Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050131b.jpg" width="353">
Personal income surged a record 3.7% last month due to a $24.8B boost from Microsoft&#39;s payment of a $32B stock dividend. Consensus expectations had been for a 3.3% gain. Excluding the dividend effect, personal income rose 0.6%. Income for all of last year grew 5.4%, the most since an 8.0% gain in 2000.
Wage &amp; salary income grew 0.4% (5.1% y/y) in December and for the year logged a 4.7% increase, also the strongest since 2000 when it rose 8.1%. Factory sector wages gained 0.4% (1.6% y/y) with the year&#39;s gain pegged at 2.1% following two years of decline.
Personal disposable income gained 4.0% (8.9% y/y) and the 5.7% rise for the full year was the strongest since a 7.5% gain in 2000. Adjusted for inflation, disposable income gained 3.4% last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050131a.jpg" width="353">
Personal consumption rose an expected 0.8% in December driven by a 12.3% m/m gain in unit sales of motor vehicles. The 6.1% rise in total PCE for the full year was just behind the next strongest year&#39;s gain of 7.3% in 2000. Spending on nondurables was unchanged in December (8.5% y/y), held back by a 7.0% decline in gasoline prices and services spending rose 0.5% (5.6% y/y).
The PCE chain price index declined by 0.1%, the second monthly decline of 2004. Less food &amp; energy prices also dipped slightly for the first time in over a year (+1.5% y/y).

<table border="0" cellspacing="0" width="100%">
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<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">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">Personal Income</td>
<td>3.7%</td>
<td>0.4%</td>
<td>8.6%</td>
<td>5.4%</td>
<td>3.2%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.8%</td>
<td>0.4%</td>
<td>6.4%</td>
<td>6.1%</td>
<td>5.2%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>3.4%</td>
<td>0.3%</td>
<td>1.2%</td>
<td>1.0%</td>
<td>1.4%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>2.2%</td>
<td>1.9%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>-0.0%</td>
<td>0.2%</td>
<td>1.5%</td>
<td>1.5%</td>
<td>1.3%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Recovered 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 31, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050131b.jpg" width="353">
The National Index of Help-Wanted Advertising published by the Conference Board recovered to 38 in December, the highest level since June. For the full year the index averaged 38 which was the same as in 2003 but was below the 44 averaged in 2002.
During the last ten years there has been an 88% correlation between the level of help-wanted advertising and the year-to-year change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume improved to 67% following the sharp drop the month prior to 37%.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Dec &#39;03</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>38</td>
<td>36</td>
<td>38</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Improved 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 31, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050131c.jpg" width="353">
The Chicago Purchasing Managers Business Barometer improved to 62.4 in January from an upwardly revised reading the month prior. Consensus expectations had been for a decline to 59.0.
During the last ten years there has been a 73% correlation between the level of the Chicago Business Barometer and the three month change in factory sector industrial output. That correlation has risen to 86% during the last five years.
The employment index recovered 1.7 points to 52.8 following a 7.8 point drop in December which was less than initially indicated. During the last twenty years there has been an 80% correlation between the level of this employment index and the three month change in factory sector employment. The new orders index also rose as did production but both series are below the autumn highs.
The index of prices paid fell sharply for the second month. During the last ten years there has been an 88% correlation between the Chicago price index and the three month change in the &quot;core&quot; intermediate goods PPI.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan&nbsp;&#39;04</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">Business Barometer</td>
<td>62.4</td>
<td>61.9</td>
<td>64.5</td>
<td>62.9</td>
<td>54.7</td>
<td>52.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>65.8</td>
<td>64.9</td>
<td>68.8</td>
<td>67.0</td>
<td>58.0</td>
<td>56.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>76.5</td>
<td>84.4</td>
<td>67.8</td>
<td>80.1</td>
<td>55.8</td>
<td>56.9</td>
</tr>
</tbody>
</table>
New Home Sales A Record in 2004 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 31, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050131g.jpg" width="353">
Sales of new single-family homes improved modestly in December to 1.098M but sales in November were revised down sharply. Consensus estimates had been for sales of 1.200M. For the full year new home sales were a record 1.178M, up 8.1% from 2003.
The figures from the Census Department reflect homes sold as opposed to the figures on existing home sales from the National Association of Realtors which reflect closings of sales in earlier months. 
Home sales were mixed throughout the country. In the Northeast sales fell to the lowest level since July but for the year were the highest since 1998. In the South sales also fell sharply to the lowest since July yet set a record for the year, adding 6.0% to the 13.8% gain in 2003. In the Midwest sales recovered nearly all of the prior month&#39;s plunge to finish the year up 10.8% at a record level. In the West, sales in December recovered some of the prior month&#39;s plunge to finish out a record year where sales rose 11.4% y/y and were more than double the levels of the early 1990s.
The median price of a new single family home recovered more than half of the prior month&#39;s decline. Rising to $222,000 (13.3% y/y), the annual gain in new home prices was the strongest since 1987.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E90401/@E90401.HTM">Homes Sales (000s, AR)</a></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>
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</thead>
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<td class="firstcol">New Single-Family</td>
<td>1,098</td>
<td>1,097</td>
<td>-2.0%</td>
<td>1,178</td>
<td>1,089</td>
<td>976</td>
</tr>
</tbody>
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Personal income surged a record 3.7% last month due to a $24.8B boost from Microsoft's payment of a $32B stock dividend. Consensus expectations had been for a 3.3% gain. Excluding the dividend effect, personal income rose 0.6%. Income [...]

Record Gain in U.S. Personal Income Fueled Spending

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/050128e.jpg" width="353">
Korean industrial production dipped in December, with the total down 1.9% and the manufacturing sector off 2.1%, according to industry data reported Friday by the National Statistics Office. Nonetheless, for 2004, factory output surged by 10.5%, the strongest since the technology boom peaked in 2000.
In examining these production data, we are impressed by two aspects, both trade related. The first is the sharp recovery following the currency crisis in 1997. Industrial output leaped ahead in 1999, by 24%, and again in 2000, by 17%. As we suggested above, this was perhaps related to the tech boom and the preparation for the Y2K calendar event. In addition, though, as evident in the accompanying graphs and the table below, a big, new market opened up for Korean products, China.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050128g.jpg" width="353">
Korea&#39;s exports to China were $4.4 billion in November (latest available), some $836 million larger than those to the United States. The emergence of China as a trading partner for Korea has been rapid. Shipments to China surpassed those to the US only in July 2003. But shipments from Korea into other major markets remained larger than to China until very recently as well. Exports to Taiwan, Singapore, Germany and the UK were larger until 1992. Shipments to Hong Kong, until 1996 and to Japan until early 2001. Thus, China&#39;s share of Korea&#39;s exports -- and therefore its importance to Korean industry -- was well down the list of major customer markets. Now it is the number one importer of Korean goods, by about 20% over the United States. And China&#39;s business probably helped Korean industry grow in 2002 and 2003 when shipments to the US were still somewhat sluggish.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol">South Korea: IP related to Exports</th>
<th scope="col">Dec 2004</th>
<th scope="col">Nov 2004</th>
<th scope="col">Year Ago</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production - Total (% Chg)</td>
<td>-1.9</td>
<td>2.1</td>
<td>4.5</td>
<td>10.1</td>
<td>5.1</td>
<td>8.1</td>
<td>0.7</td>
</tr>
<tr>
<td class="firstcol">IP - Manufacturing (% Chg)</td>
<td>-2.1</td>
<td>2.2</td>
<td>4.6</td>
<td>10.5</td>
<td>5.1</td>
<td>8.2</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Exports of Goods (Mil.$)</td>
<td>22,993</td>
<td>22,630</td>
<td>17,706</td>
<td>21,118*</td>
<td>16,153</td>
<td>13,539</td>
<td>12,537</td>
</tr>
<tr>
<td class="firstcol">Exports to US (Mil.$)</td>
<td>NA</td>
<td>3,558</td>
<td>3,014</td>
<td>3,575*</td>
<td>2,852</td>
<td>2,732</td>
<td>2,601</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports to China (Mil.$)</td>
<td>NA</td>
<td>4,394</td>
<td>3,397</td>
<td>4,124*</td>
<td>2,926</td>
<td>1,979</td>
<td>1,516</td>
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Korean industrial production dipped in December, with the total down 1.9% and the manufacturing sector off 2.1%, according to industry data reported Friday by the National Statistics Office. Nonetheless, for 2004, factory output [...]

Exports Boost Korean Industry

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050128b.jpg" width="353">
The employment cost index for private industry workers rose 0.7% last quarter, in line with Consensus expectations for a 0.8% increase. The y/y gain of 3.8% represented moderation from the 4.0% rates of growth logged during the prior four years.
Moderate wage and salary growth of just 0.4% was less than half the 3Q increase and the y/y gain of 2.4% was nearly half the peak rates of growth seen during 1998 and 2000. Wages account for roughly 70% of the compensation index.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050128c.jpg" width="353">
Benefit costs, on the other hand, shot up last year. The 4Q rise of 1.5% was below increases early in the year but pulled the y/y gain to 6.9%, the strongest in over twenty years. The y/y rise in the cost of health benefits eased to 7.3% after 10.5% growth in 2003.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB08/@EB08.HTM">ECI- Private Industry Workers</a></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">Compensation</td>
<td>0.7%</td>
<td>0.9%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>4.1%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.4%</td>
<td>0.9%</td>
<td>2.4%</td>
<td>2.4%</td>
<td>3.0%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>1.5%</td>
<td>1.0%</td>
<td>6.9%</td>
<td>7.0%</td>
<td>6.5%</td>
<td>4.8%</td>
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The employment cost index for private industry workers rose 0.7% last quarter, in line with Consensus expectations for a 0.8% increase. The y/y gain of 3.8% represented moderation from the 4.0% rates of growth logged during the prior [...]

Employment Cost Index Moderate At 0.7%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050128a.jpg" width="353">
US real GDP last quarter rose just 3.1% (AR), the leanest rate of growth in nearly two years. Despite the weak finish to 2004, 4.4% growth for the full year was the strongest since 1999. The Consensus expectation had been for 3.5% growth in 4Q.
Trade sector deterioration sapped 1.73 percentage points from 4Q GDP growth, the most for any quarter since 2Q 1998 and near the record for the last twenty years. A huge 12.2% (10.7% y/y) gain in imports of goods was countered by a 6.8% decline (+4.2% y/y) in goods exports.
Domestic demand growth maintained a healthy pace at 4.3%, led by 4.6% (3.9% y/y) growth in PCE. Business fixed investment in equipment &amp; software also rose a strong 14.9% (13.6% y/y) though investment in structures fell for the third quarter of the last four (-1.6% y/y). Residential investment was weak as well growing only 0.3% (5.7% y/y), the smallest quarterly gain in three years.
Inventory accumulation sped up and added 0.4 percentage points to growth but the contribution made up less than half of the decumulation in 3Q. For the full year, production increases to raise inventories added 0.4 percentage points to GDP growth but that was not half of the additions of the past.
Price inflation accelerated to 2.0% from 1.4% in 3Q driven by 2.7% (2.9% y/y) growth in prices behind domestic demand. The PCE chain price index rose 2.5% (2.5% y/y) and the private fixed investment price index rose 1.7% (1.2% y/y). A 5.2% (4.8% y/y) gain in prices at the state &amp; local level raised the overall government price index 4.0% (4.2% y/y).

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></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">GDP</td>
<td>3.1%</td>
<td>4.0%</td>
<td>3.7%</td>
<td>4.4%</td>
<td>3.0%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.4%</td>
<td>-1.0%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>2.7%</td>
<td>5.0%</td>
<td>3.4%</td>
<td>4.0%</td>
<td>3.1%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-1.7%</td>
<td>-0.1%</td>
<td>-0.7%</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-0.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>4.3%</td>
<td>4.9%</td>
<td>4.1%</td>
<td>4.4%</td>
<td>3.4%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.0%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>1.7%</td>
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US real GDP last quarter rose just 3.1% (AR), the leanest rate of growth in nearly two years. Despite the weak finish to 2004, 4.4% growth for the full year was the strongest since 1999. The Consensus expectation had been for 3.5% [...]

US GDP Growth Knocked Hard By Trade Sector Deterioration

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050128a.jpg" width="353">
US real GDP last quarter rose just 3.1% (AR), the leanest rate of growth in nearly two years. Despite the weak finish to 2004, 4.4% growth for the full year was the strongest since 1999. The Consensus expectation had been for 3.5% growth in 4Q.
Trade sector deterioration sapped 1.73 percentage points from 4Q GDP growth, the most for any quarter since 2Q 1998 and near the record for the last twenty years. A huge 12.2% (10.7% y/y) gain in imports of goods was countered by a 6.8% decline (+4.2% y/y) in goods exports.
Domestic demand growth maintained a healthy pace at 4.3%, led by 4.6% (3.9% y/y) growth in PCE. Business fixed investment in equipment &amp; software also rose a strong 14.9% (13.6% y/y) though investment in structures fell for the third quarter of the last four (-1.6% y/y). Residential investment was weak as well growing only 0.3% (5.7% y/y), the smallest quarterly gain in three years.
Inventory accumulation sped up and added 0.4 percentage points to growth but the contribution made up less than half of the decumulation in 3Q. For the full year, production increases to raise inventories added 0.4 percentage points to GDP growth but that was not half of the additions of the past.
Price inflation accelerated to 2.0% from 1.4% in 3Q driven by 2.7% (2.9% y/y) growth in prices behind domestic demand. The PCE chain price index rose 2.5% (2.5% y/y) and the private fixed investment price index rose 1.7% (1.2% y/y). A 5.2% (4.8% y/y) gain in prices at the state &amp; local level raised the overall government price index 4.0% (4.2% 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/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></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">GDP</td>
<td>3.1%</td>
<td>4.0%</td>
<td>3.7%</td>
<td>4.4%</td>
<td>3.0%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.4%</td>
<td>-1.0%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>2.7%</td>
<td>5.0%</td>
<td>3.4%</td>
<td>4.0%</td>
<td>3.1%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-1.7%</td>
<td>-0.1%</td>
<td>-0.7%</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-0.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>4.3%</td>
<td>4.9%</td>
<td>4.1%</td>
<td>4.4%</td>
<td>3.4%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.0%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>
Employment Cost Index Moderate At 0.7% 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 28, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050128b.jpg" width="353">
The employment cost index for private industry workers rose 0.7% last quarter, in line with Consensus expectations for a 0.8% increase. The y/y gain of 3.8% represented moderation from the 4.0% rates of growth logged during the prior four years.
Moderate wage and salary growth of just 0.4% was less than half the 3Q increase and the y/y gain of 2.4% was nearly half the peak rates of growth seen during 1998 and 2000. Wages account for roughly 70% of the compensation index.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050128c.jpg" width="353">
Benefit costs, on the other hand, shot up last year. The 4Q rise of 1.5% was below increases early in the year but pulled the y/y gain to 6.9%, the strongest in over twenty years. The y/y rise in the cost of health benefits eased to 7.3% after 10.5% growth in 2003.

<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/@EB08/@EB08.HTM">ECI- Private Industry Workers</a></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">Compensation</td>
<td>0.7%</td>
<td>0.9%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>4.1%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.4%</td>
<td>0.9%</td>
<td>2.4%</td>
<td>2.4%</td>
<td>3.0%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>1.5%</td>
<td>1.0%</td>
<td>6.9%</td>
<td>7.0%</td>
<td>6.5%</td>
<td>4.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050127e.jpg" width="353">
While the factory orders situation in the US seems to be holding up well, those in neighboring Canada and in the UK look to be eroding. We noted here a week ago that the UK&#39;s BCC survey for Q4 might be pointing toward slower growth in business activity. The CBI industrial trends survey extends this tendency into the new year. The Business Conditions Survey taken by Statistics Canada shows an abrupt drop in assessments from comfortably positive levels to zero or below in Q1.
In Canada, overall production prospects are flat in Q1, as the proportion of manufacturing firms with favorable production prospects decreased from 21% in Q4 to 13%, the lowest reading in exactly three years. Also, firms anticipating negative production developments increased from 10% to 13% of the total. These results are mirrored in the orders segment, which eroded from 13% in Q4 to -1% in Q1, that is, slightly more firms are seeing orders decline rather than rise.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050127f.jpg" width="353">
The CBI survey in the UK saw a second quarter of downturn, with the &quot;business optimism&quot; component dropping from -10 to -22, the lowest in seven quarters. Part of this deterioration was reflected in orders, which turned down from +4 to -4. In the BCC survey, the weakening tendency was most visible in domestic (&quot;home&quot;) business, with the export outlook actually fairly favorable. In this CBI data, however, both domestic and export prospects experienced erosion.
Higher energy costs and persistent strength in currencies, at least relative to the US dollar, might be seen as two reasons for the emerging concerns over manufacturing prospects in the UK and Canada. However, as evident in the first graph, there is only a rough correlation of the CBI business optimism measure and energy prices, and the relationship appears to be positive, not negative. Separately, and not illustrated here, there is virtually no correlation between FX values and the CBI index. In Canada, the energy price situation is the same: modest, positive correlation; the correlation with the currency value varies widely over time spans of different lengths. So the energy and currency factors are not supported by these data as sources of renewed concern over manufacturing in either country.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"></th>
<th scope="col">1Q 2005</th>
<th scope="col">4Q 2004</th>
<th scope="col">3Q 2004</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Canada</td>
<td>0</td>
<td>11</td>
<td>11</td>
<td>11</td>
<td>4</td>
<td>0</td>
<td>-17</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Orders Received</td>
<td>-1</td>
<td>13</td>
<td>8</td>
<td>9</td>
<td>-5</td>
<td>1</td>
<td>-32</td>
</tr>
<tr class="odd">
<td class="firstcol">UK - CBI</td>
<td>-22</td>
<td>-10</td>
<td>7</td>
<td>7</td>
<td>-17</td>
<td>-6</td>
<td>-27</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Orders</td>
<td>-4</td>
<td>4</td>
<td>2</td>
<td>9</td>
<td>-16</td>
<td>-14</td>
<td>-4</td>
</tr>
</tbody>
</table>
</body>
</html>

While the factory orders situation in the US seems to be holding up well, those in neighboring Canada and in the UK look to be eroding. We noted here a week ago that the UK's BCC survey for Q4 might be pointing toward slower growth in [...]

Q1 Business Optimism Ebbs in Canada and the UK

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050127d.jpg" width="353">
The National Activity Index (CFNAI) compiled by the Federal Reserve Bank of Chicago recovered to 0.39 last month from a downwardly revised 0.05 in November.A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
The recovery raised the three-month moving average of the CFNAI to 0.33, its highest level since July.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
During the last twenty years there has been a 74% correlation between the level of the CFNAI and q/q growth in real GDP.
The latest CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_january2005.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/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Dec &#39;03</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.39</td>
<td>0.05</td>
<td>0.20</td>
<td>0.34</td>
<td>-0.11</td>
<td>-0.40</td>
</tr>
</tbody>
</table>
</body>
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The National Activity Index (CFNAI) compiled by the Federal Reserve Bank of Chicago recovered to 0.39 last month from a downwardly revised 0.05 in November.A zero value of the CFNAI indicates that the economy is expanding at its [...]

Chicago Fed Nat'l Activity Index Recovered

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050127a.jpg" width="353">
Durable goods orders in December rose 0.6%, right on the Consensus expectation. The advance report of a November surge in orders was little revised. For 2004, the 10.7% gain in orders was the strongest in ten years and led to a 7.1% gain in factory output of durable goods.
Nondefense capital goods orders dropped 1.9%. Aircraft orders fell 16.7% following the 64.7% November spike. Excluding aircraft, orders rose 1.8% but the November gain was halved to 0.9%. For 2004 orders rose 11.5%, the strongest gain since 1997 and led to a 9.5% gain in the industrial output of business equipment, the strongest since 1998.
Orders for computers &amp; electronic products recovered 6.4% (+15.2% y/y) following two months of sharp decline. Machinery orders also rose 3.9% (11.1% y/y) but electrical equipment orders fell 6.1% (+6.2% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050127b.jpg" width="353">
Transportation equipment orders fell 3.0% but less transportation, durable goods orders rose 2.1% (11.9% y/y). Primary metals orders inched 0.3% higher (+28.5% y/y) but orders for fabricated metals fell again (+7.4% y/y).
Unfilled orders rose another 0.5% (9.0% y/y) although shipments surged 2.1% (8.8% y/y). As a result, the ratio of backlogs to shipments fell sharply to the lowest level since August.
Inventories of durable goods dipped slightly (7.4% y/y). Combined with the surge in shipments the decline lowered the I/S ratio to the lowest level since August.

<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/@ED0101.HTM">NAICS Classification</a></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">Durable Goods Orders</td>
<td>0.6%</td>
<td>1.8%</td>
<td>8.7%</td>
<td>10.7%</td>
<td>2.6%</td>
<td>-1.7%</td>
</tr>
<tr>
<td class="firstcol">Nondefense Capital Goods</td>
<td>-1.9%</td>
<td>7.5%</td>
<td>13.6%</td>
<td>13.5%</td>
<td>5.6%</td>
<td>-7.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Excluding Aircraft</td>
<td>1.8%</td>
<td>0.9%</td>
<td>11.3%</td>
<td>11.5%</td>
<td>6.6%</td>
<td>-7.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Durable goods orders in December rose 0.6%, right on the Consensus expectation. The advance report of a November surge in orders was little revised. For 2004, the 10.7% gain in orders was the strongest in ten years and led to a 7.1% [...]

U.S. Durable Goods Orders Up As Expected

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

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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).

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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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