Tom Moeller

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      <p>The <b>Composite Index </b>for the service and construction sectors
      from the Institute for Supply Management (ISM) edged lower to 56.0 in June
      but remained near its highest level in ten months. The latest figure
      matched expectations in the&nbsp; Action Economics Forecast Survey. During
      the last ten years, there has been a 75% correlation between the level of
      the nonmanufacturing composite index and the q/q change in real GDP for
      the service and the construction sectors.</p>
      
      <p><b>Haver Analytics calculates an index</b> using the ISM
      nonmanufacturing series and the ISM manufacturing sector index released
      Tuesday. The June figure edged down to 55.9 but remained near its highest
      level in ten months. During the last ten years, there has been a 76%
      correlation between this composite index and the quarterly change in real
      GDP.</p>
      
      <p>Leading the nonmanufacturing index lower last month was a sharp drop in
      the business activity index to 57.5 from 62.1. To the upside were new
      orders at 61.2, supplier deliveries at 51.0 and employment at 54.4. During
      the last ten years, there has been an 89% correlation between the
      employment index and the m/m change in private service sector plus
      construction payrolls.</p>
      
      <p>The prices paid index slipped to 61.2 but remained nearly its highest
      level since October 2012. Twenty-five percent of respondents indicated
      paying higher prices last month while three percent reported them lower.
      During the last ten years, there has been a 78% correlation between the
      price index and the q/q change in the GDP services chain price index.</p>
      
      <p>Beginning with the January 2008 Nonmanufacturing <cite>Report On
      Business, </cite>the composite index is calculated as an indication of
      overall economic conditions for the nonmanufacturing sector. It is a
      composite index based on the diffusion indices of four of the indicators
      (business activity, new orders, employment and supplier deliveries), each
      with equal weights. Readings above 50 indicate expansion in activity.</p>
      
      <p>The ISM data are available in Haver's <b>USECON</b> database. The
      expectations figure from Action Economics is in the <b>AS1REPNA </b>database.</p>
      
      <p><a href="/comment/140703k_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140703k.png"></a>
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      <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

        <thead>
          <tr>
            <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM
              Nonmanufacturing Survey (SA)</a></th>
            <th scope="col" >Jun</th>
            <th scope="col" >May</th>
            <th scope="col" >Apr</th>
            <th scope="col" >Jun'13</th>
            <th scope="col" >2013</th>
            <th scope="col" >2012</th>
            <th scope="col" >2011</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" >Composite Diffusion Index</td>
            <td  >56.0</td>
            <td  >56.3</td>
            <td  >55.2</td>
            <td  >53.4</td>
            <td  >54.7</td>
            <td  >54.6</td>
            <td  >54.4</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;&nbsp; Business Activity</td>
            <td  >57.5</td>
            <td  >62.1</td>
            <td  >60.9</td>
            <td  >53.3</td>
            <td  >56.7</td>
            <td  >57.7</td>
            <td  >57.2</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;&nbsp; New Orders</td>
            <td  >61.2</td>
            <td  >60.5</td>
            <td  >58.2</td>
            <td  >54.0</td>
            <td  >55.9</td>
            <td  >56.6</td>
            <td  >56.3</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;&nbsp; Employment</td>
            <td  >54.4</td>
            <td  >52.4</td>
            <td  >51.3</td>
            <td  >54.9</td>
            <td  >54.4</td>
            <td  >53.5</td>
            <td  >52.4</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;&nbsp; Supplier Deliveries
              (NSA)</td>
            <td  >51.0</td>
            <td  >50.0</td>
            <td  >50.5</td>
            <td  >51.5</td>
            <td  >51.7</td>
            <td  >50.6</td>
            <td  >51.9</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Prices Index</td>
            <td  >61.2</td>
            <td  >61.4</td>
            <td  >60.8</td>
            <td  >56.5</td>
            <td  >55.6</td>
            <td  >59.3</td>
            <td  >65.1</td>
 </tr>
              </tbody>
            </table>
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The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) edged lower to 56.0 in June but remained near its highest level in ten months. The latest figure matched expectations in the [...]

U.S. ISM Nonmanufacturing Index Slips

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      <p>The labor market is on a firmer footing. Nonfarm payrolls increased 288,000
      during June following upwardly-revised gains of 224,000 and 304,000 during
      the prior two months. The increase easily outpaced expectations for a
      215,000 rise in the Action Economics Forecast Survey. The unemployment
      rate moved lower to 6.1% versus an expected 6.3%. The overall unemployment
      rate, including marginally attached workers and those employed part-time
      for economic reasons, slipped to 12.1%.</p>
      
      <p>From the <b>payroll</b> employment survey, nonfarm jobs grew 288,000
      during June. That raised the average increase during the last three months
      to 272,000, its strongest since March 2012. Factory sector payrolls grew
      an improved&nbsp; 16,000 but construction sector payroll gained a lessened
      6,000. It was in the service sector where the rate of labor market
      improvement picked up steam. Nonfarm private service sector jobs grew
      236,000 (2.2% y/y) and the three-month gain improved to 222,000, both the
      strongest increases in two years. Professional &amp; business services
      jobs advanced 67,000 (3.5% y/y) including a 10,100 rise (8.1% y/y) in
      temporary employment, its weakest monthly gain in the last five. Retail
      trade hiring advanced 40,200 (2.1% y/y) while leisure &amp; hospitality
      jobs grew 39,000 (2.8% y/y). Health care employment rose a moderate 33,700
      (1.8% y/y) and wholesale trade hiring rose 15,100 (2.4% y/y). Jobs in
      transportation &amp; warehousing rose 16,600 (3.1% y/y) and information
      sector employment gained 9,000 (-1.0% y/y). Government sector employment
      showed great improvement. The 26,000 job gain (0.3% y/y) pulled the
      average three-month advance to 17,000 which equaled its best since 2010.
      Local government hiring grew 22,000 (0.6% y/y) and state government
      employment rose 2,000 (0.6% y/y). Federal government jobs improved 2,000
      (-2.0% y/y) but that only offset a May decline.</p>
      
      <p>The length of the average workweek held steady at 34.5 hours for the
      fourth straight week. The factory sector workweek remained at 41.1 hours,
      the longest of the economic recovery. The construction workweek lengthened
      to 39.0 hours and private services held at 33.3 hours for the fourth
      straight month. For all of the second quarter, aggregate hours worked
      (employment times hours) rose at a 3.8% annual rate versus Q1, the
      strongest gain in three years.</p>
      
      <p><a href="/comment/140703e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140703e.png"></a>
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      <p>Average hourly earnings improved 0.2% (2.0% y/y). Factory sector
      earnings gained 0.4% (1.8% y/y) while information sector earnings improved
      0.4% as well (3.1% y/y). Financial sector earnings grew 0.7% (2.2% y/y)
      and professional &amp; business services earnings rose 0.3% (2.4% y/y).
      Earnings in the education sector were unchanged (0.8% y/y).</p>
      
      <p>From the <b>household</b> employment survey, the unemployment rate fell
      to 6.1%, its lowest level since September 2008. The decline reflected a
      407,000 gain (1.5% y/y) in employment which easily outpaced the 81,000
      rise (-0.1% y/y) in the labor force. That rise left the labor force
      participation rate of 62.8% stable at its lowest level since early-1978.
      The number of potential workers not in the labor force grew 2.7%, about
      the rate of growth since 2009. Twenty five percent of workers had been
      unemployed for more than 52 weeks.</p>
      
      <p>The median duration of unemployment dropped to 13.1 weeks. That's
      versus a high of 25.0 weeks in June of 2010. The average length of
      joblessness fell to 33.5 week, its lowest level since September 2010.</p>
      
      <p>The unemployment rate for those without a high school diploma remained
      high at 9.1% while high school graduates realized a greatly lessened 5.8%
      unemployment rate. Those with some college but no diploma were 5.0%
      unemployed and college graduates realized 3.3% unemployment.</p>
      
      <p>The figures referenced above are available in Haver's <b>USECON</b>
      database. Additional detail can be found in the <b>LABOR</b> and in the <b>EMPL</b>
      databases. The expectation figures are from Action Economics and are in
      the <b>AS1REPNA</b> database.</p>
      
      <p><a href="/comment/140703g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140703g.png"></a>
      <a href="/comment/140703h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140703h.png"></a></p>
      
      <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
      
        <thead>
          <tr>
            <th class="firstcol" scope="col" ><b>Employment: (M/M
              Chg., 000s)</b></th>
            <th scope="col" ><b>Jun</b></th>
            <th scope="col" ><b>May</b></th>
            <th scope="col" ><b>Apr</b></th>
            <th scope="col" ><b>Y/Y</b></th>
            <th scope="col" ><b>2013</b></th>
            <th scope="col" ><b>2012</b></th>
            <th scope="col" ><b>2011</b></th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" >Payroll Employment</td>
            <td  >288</td>
            <td  >224</td>
            <td  >304</td>
            <td  >1.8%</td>
            <td  >1.7%</td>
            <td  >1.7%</td>
            <td  >1.2%</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;Previous</td>
            <td  >--</td>
            <td  >217</td>
            <td  >282</td>
            <td  >--</td>
            <td  >--</td>
            <td  >--</td>
            <td  >--</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;Manufacturing</td>
            <td  >16</td>
            <td  >11</td>
            <td  >9</td>
            <td  >1.1</td>
            <td  >0.7</td>
            <td  >1.7</td>
            <td  >1.7</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;Construction</td>
            <td  >6</td>
            <td  >9</td>
            <td  >36</td>
            <td  >3.2</td>
            <td  >3.3</td>
            <td  >2.1</td>
            <td  >0.2</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;Private Service Producing</td>
            <td  >236</td>
            <td  >202</td>
            <td  >228</td>
            <td  >2.2</td>
            <td  >2.2</td>
            <td  >2.2</td>
            <td  >1.9</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;Government</td>
            <td  >26</td>
            <td  >0</td>
            <td  >26</td>
            <td  >0.3</td>
            <td  >-0.3</td>
            <td  >-0.8</td>
            <td  >-1.8</td>
          </tr>
          <tr>
            <td class="firstcol" >Average Weekly Hours - Private
              Sector</td>
            <td  >34.5</td>
            <td  >34.5</td>
            <td  >34.5</td>
            <td  >34.5<br>
              (Jun'13)</td>
            <td  >34.5</td>
            <td  >34.4</td>
            <td  >34.3</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Average Private Sector Hourly
              Earnings (%)</td>
            <td  >0.2</td>
            <td  >0.2</td>
            <td  >0.0</td>
            <td  >2.0</td>
            <td  >2.1</td>
            <td  >1.9</td>
            <td  >2.0</td>
          </tr>
          <tr>
            <td class="firstcol" >Unemployment Rate (%)</td>
            <td  >6.1</td>
            <td  >6.3</td>
            <td  >6.3</td>
            <td  >7.5<br>
              (Jun'13)</td>
            <td  >7.4</td>
            <td  >8.1</td>
            <td  >8.9</td>
          </tr>
              </tbody>
            </table>
            </span>
</body></html>

The labor market is on a firmer footing. Nonfarm payrolls increased 288,000 during June following upwardly-revised gains of 224,000 and 304,000 during the prior two months. The increase easily outpaced expectations for a 215,000 rise [...]

U.S. Payroll Employment Growth Improves; Jobless Rate Falls Further

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      <p><a href="/comment/140703a_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140703a.png"></a>
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      <p>The labor market is on a firmer footing. Nonfarm payrolls increased 288,000
      during June following upwardly-revised gains of 224,000 and 304,000 during
      the prior two months. The increase easily outpaced expectations for a
      215,000 rise in the Action Economics Forecast Survey. The unemployment
      rate moved lower to 6.1% versus an expected 6.3%. The overall unemployment
      rate, including marginally attached workers and those employed part-time
      for economic reasons, slipped to 12.1%.</p>
      
      <p>The figures referenced above are available in Haver's <b>USECON</b>
      database. Additional detail can be found in the <b>LABOR</b> and in the <b>EMPL</b>
      databases. The expectation figures are from Action Economics and are in
      the <b>AS1REPNA</b> database.</p>
      
      <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

        <thead>
          <tr>
            <th class="firstcol" scope="col" ><b>Employment: (M/M
              Chg., 000s)</b></th>
            <th scope="col" ><b>Jun</b></th>
            <th scope="col" ><b>May</b></th>
            <th scope="col" ><b>Apr</b></th>
            <th scope="col" ><b>Y/Y</b></th>
            <th scope="col" ><b>2013</b></th>
            <th scope="col" ><b>2012</b></th>
            <th scope="col" ><b>2011</b></th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" >Payroll Employment</td>
            <td  >288</td>
            <td  >224</td>
            <td  >304</td>
            <td  >1.8%</td>
            <td  >1.7%</td>
            <td  >1.7%</td>
            <td  >1.2%</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;Previous</td>
            <td  >--</td>
            <td  >217</td>
            <td  >282</td>
            <td  >--</td>
            <td  >--</td>
            <td  >--</td>
            <td  >--</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;Manufacturing</td>
            <td  >16</td>
            <td  >11</td>
            <td  >9</td>
            <td  >1.1</td>
            <td  >0.7</td>
            <td  >1.7</td>
            <td  >1.7</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;Construction</td>
            <td  >6</td>
            <td  >9</td>
            <td  >36</td>
            <td  >3.2</td>
            <td  >3.3</td>
            <td  >2.1</td>
            <td  >0.2</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;Private Service Producing</td>
            <td  >236</td>
            <td  >202</td>
            <td  >228</td>
            <td  >2.2</td>
            <td  >2.2</td>
            <td  >2.2</td>
            <td  >1.9</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;Government</td>
            <td  >26</td>
            <td  >0</td>
            <td  >26</td>
            <td  >0.3</td>
            <td  >-0.3</td>
            <td  >-0.8</td>
            <td  >-1.8</td>
          </tr>
          <tr>
            <td class="firstcol" >Average Weekly Hours - Private
              Sector</td>
            <td  >34.5</td>
            <td  >34.5</td>
            <td  >34.5</td>
            <td  >34.5<br>
              (Jun'13)</td>
            <td  >34.5</td>
            <td  >34.4</td>
            <td  >34.3</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Average Private Sector Hourly
              Earnings (%)</td>
            <td  >0.2</td>
            <td  >0.2</td>
            <td  >0.0</td>
            <td  >2.0</td>
            <td  >2.1</td>
            <td  >1.9</td>
            <td  >2.0</td>
          </tr>
          <tr>
            <td class="firstcol" >Unemployment Rate (%)</td>
            <td  >6.1</td>
            <td  >6.3</td>
            <td  >6.3</td>
            <td  >7.5<br>
              (Jun'13)</td>
            <td  >7.4</td>
            <td  >8.1</td>
            <td  >8.9</td>
            </tr>
              </tbody>
            </table>
            </span>
</body></html>

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      <p></p>
      
      <p><a href="/comment/140702j_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140702j.png"></a>
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      <p>New orders to all manufacturers declined 0.5% (+2.4% y/y) in May
      following a 0.8% increase during April, revised from 0.7%. A 0.3% decline was
      expected in the Action Economics Forecast Survey. A 0.9% decline (+2.9% y/y) in durable goods
      orders led the total lower. Factory sector orders
      excluding transportation equipment dipped 0.1% (+3.0% y/y) after three
      months of firm increase. Orders for nondurable goods (which equal shipments)
      fell 0.2% (+2.0% y/y) and these orders have been moving sideways all year.
      Shipments from chemical plants were off 1.0% (-2.9% y/y) while textile
      mill shipments declined 0.6% (+2.2% y/y). Shipments of plastics &amp;
      rubber rebounded 0.6% (3.4% y/y).</p>
      
      <p>Inventories in the factory sector firmed 0.8% (3.8% y/y), the strongest
      gain since October 2011. In the durable goods sector,
      inventories rose 0.9% (5.4% y/y) led by a 2.2% rise (4.8% y/y) in
      computers &amp; electronic products. Amongst nondurable goods industries, inventories
      increased 0.6% (1.4% y/y). The gain was paced by a 2.1% jump (24.2% y/y) in
      apparel, a 1.5% improvement (6.6% y/y) in printing and a 1.5% increase
      (4.4% y/y) in petroleum inventories.</p>
      
      <p>Unfilled orders increased 0.6% (7.9% y/y), strong for the third consecutive month. Excluding the transportation sector,
      order backlogs rose 0.5% (5.8% y/y). Backlogs of electrical equipment
      gained 1.1% (10.3% y/y) and unfilled
      orders of transportation equipment improved 0.7% (9.2% y/y). Unfilled
      orders of furniture rose 0.6% (4.5% y/y) while backlogs in the machinery sector
      also rose 0.6% (11.3% y/y).</p>
      
      <p>The factory sector figures are available in Haver's <b>USECON </b>database.</p>
      
      <p><a href="/comment/140702l_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140702l.png"></a>
      <a href="/comment/140702m_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140702m.png"></a></p>
      
      <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

        <thead>
          <tr>
            <th class="firstcol" scope="col" >Factory Sector- NAICS
              Classification</th>
            <th scope="col" ><b>May</b></th>
            <th scope="col" ><b>Apr</b></th>
            <th scope="col" ><b>Mar</b></th>
            <th scope="col" ><b>Y/Y</b></th>
            <th scope="col" ><b>2013</b></th>
            <th scope="col" ><b>2012</b></th>
            <th scope="col" ><b>2011</b></th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" >New Orders</td>
            <td  >-0.5</td>
            <td  >0.8</td>
            <td  >1.5</td>
            <td  >2.4</td>
            <td  >2.7</td>
            <td  >2.9</td>
            <td  >12.9</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Shipments</td>
            <td  >0.1</td>
            <td  >0.4</td>
            <td  >0.4</td>
            <td  >2.9</td>
            <td  >2.1</td>
            <td  >4.0</td>
            <td  >12.1</td>
          </tr>
          <tr>
            <td class="firstcol" >Inventories</td>
            <td  >0.8</td>
            <td  >0.5</td>
            <td  >0.2</td>
            <td  >3.8</td>
            <td  >2.3</td>
            <td  >2.4</td>
            <td  >10.2</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Unfilled Orders</td>
            <td  >0.6</td>
            <td  >0.9</td>
            <td  >0.8</td>
            <td  >7.9</td>
            <td  >7.0</td>
            <td  >3.7</td>
            <td  >10.0</td>
</tr>
              </tbody>
            </table>
            </span>
</body></html>

New orders to all manufacturers declined 0.5% (+2.4% y/y) in May following a 0.8% increase during April, revised from 0.7%. A 0.3% decline was expected in the Action Economics Forecast Survey. A 0.9% decline (+2.9% y/y) in durable [...]

U.S. Factory Sector Orders Pull Back but Inventories Continue to Increase

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      <p><a href="/comment/140702f_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140702f.png"></a>
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            <p>The Mortgage Bankers Association reported that their total
            Mortgage Market Volume Index edged 0.2% lower last week (-37.5% y/y)
            and added to declines during the prior two weeks. Applications
            remained two-thirds below the peak in September 2012. Home <i>purchase</i>
            applications fell 0.7% (-15.9% y/y) while applications to <i>refinance</i>
            an existing loan were stable (-48.5% y/y).</p>
            
            <p>The effective interest rate on a 15-year mortgage declined last
            week to 3.46%, the lowest level since late-May. The effective rate
            on a 30-year fixed rate loan fell to 4.32%. The rate on a Jumbo
            30-year loan slipped to 4.28%. For adjustable 5-year mortgages, the
            effective interest rate held steady at 3.33%, its highest level
            since early-May.</p>
            
            <p>The average mortgage loan size rose to $246,600. The average loan
            size for home purchases held fairly steady at $276,200 but for
            refinancings it rose to $219,800.</p>
            
            <p>Applications for fixed interest rate loans declined 37.6% y/y
            while adjustable rate loan applications were off by 36.3% y/y.</p>
            
            <p>The survey covers over 75 percent 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 <b>SURVEYW</b> database.</p>
            
            <p><a href="/comment/140702h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140702h.png"></a>
      <a href="/comment/140702i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140702i.png"></a></p>
      
      <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

              <thead>
                <tr>
                  <th class="firstcol" scope="col" 0918 0925 >MBA
                    Mortgage Applications (SA, 3/16/90=100)</th>
                  <th scope="col" 0918 0925 >06/27/14</th>
                  <th scope="col" 0918 0925 >06/20/14</th>
                  <th scope="col" 0918 0925 >06/13/14</th>
                  <th scope="col" 0918 0925 >Y/Y%</th>
                  <th scope="col" 0918 0925 >2013</th>
                  <th scope="col" 0918 0925 >2012</th>
                  <th scope="col" 0918 0925 >2011</th>
                </tr>
              </thead>
              <tbody>
                <tr class="odd">
                  <td class="firstcol" 0918 0925 >Total Market Index</td>
                  <td 0918 0925  >347.3</td>
                  <td 0918 0925  >348.1</td>
                  <td 0918 0925  >351.6</td>
                  <td 0918 0925  >-37.5</td>
                  <td 0918 0925  >616.6</td>
                  <td 0918 0925  >813.8</td>
                  <td 0918 0925  >572.3</td>
                </tr>
                <tr>
                  <td class="firstcol" 0918 0925 >&nbsp;Purchase</td>
                  <td 0918 0925  >175.2</td>
                  <td 0918 0925  >176.4</td>
                  <td 0918 0925  >178.6</td>
                  <td 0918 0925  >-15.9</td>
                  <td 0918 0925  >197.5</td>
                  <td 0918 0925  >187.8</td>
                  <td 0918 0925  >182.6</td>
                </tr>
                <tr class="odd">
                  <td class="firstcol" 0918 0925 >&nbsp;Refinancing</td>
                  <td 0918 0925  >1,323.9</td>
                  <td 0918 0925  >1,322.6</td>
                  <td 0918 0925  >1,334.0</td>
                  <td 0918 0925  >-48.5</td>
                  <td 0918 0925  >3,070.0</td>
                  <td 0918 0925  >4,505.0</td>
                  <td 0918 0925  >2,858.4</td>
                </tr>
                <tr>
                  <td class="firstcol" 0918 0925 >15-Year Mortgage
                    Effective Interest Rate (%)</td>
                  <td 0918 0925  >3.46</td>
                  <td 0918 0925  >3.52</td>
                  <td 0918 0925  >3.54</td>
                  <td 0918 0925  >3.56<br>
                    (6/13)</td>
                  <td 0918 0925  >3.42</td>
                  <td 0918 0925  >3.25</td>
                  <td 0918 0925  >3.97</td>
                </tr>
              </tbody>
            </table>
            </span>
</body></html>

The Mortgage Bankers Association reported that their total Mortgage Market Volume Index edged 0.2% lower last week (-37.5% y/y) and added to declines during the prior two weeks. Applications remained two-thirds below the peak in [...]

U.S. Mortgage Loan Applications and Interest Rates Move Lower

Robert Brusca

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PPI trends in the EMU continue to push lower. The chart shows that only intermediate goods inflation trend has a small upturn in recent months. 
</p><p>
In May the PPI (excluding construction) rose by 0.1% after a 0.2% April increase. Still, the three-month growth rate is negative at -0.4% (SAAR). Inside of one year the PPI shows inflation rather steady in a narrow range, hovering around -0.5%. But year-over-year trends still are heading lower.
</p><p>
Various EMU countries still show a good deal of PPI weakness. In May, four of eleven countries show PPI prices falling. In April, three of eleven show prices falling. Over three months, eight of eleven show dropping producer prices. Ten of eleven show dropping prices over six months. Over one year, eight of eleven show dropping prices.
</p><p>
These trends are broad although the price drop tendencies are lessening in the past two months. That is too short a time to make a dependable trend. And measures of activity in the EMU have weakened, giving us less reason to think that the environment should firm prices.
</p><p>
For now the European Central Bank's fight to stimulate credit expansion and growth in the EMU seems to be as necessary as ever. Consumer goods prices are still dropping sharply over all horizons, but capital goods prices are showing steady if moderate expansion. The consumer sector still appears to be the weak spot in Europe. Some consumer confidence measures have begun to stir.  Unemployment has been steady at still elevated levels for the past two months. Unemployment will need to fall if solid improvements in consumer confidence are to be made. 
</p>

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PPI trends in the EMU continue to push lower. The chart shows that only intermediate goods inflation trend has a small upturn in recent months. In May the PPI (excluding construction) rose by 0.1% after a 0.2% April increase. Still, [...]

EMU PPI Is Still Weak

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<title>Chicago Fed National Activity Index Suggests Slower Economic Growth by
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      <p>Employment growth picked up steam last month. The<b> ADP/Moody's
      National Employment Report indicated a 281,000</b> rise (2.1% y/y) in June
      nonfarm private sector jobs. It was the firmest rise since November 2012
      and followed unrevised increases of 179,000 and 215,000 in May and April.
      During the last three months, job increases averaged 222,000, below the
      peak of 259,000 in February of 2012. The June job gain beat the 205,000
      rise expected in the Action Economics Forecast Survey. During the last
      twenty years there has been a 95% correlation between the monthly ADP job
      gain and the rise in private sector nonfarm payrolls.</p>
      <p>The ADP survey is based on ADP's business payroll transaction system
      covering 406,000 companies and roughly 23 million employees. The data are
      processed by Moody's Analytics Inc., then calibrated and aligned with the
      BLS data. Extensive information on the methodology is available <a href="http://www.adpemploymentreport.com/common/docs/ADP-NER-Methodology-Exec-Summary.pdf">here</a>.</p>
      <p>Service-producing payrolls led the job gains with a 230,000 increase
      (2.1% y/y). Jobs in professional and business services increased 77,000
      (3.3% y/y); transportation and utilities employment grew 50,000 (2.0% y/y)
      while financial activities headcount gained 11,000 (0.5% y/y).
      Goods-producing payrolls rose 16,000 (2.0% y/y). Factory sector payrolls
      gained 12,000 (0.8% y/y), the strongest rise since December. Construction
      payrolls jumped 36,000 (4.0% y/y), the firmest rise of the expansion.</p>
      <p>Hiring amongst small businesses totaled 117,000 (2.1% y/y).
      Medium-sized firms' payrolls advanced 115,000 (1.8% y/y) while jobs at
      large-size companies rose 49,000 (2.6% y/y).</p>
      <p>The ADP National Employment Report data are maintained in Haver's <b>USECON</b>
      database; historical figures date back to March 2001. The figures in this
      report cover jobs only in the private sector. The expectation figure is
      available in Haver's <b>AS1REPNA</b> database.</p>
      <p><b>Monetary Policy and Financial Stability</b> is today's speech by Fed
      Chair Janet L. Yellen and it is available here <a href="http://www.federalreserve.gov/newsevents/speech/yellen20140702a.htm">http://www.federalreserve.gov/newsevents/speech/yellen20140702a.htm</a></p>
      <table class="centered" border="0" cellSpacing="0" width="1871">
        <thead>
          <tr>
            <th class="firstcol" scope="col" width="1109">ADP/Moody's National
              Employment Report</th>
            <th scope="col" width="108">Jun</th>
            <th scope="col" width="108">May</th>
            <th scope="col" width="108">Apr</th>
            <th scope="col" width="108">Y/Y</th>
            <th scope="col" width="108">2013</th>
            <th scope="col" width="109">2012</th>
            <th scope="col" width="109">2011</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" width="1109">Nonfarm Private Payroll Employment
              (m/m chg, 000s)</td>
            <td align="center" width="108">281</td>
            <td align="center" width="108">179</td>
            <td align="center" width="108">215</td>
            <td align="center" width="108">2.1%</td>
            <td align="center" width="108">2.0%</td>
            <td align="center" width="109">2.3%</td>
            <td align="center" width="109">1.8%</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="1109">&nbsp;Small Payroll (1-49)</td>
            <td align="center" width="108">117</td>
            <td align="center" width="108">82</td>
            <td align="center" width="108">76</td>
            <td align="center" width="108">2.1</td>
            <td align="center" width="108">2.1</td>
            <td align="center" width="109">2.5</td>
            <td align="center" width="109">1.1</td>
          </tr>
          <tr>
            <td class="firstcol" width="1109">&nbsp;Medium Payroll (50-499)</td>
            <td align="center" width="108">115</td>
            <td align="center" width="108">62</td>
            <td align="center" width="108">82</td>
            <td align="center" width="108">1.8</td>
            <td align="center" width="108">1.6</td>
            <td align="center" width="109">2.0</td>
            <td align="center" width="109">2.0</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="1109">&nbsp;Large Payroll (&gt;500)</td>
            <td align="center" width="108">49</td>
            <td align="center" width="108">37</td>
            <td align="center" width="108">56</td>
            <td align="center" width="108">2.6</td>
            <td align="center" width="108">2.3</td>
            <td align="center" width="109">2.4</td>
            <td align="center" width="109">2.7</td>
          </tr>
          <tr>
            <td class="firstcol" width="1109">Goods-Producing</td>
            <td align="center" width="108">51</td>
            <td align="center" width="108">31</td>
            <td align="center" width="108">24</td>
            <td align="center" width="108">2.0</td>
            <td align="center" width="108">1.6</td>
            <td align="center" width="109">2.2</td>
            <td align="center" width="109">1.7</td>
          </tr>
          <tr>
            <td class="firstcol" width="1109">&nbsp;Manufacturing</td>
            <td align="center" width="108">12</td>
            <td align="center" width="108">11</td>
            <td align="center" width="108">4</td>
            <td align="center" width="108">0.8</td>
            <td align="center" width="108">0.6</td>
            <td align="center" width="109">1.6</td>
            <td align="center" width="109">1.9</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="1109">Service-Producing</td>
            <td align="center" width="108">230</td>
            <td align="center" width="108">148</td>
            <td align="center" width="108">181</td>
            <td align="center" width="108">2.1</td>
            <td align="center" width="108">2.0</td>
            <td align="center" width="109">2.3</td>
            <td align="center" width="109">1.8</td>
          </tr>
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            <span id="articletitle">U.S. Mortgage Loan Applications and Interest
            Rates Move Lower</span><br>
            <span id="byline">by <a href="http://www.haver.com/comment/Moeller.html">Tom
            Moeller</a>&nbsp;&nbsp;July 2, 2014</span><span id="articletext">
            <p>The Mortgage Bankers Association reported that their total
            Mortgage Market Volume Index edged 0.2% lower last week (-37.5% y/y)
            and added to declines during the prior two weeks. Applications
            remained two-thirds below the peak in September 2012. Home <i>purchase</i>
            applications fell 0.7% (-15.9% y/y) while applications to <i>refinance</i>
            an existing loan were stable (-48.5% y/y).</p>
            <p>The effective interest rate on a 15-year mortgage declined last
            week to 3.46%, the lowest level since late-May. The effective rate
            on a 30-year fixed rate loan fell to 4.32%. The rate on a Jumbo
            30-year loan slipped to 4.28%. For adjustable 5-year mortgages, the
            effective interest rate held steady at 3.33%, its highest level
            since early-May.</p>
            <p>The average mortgage loan size rose to $246,600. The average loan
            size for home purchases held fairly steady at $276,200 but for
            refinancings it rose to $219,800.</p>
            <p>Applications for fixed interest rate loans declined 37.6% y/y
            while adjustable rate loan applications were off by 36.3% y/y.</p>
            <p>The survey covers over 75 percent 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 <b>SURVEYW</b> database.</p>
            <table class="centered" border="0" cellSpacing="0" width="1871">
              <thead>
                <tr>
                  <th class="firstcol" scope="col" 0918 0925 width="855">MBA
                    Mortgage Applications (SA, 3/16/90=100)</th>
                  <th scope="col" 0918 0925 width="144">06/27/14</th>
                  <th scope="col" 0918 0925 width="144">06/20/14</th>
                  <th scope="col" 0918 0925 width="144">06/13/14</th>
                  <th scope="col" 0918 0925 width="145">Y/Y%</th>
                  <th scope="col" 0918 0925 width="145">2013</th>
                  <th scope="col" 0918 0925 width="145">2012</th>
                  <th scope="col" 0918 0925 width="145">2011</th>
                </tr>
              </thead>
              <tbody>
                <tr class="odd">
                  <td class="firstcol" 0918 0925 width="855">Total Market Index</td>
                  <td 0918 0925 align="center" width="144">347.3</td>
                  <td 0918 0925 align="center" width="144">348.1</td>
                  <td 0918 0925 align="center" width="144">351.6</td>
                  <td 0918 0925 align="center" width="145">-37.5</td>
                  <td 0918 0925 align="center" width="145">616.6</td>
                  <td 0918 0925 align="center" width="145">813.8</td>
                  <td 0918 0925 align="center" width="145">572.3</td>
                </tr>
                <tr>
                  <td class="firstcol" 0918 0925 width="855">&nbsp;Purchase</td>
                  <td 0918 0925 align="center" width="144">175.2</td>
                  <td 0918 0925 align="center" width="144">176.4</td>
                  <td 0918 0925 align="center" width="144">178.6</td>
                  <td 0918 0925 align="center" width="145">-15.9</td>
                  <td 0918 0925 align="center" width="145">197.5</td>
                  <td 0918 0925 align="center" width="145">187.8</td>
                  <td 0918 0925 align="center" width="145">182.6</td>
                </tr>
                <tr class="odd">
                  <td class="firstcol" 0918 0925 width="855">&nbsp;Refinancing</td>
                  <td 0918 0925 align="center" width="144">1,323.9</td>
                  <td 0918 0925 align="center" width="144">1,322.6</td>
                  <td 0918 0925 align="center" width="144">1,334.0</td>
                  <td 0918 0925 align="center" width="145">-48.5</td>
                  <td 0918 0925 align="center" width="145">3,070.0</td>
                  <td 0918 0925 align="center" width="145">4,505.0</td>
                  <td 0918 0925 align="center" width="145">2,858.4</td>
                </tr>
                <tr>
                  <td class="firstcol" 0918 0925 width="855">15-Year Mortgage
                    Effective Interest Rate (%)</td>
                  <td 0918 0925 align="center" width="144">3.46</td>
                  <td 0918 0925 align="center" width="144">3.52</td>
                  <td 0918 0925 align="center" width="144">3.54</td>
                  <td 0918 0925 align="center" width="145">3.56<br>
                    (6/13)</td>
                  <td 0918 0925 align="center" width="145">3.42</td>
                  <td 0918 0925 align="center" width="145">3.25</td>
                  <td 0918 0925 align="center" width="145">3.97</td>
                </tr>
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      <span id="articletitle">U.S. Factory Sector Orders Pull Back but Inventories
      Continue to Increase</span><br>
      <span id="byline">by <a href="http://www.haver.com/comment/Moeller.html">Tom
      Moeller</a>&nbsp;&nbsp;July 2, 2014</span><span id="articletext">
      <p>New orders to all manufacturers declined 0.5% (+2.4% y/y) in May
      following a 0.8% increase during April, revised from 0.7%. A 0.3% decline was
      expected in the Action Economics Forecast Survey. A 0.9% decline (+2.9% y/y) in durable goods
      orders led the total lower. Factory sector orders
      excluding transportation equipment dipped 0.1% (+3.0% y/y) after three
      months of firm increase. Orders for nondurable goods (which equal shipments)
      fell 0.2% (+2.0% y/y) and these orders have been moving sideways all year.
      Shipments from chemical plants were off 1.0% (-2.9% y/y) while textile
      mill shipments declined 0.6% (+2.2% y/y). Shipments of plastics &amp;
      rubber rebounded 0.6% (3.4% y/y).</p>
      <p>Inventories in the factory sector firmed 0.8% (3.8% y/y), the strongest
      gain since October 2011. In the durable goods sector,
      inventories rose 0.9% (5.4% y/y) led by a 2.2% rise (4.8% y/y) in
      computers &amp; electronic products. Amongst nondurable goods industries, inventories
      increased 0.6% (1.4% y/y). The gain was paced by a 2.1% jump (24.2% y/y) in
      apparel, a 1.5% improvement (6.6% y/y) in printing and a 1.5% increase
      (4.4% y/y) in petroleum inventories.&nbsp;</p>
      <p>Unfilled orders increased 0.6% (7.9% y/y), strong for the third consecutive month. Excluding the transportation sector,
      order backlogs rose 0.5% (5.8% y/y). Backlogs of electrical equipment
      gained 1.1% (10.3% y/y) and unfilled
      orders of transportation equipment improved 0.7% (9.2% y/y). Unfilled
      orders of furniture rose 0.6% (4.5% y/y) while backlogs in the machinery sector
      also rose 0.6% (11.3% y/y).</p>
      <p>The factory sector figures are available in Haver's <b>USECON </b>database.</p>
      <table class="centered" border="0" cellSpacing="0" width="1871">
        <thead>
          <tr>
            <th class="firstcol" scope="col" width="983">Factory Sector- NAICS
              Classification</th>
            <th scope="col" width="126"><b>May</b></th>
            <th scope="col" width="126"><b>Apr</b></th>
            <th scope="col" width="126"><b>Mar</b></th>
            <th scope="col" width="126"><b>Y/Y</b></th>
            <th scope="col" width="126"><b>2013</b></th>
            <th scope="col" width="127"><b>2012</b></th>
            <th scope="col" width="127"><b>2011</b></th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" width="983">New Orders</td>
            <td align="center" width="126">-0.5</td>
            <td align="center" width="126">0.8</td>
            <td align="center" width="126">1.5</td>
            <td align="center" width="126">2.4</td>
            <td align="center" width="126">2.7</td>
            <td align="center" width="127">2.9</td>
            <td align="center" width="127">12.9</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" width="983">Shipments</td>
            <td align="center" width="126">0.1</td>
            <td align="center" width="126">0.4</td>
            <td align="center" width="126">0.4</td>
            <td align="center" width="126">2.9</td>
            <td align="center" width="126">2.1</td>
            <td align="center" width="127">4.0</td>
            <td align="center" width="127">12.1</td>
          </tr>
          <tr>
            <td class="firstcol" width="983">Inventories</td>
            <td align="center" width="126">0.8</td>
            <td align="center" width="126">0.5</td>
            <td align="center" width="126">0.2</td>
            <td align="center" width="126">3.8</td>
            <td align="center" width="126">2.3</td>
            <td align="center" width="127">2.4</td>
            <td align="center" width="127">10.2</td>
          </tr>
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            <td class="firstcol" width="983">Unfilled Orders</td>
            <td align="center" width="126">0.6</td>
            <td align="center" width="126">0.9</td>
            <td align="center" width="126">0.8</td>
            <td align="center" width="126">7.9</td>
            <td align="center" width="126">7.0</td>
            <td align="center" width="127">3.7</td>
            <td align="center" width="127">10.0</td>
          </tr>
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Employment growth picked up steam last month. The ADP/Moody's National Employment Report indicated a 281,000 rise (2.1% y/y) in June nonfarm private sector jobs. It was the firmest rise since November 2012 and followed unrevised [...]

U.S. ADP Employment Gain is Strongest Since 2012

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      <p><a href="/comment/140702a_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140702a.png"></a>
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      <p>Employment growth picked up steam last month. The<b> ADP/Moody's
      National Employment Report indicated a 281,000</b> rise (2.1% y/y) in June
      nonfarm private sector jobs. It was the firmest rise since November 2012
      and followed unrevised increases of 179,000 and 215,000 in May and April.
      During the last three months, job increases averaged 222,000, below the
      peak of 259,000 in February of 2012. The June job gain beat the 205,000
      rise expected in the Action Economics Forecast Survey. During the last
      twenty years there has been a 95% correlation between the monthly ADP job
      gain and the rise in private sector nonfarm payrolls.</p>
      
      <p>The ADP survey is based on ADP's business payroll transaction system
      covering 406,000 companies and roughly 23 million employees. The data are
      processed by Moody's Analytics Inc., then calibrated and aligned with the
      BLS data. Extensive information on the methodology is available <a href="http://www.adpemploymentreport.com/common/docs/ADP-NER-Methodology-Exec-Summary.pdf">here</a>.</p>
      
      <p>Service-producing payrolls led the job gains with a 230,000 increase
      (2.1% y/y). Jobs in professional and business services increased 77,000
      (3.3% y/y); transportation and utilities employment grew 50,000 (2.0% y/y)
      while financial activities headcount gained 11,000 (0.5% y/y).
      Goods-producing payrolls rose 16,000 (2.0% y/y). Factory sector payrolls
      gained 12,000 (0.8% y/y), the strongest rise since December. Construction
      payrolls jumped 36,000 (4.0% y/y), the firmest rise of the expansion.</p>
      
      <p>Hiring amongst small businesses totaled 117,000 (2.1% y/y).
      Medium-sized firms' payrolls advanced 115,000 (1.8% y/y) while jobs at
      large-size companies rose 49,000 (2.6% y/y).</p>
      
      <p>The ADP National Employment Report data are maintained in Haver's <b>USECON</b>
      database; historical figures date back to March 2001. The figures in this
      report cover jobs only in the private sector. The expectation figure is
      available in Haver's <b>AS1REPNA</b> database.</p>
      
      <p><b>Monetary Policy and Financial Stability</b> is today's speech by Fed
      Chair Janet L. Yellen and it is available <a href="http://www.federalreserve.gov/newsevents/speech/yellen20140702a.htm">here</a>.</p>
      
      
      <p><a href="/comment/140702c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140702c.png"></a>
      <a href="/comment/140702d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/140702d.png"></a></p>
      
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        <thead>
          <tr>
            <th class="firstcol" scope="col" >ADP/Moody's National
              Employment Report</th>
            <th scope="col" >Jun</th>
            <th scope="col" >May</th>
            <th scope="col" >Apr</th>
            <th scope="col" >Y/Y</th>
            <th scope="col" >2013</th>
            <th scope="col" >2012</th>
            <th scope="col" >2011</th>
          </tr>
        </thead>
        <tbody>
          <tr>
            <td class="firstcol" >Nonfarm Private Payroll Employment
              (m/m chg, 000s)</td>
            <td  >281</td>
            <td  >179</td>
            <td  >215</td>
            <td  >2.1%</td>
            <td  >2.0%</td>
            <td  >2.3%</td>
            <td  >1.8%</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;Small Payroll (1-49)</td>
            <td  >117</td>
            <td  >82</td>
            <td  >76</td>
            <td  >2.1</td>
            <td  >2.1</td>
            <td  >2.5</td>
            <td  >1.1</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;Medium Payroll (50-499)</td>
            <td  >115</td>
            <td  >62</td>
            <td  >82</td>
            <td  >1.8</td>
            <td  >1.6</td>
            <td  >2.0</td>
            <td  >2.0</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >&nbsp;Large Payroll (&gt;500)</td>
            <td  >49</td>
            <td  >37</td>
            <td  >56</td>
            <td  >2.6</td>
            <td  >2.3</td>
            <td  >2.4</td>
            <td  >2.7</td>
          </tr>
          <tr>
            <td class="firstcol" >Goods-Producing</td>
            <td  >51</td>
            <td  >31</td>
            <td  >24</td>
            <td  >2.0</td>
            <td  >1.6</td>
            <td  >2.2</td>
            <td  >1.7</td>
          </tr>
          <tr>
            <td class="firstcol" >&nbsp;Manufacturing</td>
            <td  >12</td>
            <td  >11</td>
            <td  >4</td>
            <td  >0.8</td>
            <td  >0.6</td>
            <td  >1.6</td>
            <td  >1.9</td>
          </tr>
          <tr class="odd">
            <td class="firstcol" >Service-Producing</td>
            <td  >230</td>
            <td  >148</td>
            <td  >181</td>
            <td  >2.1</td>
            <td  >2.0</td>
            <td  >2.3</td>
            <td  >1.8</td>
            </tr>
              </tbody>
            </table>
            </span>
</body></html>

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

260205Z6.jpg

Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

260206E.jpg

With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

260205C15.jpg

260205D15.jpg

- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

260205A2.jpg

260205B2.jpg

Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). 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.

260205C2.jpg

260205D2.jpg

- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

260205E.jpg

German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief

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U.S. ISM Nonmanufacturing Index Slips

U.S. Payroll Employment Growth Improves; Jobless Rate Falls Further

U.S. Payroll Employment Growth Improves; Jobless Rate Falls Further

U.S. Factory Sector Orders Pull Back but Inventories Continue to Increase

U.S. Mortgage Loan Applications and Interest Rates Move Lower

EMU PPI Is Still Weak

U.S. ADP Employment Gain is Strongest Since 2012

U.S. ADP Employment Gain is Strongest Since 2012