Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103d.jpg" width="353">
The October Non-manufacturing Sector Business Activity Index from the Institute for Supply Management recovered more than half of its September decline with a 6.7 point increase to 60.0. Consensus expectations had been for a lesser recovery to 57.0.
Since the series&#39; inception in 1997 there has been a 50% correlation between the Business Activity Index and the q/q change in real GDP for services plus construction.
The orders index gained back just a piece of its September decline with a 1.6 point rise. Conversely, the employment index fell for the third month in the last four to the lowest level since January. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103e.jpg" width="353">
Pricing power reversed just some of the 14.3 point September surge to a record high with a 3.4 point decline. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP Services chain price index.
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.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
Today&#39;s testimony by Fed Chairman Alan Greenspan on the Economic Outlook before the Joint Economic committee can be found <a href="http://www.federalreserve.gov/BoardDocs/Testimony/2005/20051103/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>60.0</td>
<td>53.3</td>
<td>61.5</td>
<td>62.4</td>
<td>58.2</td>
<td>55.1</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>78.0</td>
<td>81.4</td>
<td>74.0</td>
<td>69.0</td>
<td>56.8</td>
<td>54.0</td>
</tr>
</tbody>
</table>


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The October Non-manufacturing Sector Business Activity Index from the Institute for Supply Management recovered more than half of its September decline with a 6.7 point increase to 60.0. Consensus expectations had been for a lesser [...]

ISM Non-Manufacturing Index Recovered

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103c.jpg" width="353">
Initial claims for unemployment insurance fell 8,000 to 323,000 last week versus a little revised 26,000 decline during the prior period. Consensus expectations had been for 330,000 claims. The decline lowered the level of claims to the lowest since late August.
The four-week moving average of initial claims fell to 350,500 (+3.5% y/y).
Continuing claims for unemployment insurance fell 44,000 following a downwardly revised 5,000 increase during the prior week.
The insured rate of unemployment remained at 2.2% where it has been during the last six weeks.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">10/29/05</th>
<th scope="col">10/22/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>323</td>
<td>331</td>
<td>-3.6%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,823</td>
<td>1.2%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
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</table>
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Initial claims for unemployment insurance fell 8,000 to 323,000 last week versus a little revised 26,000 decline during the prior period. Consensus expectations had been for 330,000 claims. The decline lowered the level of claims to [...]

Initial Unemployment Insurance Claims At Two Month Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103b.jpg" width="353">
Growth in non-farm labor productivity of 4.1% last quarter was nearly double the upwardly revised growth during the prior quarter and easily surpassed Consensus expectations for a 2.5% rise. The increase lifted the year on year growth in worker productivity to 3.0%, its strongest since 2Q &#39;04.
Output growth of 4.2% (4.2% y/y) was down slightly from a 4.4% increase during 2Q while hours worked grew a slight 0.1% (1.2% y/y).
The Bureau of labor Statistics indicated that the effects of Hurricanes Katrina &amp; Rita could not be separately identified but that the effects were imbedded in the 3Q figures covering output, hours and compensation.
Unit labor costs fell 0.5%, the first quarterly decline since 2Q &#39;04. The decline stemmed both from the strength in productivity as well as a moderate 3.6% (5.8% y/y) rise in compensation costs which was the slowest since 2Q &#39;04.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103a.jpg" width="353">
The implicit price deflator rose 3.3% (2.9% y/y) and the increase lifted the ratio of prices to unit labor costs to its highest since early last year. During the last ten years there has been a 58% correlation between the ratio and the y/y growth in corporate profits.
Factory sector productivity growth surged 4.5% (4.7% y/y) after a 3.6% rise during 2Q. Manufacturing compensation grew just 2.9% (7.2% y/y) which allowed unit labor costs to fall 1.6% (+2.5% y/y), the first decline since 2Q &#39;04.
Nonfinancial corporate sector productivity growth during 2Q was revised down to 6.3% (6.2% y/y) from 6.8% reported previously. Nevertheless, unit labor costs still fell 2.4% (+0.4% y/y) versus the initial estimate of a 2.6% decline. Output for this measure is gleaned from the income side of the National Income &amp; Product Accounts (NIPA) as opposed to the non-farm output figures which are derived from the output side of the NIPA. Factory sector output is derived from the industrial production measures compiled by the Federal Reserve Board.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">3Q &#39;05</th>
<th scope="col">2Q &#39;05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>4.1%</td>
<td>2.1%</td>
<td>3.0%</td>
<td>3.4%</td>
<td>3.8%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.6%</td>
<td>4.0%</td>
<td>5.8%</td>
<td>4.5%</td>
<td>4.0%</td>
<td>3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>-0.5%</td>
<td>1.8%</td>
<td>2.7%</td>
<td>1.1%</td>
<td>0.2%</td>
<td>-0.5%</td>
</tr>
</tbody>
</table>


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Growth in non-farm labor productivity of 4.1% last quarter was nearly double the upwardly revised growth during the prior quarter and easily surpassed Consensus expectations for a 2.5% rise. The increase lifted the year on year growth [...]

3Q U.S. Productivity Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103b.jpg" width="353">
Growth in non-farm labor productivity of 4.1% last quarter was nearly double the upwardly revised growth during the prior quarter and easily surpassed Consensus expectations for a 2.5% rise. The increase lifted the year on year growth in worker productivity to 3.0%, its strongest since 2Q &#39;04.
Output growth of 4.2% (4.2% y/y) was down slightly from a 4.4% increase during 2Q while hours worked grew a slight 0.1% (1.2% y/y).
The Bureau of labor Statistics indicated that the effects of Hurricanes Katrina &amp; Rita could not be separately identified but that the effects were imbedded in the 3Q figures covering output, hours and compensation.
Unit labor costs fell 0.5%, the first quarterly decline since 2Q &#39;04. The decline stemmed both from the strength in productivity as well as a moderate 3.6% (5.8% y/y) rise in compensation costs which was the slowest since 2Q &#39;04.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103a.jpg" width="353">
The implicit price deflator rose 3.3% (2.9% y/y) and the increase lifted the ratio of prices to unit labor costs to its highest since early last year. During the last ten years there has been a 58% correlation between the ratio and the y/y growth in corporate profits.
Factory sector productivity growth surged 4.5% (4.7% y/y) after a 3.6% rise during 2Q. Manufacturing compensation grew just 2.9% (7.2% y/y) which allowed unit labor costs to fall 1.6% (+2.5% y/y), the first decline since 2Q &#39;04.
Nonfinancial corporate sector productivity growth during 2Q was revised down to 6.3% (6.2% y/y) from 6.8% reported previously. Nevertheless, unit labor costs still fell 2.4% (+0.4% y/y) versus the initial estimate of a 2.6% decline. Output for this measure is gleaned from the income side of the National Income &amp; Product Accounts (NIPA) as opposed to the non-farm output figures which are derived from the output side of the NIPA. Factory sector output is derived from the industrial production measures compiled by the Federal Reserve Board.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">3Q &#39;05</th>
<th scope="col">2Q &#39;05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>4.1%</td>
<td>2.1%</td>
<td>3.0%</td>
<td>3.4%</td>
<td>3.8%</td>
<td>4.0%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.6%</td>
<td>4.0%</td>
<td>5.8%</td>
<td>4.5%</td>
<td>4.0%</td>
<td>3.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>-0.5%</td>
<td>1.8%</td>
<td>2.7%</td>
<td>1.1%</td>
<td>0.2%</td>
<td>-0.5%</td>
</tr>
</tbody>
</table>
Initial Unemployment Insurance Claims At Two Month Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103c.jpg" width="353">
Initial claims for unemployment insurance fell 8,000 to 323,000 last week versus a little revised 26,000 decline during the prior period. Consensus expectations had been for 330,000 claims. The decline lowered the level of claims to the lowest since late August.
The four-week moving average of initial claims fell to 350,500 (+3.5% y/y).
Continuing claims for unemployment insurance fell 44,000 following a downwardly revised 5,000 increase during the prior week.
The insured rate of unemployment remained at 2.2% where it has been during the last six weeks.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">10/29/05</th>
<th scope="col">10/22/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>323</td>
<td>331</td>
<td>-3.6%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,823</td>
<td>1.2%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
ISM Non-Manufacturing Index Recovered 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103d.jpg" width="353">
The October Non-manufacturing Sector Business Activity Index from the Institute for Supply Management recovered more than half of its September decline with a 6.7 point increase to 60.0. Consensus expectations had been for a lesser recovery to 57.0.
Since the series&#39; inception in 1997 there has been a 50% correlation between the Business Activity Index and the q/q change in real GDP for services plus construction.
The orders index gained back just a piece of its September decline with a 1.6 point rise. Conversely, the employment index fell for the third month in the last four to the lowest level since January. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103e.jpg" width="353">
Pricing power reversed just some of the 14.3 point September surge to a record high with a 3.4 point decline. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP Services chain price index.
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.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
Today&#39;s testimony by Fed Chairman Alan Greenspan on the Economic Outlook before the Joint Economic committee can be found <a href="http://www.federalreserve.gov/BoardDocs/Testimony/2005/20051103/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>60.0</td>
<td>53.3</td>
<td>61.5</td>
<td>62.4</td>
<td>58.2</td>
<td>55.1</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>78.0</td>
<td>81.4</td>
<td>74.0</td>
<td>69.0</td>
<td>56.8</td>
<td>54.0</td>
</tr>
</tbody>
</table>
U.S. Factory Inventories Slip 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103g.jpg" width="353">
Factory inventories fell another 0.1% in September following a deepened 0.2% decline in August even though higher prices recently have boosted petroleum inventories, (+24.9% y/y). Less petroleum, factory inventories fell 0.1% (+4.1% y/y) in September for the third decline in the last four months and have been virtually unchanged since March.
Inventory declines last month centered mostly in nondurables industries where textile products fell 0.9% (-0.1% y/y) and paper products fell 0.8% (+2.5% y/y). Plastics &amp; rubber products also fell a sharp 1.8% (+6.4% y/y) and paints &amp; coatings inventories fell 1.0% (+6.3% y/y).
Electrical equipment inventories rose 1.0% (3.2% y/y) after four months of declines while machinery inventories rose 0.2% (9.3% y/y). Computers &amp; electronic components rose 0.1% (-0.3% y/y) but electronic computer inventories rose 4.4% (0.9% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103f.jpg" width="353">
Factory shipments fell 0.5% after an upwardly revised 2.1% surge in August, however, less a 3.4% jump in shipments from petroleum refineries factory shipments fell 0.9% (3.9% y/y).
Factory sector orders fell 1.7%. The advance report of a 2.1% drop in durables goods orders was revised to -2.4%.
Unfilled orders jumped 0.7% on top of the 1.6% August spurt. Less the transportation sector backlogs surged 1.2% (8.9% y/y) and the ratio of unfilled orders to shipments jumped.<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.1%</td>
<td>-0.2%</td>
<td>4.9%</td>
<td>7.7%</td>
<td>-1.1%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-1.7%</td>
<td>2.9%</td>
<td>7.0%</td>
<td>9.3%</td>
<td>3.5%</td>
<td>-2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>-0.5%</td>
<td>2.1%</td>
<td>6.6%</td>
<td>9.5%</td>
<td>1.5%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.7%</td>
<td>1.6%</td>
<td>10.4%</td>
<td>8.4%</td>
<td>8.0%</td>
<td>-8.5%</td>
</tr>
</tbody>
</table>
PMI Surveys Around the World in October:  Europe Looks Better, China Does Not! 
by <a href="/comment/Stone.html">Carol Stone</a> November 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103j.jpg" width="353">
Purchasing manager surveys suggest economies in Europe and Japan are improving, while China might be showing signs of moderation. These monthly polls are published by NTC Research in London and conducted by local business organizations, such as Nomura in Japan and Reuters in the UK. The results are shown as diffusion indexes, which show the percentage of respondents that report increasing business for a given month. As with the ISM data in the US, manufacturing is reported on the first business day of the following month, with nonmanufacturing (mostly services) following two days later. The indexes are calculated as the percentage reporting rising business plus half of those reporting a flat performance. The resulting indexes are then seasonally adjusted.
In October, companies in the Euro-Zone saw business increase more broadly, with a manufacturing index of 52.69 and services, 54.95. Both show notable improvements from earlier in the year. European manufacturing faced a mild contraction (readings below 50%) in the spring and the service sector experienced sluggish growth in the year through August before picking up smartly in the last two months. Patterns in the UK recently have been somewhat similar, with a brief outright contraction in manufacturing during the spring, but some subsequent pickup; activity at UK service companies has held within a persistent and narrow range since the middle of 2004, indicating steady moderate growth.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103h.jpg" width="353">
In contrast, growth in Russia&#39;s manufacturing sector has slowed in the last two months. This PMI index has ranged from roughly 50 to 55 over the last several years, with September and October dropping into the lower end of the span. Services, though, are holding up well with some strengthening evident so far in 2005. Price behavior in these sectors varies as well: input prices for manufacturers show a trendless, but widely varying oscillation, while service companies&#39; input prices have risen at a dramatically larger number of firms recently.
Only manufacturing surveys are taken in Japan and China. Japanese factories appear to be doing better, with that index ratcheting upward all year long. This firming even includes employment; this index worked its way above 50% during 2004, and since March of this year, it has averaged 52.5. While not high by world standards, it looks good for Japan. The survey began in October 2001, and both the total index and the employment component were down around 40 at the time. Such improvement in manufacturing seems at odds with the Japanese government&#39;s synthetic indexes reported here Monday by Louise Curley, in which marked slowing or even decline is indicated for the Japanese economy in Q3. Clearly, at the least, various data may diverge over brief time periods. In this case, the synthetic indexes are meant to describe demand conditions, while the PMI survey looks at supply, and that in only one sector. This makes judging the prospects for even the direction of business in Japan a tough call.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051103i.jpg" width="353">
China is even more intriguing. Its manufacturing index has dropped steadily since its inception 18 months ago, and now stands just barely above 50%. The moderation appears in most of the survey components, including new orders and backlogs. Notably, output prices are below 50%, indicating declines at more companies than have increases. And in the last three months, employment at factories has been ever so slightly below 50%, basically indicating that it has stopped growing. These results feel odd for a country with GDP growth at about 9-1/2%, led by manufacturing. Perhaps the pattern is a relative one. With such a high growth trend, merely keeping up pace may give the impression of slowing, particularly from the high base that obtained in the spring of 2004 when the survey started. Asia is clearly full of interesting economic developments. We eagerly await more information on how they&#39;re doing.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">October 2005</th>
<th scope="col">September 2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro-Zone</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>52.69</td>
<td>51.74</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Services</td>
<td>54.92</td>
<td>54.65</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>51.72</td>
<td>51.52</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services</td>
<td>56.14</td>
<td>55.05</td>
</tr>
<tr class="odd">
<td class="firstcol">Russia</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>51.23</td>
<td>51.83</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Services</td>
<td>60.75</td>
<td>59.48</td>
</tr>
<tr>
<td class="firstcol">Japan</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>54.74</td>
<td>54.46</td>
</tr>
<tr>
<td class="firstcol">China</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>50.07</td>
<td>50.85</td>
</tr>
</tbody>
</table>


</html>

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051102e.jpg" width="353">
German labor market data was largely favorable in the report issued this morning by the Federal Statistics Office and the Bundesbank. Employment of German residents rose 41,000 in September, following a 29,000 gain in August (seasonally adjusted). The number of workers remains below year-earlier levels but it started to rise, however hesitantly, in May. Another positive development is a marked increase in the number of job vacancies, which numbered 498,000 in October, up 27,000 in the month and 83% greater than a year ago (272,000).
The performance of unemployment depends on which measure is used. The standard German &quot;registered unemployment&quot; remains stubbornly high, at 11.6% in October after 11.7% in September. This is about where the rate has been throughout 2005. The ILO definition, by contrast, has come down sharply. Its latest reading is for September, when it fell to 8.4% from 9.3% in August. This latter, while appearing quite constructive, is not so attractive when labor force developments are considered. The labor force, according to the ILO definition, fell nearly 400,000 in September. Thus, unemployment declined not so much because job market conditions were better, but because people pulled away from it.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051102d.jpg" width="353">
Further, the job opportunities that are available have shown most strength in the &quot;part-time&quot; segment. Among total vacancies, those for part-time work have hovered around an 18.6% share for several years. But in 2005, they have jumped dramatically and, accounting for more than half of the year-on-year increase in vacancies, reached 32.5% of the total in August, the latest reported figure.
So there are hesitant signs of improvement in the German labor market: some increase in jobs and at worst a stabilization of unemployment. The growing emphasis on part-time work is a two-edged sword: it can perhaps enhance the number of jobs, but each job would afford smaller wages and benefits than full-time work. Federal Reserve Chairman Alan Greenspan highlights the increased flexibility of US markets as a favorable development, which can help cushion the US economy from shocks. Seen in that light, greater flexibility in German labor markets, a topic of contention in their recent elections, could possibly also limit the harm from such negative forces as high energy costs.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/G10/@GA/@GA6/@GA6.HTM">German Labor Data</a> (Seasonally Adjusted)</th>
<th scope="col">Oct 2005</th>
<th scope="col">Sept 2005</th>
<th scope="col">Aug 2005</th>
<th scope="col">Year Ago</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment: German Residents (Mil)</td>
<td>--</td>
<td>38.76</td>
<td>38.72</td>
<td>38.83</td>
<td>38.78</td>
<td>38.63</td>
<td>38.99</td>
</tr>
<tr>
<td class="firstcol">Change (Thous or %)</td>
<td>&nbsp;</td>
<td>+41</td>
<td>+29</td>
<td>-0.17%</td>
<td>0.38%</td>
<td>-0.92%</td>
<td>-0.56%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment (ILO, Mil)</td>
<td>--</td>
<td>3.56</td>
<td>3.98</td>
<td>3.95</td>
<td>3.94</td>
<td>3.71</td>
<td>3.24</td>
</tr>
<tr>
<td class="firstcol">Total = Labor Force (Mil)</td>
<td>--</td>
<td>42.32</td>
<td>42.70</td>
<td>42.78</td>
<td>42.71</td>
<td>42.34</td>
<td>42.22</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (ILO, %)</td>
<td>--</td>
<td>8.4</td>
<td>9.3</td>
<td>9.2</td>
<td>9.2</td>
<td>8.8</td>
<td>7.7</td>
</tr>
<tr>
<td class="firstcol">Registered Unemployment Rate (%)</td>
<td>11.6</td>
<td>11.7</td>
<td>11.6</td>
<td>10.7</td>
<td>10.5</td>
<td>10.5</td>
<td>9.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Job Vacancies (Thous)</td>
<td>498</td>
<td>471</td>
<td>445</td>
<td>272</td>
<td>284</td>
<td>351</td>
<td>447</td>
</tr>
</tbody>
</table>
</body>
</html>

German labor market data was largely favorable in the report issued this morning by the Federal Statistics Office and the Bundesbank. Employment of German residents rose 41,000 in September, following a 29,000 gain in August [...]

Modest Gains in German Employment; Unemployment Rates Up or Down, Depending on Definition

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051102a.jpg" width="353">
The total number of mortgage applications fell a sharp 4.8% last week on the heels of a 7.9% decline the prior period according to the Mortgage Bankers Association. The decline pulled the average level of applications in October 7.8% below September.
Purchase applications fell especially hard last week, dropped 6.2% following a 7.4% decline the week earlier and pulled the October average 5.0% below September&#39;s. During the last ten years there has been a 49% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance fell another 2.8% following an 8.5% decline the prior week. The October average fell 11.4% from September and the figure was 77.5% below the high during 2003.
The effective interest rate on a conventional 30-year mortgage rose to 6.46% from 6.30% the prior week and the effective rate on a 15-year mortgage rose to 6.06%, the highest since July 2002. The interest rate on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
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 <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/28/05</th>
<th scope="col">10/21/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>646.7</td>
<td>679.1</td>
<td>-15.1%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>437.6</td>
<td>466.4</td>
<td>-11.9%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,862.8</td>
<td>1,916.8</td>
<td>-19.1%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
</body>
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The total number of mortgage applications fell a sharp 4.8% last week on the heels of a 7.9% decline the prior period according to the Mortgage Bankers Association. The decline pulled the average level of applications in October 7.8% [...]

Mortgage Applications Off Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051102c.jpg" width="353">
According to the Autodata Corporation, US sales of light vehicles in October fell another 10.0% m/m to 14.75M under the weight of higher gasoline prices and lower consumer sentiment. The decline was the third in as many months and dropped sales to the lowest monthly level since 1998.
Consumer sentiment dropped 3.5% (-19.1% y/y) last month according to the University of Michigan which indicated that current buying conditions for vehicles was especially poor.
In October, US gasoline prices dropped 6.4% versus the September average but prices were up 35.9% versus last year at $2.72 per gallon.
Last month&#39;s skid in vehicle sales additionally reflected payback from the earlier success of discount pricing programs. The average of sales during the last six months has been 17.20M, up 2.0% from all of last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051102b.jpg" width="353">
As of September, strong sales had lowered inventories of US autos to the lowest level since late 2001 (-17.9% y/y). At 1.61, the inventory to sales ratio was roughly half the level in January. Inventories of domestic &amp; imported trucks also was down 10.2% y/y though increases in August &amp; September left the level up versus 2002 and 2003.
Sales of US made cars &amp; trucks fell 12.0% (-14.3% y/y). Domestic truck sales dropped 14.0% (-22.8% y/y) and car sales fell 9.3% (-0.9% y/y).
The decline in sales of imported cars &amp; trucks was limited to a moderate 2.7% m/m (-8.6% y/y) as sales of imported trucks rose 4.9% (-12.9% y/y). Sales of imported autos fell 6.1% (-6.2% y/y).
Import&#39;s share of the US light vehicle market jumped m/m to 22.5%, the highest monthly level since 1990.
Oil Price Volatility and U.S. Macroeconomic Activity from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/05/11/KliesenGuo.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>14.75</td>
<td>16.39</td>
<td>-13.1%</td>
<td>16.87</td>
<td>16.63</td>
<td>16.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.32</td>
<td>7.99</td>
<td>-2.6%</td>
<td>7.49</td>
<td>7.62</td>
<td>8.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>7.42</td>
<td>8.40</td>
<td>-21.4%</td>
<td>9.37</td>
<td>9.01</td>
<td>8.74</td>
</tr>
</tbody>
</table>
</body>
</html>

According to the Autodata Corporation, US sales of light vehicles in October fell another 10.0% m/m to 14.75M under the weight of higher gasoline prices and lower consumer sentiment. The decline was the third in as many months and [...]

U.S. Vehicle Sales Lowest Since 1998, Inventories Lower As Well

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051102c.jpg" width="353">
According to the Autodata Corporation, US sales of light vehicles in October fell another 10.0% m/m to 14.75M under the weight of higher gasoline prices and lower consumer sentiment. The decline was the third in as many months and dropped sales to the lowest monthly level since 1998.
Consumer sentiment dropped 3.5% (-19.1% y/y) last month according to the University of Michigan which indicated that current buying conditions for vehicles was especially poor.
In October, US gasoline prices dropped 6.4% versus the September average but prices were up 35.9% versus last year at $2.72 per gallon.
Last month&#39;s skid in vehicle sales additionally reflected payback from the earlier success of discount pricing programs. The average of sales during the last six months has been 17.20M, up 2.0% from all of last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051102b.jpg" width="353">
As of September, strong sales had lowered inventories of US autos to the lowest level since late 2001 (-17.9% y/y). At 1.61, the inventory to sales ratio was roughly half the level in January. Inventories of domestic &amp; imported trucks also was down 10.2% y/y though increases in August &amp; September left the level up versus 2002 and 2003.
Sales of US made cars &amp; trucks fell 12.0% (-14.3% y/y). Domestic truck sales dropped 14.0% (-22.8% y/y) and car sales fell 9.3% (-0.9% y/y).
The decline in sales of imported cars &amp; trucks was limited to a moderate 2.7% m/m (-8.6% y/y) as sales of imported trucks rose 4.9% (-12.9% y/y). Sales of imported autos fell 6.1% (-6.2% y/y).
Import&#39;s share of the US light vehicle market jumped m/m to 22.5%, the highest monthly level since 1990.
Oil Price Volatility and U.S. Macroeconomic Activity from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/05/11/KliesenGuo.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>14.75</td>
<td>16.39</td>
<td>-13.1%</td>
<td>16.87</td>
<td>16.63</td>
<td>16.81</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.32</td>
<td>7.99</td>
<td>-2.6%</td>
<td>7.49</td>
<td>7.62</td>
<td>8.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>7.42</td>
<td>8.40</td>
<td>-21.4%</td>
<td>9.37</td>
<td>9.01</td>
<td>8.74</td>
</tr>
</tbody>
</table>
Mortgage Applications Off Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 2, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051102a.jpg" width="353">
The total number of mortgage applications fell a sharp 4.8% last week on the heels of a 7.9% decline the prior period according to the Mortgage Bankers Association. The decline pulled the average level of applications in October 7.8% below September.
Purchase applications fell especially hard last week, dropped 6.2% following a 7.4% decline the week earlier and pulled the October average 5.0% below September&#39;s. During the last ten years there has been a 49% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance fell another 2.8% following an 8.5% decline the prior week. The October average fell 11.4% from September and the figure was 77.5% below the high during 2003.
The effective interest rate on a conventional 30-year mortgage rose to 6.46% from 6.30% the prior week and the effective rate on a 15-year mortgage rose to 6.06%, the highest since July 2002. The interest rate on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
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 <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/28/05</th>
<th scope="col">10/21/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>646.7</td>
<td>679.1</td>
<td>-15.1%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>437.6</td>
<td>466.4</td>
<td>-11.9%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,862.8</td>
<td>1,916.8</td>
<td>-19.1%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Modest Gains in German Employment; Unemployment Rates Up or Down, Depending on Definition 
by <a href="/comment/Stone.html">Carol Stone</a> November 2, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051102e.jpg" width="353">
German labor market data was largely favorable in the report issued this morning by the Federal Statistics Office and the Bundesbank. Employment of German residents rose 41,000 in September, following a 29,000 gain in August (seasonally adjusted). The number of workers remains below year-earlier levels but it started to rise, however hesitantly, in May. Another positive development is a marked increase in the number of job vacancies, which numbered 498,000 in October, up 27,000 in the month and 83% greater than a year ago (272,000).
The performance of unemployment depends on which measure is used. The standard German &quot;registered unemployment&quot; remains stubbornly high, at 11.6% in October after 11.7% in September. This is about where the rate has been throughout 2005. The ILO definition, by contrast, has come down sharply. Its latest reading is for September, when it fell to 8.4% from 9.3% in August. This latter, while appearing quite constructive, is not so attractive when labor force developments are considered. The labor force, according to the ILO definition, fell nearly 400,000 in September. Thus, unemployment declined not so much because job market conditions were better, but because people pulled away from it.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051102d.jpg" width="353">
Further, the job opportunities that are available have shown most strength in the &quot;part-time&quot; segment. Among total vacancies, those for part-time work have hovered around an 18.6% share for several years. But in 2005, they have jumped dramatically and, accounting for more than half of the year-on-year increase in vacancies, reached 32.5% of the total in August, the latest reported figure.
So there are hesitant signs of improvement in the German labor market: some increase in jobs and at worst a stabilization of unemployment. The growing emphasis on part-time work is a two-edged sword: it can perhaps enhance the number of jobs, but each job would afford smaller wages and benefits than full-time work. Federal Reserve Chairman Alan Greenspan highlights the increased flexibility of US markets as a favorable development, which can help cushion the US economy from shocks. Seen in that light, greater flexibility in German labor markets, a topic of contention in their recent elections, could possibly also limit the harm from such negative forces as high energy costs.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/G10/@GA/@GA6/@GA6.HTM">German Labor Data</a> (Seasonally Adjusted)</th>
<th scope="col">Oct 2005</th>
<th scope="col">Sept 2005</th>
<th scope="col">Aug 2005</th>
<th scope="col">Year Ago</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment: German Residents (Mil)</td>
<td>--</td>
<td>38.76</td>
<td>38.72</td>
<td>38.83</td>
<td>38.78</td>
<td>38.63</td>
<td>38.99</td>
</tr>
<tr>
<td class="firstcol">Change (Thous or %)</td>
<td>&nbsp;</td>
<td>+41</td>
<td>+29</td>
<td>-0.17%</td>
<td>0.38%</td>
<td>-0.92%</td>
<td>-0.56%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment (ILO, Mil)</td>
<td>--</td>
<td>3.56</td>
<td>3.98</td>
<td>3.95</td>
<td>3.94</td>
<td>3.71</td>
<td>3.24</td>
</tr>
<tr>
<td class="firstcol">Total = Labor Force (Mil)</td>
<td>--</td>
<td>42.32</td>
<td>42.70</td>
<td>42.78</td>
<td>42.71</td>
<td>42.34</td>
<td>42.22</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (ILO, %)</td>
<td>--</td>
<td>8.4</td>
<td>9.3</td>
<td>9.2</td>
<td>9.2</td>
<td>8.8</td>
<td>7.7</td>
</tr>
<tr>
<td class="firstcol">Registered Unemployment Rate (%)</td>
<td>11.6</td>
<td>11.7</td>
<td>11.6</td>
<td>10.7</td>
<td>10.5</td>
<td>10.5</td>
<td>9.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Job Vacancies (Thous)</td>
<td>498</td>
<td>471</td>
<td>445</td>
<td>272</td>
<td>284</td>
<td>351</td>
<td>447</td>
</tr>
</tbody>
</table>
</body>
</html>

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

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Mortgage applications fell 1.4% (+22.7% y/y) in the week ending August 15 after rising 10.9% in the prior week, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for purchase loans edged 0.1% higher (22.7% y/y) last week, following a 1.4% gain in the prior week. Applications to refinance a home loan fell 3.1% (+22.8% y/y) last week, following a 23.0% rise in the week of August 8.

The effective interest rate on a 30-year fixed-rate loan held steady at 6.86% in the week ending August 15 after falling from 6.94% in the first week of August. It was the lowest rate since the first week of March, down from a high of 7.28% in the second week of January. The rate on 15-year fixed-rate mortgages rose to 6.13% in the latest week from 6.09% in the week of August 8. Conversely, the rate on 30-year Jumbo loans decreased to 6.82% last week from 6.86% one week earlier. The rate on a 5-year ARM rose to 6.24% in the week of August 15 and reversed the prior week’s decline to 6.05%.

The share of applications for refinancing an existing loan eased to 46.1% of total applications in the week ending August 15 after rising to 46.5% in the prior week. The share hit a low of 34.6% in the fourth week of May. The adjustable-rate mortgage (ARM) share of activity declined to 8.60% in the latest week after rising to 9.60% in the week of August 8.

The average size of a mortgage loan fell 2.7% (+4.1% y/y) to $387,800 in the week of August 15, following a 4.5% rise in the prior week. The average size of a purchase loan edged 0.5% higher (0.6% y/y) to $429,000 in the latest week after falling 1.2% in the week ending August 8. The average size of a loan to refinance a mortgage fell 7.3% (+9.5% y/y) to $339,800 last week, after rising 18.3% to $366,400 in the prior week. It was increased from $277,900 in the last week of May.

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.

**Tracking Labor Market Stress** from the Federal Reserve Bank of San Francisco is available [here](https://www.frbsf.org/research-and-insights/publications/economic-letter/2025/08/tracking-labor-market-stress/).

- Purchase applications edge higher while loan refinancing declines.
- Effective fixed-interest rate on 30-year loans remains at four-month low.
- Average loan size declines.

U.S. Mortgage Applications Decline Last Week as Interest Rates Steady

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Total housing starts increased 5.2% (12.9% y/y) in July to 1.428 million (SAAR) after rising 5.9% in June to 1.358 million, revised from 1.321 million, and falling 8.3% to 1.282 in May, revised from 1.263 million, according to the U.S. Census Bureau. Total starts in July remained 22.5% below their peak of 1.820 million units reached in April 2022. The Action Economics Forecast Survey expected 1.30 million starts in July.

Single-family starts in July rose 2.8% (7.8% y/y) to 939,000 after falling 3.8% in June to 913,000, revised from 883,000, and edging 0.1% higher in May to 949,000, revised from 926,000. Multi-family starts surged 9.9% (24.1% y/y) in July to 489,000 after strengthening 33.6% in June to 445,000, revised from 438,000, and declining 26.0% to a little-revised 333,000 units in May.

Housing starts in the Midwest surged 33.3% (40.8% y/y) in July to 252,000 after rising 3.3% in June. Adding to this increase, starts in the South rose 19.2% (29.5% y/y) to 833,000 after holding steady in June. Offsetting these gains, starts in the West declined 27.5% (-14.4% y/y) to 232,000 after rising 8.1% in June. Housing starts in the Northeast declined 26.0% (-35.5% y/y) to 111,000 after increasing 44.2% in June.

Building permits declined 2.8% (-5.7% y/y) last month to 1.354 million after easing slightly in June. It was the fourth consecutive monthly decline. Single-family permits rose 0.5% (-7.9% y/y) in July to 870,000 after weakening for four straight months. Multi-family permits fell 8.2% (-1.4% y/y) to 484,000 after rising 6.5% in June. Building permits in the Northeast rose 25.2% (-7.9% y/y), and they edged up 0.5% (12.9% y/y) in the Midwest. In the South, building permits declined 4.6% (-6.1% y/y) while in the West, building permits weakened 10.1% (-15.2% y/y).

The housing starts and building permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Increase brings starts to five-month high.
- Multi-family starts surge while single-family starts rise moderately.
- Building permits decline is led by multi-family.

U.S. Housing Starts Strengthen Unexpectedly in July

Winnie Tapasanun

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Online retail sales, formally known as retail e-commerce sales, rose a seasonally adjusted 1.4% q/q in Q2'25 to $304.2 billion following a 0.1% downtick in Q1’25 (0.0% initially) and a 1.7% increase in Q4’24 (unrevised), according to the U.S. Census Bureau. The Q2’25 reading was the 14th q/q gain in 15 quarters. The year-on-year rate of increase decelerated to 5.3% in Q2'25, the lowest since Q2'22, from 6.0% Q1’25. The latest y/y number was lower than 7.1% in Q2'24; thus, having remained significantly below a high of 45.3% in Q1'21 and a peak of 53.5% in Q2’20.

The Q2'25 rise in retail e-commerce sales compared to a 0.4% q/q gain (3.9% y/y) to $1,865.4 billion in total retail sales during the same period. This overall measure of retail sales excludes food services and restaurant sales. Retail e-commerce sales accounted for 16.3% of total retail sales in Q2'25 following 16.1% in Q1'25, registering the highest rate since Q2'20; the percentage was 16.1% in 2024, 15.3% in 2023, and 7.1% in 2015.

Details of the retail e-commerce sales data by sector are not seasonally adjusted. Sales of nonstore retailers, which accounted for 58.5% of total e-commerce sales, rose 5.3% (1.8% y/y) in Q2'25, the fourth q/q rise in five quarters, following a 20.7% decrease in Q1'25. Building materials & garden equipment sales recovered 34.7% (9.9% y/y), the largest q/q gain since Q2'20, reversing a 16.2% drop. Health & personal care sales rebounded 12.8% (1.7% y/y), the second q/q increase in three quarters, after having plummeted 40.9%.

Clothing accessory store sales rose 9.2% (-1.3% y/y) in Q2'25 after a 38.3% plunge in Q1'25. General merchandise store sales increased 8.4% (17.2% y/y) following a 20.9% drop. Sales of furniture & home furnishings rose 5.1% (4.4% y/y) after a 15.6% fall. Sporting goods, hobby, musical instrument & book sales grew 4.3% (6.7% y/y) following a 31.3% slump. These series registered the fourth q/q gain in five quarters.

Sales of motor vehicles & parts advanced 8.3% (15.9% y/y) in Q2'25, the largest of six straight q/q increases, on top of a 1.0% rise in Q1'25. Miscellaneous sales including gasoline stations recovered 2.6% (2.3% y/y), up for the second quarter in three, following a 2.3% decline. Food & beverage sales excluding food services rose 0.8% (15.5% y/y), the third q/q rise in four quarters, after a 0.1% easing.

E-commerce sales are goods and services ordered over an internet, mobile device (M-commerce), extranet, Electronic Data Interchange (EDI) network, electronic mail, or other comparable online system. Payment may or may not be made online and sometimes sale & price are negotiated. Total sales estimates are adjusted for seasonal variation, but not for price changes. They are also adjusted for trading-day differences and moving holidays.

Retail e-commerce sales data can be found in Haver's **USECON** database.

- Sales +1.4%, the 14th q/q rise in 15 qtrs.; +5.3% y/y, the lowest since Q2'22.
- Online share of total retail sales up to 16.3%, the highest since Q2'20.
- Nonstore sales rebound, up for the fourth quarter in five.
- Widespread gain in online sales led by bldg. materials & garden equipt. (+34.7% q/q).

U.S. Retail E-Commerce Sales Rise in Q2'25

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Retail gasoline prices for all grades, on average, inched up to $3.25 per gallon (-7.1% y/y) last week after falling to $3.24 one week earlier. Prices remained above their low of $3.13 in the week of December 9. The recent high was $3.79 in the week ending April 22, 2024. Their all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel fell to $3.71 per gallon (+0.7% y/y) in the week of August 18 after easing to $3.75 in the prior week. The latest diesel price stood well below a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil declined to $63.31 per barrel (-19.7% y/y) in the week ended August 15 from $64.71 in the prior week. The drop left prices at the lowest level since the first week of June. Prices remained above a $59.04 low in the second week of May. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $63.96 per barrel. The price of European Brent crude fell to $67.17 per barrel (-18.6% y/y) in the week of August 15, after falling to $68.17 in the prior week. Prices remained below a recent high of $95.61 in the week of September 29, 2023 and below a peak of $127.40 in June 2022. The price was $68.18 per gallon yesterday.

Natural gas prices slipped to an average $2.94/mmbtu (+38.0% y/y) in the week ended August 15, after falling to an average $2.99/mmbtu in the prior week. Prices remained well above a low of $1.40/mmbtu in the week of March 15, 2024 but below their peak of $9.56 in the week of August 26, 2022. Yesterday, the price was $2.96 per mmbtu.

Gasoline demand declined 1.5% y/y in the four weeks ending August 8, following a 2.2% y/y decline in the prior four weeks. Demand for all petroleum products rose 2.9% y/y in the four weeks ending August 8, after a 1.6% y/y increase in the previous four-week period. Crude oil input to refineries rose 4.2% y/y in the four weeks ending August 8, after a 2.9% y/y gain in the prior four weeks.

Gasoline inventories rose 1.8% y/y in the week ending August 8 after a 0.9% y/y in the prior week. Residual fuel oil inventories fell 25.7% y/y in the week of August 8, after a 25.8% y/y fall in the prior week. Crude oil inventories rose 2.8% y/y in the week of August 8 after a 2.7% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories stood at 25.0 days in the week of August 8, unchnged from the prior week. The recent low was 22.9 days in the week of November 8, 2024. The supply of crude oil held at 25.0 days in the week of August 8, and remained below a high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** & **USENERGY** database.

U.S. Energy Prices Are Mixed in Latest Week

Tian Yong Woon

This week, we examine recent developments in US-China trade and assess the broader implications of US trade actions for the BRIC bloc—Brazil, Russia, India, and China. Last week, the US and China extended their tariff truce by 90 days, a move welcomed by equity markets (chart 1). While this pause eased fears of renewed trade tensions, it remains temporary and fragile, with no durable resolution in sight.

As for China’s economy, July data disappointed: retail sales, industrial production, and fixed-asset investment all missed expectations (chart 2). This may signal that tariffs are beginning to bite, as earlier growth drivers—such as some front-loading of imports and one-off consumption boosts like China’s durable-goods subsidy—are fading (chart 3). Newer measures, including loan-interest subsidies, may provide some interim relief. Meanwhile, the property sector remains under heavy strain, with further price and investment declines evidenced in July (chart 4).

In the broader regional context, US trade measures may inadvertently push trading partners closer together, complicating Washington’s bilateral strategy. The BRIC bloc shows tentative signs of greater alignment, though this has yet to appear in data for trade flows (chart 5). China and India, however, are warming toward one another: Foreign Minister Wang Yi’s visit to India this week—focused on the Himalayan border among other issues—suggests an improving dialogue. Separately, discussions at the national level to restart direct flights between the two countries also signal a thaw. Full economic integration remains distant, but the scale of both economies suggests significant potential if relations continue to improve (chart 6).

**The US-China tariff truce**
Last week, the US and China announced a 90-day extension to their mutual tariff truce. Although largely expected, the move still generated further equity market gains (see chart 1). This contrasts sharply with worst-case scenarios earlier this year, when tensions peaked and Washington imposed sweeping tariffs of 145% on Chinese imports — levels that would have severely disrupted global trade and growth if sustained. Instead, both sides agreed to keep additional tariffs at 10% until November 10, allowing more time to pursue a durable trade deal. Still, this is merely a pause rather than progress. 

250819T1.jpg

**The China docket**
In the meantime, China’s latest monthly data releases were watched closely and offered valid reasons for caution despite earlier signs of resilience. More specifically, retail sales, industrial production, and fixed-asset investment (chart 2) all missed expectations, suggesting US tariff and non-tariff measures are beginning to weigh on growth alongside persistent domestic headwinds. Also, China’s unemployment rate inched higher, while property prices continued to decline. If such weakness persists, calls for additional policy support will grow, even though debt-fuelled measures risk merely trading today’s problems for tomorrow’s.

250819T2.jpg

**China retail sales**
Diving deeper into the individual releases, chart 3 highlights the gradual slowdown in China’s retail sales in recent months, with growth easing to 3.7% y/y in July. By product category, the deceleration reflects weaker automobile sales — amid authorities’ clampdown on carmaker price wars — and softer furniture sales, suggesting a one-off boost from the government’s durable-goods subsidy programme may now be fading. Clearer confirmation could come if sales growth of other subsidized goods, such as home appliances, also begin to weaken. Still, retail spending — and broader consumption activity — may gain fresh support from China’s new loan-interest subsidy programme, which covers both consumer borrowing and eligible service-sector business loans.

250819T3.jpg

**China property prices and investment**
Moving next to China’s beleaguered property market, the sector has shown no meaningful recovery for several years. Prices remain on a downtrend, and repeated investor attempts to call a bottom have proven futile. The latest data offered no relief: property prices continued to decline, while investment in the sector fell 12% y/y year-to-date in July (chart 4). That said, the pace of price declines has slowed sharply compared with last year. Even so, what was once a major engine of China’s growth continues to shrink into a shadow of its former self.

250819T4.jpg

**The BRIC bloc**
While recent trade measures appear favourable for the US, lowering partner tariffs and modestly raising Washington’s own rates, significant risks remain. Such moves could push US trading partners closer together, undermining the administration’s strategy of leveraging bilateral negotiations. One potential area of alignment is the BRIC bloc — Brazil, Russia, India, and China. Although hard data have yet to show major shifts (see chart 5), recent headlines suggest small steps toward deeper cooperation. That said, Russia remains constrained by heavy US sanctions and pressure, as reflected in trade flows with its closest partners.

250819T5.jpg

Digging a little further, China and India have recently begun to ease their decades-long frosty ties, partly in response to this year’s US trade tensions. A key sign of improving relations is China’s Foreign Minister Wang Yi’s high-profile visit to India from Monday to Wednesday this week. The visit focused on, among other topics, the disputed Himalayan border — which, if resolved, would mark a major step in restoring bilateral relations — and trade across the border. Other indicators of a warming relationship include ongoing talks to restart direct flights, suspended during the pandemic. Given the sheer size of their populations and economies, as shown in chart 6, a fully developed China-India economic partnership could unlock immense potential. However, the path to meaningful economic integration remains at an early stage, with numerous hurdles still to navigate.

Economy in Brief: November 2005

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ISM Non-Manufacturing Index Recovered

Initial Unemployment Insurance Claims At Two Month Low

3Q U.S. Productivity Strong

3Q U.S. Productivity Strong

Modest Gains in German Employment; Unemployment Rates Up or Down, Depending on Definition

Mortgage Applications Off Again

U.S. Vehicle Sales Lowest Since 1998, Inventories Lower As Well

U.S. Vehicle Sales Lowest Since 1998, Inventories Lower As Well