Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050204b.jpg" width="353">
Non-farm payrolls rose a moderate 146,000 in January following a downwardly revised gain of 133,000 the month prior. Consensus expectations had been for a 200,000 January increase. Benchmark revisions to payrolls beginning in January 2000 were modest.
From the separate household survey the unemployment rate fell to 5.2%, the lowest level since October 2001. Employment rose 85,000 (+1.3% y/y) but the labor force fell by 224,000 (0.8% y/y), the second consecutive monthly drop. The labor force participation rate fell to 65.8% versus a high in 2000 of 67.3%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050204a.jpg" width="353">
Factory sector payrolls fell a sharp 25,000 reflecting an 11,800 drop in transportation equipment and a 13,000 decline in nondurables. The prior month&#39;s initial read of an increase was revised to a 7,000 worker decline.
Construction jobs fell 9,000 (+3.2% y/y), the first monthly decline in nearly a year.
Private service producing payrolls rose 165,000 (2.0% y/y) led by strong gains in finance (2.0% y/y) and transportation (3.1% y/y). Professional &amp; business services also were strong (3.3% y/y) as were jobs in education &amp; health (2.5% y/y). Government employment rose 12,000 (0.8% y/y). The one month diffusion index for private payrolls rose to 57.6.
The index of aggregate hours worked (employment times hours worked) dipped 0.1% (+2.1% y/y) in January and began the new year just slightly above 4Q04.
Average hourly earnings rose the same 0.2% (2.6% y/y) as in an upwardly revised December. Private service producing wages rose 0.3% (2.8% y/y) led by strong growth in information (3.4% y/y) and transportation industries (2.5% y/y). Manufacturing earnings ticked up 0.1% (2.6% y/y).
Fed Chairman Alan Greenspan&#39;s Speech on the Current Account can be found <a href="http://www.federalreserve.gov/boardDocs/speeches/2005/20050204/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/@EB01/@EB01.HTM">Employment</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">Payroll Employment</td>
<td>146,000</td>
<td>133,000</td>
<td>1.7%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-25,000</td>
<td>-7,000</td>
<td>0.2%</td>
<td>-1.2%</td>
<td>-4.9%</td>
<td>-7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.8</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.6%</td>
<td>2.1%</td>
<td>2.7%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.2%</td>
<td>5.4%</td>
<td>5.7%</td>
<td>5.5%</td>
<td>6.0%</td>
<td>5.8%</td>
</tr>
</tbody>
</table>
</body>
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Non-farm payrolls rose a moderate 146,000 in January following a downwardly revised gain of 133,000 the month prior. Consensus expectations had been for a 200,000 January increase. Benchmark revisions to payrolls beginning in January [...]

U.S. Payroll Gain Moderate in January, Jobless Rate Lowest Since 2001

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050204b.jpg" width="353">
Non-farm payrolls rose a moderate 146,000 in January following a downwardly revised gain of 133,000 the month prior. Consensus expectations had been for a 200,000 January increase. Benchmark revisions to payrolls beginning in January 2000 were modest.
From the separate household survey the unemployment rate fell to 5.2%, the lowest level since October 2001. Employment rose 85,000 (+1.3% y/y) but the labor force fell by 224,000 (0.8% y/y), the second consecutive monthly drop. The labor force participation rate fell to 65.8% versus a high in 2000 of 67.3%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050204a.jpg" width="353">
Factory sector payrolls fell a sharp 25,000 reflecting an 11,800 drop in transportation equipment and a 13,000 decline in nondurables. The prior month&#39;s initial read of an increase was revised to a 7,000 worker decline.
Construction jobs fell 9,000 (+3.2% y/y), the first monthly decline in nearly a year.
Private service producing payrolls rose 165,000 (2.0% y/y) led by strong gains in finance (2.0% y/y) and transportation (3.1% y/y). Professional &amp; business services also were strong (3.3% y/y) as were jobs in education &amp; health (2.5% y/y). Government employment rose 12,000 (0.8% y/y). The one month diffusion index for private payrolls rose to 57.6.
The index of aggregate hours worked (employment times hours worked) dipped 0.1% (+2.1% y/y) in January and began the new year just slightly above 4Q04.
Average hourly earnings rose the same 0.2% (2.6% y/y) as in an upwardly revised December. Private service producing wages rose 0.3% (2.8% y/y) led by strong growth in information (3.4% y/y) and transportation industries (2.5% y/y). Manufacturing earnings ticked up 0.1% (2.6% y/y).
Fed Chairman Alan Greenspan&#39;s Speech on the Current Account can be found <a href="http://www.federalreserve.gov/boardDocs/speeches/2005/20050204/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/@EB01/@EB01.HTM">Employment</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">Payroll Employment</td>
<td>146,000</td>
<td>133,000</td>
<td>1.7%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-25,000</td>
<td>-7,000</td>
<td>0.2%</td>
<td>-1.2%</td>
<td>-4.9%</td>
<td>-7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.7</td>
<td>33.8</td>
<td>33.8</td>
<td>33.7</td>
<td>33.7</td>
<td>33.8</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.6%</td>
<td>2.1%</td>
<td>2.7%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.2%</td>
<td>5.4%</td>
<td>5.7%</td>
<td>5.5%</td>
<td>6.0%</td>
<td>5.8%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Down in January 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 4, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050204c.jpg" width="353">
The University of Michigan&#39;s January index of consumer sentiment fell to 95.5 versus Consensus expectations for little change from the preliminary reading of 95.8. During the last ten years there has been a 74% correlation between the level of consumer sentiment and the y/y change in real PCE.
Consumer expectations fell 5.7% m/m and reversed nearly all of a 6.7% jump in December. The decline in expectations was to the lowest level since last May and due to lower expectations for growth in real income.
The reading of current conditions improved for the fourth consecutive month as sentiment regarding personal finances vs. a year ago improved to the highest level since late 2000. During the last ten years there has been an 81% correlation between the current conditions index and y/y growth in payroll employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050204d.jpg" width="353">
Current conditions for buying large household goods slipped slightly in January but the trend has been improving for nearly two years in large part due to expectations of higher prices.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</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">Consumer Sentiment</td>
<td>95.5</td>
<td>97.1</td>
<td>-8.0%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>110.9</td>
<td>106.7</td>
<td>1.3%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>85.7</td>
<td>90.9</td>
<td>-14.4%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
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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/050203h.jpg" width="353">
Some months ago, we wondered here how it was that the well known practice of international companies &quot;outsourcing&quot; production to India should be accompanied by a trade deficit for the nation. Further, as 2004 wore on, this trade deficit only got larger, reaching a record $22.0 billion for the year as a whole. The monthly trade figures, released for December during the last 24 hours, along with balance of payments data through Q3, supply some answers to this query.
First, as in many places around the world, the value of petroleum imports has increased, with rupee data converted to dollars showing a whopping 39% advance in 2004 over 2003. But this is only a partial explanation, as non-petroleum imports themselves surged 29%, smaller than for petroleum, to be sure, but still large in an absolute sense.
The Ministry of Commerce and Industry, source of these monthly trade figures, reports detail for select major commodities. Through September, those details show steep advances in chemicals, steel and machinery; in fact, steel imports were already larger in the first nine months of 2004 than in all of 2003. Gains in such categories might indicate expanding investment and would hardly be a cause for concern over rising imports.
Finally, other accounts in the balance of payments data are really the place to look for the impact of &quot;outsourcing&quot;. This phenomenon occurs mainly in service functions. So, as seen in the chart, &quot;credits&quot; in the &quot;invisibles&quot; accounts have been very strong through Q3; the first three quarters of 2004 are up 42% from the comparable year-earlier span. And the surplus on invisibles, expressed on an annualized basis, increased almost enough to offset the year&#39;s increase in the trade deficit. Thus, India&#39;s trade and balance of payments situation is a complex one, highlighting the diversity of its rapidly developing economy.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Billions of US$</th>
<th scope="col">Dec 2004</th>
<th scope="col">Nov 2004</th>
<th scope="col">Dec 2003</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">Trade Balance</td>
<td>-2.94</td>
<td>-2.32</td>
<td>-1.61</td>
<td>-22.03</td>
<td>-12.38</td>
<td>-7.00</td>
</tr>
<tr>
<td class="firstcol">Exports of Goods</td>
<td>6.75</td>
<td>6.83</td>
<td>5.90</td>
<td>73.48</td>
<td>58.81</td>
<td>49.53</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports of Goods</td>
<td>9.69</td>
<td>9.15</td>
<td>7.51</td>
<td>95.51</td>
<td>71.19</td>
<td>56.53</td>
</tr>
<tr>
<td class="firstcol">Imports of Petroleum*</td>
<td>1.57</td>
<td>2.92</td>
<td>1.92</td>
<td>27.26</td>
<td>19.62</td>
<td>16.05</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Q 2004</td>
<td>2Q 2004</td>
<td>3Q 2003</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Invisibles Balance</td>
<td>6.35</td>
<td>9.42</td>
<td>6.29</td>
<td>30.29*</td>
<td>22.33</td>
<td>16.89</td>
</tr>
<tr class="odd">
<td class="firstcol">Invisibles Credits</td>
<td>15.49</td>
<td>19.29</td>
<td>12.89</td>
<td>66.21*</td>
<td>47.71</td>
<td>41.64</td>
</tr>
<tr>
<td class="firstcol">Invisibles Debits</td>
<td>9.14</td>
<td>9.87</td>
<td>6.59</td>
<td>35.92*</td>
<td>25.38</td>
<td>24.76</td>
</tr>
</tbody>
</table>
</body>
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Some months ago, we wondered here how it was that the well known practice of international companies "outsourcing" production to India should be accompanied by a trade deficit for the nation. Further, as 2004 wore on, this trade [...]

India's Trade Deficit Widens, but So Does Its Surplus on "Invisibles"

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203e.jpg" width="353">
Shipments from the US factory sector rose 0.9% in December, capping off a year of 10.4% growth which was the strongest in twenty years. Some of that strength is exaggerated by a 38.0% jump in shipments from petroleum refineries, but less oil factory shipments still rose a robust 8.8%.
Orders to the factory sector added 0.3% in December to the 1.4% spike the prior month and for the year surged 10.8%. Less oil orders rose 9.2% last year. The advance report of a 0.6% gain in durable goods orders in December was revised to 1.1% (9.3% y/y) as the increase in nondefense capital goods orders less aircraft was revised up to 2.5% from 1.8%.
Unfilled orders added 0.6% to the 1.1% jump in November. Supply bottlenecks perhaps eased slightly as indicated by a lower ratio of unfilled orders to shipments for durables, however the ISM index of vendor performance showed slower delivery speeds.
Factory inventories fell 0.1% in December led down by a 9.1% (+15.2% y/y) drop in petroleum inventories. Less petroleum, inventories rose 0.3% (7.0% y/y) following a 0.9% increase in November. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203d.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203f.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<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">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>7.3%</td>
<td>7.3%</td>
<td>-1.3%</td>
<td>-1.8%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.3%</td>
<td>1.4%</td>
<td>9.9%</td>
<td>10.8%</td>
<td>3.7%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.9%</td>
<td>0.4%</td>
<td>9.8%</td>
<td>10.4%</td>
<td>2.6%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.6%</td>
<td>1.1%</td>
<td>9.1%</td>
<td>9.1%</td>
<td>4.2%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
</body>
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Shipments from the US factory sector rose 0.9% in December, capping off a year of 10.4% growth which was the strongest in twenty years. Some of that strength is exaggerated by a 38.0% jump in shipments from petroleum refineries, but [...]

US Factory Sector Shipments & Orders Surged in 2004

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203c.jpg" width="353">
Initial claims for unemployment insurance fell 9,000 to 316,000 last week, reversed the unrevised 7,000 increase during the prior week and landed just above the lowest levels since early 2001. Consensus expectations had been for a larger increase to 330,000 claims.
The four week moving average of initial claims fell to 331,500 (-6.8% y/y).
During the last ten years there has been a (negative) 82% correlation between the level of initial claims and the y/y change in payroll employment.
Continuing claims for unemployment insurance declined 116,000 and reversed all of the downwardly revised gain the prior week.
The insured rate of unemployment fell back to the four year low of 2.1%.

<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">01/29/05</th>
<th scope="col">01/22/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>316</td>
<td>325</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>2,696</td>
<td>-15.1%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
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</tbody>
</table>
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Initial claims for unemployment insurance fell 9,000 to 316,000 last week, reversed the unrevised 7,000 increase during the prior week and landed just above the lowest levels since early 2001. Consensus expectations had been for a [...]

Initial Claims for Jobless Insurance Near Four Year Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203g.jpg" width="353">
The Business Activity Index for the non-manufacturing sector fell in January to 59.2 following three consecutive months of increase according to the Institute for Supply Management. Consensus expectations had been for less of a decline to 61.0.
Since the series&#39; inception in 1997 there has been a 55% correlation between the Business Activity Index and the q/q change in GDP services plus construction.
The new orders index reversed most of the prior month&#39;s rise and fell to 60.5. That was below the 61.8 averaged last year.
The employment sub index fell sharply to the lowest level since July. 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.
Pricing power eased considerably as indicated by a 7.0 point decline in the index to the lowest level in nearly a year.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.

<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">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>59.2</td>
<td>63.9</td>
<td>64.2</td>
<td>62.4</td>
<td>58.2</td>
<td>55.1</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>66.6</td>
<td>73.6</td>
<td>60.8</td>
<td>69.0</td>
<td>56.8</td>
<td>54.0</td>
</tr>
</tbody>
</table>


</html>

The Business Activity Index for the non-manufacturing sector fell in January to 59.2 following three consecutive months of increase according to the Institute for Supply Management. Consensus expectations had been for less of a [...]

ISM Non-Manufacturing Index Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203a.jpg" width="353">
Growth in 4Q &#39;04 non-farm labor productivity slowed sharply to 0.8% from 1.8% growth the prior quarter. Consensus expectations had been for 2.0% growth. For the full year, growth of 4.1% was the lowest since 2001.
Pending upward revisions to GDP growth due to raised estimates of exports (to Canada) likely will result in an upward revision to this preliminary estimate.
Slower output growth of 2.8% (4.2% y/y) versus 4.2% growth in 3Q caused the slowdown. That was partially offset by hours worked which slowed to 1.9% growth from 2.4%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203b.jpg" width="353">
Unit labor costs grew 2.3%, the fastest since 2Q &#39;02, though compensation growth slowed to 3.1% (3.6% y/y).
Productivity in the manufacturing sector improved to 5.6% (4.8% y/y) versus 4.2% growth in 3Q. Unit labor cost growth in the factory sector was about stable at 0.4% (-1.5% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">4Q &#39;04</th>
<th scope="col">3Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>0.8%</td>
<td>1.8%</td>
<td>2.5%</td>
<td>4.1%</td>
<td>4.4%</td>
<td>4.4%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.1%</td>
<td>3.5%</td>
<td>3.6%</td>
<td>4.2%</td>
<td>4.1%</td>
<td>3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>2.3%</td>
<td>1.6%</td>
<td>1.0%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>-1.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Growth in 4Q '04 non-farm labor productivity slowed sharply to 0.8% from 1.8% growth the prior quarter. Consensus expectations had been for 2.0% growth. For the full year, growth of 4.1% was the lowest since 2001. Pending upward [...]

U.S. Productivity Growth Slowed Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203a.jpg" width="353">
Growth in 4Q &#39;04 non-farm labor productivity slowed sharply to 0.8% from 1.8% growth the prior quarter. Consensus expectations had been for 2.0% growth. For the full year, growth of 4.1% was the lowest since 2001.
Pending upward revisions to GDP growth due to raised estimates of exports (to Canada) likely will result in an upward revision to this preliminary estimate.
Slower output growth of 2.8% (4.2% y/y) versus 4.2% growth in 3Q caused the slowdown. That was partially offset by hours worked which slowed to 1.9% growth from 2.4%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203b.jpg" width="353">
Unit labor costs grew 2.3%, the fastest since 2Q &#39;02, though compensation growth slowed to 3.1% (3.6% y/y).
Productivity in the manufacturing sector improved to 5.6% (4.8% y/y) versus 4.2% growth in 3Q. Unit labor cost growth in the factory sector was about stable at 0.4% (-1.5% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">4Q &#39;04</th>
<th scope="col">3Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>0.8%</td>
<td>1.8%</td>
<td>2.5%</td>
<td>4.1%</td>
<td>4.4%</td>
<td>4.4%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.1%</td>
<td>3.5%</td>
<td>3.6%</td>
<td>4.2%</td>
<td>4.1%</td>
<td>3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>2.3%</td>
<td>1.6%</td>
<td>1.0%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>-1.1%</td>
</tr>
</tbody>
</table>
ISM Non-Manufacturing Index Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203g.jpg" width="353">
The Business Activity Index for the non-manufacturing sector fell in January to 59.2 following three consecutive months of increase according to the Institute for Supply Management. Consensus expectations had been for less of a decline to 61.0.
Since the series&#39; inception in 1997 there has been a 55% correlation between the Business Activity Index and the q/q change in GDP services plus construction.
The new orders index reversed most of the prior month&#39;s rise and fell to 60.5. That was below the 61.8 averaged last year.
The employment sub index fell sharply to the lowest level since July. 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.
Pricing power eased considerably as indicated by a 7.0 point decline in the index to the lowest level in nearly a year.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.

<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">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>59.2</td>
<td>63.9</td>
<td>64.2</td>
<td>62.4</td>
<td>58.2</td>
<td>55.1</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>66.6</td>
<td>73.6</td>
<td>60.8</td>
<td>69.0</td>
<td>56.8</td>
<td>54.0</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Near Four Year Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203c.jpg" width="353">
Initial claims for unemployment insurance fell 9,000 to 316,000 last week, reversed the unrevised 7,000 increase during the prior week and landed just above the lowest levels since early 2001. Consensus expectations had been for a larger increase to 330,000 claims.
The four week moving average of initial claims fell to 331,500 (-6.8% y/y).
During the last ten years there has been a (negative) 82% correlation between the level of initial claims and the y/y change in payroll employment.
Continuing claims for unemployment insurance declined 116,000 and reversed all of the downwardly revised gain the prior week.
The insured rate of unemployment fell back to the four year low of 2.1%.

<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">01/29/05</th>
<th scope="col">01/22/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>316</td>
<td>325</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>2,696</td>
<td>-15.1%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
US Factory Sector Shipments & Orders Surged in 2004 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 3, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203e.jpg" width="353">
Shipments from the US factory sector rose 0.9% in December, capping off a year of 10.4% growth which was the strongest in twenty years. Some of that strength is exaggerated by a 38.0% jump in shipments from petroleum refineries, but less oil factory shipments still rose a robust 8.8%.
Orders to the factory sector added 0.3% in December to the 1.4% spike the prior month and for the year surged 10.8%. Less oil orders rose 9.2% last year. The advance report of a 0.6% gain in durable goods orders in December was revised to 1.1% (9.3% y/y) as the increase in nondefense capital goods orders less aircraft was revised up to 2.5% from 1.8%.
Unfilled orders added 0.6% to the 1.1% jump in November. Supply bottlenecks perhaps eased slightly as indicated by a lower ratio of unfilled orders to shipments for durables, however the ISM index of vendor performance showed slower delivery speeds.
Factory inventories fell 0.1% in December led down by a 9.1% (+15.2% y/y) drop in petroleum inventories. Less petroleum, inventories rose 0.3% (7.0% y/y) following a 0.9% increase in November. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203d.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050203f.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/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>7.3%</td>
<td>7.3%</td>
<td>-1.3%</td>
<td>-1.8%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.3%</td>
<td>1.4%</td>
<td>9.9%</td>
<td>10.8%</td>
<td>3.7%</td>
<td>-1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.9%</td>
<td>0.4%</td>
<td>9.8%</td>
<td>10.4%</td>
<td>2.6%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.6%</td>
<td>1.1%</td>
<td>9.1%</td>
<td>9.1%</td>
<td>4.2%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>


</html>

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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Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped 16,000 to 199,000 in the week ending December 27, from 215,000 in the week of December 20, revised from 214,000. The latest claims represent the third consecutive weekly decline. The four-week moving average of initial claims was 218,750 in the December 27 week, an increase of 1,750 from 217,000 in the prior week, revised from 216,750.

Federal government employees initially filed 812 (NSA) jobless insurance claims in the week ended December 20, after filing 805 claims in the week ended December 13.

Continuing claims for unemployment insurance declined 47,000 to 1.866 million in the week of December 20, from 1.913 million in the week ending December 13, revised from 1.923 million. The four-week moving average was 1.873 million in the December 20 week, a decrease of 17,750 from 1.891 million in the week ending December 13, revised from 1.894 million. The insured unemployment rate stood at 1.2% in the week of December 20, unchanged from previous week of December 13.

Federal government employees’ continuing benefits claims were 13,390 (NSA) in the week ended December 13, up from 12,887 (NSA) in the week ending December 6. 

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 13, the highest unemployment rates were in Washington (2.50%), New Jersey (2.40%), Massachusetts and Minnesota (both 2.20%), and California, Illinois and Rhode Island (all 2.10%). The lowest rates were in Florida (0.30%), and Alabama and North Carolina (both 0.40%). Rates in other notable states include New York (1.80%), Pennsylvania (1.70%), and Texas (1.20%). 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.

251230C4.jpg

251230D4.jpg

- Initial claims declined from the prior week.
- Continuing claims declined from the prior week.
- The insured unemployment rate was unchanged.

U.S. Initial Claims for Unemployment Insurance Dropped Again in Latest Week

Winnie Tapasanun

251230J46.jpg

251230K46.jpg

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).

251230L46.jpg

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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

251230E.jpg

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%).

Economy in Brief: 2005

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U.S. Payroll Gain Moderate in January, Jobless Rate Lowest Since 2001

U.S. Payroll Gain Moderate in January, Jobless Rate Lowest Since 2001

India's Trade Deficit Widens, but So Does Its Surplus on "Invisibles"

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U.S. Productivity Growth Slowed Sharply

U.S. Productivity Growth Slowed Sharply