Tom Moeller

U.S. real GDP growth during last quarter was unrevised at a 0.6% annual rate. The Commerce Department figure was just slightly below the Consensus expectation for an upward revision to a 0.8% rise. The gain still was down sharply from [...]

US 4Q GDP Held at 0.6% Growth

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080227e.jpg" width="353"></p>
<p>According to the Office of Federal Housing Enterprise Oversight (OFHEO) home prices in the U.S. rose just 0.1% last quarter. That rounded out a year end gain of just 0.8%, and of 2.8% for the full year. These rates of increase were the slowest since the 1990s, although the slowing did follow gains earlier this decade which were the strongest since the late 1970s.</p>
<p>The House Price Indices in this report are weighted indexes based on repeat sales or refinancings using data provided by Fannie Mae or Freddie Mac. The overall figures are available in Haver&#39;s <b>USECON</b> data base and the state figures are in <b>US REGIONAL</b><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080227f.jpg" width="353"></p>
<p>Home price performance varied greatly last year across the country to net out at the slight 0.8% overall uptick. Down hard were home prices in California though rates of appreciation slowed most every where. A 6.6% decline in prices 4Q/4Q was followed just barely by a 4.7% rate of decline in Florida. These declines pulled prices down for the full year but both annual shortfalls followed double digit gains in 2006. That was not, however, the pattern in Michigan where prices have declined steadily since 2005.</p>
<p>If prices in other regions did rise 4Q/4Q the rates of increase were down most everywhere. New York squeezed out a 0.7% price increase last year but it followed much more respectable gains in 2006 and 2005. The same pattern was true for neighboring New Jersey and Pennsylvania.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080227g.jpg" width="353"></p>
<p>In the South and certainly in the West, other than in California, home price appreciation barely took a breadth. For the full year 2007, double digit gains in Wyoming were accompanied by respectable price increases in Texas and South Carolina. Neighboring North Carolina and Tennessee did well as well.</p>
<p>The latest report from the <b>Office of Federal Housing Enterprise Oversight (OFHEO)</b> can be found <a href="http://www.ofheo.gov/media/pdf/4q07hpi.pdf">here</a>.</p>
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<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/REGIONAL/@R11/@R1101/@R1101.HTM"><b>House Price Index (OFHEO, %)</b></a></th>
<th scope="col"><u><b>4Q &#39;07</b></u></th>
<th scope="col"><u><b>3Q &#39;07</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><u><b>2007</b></u></th>
<th scope="col"><b><u>2006</u></b></th>
<th scope="col"><u><b>2005</b></u></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">United States</td>
<td>0.1</td>
<td>-0.2</td>
<td><i>0.8</i></td>
<td>2.8</td>
<td>8.2</td>
<td>11.8</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
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<td class="firstcol">&nbsp; California</td>
<td>-3.1</td>
<td>-1.9</td>
<td><i>-6.6</i></td>
<td>-2.7</td>
<td>11.5</td>
<td>23.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Florida</td>
<td>-1.7</td>
<td>-2.1</td>
<td><i>-4.7</i></td>
<td>-0.3</td>
<td>17.2</td>
<td>25.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Michigan</td>
<td>0.1</td>
<td>-2.5</td>
<td><i>-4.3</i></td>
<td>-2.7</td>
<td>-0.2</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Massachusetts</td>
<td>0.8</td>
<td>-1.4</td>
<td><i>-2.2</i></td>
<td>-1.6</td>
<td>1.9</td>
<td>9.7</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Wyoming</td>
<td>0.3</td>
<td>2.7</td>
<td><i>8.3</i></td>
<td>11.2</td>
<td>13.5</td>
<td>11.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Texas</td>
<td>0.7</td>
<td>1.0</td>
<td><i>5.2</i></td>
<td>6.4</td>
<td>6.3</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South Carolina</td>
<td>1.6</td>
<td>0.1</td>
<td><i>3.8</i></td>
<td>5.7</td>
<td>8.3</td>
<td>7.8</td>
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<tr class="odd">
<td class="firstcol">&nbsp; New York</td>
<td>0.6</td>
<td>-0.6</td>
<td><i>0.7</i></td>
<td>2.2</td>
<td>8.2</td>
<td>13.4</td>
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According to the Office of Federal Housing Enterprise Oversight (OFHEO) home prices in the U.S. rose just 0.1% last quarter. That rounded out a year end gain of just 0.8%, and of 2.8% for the full year. These rates of increase were [...]

Home Price Appreciation Weakest Since 1990

Robert Brusca

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080227i.jpg" align="left" border="0" height="265" width="353">
<p></p>
<p>German export and import prices are rising very strongly in
January and the three-month growth rates show acceleration. But
jettison energy, export and import price trends are a lot steadier,
still showing some acceleration in the recent months. Excluding energy,
import prices are still accelerating from a growth rate of 0.7% over 12
months to 1.4% over six months to 2.4% over three months. This sort of
acceleration will not please the ECB but given the tenacious rise in
oil prices this performance is not so bad.<span style=""></span>
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<p></p>
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<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"><b>German
International and Domestic Inflation Trends</b> </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3"><b>% m/m</b></td>
<td colspan="4"><b>% Saar</b></td>
</tr>
<tr class="odd">
<td class="firstcol"><b>SA</b></td>
<td><b>Jan-08</b></td>
<td><b>Dec-07</b></td>
<td><b>Nov-07</b></td>
<td><b>3-Mo</b></td>
<td><b>6-Mo</b></td>
<td><b>12-Mo</b></td>
<td><b>Yr-Ago</b></td>
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<td class="firstcol">Export P</td>
<td>0.7%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>3.8%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Import P</td>
<td>0.6%</td>
<td>0.4%</td>
<td>1.3%</td>
<td>9.5%</td>
<td>5.2%</td>
<td>5.4%</td>
<td>0.5%</td>
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<td class="firstcol"><b> NSA</b></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">ExpX-Petrol</td>
<td>0.7%</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>2.3%</td>
<td>1.1%</td>
<td>1.3%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">ImpX-Petrol</td>
<td>0.9%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>2.4%</td>
<td>1.4%</td>
<td>0.7%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol"><b> Memo: SA</b></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">CPI</td>
<td>0.4%</td>
<td>-0.3%</td>
<td>0.6%</td>
<td>2.9%</td>
<td>2.7%</td>
<td>2.7%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">CPIx-energy</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.2%</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">PPI</td>
<td>0.7%</td>
<td>0.0%</td>
<td>0.9%</td>
<td>6.9%</td>
<td>4.6%</td>
<td>3.2%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">PPIx-Energy</td>
<td>0.4%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.2%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>3.0%</td>
</tr>
</tbody>
</table>
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German export and import prices are rising very strongly in January and the three-month growth rates show acceleration. But jettison energy, export and import price trends are a lot steadier, still showing some acceleration in the [...]

German Ex Energy Export and Import Prices Are Still Falling Yr/Yr

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<p></p><div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080227h.jpg" width="353">
<p>The table below shows Euro area money and credit growth comparing it to money growth in several key countries. We also provide data on real balances (inflation-adjusted money and credit). Despite ongoing financial turmoil, here data show that there has been little slowing in EMU money and credit. Credit to residents has slowed a touch over the three months compared to six-month and one-year rates. Overall business loan growth in EMU has barely slowed.</p>
<p>Money growth has held up around the various main global money centers as well. Unexpectedly, the growth in real money in EMU has been stronger than in the US where it is off by 0.1% over three months. Over 12 months US M2 is up at just a pace of 1.4% compared to 7.9% in the EMU. Real money growth in the UK is quite steady. In Japan real money growth is slow but is being held fairly steady.</p>
<p>The memo item on the right of the table shows how relentless the rise has been in the price of crude oil in these various periods. Central banks have done a really impressive job in running policy amid this ongoing energy shock as well and a new shock stemming from food prices.</p>
<p>Judging by interest rate policy, monetary policy in the US is loose. But judging from the growth in real balances, US monetary policy is tighter than in UK, EMU or Japan over three months and tied with Japan for stringency over the past year.  </p><div align="left"></div></div>
</span>

<colgroup></colgroup>



<th colspan="8" scope="col"> <b>Look at Global and Euro Liquidity Trends</b></th>

<tbody>
<tr class="odd">
<td class="firstcol">Saar-all</td>
<td colspan="3"><b> Euro Measures (EA13): Money &amp; Credit</b></td>
<td colspan="3"><b> G-10 Major Markets: Money</b></td>
<td>Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&#128;<b>&#128;-Supply M2</b></td>
<td><b> Credit:Resid</b></td>
<td><b> Loans</b></td>
<td><b> $US M2</b></td>
<td><b> &pound;&pound;UK M4</b></td>
<td><b> &yen;&yen;Jpn M2+Cds</b></td>
<td><b> OIL:WTI</b></td>
</tr>
<tr>
<td class="firstcol"><b> 3-MO</b></td>
<td>9.8%</td>
<td>10.8%</td>
<td>10.3%</td>
<td>6.7%</td>
<td>12.6%</td>
<td>2.9%</td>
<td>41.6%</td>
</tr>
<tr>
<td class="firstcol"><b> 6-MO</b></td>
<td>11.4%</td>
<td>13.1%</td>
<td>10.7%</td>
<td>6.4%</td>
<td>11.6%</td>
<td>2.2%</td>
<td>58.2%</td>
</tr>
<tr>
<td class="firstcol"><b> 12-MO</b></td>
<td>11.3%</td>
<td>12.9%</td>
<td>11.0%</td>
<td>5.8%</td>
<td>12.5%</td>
<td>2.1%</td>
<td>69.6%</td>
</tr>
<tr>
<td class="firstcol"><b> 2Yr</b></td>
<td>6.7%</td>
<td>12.2%</td>
<td>10.8%</td>
<td>5.5%</td>
<td>12.8%</td>
<td>1.5%</td>
<td>19.1%</td>
</tr>
<tr>
<td class="firstcol"><b> 3Yr</b></td>
<td>15.0%</td>
<td>17.9%</td>
<td>16.4%</td>
<td>8.0%</td>
<td>19.4%</td>
<td>2.4%</td>
<td>40.9%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol"><b> Real Balances: deflated by Own CPI. Oil deflated by US CPI</b></td>
</tr>
<tr>
<td class="firstcol"><b> 3-MO</b></td>
<td>5.1%</td>
<td>6.0%</td>
<td>5.6%</td>
<td>-0.1%</td>
<td>9.7%</td>
<td>0.8%</td>
<td>32.6%</td>
</tr>
<tr>
<td class="firstcol"><b> 6-MO</b></td>
<td>7.1%</td>
<td>8.7%</td>
<td>6.4%</td>
<td>1.6%</td>
<td>8.5%</td>
<td>0.8%</td>
<td>51.1%</td>
</tr>
<tr>
<td class="firstcol"><b> 12-MO</b></td>
<td>7.9%</td>
<td>9.5%</td>
<td>7.6%</td>
<td>1.4%</td>
<td>10.1%</td>
<td>1.3%</td>
<td>62.4%</td>
</tr>
<tr>
<td class="firstcol"><b> 2Yr</b></td>
<td>7.6%</td>
<td>9.4%</td>
<td>8.1%</td>
<td>2.2%</td>
<td>10.1%</td>
<td>1.1%</td>
<td>15.4%</td>
</tr>
<tr>
<td class="firstcol"><b> 3Yr</b></td>
<td>7.1%</td>
<td>8.9%</td>
<td>8.0%</td>
<td>1.7%</td>
<td>10.0%</td>
<td>1.4%</td>
<td>21.5%</td>
</tr>
</tbody>



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The table below shows Euro area money and credit growth comparing it to money growth in several key countries. We also provide data on real balances (inflation-adjusted money and credit). Despite ongoing financial turmoil, here data [...]

Money and Credit Trend in Euro Area Remain Robust…

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<p></p><div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080227c.jpg" width="353">
<p>New orders for durable manufactured goods dropped 5.3% last month. The decline only slightly exceeded Consensus expectations for a large 4.0% downdraft but the surge during December was revised down. The weakness in orders was heralded by the orders component in the Institute for Supply Management&#39;s Composite Index of factory sector activity. It was below the breakeven level of 50 in both December and January.</p></div><div align="left">
<p>Excluding the notably volatile transportation sector, orders fell 1.6% and the December increase of 2.0% was revised down.<br><br></p>
<p>Transportation sector orders fell 13.4% due both to a 31.0% (+79.3% y/y decline in new orders for aircraft &amp; parts and a 0.8% (-5.8% y/y) decline in orders for motor vehicles parts. The nondefense portion of aircraft orders collapsed 30.5% (+86.6% y/y).</p></div><div align="left"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080227d.jpg" width="353">
<p>Orders for nondefense capital goods fell 8.1% due to that decline in aircraft orders. During the last ten years there has been an 80% correlation between the y/y gain in nondefense capital goods orders and the rise in equipment &amp; software spending in the GDP accounts. The correlation with capital goods shipments is, as one would expect, a larger 92%.</p><div align="left">
<p>During January orders for nondefense capital goods less aircraft fell 1.4% after a 5.2% December surge. Growth in these orders actually has accelerated recently with the three month rise up to 15.5% (AR) which made up a decline this past Fall.</p></div></div><div align="left">
<p>Computers &amp; related products orders fell 11.7% (+0.8% y/y) and gave back all of the 5.1% December rise. Orders for communications equipment dropped 11.9% (+3.5% y/y). Orders for machinery slipped 1.5% (+14.6% y/y) after the 7.8% December spike.<br><br></p>
<p>Overall shipments of durable goods last month rose 1.8% (2.8% y/y). Less transportation shipments 1.5% (3.5% y/y). </p></div><div align="left">
<p>Inventories of durable goods rose 0.6% (3.7% y/y). Less transportation inventories rose a firm 0.4% and the three month increase was a strong 4.7% (AR).</p><div align="left">
<p>Yesterday&#39;s speech by Federal Reserve Board Vice Chairman Donald L. Cohn can be found <a href="http://www.federalreserve.gov/newsevents/speech/kohn20080226a.htm"> here</a>.</p></div><div align="left"></div></div>
</span>
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<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"><b>NAICS Classification</b></a></th>
<th scope="col"><u><b><span>January</span></b></u></th>
<th scope="col"><b><u>December</u></b></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><b><u>2007</u></b></th>
<th scope="col"><b><u>2006</u></b></th>
<th scope="col"><b><u>2005</u></b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>-5.3%</td>
<td>4.4%</td>
<td>3.8%</td>
<td>0.9%</td>
<td>6.3%</td>
<td>9.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.6%</td>
<td>2.0%</td>
<td>3.1%</td>
<td>0.2%</td>
<td>7.6%</td>
<td>8.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-8.1%</td>
<td>5.5%</td>
<td>14.9%</td>
<td>3.5%</td>
<td>10.6%</td>
<td>17.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-1.4%</td>
<td>5.2%</td>
<td>5.4%</td>
<td>-1.6%</td>
<td>8.5%</td>
<td>11.1%</td>
</tr>
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New orders for durable manufactured goods dropped 5.3% last month. The decline only slightly exceeded Consensus expectations for a large 4.0% downdraft but the surge during December was revised down. The weakness in orders was [...]

U.S. Durable Goods Orders Off Big, As Expected

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<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080227b.jpg" width="353"></p>
<p>During January new single family home sales fell 2.8% m/m to 588,000. The decline dropped sales to the lowest level since 1995 and they were <b>down 57.7% since the peak in July of 2005</b>. A sales rate of 600,000 was the Consensus expectation for last month and January sales were nearly one quarter below the 2007 average.</p>
<p>Reflecting the weakness in the auto industry, sales in the Midwest fell 7.6% m/m to a level <b>71.5% below the 2003 peak</b>. In the West sales actually ticked up slightly m/m in January but remained down 67.4% from the 2005 peak.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080227a.jpg" width="353"></p>
<p>December sales in the South fell by 2.4% and were 53.9% below the 2005 peak. Sales in the Northeast fell 10.3% m/m and were 50% below the 2004 monthly peak.</p>
<p>The median price for a new single family home fell again last month by 1.5%. That left prices down 17.7% from early 2007 peak.</p>
<p>The <b>inventory </b>of new homes for sale declined 2.2% last month and the supply of homes is off 15.9% from the 2005 peak.</p>
<p>The decline in the number of homes for sale continued to not keep pace with the drop in home sales. At the current low sales rate, the 9.9 months&#39; supply of homes on the market was more than double the rate for all of 2005 and it was the highest since 1981.</p><div align="left"><div align="left">
<p>Today&#39;s testimony by Federal Reserve Board Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20080227a.htm"> here</a>.</p></div><div align="left"></div></div>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><b>US New Homes</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2007</b></th>
<th scope="col"><b>2006</b></th>
<th scope="col"><b>2005</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><b>Total Sales</b> (SAAR, 000s)</td>
<td>588</td>
<td>605</td>
<td>-33.9%</td>
<td>773</td>
<td>1,049</td>
<td>1,279</td>
</tr>
<tr>
<td class="firstcol"><b>Median Price</b> (NSA, $)</td>
<td>216,000</td>
<td>219,200</td>
<td>-15.1%</td>
<td>242,383</td>
<td>243,067</td>
<td>234,208</td>
</tr>
</tbody>
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During January new single family home sales fell 2.8% m/m to 588,000. The decline dropped sales to the lowest level since 1995 and they were down 57.7% since the peak in July of 2005. A sales rate of 600,000 was the Consensus [...]

US New Home Sales Off 57.7%, Midwest Sales Down 71.5%

Louise Curley

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080226i.jpg" width="353"></p>
<p>Germany&#39;s business confidence rose, if only slightly, for the second month in a row. The IFO Business Climate Index for industry and trade rose 0.7% in February to 104.1 (2000=100) after having risen 0.4% in January. The increase in confidence among members of the business community follows an unexpected increase in confidence in the financial community earlier this month as reported by the Centre for European Economic Research (ZEW).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080226j.jpg" width="353"></p>
<p>In both cases the increase in confidence was due more to a more positive appraisal of current economic conditions that offset a slight deterioration in expectations. The first chart shows the IFO Business Climate Index and its two major components: the appraisal of current conditions and expectations of condition six months ahead.</p>
<p>Among the data released today* are diffusion indexes for the Business Climate for the Manufacturing, Construction, Wholesale and Retail Trade businesses, which are shown in the second chart. The most striking feature of this chart is the positive 18.8 percentage point change in confidence in the retail trade sector. Although the February survey shows only a 1.3% excess of optimists over pessimists in retail trade, this is the first excess of optimists since the early nineties. How much of the change was due to the appraisal of current conditions and/or to expectations will be answered later this week.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><b>GERMAN BUSINESS CONFIDENCE (IFO)&nbsp;</b></th>
<th scope="col"><b>Feb 08</b></th>
<th scope="col"><b>Jan 08&nbsp;</b></th>
<th scope="col"><b>Feb 07&nbsp;</b></th>
<th scope="col"><b>M/M&nbsp; Chg&nbsp;</b></th>
<th scope="col"><b>Y/Y Chg&nbsp;</b></th>
<th scope="col"><b>2006</b></th>
<th scope="col"><b>2005</b></th>
<th scope="col"><b>2004</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>Business Climate (2000=100)</b></td>
<td>104.1</td>
<td>103.4</td>
<td>107.0</td>
<td>0.68</td>
<td>-2.71</td>
<td>103.2</td>
<td>106.5</td>
<td>95.5</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp; Current Conditions&nbsp;</b></td>
<td>110.3</td>
<td>107.9</td>
<td>111.5</td>
<td>2.22</td>
<td>-1.08</td>
<td>111.2</td>
<td>108.4</td>
<td>94.8</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp; Expectations</b></td>
<td>98.2</td>
<td>99.0</td>
<td>102.7</td>
<td>-0.81</td>
<td>-4.38</td>
<td>101.4</td>
<td>102.7</td>
<td>96.3</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>Business Climate (Percent Balance)</b></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp; Manufacturing</b></td>
<td>16.3</td>
<td>17.4</td>
<td>23.0</td>
<td>-1.1</td>
<td>-6.8</td>
<td>22.3</td>
<td>19.7</td>
<td>1.2</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp; Construction&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</b></td>
<td>-24.9</td>
<td>-16.9</td>
<td>-11.8</td>
<td>-8.0</td>
<td>-13.1</td>
<td>-16.2</td>
<td>-15.8</td>
<td>-37.1</td>
</tr>
<tr>
<td class="firstcol"><b>&nbsp; Wholesale Trade</b></td>
<td>5.8</td>
<td>3.2</td>
<td>16.0</td>
<td>2.6</td>
<td>-10.2</td>
<td>11.0</td>
<td>11.6</td>
<td>-9.8</td>
</tr>
<tr>
<td class="firstcol"><b> &nbsp;&nbsp; Retail Trade</b></td>
<td>1.3</td>
<td>-17.5</td>
<td>-7.8</td>
<td>18.8</td>
<td>9.1</td>
<td>-6.6</td>
<td>-6.1</td>
<td>-28.0</td>
</tr>
</tbody>
</table>
</body>
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Germany's business confidence rose, if only slightly, for the second month in a row. The IFO Business Climate Index for industry and trade rose 0.7% in February to 104.1 (2000=100) after having risen 0.4% in January. The increase in [...]

German Business Confidence Improves--A Big Increase In Confidence In Retail Trade

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

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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Retail gasoline prices for all grades rose to an average $3.19 per gallon (0.3% y/y) in the week ended November 10 after easing to $3.15 in the previous week. The recent high was $3.79 in the week ending April 22, 2024. Their all-time high of $5.11 occurred in the week ending June 13, 2022. Haver Analytics seasonally adjusts the retail price of regular grade gasoline. That price rose to $3.10 last week from $3.05 in the previous week. Diesel fuel prices rose to $3.84 per gallon last week (9.0% y/y) after increasing to $3.75 per gallon in the prior week.

The price of West Texas Intermediate crude oil fell to an average $60.08 per barrel (-16.1% y/y) in the week ended November 7 after improving to $60.70 per barrel in the prior week. Prices remained below a recent high of $74.17 during the third week of June. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $61.04 per barrel. The price of European Brent crude declined to $64.30 per barrel (-15.0% y/y) in the week of November 7 after rising to $65.02 in the prior week. Prices remained below a recent high of $95.61 in the week of September 29, 2023 and below a peak of $127.40 in June 2022. Yesterday, the price was $63.86 per barrel.

Natural gas prices strengthened to an average $3.54/mmbtu (137.6% y/y) in the week ended November 7 after rising to $3.43/mmbtu in the prior week. The rise left prices at the highest level since the second week of April and well above the low of $1.40/mmbtu in the week of March 15, 2024. Yesterday, the price was $3.80 per mmbtu.

Gasoline demand declined 2.1% y/y in the four weeks ending October 31, following a 4.2% y/y decline in the prior four weeks. Demand for all petroleum products weakened 1.2% y/y in the four weeks ending October 31, after falling 0.9% y/y in the previous four-week period. Crude oil input to refineries declined 4.5% y/y in the four weeks ending October 31, after falling 1.7% y/y in the prior four weeks.

Gasoline inventories fell 2.5% y/y in the week ending October 31 following a 0.1% y/y slip in the prior week. Residual fuel oil inventories fell 7.1% y/y in the October 31 week after falling 10.0% y/y in the prior week. Working higher, crude oil inventories rose 1.9% y/y in the week of October 31 after increasing 1.7% y/y in the previous week.

Measured in days’ supply, gasoline inventories fell to 23.7 days in the week of October 31 from 24.3 days in the prior week. The recent low was 22.9 days in the week of November 8, 2024. The supply of crude oil rose to 27.5 days in the week of October 31 from 26.7 days in the prior week. The supply remained below a recent high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** and **USENERGY** databases.

- Gasoline prices rise to four-week high.
- Crude oil prices decline.
- Natural gas prices move to highest level since April.
- Demand for gasoline & all petroleum products falls.

U.S. Energy Prices Remain Mixed in Latest Week

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The number of weekly mortgage loan edged 0.6% higher (73.7% y/y) during the week ended November 7 after falling 1.9% during the prior week and rising 7.1% one week earlier.

The effective interest rate on a 30-year fixed-rate mortgage rose to 6.52% after rough stability at 6.48% during the prior week. These rates stand below their January average of 7.20%. Rates on a 15-year fixed rate loan were 5.86% while interest rates on a 30-year JUMBO loan averaged 6.57%. Rates on a 5-year ARM eased to 5.82%.

Purchase loan applications last week increased 5.8% (29.6% y/y) after falling 0.6% in the prior week and rising 4.5% one week earlier. Applications to refinance an existing loan declined 3.4% (+146.5% y/y) following a 2.8% decline in the prior week and rising 9.3% one week earlier.

Loans to refinance an existing mortgage fell to 55.6% of total applications from 57.0% in the prior week. The percentage of total loans that were ARMs declined to 7.8% from 8.7% one week earlier.

The average loan size declined to $396,500 last week from $414,900. The size of conventional purchase loans declined to $431,400 from $435,100 while the size of refinanced loans declined to $368,700 from $399,700 one week earlier.

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

- Mortgage interest rates rise to three-week high.
- Purchase loans surge but refinancing declines.

U.S. Weekly Mortgage Applications & Interest Rates Edge Higher

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The NFIB Small Business Optimism Index eased 0.6% (+4.8%) to 98.2 in October after falling 2.0% to a 98.8 in September and rising 0.5% to 100.8 in August, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. Four of the ten index components increased last month while five fell and one was unchanged. The NFIB Small Business Uncertainty Index fell 12.0% (-20.0% y/y) last month to 88 after rising 7.5% in September.

The outlook for business conditions was mixed in the latest survey. The net balance of respondents planning to add to inventories declined to a six-month low of -2% from +1% in September. The net percent expecting the economy to improve fell to 20% last month after weakening to 23% in September. A lessened 6% expected higher real sales in six months, compared to 8% in September. A lessened 15% of respondents indicated that now was a good time to increase employment compared to 16% in September. Earnings trends deteriorated sharply.

Offsetting these declines, plans to make capital outlays rose to a ten-month high of 23% of firms after steadying at 21%. The index of expected credit conditions jumped to -3% from -7%. It remained up from a low of -11 in November 2023. A modestly increased 13% of respondents felt that now was a good time to expand. Inventories were assessed as being too low by a lessened 4% of respondents after 7% in September.

On the labor front, 49% of businesses reported few or no qualified workers to fill job openings in October, down slightly from 50% in September. That remained up, however, from a low of 43% in August. These readings remained below a high of 56% in August of 2024.

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The net percent raising their average selling prices fell to 21% last month compared to 24% in September. It had grown to 32% in February. The percentage planning to raise prices eased to 30% in October, down from a 32% high in June. Worker compensation deteriorated as a net 26% of respondents lifted compensation during the last three months versus 31% in the last survey. Compensation gains peaked at 50% of firms in January 2022. A steady net 19% of firms are making plans to raise worker compensation in the next three months, below the November 2024 high of 28%.

The quality of labor was reported by 27% of member firms as the single most important issue facing small businesses. That was increased from 18% in September, and the highest in five years. Moving lower, the cost of labor was ranked by 8% of respondents as the largest problem, compared to 11% in September, while financial & interest rates worries dropped to 2%, the lowest in two years. A lessened 12% cited inflation as the most important problem. Other major concerns were taxes (16%) and poor sales (10%). 

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s **SURVEYS** database.

- Inventory, economy & employment concerns weigh on optimism.
- Percentage of respondents raising prices moves down; price expectations ease.
- Concerns about quality of labor surge but labor cost worries recede.

U.S. NFIB Small Business Optimism Index Slips in October

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Macroeconomic expectations in the ZEW survey backtracked slightly in Germany while improving slightly in the United States in November. The economic situation improved slightly in the euro area and Germany while backtracking in the United States. That's the assessments of the current economic situation and expectations for Germany or the EMU that are moving in different directions in the U.S. and in Germany or in the U.S. vs. the European Monetary Union in November.

Inflation expectations backed off across the board easing slightly in the euro area, Germany, and also in the United States. While that happened, expectations for short-term interest rates became less focused on rate cuts in the euro area and slightly less tilted toward the expectation for rate cuts in the U.S. as well. Long-term rate expectations receded somewhat in both Germany and in the U.S. in November by small amounts. Stock market expectations picked up in the euro area, Germany, and the U.S., and in most cases, somewhat significantly.

**The queue standings**
The queue standings are ranked standings of these various metrics, and they tell a clear story of how the ZEW experts see current conditions and policy tradeoffs. The euro area has an economic situation where the queue standing is at its 51st percentile, slightly above its historic median (on data since the early 1990s). However, Germany and the U.S. have very weak percentile standings with Germany in its 14.5 percentile and the U.S. in its 35th percentile. Macroeconomic expectations, however, find Germany at a solid 63.6 percentile while the U.S. is at a 23.3 percentile. ZEW experts are far more upbeat on prospects for German recovery right now than in the United States – and that seems odd to me with a lot of fiscal stimulus in train in the U.S. and tons of ‘AI’ investment.

Inflation expectations are high in the U.S. at an 85.5 percentile standing, well above the historic median, and clearly showing threatening conditions. This compares to a 30% queue standing for the euro area and Germany.

Short-term rate expectations are significantly below the median for both the euro area and the U.S. with the euro area at a 26.8 percentile and the U.S. at a 9.3 percentile standing. Long-term rate expectations have Germany at a 43-percentile and the U.S. at a more similar 35-percentile. Stock market expectations are fairly similar across the lot with the euro area at a 38-percentile standing, Germany at a 35-percentile standing and the U.S. at a 38-percentile standing.

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**Summing up**
These metrics remind us that ZEW experts see different inflation circumstances in the U.S. compared to Europe as well as very different current economic situations, especially between the U.S. and the euro area and very different macroeconomic expectations between the U.S. and Germany. The U.S. is seen more as a place that's percolating inflation despite the fact that the Federal Reserve continues to say inflation is under control and inflation expectations are well anchored. Apparently, they are not well-anchored among the ZEW financial experts. We might add, nor are they well-anchored among participants in the University of Michigan survey, or for respondents to the NFIB survey that was just released. Maybe it's the Fed that is not very well anchored to reality when it comes to inflation expectations assessments?

ZEW Expectations Weaken Mildly

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Initial claims for unemployment insurance rose 9,379 during the week ended November 1 to 228,899 (3.4% y/y) and mostly reversed the prior week’s 12,643 decline to 219,520. The four-week moving average of initial claims eased to 225,213 from 226,766. The four-week average hit a low of 200,323 in January 2024.

Federal government employees filed 7,482 initial jobless insurance claims last week after 9,435 in the prior week. These figures are increased from 588 at the end of September.

Continuing claims for unemployment insurance rose to 1.964 million (4.4% y/y) in the week ended October 25 from 1.957 million in the prior week. The four-week moving average rose to 1.949 million from 1.940 million. It was the highest level since the last week of August.

Federal government employees continuing benefits rose to 30,649 in the week ended October 25 from 23,188 in the prior week. These figures are increased from 8,676 at the end of September.

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.

- Increase in initial claims reverses most of earlier decline.
- Continuing claims continue to increase.

Economy in Brief: 2008

Jump to:

US 4Q GDP Held at 0.6% Growth

Home Price Appreciation Weakest Since 1990

German Ex Energy Export and Import Prices Are Still Falling Yr/Yr

Money and Credit Trend in Euro Area Remain Robust…

U.S. Durable Goods Orders Off Big, As Expected

US New Home Sales Off 57.7%, Midwest Sales Down 71.5%

US New Home Sales Off 57.7%, Midwest Sales Down 71.5%

German Business Confidence Improves--A Big Increase In Confidence In Retail Trade