Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004g.jpg" width="353">
Factory inventories rose 0.4% last month, half the upwardly revised gain during July. Nevertheless, the y/y rate of accumulation was at its highest since early 2005.
Primary metals inventories again were firm and rose 1.4% (11.7% y/y) after an upwardly revised 2.1% increase during July. Growth in inventories of computers &amp; electronic products slowed to 0.4% (8.5% y/y) from a 0.9% July gain but inventories of electrical equipment jumped another 1.5% (12.9% y/y). Machinery inventories rose 0.3% (4.5% y/y).
Total factory orders fell slightly after a deepened 1.0% July decline. Durable goods orders fell just slightly and that was a bit better than the 0.5% decline that was in the advance report of a 0.5% drop. Factory orders less transportation fell 0.7% (+5.5% y/y) after a 0.6% July gain.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004f.jpg" width="353">
Factory shipments surged 1.1%on the strength of a 6.0% jump in transportation. Less transportation shipments rose 0.4% (6.9% y/y) despite lower petroleum shipments. Factory shipments less transportation &amp; petroleum rose a strong 0.9% (6.7% y/y).
Unfilled orders rose 0.4% last month and less the transportation sector backlogs rose 0.3% (13.8% y/y).<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.4%</td>
<td>0.8%</td>
<td>6.5%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-0.0%</td>
<td>-1.0%</td>
<td>4.6%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.1%</td>
<td>-0.1%</td>
<td>6.1%</td>
<td>7.1%</td>
<td>6.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.4%</td>
<td>1.2%</td>
<td>18.5%</td>
<td>16.3%</td>
<td>4.5%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
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Factory inventories rose 0.4% last month, half the upwardly revised gain during July. Nevertheless, the y/y rate of accumulation was at its highest since early 2005. Primary metals inventories again were firm and rose 1.4% (11.7% y/y) [...]

U.S. Factory Inventory Gain Slowed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004h.jpg" width="353">
The September Business Activity Index for the non-manufacturing sector from the Institute for Supply Management (ISM) fell unexpectedly to its lowest level in over three years. The decline to 52.9 compared to Consensus expectations for a lesser drop to 56.0.
Since the series&#39; inception in 1997 there has been a 50% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders sub-index rose to 57.2, recovering a sharp drop in August, and the employment index also recovered most of its August decline. 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/061004i.jpg" width="353">
Pricing power dropped to its lowest level in three years. 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 back to July 1997.
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.

<table border="0" cellspacing="0" width="100%">
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<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">September</th>
<th scope="col">August</th>
<th scope="col">Sept. &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>52.9</td>
<td>57.0</td>
<td>53.7</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>56.7</td>
<td>72.4</td>
<td>78.4</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>


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The September Business Activity Index for the non-manufacturing sector from the Institute for Supply Management (ISM) fell unexpectedly to its lowest level in over three years. The decline to 52.9 compared to Consensus expectations [...]

ISM Nonmanufacturing Index Down, Components Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004b.jpg" width="353">
U.S. sales of light vehicles in September rose 3.5% to 16.63M units, according to the Autodata Corporation. The gain recovered a piece of the prior month&#39;s 6.5% decline and during the first nine months of 2006 vehicle sales averaged 16.63M, down 3.8% from the comparable period during.
A forty cent m/m decline in retail gasoline prices to an average $2.56 per gallon helped lift overall light truck sales 7.5% last month after a 6.6% decline during August. Nevertheless, higher gasoline prices versus last year have prompted an 8.3% decline in light truck sales year to date versus the first nine months of last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004c.jpg" width="353">
Sales of the relatively fuel efficient imported light trucks surged a strong 14.4% last month (29.8% y/y) and advanced 9.8% year to date. Domestic truck sales also rose 6.3% (1.0% y/y) during September, however, during the first nine months of this year domestic light truck sales fell 10.8% from the first nine months of 2005 to an average of 7.48M.
Auto sales slipped 0.8% last month after a 6.4% decline during August. Sales of imported autos fell 5.0% (+3.4% y/y) after a 10.1% August decline. Still, year to date sales of imported autos were up 9.2% versus 2005. Domestic car sales rose 1.2% (-6.6% y/y) after a 4.5% August decline. Year to date sales of domestic autos were down 1.2% versus last year.
Imports&#39; share of the US light vehicle market fell m/m to 23.0% during September. Last year, imports&#39; share of the U.S. vehicle market totaled 20.4%
Inflation Targets and Inflation Expectations: Some Evidence from the Recent Oil Shocks from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-22.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">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.63</td>
<td>16.06</td>
<td>0.7%</td>
<td>16.96</td>
<td>16.87</td>
<td>16.63</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.63</td>
<td>7.69</td>
<td>-3.6%</td>
<td>7.65</td>
<td>7.49</td>
<td>7.62</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.00</td>
<td>8.37</td>
<td>4.6%</td>
<td>9.32</td>
<td>9.37</td>
<td>9.01</td>
</tr>
</tbody>
</table>
</body>
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U.S. sales of light vehicles in September rose 3.5% to 16.63M units, according to the Autodata Corporation. The gain recovered a piece of the prior month's 6.5% decline and during the first nine months of 2006 vehicle sales averaged [...]

Lower Gasoline Prices Fueled U.S. Vehicle (Truck) Sales

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004a.jpg" width="353">
The Nat&#39;l Employment Report, published by the payroll processor ADP, indicated that private nonfarm payrolls rose 78,000 last month. The September figure from BLS will be published this Friday.
During August, ADP&#39;s measure of private nonfarm payrolls rose 107,000 and that gain was accompanied by a 111,000 rise in private nonfarm payrolls, as published by the Bureau of Labor Statistics.
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which grew an average of 11,333 per month over the last year.
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/report_analysis.aspx">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.
The Coming Demographic Transition: Will We Treat Future Generations Fairly?, today&#39;s speech by Fed Chairman Bernanke is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20061004/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Nonfarm Private Payroll Employment (Chg.)</td>
<td>78,000</td>
<td>107,000</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>-0.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Nat'l Employment Report, published by the payroll processor ADP, indicated that private nonfarm payrolls rose 78,000 last month. The September figure from BLS will be published this Friday. During August, ADP's measure of private [...]

ADP Reports Less Hiring During September

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004a.jpg" width="353">
The Nat&#39;l Employment Report, published by the payroll processor ADP, indicated that private nonfarm payrolls rose 78,000 last month. The September figure from BLS will be published this Friday.
During August, ADP&#39;s measure of private nonfarm payrolls rose 107,000 and that gain was accompanied by a 111,000 rise in private nonfarm payrolls, as published by the Bureau of Labor Statistics.
ADP compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which grew an average of 11,333 per month over the last year.
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/report_analysis.aspx">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.
The Coming Demographic Transition: Will We Treat Future Generations Fairly?, today&#39;s speech by Fed Chairman Bernanke is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20061004/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/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Nonfarm Private Payroll Employment (Chg.)</td>
<td>78,000</td>
<td>107,000</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>-0.4%</td>
</tr>
</tbody>
</table>
Lower Gasoline Prices Fueled U.S. Vehicle (Truck) Sales 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 4, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004b.jpg" width="353">
U.S. sales of light vehicles in September rose 3.5% to 16.63M units, according to the Autodata Corporation. The gain recovered a piece of the prior month&#39;s 6.5% decline and during the first nine months of 2006 vehicle sales averaged 16.63M, down 3.8% from the comparable period during.
A forty cent m/m decline in retail gasoline prices to an average $2.56 per gallon helped lift overall light truck sales 7.5% last month after a 6.6% decline during August. Nevertheless, higher gasoline prices versus last year have prompted an 8.3% decline in light truck sales year to date versus the first nine months of last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004c.jpg" width="353">
Sales of the relatively fuel efficient imported light trucks surged a strong 14.4% last month (29.8% y/y) and advanced 9.8% year to date. Domestic truck sales also rose 6.3% (1.0% y/y) during September, however, during the first nine months of this year domestic light truck sales fell 10.8% from the first nine months of 2005 to an average of 7.48M.
Auto sales slipped 0.8% last month after a 6.4% decline during August. Sales of imported autos fell 5.0% (+3.4% y/y) after a 10.1% August decline. Still, year to date sales of imported autos were up 9.2% versus 2005. Domestic car sales rose 1.2% (-6.6% y/y) after a 4.5% August decline. Year to date sales of domestic autos were down 1.2% versus last year.
Imports&#39; share of the US light vehicle market fell m/m to 23.0% during September. Last year, imports&#39; share of the U.S. vehicle market totaled 20.4%
Inflation Targets and Inflation Expectations: Some Evidence from the Recent Oil Shocks from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-22.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">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.63</td>
<td>16.06</td>
<td>0.7%</td>
<td>16.96</td>
<td>16.87</td>
<td>16.63</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.63</td>
<td>7.69</td>
<td>-3.6%</td>
<td>7.65</td>
<td>7.49</td>
<td>7.62</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>9.00</td>
<td>8.37</td>
<td>4.6%</td>
<td>9.32</td>
<td>9.37</td>
<td>9.01</td>
</tr>
</tbody>
</table>
ISM Nonmanufacturing Index Down, Components Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 4, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004h.jpg" width="353">
The September Business Activity Index for the non-manufacturing sector from the Institute for Supply Management (ISM) fell unexpectedly to its lowest level in over three years. The decline to 52.9 compared to Consensus expectations for a lesser drop to 56.0.
Since the series&#39; inception in 1997 there has been a 50% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders sub-index rose to 57.2, recovering a sharp drop in August, and the employment index also recovered most of its August decline. 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/061004i.jpg" width="353">
Pricing power dropped to its lowest level in three years. 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 back to July 1997.
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.

<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">September</th>
<th scope="col">August</th>
<th scope="col">Sept. &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>52.9</td>
<td>57.0</td>
<td>53.7</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>56.7</td>
<td>72.4</td>
<td>78.4</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>
U.S. Factory Inventory Gain Slowed 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 4, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004g.jpg" width="353">
Factory inventories rose 0.4% last month, half the upwardly revised gain during July. Nevertheless, the y/y rate of accumulation was at its highest since early 2005.
Primary metals inventories again were firm and rose 1.4% (11.7% y/y) after an upwardly revised 2.1% increase during July. Growth in inventories of computers &amp; electronic products slowed to 0.4% (8.5% y/y) from a 0.9% July gain but inventories of electrical equipment jumped another 1.5% (12.9% y/y). Machinery inventories rose 0.3% (4.5% y/y).
Total factory orders fell slightly after a deepened 1.0% July decline. Durable goods orders fell just slightly and that was a bit better than the 0.5% decline that was in the advance report of a 0.5% drop. Factory orders less transportation fell 0.7% (+5.5% y/y) after a 0.6% July gain.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004f.jpg" width="353">
Factory shipments surged 1.1%on the strength of a 6.0% jump in transportation. Less transportation shipments rose 0.4% (6.9% y/y) despite lower petroleum shipments. Factory shipments less transportation &amp; petroleum rose a strong 0.9% (6.7% y/y).
Unfilled orders rose 0.4% last month and less the transportation sector backlogs rose 0.3% (13.8% y/y).<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">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>0.4%</td>
<td>0.8%</td>
<td>6.5%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-0.0%</td>
<td>-1.0%</td>
<td>4.6%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.1%</td>
<td>-0.1%</td>
<td>6.1%</td>
<td>7.1%</td>
<td>6.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.4%</td>
<td>1.2%</td>
<td>18.5%</td>
<td>16.3%</td>
<td>4.5%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
Mortgage Applications Surged 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 4, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004e.jpg" width="353">
According to the Mortgage Bankers Association. the total number of mortgage applications surged 11.9% last week. It was the strongest w/w increase since June 2005. The gain lifted applications for the month 5.6% above the August average.
Applications to refinance surged 17.5% after the prior week&#39;s 4.1% decline. The average level of refis in September rose 8.7% from August which surged 13.3% m/m from July.
Purchase applications recovered 7.6% after the prior week&#39;s 5.5% decline. The increase raised the month&#39;s average 3.2% from August, only the first rise in the last five months. The latest level was 23.1% below the peak during May of 2005.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004d.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage rose six basis points to 6.39% to 6.45% and averaged 6.50% last month versus 6.64% in August. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing ticked just slightly w/w to 6.11% and averaged 6.20% last month. The peak rate was 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
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">09/29/06</th>
<th scope="col">09/22/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>633.9</td>
<td>566.5</td>
<td>-11.2%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>404.6</td>
<td>375.9</td>
<td>-14.6%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,970.8</td>
<td>1,677.5</td>
<td>-6.5%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
UK House Prices Still Strong in September 
by <a href="/comment/Stone.html">Carol Stone</a> October 4, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004j.jpg" width="353">
Unlike in the US, the property market in the UK is still strong. Home prices published today by the Halifax Royal Bank of Scotland (HBOS) showed a 1.0% monthly increase in September, seasonally adjusted. August was revised upward to 1.3% from 1.0% reported initially. September&#39;s price stood 8.2% above a year ago; the growth rate in the three-month moving average most frequently cited by the bank was 8.0%. This is less than in the prior four months, but firmer than what prevailed across 2005.
For comparison, we can look at the price in US dollars; it was $342,000. A slight firming in the dollar diminished September&#39;s sterling price gain in to 0.4% in the US currency, but that followed a 4.0% surge in August when the dollar had fallen 2.6% again the pound.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061004k.jpg" width="353">
The firmness in UK house prices is presently accompanying firm demand for houses in the UK, suggested by the positive readings in the RICS housing market survey. Data on actual counts of home sales transactions lag a couple of months. But this survey by Chartered Surveyors gives the balance of respondents showing more &quot;newly agreed sales&quot; over fewer sales at +21% in August, the second highest since early 2004.
Analysts were impressed with the strength in home prices, even as interest rates are also moving up. In early August, the Bank of England raised its base rate 25 basis points to 4.75%. This appears not yet fully reflected in available data on mortgage rates, which show the &quot;standard variable rate&quot; inching up just 2 basis points in August to 6.50% from 6.48% in July. The &quot;base-rate tracker&quot; mortgage rate rose in August to 5.30% from 5.16% in July. The higher house prices suggest that rising mortgage rates didn&#39;t discourage buyers in September -- or perhaps they stimulated buyers in the reverse way: &quot;let&#39;s get our house and our mortgage now before rates go up more&quot;, they may have thought, which circumstance would point to a slowdown in coming months.

<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/UK/@U4/@U4.HTM">UK House Prices</a></th>
<th scope="col">Sept 2006</th>
<th scope="col">Aug 2006</th>
<th scope="col">July 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Average House Price (SA*, &pound;000)</td>
<td>181.2</td>
<td>179.5</td>
<td>177.2</td>
<td>167.5</td>
<td>165.3</td>
<td>157.0</td>
<td>132.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Chg</td>
<td>1.0</td>
<td>1.3</td>
<td>0.3</td>
<td>8.2</td>
<td>5.3</td>
<td>18.8</td>
<td>19.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; US $ (000)</td>
<td>341.5</td>
<td>340.0</td>
<td>326.9</td>
<td>302.9</td>
<td>300.7</td>
<td>287.6</td>
<td>216.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; % Chg</td>
<td>0.4</td>
<td>4.0</td>
<td>0.4</td>
<td>12.8</td>
<td>4.6</td>
<td>32.9</td>
<td>29.2</td>
</tr>
<tr class="odd">
<td class="firstcol">RICS Newly Agreed Sales**</td>
<td>--</td>
<td>+21%</td>
<td>+12%</td>
<td>+12%</td>
<td>+2%</td>
<td>-9%</td>
<td>-2%</td>
</tr>
<tr>
<td class="firstcol">Mortgage Rate***</td>
<td>--</td>
<td>6.50%</td>
<td>6.48%</td>
<td>6.71%</td>
<td>6.63%</td>
<td>6.25%</td>
<td>5.61%</td>
</tr>
</tbody>
</table>


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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061003d.jpg" width="353">
Comparisons of retail sales among countries are beset by different definitions and by different units. Some countries report sales only in index form, others only in their national currencies. Some countries include sales of motor vehicle and parts; others do not. Some counties report sales both including and excluding motor vehicles and parts.
Today three countries--France, Australia and Hong Kong--reported retail sales. Yesterday Germany reported. The easiest comparison to make is between Germany and France. The volume of retail sales is reported in the EUROSTAT data base where concepts are harmonized. One can be reasonably certain that the difference in trends of retail sales in the two countries, shown in Chart 1, is a substantive one and not due to statistical quirks.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061003f.jpg" width="353">
If one wishes to compare retail sales in Germany with those in Hong Kong one should note that the German concept excludes motor vehicles and parts while the Hong Kong concept includes them. Fortunately, however in the GERMANY data base, there is a memorandum item--Retail Sales including motor vehicle and parts. This series has a base of 2003 and the retail sales series in Hong Kong from the EMERGEPR data base has a base of October, 2004-September, 2005. One could change the Hong Kong index to base 2003=100 or, as we did change both to 2000=100 to be comparable with the other charts. The two series with base 2000=100 are shown in Chart 2.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061003e.jpg" width="353">
Another problem comes up when one series is in local currency and another in index form. Such is the case if one want to compare retail sales in France and Australia. The Australian data are given in millions of Australian Dollars, while the French data are given in terms of value and volume indexes. Both concepts, fortunately, exclude motor vehicles and parts. One simple approach is to take the Australian data from the ANZ data base, and, by using the advanced function, put the data in index form with 2000=100, the same base as the French value index that is found in the FRANCE data base.This comparison is shown in Chart 3.
The second and third charts, like the first show comparisons that reflect substantive differences and not statistical quirks. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Retail Sales</th>
<th scope="col">Aug&nbsp; 06</th>
<th scope="col">Jul 06</th>
<th scope="col">Aug 05</th>
<th scope="col">M/M %&nbsp;&nbsp;</th>
<th scope="col">Y/Y %&nbsp;&nbsp;&nbsp;</th>
<th scope="col">2005&nbsp;&nbsp;</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GERMANY&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Vol Retail Sales, ex motor vehicles &amp; pts (2000=100)</td>
<td>104.3</td>
<td>104.3</td>
<td>104.1</td>
<td>0.00</td>
<td>0.19</td>
<td>103.2</td>
<td>101.6</td>
<td>100.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Val Retail Sales, ex motor vehicles &amp; pts&nbsp; (2000=100)</td>
<td>105.6</td>
<td>105.5</td>
<td>104.5</td>
<td>0.09</td>
<td>1.05</td>
<td>103.7</td>
<td>101.6</td>
<td>100.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Val Retail Sales, incl&nbsp; motor vehicles &amp; pts (2000=100)</td>
<td>107.1</td>
<td>106.3</td>
<td>104.4</td>
<td>0.75</td>
<td>2.59</td>
<td>103.9</td>
<td>101.8</td>
<td>100.2</td>
</tr>
<tr class="odd">
<td class="firstcol"> FRANCE</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Val Retail Sales, ex motor vehicles &amp; pts (2000=100)</td>
<td>116.3</td>
<td>116.1</td>
<td>114.1</td>
<td>0.68</td>
<td>2.25</td>
<td>114.7</td>
<td>113.2</td>
<td>109.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Vol Retail Sales, ex motor vehicles &amp; pts&nbsp; (2000=100)&nbsp;</td>
<td>n.a.</td>
<td>123.5</td>
<td>120.6</td>
<td>n.a</td>
<td>n.a</td>
<td>121.3</td>
<td>119.3</td>
<td>115.0</td>
</tr>
<tr>
<td class="firstcol">AUSTRALIA</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Retail Sales (Mil A$)</td>
<td>18.176</td>
<td>18031</td>
<td>17212.3</td>
<td>0.25</td>
<td>5.60</td>
<td>217396</td>
<td>198214</td>
<td>175956</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Retail Sales 2000=100)</td>
<td>146.4</td>
<td>146.0</td>
<td>138.6</td>
<td>0.25</td>
<td>5.60</td>
<td>137.2</td>
<td>133.1</td>
<td>124.5 vA</td>
</tr>
<tr class="odd">
<td class="firstcol">HONG KONG</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Val Retail Sales (2000=100)</td>
<td>118.8</td>
<td>117.4</td>
<td>109.4</td>
<td>1.20</td>
<td>8.61</td>
<td>109.6</td>
<td>102.7</td>
<td>92.6</td>
</tr>
</tbody>
</table>
</body>
</html>

Comparisons of retail sales among countries are beset by different definitions and by different units. Some countries report sales only in index form, others only in their national currencies. Some countries include sales of motor [...]

Avoiding Pitfalls in Comparing Retail Sales Among Countries

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061003c.jpg" width="353">
For September, announced job cuts reported by Challenger, Grey &amp; Christmas jumped for the second month. The 35,037 increase to 100,315 was to the highest level since January. The three month moving average of layoff announcements also rose 19.5% to its highest level since April.
During the last ten years there has been an 83% (inverse) correlation between the three month moving average level of announced job cuts and the three month change payroll employment.
A sharply higher level of layoffs in automotive (464.2% y/y), commodities (77.2% y/y), consumer goods (9.5% y/y), industrial goods (-16.1% y/y), and insurance (396.0% y/y) boosted the total. These were offset by declines in retail (-82.7% y/y), financial (-26.5% y/y), real estate and transportation (-90.8% y/y).
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans more than tripled m/m (87.9% y/y).
Remarks by Fed Governor Randall S. Kroszner titled What Drives Productivity Growth? Implications for the Economy and Prospects for the Future can be found <a href="http://www.federalreserve.gov/BoardDocs/Speeches/2006/20060927/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/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>100,315</td>
<td>65,278</td>
<td>39.6%</td>
<td>1,072,054</td>
<td>1,039,935</td>
<td>1,236,426</td>
</tr>
</tbody>
</table>
</body>
</html>

For September, announced job cuts reported by Challenger, Grey & Christmas jumped for the second month. The 35,037 increase to 100,315 was to the highest level since January. The three month moving average of layoff announcements also [...]

Challenger Layoffs Up Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061003b.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS indicated that chain store sales fell last week. The 0.3% decline was the fourth drop in as many weeks and pulled the average of sales in September 0.5% below August.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The retail price for a gallon of regular unleaded gasoline also fell last week. The seven cent w/w decline to an average $2.31 (-21.1% y/y) was to the lowest level since late February. 
The earlier decline in spot market prices, however, recently stabilized. In trading yesterday, the NY harbor price for regular unleaded gasoline was $1.55 per gallon versus an average $1.54 last week and $1.53 the prior period. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/061003a.jpg" width="353">
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS reversed all of the prior week&#39;s decline with a 0.7% rise, the third gain in the last four weeks. The indicator in September rose 0.7% from the August average, the first m/m rise since June.
The latest Short-Term Energy Outlook from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.
Consumer Confidence Surveys: Can They Help Us Forecast Consumer Spending in Real Time? from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/br_q3-2006-1_consumer_confidence.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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">09/30/06</th>
<th scope="col">09/23/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>463.0</td>
<td>464.2</td>
<td>3.3%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers (ICSC)-UBS indicated that chain store sales fell last week. The 0.3% decline was the fourth drop in as many weeks and pulled the average of sales in September 0.5% below August.

Chain Store Sales & Gasoline Prices Fell Again

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

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

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Andrew Cates

**The US labour market**
The latest data highlight a growing sense of fragility in the US labour market. The unemployment rate, while still relatively low by historical standards, has been edging higher through the course of this year. More telling, however, is the signal from this week’s consumer confidence survey from Conference Board and specifically the labour market differential — the gap between the share of consumers saying jobs are plentiful versus those saying jobs are hard to get. That balance has narrowed sharply, moving back toward levels historically associated with softer labour demand and rising unemployment.

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**Goods and services inflation** 
Haver’s breakdown of goods and services CPI inflation in the advanced economies highlights where fresh risks are emerging. Goods inflation, which had been receding sharply after the pandemic supply shocks, has recently shown signs of firming again. Some of this probably reflects the impact of US tariff policies, which are raising import costs and putting renewed upward pressure on traded goods prices. While services inflation remains the more stubborn component in most advanced economies, the risk is that tariffs could reintroduce stickiness into goods prices, slowing the overall disinflation process.

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**China, Europe and US trade policy**
A consequence of US tariff policies has been a sharp contraction in Chinese exports to the US market, with much of the surplus redirected elsewhere. Europe in particular has recorded near double-digit import growth in recent months, raising concerns that Beijing is deflecting its industrial overcapacity problem rather than resolving it, effectively transferring the pressure onto trading partners. China’s authorities, however, have begun to push back, introducing measures to curb excess supply and rein in so-called “involution,” including clampdowns on price wars across several industries.

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**China’s excess capacity and Europe**
A closer look at Europe–China trade shows that electric vehicles remain a key flashpoint. Import volumes from China have continued to rise even as per-unit prices fall sharply from a year ago —evidence suggesting that industrial overcapacity persists, with low-cost Chinese EVs increasingly challenging European automakers. The surge has carried on despite EU tariffs of up to 45% on battery EVs, as Chinese producers have adapted by pushing plug-in hybrids and expanding onshore production in Europe to bypass duties and defend market share.

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**Wage growth in the US and Europe** 
Turning back to inflation dynamics, the UK stands out for its persistent wage pressures. While posted wage growth has cooled across the US and euro area, the UK measure has remained elevated at around 6% year-on-year, well above pre-pandemic norms. This stickiness reflects a still-tight labour market in key service sectors, even as broader activity has slowed and unemployment has edged higher. For the Bank of England, it underscores the dilemma: headline inflation is easing, but underlying pay growth risks keeping services inflation uncomfortably high, complicating the timing and scale of policy easing.

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**The UK economy**
The UK’s net international investment position has deteriorated noticeably in recent years, with both direct investment and portfolio flows showing persistent weakness. The latest data underline how net FDI has turned increasingly negative, while the portfolio investment balance has also eroded, leaving the UK more reliant on volatile short-term funding sources. This deterioration comes against a backdrop of heightened investor unease about the riskiness of UK debt markets, where elevated gilt yields and rising debt-servicing costs have amplified concerns over fiscal sustainability. Taken together, these trends underscore the vulnerability of the UK’s external position at a time when global capital is arguably proving more selective and risk sensitive.

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Global markets have continued to rally into late summer, buoyed by AI optimism, dovish signals from central bankers at Jackson Hole, and expectations of easier policy ahead. Yet beneath the surface, risks to the world economy are accumulating. In the US, labour market indicators point to softening conditions (chart 1), while tariff-driven pressures are beginning to push goods prices higher (chart 2). Global trade flows are being reshaped by US policy, with China’s excess capacity increasingly diverted toward Europe, most visibly through surging exports of electric vehicles (EVs) (charts 3 and 4). At the same time, wage growth remains stubbornly elevated in the UK, complicating disinflation (chart 5), while concerns are mounting over the country’s external vulnerabilities as net FDI and portfolio positions weaken against the backdrop of jittery debt markets (chart 6). Together, these dynamics highlight the tension between buoyant market performance and a global economy still grappling with structural fragilities.

Charts of the Week: Riskbusters

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Real GDP grew 3.3% (SAAR) during the second quarter of 2025, revised from a 3.0% gain reported initially. The increase followed an unrevised 0.5% decline in Q1. A 3.1% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.1% compared to 2.0% y/y in Q1, and remained below its most recent high of 3.2% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment increased 1.4% (7.0% y/y) last quarter after easing 0.8% in Q1. Before-tax earnings with IVA & CCA rose 1.7% (4.3% y/y) after falling 2.3% in Q1. Financial sector earnings rose 1.4% (15.3% y/y) after rising 2.3% in Q1. Nonfinancial corporate profits rose 2.2% (2.5% y/y) after falling 2.5% in Q1. Earnings from abroad eased 0.7% (-0.4% y/y) following a 7.3% Q1 decline.

Foreign trade balance improvement added 4.95 percentage points to growth last quarter after subtracting 4.61 percentage points in Q1. Imports fell 29.8% (+1.3% y/y) after surging 38.0% in Q1. Exports declined 1.3% (+2.0% y/y) after improving 0.4% in Q1. Inventories subtracted 3.29 percentage points from growth after adding 2.59 percentage point to Q1 growth.

Real final sales to domestic purchasers grew 1.6% (2.4% y/y), revised from 1.1%, in Q2 after rising 1.5% in Q1. Personal consumption expenditures rose 1.6% (2.4% y/y), revised from 1.4%, following a 0.5% gain. Durable goods spending rose 2.6% (4.6% y/y) after falling 3.7% in Q1. Motor vehicle purchases strengthened 11.7% (6.7% y/y) after declining 11.2% in Q1. Spending on home furnishings & appliances weakened 2.1% (+3.5% y/y) following a 1.5% rise. Recreational goods & vehicle outlays fell 3.5% (+4.3% y/y) last quarter after a 0.4% Q1 gain.

Nondurable goods outlays in constant dollars rose 2.3% (3.0% y/y) following 2.1% growth in Q1. Apparel spending increased 5.4% (4.8% y/y) following a 7.0% rise. Food & beverage buying gained 0.3% (1.5% y/y) after a 1.0% increase. Gasoline & fuel oil purchases weakened 1.4% (+0.9% y/y) after gaining 3.6% in Q1.

Real spending on services increased 1.2% (1.9% y/y) after a 0.6% gain. Outlays on housing & utilities eased 0.4% (+1.1% y/y) after rising 2.9% in Q1. Health care expenditures rose 4.2% (4.8% y/y) after a 3.1% increase. Transportation outlays declined 2.9% (-0.6% y/y) after a 1.4% rise, while recreation spending rose 3.6% (0.7% y/y) following a 5.1% decline. Restaurant & hotel expenditures increased 5.1% (1.9% y/y) after falling 1.8%. Financial services expenditures rose 1.9% (2.3% y/y) following a 0.1% Q1 increase.

Business fixed investment in constant dollars increased 5.7% last quarter (4.2% y/y), revised from 1.9%, following a 10.3% surge in Q1. Expenditures on structures declined 8.9% (-3.4% y/y), after falling 2.4% in Q1. Expenditures on producers’ durable equipment increased 7.4% (7.7% y/y), revised from 4.8%, after surging 23.7% in Q1. Outlays on information processing equipment rose 10.1% (20.1% y/y), revised from 5.5%, after soaring 72.8% during Q1. Industrial equipment investment rose 6.7% (4.0% y/y) after a 4.7% rise. Transportation equipment investment surged 20.4% (6.8% y/y) after a 6.9% gain. Intellectual property product spending rose 12.8% last quarter (5.2% y/y) following a 6.0% rise.

Residential structures investment in real terms declined a little-revised 4.7% (-1.3% y/y), the fourth decline in the last five quarters.

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Government spending eased 0.2%, revised from up 0.5% in Q2 (+1.8% y/y) after a 0.6% decline. Federal government expenditures declined 4.7% (+0.7% y/y) after falling 4.6% in Q1. National defense expenditures increased 1.4% (3.0% y/y) after declining 7.1% in Q1. State & local government spending rose 2.6% (2.5% y/y) following a 2.0% rise.

The GDP chain price index rose an unrevised and expected 2.0% last quarter (2.5% y/y) after increasing 3.8% in Q1. The PCE chain price index increased 2.0% (2.4% y/y) following a 3.7% rise. The PCE price index excluding food and energy rose 2.5% (2.7% y/y) after increasing 3.5% in Q1. The business fixed investment price index edged 0.5% lower (+1.1% y/y) after a 0.4% rise. The residential price index rose 1.1% (2.6% y/y) after a 4.1% rise while the government price index increased 3.3% (3.1% y/y) following a 4.6% rise.

The GDP data 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. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Business investment strengthens & consumer spending firms.
- U.S. business earnings reverse Q1 decline.
- Increase in price index is unrevised, remaining roughly half of Q1’s gain.

U.S. GDP Q2’25 Growth Revised Up; Profits Improve

Sandy Batten

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The Kansas City Fed manufacturing composite index was unchanged at 1 in August from July. This was the second consecutive month that the index has been positive, indicating the manufacturing in the KC Fed district continue to inch up in August. Prior to the positive reading in July, the index had been negative for 22 consecutive months. The index’s most recent high was 31 reached in both April 2021 and October 2021. The durable manufacturing sector was mostly flat in August, while nondurable manufacturing activity declined slightly driven by printing activities and paper and chemical manufacturing. 

The August survey was open for a six-day period from August 20-25, 2025 and included 103 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

The ISM-adjusted index calculated by Haver Analytics rose to 51.1 (NSA) in August from 50.2 in July. This was the fifth reading above the critical 50 level that separates expansion from contraction in the past six months, a further indication of expanding manufacturing activity.

For the major component indexes, the production index was 0 in August, but this was up from -3 in July. The new orders index rose to 5 in August, its highest reading since May 2022, from 2 in July. The shipments index increased to 6 in August from 3 in July. The employment index was 0 in August, but this was up from -11 in July. Also, the average workweek index rebounded to 3 in August after having been in negative territory for the previous four months. Supplier delivery times were unchanged at 7 in August. The elevation of this index since April may indicate some incipient supply-chain disruptions from higher tariffs. In contrast, raw materials inventories fell to -7 in August from 8 in July.

On the inflation front, the prices paid for raw materials index remained elevated but fell to 43 in August from 47 in July and a local high of 51 in June. Forty-four percent of respondents reported an increase in raw materials prices in August, down from 48% in July and 53% in June, while only 4% reported a decrease, down from 5% in July and 6% in June. The prices received for finished products index increased to 21 in August from 18 in July. This index has fluctuated in a range between 17 and 21 for the past four months.

Expectations for future activity remained positive, with the composite index rising to 11 from 8, as firms anticipate an improvement in production and new orders. While expectations have been trending up over the past several months, they remain depressed relative to the recent high reading of 17 last December. Capital expenditures expectations remained in negative territory in August for the second consecutive month but edged up to -3 from -4 in July.

The series dates back to July 2001. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Data for the Kansas City Fed Survey can be found in Haver’s **SURVEYS** database.

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- Index remained (though barely) in positive territory for the second consecutive month, indicating that manufacturing activity was inching up.
- Prior to last month, the index had been negative for 22 consecutive months.
- Positive readings across most key components.

FRB Kansas City Manufacturing Index Unchanged in August

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The Pending Home Sales Index weakened 0.4% in July (+0.7% y/y) to 71.7 after falling an unrevised 0.8% in June and rising an unrevised 1.8% in May, according to the National Association of Realtors (NAR). The Index remained 42.7% below its most recent peak of 125.1 in October 2021. The index is a forward-looking measure of home sales based on contract signings.

The fall in pending home sales occurred as the average rate on a 30-year mortgage rose to 6.72% in July after holding steady m/m at 6.82% in June. These rates remained well above a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales were mixed last month in the four major regions of the country. Sales in the Midwest declined 4.0% (+1.3% y/y) in July after easing 0.8% in June. Sales in the Northeast fell 0.6% both m/m and y/y, after holding steady in June. In the South, sales eased 0.1% (+1.8% y/y) following a 0.6% June decline, but sales in the West increased 3.7% (-1.9% y/y), reversing a 3.9% June 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 **WEEKLY** database.

- Decline adds to June weakness.
- Regional changes are mixed.


U.S. Pending Home Sales Decline in July

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined to 229,000 during the week of August 23, after rising to 234,000 in the week of August 16, revised from 235,000. The Action Economics Forecast Survey expected 230,000 initial claims for last week. The four-week moving average of initial claims increased to 228,500 from 226,000, revised from 226,250. It was the highest level since the second week of July.

In the week ended August 16, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – decreased by 7,000 to 1.954 million from 1.961 million in the prior week, revised down by 11,000 from 1.972 million. The four-week moving average rose to 1.956 million in the week ending August 16, the highest level in six weeks, and up from 1.952 million in the prior week, revised from 1.955 million.

In the week ending August 16, the insured rate of unemployment (the number of beneficiaries as a percent of covered employment) was 1.3% for the twelfth consecutive week.

The insured unemployment rate varied greatly across individual states and territories. In the week ended August 9, the highest unemployment rates were in New Jersey (2.75%), Rhode Island (2.58%), Massachusetts (2.18%), Minnesota (2.17%), California (2.11%), Washington (2.08%), District of Columbia (2.04%), and Puerto Rico (2.02%). The lowest were in South Dakota (0.28%), Florida (0.42%), and Alabama and North Carolina (both 0.47%). Rates in other notable states include Pennsylvania (1.92%), New York (1.73%), Illinois (1.72%), and Texas (1.24%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Initial claims declined in latest week after a surge in the prior week.
- Continuing claims declined.
- Insured unemployment rate holds steady.

Economy in Brief: October 2006

Jump to:

U.S. Factory Inventory Gain Slowed

ISM Nonmanufacturing Index Down, Components Up

Lower Gasoline Prices Fueled U.S. Vehicle (Truck) Sales

ADP Reports Less Hiring During September

ADP Reports Less Hiring During September

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Chain Store Sales & Gasoline Prices Fell Again