Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050217f.jpg" width="353">
The Philadelphia Fed reported that its Index of General Business Conditions in the manufacturing sector improved in February to 23.9 from an unrevised 13.2 the prior month. Consensus expectations had been for a reading of 17.5.
During the last ten years there has been a 69% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 52% correlation with q/q growth in real GDP.
Shipments recovered sharply but orders improved just modestly as the number of employees fell. During the last ten years there has been a 64% correlation between the employment index and the three month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.
The separate index of expected business conditions in six months also improved but just moderately.
The prices paid index fell to the lowest level in a year. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the intermediate goods PPI. The correlation with the finished goods PPI has been 50% and with the CPI it&#39;s been 43%.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0205.html">here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050217g.jpg" width="353"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050217h.jpg" width="353">

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>23.9</td>
<td>13.2</td>
<td>30.1</td>
<td>28.1</td>
<td>10.6</td>
<td>7.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>43.5</td>
<td>66.1</td>
<td>43.0</td>
<td>51.3</td>
<td>16.8</td>
<td>12.3</td>
</tr>
</tbody>
</table>
</body>
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The Philadelphia Fed reported that its Index of General Business Conditions in the manufacturing sector improved in February to 23.9 from an unrevised 13.2 the prior month. Consensus expectations had been for a reading of 17.5. During [...]

Philadelphia Fed Activity Index Improved

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050217a.jpg" width="353">
Initial claims for unemployment insurance inched down another 2,000 to 302,000 last week, the lowest level since late 2000. The prior week&#39;s figure was revised up slightly and Consensus expectations had been for 315,000 claims.
The latest figure covers the February survey period for nonfarm payrolls and initial claims were 16,000 (5.0%) lower than the prior month.
The four week moving average of initial claims fell to 311,750 (-13.5% y/y).
Continuing claims for unemployment insurance fell 14,000 following a downwardly revised gain of 40,000 the prior week.
During the last ten years there has been a (negative) 75% correlation between the level of initial claims for unemployment insurance and the monthly change in payroll employment. There has been a (negative) 66% correlation with the level of continuing claims.
The insured rate of unemployment fell to 2.1%, the lowest since 2001.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">02/12/05</th>
<th scope="col">02/05/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>302</td>
<td>304</td>
<td>-13.7%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,717</td>
<td>-15.9%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
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Initial claims for unemployment insurance inched down another 2,000 to 302,000 last week, the lowest level since late 2000. The prior week's figure was revised up slightly and Consensus expectations had been for 315,000 claims. The [...]

Initial Jobless Insurance Claims Held the Low Ground

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050217b.jpg" width="353">
Import prices rose 0.9% last month due to a surprising 4.6% spurt in petroleum prices. Consensus expectations had been for a 0.6% rise. Nonpetroleum prices, however, rose an easier 0.2% following a downwardly revised gain of 0.4% in December.
During the last ten years there has been a negative 55% correlation between the foreign exchange value of the dollar against major currencies and the y/y change in nonpetroleum import prices. There has been a negative 39% correlation between the broad trade weighted dollar index and prices.
Import pricing strength in January was pronounced for consumer goods less autos, up 0.4% (0.8% y/y). Capital goods prices rose a moderate 0.2% (-0.8% y/y) but that gain was held back by a 1.0% (-6.9% y/y) decline in computer prices. Excluding computers capital goods prices rose 0.8% (2.3% y/y), lifted by a 1.7% rise in prices for civilian aircraft. Motor vehicle and parts prices fell 0.1% (+1.6% y/y) and food &amp; beverage prices fell 0.2% (+6.9% y/y).
Petroleum prices jumped 4.6%. The price of Brent crude oil rose to $43.55 in January and is up roughly another dollar this month.
Export prices rose 0.7% due to a 0.7% surge (5.1% y/y) in nonagricultural export prices.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.9%</td>
<td>-1.4%</td>
<td>6.0%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>4.6%</td>
<td>-11.5%</td>
<td>26.9%</td>
<td>30.4%</td>
<td>21.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.2%</td>
<td>0.4%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>1.1%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.7%</td>
<td>0.2%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>-1.0%</td>
</tr>
</tbody>
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Import prices rose 0.9% last month due to a surprising 4.6% spurt in petroleum prices. Consensus expectations had been for a 0.6% rise. Nonpetroleum prices, however, rose an easier 0.2% following a downwardly revised gain of 0.4% in [...]

Import Prices Higher With Petroleum, Non Oil Prices Easier

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050217c.jpg" width="353">
The Composite Index of Leading Economic Indicators fell 0.3% in January following two months of 0.3% gain, reported the Conference Board. The six-month growth rate for the leaders remained negative at -1.4%. Six month growth in the leaders deeper than -2.5% preceded past US recessions.
The breadth of one month gain amongst the 10 components of the leading index narrowed to 40% from 60% in December and 70% in November and the six month breadth of gain backpedaled to 50% from 70% the prior period. The largest negative contribution was made in January by lower vendor performance. Stock prices and the yield curve also were negative contributors.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
A longer leading indicator, the ratio of the coincident to the lagging indicators which measures actual economic performance relative to excess fell from the record high in December, the first decline since September.
The coincident indicators were unchanged following an upwardly revised 1.1% surge in December. The six-month growth rate dipped slightly to 3.6%. During the last ten years there has been an 84% correlation between the six month growth in the coincident indicators and two quarter growth in real GDP.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">6-Month Chg</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>-1.4%</td>
<td>3.0%</td>
<td>1.3%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.0%</td>
<td>1.1%</td>
<td>3.6%</td>
<td>2.5%</td>
<td>0.4%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>0.8%</td>
<td>-2.1%</td>
<td>-1.9%</td>
<td>-2.3%</td>
</tr>
</tbody>
</table>
</body>
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The Composite Index of Leading Economic Indicators fell 0.3% in January following two months of 0.3% gain, reported the Conference Board. The six-month growth rate for the leaders remained negative at -1.4%. Six month growth in the [...]

Leading Indicators Backpedaled

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050217c.jpg" width="353">
The Composite Index of Leading Economic Indicators fell 0.3% in January following two months of 0.3% gain, reported the Conference Board. The six-month growth rate for the leaders remained negative at -1.4%. Six month growth in the leaders deeper than -2.5% preceded past US recessions.
The breadth of one month gain amongst the 10 components of the leading index narrowed to 40% from 60% in December and 70% in November and the six month breadth of gain backpedaled to 50% from 70% the prior period. The largest negative contribution was made in January by lower vendor performance. Stock prices and the yield curve also were negative contributors.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
A longer leading indicator, the ratio of the coincident to the lagging indicators which measures actual economic performance relative to excess fell from the record high in December, the first decline since September.
The coincident indicators were unchanged following an upwardly revised 1.1% surge in December. The six-month growth rate dipped slightly to 3.6%. During the last ten years there has been an 84% correlation between the six month growth in the coincident indicators and two quarter growth in real GDP.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">6-Month Chg</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>-1.4%</td>
<td>3.0%</td>
<td>1.3%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.0%</td>
<td>1.1%</td>
<td>3.6%</td>
<td>2.5%</td>
<td>0.4%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.3%</td>
<td>-0.7%</td>
<td>0.8%</td>
<td>-2.1%</td>
<td>-1.9%</td>
<td>-2.3%</td>
</tr>
</tbody>
</table>
Import Prices Higher With Petroleum, Non Oil Prices Easier 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 17, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050217b.jpg" width="353">
Import prices rose 0.9% last month due to a surprising 4.6% spurt in petroleum prices. Consensus expectations had been for a 0.6% rise. Nonpetroleum prices, however, rose an easier 0.2% following a downwardly revised gain of 0.4% in December.
During the last ten years there has been a negative 55% correlation between the foreign exchange value of the dollar against major currencies and the y/y change in nonpetroleum import prices. There has been a negative 39% correlation between the broad trade weighted dollar index and prices.
Import pricing strength in January was pronounced for consumer goods less autos, up 0.4% (0.8% y/y). Capital goods prices rose a moderate 0.2% (-0.8% y/y) but that gain was held back by a 1.0% (-6.9% y/y) decline in computer prices. Excluding computers capital goods prices rose 0.8% (2.3% y/y), lifted by a 1.7% rise in prices for civilian aircraft. Motor vehicle and parts prices fell 0.1% (+1.6% y/y) and food &amp; beverage prices fell 0.2% (+6.9% y/y).
Petroleum prices jumped 4.6%. The price of Brent crude oil rose to $43.55 in January and is up roughly another dollar this month.
Export prices rose 0.7% due to a 0.7% surge (5.1% y/y) in nonagricultural export prices.

<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/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>0.9%</td>
<td>-1.4%</td>
<td>6.0%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>4.6%</td>
<td>-11.5%</td>
<td>26.9%</td>
<td>30.4%</td>
<td>21.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.2%</td>
<td>0.4%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>1.1%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.7%</td>
<td>0.2%</td>
<td>4.0%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Held the Low Ground 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 17, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050217a.jpg" width="353">
Initial claims for unemployment insurance inched down another 2,000 to 302,000 last week, the lowest level since late 2000. The prior week&#39;s figure was revised up slightly and Consensus expectations had been for 315,000 claims.
The latest figure covers the February survey period for nonfarm payrolls and initial claims were 16,000 (5.0%) lower than the prior month.
The four week moving average of initial claims fell to 311,750 (-13.5% y/y).
Continuing claims for unemployment insurance fell 14,000 following a downwardly revised gain of 40,000 the prior week.
During the last ten years there has been a (negative) 75% correlation between the level of initial claims for unemployment insurance and the monthly change in payroll employment. There has been a (negative) 66% correlation with the level of continuing claims.
The insured rate of unemployment fell to 2.1%, the lowest since 2001.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">02/12/05</th>
<th scope="col">02/05/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>302</td>
<td>304</td>
<td>-13.7%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,717</td>
<td>-15.9%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
Philadelphia Fed Activity Index Improved 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 17, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050217f.jpg" width="353">
The Philadelphia Fed reported that its Index of General Business Conditions in the manufacturing sector improved in February to 23.9 from an unrevised 13.2 the prior month. Consensus expectations had been for a reading of 17.5.
During the last ten years there has been a 69% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 52% correlation with q/q growth in real GDP.
Shipments recovered sharply but orders improved just modestly as the number of employees fell. During the last ten years there has been a 64% correlation between the employment index and the three month growth in factory payrolls.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050217h.jpg" width="353">
The business conditions index reflects a separate survey question, not the sub indexes.
The separate index of expected business conditions in six months also improved but just moderately.
The prices paid index fell to the lowest level in a year. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the intermediate goods PPI. The correlation with the finished goods PPI has been 50% and with the CPI it&#39;s been 43%.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0205.html">here</a>.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050217g.jpg" width="353">

<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/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>23.9</td>
<td>13.2</td>
<td>30.1</td>
<td>28.1</td>
<td>10.6</td>
<td>7.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>43.5</td>
<td>66.1</td>
<td>43.0</td>
<td>51.3</td>
<td>16.8</td>
<td>12.3</td>
</tr>
</tbody>
</table>
</body>
</html>

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050216e.jpg" width="353">
Japanese GDP, reported for Q4 today in Tokyo, badly disappointed. It fell 0.1% (0.5% annualized), compared with a 0.7% increase expected by market forecasters. Thus, after a 1.4% gain in Q1, GDP has now fallen three consecutive quarters, leading some to say that Japan has once again slumped into recession.
Sluggish household spending was the main culprit, down 0.3% following -0.2% in Q3. Imports also contributed with a sizable 3.1% quarterly increase. In contrast, capital spending advanced 0.5%, with gains in both dwellings and private plant and equipment. Government investment declined, but much less than in Q3. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050216f.jpg" width="353">
The shallow declines, while weaker than market expectations, still left GDP well above year-earlier levels. And the growth for the year as a whole, 2.6% over 2003, was the largest since 1996. Yesterday, in discussing the shortfall in European growth, Louise Curley illustrated the constricting forces of strong currency and higher oil prices. These factors also apply in Japan. Further, employment in Japan has been weak for several years, also restraining consumer spending; the number of employed persons did recover somewhat in the first half of 2004, but then fell back, erasing those earlier increases. Thus, the Japanese economy, which had looked promising several months ago, has sagged anew, with prospects clouded for any renewal of more vigorous performance.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">% Changes</th>
<th scope="col">Q4 2004*</th>
<th scope="col">Q3 2004*</th>
<th scope="col">Year/Year</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-0.1</td>
<td>-0.3</td>
<td>3.4</td>
<td>2.6</td>
<td>1.4</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">Final Consumption: Households</td>
<td>-0.3</td>
<td>-0.2</td>
<td>0.2</td>
<td>1.5</td>
<td>0.2</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Government</td>
<td>0.4</td>
<td>0.3</td>
<td>2.6</td>
<td>2.6</td>
<td>1.2</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Gross Fixed Capital Formation</td>
<td>0.5</td>
<td>0.0</td>
<td>-0.6</td>
<td>1.8</td>
<td>0.9</td>
<td>-5.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>1.3</td>
<td>0.6</td>
<td>3.9</td>
<td>14.3</td>
<td>9.1</td>
<td>7.3</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>3.1</td>
<td>2.4</td>
<td>6.6</td>
<td>9.2</td>
<td>3.8</td>
<td>1.3</td>
</tr>
</tbody>
</table>
</body>
</html>

Japanese GDP, reported for Q4 today in Tokyo, badly disappointed. It fell 0.1% (0.5% annualized), compared with a 0.7% increase expected by market forecasters. Thus, after a 1.4% gain in Q1, GDP has now fallen three consecutive [...]

Japan Economy in Renewed Slump as GDP Falls in Q4

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050216b.jpg" width="353">
Industrial production was unchanged last month versus Consensus expectations for a 0.3% increase. The shortfall was entirely due to a 3.1% decline in utility output as well as a 0.3% drop in mining output.
The factory sector again performed well and output rose 0.5% (5.3% y/y) following a downwardly revised 0.4% gain in December.
High tech sector output increased 1.5% (18.1% y/y) as output of communications equipment rose 3.0% (13.8% y/y). Semiconductor &amp; related equipment output rose 0.9% (26.5% y/y) and computer &amp; peripheral output also gained 0.9% (6.0% y/y).
Factory output excluding high tech rose 0.4% in December (4.4% y/y). A 1.2% decline in clothing output (-5.0% y/y) was offset by a 1.6% rise (9.5% y/y) in machinery output. Nondurables output also rose as did output of metals. Production of appliances, furniture &amp; carpeting fell 1.1% (-0.4% y/y) as furniture output fell 0.5% (+1.3% y/y).
Motor vehicle output fell 2.0% (+0.2% y/y) in January. Excluding motor vehicles, factory output rose 0.7% (5.7% y/y). Excluding both high tech and motor vehicles factory output rose 0.6% (4.8% y/y).
Total capacity utilization fell slightly to 79.0%. Capacity grew 1.2% y/y.

<table border="0" cellspacing="0" width="100%">

</table>
<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/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>0.0%</td>
<td>0.7%</td>
<td>4.0%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>79.0%</td>
<td>79.1%</td>
<td>76.9% (01/04)</td>
<td>78.0%</td>
<td>75.5%</td>
<td>75.3%</td>
</tr>
</tbody>
</table>
</body>
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Industrial production was unchanged last month versus Consensus expectations for a 0.3% increase. The shortfall was entirely due to a 3.1% decline in utility output as well as a 0.3% drop in mining output. The factory sector again [...]

Warm Weather Left Industrial Production Unchanged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050216d.jpg" width="353">
Mortgage applications dipped modestly last week following two weeks of gain according to the Mortgage Bankers Association (MBA) Survey. The 0.5% w/w decline followed gains of 4.2% and 7.3% during the prior two weeks.
The decline was due to a 4.8% drop in purchase applications. During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance rose another 4.1% following two weeks of gain but versus last year still are down 23.3%.
The effective interest rate on a conventional 30-year mortgage ticked higher to 5.75% but remained below the 5.89% averaged last month. The effective rate on a 15-year mortgage also rose to 5.41% last week.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <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">02/11/05</th>
<th scope="col">02/04/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>732.3</td>
<td>735.9</td>
<td>-12.5%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>423.3</td>
<td>444.6</td>
<td>2.3%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,530.1</td>
<td>2,430.7</td>
<td>-23.3%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Mortgage applications dipped modestly last week following two weeks of gain according to the Mortgage Bankers Association (MBA) Survey. The 0.5% w/w decline followed gains of 4.2% and 7.3% during the prior two weeks. The decline was [...]

Mortgage Applications Dipped

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

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

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Winnie Tapasanun

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U.S. house prices rose 0.4% m/m in October following a 0.1% dip in September (0.0% initially) and a 0.4% rise in August (unrevised), according to the Federal Housing Finance Agency (FHFA) House Price Index. October marked the second m/m increase in three months after no change in July. The HPI reached a record high of 436.75 in October, up 13.4% from its August 2022 low of 384.98. The year-on-year rate of increase eased to 1.7% in October from 1.8% in September—the slowest pace since March 2012—down from 4.7% in October 2024 and well below a high of 18.6% in February 2022.

House prices increased m/m in October (vs. September) across seven of the nine census divisions. Gains were led by West South Central (+1.0% vs. -1.6%), followed by New England (+0.9% vs. -0.3%), East North Central (+0.6% vs. +0.7%), Mountain (+0.6% vs. -0.8%), West North Central (+0.6% vs. +0.6%), Middle Atlantic (+0.4% vs. +0.2%), and Pacific (+0.2% vs. +0.3%). In contrast, house prices fell m/m in two census divisions in October (vs. September): East South Central (-0.4% vs. +0.7%) and South Atlantic (-0.2% vs. -0.2%).

Year-on-year house prices continued to rise in October across most regions, except West South Central and South Atlantic. The y/y pace accelerated in October (vs. September) in four of the nine census divisions: West North Central (+3.8% vs. +3.2%), New England (+3.7% vs. +3.2%), Mountain (+0.3% vs. -0.8%), and Pacific (+0.2% vs. -0.6%). Meanwhile, house price growth decelerated y/y in October (vs. September) in East South Central (+1.5% vs. +2.7%), East North Central (+5.1% vs. +5.4%), and Middle Atlantic (+5.3% vs. +5.4%). To the downside, West South Central (-0.7% vs. -1.0%) and South Atlantic (-0.5% vs. +0.4%) were the only regions posting y/y declines in October (vs. September).

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

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

The minutes to the December 9–10 **FOMC** meeting can be found [here](https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20251210.pdf).

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- FHFA HPI +0.4% m/m (+1.7% y/y) in Oct.; second m/m gain in three months.
- House prices up m/m in seven of nine census divisions but down in East South Central (-0.4%) and South Atlantic (-0.2%).
- House prices up y/y in seven of nine regions, led by Middle Atlantic (+5.3%), but down in West South Central (-0.7%) and South Atlantic (-0.5%).

U.S. FHFA House Prices Rebound in October Following September’s Easing

Robert Brusca

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When inflation numbers come hot off the griddle, some part of them might stick to the pan. That's the case this month with Spain’s release of inflation in December. It provides us with the headline for the HICP measure, a headline to the domestic measure, and the domestic measure excluding energy. But it does not release the sector detail for the rest of the report.

However, based upon what's been released, it’s clear that inflation in Spain has picked up. The part of the core that we have in-hand, which is just the portion excluding energy, still appears to be fairly well behaved; however, its gain is still slightly excessive.

**HICP trend**
Spain’s HICP measure in December rose 0.4% after rising by 0.5% in both October and November; those are hot numbers. That translates into a 5.7% annual rate over three months which is hotter than its pace of 4.5% over six months which in turn is hotter than the 12-month increase of 3%. The HCP headline for Spain has clearly been accelerating, the year-over-year rise is too-hot, and the shorter-term metrics are hotter still. This is not good news, and this is not a welcome progression.

**Domestic inflation**
Looking at Spain’s domestic CPI conditions, we find that they are still on the hot side with December showing a headline gain of 0.3% but gains in October and November of 0.5% each, producing a three-month annual rate of 5.4%, which is hotter than its 4.2% over six months, which, in turn, is hotter than the year-over-year gain at 2.9%. And these patterns/results are very similar to the pattern and the readings for the HICP. The domestic inflation picture is too hot over 12 months and accelerating over the shorter periods.

**Domestic inflation ex-energy:** The CPI excluding energy is not as bloated as the HICP or the domestic headline, but it is still a reading on rough terrain. Over 12 months, inflation excluding energy rises at a 2.6% annual rate; that's above the 2% pace sought by the ECB for the community as a whole. Over six months, the reading ramps up to a 3.1% annual rate, again moving the wrong direction and a reading at 3.1% is simply too hot. Over three months, there's a slight deceleration compared to six months but still a rate that is too hot, at 2.9%, and stronger than the 12-month pace. Core inflation is better behaved than headline inflation and both the domestic and the HICP frameworks, but inflation is unruly overall and, for the most part, showing either acceleration or at least a 3-month pace stronger than its 12-month pace. None of this is what the ECB is looking for or trying to achieve.

**Beyond the missing details**
The details of the Spanish report are missing for December because the data are too preliminary for the authorities to post. However, if we look at the sequential pace of inflation over 12 months, six months, and three months on a lagged basis, it is looking at data that are up-to-date through November rather than through December what's the numbers that are generally excessive and they show too much acceleration moving from 12-months to 6-months to 3-months. Over 12 months compared to a year ago, five of nine categories show inflation accelerating. Over 6 months compared to 12 months, four categories are accelerating. Over 3 months compared to 6 months, six of the nine categories are accelerating. These acceleration tendencies are worrisome.

In addition, over 12 months, six of nine categories have a pace above 2%. Over 6 months, six of nine categories have annualized gains above 2%, and over 3 months, the lagged data show six of nine categories with gains above 2%. Only apparel shows inflation tempered on all horizons (at or below 2%). Food, housing, transport, education and other all show above 2% inflation on all horizons.

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**Summing up-challenging times ahead?**
Is Spain past its best inflation performance? Is the inflation worm going to begin to turn more broadly? These are trends we will need to watch. Inflation broadly has slowed or stopped its declines and largely done that in Europe as well as in the United States. Inflation is now hovering at a pace that is too strong- maybe tolerable or maybe not. Central banks need to decide and tell us what a 2% target means. Then, the question of what’s next hangs in the air. U.K. inflation remains excessive but has stepped down as the economy has begun to experience some significantly weaker economic data. Is that the future? Is it stagflation? Is it recovering from a slowdown and higher rates of interest and inflation? Or will there be continued inflation progress? Open the door on 2026…the envelope… please.

Spain

Spanish Inflation Flares at Year-End

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General business activity in Texas declined further in December, according to the Texas Manufacturing Outlook Survey conducted by the Federal Reserve Bank of Dallas. The overall measure, the general business activity index, fell to -10.9 in December, the lowest level since June, from -10.4 in November and -5.0 in October. The index, while above a low of -35.8 in April, was well below a high of +14.1 in January and +4.5 in December 2024. The index had been in negative territory from February through December 2025, except for a one-month positive reading of +0.9 in July. In December, 12.7% of respondents reported improved business activity, down from 18.9% in November, while 23.6% of respondents reported worsened business conditions, down from November's 29.3%. The company outlook index dropped to -11.9 in December, the fourth consecutive negative reading and the lowest since April, from -6.3 in November. Just 10.8% of respondents expected improved company outlook this month while 22.7% expected deterioration. Data were collected between December 15 and 23 from 74 Texas manufacturers.

The production index, a key measure of state manufacturing conditions, plunged to -3.2 in December after a 15.3-point jump to 20.5 in November, indicating production contracted for the first time since February. A lessened 17.2% of respondents reported higher production this month while an increased 20.4% reported a decline. The capacity utilization index plummeted to -4.5 in December, the lowest reading since February, following a four-year-high 19.4 in November; it was up from a low of -15.0 in January 2024 but well below a record-high 46.3 in March 2021.

The growth rate of orders index declined steeply to -16.0 in December from -1.3 in November, marking the weakest of four successive negative readings and the lowest level since June. The index was above a low of -22.0 in April and a low of -24.3 in November 2023 but significantly below a peak of 29.6 in April 2021. The new orders index fell to -6.4 this month after rising to 4.8 in November, indicating a decline in demand for the third time in four months and the lowest level since June. The index was above a low of -20.0 in April and a low of -21.8 in November 2022 but well below a high of 22.6 in February 2022 and a record-high 38.6 in April 2021. The shipments index plunged to -10.6 this month after jumping to 15.1 in November, marking its first negative reading since June and the lowest since July 2024. The unfilled orders index dropped to -13.5 in December from -6.6 in November, registering the 16th straight negative reading and the lowest since November 2024. The index was below a high of 1.4 in August 2024 but above a low of -26.3 in July 2024. Meanwhile, the delivery time index increased to 3.3 this month, the highest reading since March, from -8.4 in November.

Labor market indexes showed flat employment conditions and shorter workweeks in December. The employment index slipped to -1.1 this month from 1.2 in November, marking its first negative reading since September, with the near-zero level indicating little change in employment. The latest reading, while up from a low of -9.7 in January 2024, was far below a high of 17.9 in January 2023 and a record-high 31.8 in April 2021. A lessened 12.3% of respondents reported net hiring in December while 13.4% reported net layoffs. The hours worked index fell sharply to -7.5 this month, the lowest reading since June, after rising to 9.9 in November. Meanwhile, the wages & benefits index climbed to 21.8 in December, the highest level since October 2024 and near its series average of 21.0, up from 15.4 in November; nevertheless, having been trending downward since a peak of 55.0 in March 2022.

Inflationary pressures were little changed this month. The index for prices received for finished goods declined to 8.2 in December following a 3.1-point rise to 10.8 in November; it was up from a low of -7.0 in November 2023 but meaningfully below a high of 47.4 in March 2022 and a peak of 51.4 in October 2021. In December, 13.1% of respondents reported raising prices while only 4.9% reported lowering prices. The index of prices paid for raw materials rose to 36.0 this month, the highest reading since September, after a 1.9-point increase to 35.3 in November. The index was well above a low of 1.0 in June 2023 but significantly below 73.2 in March 2022 and a record-high 83.8 in November 2021.

Expectations on future manufacturing activity remained positive this month. The future general business activity index dipped to 10.8 in December after rising to 11.0 in November, registering the eighth straight positive reading. The future production index rose to a four-month-high 34.2 from November’s 33.7. Other indexes of future manufacturing activity also rose in December (vs. November), signaling increased activity six months ahead: company outlook (16.5 vs. 16.2), shipments (33.9 vs. 27.0), wages & benefits (42.5 vs. 39.1), and capital expenditures (17.7 vs. 12.9). Meanwhile, future indexes for capacity utilization (28.9 vs. 34.0), new orders (30.5 vs. 39.2), growth rate of new orders (24.9 vs. 27.8), and employment (20.9 vs. 22.3) declined in December (vs. November), but they remained in positive territory.

Each index is calculated by subtracting the percentage reporting a decrease in activity from the percentage reporting an increase. When all firms report rising activity, an index will register 100. An index will register -100 when all firms report a decrease. An index will be zero when the number of firms reporting an increase equals the number reporting a decrease. Data for the Texas Manufacturing Outlook, conducted by the Federal Reserve Bank of Dallas, can be found in Haver's **SURVEYS** database.

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- General Business Activity down in Dec. to -10.9, lowest level since June.
- Company Outlook (-11.9) negative for the fourth straight mth. and at an eight-month low; Production (-3.2) negative for the first time since Feb.
- New Orders Growth (-16.0) and New Orders (-6.4) at a six-month low.
- Employment (-1.1) negative for the first time since Sept.
- Prices Received down 2.6 pts. to 8.2; Prices Paid up 0.7 pts. to a three-month-high 36.0.
- Future General Business Activity down to 10.8, still positive for the eighth consecutive mth.

Texas General Business Activity Still Negative in December, But Expectations Remain Positive

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The Pending Home Sales Index, a forward-looking measure of home sales based on contract signings, rose 3.3% m/m to 79.2 in November after increases of 2.4% in October (+1.9% initially) and 0.1% in September (unrevised), according to the National Association of Realtors (NAR). The November reading registered the fourth consecutive m/m gain after declining in July and June. The year-on-year growth rate accelerated to 2.6% in November, the highest since August, from 0.1% in October, though still below +6.0% y/y in November 2024. Despite recent gains, the PHSI had fallen 36.7% since its October 2021 high of 125.1.

The m/m rise in November pending home sales coincided with a decline in the average 30-year mortgage rate to 6.24% in November, the lowest since September 2024, down from 6.25% in October and 6.35% in September. These rates, while below a peak of 7.62% in October 2023, had remained higher than a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales rose m/m in November across all four major regions. Sales in the West recovered 9.2% (2.4% y/y) in November, the first m/m increase since August, following a 1.4% decline in October. Sales in the South rose 2.4% (3.3% y/y), the fourth straight m/m rise, on top of a 2.7% October advance. Sales in the Northeast grew 1.8% (1.8% y/y), the third successive m/m increase, after a 2.3% October gain. Sales in the Midwest rose 1.3% (2.2% y/y), up for the third time in four months, after a 5.3% November rebound.

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.

- PHSI +3.3% (+2.6% y/y) in Nov., driven by lower mortgage rates.
- Home sales m/m up in all four major regions, w/ the highest rate in the West (+9.2%).
- Home sales y/y up across all regions, w/ the highest rate in the South (+3.3%).

U.S. Pending Home Sales Rise for the Fourth Straight Month in November

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Swedish exports advanced month-to-month for the second month in a row while imports continued on a losing streak declining by 0.9% in November.

Exports have gradually been firming with exports falling by 6.1% over 12 months, rising at an annual rate of 4.8% over six months, and then rising at a 3.9% annual rate over three months. Exports are not on a steady acceleration path, but they have transitioned from a year-over-year growth rate that's negative to moderate positive short-term rates of growth.

Swedish imports, on the other hand, are weakening relatively sharply. Imports were down 4.4% over 12 months, down at a 1.2% annual rate over six months, and falling at a 17% annual rate over three months.

The global trade picture remains somewhat mixed. The Baltic Dry goods index, which is an indicator of global trade volume, has backed off of its highs but continues to post relatively steady volume indications. However, the S&P global manufacturing survey has been showing weakness; when manufacturing is weak, typically international trade is weak as well. Swedish trade may be picking up some of that weakness as well.

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On balance, Sweden's trade surplus has continued to recover and hold to a relatively high level over recent months as exports have maintained momentum better than imports.

Swedish domestic barometers of economic growth have remained relatively upbeat including orders and industrial production as well as employment growth and GDP. There is no reason there to expect weak imports based on the recent data we have seen. But then sometimes trade data show economic weakness first.   

At this time, the yearend weakness in Sweden’s imports is without a specific cause. Year-end flows can be surprising. Domestic demand, however, does not appear to be weak. But there is a good deal of weakness in Europe and the Ukraine-Russia war is still a nagging factor – a cloud that hangs over all of Europe with no certain end date or result in sight.

Economy in Brief: 2005

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Philadelphia Fed Activity Index Improved

Initial Jobless Insurance Claims Held the Low Ground

Import Prices Higher With Petroleum, Non Oil Prices Easier

Leading Indicators Backpedaled

Leading Indicators Backpedaled

Japan Economy in Renewed Slump as GDP Falls in Q4

Warm Weather Left Industrial Production Unchanged

Mortgage Applications Dipped