Tom Moeller

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 The Composite Index of manufacturing sector activity from the
 Institute for Supply Management improved to 50.9 during June versus an
 unrevised 49.0 in May. The figure roughly matched consensus expectations
 for 50.5. Any figure above 50 indicates an increasing level of activity.
 During the last ten years, there has been a 69% correlation between the
 ISM index and the q/q change in real GDP.
 Leading the rebound in the overall index was a higher production
 reading. It rose to 53.4 but remained below the February high of 57.6.
 Also rising was the new orders figure to 51.9 but that also remained
 lower than the February high of 57.8. The separate index of new export
 orders also rebounded to 54.5. The inventories index improved to 50.5,
 suggesting a modest rate of inventory building. The supplier delivery
 index ticked up to 50.0, thus indicating slower delivery speeds. The
 number remained, however, sharply lower versus December's high of 53.7.
 A lower level of factory sector employment was indicated by the employment
 reading which fell to 48.7. That was nearly the lowest level of the
 economic recovery. During the last ten years there has been an 88%
 correlation between the employment index and the m/m change in factory
 payrolls.
 The prices paid index recovered slightly to 52.5. Twenty percent of
 firms raised prices while fifteen percent lowered them. During the last
 ten years there has been a 65% correlation between the index and the m/m
 change in the intermediate producer price index.
 The figures from the Institute For Supply Management (ISM) are
 diffusion indexes and can be found in Haver's USECON database.
 The expectations data are in the AS1REPNA database.
 

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 &nbsp;


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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" >ISM Mfg</th>
 <th scope="col" >Jun</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Jun'12</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Composite Index</td>
 <td >50.9</td>
 <td >49.0</td>
 <td >50.7</td>
 <td >50.2</td>
 <td >51.7</td>
 <td >55.2</td>
 <td >57.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;New Orders</td>
 <td >51.9</td>
 <td >48.8</td>
 <td >52.3</td>
 <td >49.6</td>
 <td >52.9</td>
 <td >56.4</td>
 <td >59.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Production</td>
 <td >53.4</td>
 <td >48.6</td>
 <td >53.5</td>
 <td >52.4</td>
 <td >53.6</td>
 <td >57.4</td>
 <td >61.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Employment</td>
 <td >48.7</td>
 <td >50.1</td>
 <td >50.2</td>
 <td >55.7</td>
 <td >53.8</td>
 <td >57.4</td>
 <td >57.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Supplier Deliveries</td>
 <td >50.0</td>
 <td >48.7</td>
 <td >50.9</td>
 <td >49.5</td>
 <td >50.0</td>
 <td >54.7</td>
 <td >58.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Inventories</td>
 <td >50.5</td>
 <td >49.0</td>
 <td >46.5</td>
 <td >44.0</td>
 <td >48.2</td>
 <td >50.1</td>
 <td >50.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Prices Paid Index (NSA)</td>
 <td >52.5</td>
 <td >49.5</td>
 <td >50.0</td>
 <td >37.0</td>
 <td >53.2</td>
 <td >65.2</td>
 <td >68.9</td>
 </tr>
 </tbody>
 </table>
 
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The Composite Index of manufacturing sector activity from the Institute for Supply Management improved to 50.9 during June versus an unrevised 49.0 in May. The figure roughly matched consensus expectations for 50.5. Any figure above [...]

U.S. ISM Composite Factory Sector Index Recovers

Robert Brusca

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The new overall EU sentiment index for June, at 92.6, is up from 90.8 in May. This is highest level since April 2012, a little more than a year ago. It's good mark but still it continues to be a very, very, low reading. Place this June reading in the historic context of its queue of values and a 92.6 reading for June 2013 ranks in the lower 15% of its history meaning it has been weaker than this only 15% of the time. This is still an exceptionally low reading for economic sentiment. I suppose if you're looking for good news the good news is that the bad news isn't worse, but this isn't particularly good news

Of course, having said that I know that improvement will come one step at a time and that the steps may not be large and may not be monotonic- but that too is part of the point. We need to understand what this process is and to recognize that the risk of backsliding may dog this recovery for some time and may require near constant vigilance. 

The reading for industry improved by one point, from -12.3 in May 2013 to -11.3, in June. At this level the industrial sector is in the lower 26 percentile of its historic queue roughly a bottom quarter of the range reading. 

Consumer confidence improved to -17.5 from -20.2. Consumer confidence occupies a -17th percentile standing in its historic queue.

For the retailing index, an improvement to -10.2 in June was recognized from -12 in May. This is a modest 27th percentile standing in its historic queue.

The construction sector improved to -31 from -32; its standing is in the 21st percentile of its historic queue.

The services index improved to -6.2 in June from -7.9 in May as the standing rose to the 28th - nearly the 29th - percentile of its historic queue.

While these are improvements, they are not improvements to very strong positions. The chart makes it clear that there is a turn of some sort in train but it's also clear that it's very slow-moving and because of the short-term nature the chart doesn't give you any idea how weak things still are. But you get that information in the table by looking at the percentile rankings.

Let's look at the circumstances of countries: we Chronicle 10 members of the common currency union plus the UK in the table at hand. In the month there are declines for overall sentiment only in Greece, in the UK and in Austria. If we look to the percentile standings of the countries we find that Germany has the strongest percentile standing in the 37th percentile of its historic queue followed by the UK in nearly the 30th percentile followed by Finland and the 25th percentile and Spain in its 25th percentile. These are the 'best of the best' and the readings all are still trapped below the 50th percentile and even though these are the top four nations their standings reach down to the top of the lower 25th percentile. The 'best rating is not even to the 40th percentile let alone the break-even mark of the 50th percentile.

After that, counting up from the bottom, the weakest is Italy in the bottom 12 percentile of its historic queue, after that there's a tie the 13.2 percentile between Austria and France just above them is the Netherlands in the 14.7 percentile and so on.

While we see improvement in the zone we don't see very strong improvement. Still the gains are relatively broad-based with seven of the 10 common currency members in the table showing consecutive monthly gains in their respective sentiment indices, and with Portugal and Spain and the Netherlands showing three months without a setback. There certainly is some good news in the euro-Zone.

But the bank bail-in bill that has been approved clearly is something that is going to overhang market and although there is no adverse market reaction today. It seems to build on the Cyprus model which we were told at the time would not be a framework for any future banking assistance. Never mind. 

Eurozone ministers renewed their failed declaration of a year ago to make progress on reducing high unemployment levels in the Zone. And once again they have given us an objective without a means to reach it.

The BIS continues to see austerity is the answer and a little austerity as the reason that things have gone wrong. While it's easy to look back in history and the say there has been too much borrowing the and therefore not enough austerity in Europe or in the United States, the pressing question is what to do about it now. While there seems to be some renewed interest in pursuing more of a growth strategy, there is no interest in throwing out the austerity gains the with the bathwater. However, it's completely unclear how countries are going to be able to proceed to pursue greater growth in an environment where they are going to have to be mindful to hang on to gains that they have made under austerity. As always it sounds better as rhetoric than it will play out as policy. 

Quite apart from pulling a rabbit out of their hats euro-Zone countries continues to have conflicting goals and constraints that are all too binding. While the Zone has been able to come together to have some degree of a banking 'bail-in' plan, because of its restrictions is not clear whether it will be useful, particularly for any of the banking systems in southern Europe.

There is some sense of progress in the euro-Zone. However, there are still big question marks as to the speed for that progress into its durability. While it's not part of the euro-Zone issue is no doubt that the backsliding and sense of risk in China is simply another risk element that the euro-Zone is going to have to deal with. At the moment I don't see any positive bandwagon to jump upon.



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The new overall EU sentiment index for June, at 92.6, is up from 90.8 in May. This is highest level since April 2012, a little more than a year ago. It's good mark but still it continues to be a very, very, low reading. Place this [...]

EU Does Better...Can it Continue?

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 Real GDP growth for Q1'13 was revised lower to 1.8% (1.6% y/y) from
 last month's estimated 2.4% rise. Expectations were for a 2.4% gain.
 Growth in consumer spending and business investment were significantly
 reduced, but residential investment growth was raised. The increase in
 the GDP chain price index was raised slightly to a modest 1.2% (1.6%
 y/y).
 
 After-tax corporate profits fell 1.4% (+4.7%
 y/y), less than the initial estimate of a 2.0% decline which followed a
 1.8% Q4 rise. The decline reflected weakness across sectors. Rest-of-world
 profits fell 4.3% (+7.4% y/y), domestic nonfinancial earnings slipped 0.5%
 (+3.1% y/y) and earnings in the financial sector were off 0.7% (+5.0%
 y/y).&nbsp;&nbsp;
 A reduced gain in final sales to domestic purchasers accounted for
 the GDP revision. Sales grew at a revised 1.3% rate (1.5% y/y), down
 from last month's estimated 1.9% rise. The gain in personal consumption
 expenditures was pared back to 2.6% (1.9% y/y) from 3.4%. Growth in
 business fixed investment also was lowered to 0.4% (3.7% y/y) from 2.2%.
 Working the other way, residential investment's advance was increased to
 14.0% (13.3% y/y) from 12.0%. Unchanged was the decline in government
 spending. The 4.8% drop (-2.2% y/y) reflected an 8.7% shortfall (-4.0%
 y/y) in federal government spending. Defense outlays were off at a 12.0%
 rate (-6.2% y/y). State and local government investment also fell at a
 2.1% rate (-1.1% y/y).&nbsp;
 The effect on GDP growth from inventory rebuilding was unrevised at
 0.6 percentage points. It did not, however, recoup the 1.5 point
 subtraction during Q4. Trade deficit deterioration still lowered growth
 by 0.1 percentage point. It occurred as imports slipped 0.4% (-0.6% y/y)
 instead of rising slightly while exports fell at a 1.1% rate (+0.8% y/y)
 instead of increasing 0.8%.
 The GDP chain price index grew at a modest and marginally changed 1.2%
 rate (1.6% y/y). This increase was largely influenced by an unchanged
 1.0% increase (1.2% y/y) in the PCE price index, held back by lower
 energy prices. Also unchanged was the 6.7% rise (3.5% y/y) in the
 residential price index. The 0.9% increase (1.0% y/y) in the business
 fixed investment price index was slightly firmer than last month's
 report.&nbsp;
 The latest GDP figures can be found in Haver's USECON and USNA
 databases; USNA contains basically all of the Bureau of Economic
 Analysis' detail on the national accounts, including the new integrated
 economics accounts and the recently added GDP data for U.S. Territories.
 The Consensus estimates can be found in AS1REPNA.&nbsp;
 Modest to Moderate Growth Expected for Rest of Year from the
 Federal Reserve Bank of Dallas can be found here <a href="http://www.dallasfed.org/assets/documents/research/update/us/2013/1304.pdf">http://www.dallasfed.org/assets/documents/research/update/us/2013/1304.pdf</a>
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 <col>
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 <thead>
 <tr>
 <th class="firstcol" scope="col" width="315"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM" ;>Chained
 2005 $, %, AR</a></th>
 <th scope="col" width="101" align="center">Q1'13 (3rd Estimate)</th>
 <th scope="col" width="101" align="center">Q1'13 (2nd Estimate)</th>
 <th scope="col" width="101" align="center">Q1'13 (Advance)</th>
 <th scope="col" width="101" align="center">Q4'12</th>
 <th scope="col" width="101" align="center">Q3'12</th>
 <th scope="col" width="101" align="center">Q1 Y/Y</th>
 <th scope="col" width="102" align="center">2012</th>
 <th scope="col" width="102" align="center">2011</th>
 <th scope="col" width="102" align="center">2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="315">Gross Domestic Product</td>
 <td width="101" align="center">1.8</td>
 <td width="101" align="center">2.4</td>
 <td width="101" align="center">2.5</td>
 <td width="101" align="center">0.4</td>
 <td width="101" align="center">3.1</td>
 <td width="101" align="center">1.6</td>
 <td width="102" align="center">2.2</td>
 <td width="102" align="center">1.8</td>
 <td width="102" align="center">2.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="315">&nbsp;Inventory Effect</td>
 <td width="101" align="center">0.6</td>
 <td width="101" align="center">0.6</td>
 <td width="101" align="center">1.0</td>
 <td width="101" align="center">-1.5</td>
 <td width="101" align="center">0.7</td>
 <td width="101" align="center">-0.1</td>
 <td width="102" align="center">0.2</td>
 <td width="102" align="center">-0.2</td>
 <td width="102" align="center">1.5</td>
 </tr>
 <tr>
 <td class="firstcol" width="315">Final Sales</td>
 <td width="101" align="center">1.2</td>
 <td width="101" align="center">1.8</td>
 <td width="101" align="center">1.5</td>
 <td width="101" align="center">1.9</td>
 <td width="101" align="center">2.4</td>
 <td width="101" align="center">1.8</td>
 <td width="102" align="center">2.1</td>
 <td width="102" align="center">2.0</td>
 <td width="102" align="center">0.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="315">&nbsp;Foreign Trade Effect</td>
 <td width="101" align="center">-0.1</td>
 <td width="101" align="center">-0.2</td>
 <td width="101" align="center">-0.5</td>
 <td width="101" align="center">0.3</td>
 <td width="101" align="center">0.4</td>
 <td width="101" align="center">0.2</td>
 <td width="102" align="center">0.1</td>
 <td width="102" align="center">0.2</td>
 <td width="102" align="center">-0.4</td>
 </tr>
 <tr>
 <td class="firstcol" width="315">Domestic Final Sales</td>
 <td width="101" align="center">1.3</td>
 <td width="101" align="center">1.9</td>
 <td width="101" align="center">1.9</td>
 <td width="101" align="center">1.5</td>
 <td width="101" align="center">1.9</td>
 <td width="101" align="center">1.5</td>
 <td width="102" align="center">1.9</td>
 <td width="102" align="center">1.8</td>
 <td width="102" align="center">1.3</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" width="1125">Demand Components</td>
 </tr>
 <tr>
 <td class="firstcol" width="315">Personal Consumption</td>
 <td width="101" align="center">2.6</td>
 <td width="101" align="center">3.4</td>
 <td width="101" align="center">3.2</td>
 <td width="101" align="center">1.8</td>
 <td width="101" align="center">1.6</td>
 <td width="101" align="center">1.9</td>
 <td width="102" align="center">1.9</td>
 <td width="102" align="center">2.5</td>
 <td width="102" align="center">1.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="315">Business Fixed Investment</td>
 <td width="101" align="center">0.4</td>
 <td width="101" align="center">2.2</td>
 <td width="101" align="center">2.1</td>
 <td width="101" align="center">13.1</td>
 <td width="101" align="center">-1.8</td>
 <td width="101" align="center">3.7</td>
 <td width="102" align="center">8.0</td>
 <td width="102" align="center">8.6</td>
 <td width="102" align="center">0.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="315">Residential Investment</td>
 <td width="101" align="center">14.0</td>
 <td width="101" align="center">12.0</td>
 <td width="101" align="center">12.6</td>
 <td width="101" align="center">17.5</td>
 <td width="101" align="center">13.6</td>
 <td width="101" align="center">13.3</td>
 <td width="102" align="center">12.1</td>
 <td width="102" align="center">-1.4</td>
 <td width="102" align="center">-3.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="315">Government Spending</td>
 <td width="101" align="center">-4.8</td>
 <td width="101" align="center">-4.9</td>
 <td width="101" align="center">-4.1</td>
 <td width="101" align="center">-7.0</td>
 <td width="101" align="center">3.9</td>
 <td width="101" align="center">-2.2</td>
 <td width="102" align="center">-1.7</td>
 <td width="102" align="center">-3.1</td>
 <td width="102" align="center">0.6</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" width="1125">Chain-Type Price
 Index</td>
 </tr>
 <tr>
 <td class="firstcol" width="315">GDP</td>
 <td width="101" align="center">1.2</td>
 <td width="101" align="center">1.1</td>
 <td width="101" align="center">1.2</td>
 <td width="101" align="center">1.0</td>
 <td width="101" align="center">2.7</td>
 <td width="101" align="center">1.6</td>
 <td width="102" align="center">1.8</td>
 <td width="102" align="center">2.1</td>
 <td width="102" align="center">1.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="315">Personal Consumption Expenditures</td>
 <td width="101" align="center">1.0</td>
 <td width="101" align="center">1.0</td>
 <td width="101" align="center">0.9</td>
 <td width="101" align="center">1.6</td>
 <td width="101" align="center">1.6</td>
 <td width="101" align="center">1.2</td>
 <td width="102" align="center">1.8</td>
 <td width="102" align="center">2.4</td>
 <td width="102" align="center">1.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="315">&nbsp;&nbsp; PCE less Food &amp;
 Energy</td>
 <td width="101" align="center">1.3</td>
 <td width="101" align="center">1.2</td>
 <td width="101" align="center">1.2</td>
 <td width="101" align="center">1.0</td>
 <td width="101" align="center">1.1</td>
 <td width="101" align="center">1.3</td>
 <td width="102" align="center">1.7</td>
 <td width="102" align="center">1.4</td>
 <td width="102" align="center">1.5</td>
 </tr>
 </tbody>
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 &nbsp;
 &nbsp;
 U.S. Mortgage Applications Continue Lower As
 Interest Rates Surge 
 by <a href="http://www.haver.com/comment/Moeller.html">Tom
 Moeller</a>&nbsp;&nbsp;June 26, 2013
 
 The Mortgage Bankers Association reported that total applications for a
 home mortgage fell 3.0% w/w, extending the declines of the prior six
 weeks. The latest level was down by one-third since early-May. Last week's
 decline reflected a 5.2% drop (-38.4% y/y) in applications to refinance
 an existing loan. Refinancings were down 41.8% since early May. Home purchase
 mortgage applications increased 2.1% last week (15.9% y/y), up 26.7% since
 year end.
 Evidence of a firming economy is raising interest rates. The
 effective interest rate on a 15-year mortgage jumped w/w to 3.66% from 3.30%,
 up from the early-May low of 2.89%. The effective rate on a 30-year fixed
 rate loan increased to 4.57% last week while the rate on a Jumbo 30-year
 loan was 4.60%. The 91 basis point spread between 15- and 30-year loan
 rates was a record. The effective interest rate on an adjustable 5-year
 mortgage increased to 3.20%, up from its low of 2.59% at the beginning of
 May.
 Applications for fixed interest rate loans fell by 30.3% y/y while
 adjustable rate loan applications rose 20.0% y/y. The average mortgage
 loan size was $222,500. The average size loan for home purchases was $266,800
 last week while for refinancings it was $201,000.
 The survey covers over 75 percent of all U.S. retail residential
 mortgage applications, and has been conducted weekly since 1990.&nbsp;
 Respondents include mortgage bankers, commercial banks and thrifts.&nbsp;
 Base period and value for all indexes is March 16, 1990=100. 
 The figures for weekly mortgage applications are available in Haver's SURVEYW
 database.&nbsp;
 Why Financial Stability is a Necessary Prerequisite
 for an Effective Monetary Policy from the Federal Reserve Bank of New
 York can be found here <a href="http://www.newyorkfed.org/newsevents/speeches/2013/dud130624.html">http://www.newyorkfed.org/newsevents/speeches/2013/dud130624.html</a>
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 <thead>
 <tr>
 <th class="firstcol" scope="col" width="561">MBA Mortgage
 Applications (SA, 3/16/90=100)</th>
 <th scope="col" width="95">06/21/13</th>
 <th scope="col" width="95">06/14/13</th>
 <th scope="col" width="95">06/07/13</th>
 <th scope="col" width="95">Y/Y%</th>
 <th scope="col" width="95">2012</th>
 <th scope="col" width="95">2011</th>
 <th scope="col" width="96">2010</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" width="561">Total Market Index</td>
 <td align="center" width="95">629.2</td>
 <td align="center" width="95">648.9</td>
 <td align="center" width="95">670.7</td>
 <td align="center" width="95">-28.1</td>
 <td align="center" width="95">813.8</td>
 <td align="center" width="95">572.3</td>
 <td align="center" width="96">659.3</td>
 </tr>
 <tr>
 <td class="firstcol" width="561">&nbsp;Purchase</td>
 <td align="center" width="95">214.8</td>
 <td align="center" width="95">210.4</td>
 <td align="center" width="95">217.0</td>
 <td align="center" width="95">15.9</td>
 <td align="center" width="95">187.8</td>
 <td align="center" width="95">182.6</td>
 <td align="center" width="96">199.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="561">&nbsp;Refinancing</td>
 <td align="center" width="95">3,041.4</td>
 <td align="center" width="95">3,208.5</td>
 <td align="center" width="95">3,322.3</td>
 <td align="center" width="95">-38.4</td>
 <td align="center" width="95">4,505.0</td>
 <td align="center" width="95">2,858.4</td>
 <td align="center" width="96">3,348.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="561">15-Year Mortgage Effective Interest
 Rate (%)</td>
 <td align="center" width="95">3.66</td>
 <td align="center" width="95">3.30</td>
 <td align="center" width="95">3.32</td>
 <td align="center" width="95">3.22 
 (6/12)</td>
 <td align="center" width="95">3.25</td>
 <td align="center" width="95">3.97</td>
 <td align="center" width="96">4.39</td>
 </tr>
 </tbody>
 </table>
 
 
 


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Real GDP growth for Q1'13 was revised lower to 1.8% (1.6% y/y) from last month's estimated 2.4% rise. Expectations were for a 2.4% gain. Growth in consumer spending and business investment were significantly reduced, but residential [...]

U.S. GDP Growth is Revised Lower with Lessened Growth in Domestic Purchases

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 Is the Oxygen Running Out? 

 
 
 

 
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Germans do live in a country of their own but is it also a world of their own? The forward-looking GFK consumer climate survey moved up to 6.8 in July from 6.5 in June. The 6.8 reading was last surpassed in September 2007. The German index is being propelled by a strong move in the propensity to buy, and by increases in income, but assessments of the economy are actually lagging behind. Economic expectations have dropped compared of their value year ago. It's true that expectations are up from their deep dark values at the end of December as the economic reading was a -17.9 at that time, but the most recent economy reading is for June and its 1.1 reading reverses a string of negativism but it still is below its value of 3.0 for June 2012 and remains below a series of stronger numbers prior to that in 2012.

However, compared to the rest of Europe, Germany is in absolutely terrific shape. Germany's climate reading for July is above the 90th percentile of its historic queue or rank. It's components which lag by one month and are available for June show the economic reading in the 48th queue percentile, the income reading in the 91st queue percentile and the propensity to buy in the 85th percentile.

In contrast the index for Italy which is up-to-date three June stands at its 20th queue percentile denoting that it has been weaker only 20% of the time. The reading for France stands in the lower 0.8% of its queue; it's up-to-date through May. UK reading, also up to date through May stands in the 34th percentile of its queue. 

Germany's climate reading continues to move up even as it economic reading has faltered and exhibited a great deal of instability. Germany is financially the most powerful firm in Europe. Its economy is still clearly the strongest in Europe. But, having said that, the German growth rate is not impressive. We are talking 'first gear' strength, not overdrive. And Germany is an economy that depends great deal of its ability to export. With its historically low inflation performance within EMU it has remained as the most competitive nation in the euro-Zone. However, the weakness within the Zone as well as global economic weakness is adversely affecting Germany's ability to export and thereby threatens growth in Germany itself. 

Although the air of crisis may seem to have passed in the euro-Zone there continues to be serious questions about the euro-Zone, particularly about France and more questioning about what Germany's role in the union should be. It's not likely that the questions about Germany are going to be addressed let alone resolved until after the elections. At that point angle of Merkel will have a freer hand. But at the moment her hands tied by election politics.

And then there is France...ECB head, Mario Draghi, traveled to France where he gave a speech urging growth. I don't think anyone believes that you need to urge the French to pursue more growth. France has had a problem in dealing with its austerity since Holland took control. He has implemented tax hikes in order to not dismantle social welfare programs. Overall he has taken fewer steps to address its excesses than perhaps any other EMU member. While in general it may be a good time to try to urge countries to find a way to create more growth and to bend a little bit less to the whip of austerity, I can't think of a place that less needs that speech than France. All this leaves me a bit confused about what the real Draghi agenda might be. 

The recent numbers from the US underscore the US growth is not doing well. The recent forecasts from the various Federal Reserve FOMC members seem already to be hopelessly out of date in addressing the economy's future. It's not just that the FOMC seems to be optimistic on growth but that from the outset its expectations for unemployment seem to be too optimistic based upon the growth scenario that had been laid out. Now, with weaker than expected Q1 GDP in the US, that 'assumption' or 'relationship' glares all the more. Everyone is aware that China is growing more slowly and nobody believes their official numbers (numb-ers?). And, to that mix, a slower US economy and a reduced outlook for the German economy from the IFO that was just released and we have still very challenging global economic circumstances ahead of us. 

It will be interesting to see if the German consumer can keep getting his or her hopes up as has been happening amidst the global turmoil and backtracking. 

 
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Germans do live in a country of their own but is it also a world of their own? The forward-looking GFK consumer climate survey moved up to 6.8 in July from 6.5 in June. The 6.8 reading was last surpassed in September 2007. The German [...]

German Consumer is on the Moon

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 The Mortgage Bankers Association reported that total applications for a
 home mortgage fell 3.0% w/w, extending the declines of the prior six
 weeks. The latest level was down by one-third since early-May. Last week's
 decline reflected a 5.2% drop (-38.4% y/y) in applications to refinance
 an existing loan. Refinancings were down 41.8% since early May. Home purchase
 mortgage applications increased 2.1% last week (15.9% y/y), up 26.7% since
 year end.
 Evidence of a firming economy is raising interest rates. The
 effective interest rate on a 15-year mortgage jumped w/w to 3.66% from 3.30%,
 up from the early-May low of 2.89%. The effective rate on a 30-year fixed
 rate loan increased to 4.57% last week while the rate on a Jumbo 30-year
 loan was 4.60%. The 91 basis point spread between 15- and 30-year loan
 rates was a record. The effective interest rate on an adjustable 5-year
 mortgage increased to 3.20%, up from its low of 2.59% at the beginning of
 May.
 Applications for fixed interest rate loans fell by 30.3% y/y while
 adjustable rate loan applications rose 20.0% y/y. The average mortgage
 loan size was $222,500. The average size loan for home purchases was $266,800
 last week while for refinancings it was $201,000.
 The survey covers over 75 percent of all U.S. retail residential
 mortgage applications, and has been conducted weekly since 1990.&nbsp;
 Respondents include mortgage bankers, commercial banks and thrifts.&nbsp;
 Base period and value for all indexes is March 16, 1990=100. 
 The figures for weekly mortgage applications are available in Haver's SURVEYW
 database.&nbsp;
 Why Financial Stability is a Necessary Prerequisite
 for an Effective Monetary Policy from the Federal Reserve Bank of New
 York can be found <a href="http://www.newyorkfed.org/newsevents/speeches/2013/dud130624.html">here</a>.
 
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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col">MBA Mortgage
 Applications (SA, 3/16/90=100)</th>
 <th scope="col">06/21/13</th>
 <th scope="col">06/14/13</th>
 <th scope="col">06/07/13</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 class="odd">
 <td class="firstcol">Total Market Index</td>
 <td>629.2</td>
 <td>648.9</td>
 <td>670.7</td>
 <td>-28.1</td>
 <td>813.8</td>
 <td>572.3</td>
 <td>659.3</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp;Purchase</td>
 <td>214.8</td>
 <td>210.4</td>
 <td>217.0</td>
 <td>15.9</td>
 <td>187.8</td>
 <td>182.6</td>
 <td>199.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp;Refinancing</td>
 <td>3,041.4</td>
 <td>3,208.5</td>
 <td>3,322.3</td>
 <td>-38.4</td>
 <td>4,505.0</td>
 <td>2,858.4</td>
 <td>3,348.1</td>
 </tr>
 <tr>
 <td class="firstcol">15-Year Mortgage Effective Interest
 Rate (%)</td>
 <td>3.66</td>
 <td>3.30</td>
 <td>3.32</td>
 <td>3.22 
 (6/12)</td>
 <td>3.25</td>
 <td>3.97</td>
 <td>4.39</td>
 </tr>
 </tbody>
 </table>
 
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The Mortgage Bankers Association reported that total applications for a home mortgage fell 3.0% w/w, extending the declines of the prior six weeks. The latest level was down by one-third since early-May. Last week's decline reflected [...]

U.S. Mortgage Applications Continue Lower As Interest Rates Surge

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 Real GDP growth for Q1'13 was revised lower to 1.8% (1.6% y/y) from
 last month's estimated 2.4% rise. Expectations were for a 2.4% gain.
 Growth in consumer spending and business investment were significantly
 reduced, but residential investment growth was raised. The increase in
 the GDP chain price index was raised slightly to a modest 1.2% (1.6%
 y/y).
 After-tax corporate profits fell 1.4% (+4.7%
 y/y), less than the initial estimate of a 2.0% decline which followed a
 1.8% Q4 rise. The decline reflected weakness across sectors. Rest-of-world
 profits fell 4.3% (+7.4% y/y), domestic nonfinancial earnings slipped 0.5%
 (+3.1% y/y) and earnings in the financial sector were off 0.7% (+5.0%
 y/y).&nbsp;&nbsp;
 
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 A reduced gain in final sales to domestic purchasers accounted for
 the GDP revision. Sales grew at a revised 1.3% rate (1.5% y/y), down
 from last month's estimated 1.9% rise. The gain in personal consumption
 expenditures was pared back to 2.6% (1.9% y/y) from 3.4%. Business fixed investment growth was lowered to 0.4% (3.7% y/y) from 2.2%.
 Working the other way, residential investment's advance was increased to
 14.0% (13.3% y/y) from 12.0%. Unchanged was the decline in government
 spending. The 4.8% drop (-2.2% y/y) reflected an 8.7% shortfall (-4.0%
 y/y) in federal government spending. Defense outlays were off at a 12.0%
 rate (-6.2% y/y). State and local government investment also fell at a
 2.1% rate (-1.1% y/y).&nbsp;
 
 <a href="/comment/130626e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130626e.png" align="left"></a> 
 The effect on GDP growth from inventory rebuilding was unrevised at
 0.6 percentage points. It did not, however, recoup the 1.5 point
 subtraction during Q4. Trade deficit deterioration still lowered growth
 by 0.1 percentage point. It occurred as imports slipped 0.4% (-0.6% y/y)
 instead of rising slightly while exports fell at a 1.1% rate (+0.8% y/y)
 instead of increasing 0.8%.
 
 The GDP chain price index grew at a modest and marginally changed 1.2%
 rate (1.6% y/y). This increase was largely influenced by an unchanged
 1.0% increase (1.2% y/y) in the PCE price index, held back by lower
 energy prices. Also unchanged was the 6.7% rise (3.5% y/y) in the
 residential price index. The 0.9% increase (1.0% y/y) in the business
 fixed investment price index was slightly firmer than last month's
 report.&nbsp;
 The latest GDP figures can be found in Haver's USECON and USNA
 databases; USNA contains basically all of the Bureau of Economic
 Analysis' detail on the national accounts, including the new integrated
 economics accounts and the recently added GDP data for U.S. Territories.
 The Consensus estimates can be found in AS1REPNA.
 
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 Modest to Moderate Growth Expected for Rest of Year from the
 Federal Reserve Bank of Dallas can be found <a href="http://www.dallasfed.org/assets/documents/research/update/us/2013/1304.pdf">here</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" ><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM" ;>Chained
 2005 $, %, AR</a></th>
 <th scope="col" >Q1'13 (3rd Est)</th>
 <th scope="col" >Q1'13 (2nd Est)</th>
 <th scope="col" >Q1'13 (Adv)</th>
 <th scope="col" >Q4'12</th>
 <th scope="col" >Q3'12</th>
 <th scope="col" >Q1 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" >Gross Domestic Product</td>
 <td >1.8</td>
 <td >2.4</td>
 <td >2.5</td>
 <td >0.4</td>
 <td >3.1</td>
 <td >1.6</td>
 <td >2.2</td>
 <td >1.8</td>
 <td >2.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Inventory Effect</td>
 <td >0.6</td>
 <td >0.6</td>
 <td >1.0</td>
 <td >-1.5</td>
 <td >0.7</td>
 <td >-0.1</td>
 <td >0.2</td>
 <td >-0.2</td>
 <td >1.5</td>
 </tr>
 <tr>
 <td class="firstcol" >Final Sales</td>
 <td >1.2</td>
 <td >1.8</td>
 <td >1.5</td>
 <td >1.9</td>
 <td >2.4</td>
 <td >1.8</td>
 <td >2.1</td>
 <td >2.0</td>
 <td >0.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Foreign Trade Effect</td>
 <td >-0.1</td>
 <td >-0.2</td>
 <td >-0.5</td>
 <td >0.3</td>
 <td >0.4</td>
 <td >0.2</td>
 <td >0.1</td>
 <td >0.2</td>
 <td >-0.4</td>
 </tr>
 <tr>
 <td class="firstcol" >Domestic Final Sales</td>
 <td >1.3</td>
 <td >1.9</td>
 <td >1.9</td>
 <td >1.5</td>
 <td >1.9</td>
 <td >1.5</td>
 <td >1.9</td>
 <td >1.8</td>
 <td >1.3</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="10" >Demand Components</td>
 </tr>
 <tr>
 <td class="firstcol" >Personal Consumption</td>
 <td >2.6</td>
 <td >3.4</td>
 <td >3.2</td>
 <td >1.8</td>
 <td >1.6</td>
 <td >1.9</td>
 <td >1.9</td>
 <td >2.5</td>
 <td >1.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Business Fixed Investment</td>
 <td >0.4</td>
 <td >2.2</td>
 <td >2.1</td>
 <td >13.1</td>
 <td >-1.8</td>
 <td >3.7</td>
 <td >8.0</td>
 <td >8.6</td>
 <td >0.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Residential Investment</td>
 <td >14.0</td>
 <td >12.0</td>
 <td >12.6</td>
 <td >17.5</td>
 <td >13.6</td>
 <td >13.3</td>
 <td >12.1</td>
 <td >-1.4</td>
 <td >-3.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Government Spending</td>
 <td >-4.8</td>
 <td >-4.9</td>
 <td >-4.1</td>
 <td >-7.0</td>
 <td >3.9</td>
 <td >-2.2</td>
 <td >-1.7</td>
 <td >-3.1</td>
 <td >0.6</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="10" >Chain-Type Price
 Index</td>
 </tr>
 <tr>
 <td class="firstcol" >GDP</td>
 <td >1.2</td>
 <td >1.1</td>
 <td >1.2</td>
 <td >1.0</td>
 <td >2.7</td>
 <td >1.6</td>
 <td >1.8</td>
 <td >2.1</td>
 <td >1.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Personal Consumption Expenditures</td>
 <td >1.0</td>
 <td >1.0</td>
 <td >0.9</td>
 <td >1.6</td>
 <td >1.6</td>
 <td >1.2</td>
 <td >1.8</td>
 <td >2.4</td>
 <td >1.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; PCE less Food &amp;
 Energy</td>
 <td >1.3</td>
 <td >1.2</td>
 <td >1.2</td>
 <td >1.0</td>
 <td >1.1</td>
 <td >1.3</td>
 <td >1.7</td>
 <td >1.4</td>
 <td >1.5</td>
 </tr>
 </tbody>
 </table>
 
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 Home price strength is building throughout the country.
 The seasonally adjusted Case-Shiller 20 City Home Price
 Index rose 1.7% (12.0% y/y) during April following its
 upwardly revised 1.9% March jump, earlier reported as
 1.1%. The 3-month annualized rate of increase of 21.5% was
 a record for the series which dates back to 2000. Home
 prices in the narrower 10 city group rose 1.8% in April
 (11.6% y/y).&nbsp;
 Home prices have risen in each metropolitan area with
 the strongest gains in San Francisco, Las Vegas, Phoenix,
 Atlanta, Detroit, Los Angeles and Minneapolis. Lagging the
 rest of the country have been home price gains in New
 York, Cleveland, Washington D.C., Dallas, Boston and
 Chicago.
 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.&nbsp;
 
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 <a href="/comment/130625i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130625i.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">S&amp;P
 Case-Shiller Home Price Index (SA, %)</th>
 <th scope="col">Apr</th>
 <th scope="col">Mar</th>
 <th scope="col">Feb</th>
 <th scope="col">Apr 
 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>1.7</td>
 <td>1.9</td>
 <td>1.3</td>
 <td>12.0</td>
 <td>0.9</td>
 <td>-3.9</td>
 <td>1.3</td>
 </tr>
 <tr class="grey2">
 <td class="firstcol" colSpan="9">Regional
 Indicators</td>
 </tr>
 <tr>
 <td class="firstcol">San Francisco</td>
 <td>2.7</td>
 <td>3.6</td>
 <td>2.0</td>
 <td>23.9</td>
 <td>3.5</td>
 <td>-4.9</td>
 <td>9.3</td>
 </tr>
 <tr>
 <td class="firstcol">Las Vegas</td>
 <td>2.3</td>
 <td>3.0</td>
 <td>2.0</td>
 <td>22.2</td>
 <td>-0.3</td>
 <td>-6.5</td>
 <td>-7.7</td>
 </tr>
 <tr>
 <td class="firstcol">Phoenix</td>
 <td>1.4</td>
 <td>1.8</td>
 <td>1.9</td>
 <td>21.4</td>
 <td>13.9</td>
 <td>-7.3</td>
 <td>-0.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Atlanta</td>
 <td>1.9</td>
 <td>1.7</td>
 <td>1.1</td>
 <td>20.8</td>
 <td>-7.8</td>
 <td>-7.0</td>
 <td>-2.4</td>
 </tr>
 <tr>
 <td class="firstcol">Detroit</td>
 <td>0.7</td>
 <td>3.8</td>
 <td>0.2</td>
 <td>19.9</td>
 <td>8.0</td>
 <td>0.0</td>
 <td>-3.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Los Angeles</td>
 <td>2.7</td>
 <td>2.5</td>
 <td>1.9</td>
 <td>18.7</td>
 <td>0.7</td>
 <td>-3.4</td>
 <td>5.3</td>
 </tr>
 <tr>
 <td class="firstcol">Minneapolis</td>
 <td>2.7</td>
 <td>0.9</td>
 <td>1.5</td>
 <td>14.8</td>
 <td>6.0</td>
 <td>-8.2</td>
 <td>3.2</td>
 </tr>
 <tr>
 <td class="firstcol">San Diego</td>
 <td>2.8</td>
 <td>2.1</td>
 <td>0.8</td>
 <td>14.7</td>
 <td>1.2</td>
 <td>-4.4</td>
 <td>7.3</td>
 </tr>
 <tr>
 <td class="firstcol">Portland</td>
 <td>1.5</td>
 <td>2.5</td>
 <td>1.6</td>
 <td>12.9</td>
 <td>1.7</td>
 <td>-7.1</td>
 <td>-3.2</td>
 </tr>
 <tr>
 <td class="firstcol">Miami</td>
 <td>2.6</td>
 <td>2.1</td>
 <td>0.8</td>
 <td>12.9</td>
 <td>5.1</td>
 <td>-4.9</td>
 <td>-2.1</td>
 </tr>
 <tr>
 <td class="firstcol">Seattle</td>
 <td>1.2</td>
 <td>2.6</td>
 <td>0.5</td>
 <td>11.4</td>
 <td>2.1</td>
 <td>-6.6</td>
 <td>-3.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Tampa</td>
 <td>1.1</td>
 <td>2.3</td>
 <td>1.5</td>
 <td>11.3</td>
 <td>2.7</td>
 <td>-6.6</td>
 <td>-4.0</td>
 </tr>
 <tr>
 <td class="firstcol">Denver</td>
 <td>0.7</td>
 <td>0.9</td>
 <td>1.0</td>
 <td>9.9</td>
 <td>4.5</td>
 <td>-2.1</td>
 <td>0.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Chicago</td>
 <td>1.1</td>
 <td>1.7</td>
 <td>1.3</td>
 <td>9.4</td>
 <td>-2.8</td>
 <td>-6.8</td>
 <td>-3.7</td>
 </tr>
 <tr>
 <td class="firstcol">Boston</td>
 <td>1.3</td>
 <td>1.9</td>
 <td>1.2</td>
 <td>8.1</td>
 <td>0.5</td>
 <td>-2.0</td>
 <td>1.9</td>
 </tr>
 <tr>
 <td class="firstcol">Dallas</td>
 <td>1.0</td>
 <td>0.9</td>
 <td>0.8</td>
 <td>7.4</td>
 <td>3.2</td>
 <td>-2.4</td>
 <td>0.1</td>
 </tr>
 <tr>
 <td class="firstcol">Washington, D.C.</td>
 <td>0.9</td>
 <td>2.5</td>
 <td>0.1</td>
 <td>7.2</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>0.8</td>
 <td>0.4</td>
 <td>4.8</td>
 <td>-0.1</td>
 <td>-4.3</td>
 <td>0.7</td>
 </tr>
 <tr>
 <td class="firstcol">New York</td>
 <td>0.9</td>
 <td>0.4</td>
 <td>0.9</td>
 <td>3.2</td>
 <td>-2.4</td>
 <td>-3.1</td>
 <td>-1.5</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Home price strength is building throughout the country. The seasonally adjusted Case-Shiller 20 City Home Price Index rose 1.7% (12.0% y/y) during April following its upwardly revised 1.9% March jump, earlier reported as 1.1%. The [...]

U.S. Case-Shiller Home Price Index Continues To Strengthen

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
</head>
<body>
	 
 
 
 

 <a href="/comment/130625n_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130625n.png"></a>
 <a href="/comment/130625o_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130625o.png"></a>
 
 
 Consumer confidence remains on an uptrend. The Conference
 Board's Consumer Confidence Index rose to 81.4 this month
 following a downwardly revised May reading of 74.3. Consensus
 expectations had been for 75.2. During the last ten years, there
 has been a 47% correlation between the level of confidence and
 the three-month change in real PCE.
 Another sharp improvement in the consumer expectations figure
 to 89.5 from 80.6 led the strength in the overall confidence
 index this month. Expectations for more jobs and better income
 led the rise. Expectations for the inflation rate in twelve
 months backed up to 5.5%, reversing the prior month's drop. The
 percentage expecting higher stock prices more-than reversed its
 May increase but remained in an uptrend. Higher interest rates
 in twelve months were expected by an increased 58.3% of
 respondents.
 The present situations index also improved sharply m/m to
 69.2. The 19.1% of respondents who thought that business
 conditions were good was the most since January 2008. Jobs were
 thought to be hard to get by 36.9% of respondents. That was up
 slightly m/m but down sharply versus the high of 49.4% in June
 2011. Jobs were viewed as not so plentiful by 51.4% of
 individuals, down sharply from the recent high.
 The consumer confidence index for those under 35 years ticked
 up to the highest level since December 2007. Confidence amongst
 middle-aged individuals improved sharply to the highest since
 January 2008 while confidence amongst individuals over 55 years
 surged to the highest level also since January 2008.
 The Consumer Confidence data is available in Haver's CBDB&nbsp;database.
 The Future of Social Security Disability Insurance
 from the Federal Reserve Bank of San Francisco is available
 <a href="http://www.frbsf.org/economic-research/publications/economic-letter/2013/june/future-social-security-disability-insurance-ssdi/">here</a>.

 <a href="/comment/130625p_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130625p.png"></a>
 <a href="/comment/130625q_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/130625q.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">Conference
 Board (SA, 1985=100)</th>
 <th scope="col">June</th>
 <th scope="col">May</th>
 <th scope="col">April</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">Consumer Confidence Index</td>
 <td>81.4</td>
 <td>74.3</td>
 <td>69.0</td>
 <td>29.8</td>
 <td>67.1</td>
 <td>58.1</td>
 <td>54.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp; Present Situation</td>
 <td>69.2</td>
 <td>64.8</td>
 <td>61.0</td>
 <td>48.5</td>
 <td>49.8</td>
 <td>36.1</td>
 <td>25.7</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp; Expectations</td>
 <td>89.5</td>
 <td>80.6</td>
 <td>74.3</td>
 <td>21.9</td>
 <td>78.6</td>
 <td>72.8</td>
 <td>73.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Consumer Confidence By
 Age Group</td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp; Under 35 Years</td>
 <td>97.3</td>
 <td>96.9</td>
 <td>96.1</td>
 <td>5.8</td>
 <td>86.5</td>
 <td>77.3</td>
 <td>70.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">&nbsp; Aged 35-54 Years</td>
 <td>83.3</td>
 <td>76.6</td>
 <td>69.1</td>
 <td>29.3</td>
 <td>68.5</td>
 <td>59.8</td>
 <td>55.1</td>
 </tr>
 <tr>
 <td class="firstcol">&nbsp; Over 55 Years</td>
 <td>71.6</td>
 <td>61.4</td>
 <td>58.1</td>
 <td>45.2</td>
 <td>56.6</td>
 <td>47.3</td>
 <td>47.4</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Consumer confidence remains on an uptrend. The Conference Board's Consumer Confidence Index rose to 81.4 this month following a downwardly revised May reading of 74.3. Consensus expectations had been for 75.2. During the last ten [...]

U.S. Consumer Confidence Trends Higher

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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Michael J. Moran

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The consumer price index rose 0.2% in January, slower than the expected increase of 0.3% (and it rounded up to reach the published advance – 0.17% when calculated with more precision; annual rate of 2.04%). The latest monthly increase left the year-over-year at 2.4%, down from a recent high of 3.0% in September and bested by only one other recent reading: 2.3% in April of last year.

A drop of 1.5% in energy prices helped to contain the headline index. The drop was led by sharp retreats in the prices of both fuel oil and gasoline (off 5.7% and 3.2%, respectively). Energy prices have jumped around from month-to-month, but they have stayed within a narrow range in the past two years. Food prices rose 0.2% in January after a surge of 0.7% in the prior month. The food category experienced severe pressure during the inflation burst in 2022 (peak of 11.4%). Pressure settled in 2024, with annual food inflation easing to a low of 2.0% in August of that year. However, prices picked up again in 2025, with the year-over-year increase moving to 3.2% in August and staying close to that pace in subsequent months. The year-over-year increase in January totaled 2.9%.

The core component (ex food and energy) rose 0.3% in January, one of the sharpest advances of the past year or so. However, the increase was not especially troubling, as it was influenced by a jump of 6.5% in airfares, which added nearly a full tenth percentage point to the core component (0.08%). Airfares often move erratically, and the ups and downs in the past few years have left little net change. Discounting, most likely, will unfold in coming months. Even with the jump in airfares, the year-over-year increase in core prices moved to a new low for the current period of deceleration (2.5%). Core inflation appeared to be picking up in the spring and summer of last year (a recent peak of 3.1% in August), but pressure has eased since then.

The source of the waxing and waning in core prices lies primarily in the goods component of the CPI. Goods prices were declining noticeably in the first half of 2024 (deflation!), but, they began to shift direction in the second half of 2024 and moved to price increases in 2025. The upward trend seems to have peaked at 1.5% in September and October, with the year-over-year change easing to 1.1 percent in January. Service prices have been decelerating over the past few years, but the rate of decline began to slow last year, and the latest months have shown no further improvement, stuck at 3.0% in the past three months.

Within the core component, the movement of housing costs is notable. Rental rates rose 0.2% in January, a marked shift from the experience in 2022 and 2023, when increases in excess of 0.6% were common.  This component jumps around from month-to-month, but the downtrend is unmistakable. After peaking at 8.2% in 2022, the latest year-over-increase totaled 3.0% in January.

The cost of electricity is now gathering the attention of the public and politicians because of the pressure being exerted by the infrastructure requirements of artificial-intelligence. Costs were tame in January (down 0.1%), but increases have largely been the norm in the past year or so. The year-over-year increase totaled 6.3% in January, down from 7.0% in November but still a challenge for many households. Many observers are expecting more upward pressure down the road. Some observers perhaps recall (and fear) the experience in 2022, when electricity inflation touched 15.8%.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

260213N.jpg

260213O.jpg

- The year-over-year change in the headline index moved to the bottom of its recent range.
- The annual change in the core index moved to a new low for the current cycle.

Consumer Price Index: Slow, but Steady, Deceleration

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).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/6wkBik7cLDk3qoA0p1AKaG?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

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

260212E.jpg

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.

Economy in Brief

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