Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051201b.jpg" width="353">
A strong 0.6% gain in wage &amp; salary disbursements raised U.S. personal income by 0.4% in October. The increase in wages offset declines in proprietors&#39; and rental income while the latest rise in total income followed an unrevised 1.7% surge in September, though income in August was revised down slightly. Consensus expectations had been for 0.5% income growth in October.
The effects of Hurricanes Katrina, Rita &amp; Wilma are reflected in the last three months&#39; income figures. A description of these effects can be found <a href="http://www.bea.gov/bea/faq/national/disastersincmeas.htm"> here</a>.
Wages &amp; salary income doubled the previous months&#39; rise and increased 0.6% (5.0% y/y) on the strength of a 1.4% (3.2% y/y) surge in factory sector wages. Service sector wages rose 0.6% (5.5% y/y) after an upwardly revised 0.5% September increase and government wages rose 0.2% (3.4% y/y).
Disposable personal income rose 0.3% (4.2% y/y) following the unrevised 1.9% jump in September. Adjusted for the 0.1% rise in prices, take home pay rose 0.2% (0.9% y/y).
The PCE chain price index rose a modest 0.1% in October, held back by lower gasoline prices which caused nondurable prices to fall 0.4% (+5.1% y/y). Less food &amp; energy the modest 0.1% increase additionally reflected lower light vehicle prices. Services price rose 0.4% (3.2% y/y) for the second month.
Personal consumption expenditures rose an expected, modest 0.2%. Light vehicle sales fell for the third consecutive month and lowered spending on durables by 2.5% (-2.0% y/y). Nondurables outlays rose 0.6% (9.1% y/y) but adjusted for the y/y gain in prices spending on nondurables rose a lesser 3.8% y/y. Services spending rose 0.5% (6.2% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>1.7%</td>
<td>5.3%</td>
<td>5.9%</td>
<td>3.2%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.2%</td>
<td>0.5%</td>
<td>6.1%</td>
<td>6.5%</td>
<td>4.9%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-0.7%</td>
<td>-0.8%</td>
<td>1.1% (Oct &#39;04)</td>
<td>1.7%</td>
<td>2.1%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1%</td>
<td>0.9%</td>
<td>3.3%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>2.0%</td>
<td>1.3%</td>
<td>1.8%</td>
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A strong 0.6% gain in wage & salary disbursements raised U.S. personal income by 0.4% in October. The increase in wages offset declines in proprietors' and rental income while the latest rise in total income followed an unrevised 1.7% [...]

U.S. Personal Income Lifted By Strong Wage Gain

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051201b.jpg" width="353">
A strong 0.6% gain in wage &amp; salary disbursements raised U.S. personal income by 0.4% in October. The increase in wages offset declines in proprietors&#39; and rental income while the latest rise in total income followed an unrevised 1.7% surge in September, though income in August was revised down slightly. Consensus expectations had been for 0.5% income growth in October.
The effects of Hurricanes Katrina, Rita &amp; Wilma are reflected in the last three months&#39; income figures. A description of these effects can be found <a href="http://www.bea.gov/bea/faq/national/disastersincmeas.htm"> here</a>.
Wages &amp; salary income doubled the previous months&#39; rise and increased 0.6% (5.0% y/y) on the strength of a 1.4% (3.2% y/y) surge in factory sector wages. Service sector wages rose 0.6% (5.5% y/y) after an upwardly revised 0.5% September increase and government wages rose 0.2% (3.4% y/y).
Disposable personal income rose 0.3% (4.2% y/y) following the unrevised 1.9% jump in September. Adjusted for the 0.1% rise in prices, take home pay rose 0.2% (0.9% y/y).
The PCE chain price index rose a modest 0.1% in October, held back by lower gasoline prices which caused nondurable prices to fall 0.4% (+5.1% y/y). Less food &amp; energy the modest 0.1% increase additionally reflected lower light vehicle prices. Services price rose 0.4% (3.2% y/y) for the second month.
Personal consumption expenditures rose an expected, modest 0.2%. Light vehicle sales fell for the third consecutive month and lowered spending on durables by 2.5% (-2.0% y/y). Nondurables outlays rose 0.6% (9.1% y/y) but adjusted for the y/y gain in prices spending on nondurables rose a lesser 3.8% y/y. Services spending rose 0.5% (6.2% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>1.7%</td>
<td>5.3%</td>
<td>5.9%</td>
<td>3.2%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.2%</td>
<td>0.5%</td>
<td>6.1%</td>
<td>6.5%</td>
<td>4.9%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-0.7%</td>
<td>-0.8%</td>
<td>1.1% (Oct &#39;04)</td>
<td>1.7%</td>
<td>2.1%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1%</td>
<td>0.9%</td>
<td>3.3%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>2.0%</td>
<td>1.3%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>
ISM Index Fell As Expected and Still Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051201c.jpg" width="353">
The Institute of Supply Management (ISM) reported that the November Composite Index of activity in the manufacturing sector fell one point to 58.1. The decline about matched Consensus expectations and the average of the last three months, at 58.9, was the highest in over a year.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
As during October, three of the index&#39;s five components fell last month. New orders fell another 1.9 points but remained well up from the May low. The moderate decline in production also left the level up from the Spring low and the pace of supplier deliveries quickened to the fastest pace since August .
Job creation in the factory sector improved to the best level since February with a 1.6 point gain. During the last twenty years there has been a 67% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.
Pricing power in the factory sector eased to the lowest level since August with a ten point m/m decline.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Nov &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Index</td>
<td>58.1</td>
<td>59.1</td>
<td>57.6</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>59.8</td>
<td>61.7</td>
<td>60.7</td>
<td>63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>74.0</td>
<td>84.0</td>
<td>74.0</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051201a.jpg" width="353">
Initial claims for jobless insurance reversed about half of the prior week&#39;s rise and fell 17,000 to 320,000 during Thanksgiving week. Consensus expectations had been for 323,000 claims.
Hurricane related claims dropped back to 10,000 and brought the total of the three storms during the last thirteen weeks to 592,000.
The four-week moving average of initial claims fell slightly to 322,500 (-3.5% y/y).
Continuing claims for unemployment insurance fell 24,000 following a downwardly revised 26,000 gain the prior week.
The insured rate of unemployment held at 2.2% for the tenth consecutive week. 

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">11/26/05</th>
<th scope="col">11/19/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>320</td>
<td>337</td>
<td>-7.5%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,767</td>
<td>1.1%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
US 3Q GDP Revised Up, Hurricanes Slam Profits 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051201f.jpg" width="353">
US real GDP growth for 3Q was revised upward to 4.3% (AR) and surpassed Consensus expectations for 4.1% growth.
Operating corporate profits are estimated to have declined 3.4% (+16.5% y/y) and that reversed most of a 2Q rise. Financial sector earnings were hit hard by three hurricanes and fell 18.6% (+7.9% y/y). Profits of domestic nonfinancial corporations rose a slight 0.2% (20.2% y/y) after the 11.5% surge during 2Q while margins slipped. 
Domestic demand growth of 4.7% versus the initial report of a 4.1% rise was due to an upward revision to real PCE to 4.3% (3.9% y/y) growth.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051201e.jpg" width="353">
Strength in business fixed investment also was increased to 8.7% (8.4% y/y) and residential investment growth was doubled to 8.4% (7.5% y/y).
Inventory accumulation continued to have a negative effect on GDP growth but was little revised at -0.4%.
The foreign trade deficit subtracted rather than added to GDP growth since imports grew 2.1% (5.1% y/y) rather than declining as initially estimated.
The chain price index rose about as initially estimated.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;05 (Revised)</th>
<th scope="col">3Q &#39;05 (Advance)</th>
<th scope="col">2Q &#39;05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>4.3%</td>
<td>3.8%</td>
<td>3.3%</td>
<td>3.7%</td>
<td>4.2%</td>
<td>2.7%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.4%</td>
<td>-0.6%</td>
<td>-2.1%</td>
<td>-0.6%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>4.7%</td>
<td>4.4%</td>
<td>5.6%</td>
<td>4.3%</td>
<td>3.9%</td>
<td>2.7%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>-0.3%</td>
<td>0.1%</td>
<td>1.1%</td>
<td>0.2%</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>4.7%</td>
<td>4.1%</td>
<td>4.2%</td>
<td>4.2%</td>
<td>4.4%</td>
<td>3.0%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.0%</td>
<td>3.1%</td>
<td>2.6%</td>
<td>2.9%</td>
<td>2.6%</td>
<td>2.0%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Up  
by <a href="/comment/Moeller.html">Tom Moeller</a>  December 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051201d.jpg" width="353">
The value of construction put in place rose 0.7% in October though the September gain was revised lower to 0.2% due to a lessened increase in residential building.
Residential building in October continued at about its earlier pace and rose 0.6%. New single family building rose 0.7% (11.6% y/y) following an upwardly revised 1.7% surge. The value of residential improvements fell 0.6% (-4.5% y/y) and a previously reported moderate September decline was revised to a 2.6% collapse.
Nonresidential building activity slipped moderately for the second consecutive month thanks to lower office construction (+5.9% y/y) which had been strong.
Public construction spending also fell moderately for the second month as construction activity on highways &amp; streets, nearly one third of the value of public construction spending slipped 0.2% (14.0% y/y) after a 2.0% September surge.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7%</td>
<td>0.2%</td>
<td>7.9%</td>
<td>10.9%</td>
<td>5.4%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.3%</td>
<td>0.4%</td>
<td>6.9%</td>
<td>13.6%</td>
<td>6.3%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.6%</td>
<td>0.7%</td>
<td>8.3%</td>
<td>18.2%</td>
<td>12.9%</td>
<td>8.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>3.5%</td>
<td>3.9%</td>
<td>-5.4%</td>
<td>-13.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>1.9%</td>
<td>-0.5%</td>
<td>11.7%</td>
<td>2.5%</td>
<td>2.7%</td>
<td>5.7%</td>
</tr>
</tbody>
</table>
Indonesia Trade Balance Largely Steady through October, Even with Big Gains in Oil and Non-oil Exports 
by <a href="/comment/Stone.html">Carol Stone</a> December 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051201g.jpg" width="353">
Indonesia&#39;s trade data for October, reported this morning, highlight two unexpected aspects of that oil-producing nation&#39;s economic development. In October, its monthly trade surplus was $2.6 billion, a large figure, but not the highest ever, and more importantly, only modestly above the $2.3 billion average for 2003, a time when oil and gas prices were considerably lower than they are now. Thus, even as oil and gas exports have risen, so have the country&#39;s imports, restraining the widening of the trade surplus. Further, in dollar terms, non-oil exports have risen more than oil-related exports. Total exports were $7.2 billion in October, up 41% from a monthly average of $5.1 billion in 2003. Such large growth in exports emphasizes how remarkable it is that the trade balance has changed so little.
When the first energy crisis hit in the mid-1970s, one concern was over how to &quot;recycle petro-dollars&quot;. What would oil-exporting nations do with the large amounts of dollars they were newly receiving? Clearly, this is now a non-issue. The ability of businesses and consumers, at least in Indonesia, to seek out foreign merchandise to import recycles petro-dollars quite effectively. Imports in October were $4.6 billion, up 15% from the year-ago month and 70% from their 2003 average.
Further, oil and gas are hardly the only items Indonesia exports. Over time, Indonesian industry has diversified, so that non-energy products now constitute by far the bulk of its exports. Recently this share has been just above 75% and sometimes in recent years, it has reached 80%. By contrast in the mid-1980s when the data began to include some detail, non-energy exports were only about 25% of total exports. Lately, a look at industrial production data through 2004 suggests that chemicals and fabricated metals have been sources for this growth. Expansion of the chemical sector makes sense in light of the petroleum products already there. Interestingly, the wood and paper products that one might have traditionally thought of for Indonesia are no longer contributors to growth; their industrial production has been declining outright over the past several years.

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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEPR/@P7/@P75/@P75.HTM">Indonesia: Foreign Trade</a> Mil.$, Seas Adj*</th>
<th scope="col">Oct 2005</th>
<th scope="col">Sept 2005</th>
<th scope="col">Oct 2004</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Trade Balance</td>
<td>2579.6</td>
<td>2407.8</td>
<td>2254.1</td>
<td>1916.5</td>
<td>2375.6</td>
<td>2155.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>7191.4</td>
<td>7226.2</td>
<td>6259.1</td>
<td>5794.8</td>
<td>5088.1</td>
<td>4763.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Oil &amp; Gas</td>
<td>1820.9</td>
<td>1636.4</td>
<td>1401.6</td>
<td>1294.0</td>
<td>1136.9</td>
<td>1009.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-Oil &amp; Gas</td>
<td>5370.5</td>
<td>5589.8</td>
<td>4857.5</td>
<td>4500.8</td>
<td>3951.2</td>
<td>3753.8</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>4611.8</td>
<td>4818.4</td>
<td>4005.0</td>
<td>3878.3</td>
<td>2712.5</td>
<td>2607.4</td>
</tr>
</tbody>
</table>


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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051130c.jpg" width="353">
Eurostat made its first full report of Q3 GDP today. Total growth was 0.6%, the same as estimated a couple of weeks ago in the &quot;flash&quot; report for both Euro-zone12 and the EU25 . This new figures represent the routine addition of more countries, specifically Denmark and Poland. But in this report, Eurostat made important methodological changes as well, most notably shifting to chain weighting to calculate the volume measures of GDP and its components. They also changed the treatment of &quot;FISIM&quot;, the imputed value of &quot;financial services indirectly measured&quot;.
As to the performance, seen in the table below, growth picked up somewhat to 0.6% in Q3 from 0.4% in Q2. Final consumption grew 0.4%, slightly more than the 0.3% in the prior period; both public and private consumption participated. Exports were the other source of advance, surging by 3.4% after 2.2% in Q2. This put yearly expansion of exports at 5.2% from Q3 2004, largely keeping up the strong 5.9% pace set for last year as a whole. Imports gained a little more in the latest quarter. Overall capital formation looks weak, but importantly, the slowdown here is due to much smaller inventory accumulation; fixed investment advanced considerably, 1.6%, after 0.8% in Q2. This is the strongest investment gain since early 2000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051130d.jpg" width="353">
Regarding the methodology, the change to FISIM involves allocating it to the specific industry sectors where it applies and removing it as an explicit adjustment between gross value added and gross domestic product. The net numerical result appears as an upward revision to nominal GDP, according to Eurostat, of about 1.0% in the Euro-zone and about 0.6% for the EU25.
Chain-linking is by now fairly well-known, and actually had remarkably little impact on total reported Euro-zone growth. History runs back only to 1995; perhaps the effect would have been greater in earlier years. Eurostat&#39;s press release shows changes in total growth of only 0.1%, up or down, in some quarters, but not in all and without trend. It&#39;s important to note that not all Euro-zone countries yet produce chain-weighted accounts. Italy and Belgium are two countries where no chaining is done; France&#39;s quarterly data is also not yet chained. So data for these three countries in particular remain in fixed-weight terms in the relevant Haver databases (ITALY, BENELUX and FRANCE, as well as EUROSTAT and G10).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EUROSTAT/@U2/@U2.HTM">EuroZone12 GDP:</a> Chained 2000 Euros</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q2 2005</th>
<th scope="col">Q3 2004 (yr/yr)</th>
Yearly Totals
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">GDP</td>
<td>0.6</td>
<td>0.4</td>
<td>1.6</td>
<td>1.8</td>
<td>0.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Consumption</td>
<td>0.4</td>
<td>0.3</td>
<td>1.5</td>
<td>1.3</td>
<td>1.2</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">Gross Capital Formation</td>
<td>0.2</td>
<td>1.2</td>
<td>1.6</td>
<td>3.5</td>
<td>1.7</td>
<td>-2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>3.4</td>
<td>2.2</td>
<td>5.2</td>
<td>5.9</td>
<td>1.3</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol">-Imports</td>
<td>2.8</td>
<td>2.6</td>
<td>5.2</td>
<td>6.1</td>
<td>3.1</td>
<td>0.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Eurostat made its first full report of Q3 GDP today. Total growth was 0.6%, the same as estimated a couple of weeks ago in the "flash" report for both Euro-zone12 and the EU25 . This new figures represent the routine addition of more [...]

Euro-zone Growth Picks Up to 0.6% in Q3; Chain-Linking Introduced to Eurostat Aggregates

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051130a.jpg" width="353">
The Chicago Purchasing Managers Business Barometer was 61.7 for November, down slightly from October&#39;s 62.7, but firmer than forecasts of about 60.0. This was the third straight reading above 60, a favorable performance after about six months of saw tooth behavior.
The new orders index, however, kept up the seesaw pattern, as it fell back 11.0 points to 61.6 after October&#39;s 9.2-point increase; the October advance, notably, was corroborated in yesterday&#39;s report of a 3.4% surge in the value of national durable goods orders in October. The Chicago production index eased 4.5 points, partially reversing its October gain. Employment fell by a point to 50.3, indicating a marginal expansion of factory jobs in the Chicago region. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051130b.jpg" width="353">
While the components describing real manufacturing activity portray a fairly optimistic picture, the index of prices paid may cause some worry. It rose once again, reaching 94.1, the highest since August 1979, when inflation in general was pretty rapid. This comparison, however, calls our attention to an important distinction in the Chicago and other Purchasing Manager surveys: these surveys count the number of firms reporting moves in a specific direction, not the magnitude of the move. Thus, many firms paid higher prices and fewer firms paid lower prices, but we have no idea how much those prices changed. Also note that the run-up in the overall index in fact resulted partially from a reduction in the number of firms paying lower prices, from 6% to 3%; as recently as August, this deflationary factor was 11% and 16% in May. The number of firms paying higher prices represents 67% of the total, a high figure, but not so dramatic as in earlier inflation periods and not even as high as several readings last year in the mid-70s.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">&nbsp;Oct &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>61.7</td>
<td>62.9</td>
<td>67.7</td>
<td>62.9</td>
<td>54.6</td>
<td>52.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>61.6</td>
<td>72.6</td>
<td>79.7</td>
<td>67.0</td>
<td>58.0</td>
<td>56.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>94.1</td>
<td>79.6</td>
<td>84.7</td>
<td>80.1</td>
<td>55.8</td>
<td>56.9</td>
</tr>
</tbody>
</table>
</body>
</html>

The Chicago Purchasing Managers Business Barometer was 61.7 for November, down slightly from October's 62.7, but firmer than forecasts of about 60.0. This was the third straight reading above 60, a favorable performance after about [...]

Chicago Purchasing Managers' "Business Barometer" Holds Up; Prices Accelerate to 26-Year High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051130a.jpg" width="353">
The Chicago Purchasing Managers Business Barometer was 61.7 for November, down slightly from October&#39;s 62.7, but firmer than forecasts of about 60.0. This was the third straight reading above 60, a favorable performance after about six months of saw tooth behavior.
The new orders index, however, kept up the seesaw pattern, as it fell back 11.0 points to 61.6 after October&#39;s 9.2-point increase; the October advance, notably, was corroborated in yesterday&#39;s report of a 3.4% surge in the value of national durable goods orders in October. The Chicago production index eased 4.5 points, partially reversing its October gain. Employment fell by a point to 50.3, indicating a marginal expansion of factory jobs in the Chicago region. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051130b.jpg" width="353">
While the components describing real manufacturing activity portray a fairly optimistic picture, the index of prices paid may cause some worry. It rose once again, reaching 94.1, the highest since August 1979, when inflation in general was pretty rapid. This comparison, however, calls our attention to an important distinction in the Chicago and other Purchasing Manager surveys: these surveys count the number of firms reporting moves in a specific direction, not the magnitude of the move. Thus, many firms paid higher prices and fewer firms paid lower prices, but we have no idea how much those prices changed. Also note that the run-up in the overall index in fact resulted partially from a reduction in the number of firms paying lower prices, from 6% to 3%; as recently as August, this deflationary factor was 11% and 16% in May. The number of firms paying higher prices represents 67% of the total, a high figure, but not so dramatic as in earlier inflation periods and not even as high as several readings last year in the mid-70s.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">&nbsp;Oct &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>61.7</td>
<td>62.9</td>
<td>67.7</td>
<td>62.9</td>
<td>54.6</td>
<td>52.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>61.6</td>
<td>72.6</td>
<td>79.7</td>
<td>67.0</td>
<td>58.0</td>
<td>56.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>94.1</td>
<td>79.6</td>
<td>84.7</td>
<td>80.1</td>
<td>55.8</td>
<td>56.9</td>
</tr>
</tbody>
</table>
Euro-zone Growth Picks Up to 0.6% in Q3; Chain-Linking Introduced to Eurostat Aggregates 
by <a href="/comment/Stone.html">Carol Stone</a> November 30, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051130c.jpg" width="353">
Eurostat made its first full report of Q3 GDP today. Total growth was 0.6%, the same as estimated a couple of weeks ago in the &quot;flash&quot; report for both Euro-zone12 and the EU25 . This new figures represent the routine addition of more countries, specifically Denmark and Poland. But in this report, Eurostat made important methodological changes as well, most notably shifting to chain weighting to calculate the volume measures of GDP and its components. They also changed the treatment of &quot;FISIM&quot;, the imputed value of &quot;financial services indirectly measured&quot;.
As to the performance, seen in the table below, growth picked up somewhat to 0.6% in Q3 from 0.4% in Q2. Final consumption grew 0.4%, slightly more than the 0.3% in the prior period; both public and private consumption participated. Exports were the other source of advance, surging by 3.4% after 2.2% in Q2. This put yearly expansion of exports at 5.2% from Q3 2004, largely keeping up the strong 5.9% pace set for last year as a whole. Imports gained a little more in the latest quarter. Overall capital formation looks weak, but importantly, the slowdown here is due to much smaller inventory accumulation; fixed investment advanced considerably, 1.6%, after 0.8% in Q2. This is the strongest investment gain since early 2000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051130d.jpg" width="353">
Regarding the methodology, the change to FISIM involves allocating it to the specific industry sectors where it applies and removing it as an explicit adjustment between gross value added and gross domestic product. The net numerical result appears as an upward revision to nominal GDP, according to Eurostat, of about 1.0% in the Euro-zone and about 0.6% for the EU25.
Chain-linking is by now fairly well-known, and actually had remarkably little impact on total reported Euro-zone growth. History runs back only to 1995; perhaps the effect would have been greater in earlier years. Eurostat&#39;s press release shows changes in total growth of only 0.1%, up or down, in some quarters, but not in all and without trend. It&#39;s important to note that not all Euro-zone countries yet produce chain-weighted accounts. Italy and Belgium are two countries where no chaining is done; France&#39;s quarterly data is also not yet chained. So data for these three countries in particular remain in fixed-weight terms in the relevant Haver databases (ITALY, BENELUX and FRANCE, as well as EUROSTAT and G10).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EUROSTAT/@U2/@U2.HTM">EuroZone12 GDP:</a> Chained 2000 Euros</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q2 2005</th>
<th scope="col">Q3 2004 (yr/yr)</th>
Yearly Totals
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">GDP</td>
<td>0.6</td>
<td>0.4</td>
<td>1.6</td>
<td>1.8</td>
<td>0.7</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Consumption</td>
<td>0.4</td>
<td>0.3</td>
<td>1.5</td>
<td>1.3</td>
<td>1.2</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">Gross Capital Formation</td>
<td>0.2</td>
<td>1.2</td>
<td>1.6</td>
<td>3.5</td>
<td>1.7</td>
<td>-2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>3.4</td>
<td>2.2</td>
<td>5.2</td>
<td>5.9</td>
<td>1.3</td>
<td>1.8</td>
</tr>
<tr>
<td class="firstcol">-Imports</td>
<td>2.8</td>
<td>2.6</td>
<td>5.2</td>
<td>6.1</td>
<td>3.1</td>
<td>0.4</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051129g.jpg" width="353">
November is probably the busiest month for the release of economic growth estimates for the third quarter in individual countries. Today Gross Domestic Product data for Hungary, Denmark and the Philippines were released. Denmark&#39;s GDP was 4.70% above the third quarter of 2005, compared with 4.46% for Hungary and 4.09% for the Philippines. In terms of developed versus developing countries we have Denmark and Hungary in Europe. In terms of the location of developing countries we have Hungary in Eastern Europe and the Philippines in Asia.
First take a look at the year-to-year growth in the developed country, Denmark, and the developing country, Hungary--both in Europe--as shown in the first chart. Over the past five years until the third quarter of this year, Hungary has grown at a significantly higher rate than that of Denmark. In the third quarter, however, Denmark&#39;s growth rate was 4.70% compared with Hungary&#39;s, 4.46%. Not only has Denmark&#39;s growth rate exceeded that of Hungary in the third quarter, but since the second quarter of 2004, growth in Denmark, a non Euro Zone country, has been greater than that of the Euro Zone as a whole. The quarter-to-quarter growth rates so far this year show some weakness in Hungary in contrast to relatively steady advances in Denmark.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051129f.jpg" width="353">
Now, contrast the year-to-year growth rates of the two developing countries in the second chart. The higher growth rate of the Philippines until this last quarter probably reflects the dynamism of the Pacific Rim economies versus the more subdued recoveries of the emerging countries of Eastern Europe. In the third quarter of this year, however, Hungary&#39;s economic grew 1% while that of the Philippines was virtually unchanged. 

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Growth in Gross Domestic Product</th>
<th scope="col">Q3 05&nbsp; %</th>
<th scope="col">Q2 05 % </th>
<th scope="col">Q1 05 %</th>
<th scope="col">2004 %</th>
<th scope="col">2003 %</th>
<th scope="col">2002 %&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;Year-to Year&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Denmark</td>
<td>4.70</td>
<td>3.06</td>
<td>2.13</td>
<td>2.07</td>
<td>0.6</td>
<td>0.46</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Hungary</td>
<td>4.46</td>
<td>4.15</td>
<td>2.88</td>
<td>4.23</td>
<td>2.94</td>
<td>3.50</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Philippines</td>
<td>4.09</td>
<td>5.15</td>
<td>4.49</td>
<td>6.02</td>
<td>4.51</td>
<td>4.45</td>
</tr>
<tr class="odd">
<td class="firstcol">Quarter-to-Quarter</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Denmark</td>
<td>1.39</td>
<td>1.60</td>
<td>0.54</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Hungary</td>
<td>0.97</td>
<td>2.08</td>
<td>-0.08</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Philippines</td>
<td>-0.02</td>
<td>2.20</td>
<td>1.27</td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

November is probably the busiest month for the release of economic growth estimates for the third quarter in individual countries. Today Gross Domestic Product data for Hungary, Denmark and the Philippines were released. Denmark's GDP [...]

Denmark's Third Quarter GDP Growth Rate Tops That of Hungary and the Philippines

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051129e.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey indicated that during Thanksgiving week, chain store sales slipped 0.7% following the prior period&#39;s 1.0% jump. The latest left the average level of sales in November 1.2% above October which rose 0.1% from September.
During the last ten years there has been a 51% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC slipped 0.3% (-2.0% y/y) during the latest week following two consecutive weeks of increases.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 
The latest decline in store sales occurred despite a further drop in gasoline prices. The retail average price of gasoline in the U.S. fell a nickel last week to $2.15 (+10.7% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">11/26/05</th>
<th scope="col">11/19/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>454.8</td>
<td>458.0</td>
<td>5.1%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers (ICSC)-UBS survey indicated that during Thanksgiving week, chain store sales slipped 0.7% following the prior period's 1.0% jump. The latest left the average level of sales in November [...]

Chain Store Sales Backpedaled, Gas Prices Down Again

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The Conference Board reported that it&#39;s November index of Consumer Confidence recovered to the highest level since August. The 16.1% m/m jump contrasted to Consensus expectations for a lesser gain to 90.0 and it was the strongest m/m increase since early 2003. The gain exceeded the 10.0% m/m rebound in Consumer sentiment reported last week by the University of Michigan.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
The index of consumers&#39; expectations ballooned 26.7% m/m (-1.6% y/y) as optimism rose that during the next six months business conditions would get better, more jobs would be created and that incomes would rise.
Consumers&#39; assessment of the present situation also improved and recovered some of the prior two months&#39; decline (+18.4% y/y). Though an increased percentage of respondents indicated business conditions were good, jobs were viewed as hard to get by a lesser 23.2% of survey participants.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Consumer Confidence</td>
<td>98.9</td>
<td>85.2</td>
<td>6.8%</td>
<td>96.1</td>
<td>79.8</td>
<td>96.6</td>
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The Conference Board reported that it's November index of Consumer Confidence recovered to the highest level since August. The 16.1% m/m jump contrasted to Consensus expectations for a lesser gain to 90.0 and it was the strongest m/m [...]

Consumer Confidence Recovered

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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Sandy Batten

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Existing home sales rose 0.5% m/m (-1.0% y/y) in November to 4.13 million homes (SAAR) following a 1.5% monthly gain in October and a 1.3% monthly rise in September, according to the National Association of Realtors (NAR). It was the highest level of sales since February and matched expectations in the Action Economics Forecast Survey. The average effective 30-year mortgage interest rate was unchanged at 6.54% last month, but this is down markedly from 7.10% in May and accounts for some of the revival in home sales over the past several months. The sales figures are based on closings of sales contracts signed over the past couple of months.

Existing single-family home sales rose 0.8% m/m (-0.8% y/y) in November to 3.75 million units after a 1.1% m/m rise in October and a 1.4% monthly gain in September. Sales of condos and co-ops slumped 2.6% m/m (-2.6% y/y) to 380,000 in November following a 5.4% monthly jump in October.

Compared to a month ago, sales rose 4.1% m/m in the Northeast, increased 1.1% m/m in the South, were unchanged in the West and fell 2.0% m/m in the Midwest. Compared to a year ago, sales were unchanged in both the Northeast and the South, fell 3.0% y/y in the Midwest and declined 1.3% y/y in the West.

The median price of all existing homes (NSA) declined 1.4% m/m (+1.2% y/y) to $409,200 in November. The median price of an existing single-family home fell 1.4% m/m (+1.2% y/y) to $414,300 in November. Prices of single-family homes in the Northeast edged up 0.9% from a year ago. Prices in the Midwest jumped 5.8% y/y; prices in the South rose 1.0% y/y. In contrast, prices in the West declined 0.8% from a year ago.

Inventories of homes for sale continued to weaken in November. The number of existing homes for sale (NSA) slumped 5.9% m/m (+7.5% y/y) to 1.43 million units in November. The supply of homes on the market at the current selling rate (NSA) slid to 4.2 months, its lowest reading since March.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's USECON database. Regional price and affordability data and national inventory data are available in the REALTOR database. Mortgage interest rates can be found in the WEEKLY database. The expectations figure is from the Action Economics Forecast Survey, reported in the AS1REPNA database.


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- Existing home sales increased 0.5% m/m in November, the third consecutive monthly gain.
- Month-over-month sales increased in the Northeast and South, were unchanged in the West, and fell in the Midwest.
- Year-over-year sales were unchanged in the Northeast and South and decreased in the Midwest and West.


U.S. Existing Home Sales Edged Up in November

Andrew Cates

**Faster-than-Expected Monetary Easing**
Our first potential upside risk for 2026 is that monetary policy across most major advanced economies is loosened further and by more than markets and forecasters currently anticipate. Monetary policy cycles have a history of being underestimated in both length and magnitude—in large part because of the powerful feedback loops between interest rates, inflation, and economic behaviour. On the way up, higher policy rates feed into mortgage costs, debt-service burdens, rents, and the general cost of doing business, reinforcing wage pressures and inflation persistence. But these same channels work in reverse on the way down. As rates fall, debt servicing eases, housing and rental inflation softens, and cost pressures across the economy unwind more rapidly than expected—allowing inflation to decelerate faster and creating scope for further easing. A risk, therefore, is that if disinflation becomes self-reinforcing, central banks find themselves cutting rates more aggressively than currently priced, not because of economic distress, but because restrictive policy proves increasingly unnecessary.

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**Energy Supply Dynamics Prove More Supportive**
The second chart reinforces the message from the first: easing monetary policy may be accompanied—and amplified—by a more benign energy backdrop. Recent projections from the EIA point to a renewed build-up in OECD crude oil and liquids inventories over the year ahead, a dynamic that has historically been associated with downward pressure on oil prices. If inventories continue to rise as supply growth outpaces demand, spot prices for crude could undershoot current forecasts, keeping energy inflation subdued. That, in turn, would reinforce disinflationary forces already in play—lowering headline CPI, easing cost pressures for firms and households, and giving central banks greater confidence to loosen policy further. In that sense, softer oil prices would not just be a standalone positive shock, but part of a reinforcing feedback loop alongside rate cuts, supporting real incomes, financial conditions, and global growth into 2026.


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**AI-Driven Productivity Gains Materialise More Quickly** 
The third chart shows a clear pickup in US nonfinancial productivity growth, reviving the debate around whether AI-driven efficiency gains may arrive sooner than many forecasters expect. While the longer-term productivity potential of AI remains uncertain and uneven across sectors, there are reasons to think that at least some near-term gains could prove more tangible than currently assumed. Rather than transformative breakthroughs, early benefits are likely to come from incremental improvements—automation of routine processes, better scheduling and logistics, more efficient use of capital and labour, and modest reductions in overhead costs—areas where US firms are already well positioned to implement new technologies quickly. If these gains accumulate and diffuse more broadly, the implications would still be meaningful. Even a modest, sustained uplift in productivity would help contain unit labour costs, support real income growth, and raise the economy’s speed limit without generating renewed inflation pressure. In that scenario, productivity would not need to “revolutionise” the economy to matter: incremental efficiency gains could nonetheless provide a supportive backdrop for growth, earnings, and policy easing into 2026—representing a genuine upside risk to the outlook.


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**The US Economy Proves Resilient Again**
The next chart highlights a further upside risk to the 2026 outlook: the possibility that the US economy once again outperforms its peers. Unlike the typical pre-recession backdrop, there is little evidence of meaningful financial stress in the US private sector. After a prolonged period of balance-sheet repair, private-sector debt ratios have been trending lower in recent years, while the sector as a whole is running a healthy financial surplus. This stands in stark contrast to previous late-cycle episodes, which were characterised by rising leverage, widening deficits, and growing dependence on credit expansion. The absence of private-sector excesses reduces the economy’s vulnerability to higher rates and external shocks, and helps explain why growth has remained more durable than expected. If households and firms continue to prioritise balance-sheet strength rather than forced deleveraging, the usual mechanisms that tip the economy into recession may fail to materialise. In that environment, even modest easing in financial conditions could translate into renewed spending and investment, allowing the US to sustain above-trend growth into 2026—representing another upside risk to the global outlook.


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**India’s Growth Engine Accelerates Further** 
Chart 5 points to another potential upside risk for 2026 emanating from India’s economy. After a period of relative pessimism earlier in the year, consensus growth forecasts for 2026 have been revised modestly higher, even as inflation projections have continued to drift lower. This combination—firmer growth expectations alongside easing inflation pressures—creates scope for a more supportive policy backdrop than markets currently assume. With real interest rates no longer rising and financial conditions stabilising, India’s investment cycle, already underpinned by public infrastructure spending and improving corporate balance sheets, could prove more durable than forecast. If these trends persist, India may deliver growth that is both stronger and more internally driven than expected, providing a meaningful demand impulse to the broader global economy. Given India’s increasing weight in global growth, even small upside surprises would have outsized effects on trade, commodity demand, and regional activity—reinforcing the case that the global outlook for 2026 may be skewed to the upside.


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**The Global South Becomes a More Independent Source of Demand** 
The final chart points to a broader upside risk for the global economy in 2026: that economies across the so-called Global South generate more durable momentum than currently assumed. With a few notable exceptions—such as China and Thailand—many emerging economies continue to benefit from stronger growth in their working-age populations and/or faster real GDP per capita growth than their advanced-economy counterparts. These demographic and income dynamics are helping to underpin domestic consumption, support labour-force expansion, and attract capital inflows, as reflected in the pattern of net FDI across countries. In contrast, much of the advanced world faces binding demographic constraints and lower steady-state growth rates, limiting the scope for demand to re-accelerate organically. If growth in the Global South proves more resilient and internally driven—rather than overly dependent on exports to advanced economies—it could provide a more stable and geographically diversified source of global demand. In that scenario, global growth in 2026 would be less reliant on a narrow set of advanced economies, reinforcing the case that risks to the outlook may be skewed to the upside.


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_This marks our final Charts of the Week publication for 2025 The next edition will be released on Thursday 8 January._

Last week’s Charts of the Week focused on the darker tail risks hanging over the 2026 outlook: the possibility of monetary policy mis-calibration, that geopolitics and trade fragmentation further disrupt supply chains, and that elevated debt levels—particularly in the public sector—reassert themselves as a drag on growth. This week’s charts take a deliberately different tack. Taken together, they highlight a set of upside risks that are possibly underappreciated in current forecasts. For example, policy easing across advanced economies may extend further than expected as disinflation feeds on itself (chart 1); oil prices could surprise on the downside as inventories rebuild (chart 2); US productivity may deliver incremental but meaningful gains sooner than assumed (chart 3); the US economy itself could continue to benefit from an absence of private-sector financial stress (chart 4); India’s growth momentum might firm again as inflation pressures recede (chart 5); and, more broadly, parts of the Global South appear increasingly capable of generating their own demand impulse, supported by favourable demographics and income growth (chart 6). None of these forces is guaranteed, and each carries its own caveats—but together they suggest that, having spent much of the past year fixated on downside risks, the risks to global growth in 2026 may be more evenly balanced than is widely assumed.

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Charts of the Week: The Upside Risks

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped 13,000 to 224,000 during the week of December 13, from 237,000 during the week of December 6, revised from 236,000. The four-week moving average of initial claims was 217,500, an increase of 500 from the previous week, which was revised to 217,000 from 216,750.

Federal government employees initially filed 1091 (NSA) jobless insurance claims in the week ended December 6, after filing 643 claims in the week ended November 29.

Continuing claims for unemployment insurance rose 67,000 to 1,897,000 in the week ending December 6, following a sharp decline of 107,000 to 1,830,000 in the prior week, revised from 1,838,000. The four-week moving average was 1,902,000 in the week ending December 6, a decrease of 14,000 from 1,916,00 in the week ended November 29, revised from 1,918,000. The insured unemployment rate stood at 1.2% in the week of December 6, unchanged from the prior week.

Federal government employees’ continuing benefits rose to 14,077 (NSA) in the week of November 29 from 12,732 (NSA) in the week ended November 22.

The insured unemployment rate varied greatly across individual states and territories. In the week ending November 29, the highest unemployment rates were in Washington (2.48%), New Jersey (2.42%), California (2.26%), Minnesota (2.16%), and Massachusetts (2.10%). The lowest rates were in Florida (0.34%), South Dakota (0.40%), North Carolina (0.41%), Louisiana (0.44%), Alabama (0.46%), Virginia (0.47%), and Tennessee (0.49%). Rates in other notable states include New York (1.81%), Illinois and Pennsylvania (both 1.67%), and Texas (1.22%). 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.



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- Initial claims dropped from the prior week.
- Continuing claims rebounded from the prior week sharp decline.
- The insured unemployment rate was unchanged.


U.S. Initial Claims for Unemployment Insurance Eased in Latest Week

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Mortgage applications dropped 3.8% w/w (+40.9% y/y) in the week of December 12 after a rise of 4.8% w/w (45.4% y/y) in the week of December 5, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house fell 2.8% w/w (+12.3% y/y) in the latest week after declining 2.4% w/w (+17.2% y/y) in the week of December 5. Applications for loan refinancing dropped 3.6% w/w (+86.0% y/y) in the week of December 12, following the 14.3% (87.8% y/y) jump in the week ended December 5.

The effective interest rate on a 30-year fixed-rate loan rose 6bps to 6.56% in the week ending December 12, from 6.50% in the week ending December 5. The rate on 15-year fixed-rate mortgages rose 4bps to 5.91% in the latest week from 5.87% in the December 5 week. The rate on 30-year jumbo edged down 2bps to 6.55% in the December 12 week from 6.57% in the prior week. The rate on a 5-year ARM eased 4bps to 5.76% in the latest week from 5.80% in the December 5 week.

The share of applications for refinancing an existing loan rose to 59.0% of total applications in the December12 week from 58.2% in the week ending December 5. The adjustable-rate mortgage (ARM) share of activity rose to 7.2% in the latest week from 7.0% in the December 5 week.

The average size of a mortgage loan rose 1.5% (6.4% y/y) to $400,000 in the December 12 week, following a decline of 0.7% (+7.1% y/y) to $394,200 in the December 5 week. The average size of a purchase loan edged up 0.6% (-0.3% y/y) to $424,200 in the latest week, after dropping 0.4% (+1.3% y/y) to $421,700 in the December 5 week. The average size of a loan to refinance a mortgage rose 2.4% (19.8% y/y) to $383,300 in the week ending December 12 after rising 0.2% (19.4% y/y) to $374,500 in the December 5 week.

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.

- Purchase applications fell 2.8% w/w; refinancing loan applications fell 3.6% w/w.
- Effective interest rate on 30-year fixed loans rose to 6.56%.
- Average loan size rose moderately.

U.S. Mortgage Applications Retreated in the Week of December 12

Robert Brusca

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U.K. inflation has moderated in November, posting a 0.1% drop on the HICP, a 0.1% gain in the CPI-H headline measure as well as a 0.1% gain in the CPI-H core (excluding energy, food, alcohol, and tobacco). The sequential trend in core inflation points lower and is eroding but continues to run over the 2% mark set as a target by the Bank of England for overall inflation (over 12 months). The headline is excessive as well but also eroding.

Sequentially the CPI-H gains 3.5% over 12 months, slows to a 2.8% annual rate over six months and then dips to 1.4% annual rate over three months. The CPI-H core rises by 3.6% over 12 months, ticks down to a 3.0% pace over six months, and then runs at a 2.4% annualized pace over three months.

The trend for the CPI core, and for the headline, both are quite good and would be completely consistent with the Bank of England cutting rates, a move that is widely expected – although the 12-month pace for each is excessive.

Not only is inflation showing signs of falling into the Bank of England's target zone, but the economy has been weak although the unemployment rate currently is only hovering around the 4% mark. Still, recent economic data have been weak, and the recent monthly GDP report posted a negative reading, further unsettling the outlook. The October monthly GDP change was estimated at -0.1% while the year-over-year increase in GDP in October produced a gain of just 1.1%. These metrics have put the U.K. economy on recession watch at a time when there has been a sharp revision in the budget process that will be much more constrictive. A sharp pullback in the manufacturing of motor vehicles is blamed for the sudden weakness in GDP in October. The three-month drop in GDP is the first such drop since December 2023.

Meanwhile, the headline and the core inflation statistics are progressing. The table calculates breadth statistics on how widespread inflation acceleration has been and we see that it has not been prevalent (over 50%) in September or November, although breadth did touch the 58% mark in October. Sequentially, inflation acceleration has been tamed: over 12 months (when it is neutral), six months, and three months. Over 12 months, inflation accelerated in only 50% of the categories. And inflation according to the CPI headline and in the core over six months continues to show deceleration to accompany narrowing breadth - only 8.3%. That reading indicates that there was more inflation deceleration than acceleration by a wide margin over six months. At 50%, inflation acceleration and deceleration forces are balanced. Readings below 50% indicate relatively more deceleration, and that is now the more common condition. Inflation acceleration is extremely rare across categories over six months and three months.

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On balance, inflation by the headline and by the core measures is well disciplined and falling into line although still excessive over 12 months. The breadth statistics reinforce the view that inflation is broadly coming to heel at the same time the real economy data are showing a cooling in the economy- and perhaps an excessive slowing at that. The new budget should put the economy under additional downward pressure, further restraining inflation and causing growth to moderate. In this situation, a rate cut from the Bank of England is the odds-on bet. Perhaps the only question now is how large a cut? How much will the Bank think that circumstance have changed and that key trends have been altered in a significant way? Will policy react mostly to lower trend tempered by an excessive 12-month pace, or will it be willing to look farther forward and weight heavily the deteriorating economic trend as well?

Economy in Brief: 2005

Jump to:

U.S. Personal Income Lifted By Strong Wage Gain

U.S. Personal Income Lifted By Strong Wage Gain

Euro-zone Growth Picks Up to 0.6% in Q3; Chain-Linking Introduced to Eurostat Aggregates

Chicago Purchasing Managers' "Business Barometer" Holds Up; Prices Accelerate to 26-Year High

Chicago Purchasing Managers' "Business Barometer" Holds Up; Prices Accelerate to 26-Year High

Denmark's Third Quarter GDP Growth Rate Tops That of Hungary and the Philippines

Chain Store Sales Backpedaled, Gas Prices Down Again

Consumer Confidence Recovered