Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203d.jpg" align="left" border="0" height="265" width="353">
Despite the U.S. recession and reduced demand, regular
gasoline prices again moved higher last week to an average
$1.89 per gallon prices. That was up from 10 cents from the January
average and up 28 cents from the December low, according to the U.S.
Department of Energy survey. Yesterday, the spot market price for
regular gasoline fell sharply backward from Friday's level to $1.17 per
gallon (where it began the month of January). Spot prices still were
up, however, by 32 cents from their December low.
Weekly gasoline prices can be found in Haver's WEEKLY
database. Daily prices are in the DAILY
database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203e.jpg" align="right" border="0" height="265" width="353">
Demand continued quite weak for gasoline in reaction to the
economy's weakness. The U.S. Department of Energy reported that the demand
for gasoline fell by 3.5% during the latest four weeks.
While the rate of decline remained nearly the fastest since late-1995
(the latest four weeks versus the same four weeks in 2008) it has been
stable since November. The demand for all petroleum
products also is down a sharp 4.0% y/y. These numbers are available in
Haver's OILWKLY database.
The source for that reduced demand for gasoline is the cutback
in vehicle miles driven which have fallen 5.3% year-to-year during the
twelve months ended November. The rate of decline has been accelerating
since late 2007 and it is nearly unprecedented. These Department of
Transportation figures are available in Haver's OGJ database.
The price for a barrel of West Texas Intermediate crude moved
slightly higher last week to $42.52 per barrel and it was up 10 dollars
from the low reached late in December. Prices reached a high of $145.66
last July. In futures trading yesterday, the one-month price for crude
oil fell versus last week to $40.08 per barrel, down sharply from one
week ago.
The price of natural gas fell again, last week to $4.75 per
mmbtu (-40.9% y/y). The latest average price was down roughly
two-thirds from the high reached in early-July of $13.19/mmbtu.
Labor Supply Responses to Changes in Wealth and
Credit from the Federal Reserve Bank of San Francisco
is available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-05.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">02/02/09</th>
<th scope="col">01/25/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon)</td>
<td>1.89</td>
<td>1.84</td>
<td>-36.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>42.52</td>
<td>42.18</td>
<td>-53.3%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
 U.S. Chain Store Sales Recovered
Last Week 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 3, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203f.jpg" align="left" border="0" height="265" width="353">
With a 1.6% increase last week chain store sales recovered
nearly all of the prior week's decline, according to the International
Council of Shopping Centers-Goldman Sachs Index. Nevertheless, the
year-to year change of -2.5% continued as the weakest in the series'
history which extends back to 1990. For January as a whole,
sales ticked up 0.1% from December after that month's 0.3% gain.
During the last ten years there has been a 64% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


The outlook for sales weakened further as the weekly leading
indicator of chain store sales from ICSC-Goldman Sachs fell 0.7% and it
was the third straight week of decline. The average level in January
was up 0.6% from December, which rose 2.1% versus November. Since the
lows of one month ago the index has recovered 3.0%.
The chain store sales figures are available in Haver's SURVEYW
database.
The January 2009 Senior Loan Officer Opinion
Survey on Bank Lending Practices from the Federal
Reserve Board can be found <a href="http://www.federalreserve.gov/boarddocs/SnLoanSurvey/200902/fullreport.pdf">here.</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">01/30/09</th>
<th scope="col">01/23/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>478.5</td>
<td>471.0</td>
<td>-2.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
 German Retail Sales Head South For
The Winter 
by <a href="/comment/Brusca.html">Robert
Brusca&nbsp;</a> February 3, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203g.jpg" align="left" border="0" height="265" width="353">
German nominal and real ex-auto retail sales are off for the
third month in a row. In the fourth quarter nominal retail sales are
off at a 4% pace; ex-auto real retail sales are dropping at a 2.1%
pace. The sequential growth rates show an accelerating pattern of
losses from 12-months to 6-months to 3-months, across the main
categories in the table. 
 

The downturn has spreading across other measures as well, as
manufacturing has been notoriously weak. German consumers have not been
much of a prop to this economy for a long time. In the quarter ended
Sept 2008 they did rise by 1.9% Q/Q (saar), but that was after falling
by 3.2% (saar) in the previous quarter. Yr/Yr quarterly average real
(ex auto) retail sales have been negative in German since the quarter
ended December 2006. Ironically the 2008-Q4 retail sales figures on
this same basis are up by 0.1%, the first quarterly increase since
Q4-2008 and it comes as sales have turned tail to move sharply lower in
the quarter. 
 

The German retailing association HDE is looking for retail
sales to decline in real terms in 2009. Manufacturing is coming apart
at the seams. Construction is weak, The German economy, Europe&#8217;s
largest, is under fire. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> German
Real and Nominal Retail Sales</th>
<th scope="col">QTR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Nominal</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAgo</td>
<td>Saar</td>
</tr>
<tr>
<td class="firstcol">Retaill Ex auto</td>
<td> -0.6%</td>
<td> -0.8%</td>
<td> -0.9%</td>
<td> -8.7%</td>
<td> -0.4%</td>
<td>1.2%</td>
<td> -4.6%</td>
<td> -4.0%</td>
</tr>
<tr>
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td> -1.5%</td>
<td> -1.6%</td>
<td>0.0%</td>
<td> -11.6%</td>
<td> -1.1%</td>
<td>1.2%</td>
<td> -3.2%</td>
<td> -2.6%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td> -0.9%</td>
<td>1.1%</td>
<td> -4.4%</td>
<td> -15.9%</td>
<td>4.3%</td>
<td>1.1%</td>
<td> -2.7%</td>
<td> -5.</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">&nbsp;
Real</td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td> -0.2%</td>
<td> -0.1%</td>
<td> -0.9%</td>
<td> -4.6%</td>
<td>0.6%</td>
<td>0.2%</td>
<td> -6.5%</td>
<td> -2.1%</td>
</tr>
</tbody>
</table>
 U.S. Pending Home Sales Up in
December But Down For 2008. Affordability At New High With Lower Rates
&amp; Prices 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 3, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203i.jpg" align="left" border="0" height="265" width="353">
The National Association of Realtors indicated that pending
sales of existing homes in December rose 6.3% The increase reversed
most of the declines during the prior two months. Consensus
expectations were for no change in sales m/m. For the year as a whole,
sales fell 9.3% after declines of 14.6% and 9.8% during the prior two
years. Despite the monthly sales increase, the December level was near
the series' low.
The home sales figures are analogous to the new home sales
data from the Commerce Department in that they measure existing home
sales when the sales contract is signed, not at the time the sale is
closed. The series dates back to 2001.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203j.jpg" align="right" border="0" height="265" width="353">
Lower prices continued to bolster home sales. The median sales
price of an existing home in December fell for the sixth straight month
and was down 15.3% year-to-year. Prices were down 23.4% from their peak
during June of last year. For single-family homes only, prices fell
2.9% during December and they were off 23.8% from their peak. Lower
prices combined with lower interest rates significantly raised the
affordability index of a home. It reached a record high for the series
which extends back to 1970.
A 13.0% December rise in the South led the latest increase in
total sales but were still off 16.2% for the year. Sales in the Midwest
also posted a 12.8% gain in December but that was not enough to keep
full-year sales from falling 9.7%. December sales in the West fell 3.7%
in December but rose 7.8% for the full year. Home sales in the
Northeast ticked lower by 1.7% for the month but repeated their decline
of 2007 and fell 15.2%.
Weak home sales are encouraging potential sellers to keep
their homes off the market. The Realtors Association indicated in an
earlier report that the number of homes on the market and available for
sale fell by 11.7% last month, down 7.5% for the full year.
At the current sales rate there was a 9.3 months' supply of
homes on the market and there was a 10.4 months' supply during all of
last year, up from the 8.9 months supply during 2007 and 6.5 months
during 2006. For single family homes, there was an 8.7 months' supply
in December versus a full-year figure of 10.0 months.
The pending home sales data are available in Haver's PREALTOR
database. The number of homes on the market and prices are in
the REALTOR database.
The American Recovery and Reinvestment Act of 2009
from the Congressional Budget Office can be found <a href="http://www.cbo.gov/ftpdocs/99xx/doc9977/hr1senate.pdf">here.</a>
The Term Structure of Inflation Expectations from
the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr362.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending
Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>87.7</td>
<td>82.5</td>
<td>&nbsp;&nbsp; 2.1%</td>
<td>86.8</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>62.1</td>
<td>63.2</td>
<td>-14.5</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>83.7</td>
<td>74.2</td>
<td>-1.2</td>
<td>80.9</td>
<td>89.6</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>96.8</td>
<td>85.7</td>
<td>1.6</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>97.5</td>
<td>101.2</td>
<td>17.5</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
</tr>
</tbody>
</table>
</body></html>

Despite the U.S. recession and reduced demand, regular gasoline prices again moved higher last week to an average $1.89 per gallon prices. That was up from 10 cents from the January average and up 28 cents from the December low, [...]

U.S. Gasoline Prices Up Again

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203a.jpg" align="right" border="0" height="265" width="353">
South Korea announced today that its January exports fell
32.7% below a year ago, the largest year to year percentage decline on
record. Except for September 2007, when exports fell 1.1%, Korea's
exports have shown double digit year to year percent increases in
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203b.jpg" align="right" border="0" height="265" width="353">
practically every month since July 2002 until November of last year
when double digit declines began to appear, as shown in the first chart.
Imports have also declined, but at a somewhat slower pace with
the results that the ten year stretch of South Korean trade surpluses
begun in 1998 has come to a stop. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203c.jpg" align="right" border="0" height="265" width="353">
There was a $12.7 billion trade
deficit in 2008, compared with a surplus of $14.6 billion in 2007.
Annual data for exports, imports and balances of trade from 1998
through 2008 are shown in the second chart.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">South
Korea&nbsp;</th>
<th scope="col">Jan 09</th>
<th scope="col">Dec 08</th>
<th scope="col">Nov&nbsp; 08&nbsp;</th>
<th scope="col">Oct 08&nbsp;</th>
<th scope="col">Sep 08&nbsp;</th>
<th scope="col">Aug 08</th>
<th scope="col">July 08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Exports (NSA, Bil US$)</td>
<td>21.7</td>
<td>27.3</td>
<td>29.2</td>
<td>37.4</td>
<td>39.1</td>
<td>36.6</td>
<td>41.0</td>
<td>422.9</td>
<td>371.5</td>
</tr>
<tr class="even">
<td class="firstcol">Imports (NSA, Bil US$)</td>
<td>24.7</td>
<td>26.8</td>
<td>28.9</td>
<td>35.8</td>
<td>39.4</td>
<td>40.1</td>
<td>43.7</td>
<td>435.6</td>
<td>356.9</td>
</tr>
<tr class="even">
<td class="firstcol">Balance (NSA, Bil US$)</td>
<td>-3.0</td>
<td>0.7</td>
<td>0.3</td>
<td>1.2</td>
<td>-2.2</td>
<td>-3.8</td>
<td>-2.0</td>
<td>-12.7</td>
<td>14.6</td>
</tr>
<tr class="even">
<td class="firstcol">Exports (Y/Y % Chg</td>
<td>-32.8</td>
<td>-17.4</td>
<td>-18.2</td>
<td>8.53</td>
<td>27.7</td>
<td>18.2</td>
<td>35.6</td>
<td>14.1</td>
<td>13.8</td>
</tr>
<tr class="even">
<td class="firstcol">Imports (Y/Y % Chg</td>
<td>-32.1</td>
<td>-21.5</td>
<td>-14.7</td>
<td>10.4</td>
<td>45.8</td>
<td>36.4</td>
<td>47.4</td>
<td>15.4</td>
<td>22.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports to US Y/Y % Chg</td>
<td>--</td>
<td>-9.4</td>
<td>-14.3</td>
<td>5.0</td>
<td>19.3</td>
<td>1.0</td>
<td>9.3</td>
<td>11.5</td>
<td>18.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; To China
Y/Y % Chg</td>
<td>--</td>
<td>-36.4</td>
<td>-33.7</td>
<td>-3.5</td>
<td>15.0</td>
<td>19.3</td>
<td>30.1</td>
<td>3.2</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; To Taiwan
Y/Y %
Chg&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>--</td>
<td>-56.9</td>
<td>-45.2</td>
<td>-17.0</td>
<td>1.3</td>
<td>-15.0</td>
<td>-1.4</td>
<td>-12.0</td>
<td>0.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; To Malaysia
Y/Y % Chg</td>
<td>--</td>
<td>-30.5</td>
<td>-21.4</td>
<td>-24.8</td>
<td>8.2</td>
<td>10.8</td>
<td>27.6</td>
<td>1.6</td>
<td>9.1</td>
</tr>
</tbody>
</table>


</body></html>

South Korea announced today that its January exports fell 32.7% below a year ago, the largest year to year percentage decline on record. Except for September 2007, when exports fell 1.1%, Korea's exports have shown double digit year [...]

South Korean Exports Plummet: Sharp Fall in Exports to Pacific Rim

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202f.jpg" width="353">
The value of construction put in place during December dropped another 1.4%. The decline followed a 1.2% November drop which was double the decline originally estimated. These declines pulled overall construction down 5.2% for the full year 2008 which was the weakest performance since 1991. It followed a 2.7% decline during 2007. Last month&#39;s decline about matched Consensus expectations.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202g.jpg" width="353">
Residential building activity led the latest monthly decline with a 3.2% drop which pulled 2008 activity off by roughly one-quarter from the full year from 2007. That was a record decline for the series which extends back to 1965. Single-family construction activity fell 8.1% last month after a 6.1% November drop. It pulled the full-year level down 39.0% after a 26.8% drop during 2007. Building activity on multi-family units also fell hard. The 3.2% December decline lowered activity by 8.5% for the full year, about the same as the 2007 drop. Spending on improvements, however, recouped a 2.0% November fall but still ended the year posting a 7.2% decline.
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
The value of nonresidential building activity has remained firm relative to the residential sector. Though the 0.4% December slip was the fifth in the last six months, activity rose 15.3% for the full year or about the same as during 2007. Spending on office construction rose<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202h.jpg" width="353"> 8.3% for the year, but that was roughly half the growth during the prior three years. Building in the multi-retail sector, however, fell 3.8% for the year after a 17.0% gain during 2007 and a 28.3% surge during 2006. Spending on health care facilities rose 8.1% for the year, about as it has since 2003. Building activity of educational facilities rose 10.2% last year after a 22.9% 2007 gain
Public construction fell 0.8% in December. But for the year activity rose a firm 7.1% after a 12.3% 2007 rise. Office building led the gain with 30.8% rise for the full year while the value of spending on educational facilities rose 7.8%. Spending on highways &amp; streets rose 5.1% the full year, about as it did in 2007. The value of construction on highways &amp; streets is roughly one-third of the value of total public construction spending.
The more detailed categories of construction represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for automotive dealers and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002, and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E907.HTM">Construction</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-1.4</td>
<td>-1.2</td>
<td>-3.6</td>
<td>-5.2</td>
<td>-2.7</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.7</td>
<td>-2.3</td>
<td>-7.6</td>
<td>-9.3</td>
<td>-6.9</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-3.2</td>
<td>-4.1</td>
<td>-22.9</td>
<td>-27.1</td>
<td>-19.8</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.4</td>
<td>-0.8</td>
<td>8.9</td>
<td>15.3</td>
<td>19.6</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>-0.8</td>
<td>1.2</td>
<td>7.0</td>
<td>7.1</td>
<td>12.3</td>
<td>9.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place during December dropped another 1.4%. The decline followed a 1.2% November drop which was double the decline originally estimated. These declines pulled overall construction down 5.2% for the [...]

U.S. Construction Spending Fell For Second Year

Robert Brusca

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202i.jpg" align="left" border="0" height="265" width="353">

The PMIs for Europe reside very near the bottom of their
respective ranges. Generally the readings are bottom 10% of range or
less across large EMU members and the UK. Germany is now one of the
relative weakest countries on this measure &#8211; it is at its range low
point. Germany is one of four countries to see its MFG PMI drop further
in January. 
 

PMIs: what they are: 
PMIs are super sensitive gauges of activity. And they usually detect
turning points in a sector before more convention indicators do. The
MFG PMIs have only just stopped their declining ways for the EMU
region; for several countries the bottom has not yet been hit (as far
as we know). Even for those that have rebounded this month we do not
know with any degree of confidence that they have firmly put their past
low point behind them for the duration of this cycle. 
 

Too soon for the end? 
It is too soon to call this a turning point signal. But the first step
to getting to a turning point is to build a base that signals that the
PACE OF decline has bottomed out. Remember that these are diffusion
indices and even if they move &#8216;sideways&#8217;, as long as the value is below
50 it is signaling further declines in the sector they measure. Also
recall that PMIs are formally indicators of the breadth of a decline or
the breadth of an increase in industry; they are not indicators of
STRENGTH. 
 

What about the beginning of the end? 
It may also be too soon to look even for bottoming, but it may also be
that such a bottoming process has begun. The levels of the PMIs are
extremely low, and that is the sort of pace we would expect a true
stabilization process to begin at in a cycle such as this. We know MFG
is hard-hit so unless the PMIs reached very low readings we would
continue to think that worse results would still lay ahead. Now that a
first criterion for stabilization has been met (new all-time lows or
readings near to that) we can look for a second, namely a period of
time in which the PMIs either make modest gains or establish a base by
moving sideways. The final step would be for them to rise and
eventually to poke their heads above the level of 50. That one is still
quite a way off. 

</div>



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">NTC/Markit MFG Indices</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Euro-13</td>
<td>34.42</td>
<td>33.88</td>
<td>35.58</td>
<td>34.63</td>
<td>39.58</td>
<td>44.98</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>31.96</td>
<td>32.66</td>
<td>35.66</td>
<td>33.43</td>
<td>40.03</td>
<td>46.69</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>37.90</td>
<td>34.91</td>
<td>37.28</td>
<td>36.70</td>
<td>39.91</td>
<td>45.34</td>
<td>10.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>36.06</td>
<td>35.54</td>
<td>34.95</td>
<td>35.52</td>
<td>39.62</td>
<td>43.86</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>31.51</td>
<td>28.49</td>
<td>29.42</td>
<td>29.81</td>
<td>34.12</td>
<td>38.89</td>
<td>10.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Austria</td>
<td>33.12</td>
<td>35.01</td>
<td>38.26</td>
<td>35.46</td>
<td>40.74</td>
<td>45.43</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>39.98</td>
<td>40.96</td>
<td>42.25</td>
<td>41.06</td>
<td>45.77</td>
<td>49.44</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>38.94</td>
<td>37.87</td>
<td>37.10</td>
<td>37.97</td>
<td>40.36</td>
<td>43.00</td>
<td>10.1%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>36.29</td>
<td>38.42</td>
<td>38.71</td>
<td>37.81</td>
<td>42.80</td>
<td>46.99</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">EU</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>35.78</td>
<td>34.91</td>
<td>34.48</td>
<td>35.06</td>
<td>38.64</td>
<td>43.65</td>
<td>6.0%</td>
</tr>
<tr class="odd">
<td colspan="6">percentile is over range since March
2000</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

The PMIs for Europe reside very near the bottom of their respective ranges. Generally the readings are bottom 10% of range or less across large EMU members and the UK. Germany is now one of the relative weakest countries on this [...]

MFG PMIs Stop Their Descent

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202d.jpg" width="353">
The Institute for Supply Management (ISM) reported that its January Composite Index of Activity in the manufacturing sector improved slightly to 35.6 from it&#39;s December low of 32.4. The latest was still near the lowest level since the recession year of 1980. The break-even level for this diffusion index of factory sector activity is a level of 50.you
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three-month growth in factory sector industrial production.
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by using all of the positive changes in activity added to one half of the zero change in activity measures.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202e.jpg" width="353">
The separate index of prices paid also improved moderately to 29.0. That, however, was not much above the lowest level since 1949. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.
The latest increase in the composite index recouped only a bit of the declines during the prior five months. That suggests the recent 10% rate of decline in industrial output will continue.
The new orders index during January improved slightly as 15% of survey participants reported higher orders but 52% reported that orders fell. The export order index improved, but only at the margin as economic weakness outside of the U.S. continued. It was still near the lowest level in this index&#39;s short twenty year history. During the last ten years there has been a 53% correlation between the index and the q/q change in real exports of goods in the GDP accounts.

<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/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">January &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>35.6</td>
<td>32.9</td>
<td>50.8</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>33.2</td>
<td>23.1</td>
<td>48.9</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>29.9</td>
<td>29.9</td>
<td>47.9</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>29.0</td>
<td>18.0</td>
<td>76.0</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The Institute for Supply Management (ISM) reported that its January Composite Index of Activity in the manufacturing sector improved slightly to 35.6 from it's December low of 32.4. The latest was still near the lowest level since the [...]

ISM Index Improved Slightly From Historic Low

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202a.jpg" align="left" border="0" height="265" width="353">

The personal income &amp; outlays report for the end of
2008 contained news of difficult times for the "front-end" of the U.S.
economy. To start, personal income fell for the third straight month.
The 0.2% December decline was a bit less-than-expected and it lowered
the gain for the full year to 3.7% which was the weakest since 2003.
The year ended with December-to-December growth in income of just 1.4%
and a three-month drop of 2.6% (AR).
A 0.3% decline in wages &amp; salaries was in the
forefront of that income weakness as employment levels declined. Wages
over the last three months were down at a 2.1%rate and up just 2.8% for
the full year, half that during 2007. Factory sector wages suffered the
worst of the shortfall with an 8.2% three-month rate of decline. In
addition, service sector wages fell at a 1.5% rate during those three
months which was their weakest performance since the recession of 2001.
Lower interest rates caused the seventh straight monthly
decline in interest income. The -7.2% y/y growth rate was eclipsed,
however, by the 22.1% rate of decline during the last three months.
Dividend income also fell at a 5.9% rate during that three month period
as corporate profits fell.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202b.jpg" align="right" border="0" height="265" width="353">
Disposable personal income dropped last
month for the sixth month in the last seven to lower the three-month
change to -2.3%. Thanks to falling energy prices and weaker pricing
power generally, real disposable income growth actually increased by a
strong 6.7% (1.3% y/y).
Personal consumption suffered heavily from across-the-board
weakness. The December decline was the sixth in a row. While the
three-month rate of growth was an abysmal -11.2% (AR), the change in
real terms was little better. Real personal consumption
expenditures fell 0.5% last month and at a 3.1% during the
last three.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202c.jpg" align="left" border="0" height="265" width="353">
Real spending on discretionary items was notably weak. Motor
vehicle &amp; parts purchases fell 0.4% in December and the
three-month annual growth rate amounted to -33.1%. Real spending on
household furniture &amp; appliances fell at a lesser 4.7% rate
while real spending on apparel dropped at a 2.7% rate since September.
These and other detailed spending figures are available in Haver's
USNA database.
The silver lining of this weakness in spending is while it
reflects weakened income growth, it also produced a rise in the level
of savings. The personal savings rate rose last month to 3.6 versus an
average of 1.7% for the year, which was the highest since 2004.
Declines in spending caused pricing power to evaporate. The PCE
chain price index fell 0.5% last month with lower petroleum
prices. Core pricing power, however, was additionally under pressure.
The 0.0% December downtick in the core PCE price index
about matched expectations and it was the third such consecutive
decline. It lowered the three-month change in core pricing to -0.1%
which was its weakest since the recession of 2001.
The Federal Reserve Board published a policy that was
adopted to help avoid preventable foreclosures on certain residential
mortgage assets. The Fed's release can be found <a href="http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090130a1.pdf">
here</a>.
</div>


<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/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>-0.2</td>
<td>-0.4</td>
<td>1.4</td>
<td>3.7</td>
<td>6.1</td>
<td>7.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>-0.2</td>
<td>-0.3</td>
<td>1.9</td>
<td>4.6</td>
<td>5.5</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption</td>
<td>-1.0</td>
<td>-0.8</td>
<td>-1.1</td>
<td>3.6</td>
<td>5.5</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>3.6</td>
<td>2.8</td>
<td>0.4 (Dec. 08)</td>
<td>1.7</td>
<td>0.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>-0.5</td>
<td>-1.1</td>
<td>0.6</td>
<td>3.3</td>
<td>2.6</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>-0.0</td>
<td>-0.0</td>
<td>1.7</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
</tr>
</tbody>
</table>
</body></html>

The personal income & outlays report for the end of 2008 contained news of difficult times for the "front-end" of the U.S. economy. To start, personal income fell for the third straight month. The 0.2% December decline was a bit less- [...]

U.S. December Income, Consumption & Prices Fell While Savings Rose

U.S. December Income, Consumption& Prices Fell While Savings Rose

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

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Andrew Cates

**The US housing market**
This first chart below highlights the growing downside risks to the US economic outlook stemming from the housing market. The S&P Case-Shiller home price index has slowed sharply from the pandemic-era surge, while the NAHB (National Association of Homebuilders) housing market index has weakened to levels historically associated with falling home prices. Housing matters because it is not just a cyclical sector but also a key transmission channel for the broader economy: consumer confidence, household balance sheets and credit conditions are all heavily influenced by shifts in the housing market.

250821Z1.jpg

**China’s economy**
The latest run of data from China has also reinforced downside risks for the broader world economy. As the Citigroup Economic Surprise Indices show below, China-specific data have more consistently undershot expectations in recent days. China’s July releases in particular disappointed: retail sales growth slowed to just 3.7% y/y, with weakness in autos and furniture hinting that earlier policy-driven boosts are fading. Industrial output and fixed-asset investment also came in below consensus, while property prices continued to fall and retail sector investment contracted by double digits. Even the labour market showed strain, with unemployment edging higher. The worry is not just China’s slowdown in isolation, but the spillovers. Softer Chinese demand feeds directly into global supply chains, commodity markets, and regional trade partners. Combined with tariff and non-tariff headwinds from the US, the risk is that China’s structural challenges spill into weaker global growth momentum.

250821Z2.jpg

**UK inflation** 
Persistently high services inflation remains one of the biggest headaches for UK monetary policy - and the UK is far from unique in that regard. Services are wage- and demand-sensitive, and their stickiness complicates the calibration of monetary policy even as broader disinflation takes hold. This week’s July upside surprise to UK services inflation was driven in no small part by airfares, which spiked 30% month-on-month – the largest July rise on record. While such volatility may prove temporary, it nonetheless lifted year-on-year services inflation to 5.0%, well above comfort levels. Still, the offsets are important: stripping out airfares and other volatile components, underlying services momentum appears to have eased, while broader data on wages, employment, and activity point to cooling demand. Nevertheless, this tension – headline stickiness versus softer underlying trends – underscores why the Bank of England is treading carefully.

250821Z3.jpg

**Inflation expectations and energy**
US medium-term inflation expectations have been unusually decoupling from oil prices in recent weeks. Normally, falling oil prices would help anchor breakevens, yet the 5-year forward inflation rate has edged higher of late even as WTI has slipped. This probably reflects US tariff policies that are shifting inflation dynamics away from energy and toward trade-related costs. At the same time, a weaker dollar has lifted imported prices, and the upward creep in expectations suggests markets may be more actively questioning whether the Fed’s “higher for longer” stance is sufficient to contain medium-term inflation risks.

250821Z4.jpg

**Clean energy**
Pivoting to more structural issues, the stark divergence between the global clean energy equity market index and the broader S&P 500 underlines the mounting challenges facing the renewables sector at present. While US equities have pushed to record highs, clean energy stocks have languished, weighed down by policy uncertainty, higher financing costs, and a more sceptical public mood. In the US, shifting political winds and uneven implementation of green subsidies have clouded the outlook for investment, while globally, resistance to renewables has grown as consumers and businesses grapple with high energy bills. Rising interest rates have further undermined the economics of capital-intensive clean energy projects, eroding returns and delaying investment pipelines. At the same time, bottlenecks in transmission infrastructure, permitting delays, and questions over the pace of the net-zero transition have all dented confidence. The result is a sector underperforming dramatically even as the urgency of the climate challenge grows.

250821Z5.jpg

**Renewables versus non-renewables**
Global energy consumption data show how limited—and in some respects, stalled—the transition away from fossil fuels has become. Oil, gas, and coal still dominate the energy mix, with shares that have proven remarkably resilient over the past several years. In fact, coal use has ticked higher of late as countries turned back to cheaper, more secure supplies amid energy price spikes and supply disruptions. While renewables have grown rapidly in percentage terms, their absolute contribution remains small compared with the scale of fossil fuel demand. Nuclear and hydro have also struggled to gain ground, leaving the overall mix looking more like a story of continuity than transformation. The result is a global transition that has not just slowed but, in key areas, has partially reversed—highlighting the gulf between climate ambitions and energy realities.

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Recent financial market gains have been underpinned by resilient global data, AI-fuelled optimism, and hopes that most central banks will continue to loosen monetary policy. Yet beneath the surface, a more complicated picture may be emerging. In the US, housing indicators are flashing warnings about household balance sheets and credit channels (chart 1), while China’s latest data—covering retail sales, industrial output, and property—underscore persistent weakness (chart 2). In the UK, this week’s data showing sticky services inflation is complicating the Bank of England’s easing path (chat 3), while back in the US, medium-term inflation expectations have been rising despite softer oil prices (chart 4), hinting at a more disruptive role for trade policy. Against this cyclical backdrop sit deeper structural challenges: global energy consumption remains overwhelmingly dependent on fossil fuels, the clean energy sector has lost momentum amid high costs and policy uncertainty, and equity markets have punished renewables even as climate imperatives intensify (charts 5 and 6). Together, these dynamics suggest that while markets continue to trade on optimism, the mix of weak housing signals, patchy Chinese demand, sticky inflation, and an uneven energy transition potentially leaves the global outlook more fragile than headline performance implies.

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Charts of the Week: Cracks Beneath The Shine

Sandy Batten

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The Current Activity Diffusion Index from the latest Manufacturing Business Outlook Survey (MBOS) conducted by the Federal Reserve Bank of Philadelphia, fell more than 16 points to -0.3 in August from 15.9 in July. The index has posted negative readings, which indicate that activity is declining, in four of the previous five months. A reading of +5.0 for August had been expected by the Action Economics Forecast Survey. Nearly 30% of respondents reported an increase in activity in August, down from 31.7% in July, while 30% reported a decline, up markedly from 16% in July. Responses to this month's survey were collected from August 11 to August 18.

The headline index reflects the answer to a single question on activity. Haver Analytics calculates an ISM-adjusted current activity diffusion index from five key components using the methodology employed in constructing the national ISM index. That calculated index fell to 49.1 in August, the first reading below the critical 50 level that separates expansion from contraction since April, from 51.2 in July.

Looking at the component indexes, both new orders and shipments posted significant declines in August with orders plummeting into negative territory at -1.9 versus 18.4 in July. This was the first negative reading for new orders since the tariff-induced plunge in April. Thirty-four percent of respondents reported an increase in orders in August, little changed from 35% in July. In contrast, 36% reported a decline in orders in August, up markedly from 17% in July. Shipments also declined significantly in August although they remained in positive territory at 4.5 versus 23.7 in July. Twenty-nine percent of respondents reported an increase in shipments, down slightly from 32% in July. In contrast, 24% reported a decline, up markedly from 9% in July.

Firms continued to report overall increases in employment, but at a slower pace. The employment index fell 4 points to 5.9 in August from 10.3 in July. Most firms continued to report no change in employment levels (74%), while the share of firms reporting increases (16%) exceeded the share reporting decreases (10%, up from 7% in July). The average workweek index rose from 0.4 in July to 4.7 in August, its highest reading since March.

There was still no indication that increased tariffs have damaged supply chains. The delivery times index slipped further below zero to -5.4 in August, the fourth negative reading in five months indicating that delivery times are shortening, from -4.7 in July. Thirteen percent of respondents reported an increase in delivery times in August, up from 8% in July, while 18% reported a decrease versus 13% in July.

Inflation indicators continued to rise in August. The prices paid index jumped to 66.8 in August, its highest reading since May 2022, from an already elevated 58.8 in July. Nearly 67% of respondents reported an increase in input prices while no respondent reported a decline. The prices received index edged up to 36.1 in August, its highest reading in three months, from 34.8 in July. In the answer to a special question, firms expected a 4.1% increase in the prices of their own products over the coming year, up from 3.8% when this question was last asked in the May survey.

The outlook for the next six months brightened marginally in August with the Future Activity Index rising to 25.0 following an increase to 21.5 in July. Forty-one percent of respondents expect activity to increase over the coming six months, the same as in July, while 16% expect it to decline, down from 20% in July. The pace of increase in both new orders and shipments is expected to pick up. Delivery times are expected to increase only slightly. Employment growth is expected to slow. The outlook for capital expenditures rose markedly to 38.4 in August, the highest reading since January.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The series from the survey dating back to May 1968 can be found in Haver's **SURVEYS** database. The expectations forecast figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- The headline index fell more than 16 points to -0.3, led by outsized declines in both new orders and shipments.
- The ISM-adjusted composite fell below the critical 50 level for the first time in four months, also pointing to a decline in activity.
- Delivery times shortened further while both prices paid and prices received indexes posted gains.

U.S. Philly Fed Manufacturing Index Dipped Below Zero in August

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Initial claims for unemployment insurance rose to 235,000 during the week ended August 16 after falling to an unrevised 224,000 in the prior week. The Action Economics Forecast Survey expected 226,000 initial claims for last week. The four-week moving average of initial claims increased to 226,250 from 221,750. It was the highest level since the second week of July.

In the week ended August 9, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – rose to 1.972 million from 1.942 million in the prior week, revised from 1.953 million. The four-week moving average rose to 1.955 million, the highest level in five weeks.

In the week ending August 9, the insured rate of unemployment (the number of beneficiaries as a percent of covered employment) was 1.3% for the eleventh straight week.

The insured unemployment rate varied greatly across individual states and territories. In the week ended August 2, the highest unemployment rates were in New Jersey (2.74%), Puerto Rico (2.62%), Rhode Island (2.52%), California (2.14%), Minnesota (2.20%) and Massachusetts (2.15%). The lowest were in South Dakota (0.27%), Florida (0.39%), North Carolina (0.47%), Kansas (0.58%), Georgia (0.59%) and Louisiana (0.61%). Rates in other notable states include Pennsylvania (1.90%), Illinois (1.72%), New York (1.73%), Texas (1.25%) and Michigan (1.17%). These state data are not seasonally adjusted.

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

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- Initial claims surge to highest level in eight weeks.
- Continuing claims extend upward trend.
- Insured unemployment rate holds steady.

U.S. Initial Unemployment Insurance Claims Rise Sharply in Latest Week

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

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

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

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

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

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

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

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

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

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

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

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

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

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

Economy in Brief: February 2009