Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060201a.jpg" width="353">
During the last week of January, the total number of mortgage applications reversed most of the prior week&#39;s increase with a 5.1% decline. Nevertheless, because of increases during the first three weeks of the month, mortgage applications still rose 5.2% on average in January versus December.
A 8.0% w/w decline in purchase applications was to the lowest level in four weeks and lowered the average level in January 0.6% below December.
During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales
In contrast, applications to refinance were relatively firm as a 1.5% decline last week only dented the fairly strong increases of the prior four periods. As a result the average level of refis in January rose 17.7% versus December.
The effective interest rate on a conventional 30-year mortgage rose 15 basis points w/w to 6.44% versus an average 6.48% in December and a high November average of 6.52%. The effective rate on a 15-year mortgage rose about the same amount to 6.09%. The interest rates 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%">
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<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">01/27/06</th>
<th scope="col">01/20/06</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>626.8</td>
<td>660.5</td>
<td>-11.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>435.7</td>
<td>473.7</td>
<td>-1.0%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,747.2</td>
<td>1,773.9</td>
<td>-22.5%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
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During the last week of January, the total number of mortgage applications reversed most of the prior week's increase with a 5.1% decline. Nevertheless, because of increases during the first three weeks of the month, mortgage [...]

Mortgage Applications' Rebound Cut Short

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060201d.jpg" width="353">
The value of construction put in place increased a firm 1.0% in December, double the upwardly revised November rise. Consensus expectations had been for a 0.2% gain.
Residential building rose a sharp 1.0% following little change in November. The value of improvements (-7.7% y/y) recovered most of the prior month&#39;s decline with a 3.2% increase and new multi-family residential (19.9% y/y) rose a strong 1.0%. New single family building added 0.2% (14.2% y/y) to several months of strong increase.
Nonresidential building rose strongly for the second consecutive month led by a 2.5% gain in office construction (13.9% y/y), a 2.6% rise in commercial (12.7% y/y) and a 1.9% increase in lodging (-0.5% y/y).
Public construction spending rose 0.7% following a revised 1.2% increase during November as construction activity on highways &amp; streets, nearly one third of the value of public construction spending, dipped slightly m/m (9.1% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</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>1.0%</td>
<td>0.5%</td>
<td>8.1%</td>
<td>9.1%</td>
<td>10.9%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>1.1%</td>
<td>0.3%</td>
<td>7.7%</td>
<td>9.5%</td>
<td>13.6%</td>
<td>6.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>1.0%</td>
<td>0.0%</td>
<td>8.6%</td>
<td>11.4%</td>
<td>18.2%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.3%</td>
<td>1.1%</td>
<td>5.5%</td>
<td>5.2%</td>
<td>3.9%</td>
<td>-5.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.7%</td>
<td>1.2%</td>
<td>9.7%</td>
<td>7.7%</td>
<td>2.5%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
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The value of construction put in place increased a firm 1.0% in December, double the upwardly revised November rise. Consensus expectations had been for a 0.2% gain. Residential building rose a sharp 1.0% following little change in [...]

U.S. Construction Increase Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060201b.jpg" width="353">
For January, the Institute of Supply Management (ISM) reported that the Composite Index of activity in the manufacturing sector eased to 54.8 from an upwardly revised level of 55.6 in December. It was the third consecutive monthly decline and left the index down sharply from the monthly peaks during 2003 &amp; 2004 near 63. Consensus expectations for 55.4.
During the last twenty years there has been a 68% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
Four of the index&#39;s five components fell last month led by a 2.3 point drop in employment to the lowest level since June. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060201c.jpg" width="353">
The new orders index fell 1.1 points and, at 58.0, is well below December 2003 peak of 71.6. Production fell 1.2 points to 56.6 and the inventory index slipped 0.8 points to 46.5, down sharply from the peak last March of 53.7. Only the supplier deliveries index rose in January to 55.3 but it remained down sharply from October&#39;s level of 60.8.
Prices continued to rise. A two point increase in the index to 65.0 nevertheless left the figure down from the recent peak of 84.0 in October. During the last twenty years there has been a 77% correlation between the price index and the three month change in the PPI for intermediate goods.

<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/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#39;05</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">Composite Index</td>
<td>54.8</td>
<td>55.6</td>
<td>56.3</td>
<td>55.5</td>
<td>60.5</td>
<td>53.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>58.0</td>
<td>59.1</td>
<td>57.3</td>
<td>57.4</td>
<td>63.5</td>
<td>57.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>65.0</td>
<td>63.0</td>
<td>69.0</td>
<td>66.4</td>
<td>79.8</td>
<td>59.6</td>
</tr>
</tbody>
</table>
</body>
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For January, the Institute of Supply Management (ISM) reported that the Composite Index of activity in the manufacturing sector eased to 54.8 from an upwardly revised level of 55.6 in December. It was the third consecutive monthly [...]

ISM Index Eased

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060201b.jpg" width="353">
For January, the Institute of Supply Management (ISM) reported that the Composite Index of activity in the manufacturing sector eased to 54.8 from an upwardly revised level of 55.6 in December. It was the third consecutive monthly decline and left the index down sharply from the monthly peaks during 2003 &amp; 2004 near 63. Consensus expectations for 55.4.
During the last twenty years there has been a 68% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
Four of the index&#39;s five components fell last month led by a 2.3 point drop in employment to the lowest level since June. During the last twenty years there has been a 67% correlation between the level of the ISM employment Index and the three month growth in factory sector employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060201c.jpg" width="353">
The new orders index fell 1.1 points and, at 58.0, is well below December 2003 peak of 71.6. Production fell 1.2 points to 56.6 and the inventory index slipped 0.8 points to 46.5, down sharply from the peak last March of 53.7. Only the supplier deliveries index rose in January to 55.3 but it remained down sharply from October&#39;s level of 60.8.
Prices continued to rise. A two point increase in the index to 65.0 nevertheless left the figure down from the recent peak of 84.0 in October. During the last twenty years there has been a 77% correlation between the price index and the three month change in the PPI for intermediate goods.

<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/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#39;05</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">Composite Index</td>
<td>54.8</td>
<td>55.6</td>
<td>56.3</td>
<td>55.5</td>
<td>60.5</td>
<td>53.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>58.0</td>
<td>59.1</td>
<td>57.3</td>
<td>57.4</td>
<td>63.5</td>
<td>57.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>65.0</td>
<td>63.0</td>
<td>69.0</td>
<td>66.4</td>
<td>79.8</td>
<td>59.6</td>
</tr>
</tbody>
</table>
U.S. Construction Increase Firm  
by <a href="/comment/Moeller.html">Tom Moeller</a>  February 1, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060201d.jpg" width="353">
The value of construction put in place increased a firm 1.0% in December, double the upwardly revised November rise. Consensus expectations had been for a 0.2% gain.
Residential building rose a sharp 1.0% following little change in November. The value of improvements (-7.7% y/y) recovered most of the prior month&#39;s decline with a 3.2% increase and new multi-family residential (19.9% y/y) rose a strong 1.0%. New single family building added 0.2% (14.2% y/y) to several months of strong increase.
Nonresidential building rose strongly for the second consecutive month led by a 2.5% gain in office construction (13.9% y/y), a 2.6% rise in commercial (12.7% y/y) and a 1.9% increase in lodging (-0.5% y/y).
Public construction spending rose 0.7% following a revised 1.2% increase during November as construction activity on highways &amp; streets, nearly one third of the value of public construction spending, dipped slightly m/m (9.1% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</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>1.0%</td>
<td>0.5%</td>
<td>8.1%</td>
<td>9.1%</td>
<td>10.9%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>1.1%</td>
<td>0.3%</td>
<td>7.7%</td>
<td>9.5%</td>
<td>13.6%</td>
<td>6.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>1.0%</td>
<td>0.0%</td>
<td>8.6%</td>
<td>11.4%</td>
<td>18.2%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.3%</td>
<td>1.1%</td>
<td>5.5%</td>
<td>5.2%</td>
<td>3.9%</td>
<td>-5.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>0.7%</td>
<td>1.2%</td>
<td>9.7%</td>
<td>7.7%</td>
<td>2.5%</td>
<td>2.7%</td>
</tr>
</tbody>
</table>
Mortgage Applications' Rebound Cut Short 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 1, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060201a.jpg" width="353">
During the last week of January, the total number of mortgage applications reversed most of the prior week&#39;s increase with a 5.1% decline. Nevertheless, because of increases during the first three weeks of the month, mortgage applications still rose 5.2% on average in January versus December.
A 8.0% w/w decline in purchase applications was to the lowest level in four weeks and lowered the average level in January 0.6% below December.
During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales
In contrast, applications to refinance were relatively firm as a 1.5% decline last week only dented the fairly strong increases of the prior four periods. As a result the average level of refis in January rose 17.7% versus December.
The effective interest rate on a conventional 30-year mortgage rose 15 basis points w/w to 6.44% versus an average 6.48% in December and a high November average of 6.52%. The effective rate on a 15-year mortgage rose about the same amount to 6.09%. The interest rates 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">01/27/06</th>
<th scope="col">01/20/06</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>626.8</td>
<td>660.5</td>
<td>-11.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>435.7</td>
<td>473.7</td>
<td>-1.0%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,747.2</td>
<td>1,773.9</td>
<td>-22.5%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Russian Growth Moderates in 2005; Inflation Still Up in Double-Digits 
by <a href="/comment/Stone.html">Carol Stone</a> February 1, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060201e.jpg" width="353">
The State Committee of the Russian Federation reported GDP data today for the year 2005. Total GDP expanded 6.4% for the year as a whole. Assuming there are no meaningful revisions to the first three quarters of the year, the year-to-year growth for Q4 would be 7.0%, the same as for Q3, not seasonally adjusted. [The implied Q4 information is calculated by us, using DLX capabilities in Excel.]
For the year as a whole, growth slowed from 2004 in all major expenditure categories. For most, this downshift was quite modest. Indeed, private consumption remained on a firm growth path after picking up in 2004. In contrast, both exports and imports saw a sizable adjustment. Imports of goods and services had expanded 22.5% in 2004 and moderated to 16.2% in 2005. Exports had been up 11.9% in &#39;04 and then grew only 5.6% last year. A cursory examination of the price deflator for exports suggests that accelerating prices, perhaps for oil, lifted nominal export growth, while export volume gains were much smaller, their weakest since 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060201f.jpg" width="353">
Prices in general seem still to be an issue in Russia. Inflation, again perhaps energy related, accelerated sharply in 2004, to nearly 20% from 13.2% in 2003. Last year saw a bit of moderation at a still-high rate. The acceleration is reflected in a price deflator for Russian exports, seen in the second graph. Deflators for consumption and capital formation don&#39;t show this significant increase, although they still run at 10-12% rates. Compared with its neighbors, this range of inflation is fairly high. The Ukraine and Kazakhstan experience occasional bouts of double-digit price increases, but most other surrounding industrial countries have much lower rates: Poland, Hungary, the Czech Republic, and so on. Russia continues then to grapple with structural difficulties that, despite its apparently healthy real growth, keep its overall economic performance in a rather precarious state.

<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/EMERGECW/@EB/@EB2/@EB2.HTM">Russia</a> (Bil.2003 Rubles)</th>
<th scope="col">2005 Annual Level</th>
<th scope="col">% of Total</th>
<th scope="col">Q4 Y/Y Implied Growth</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total GDP</td>
<td>15,101</td>
<td>100.0</td>
<td>7.0</td>
<td>6.4</td>
<td>7.2</td>
<td>8.2</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol">Private Consumption</td>
<td>8,109</td>
<td>53.7</td>
<td>--</td>
<td>11.1</td>
<td>11.6</td>
<td>6.0</td>
<td>8.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Gov&#39;t Consumption</td>
<td>2,423</td>
<td>16.0</td>
<td>--</td>
<td>1.8</td>
<td>2.1</td>
<td>0.6</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Capital Formation</td>
<td>2,991</td>
<td>19.8</td>
<td>--</td>
<td>10.5</td>
<td>11.3</td>
<td>11.5</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>4,488</td>
<td>29.7</td>
<td>--</td>
<td>16.2</td>
<td>22.5</td>
<td>18.6</td>
<td>14.6</td>
</tr>
<tr>
<td class="firstcol">Exports</td>
<td>5,501</td>
<td>36.4</td>
<td>--</td>
<td>5.6</td>
<td>11.9</td>
<td>12.4</td>
<td>10.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Deflator (2003=100)</td>
<td>143.47</td>
<td>--</td>
<td>25.7</td>
<td>19.7</td>
<td>19.9</td>
<td>13.2</td>
<td>15.5</td>
</tr>
</tbody>
</table>
</body>
</html>

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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Winnie Tapasanun

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The advance estimate of the U.S. international trade deficit in goods widened to a larger-than-expected $103.57 billion in July after narrowing to $84.85 billion in June, data from the U.S. Census Bureau showed. The July reading, the second widening in the goods trade deficit in three months, was slightly smaller than a $103.92 billion shortfall in July 2024. A deficit of $90.2 billion for July had been expected by the Action Economics Forecast Survey. The deficit reached a record $161.95 billion in March. In Q2'25, the goods trade deficit narrowed to $266.96 billion, the smallest since Q4'23, after ballooning to a record $465.035 billion in Q1'25; the monthly deficit averaged $88.99 billion in Q2'25, down from a record $155.01 billion in Q1'25.

Total goods exports dipped 0.1% m/m (+3.0% y/y), the third consecutive monthly decline, to $177.97 billion in July, the lowest level since January, after a 0.7% decrease to $178.08 billion in June. April registered a record high of $190.08 billion. Exports were up 9.6% from a June 2023 low but down 2.1% from a July 2022 high. The m/m decline in exports in July reflected exports m/m drops of 2.4% (+16.3% y/y) in other goods, 0.9% (+5.1% y/y) in nonfood consumer goods excluding autos, and 0.8% (-1.2% y/y) in industrial supplies & materials. To the upside, exports for the following end-use categories rose m/m in July: automotive vehicles & parts (2.2%; -4.0% y/y), capital goods excluding autos (0.7%; 7.0% y/y), and foods, feeds & beverages (0.5%; 1.4% y/y).

Total goods imports rebounded 7.1% m/m (1.7% y/y), the first monthly increase since March, to a four-month-high $281.54 billion in July following a 4.6% drop to $262.94 billion in June. March registered a record high of $344.59 billion. Imports were up 11.9% from a June 2023 low but down 2.6% from a March 2022 high. The m/m rebound in imports in July reflected m/m rises in most imports end-use categories. These included a 25.4% surge (the first m/m increase and the largest since January; 4.9% y/y) in industrial supplies & materials as well as rises of 11.5% (23.5% y/y) in other goods, 4.8% (14.7% y/y) in capital goods excluding autos, 2.4% (4.9% y/y) in foods, feeds & beverages, and 2.1% (-12.2% y/y) in nonfood consumer goods excluding autos. In contrast, imports of automotive vehicles & parts, the only end-use category with a monthly decline in July, fell 3.2% (-14.1% y/y), the third m/m fall in four months, on top of a 3.6% June decrease.

The advance international trade data can be found in Haver's **USECON** database. The expectation figure is from the Action Economics Forecast Survey, which is in **AS1REPNA**.

- Deficit: $103.57 bil. in July, jumping 22.1% from June’s $84.85 bil.
- Exports -0.1%, down for the third straight month, led by a 2.4% decline in exports of other goods.
- Imports +7.1%, up for the first time since March, led by a 25.4% surge in imports of industrial supplies & materials.

U.S. Goods Trade Deficit Balloons in July; Largest Since March’s Record High

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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.

U.S. Initial Unemployment Insurance Claims Declined in Latest Week

Economy in Brief: February 2006

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Mortgage Applications' Rebound Cut Short

U.S. Construction Increase Firm

ISM Index Eased

ISM Index Eased