following a 5.5% decline in the week prior. Applications to refinance an existing loan fell 2.2% (-72.0% y/y) following a 12.5% decline in the prior week.

The percentage of applications for refinancing an existing loan rose to 32.5% in the week ended February 17, up from 26.1% at the end of November. The percentage of ARM loans rose to 7.6% but remained down from a recent high of 12.8% in the second week of October.

The effective interest rate on a 30-year fixed-rate loan rose w/w to 6.84% from 6.36% two weeks earlier. It remained below a high of 7.42% in the third week of October. The effective rate on 15-year fixed-rate mortgages rose to 6.22% last week from 6.06% in the prior week and 5.80% one week earlier. The rate on 30-year Jumbo loans increased to 6.59% from 6.38%. The rate on a 5-year ARM rose to 6.02% from 5.80% in the prior week. It was the highest rate since the third week of November.

The average loan size fell 1.1% (+1.6% y/y) to $378,400 in the week ended February 17 from $382,500 in the prior week. The series high of $401,900 was reached in the week ended May 6. The average size of a purchase loan fell to $431,900 (-4.1% y/y) from $433,300 in the week prior. The average loan size to refinance a mortgage declined to $267,200 (-9.3% y/y) from $274,300. It was the lowest level in five weeks.

The Mortgage Bankers 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 applications fall sharply; refinancing applications ease.
-	Mortgage interest rate on 30-year loan jumps.


U.S. Mortgage Applications Decline as Interest Rates Rise

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