Tom Moeller

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 Home price inflation eased further in June. The seasonally adjusted
 Case-Shiller 20 City Home Price Index rose 0.9% (12.1% y/y) on a
 seasonally adjusted basis after a 1.0% May gain. It was the third
 consecutive month of lessened increase following the 1.9% March jump. The
 result was to drop the 3-month annualized rate of increase to 15.3% from
 its record 20.2% recorded in March. Home prices in the narrower 10 city
 group rose 1.1% in June (11.9% y/y). Not adjusted for normal seasonal
 variation, the Case-Shiller Home Price Index rose 2.2% in June after a 2.5%
 May increase.
 The lessened monthly gain in the composite price index reflected
 price declines in five major metropolitan areas including Detroit,
 Minneapolis, Boston, Washington, D.C. and Cleveland. Lessened monthly
 gains were logged in most other cities with the exceptions of Los Angeles,
 Portland and Tampa.
 The Case-Shiller home price series is value-weighted, i.e., a greater
 index weight is assigned to more expensive homes. It is a three-month
 moving average and is calculated using the &quot;repeat sales
 method,&quot; where the item measured is the price change for a specific
 house compared to the price for that same house the last time it sold. The
 nation-wide S&amp;P/Case-Shiller home price indexes can be found in
 Haver's USECON database, and the city data highlighted below are in
 the REGIONAL database.
 
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 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
 <thead>
 <tr>
 <th class="firstcol" scope="col" >S&amp;P Case-Shiller
 Home Price Index (SA, %)</th>
 <th scope="col" >Jun</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Jun 
 Y/Y</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >20 City Composite Index</td>
 <td >0.9</td>
 <td >1.0</td>
 <td >1.7</td>
 <td >12.1</td>
 <td >0.9</td>
 <td >-3.9</td>
 <td >1.3</td>
 </tr>
 <tr class="grey2">
 <td class="firstcol" >Regional Indicators</td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 <td ></td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Las Vegas</td>
 <td >2.2</td>
 <td >2.6</td>
 <td >2.4</td>
 <td >24.9</td>
 <td >-0.3</td>
 <td >-6.5</td>
 <td >-7.7</td>
 </tr>
 <tr>
 <td class="firstcol" >San Francisco</td>
 <td >1.9</td>
 <td >2.0</td>
 <td >2.7</td>
 <td >24.5</td>
 <td >3.5</td>
 <td >-4.9</td>
 <td >9.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Los Angeles</td>
 <td >1.6</td>
 <td >1.4</td>
 <td >2.8</td>
 <td >19.9</td>
 <td >0.7</td>
 <td >-3.4</td>
 <td >5.3</td>
 </tr>
 <tr>
 <td class="firstcol" >Phoenix</td>
 <td >0.9</td>
 <td >1.1</td>
 <td >1.3</td>
 <td >19.8</td>
 <td >13.9</td>
 <td >-7.3</td>
 <td >-0.3</td>
 </tr>
 <tr>
 <td class="firstcol" >San Diego</td>
 <td >2.2</td>
 <td >2.5</td>
 <td >2.7</td>
 <td >19.3</td>
 <td >1.2</td>
 <td >-4.4</td>
 <td >7.3</td>
 </tr>
 <tr>
 <td class="firstcol" >Atlanta</td>
 <td >1.0</td>
 <td >1.1</td>
 <td >1.9</td>
 <td >19.0</td>
 <td >-7.8</td>
 <td >-7.0</td>
 <td >-2.4</td>
 </tr>
 <tr>
 <td class="firstcol" >Detroit</td>
 <td >-1.4</td>
 <td >2.4</td>
 <td >1.7</td>
 <td >16.4</td>
 <td >8.0</td>
 <td >0.0</td>
 <td >-3.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Miami</td>
 <td >1.3</td>
 <td >1.6</td>
 <td >2.5</td>
 <td >14.8</td>
 <td >5.1</td>
 <td >-4.9</td>
 <td >-2.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Portland</td>
 <td >1.1</td>
 <td >0.6</td>
 <td >1.4</td>
 <td >11.8</td>
 <td >1.7</td>
 <td >-7.1</td>
 <td >-3.2</td>
 </tr>
 <tr>
 <td class="firstcol" >Seattle</td>
 <td >0.9</td>
 <td >1.4</td>
 <td >1.2</td>
 <td >11.8</td>
 <td >2.1</td>
 <td >-6.6</td>
 <td >-3.6</td>
 </tr>
 <tr>
 <td class="firstcol" >Minneapolis</td>
 <td >-1.1</td>
 <td >-0.4</td>
 <td >3.0</td>
 <td >11.5</td>
 <td >6.0</td>
 <td >-8.2</td>
 <td >3.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Tampa</td>
 <td >0.8</td>
 <td >0.7</td>
 <td >0.8</td>
 <td >11.1</td>
 <td >2.7</td>
 <td >-6.6</td>
 <td >-4.0</td>
 </tr>
 <tr>
 <td class="firstcol" >Denver</td>
 <td >0.3</td>
 <td >0.6</td>
 <td >0.6</td>
 <td >9.4</td>
 <td >4.5</td>
 <td >-2.1</td>
 <td >0.9</td>
 </tr>
 <tr>
 <td class="firstcol" >Dallas</td>
 <td >0.4</td>
 <td >0.6</td>
 <td >0.9</td>
 <td >8.0</td>
 <td >3.2</td>
 <td >-2.4</td>
 <td >0.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Chicago</td>
 <td >0.3</td>
 <td >1.5</td>
 <td >1.6</td>
 <td >7.3</td>
 <td >-2.8</td>
 <td >-6.8</td>
 <td >-3.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Boston</td>
 <td >-0.2</td>
 <td >0.2</td>
 <td >1.3</td>
 <td >6.7</td>
 <td >0.5</td>
 <td >-2.0</td>
 <td >1.9</td>
 </tr>
 <tr>
 <td class="firstcol" >Washington, D.C.</td>
 <td >-0.2</td>
 <td >0.4</td>
 <td >0.9</td>
 <td >5.7</td>
 <td >2.1</td>
 <td >-0.4</td>
 <td >4.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Cleveland</td>
 <td >-0.1</td>
 <td >-0.3</td>
 <td >0.0</td>
 <td >3.5</td>
 <td >-0.1</td>
 <td >-4.3</td>
 <td >0.7</td>
 </tr>
 <tr>
 <td class="firstcol" >New York</td>
 <td >0.5</td>
 <td >0.6</td>
 <td >0.9</td>
 <td >3.3</td>
 <td >-2.4</td>
 <td >-3.1</td>
 <td >-1.5</td>
 </tr>
 </tbody>
 </table>
 
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Home price inflation eased further in June. The seasonally adjusted Case-Shiller 20 City Home Price Index rose 0.9% (12.1% y/y) on a seasonally adjusted basis after a 1.0% May gain. It was the third consecutive month of lessened [...]

U.S. Case-Shiller Home Price Index Increase Eases Again

Robert Brusca

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While everyone is getting warm and fuzzy about the improvement in growth and in growth prospects for the European Monetary Union, the Union continues to face important issues. One issue is that growth is uneven, as we have seen. The Union overall is posting a rise in GDP while a number of important members continue to be mired in recession; along with that there are persisting differences in the evolution of inflation.

In looking at the recent history and problems in this monetary union, we can argue about whether the real problem has been fiscal differences or differences in regional inflation. While they may be related, they are not the same thing. 

With countries in the periphery still suffering weak growth, their distress is not altogether bottling up inflation. Spain's overall PPI is growing at an 8.3% annual rate over three months compared to Germany where the index is declining at a 0.3% annual rate over three months. Year-over-year Spain's inflation is not so different up by 0.9% compared to Germany at 0.6%.

The biggest inflation divergence is in the table- fortunately - are among the Zone's single currency members those countries that are not in the single currency framework but are members of the economic union. Year-over-year the UK has a 4.5% inflation rate while Sweden is at a -2.7% inflation rate in the overall PPI.

Looking at single currency members only, that would be Germany, Spain, Portugal, Austria, Denmark and Finland, we see that over six months PPI prices are falling everywhere except in Portugal where inflation is flat at zero. However, turning to three-months, there's a difference with only Germany and Finland showing continuing price declines while Spain is posting and 8.3% annual rate of increase, Austria a 4.9% rate, and Portugal at a 2.3% rate of increase along with Denmark.

Of course, the European central bank prefers to look at inflation through the lens of the CPI, and the harmonized index of consumer prices. But inflation pressures at the producer or the wholesale level can eventually become a problem at the consumer level. And, of course, one of the things that inflation divergence tells us is that the economic union is not very well integrated and spells a problem for policy no matter what it looks at since indicator divergence (be it inflation or growth) says that there is no single gauge or group of countries it can or should look at to set policy. 

If the economic union were well-integrated, inflation divergence could not and would not persist. Prosperity would come to regions that had lower inflation (output costs), that would bring an increase in output, a migration of labor and eventually cause some increase in prices there. Meanwhile, high inflation areas (high cost areas) would become less prosperous, would cut back on output, would lose labor and prices would recede. In a truly integrated monetary union profitability, sector prices, and output prices would be determined in a single framework -- not in multiple local arenas -- with persisting differences. There would always be some regional differences, but essentially those differences would be bounded by economic competition and arbitrage. The point is that in the European Union these forces really don't exist in any strong fashion. Because of this failing, the European Union needs to do other things to try to create unity in its region-wide markets. Having adopted some harmonization rules, while a laudable exercise, is not enough.

We're going to continue to monitor inflation differences in producer prices and consumer prices in all different ways because we think that these are evidence of regional disparities that once again lead to regional problems. We still think that the best way to analyze the euro-Zone is by looking at its constituent members rather than the overall index of pooled data. The problem with pooled data is those data have weights that emphasize an economy's size. That means that Germany is going to get a tremendous weight when looking at what's going on in the euro-Zone as a single unit. However, the point that has been made time and time again is that the euro-Zone is running nothing that is anything like an optimal currency area. Anyone trying to prove that it is, gives off the unmistakable sounds of someone trying to smash a square peg through a round hole. 

The euro-Zone is first and foremost a political union that has a number of odd bedfellows thrown in together for the sake of political stability. Therefore the euro-Zone is a mismatched economic zone and that creates political tensions. Since it ultimately is a political animal we have to be aware of incipient political tensions that are going to be caused by the lack of economic suitability among the countries have been pulled together in the single zone with a single currency and a single monetary policy. The question is whether these countries can come to the necessary political accommodations given their unsuited economic circumstances. That means we have to continue to look at the divergence within the Zone in order to understand it and to assess its progress and viability. That means that looking at overall euro-Zone data will lead to an important loss of information. We recommend looking at the euro-trees instead of the euro-forest.


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While everyone is getting warm and fuzzy about the improvement in growth and in growth prospects for the European Monetary Union, the Union continues to face important issues. One issue is that growth is uneven, as we have seen. The [...]

Inflation Trend-Differences Hamper Policy in EMU

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 New orders for durable goods slumped 7.3% last month (-0.3% y/y)
 following a downwardly revised 3.9% increase during June, earlier reported
 as a 4.2% advance. The decline compared to consensus expectations for a
 3.7% drop. Fewer orders for transportation equipment led the decline with
 a 19.4% slump (-11.8% y/y). Aircraft orders dropped 44.3% (-32.0% y/y)
 held back by a 52.3% shortfall (-39.9% y/y) in nondefense bookings. Motor
 vehicle parts orders offset some of this decline with a 0.5% gain
 (5.4% y/y). 
 Outside of the transportation sector, orders growth has moderated. Orders
 less transportation slipped 0.6% (+5.9% y/y) following a 0.1% June uptick.
 Electrical equipment orders declined 4.3% (+4.3% y/y) after an unchanged
 in June while computers &amp; electronic products fell 3.6% (-0.7% y/y)
 following a 0.8% June decline. Orders for computers &amp; related products
 fell 19.9% (-22.7% y/y). Machinery orders were unchanged (+13.0% y/y) as
 were orders for primary metals (4.1% y/y). The 15.4% decline (-3.4% y/y)
 in nondefense capital goods orders reflected the drop in aircraft. A 3.3%
 shortfall (8.4% y/y) in orders elsewhere was the first drop in five
 months. 
 Shipments of durable goods slipped 0.3% (+2.1% y/y), the third
 shortfall in the last four months. Transportation shipments slipped 0.1%
 (+5.6% y/y). Shipments excluding transportation were off 0.4% (+0.7% y/y)
 led by a 3.2% drop (-9.2% y/y) in computers &amp; electronic products.
 Shipments of nondefense capital goods fell 1.4% (+1.2% y/y), the third
 decline in the last four months, while excluding aircraft orders were off
 1.5% (+0.8% y/y).
 Inventories of durable goods rose 0.4% (2.5% y/y), the first meaningful
 increase since February. Excluding transportation inventories rose 0.2%
 but were unchanged y/y. Unfilled orders for durable goods gained 0.4%
 (4.3% y/y). Excluding transportation backlogs gained 0.9% (2.3% y/y) and
 have firmed following a decline during all of last year.
 The durable goods figures are available in Haver's USECON database.
 The Action Economics consensus forecast figure is in the AS1REPNA
 database. 
 
 
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 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
 <thead>
 <tr>
 <th class="firstcol" scope="col" >Durable Goods NAICS
 Classification</th>
 <th>Jul</th>
 <th>Jun</th>
 <th>May</th>
 <th>Y/Y</th>
 <th>2012</th>
 <th>2011</th>
 <th>2010</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >New Orders</td>
 <td >-7.3</td>
 <td >3.9</td>
 <td >5.5</td>
 <td >-0.3</td>
 <td >4.1</td>
 <td >11.0</td>
 <td >23.2</td>
 </tr>
 <tr>
 <td class="firstcol" >Transportation</td>
 <td >-19.4</td>
 <td >11.7</td>
 <td >15.1</td>
 <td >-11.8</td>
 <td >8.9</td>
 <td >14.9</td>
 <td >49.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Total Excluding Transportation</td>
 <td >-0.6</td>
 <td >0.1</td>
 <td >1.3</td>
 <td >5.9</td>
 <td >2.1</td>
 <td >9.5</td>
 <td >15.2</td>
 </tr>
 <tr>
 <td class="firstcol" >Nondefense Capital
 Goods</td>
 <td >-15.4</td>
 <td >7.1</td>
 <td >12.8</td>
 <td >-3.4</td>
 <td >3.7</td>
 <td >15.3</td>
 <td >27.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Excluding
 Aircraft</td>
 <td >-3.3</td>
 <td >1.3</td>
 <td >2.1</td>
 <td >8.4</td>
 <td >2.1</td>
 <td >11.6</td>
 <td >12.9</td>
 </tr>
 <tr>
 <td class="firstcol" >Shipments</td>
 <td >-0.3</td>
 <td >-0.1</td>
 <td >1.3</td>
 <td >2.1</td>
 <td >6.4</td>
 <td >9.4</td>
 <td >11.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Inventories</td>
 <td >0.4</td>
 <td >0.2</td>
 <td >-0.1</td>
 <td >2.5</td>
 <td >4.5</td>
 <td >10.8</td>
 <td >9.4</td>
 </tr>
 <tr>
 <td class="firstcol" >Unfilled Orders</td>
 <td >0.4</td>
 <td >2.1</td>
 <td >1.2</td>
 <td >4.3</td>
 <td >3.7</td>
 <td >10.0</td>
 <td >5.2</td>
 </tr>
 </tbody>
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New orders for durable goods slumped 7.3% last month (-0.3% y/y) following a downwardly revised 3.9% increase during June, earlier reported as a 4.2% advance. The decline compared to consensus expectations for a 3.7% drop. Fewer [...]

U.S. Durable Goods Orders Decline Sharply; Orders Excluding Transportation Slip

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 Strength in the housing market continues to exhibit itself in
 rising selling prices. The U.S. House Price Index from the Federal
 Housing and Finance Agency (FHFA) rose 0.7% during May following a
 0.5% April rise. The 7.3% y/y rate of increase was double the gain
 during all of last year. During the last three months prices have
 risen at a firmer 11.2% annual rate.
 Home price appreciation was broad-based in the U.S. It continued
 to be greatest in the Pacific (15.8% y/y) and Mountain (12.7% y/y)
 states. Lesser gains were logged across the country with prices in
 the East South Central region up the least (2.7% y/y).
 The FHFA house price index is a weighted repeat sales index. It
 measures average price changes in repeat sales or refinancings on
 the same properties. It is based on transactions involving
 conforming, conventional mortgages purchased or securitized by
 Fannie Mae or Freddie Mac. Only mortgage transactions on single
 family properties are included. The FHFA data is available in
 Haver's USECON database.&nbsp;
 <table class="centered" border="0" cellSpacing="0" width="1231">
 <thead>
 <tr>
 <th class="firstcol" width="745">FHFA U.S. House Price Index
 Purchase Only (SA %)</th>
 <th scope="col" width="68">May</th>
 <th scope="col" width="69">Apr</th>
 <th scope="col" width="69">Mar</th>
 <th scope="col" width="69">Y/Y</th>
 <th scope="col" width="69">2012</th>
 <th scope="col" width="69">2011</th>
 <th scope="col" width="69">2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="745">Total</td>
 <td align="center" width="68">0.7</td>
 <td align="center" width="69">0.5</td>
 <td align="center" width="69">1.5</td>
 <td align="center" width="69">7.3</td>
 <td align="center" width="69">3.5</td>
 <td align="center" width="69">-4.1</td>
 <td align="center" width="69">-2.9</td>
 </tr>
 <tr>
 
 <td class="firstcol" width="745">&nbsp; Pacific</td>
 <td align="center" width="68">0.8</td>
 <td align="center" width="69">1.8</td>
 <td align="center" width="69">2.4</td>
 <td align="center" width="69">15.8</td>
 <td align="center" width="69">4.9</td>
 <td align="center" width="69">-7.0</td>
 <td align="center" width="69">-2.2</td>
 
 </tr>
 <tr>
 
 <td class="firstcol" width="745">&nbsp; Mountain</td>
 <td align="center" width="68">-0.1</td>
 <td align="center" width="69">1.9</td>
 <td align="center" width="69">1.3</td>
 <td align="center" width="69">12.7</td>
 <td align="center" width="69">8.2</td>
 <td align="center" width="69">-6.9</td>
 <td align="center" width="69">-6.5</td>
 
 </tr>
 <tr>
 
 <td class="firstcol" width="745">&nbsp; South Atlantic</td>
 <td align="center" width="68">1.8</td>
 <td align="center" width="69">-0.6</td>
 <td align="center" width="69">1.3</td>
 <td align="center" width="69">8.0</td>
 <td align="center" width="69">4.1</td>
 <td align="center" width="69">-5.2</td>
 <td align="center" width="69">-4.8</td>
 
 </tr>
 <tr>
 
 <td class="firstcol" width="745">&nbsp; West South Central</td>
 <td align="center" width="68">0.9</td>
 <td align="center" width="69">0.1</td>
 <td align="center" width="69">0.3</td>
 <td align="center" width="69">6.1</td>
 <td align="center" width="69">4.3</td>
 <td align="center" width="69">-1.1</td>
 <td align="center" width="69">-0.3</td>
 
 </tr>
 <tr>
 
 <td class="firstcol" width="745">&nbsp; East North Central</td>
 <td align="center" width="68">0.5</td>
 <td align="center" width="69">0.7</td>
 <td align="center" width="69">1.8</td>
 <td align="center" width="69">4.7</td>
 <td align="center" width="69">2.2</td>
 <td align="center" width="69">-3.7</td>
 <td align="center" width="69">-3.2</td>
 
 </tr>
 <tr>
 
 <td class="firstcol" width="745">&nbsp; West North Central</td>
 <td align="center" width="68">-0.0</td>
 <td align="center" width="69">0.2</td>
 <td align="center" width="69">1.1</td>
 <td align="center" width="69">4.4</td>
 <td align="center" width="69">3.5</td>
 <td align="center" width="69">-3.3</td>
 <td align="center" width="69">-2.0</td>
 
 </tr>
 <tr class="odd">
 <td class="firstcol" width="745">&nbsp; New England</td>
 <td align="center" width="68">0.8</td>
 <td align="center" width="69">0.1</td>
 <td align="center" width="69">1.3</td>
 <td align="center" width="69">3.9</td>
 <td align="center" width="69">-0.1</td>
 <td align="center" width="69">-2.2</td>
 <td align="center" width="69">-2.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="745">&nbsp; Middle Atlantic</td>
 <td align="center" width="68">0.9</td>
 <td align="center" width="69">0.4</td>
 <td align="center" width="69">1.5</td>
 <td align="center" width="69">3.3</td>
 <td align="center" width="69">-0.0</td>
 <td align="center" width="69">-3.2</td>
 <td align="center" width="69">-1.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="745">&nbsp; East South Central</td>
 <td align="center" width="68">-1.5</td>
 <td align="center" width="69">0.8</td>
 <td align="center" width="69">1.8</td>
 <td align="center" width="69">2.7</td>
 <td align="center" width="69">2.6</td>
 <td align="center" width="69">-2.6</td>
 <td align="center" width="69">-2.8</td>
 </tr>
 </tbody>
 </table>
 
 
 
 <td> 
 New England: Maine, New Hampshire, Vermont,
 Massachusetts, Rhode Island and Connecticut 
 Middle Atlantic: New York, New Jersey &amp;
 Pennsylvania. 
 East North Central: Michigan, Wisconsin, Illinois,
 Indiana and Ohio. 
 West North Central: North Dakota, South Dakota,
 Minnesota, Nebraska, Iowa, Kansas and Missouri. 
 South Atlantic: Delaware, Maryland, District of
 Columbia, Virginia, West Virginia, North Carolina, South
 Carolina, Georgia and Florida. 
 East South Central: Kentucky, Tennessee, Mississippi
 and Alabama. 
 West South Central: Oklahoma, Arkansas, Texas and
 Louisiana. 
 Mountain: Montana, Idaho, Wyoming, Nevada, Utah,
 Colorado, Arizona and New Mexico. 
 Pacific: Hawaii, Alaska, Washington, Oregon and
 California. 
 </td>
 &nbsp;
 
 
 
 &nbsp;
 
 
 




</html>

Strength in the housing market continues to exhibit itself in rising selling prices. The U.S. House Price Index from the Federal Housing and Finance Agency (FHFA) rose 0.7% during May following a 0.5% April rise. The 7.3% y/y rate of [...]

FHFA Home Price Index Builds Upward Momentum

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 Fewer new home sales accompanied lower home prices
 last month. New home sales in July dropped
 13.4% to 394,000 from 455,000 in June, initially reported as 497,000. The
 latest was the lowest number of new home sales since October. The figure
 disappointed the Consensus forecast for 492,000 sales in July. These
 volume figures are quoted at seasonally adjusted annual rates.
 Sales were down across the country. The West paced the fall-off with a
 16.1% drop (-7.8% y/y) to 94,000, the lowest figure since March of last
 year. The decline was followed by the South where home sales fell 13.4%
 (+16.4% y/y) to 213,000, the lowest level since October. The Midwest
 region followed with a 12.9% decline to 54,000 and were unchanged y/y.
 Finally, sales in the Northeast dropped 5.7% (+10.0% y/y) to 33,000.
 
 
 The median price of a new home slipped 0.5% to
 $257,200. Prices have fallen 7.9% during the last three months.
 Nevertheless, they remain 8.3% ahead of July 2012. Average new home prices
 rose to $322,700 during July, up 6.8% from June and up 14.3% from a year
 ago.
 
 The inventory of unsold homes rose by nearly one-quarter y/y and the
 months' sales supply of new homes rose to 5.2, its highest since January
 of last year. The length of time to sell a new home retreated in July to
 3.5 months compared to 14.0 months at the end of 2009.
 
 The data in this report are available in Haver's USECON database. The
 consensus expectation figure is from the Action Economics survey and is
 available in the AS1REPNA database.&nbsp;
 The Parts Are More Than the Whole: Separating Goods and Services to
 Predict Core Inflation from the Federal Reserve Bank of New York can
 be found <a href="http://www.newyorkfed.org/research/current_issues/ci19-7.pdf">here.</a>
 
 <a href="/comment/130823d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130823d.png"></a>
 <a href="/comment/130823e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130823e.png"></a>
 
 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
 <thead>
 <tr>
 <th class="firstcol" scope="col" >U.S. New Home Sales</th>
 <th scope="col" >July</th>
 <th scope="col" >June</th>
 <th scope="col" >May</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total SAAR, 000s</td>
 <td >394</td>
 <td >455</td>
 <td >439</td>
 <td >6.8</td>
 <td >368</td>
 <td >306</td>
 <td >321</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Northeast</td>
 <td >33</td>
 <td >35</td>
 <td >29</td>
 <td >10.0</td>
 <td >29</td>
 <td >21</td>
 <td >31</td>
 </tr>
 <tr>
 <td class="firstcol" >Midwest</td>
 <td >54</td>
 <td >62</td>
 <td >75</td>
 <td >0.0</td>
 <td >47</td>
 <td >45</td>
 <td >45</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >South</td>
 <td >213</td>
 <td >246</td>
 <td >233</td>
 <td >16.4</td>
 <td >196</td>
 <td >168</td>
 <td >173</td>
 </tr>
 <tr>
 <td class="firstcol" >West</td>
 <td >94</td>
 <td >112</td>
 <td >102</td>
 <td >-7.8</td>
 <td >97</td>
 <td >72</td>
 <td >74</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Median Price (NSA, $)</td>
 <td >257,200</td>
 <td >258,500</td>
 <td >262,600</td>
 <td >8.3</td>
 <td >242,108</td>
 <td >224,317</td>
 <td >221,242</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Fewer new home sales accompanied lower home prices last month. New home sales in July dropped 13.4% to 394,000 from 455,000 in June, initially reported as 497,000. The latest was the lowest number of new home sales since October. The [...]

U.S. New Home Sales Retrace All of This Year's Gains

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The UK economy expanded 0.7% (Q/Q) in the second quarter, in a revised GDP statement issued today. The new GDP growth rate exceeds the initial estimate of 0.6%. GDP is now advancing at a 2.9% annual rate in the quarter and is up by 1.5% Year-over-year in Q2. Construction and manufacturing seem to have performed slightly better in this second pass at estimating GDP. 

Trade is the most important contributor to growth in the second quarter. UK export data have been showing strength recently, so this result is no surprise. Export data for the euro-Zone has also showed some pick up. There is evidence of demand stirring in the global economy, although just where that is remains a bit difficult to puzzle out. UK exports jumped at a 15.2% annual rate in real terms in Q2. The quarterly gain in UK exports is the strongest since Q4 of 2011. Meanwhile, imports are advancing as well as domestic demand is reviving. Imports rose at a strong 10.5% annual rate in 2013-Q2- still short of the pace for exports. On the year exports are up by 3.4% compared to imports at 0.1%. 

During the downturn and weak recovery public expenditures and exports have helped to soften the blow on the economy as both of those flows have net gains over the period and government spending was always a positive force in GDP while exports have had only a few negative contributions to GDP during the downturn and weak recovery. Imports also have reduced the blow to GDP as they are still lower on average by 0.5%, over the last five and one-quarter years. Imports are a subtraction from GDP. Private consumption has averaged a pace of decline of 0.5% over the last 5 1/4 years as domestic demand averaged a 1% decline. Housing, as always, was weak with an average rate of decline on this period of 4.4%. 

However, the big issue has been capital formation. For all of the efforts to try to craft and austerity program that might still return the economy to growth quickly, capital formation fell harder in the last 5 1/4 years on average than other major GDP component, averaging a pace of contraction of 5%- even more severe than that of housing. 

In revised data capital formation spending is beginning to pick up. However, it is still lower on balance when measured year-over-year. 

The UK economy is doing better than the euro-Zone, although not quite as well as Germany. Recent UK indicators including a robust report from the CBI showing a strong domestic and export order component make it look as though the economy is on the right track. Services are still listless, however.

The UK economy is still importantly plugged into the EMU area where growth, though stirring, has poor underpinnings. The UK itself has a still extraordinary monetary policy being run. The UK growth data have better underpinnings the does the euro-Zone as a whole, but the UK also faces its own issues; like most advanced economics fiscal policy is on the check-list of things it must pay attention to. Many key financial institutions still need a good deal of attention. As growth becomes better-established many of the highly industrialized economies are going to have turn their attention from trying to make their recovery speed even faster to shoring up their excessive fiscal imbalances and banking systems. Growth will do some of the fixing, but not all of it. 


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The UK economy expanded 0.7% (Q/Q) in the second quarter, in a revised GDP statement issued today. The new GDP growth rate exceeds the initial estimate of 0.6%. GDP is now advancing at a 2.9% annual rate in the quarter and is up by [...]

UK GDP Is Even Stronger

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The Markit 'flash' indicators for the euro-Zone show continued improvement in the manufacturing and services sectors in August. The euro-Area manufacturing index is up to 51.3 from a level of 50.3 in July. The services sector made a sharper gain but to a slightly slower pace with its index at 51.0 compared to 49.62 in July.

Both sectors in the Eurozone show steady progress from 12 months to six months to three months. The manufacturing index is higher in relative terms as it stands at the 48.9 percentile of its historic queue since 2006. The services index sits only at its 43.5th percentile since 2006, in the middle of its 43rd percentile.

In August, Germany shows continuing increases in its manufacturing PMI. It has moved up from 48.67 in June to 50.25 in July and is at the 51.98 level in August 2013. By comparison France, the second-largest country in the Monetary Union, flattened out in August at 49.74 just slightly weaker than its 49.76 reading in July but up from its 48.34 reading in June. The shortfall of the French index relative to the neutral value of '50' indicates that output in MFG is still contracting. Both France and Germany show substantial progress from 12 months to six months to three months but France is now hesitating to continue in August and output is still declining.

On the services side of the equation, Germany is showing expansion but not any increase in it pace in August as its level of 52.42 is slightly below its 52.46 reading for July. In France the service sector backtracked in August. It had improved fairly sharply to 48.28 in July from 46.47 in June. However, in August, it has fallen back to 47.7. Since it's below the level of 50, it shows that the sector is contracting and contracting in a slightly faster pace than it was in July. 

Both the French services and manufacturing sectors are still shrinking.

Putting aside the changes in the diffusion levels for the manufacturing readings in Germany and France the position of those manufacturing readings in their historic queues remain low. Even though Germany shows a diffusion index that indicates expansion, the German index only sits at the 43rd percentile of its historic queue, still 6.5 percentage points below what has been its median. For France the relative position is somewhat worse as its manufacturing index sits at the 39th percentile level indicating a nearly 11 percentage point shortfall from its historic median since 2006.

Viewing the service sector from a percentile standing basis, the German index, while showing expansion, is relatively lower in its historic profile than even its manufacturing index, sitting at the 40th percentile of its historic queue. However, France's service sector is shrinking and shrinking faster in August and is much weaker than Germany, sitting only in the 26th percentile of its historic queue barely above the lower quartile of its historic queue of values since the year 2006.

While there is some optimism about the Monetary Union because of these improved PMI levels in August (and earlier) much of the improvement owes to Germany and the strong weight it bears in the Monetary Union. Since Germany has an economy based on export-led growth the improvement in Germany doesn't have the same kind of transmission or 'locomotive' effect that you might think. Its main impact on the EMU index is through the high weighted value that it contributes to the overall EMU standing. The weakness in France is illustrative as it is another important EMU economy that is adjacent to the German economy and it is not being pulled up very strongly by the German revival. The same is true of many other European Monetary Union economies that are still struggling and that still have issues.

To have confidence in the Monetary Union's revival we need to look beyond what the euro-Area index is doing to see what a substantial number of the countries in the Union are doing. The large weight for Germany in the EMU index, while perhaps correct for some methods of analysis, obfuscates the underlying trends and smothers intra-union divergences. We remain circumspect about what's really going on in the Monetary Union and somewhat wary of future prospects simply because the underlying circumstances in so many European economies still have some holes, question marks, and needs. We would like to see the improvement from the micro-economic ground up instead of from the macro-economic data down. That is not happening. 


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The Markit 'flash' indicators for the euro-Zone show continued improvement in the manufacturing and services sectors in August. The euro-Area manufacturing index is up to 51.3 from a level of 50.3 in July. The services sector made a [...]

EMU Recovery Continues as Does Bifurcation

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 The index of Leading Economic Indicators, published by the Conference
 Board, increased 0.6% last month (3.1% y/y). The gain was the strongest
 since April and followed an unrevised no-change during June. A 0.5% rise
 had been expected for July in the Action Economics Forecast Survey. The
 breadth of component increase improved last month. Eighty percent of the
 component series had a positive influence on the index, the most since
 February. A steeper interest rate yield curve and the leading credit index
 had the largest positive influences on the total. These were followed by
 higher stock prices, more building permits and an increased ISM new orders
 index. Offsetting the gains were a shorter workweek and a slip in
 nondefense capital goods orders.
 The index of coincident indicators rose 0.2% (1.9% y/y) after a
 downwardly revised 0.1% June gain. Each of the component series - payroll
 employment, personal income less transfers, manufacturing &amp; trade
 sales and industrial production - increased.
 The index of lagging economic indicators fell 0.2% (2.4% y/y) following
 a downwardly revised 0.2% June rise. The slip suggested that economic
 excesses eased last month. Fewer C&amp;I loans outstanding, a shorter
 duration of unemployment and an easier increase in the services CPI had
 the largest dampening impacts on the overall series. 
 Another leading economic series is the ratio of coincident-to-lagging
 indicators. It measures how the economy is performing versus its excesses.
 The figure rose last month (-0.6% y/y) to its highest level since
 December.
 The Conference Board figures are available in Haver's BCI
 database; the components are available there, and most are also in USECON.
 The forecast figures for the Consensus are in the AS1REPNA
 database. Visit the Conference Board's <a href="http://www.conference-board.org/">site</a>
 for coverage of leading indicator series from around the world.&nbsp;
 
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 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 
 <thead>
 <tr>
 <th class="firstcol" scope="col" >Business Cycle
 Indicators (%)</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Jun</th>
 <th scope="col" >May</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Leading</td>
 <td >0.6</td>
 <td >0.0</td>
 <td >0.3</td>
 <td >3.1</td>
 <td >2.0</td>
 <td >5.1</td>
 <td >8.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Coincident</td>
 <td >0.2</td>
 <td >0.1</td>
 <td >0.3</td>
 <td >1.9</td>
 <td >2.1</td>
 <td >2.4</td>
 <td >1.2</td>
 </tr>
 <tr>
 <td class="firstcol" >Lagging</td>
 <td >-0.2</td>
 <td >0.2</td>
 <td >0.3</td>
 <td >2.4</td>
 <td >3.6</td>
 <td >2.7</td>
 <td >-3.1</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The index of Leading Economic Indicators, published by the Conference Board, increased 0.6% last month (3.1% y/y). The gain was the strongest since April and followed an unrevised no-change during June. A 0.5% rise had been expected [...]

U.S. Leading Economic Indicators Rise

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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Andrew Cates

**The Blue Chip Growth Consensus**
The first chart this week highlights a striking feature of recent forecast revisions: the outperformance of Asia, and Taiwan in particular. Over the past six months, Blue Chip panelists have upgraded their 2026 GDP growth forecasts most aggressively for Taiwan, far outpacing revisions elsewhere. This reflects the central role Taiwan plays in the global AI supply chain, especially in advanced semiconductors, where demand linked to data centres, AI accelerators and high-performance computing continues to strengthen. More broadly, positive revisions across parts of Asia suggest that the current AI-driven investment cycle is not just a US story, but one that is increasingly feeding through global tech supply chains, boosting exports, industrial production and capital spending across the region. In contrast, forecast changes elsewhere remain far more muted, underscoring how tightly the near-term growth impulse from AI is concentrated in economies most directly exposed to the semiconductor and hardware build-out.

260212Z1.jpg

**The Blue Chip Inflation Consensus**
The second chart highlights a growing theme of cross-country divergence, this time through the lens of inflation and monetary policy. Recent changes to Blue Chip CPI forecasts for 2026 show upward revisions in economies such as Japan, Australia and Canada, where inflation pressures are proving more persistent and policy tightening is either already under way or increasingly expected. In contrast, inflation forecasts in the US have been revised lower, consistent with softer recent data and reinforcing expectations of further monetary easing. The result is an increasingly asymmetric global policy backdrop: some central banks are still leaning against residual inflation risks, while others are preparing to shift toward rate cuts. This divergence, moreover, could matter more for global capital flows, exchange rates and financial conditions in the period ahead.

260212Z2.jpg

**South Korea’s Semiconductor Trade**
The third chart provides a concrete, high-frequency illustration of the forces underpinning the forecast upgrades seen earlier for Asia. South Korea’s semiconductor exports have surged sharply on a year-on-year basis, marking one of the strongest upswings of the past decade and underscoring the revival of the global tech cycle. This acceleration is closely linked to AI-related demand, particularly for advanced memory chips used in data centres and high-performance computing. Alongside Taiwan, South Korea sits at the core of the AI hardware supply chain, and the strength of semiconductor exports helps explain why growth expectations in parts of Asia have been revised higher so decisively. In this sense, the chart offers a real-economy counterpart to the consensus forecast revisions: the AI boom is not just a financial or expectations story, but one that is already showing up clearly in trade and industrial data across the region.

260212Z3.jpg

**Global Supply Chain Pressures**
The fourth chart places recent inflation dynamics in a broader supply-chain context and offers little evidence that current US tariff policies are materially exacerbating global bottlenecks. The Global Supply Chain Pressure Index has remained close to historical norms in recent months, a sharp contrast with the extreme dislocations seen during the pandemic period. Consistent with this, producer price inflation across advanced economies has remained muted, reinforcing the tight relationship between supply-chain stress and upstream price pressures. While tariffs may still influence relative prices at the margin and contribute to sector-specific adjustments, the data do not point to a broad-based resurgence in supply-chain pressures of the kind that would generate renewed, systemic inflationary pressure.

260212Z4.jpg

**Uncertainty in the US versus Europe** 
The fifth chart highlights a striking shift in the global policy uncertainty landscape. The US news-based economic policy uncertainty index has risen sharply and is now approaching levels more typically associated with Europe — a vivid contrast with the post-GFC and post-pandemic period, when US policy uncertainty was consistently well below European norms. This convergence likely reflects a combination of factors: renewed uncertainty around US trade policy and tariffs, questions over fiscal sustainability and debt dynamics, and growing debate around institutional independence, including the role of the Federal Reserve. At the same time, political polarisation and an increasingly unpredictable policy environment have become more prominent features of the US backdrop. The implications are potentially important for markets. A sustained rise in policy uncertainty would argue for a higher risk premium on US assets, particularly if it begins to influence corporate investment decisions, capital flows or the perceived safe-haven status of US markets.

260212Z5.jpg

**The Global Business Cycle** 
The final chart brings the story together by highlighting a further strengthening in global economic sentiment in February. The Sentix global expectations index moved higher alongside a renewed run of positive economic surprises across a number of major economies, as captured by the Citi Global Economic Surprise Index. This combination points to an environment in which incoming data have consistently exceeded expectations, helping to reinforce investor confidence and support risk appetite. Taken together, the improvement in sentiment and the upside surprise in activity data underscore the constructive macroeconomic backdrop that markets have been responding to in recent months — one characterised by resilient growth, easing inflation pressures and still-supportive financial conditions, even as policy paths and regional dynamics continue to diverge.

260212Z6.jpg

While markets have been unsettled at times by shifting policy expectations, geopolitical noise and questions around valuation, underlying global macroeconomic signals remain broadly supportive. Upgrades to Blue Chip consensus growth forecasts for parts of Asia — led by Taiwan — point to the tangible impact of the AI-driven tech cycle, a theme reinforced by the sharp rebound in semiconductor exports from South Korea (charts 1 and 3). At the same time, revisions to inflation forecasts underline a growing divergence in monetary policy paths, with easing still expected in the US and UK, while tighter stances persist elsewhere (chart 2). Importantly, there is little evidence so far that global supply-chain pressures are re-emerging in a way that would reignite inflation, notwithstanding lingering trade policy tensions (chart 4). Against this backdrop, rising policy uncertainty — particularly in the US — stands out as a potential source of risk, with implications for asset pricing and risk premia (chart 5). Yet the improvement in global sentiment surveys and a continued run of positive economic surprises suggest that markets are responding not just to policy noise, but to a genuinely resilient and improving macroeconomic environment (chart 6).

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Charts of the Week: AI-Led Growth Meets Monetary Divergence

Winnie Tapasanun

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Existing home sales fell 8.4% m/m (-4.4% y/y) to a lower-than-expected 3.91 million units (SAAR) in January following a downwardly revised 4.4% gain to 4.27 million in December (previously +5.1%; 4.35 mil.), according to the National Association of Realtors (NAR). January sales registered the lowest level since September 2024 and the deepest m/m drop since February 2022, well below the Action Economics Forecast Survey expectation of 4.20 million. Sales were 39.2% below a high of 6.43 million in January 2022 and 40.8% below a peak of 6.60 million in January 2021. The sales fall accompanied a drop in the average 30-year fixed mortgage rate to 6.11% in January, the lowest since September 2022, after declining to 6.20% in December, according to Freddie Mac. The sales figures are based on closings of sales contracts signed over the past couple of months.

Existing single-family home sales slid 9.0% (-4.3% y/y) to 3.53 million units in January, the lowest level since September 2024, after a 4.3% gain to 3.88 million in December. Sales of condos and co-ops fell 2.6% (-5.0% y/y) to 380,000 following a 5.4% December rebound to 390,000.

By region, January existing home sales decreased m/m across all major regions. Sales in the West slumped 10.3% (-7.9% y/y) to 700,000 in January after a 4.0% increase in December, marking the third m/m decline in four months and the lowest level since December 2023. Sales in the South dropped 9.0% (-1.6% y/y) to 1.81 million, the lowest reading since October 2024, reversing a 6.4% December gain. Sales in the Midwest fell 7.1% (-7.1% y/y) to 920,000, the lowest level since September 2024, after a 2.1% December increase. Sales in the Northeast declined 5.9% (-4.0% y/y) to 480,000, the lowest level since June 2025, after rising 2.0% in December and November. The South remained the dominant region, accounting for 46.3% of total U.S. existing home sales.

The median price of all existing homes (NSA) fell 2.0% (+0.9% y/y) to $396,800 in January after a 1.2% decline to $405,100 in December ($405,400 initially), representing the sixth m/m fall in seven months and the lowest level since February 2025. Prices were 8.3% below a high of $432,700 in June 2025. The median price of an existing single-family home, also down for the sixth time in seven months, slid 2.2% (+0.6% y/y) to a one-year-low $400,300 in January after a 1.3% decline to $409,500 in December. The median price of condos and co-ops, up for the third time in four months, rose 0.9% (3.8% y/y) to $364,600, the highest level since August, after a 0.4% December increase to $361,200. Regionally, overall prices fell m/m in the Midwest (-3.6%; +2.3% y/y) and South (-2.3%; +0.1% y/y) in January, but increased m/m in the Northeast (+1.1%; +5.8% y/y) and West (+0.4%; -1.4% y/y).

Inventories of homes for sale weakened further in January. The number of existing homes for sale (NSA) fell 0.8% (+3.4% y/y) to 1.22 million units on top of a 14.6% December plunge to 1.23 million, posting the fourth consecutive m/m fall and the lowest level since January 2025. The supply of homes on the market at the current selling rate (NSA) rose to 3.7 months in January after falling to 3.5 months in December (the lowest since January 2025). The most recent high of 4.6 months was in August 2025, while a record low in supply of 1.6 months was in January 2022.

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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- January sales -8.4% (-4.4% y/y) to 3.91 mil., below expectations; steepest m/m fall since Feb. ’22.
- Widespread regional m/m declines: West (-10.3%), South (-9.0%), Midwest (-7.1%), Northeast (-5.9%); all regions down y/y.
- Median sales price -2.0% (+0.9% y/y) to $396,800, lowest since Feb. ’25.
- Unsold inventory -0.8% (+3.4% y/y) to 1.22 mil. units, a one-year low; 3.7 months' supply.

U.S. Existing Home Sales Drop in January; Lowest Level Since Sept. ’24

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped 5,000 to 227,000 in the week of February 7, from 232,000, revised from 231,000, in the week ended January 31. The four-week average rose 7,000 to 219,500 from 212,500. The Action Economics Forecast Survey looked for 225,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 21,000 to 1.862 million in the week ending January 31, from 1.841 million, revised from 1.844 million, in the week ending January 24. The four-week moving average stood at 1.847 million in the January 31 week, the lowest level for this average since October 5, 2024, when it was 1.846 million. The prior week was 1.850 million. The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous nine weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 24, the highest unemployment rates were in Rhode Island (2.95%), New Jersey (2.78%), Massachusetts (2.68%), Minnesota and Washington (both 2.58%), California (2.30%), and Montana (2.21%). The lowest rates were in Florida (0.31%), Arkansas (0.39%), North Carolina (0.43%), Louisiana (0.41%), and Alabama (0.45%). Rates in other notable states include Illinois (2.23%), New York (2.11%), Pennsylvania (1.91%), and Texas (1.16%). 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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- New claims dropped 5,000 to 227,000.
- Continuing claims rose to 1.862 million.
- The insured unemployment rate remained at 1.2% for the tenth consecutive week.

U.S. Initial Unemployment Claims Declined in Latest Week

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U.K. GDP slowed to a crawl at the end of the year, with growth at a 0.2% (annualized) rate logged in both the third and fourth quarters as 2025 drew to a close. The year had started with a strong 2.7% growth rate in Q1, which slipped to a 0.8% pace in the second quarter and decelerated to negligible growth at the end of the year.

These quarterly growth rates correspond to higher but obviously declining year over year growth rates. Because the quarterly growth rates diminished as the year progressed, year over year growth to start 2025 was at 1.8%; growth slipped to 1.4% in the second quarter and then to 1.2% in the third quarter. By the end of the year, growth had slipped to 1%.

The quarterly growth rates in the fourth quarter show public spending picked up to a 1.7% annual rate following 1% in the third quarter and erratic behavior in the first two quarters. Capital formation has remained relatively strong but has also oscillated, with first quarter growth at a blowout annual rate of 14.3%, falling to a contraction of 3.1% in Q2, rising back to 4.4% in Q3, and then declining at a 0.5% annual rate in Q4. So the year-over-year growth rates for capital formation during the course of the year only slipped from 4% in the first quarter to 3.6% in the fourth quarter, holding up fairly solidly and indicating strong rates of expansion for capital spending.

Housing, which was firm and strong in Q1 and Q2, slipped to a 0.8% annual rate of growth in the third quarter, and then housing investment fell at a 9.1% annualized rate in the fourth quarter. Year over year trends for housing show mostly low to moderate spending growth for residential investment.

U.K. exports have been floundering quarter-to-quarter, alternating between expanding and contracting; this corresponds to year over year growth rates that steadily diminish. In the first quarter of 2025, exports grew 3.5% year-over-year; that slipped to a 2% growth rate in Q2, then to a 1.5% growth rate in the third quarter. In the fourth quarter, U.K. exports are falling at a 0.5% annual rate of growth.
 
The export pattern contrasts with U.K. imports. They have mostly continued to grow, posting positive growth rates in three of the four quarters, starting the year with 5% quarterly growth and ending the fourth quarter with a 3.3% annual growth rate. Import growth rates have slipped, but not as much as other growth rates in GDP. For example, first quarter import growth was extremely strong at 7.6%; that year over year growth rate slips to 2.1% in Q2, then rises back to 5.3% in Q3, and finishes the year at 2.3%. There is slippage, but still significant growth, and the year began on a really high note.

Domestic demand has been fluctuating. In both quarterly and annual terms, there is unevenness. Quarterly growth rates range from 3.1% at an annual rate in Q1, to a 0.6% and 0.7% annual rate in the middle two quarters of the year; domestic demand ends the fourth quarter with a quarterly growth rate of 2.1% annualized. This causes year-over-year growth to be 2.9% in the first quarter; that falls to 1.2% in the second quarter, rebounds to 2.1% in the third quarter, and ends the year at 1.6% year-over-year.

Domestic demand has consistently been stronger than private consumption and it has been supported by both public consumption and by capital formation. Private consumption in 2025 has been erratic, logging 1.2% quarterly growth, annualized, in the first quarter; growth dropped to 0.2% in Q2, rising back to 1.7% in Q3, and then ending the year at a 0.6% rate of expansion quarter-over-quarter. The year-over-year data showed private consumption slipping but not dramatically, at a pace of 1.1% in the first quarter, up to 1.2% in the second quarter and then logging 0.9% in both the third and fourth quarters of 2025 as domestic demand ended the year stronger.

All of the U.K. growth rates are consistently and substantially below their five year growth rates. The economy continues to have a problem with inflation. Some recent inflation signals, however, suggest that there may be deceleration and progress, but the Bank of England hasn’t been convinced yet, even though Monetary Policy Committee members continue to speak favorably about the prospects for rate reductions ahead. The U.K. also has a corseted fiscal situation as there’s not much flexibility to spend more given its relatively bloated budget. The economy is waffling. The current administration has had its share of political issues, having recently had to eject several members from leadership positions in government. The outlook for growth is still touch and go. The outlook for inflation holds slightly more promise for deescalation. But overall, there is a lot of uncertainty over events and the growth path for the U.K. economy.

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United Kingdom

U.K. Second Half GDP Slows to a Crawl

Michael J. Moran

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Nonfarm payroll employment rose 130,000 in January, notably better than the expected increase of approximately 50,000 and far better than the average monthly gain of 15,000 in 2025. Some observers might not be impressed because the increase was concentrated in the health-care and social-services category (124,000), which is not especially sensitive to the business cycle. In addition, the increase in this category was unusually sharp, suggesting the possibility of random volatility.  The increase was the largest since the summer of 2020, when pandemic-related noise was driving activity.

To be sure, the employment gain outside of health-care and social-services was modest, but the report carried some bright spots nonetheless. The construction sector, which is highly sensitive to business conditions, rose sharply for the second time in the past three months (net gain of 65,000). Similarly, employment in business services, another area sensitive to the business cycle, rose for the third consecutive month, a marked shift from declines in nine of the prior ten months. The manufacturing sector added 5,000 jobs, a moderate change but a welcome break from 13 consecutive declines before January.

Results from the household survey also were favorable, with the unemployment dipping 0.1 percentage point for the second consecutive month. Also, it was a “strong” decline, with the drop reflecting a surge in employment as measured by the household survey (528,000) that exceeded a sharp increase in the size of the labor force (387,000). The broad unemployment rate (the so-calledU-6 measure) showed even sharper improvement (off 0.4 percentage point to 8.0%). Both of the two items added to the headline measure in the broad rate contribute to the decline. The number of individuals working part time for economic reasons fell 8.5% and the number of individuals marginally attached to the labor force fell 4.9%.

An increase of 0.4% in average hourly earnings could be viewed as a bright spot. The monthly change was in the upper end of the range from the past year or two, which left little change in the year-over-year increase (3.7%). The steady advance at a rate in excess of inflation shows that demand for workers has not evaporated.

The length of the average workweek often receives scant attention in reviews of the labor market, but it can be an important variable. Businesses can alter the pace of activity by adjusting hours worked rather than changing payrolls, and thus, shifts in the workweek can signal changes in the tempo of the economy. Fortunately, the workweek has been steady recently, rising 0.1 hour in January and moving to the upper end of the tight range that has been in place for the past year or two. 

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- The increase in employment in January was firm, although narrowly based.
- The unemployment rate dipped for the second consecutive month, led by strong employment as measured by the household survey.