Tom Moeller

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 Forward momentum in the factory sector has disappeared. The Composite Index
 of manufacturing activity from the Institute for Supply Management fell to
 49.0 during May from an unrevised 50.7 in April. Below the break-even
 point of 50, it was the lowest reading since the recession ended in June
 2009. The figure disappointed 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 overall index down was a fall in the production reading.
 The sharp decline to 48.6 brought it to the lowest level since May 2009.
 Also down hard was the new orders reading to 48.8, its lowest since April
 2009. The separate index of new export orders dropped sharply to 51.0, a
 five month low. The employment reading slipped to 50.1, also a
 recovery-low. During the last ten years there has been an 88% correlation
 between the employment index and the m/m change in factory payrolls.
 Falling sharply in addition was the supplier delivery index to 48.7, thus
 indicating faster delivery speeds. Offsetting these declines was a modest
 rise in the inventories index to 49.0.
 The prices paid index at 49.5 weakened further and indicated no rise in
 prices. Nineteen percent of firms raised prices but twenty 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.
 The Ten Suggestions is the title of Fed Chairman Ben S.
 Bernanke's speech and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20130602a.htm">here</a>.&nbsp;
 
 
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 &nbsp;


<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" >ISM Mfg</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >May'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 >49.0</td>
 <td >50.7</td>
 <td >51.3</td>
 <td >52.5</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 >48.8</td>
 <td >52.3</td>
 <td >51.4</td>
 <td >57.2</td>
 <td >52.9</td>
 <td >56.4</td>
 <td >59.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Production</td>
 <td >48.6</td>
 <td >53.5</td>
 <td >52.2</td>
 <td >54.1</td>
 <td >53.6</td>
 <td >57.4</td>
 <td >61.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Employment</td>
 <td >50.1</td>
 <td >50.2</td>
 <td >54.2</td>
 <td >55.9</td>
 <td >53.8</td>
 <td >57.4</td>
 <td >57.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Supplier Deliveries</td>
 <td >48.7</td>
 <td >50.9</td>
 <td >49.4</td>
 <td >49.2</td>
 <td >50.0</td>
 <td >54.7</td>
 <td >58.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Inventories</td>
 <td >49.0</td>
 <td >46.5</td>
 <td >49.5</td>
 <td >46.0</td>
 <td >48.2</td>
 <td >50.1</td>
 <td >50.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Prices Paid Index (NSA)</td>
 <td >49.5</td>
 <td >50.0</td>
 <td >54.5</td>
 <td >47.5</td>
 <td >53.2</td>
 <td >65.2</td>
 <td >68.9</td>
 </tr>
 </tbody>
 </table>



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Forward momentum in the factory sector has disappeared. The Composite Index of manufacturing activity from the Institute for Supply Management fell to 49.0 during May from an unrevised 50.7 in April. Below the break-even point of 50, [...]

U.S. ISM Composite Factory Sector Index Falls to Recovery Low

Robert Brusca

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Unemployment rates in April in the European Monetary Union continue to rise, as the overall EMU rate is moving up to 12.2% in April from 12.1% in March. The March rate was steady at the same pace as in February. Over three months the EMU unemployment rate is up by 0.2%; over six months it's up by 0.5%; over 12-months it's up by 1.0%. By comparison with the Economic Union which contains the same EMU countries plus some that are not part of the exchange rate mechanism, the increases in unemployment over those horizons were lower in each case.

Of the 11 European countries named in the table six saw increases in their unemployment rates month-to-month in April only one of them, Ireland saw a decrease. Over three months eight of these countries have net increases in their rates of unemployment, again, Ireland is an exception with a sizable drop of 0.3 percentage points. Over six months all European countries the table show unemployment rate increases except Germany which is flat and Ireland the unemployment rate is down by 1%. Over 12 months we see that familiar pattern with all countries having a higher unemployment rate except Ireland where the rate falls by 1.4% in Germany with the rate tics down by 0.1%. Ireland has been the exception with a declining unemployment rate over the last year on a consistent basis although its rate of unemployment is still high: it has the third highest unemployment rate in the table despite its recent dropping trend. During this period when the European unemployment rates have risen, Germany's rate has been for the most part flat with one small net decline over 12 months. 

When we compare the European countries in the table to the United States and Japan we see that the US rate has been falling rather consistently and even Japan has been able to reduce its rate which is extremely low by European standards. Moving to the bottom of the table, where the unemployment data lag for the UK and Greece, we see that Greek unemployment has continued to rise although data are only available through February. We also see that the UK, which is an EU member not in the EMU currency mechanism, has its unemployment rate net lower over six months and net lower by 0.5% over 12-months.

While European inflation has been modest and generally declining, in the current month there's been a slight increase in inflation for the European monetary zone as a whole. There is also evidence that bad weather may have been a factor at least in the German economy where retail sales have declined for the third consecutive month in the midst of extreme winter weather that has been unseasonably cold and rainy. Europe's growth indicator the euro coin index for May has dropped for the first time in nine months; it had last fallen in August 2012.

With Eurozone unemployment moving up to a new record we more easily understand why several European countries were the given a little bit more time to reach their austerity goals. And in data released today we see that Spain's current account has shifted into surplus in March on the back of imports which fell 13.5% and exports that backed off only slightly. So this is progress? A surplus is 'bought' at the cost of throttling growth? Economic activity in the Zone continues to be adversely impacted by austerity and when we compare the European Monetary Union countries to the Economic Union members who not currency union members, we see that the monetary union members having more trouble as they are burdened by the corset of the common currency. Also the US and Japan, that, of course, have different circumstances and independent monetary policies are doing generally much better than the European Monetary Union in their ability to reduce their unemployment rates.

Still unemployment is a thorny problem in this global economy where virtually all countries participated in the same world war are undergoing the same demographic developments. Technology that has brought labor saving methods to the market is adding its depressing effect to employment growth at the same time that the expansion of growth and export behavior in some key and very large developing economies has displaced labor in the developed countries of the West. 

It's a time that would normally call for more vigor and growth but instead policymakers in the West did not position themselves well for this shock and it hit them while they were in a position of excess of debt. The decision to try to reduce debt in the midst of these pressures rather than to try to string along growth is one of the main factors that's behind the ongoing grind and rise in unemployment rates around the world. Supply can simply be generated with much greater facility and with less labor in this modern economy at a time that demand has been forcibly restricted by policy. The work around which has been the keep fiscal policy tight while stimulating monetary policy has been a little bit like putting your foot on the brake at the same time you put the other on the accelerator there has been a whole lot of noise but not a lot happened, by excesses are building and you really don't want to keep doing this. So far there is not much evidence that that's changing.


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Unemployment rates in April in the European Monetary Union continue to rise, as the overall EMU rate is moving up to 12.2% in April from 12.1% in March. The March rate was steady at the same pace as in February. Over three months the [...]

EMU Unemployment Continues to Rise

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Consumers are feeling better about today's economy and its prospects. The
University of Michigan's Index of Consumer Sentiment for May improved to 84.5
(6.6% y/y), the highest level since July 2007. It compared to the consensus
forecast for 83.8 and a mid-month reading of 83.7. During the last ten years,
there has been a 60% correlation between the level of sentiment and the
three-month change in real personal consumption expenditures.
This month's reading of current economic conditions increased 9.0% (12.4%
y/y) to 98.0, the highest figure since July 2007. The consumer expectations
figure improved 11.8% (2.0% y/y) to 75.8.
The Reuters/University of Michigan survey data are not seasonally adjusted.
The readings are based on telephone interviews with over 300 households. Data
can be found in Haver's USECON database. The expectations figure is from
Action Economics and can be found in Haver's AS1REPNA database.
Piggy Banks from the Federal Reserve Bank of New York is available
<a href="http://libertystreeteconomics.newyorkfed.org/2013/05/piggy-banks.html">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" >University of Michigan (Q1'66
 = 100)</th>
 <th scope="col" >May</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >May'12</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Consumer Sentiment</td>
 <td >84.5</td>
 <td >76.4</td>
 <td >78.6</td>
 <td >79.3</td>
 <td >76.5</td>
 <td >67.3</td>
 <td >71.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Current Economic Conditions</td>
 <td >98.0</td>
 <td >89.9</td>
 <td >90.7</td>
 <td >87.2</td>
 <td >85.6</td>
 <td >79.1</td>
 <td >80.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Consumer Expectations</td>
 <td >75.8</td>
 <td >67.8</td>
 <td >70.8</td>
 <td >74.3</td>
 <td >70.7</td>
 <td >59.8</td>
 <td >66.0</td>
 </tr>
 </tbody>
</table>


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Consumers are feeling better about today's economy and its prospects. The University of Michigan's Index of Consumer Sentiment for May improved to 84.5 (6.6% y/y), the highest level since July 2007. It compared to the consensus [...]

U.S. Consumer Sentiment Continues To Improve

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 Personal income moved marginally lower during April (2.8% y/y) following
 a 0.3% March advance, initially reported as 0.2%. The income figure fell
 short of consensus expectations for a 0.2% increase. No change in wages
 and salaries (3.2% y/y) followed a 0.2% increase. Rental income ticked up
 0.1% (14.7% y/y) but proprietors income reversed earlier strength and fell
 0.7% (+6.2% y/y). Dividend income remained firm with a 1.0% rise (8.4%
 y/y). A 0.5% advance (-0.5% y/y) in interest income followed three
 consecutive months of 0.9% decline. Transfer receipts were off 0.6% (+2.7%
 y/y). Notable was the 3.0% drop (-30.8% y/y) in jobless insurance benefits.
 A 0.2% decline (+2.8% y/y) in personal consumption expenditures
 followed March's 0.1% uptick. No change in spending was expected. Lower
 prices prompted an 8.4% decline (-10.6% y/y) in spending on gasoline.
 Consumers took the money and spent it on clothing, up 1.0% (4.0% y/y), and
 furniture &amp; appliances, up 0.7% (4.6% y/y). Motor vehicle expenditures
 slipped marginally (+8.5% y/y), off for the third consecutive month.
 Services spending ticked up 0.1% (3.2% y/y), bolstered by a 0.9% jump (5.5%
 y/y) in outlays at restaurants &amp; hotels.
 The personal savings rate held stable at a low 2.5%. The level
 remained well below the 3.5% rate 12 months ago and the 4.0%-to-5.5%
 averages of the prior four years.
 The PCE chain price index declined 0.3% (+0.7% y/y) pulled lower
 by a 7.7% drop (-8.0% y/y) in gasoline &amp; energy prices. Elsewhere,
 durable goods prices fell 0.3% (-1.8% y/y) while apparel prices were off
 the same 0.3% (+0.3% y/y). Food prices ticked up another 0.1% (1.1% y/y)
 while services prices also inched up 0.1% (1.7% y/y). The price index
 excluding food &amp; energy was unchanged (1.1% y/y). &nbsp;
 Adjusted for price changes,&nbsp;disposable income during April ticked
 up 0.1% (1.0% y/y) while real spending also inched up 0.1% (2.1% y/y).
 The personal income &amp; consumption figures are available in Haver's USECON
 and USNA databases. The consensus expectation figure is in the AS1REPNA
 database.
 Estimating the Trend Rate of Economic Growth Using the CFNAI
 from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2013/cfljune2013_311.pdf">here</a>.

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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" >Personal Income &amp;
 Outlays (%)</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >Feb</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" >Personal Income</td>
 <td >-0.0</td>
 <td >0.3</td>
 <td >1.2</td>
 <td >2.8</td>
 <td >3.5</td>
 <td >5.1</td>
 <td >3.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Wages &amp; Salaries</td>
 <td >0.0</td>
 <td >0.2</td>
 <td >0.7</td>
 <td >3.2</td>
 <td >3.3</td>
 <td >4.0</td>
 <td >2.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Disposable Personal Income</td>
 <td >-0.1</td>
 <td >0.2</td>
 <td >1.2</td>
 <td >1.7</td>
 <td >3.3</td>
 <td >3.8</td>
 <td >3.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Personal Consumption Expenditures</td>
 <td >-0.2</td>
 <td >0.1</td>
 <td >0.8</td>
 <td >2.8</td>
 <td >3.7</td>
 <td >5.0</td>
 <td >3.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Personal Saving Rate</td>
 <td >2.5</td>
 <td >2.5</td>
 <td >2.4</td>
 <td >3.5 
 (Apr'12)</td>
 <td >3.9</td>
 <td >14.2</td>
 <td >5.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >PCE Chain Price Index</td>
 <td >-0.3</td>
 <td >-0.1</td>
 <td >0.4</td>
 <td >0.7</td>
 <td >1.7</td>
 <td >2.4</td>
 <td >1.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Less Food &amp; Energy</td>
 <td >0.0</td>
 <td >0.1</td>
 <td >0.1</td>
 <td >1.1</td>
 <td >1.7</td>
 <td >1.4</td>
 <td >1.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Real Disposable Income</td>
 <td >0.1</td>
 <td >0.3</td>
 <td >0.8</td>
 <td >1.0</td>
 <td >1.5</td>
 <td >1.3</td>
 <td >1.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Real Personal Consumption
 Expenditures</td>
 <td >0.1</td>
 <td >0.2</td>
 <td >0.4</td>
 <td >2.1</td>
 <td >1.9</td>
 <td >2.5</td>
 <td >1.8</td>
 </tr>
 </tbody>
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Personal income moved marginally lower during April (2.8% y/y) following a 0.3% March advance, initially reported as 0.2%. The income figure fell short of consensus expectations for a 0.2% increase. No change in wages and salaries [...]

U.S. Personal Income, Spending and Prices Fall; Savings Remain Lean

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 Progress, yes...but not much 
 
 
 
 

 
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The indices of sentiment and confidence in the EU area, for the Monetary Union sub-set, as well as for their key individual members, showed surprising resilience and strength in May. The overall EU index rose as the sentiment index for 10 of 11 key EU members improved month-to-month. This improvement followed a month in which seven of the same members reported month-to-month declines. In the previous month of March, 5 of them had reported declines.

Is it always good to remind people that one month does not determine a trend, however, the rebound of these sentiment indices for 10 out of 11 key countries as well as for the EU as a whole and for the Monetary Union is a good start to something better.

Still, once we evaluate where things sit, the answer is that the readings for the economic union the monetary union and these key 11 countries are still unfailingly week - even after the rebound in May. 

We evaluate the standing of the respective EU diffusion metrics in May by placing the current reading for each region or country in an ordered queue of its historic data then expressing that standing is a percentile positioning in the queue. For example, the EU index is in the 12 percentile of its queue. That means it is weaker historically than its current level only 12% of the time. The EMU metric for sentiment is in the 11.4 percentile of its queue, its weaker only 11.4% of the time. Of course, the ranking for the union is a weighted average of its various economies but with the overall index being weighted separately. Right now, for example, it appears that the EMU index is weaker than most of the members that carry the largest weight in the euro-Zone itself. How could that happen? The answer is that it's not just the weakness of the components in the EMU index that gives it its ranking but also the coincidence of all of that weakness happening together and it's the coincident occurrence of weakness that is responsible for the lower standing of the region than for most of its members

The weakest queue standing among these key 10 EMU members is from France which is in the 9.3 percentile of its queue followed by Spain in the 10.2 percentile of its queue. After those two relatively large EMU members the percentile standings move up to 12.9 for Belgium, to 14.1 for the Netherlands, to 15.0 for Portugal, and to 16.8 for Austria and so on. Germany, of course, is that the top of the food chain with the 35.6 percentile standing but note this is still pretty close to the bottom third of its range and it's the best of the lot and Germany is the largest economy in EMU.
The Industrial sector 
The industrial sector improved in the monetary union to a reading of -13 from reading of -14 (note that the values in the table by industry sector are for all of the EU not for the EMU). The queue standings for industry find Germany at the strongest reading at 40.7 percentile, Italy at the 13.8 percentile, France at the 18.6 percentile all expressed as percentile standings of their their respective queues. We also look at them in terms of changes of the last three months the German reading has deteriorated by four points, the French reading has deteriorated by three points, the Italian reading is unchanged, and the Spanish reading is down by one point. The overall EMU reading is weaker by two points. So the improvement that were seeing in industrial sector is mostly from very weak levels in April as we are still for the most part below the levels we saw in February. This is a common them for most categories this month...a minor one month bounce.
Consumer Confidence 
Consumer confidence in EMU continues to be uniformly low. In the EMU region it's in the bottom 15 percentile of its queue standing. There was no improvement in consumer confidence month-to-month, although April had showed improvement from March which was even with its value in February. Unemployment expectations have been steadily dropping they are still quite high in the top 22nd percent of their historic queue (expectations are higher only 22% of the time). And by country Germany continues to be the strongest with a decent consumer rating in the 64th percentile of its historic queue, nearly a top one-third reading. The EU's UK has a 20%-of-queue rating, while France's standing is in the bottom 12% of its queue and Spain is in the bottom 11.6% of its queue. 
Retailing: retail therapy? 
Retailing improved in the month in EMU to a -17 net reading from -18 reading in April but it is still below its -16 reading for February. The queue standing for the May reading of -17 is in the 17 percentile of its historic queue, a very weak standing. Germany has the highest queue standing on this metric in the 66.8 percentile or top one-third reading. the UK moves up to a more respectable 42nd percentile standing with Greece (Greece!) at a 34th percentile standing. Spain is at a 29th percentile and Italy at about 30th percentile all of these are relatively better than what we see for other components although clearly (except for the UK and Germany) all of these are still bottom one third of their queue standings which we have to regard as very weak. We do however see strong improvements from their February levels: Greece is at a -15 compared with a -33 raw-reading in February, Portugal which is at a -15 reading compared with a -20 raw reading in February, and even Italy, at a -22 compared with a -28 raw- reading in February. We are seeing improvement in retailing in the countries that have been the most hard-hit by austerity.
Services sector 
The services metric for EMU improved to -9 in May from -11 in April that -9 reading stands at its February level as well. There were month-to-month improvements in Germany, in Italy, and in Portugal; a sharp improvement in the UK and Greece. But the ranking of the services index for EMU in May is in the lower 12 percentile of its historic queue. Generally the services readings by country are slightly better than for other components, except for retailing. Interestingly, the UK has the highest percentile standing in the 33.5th percentile compared to Germany which is second at the 32nd percentile Greece is in the 29th percentile, Spain in the 20th percentile, Italy in the 13th percentile, Portugal in the 10th percentile and France, which was unchanged on the month stands in the lower 5th percentile of its historic queue, an extremely weak reading. 
Construction 
The construction sector in EMU ranks in the 17 percentile of its historic queue unlike the other measures it fell in May to a -34 reading to a -32 reading and it's below its February reading. By country Germany is exceptionally strong in the top 1% of its historic queue for the construction sector! Italy's reading is basically tied with the UK in the 37th percentile of their respective queues. France's reading stands in the 28th percentile of its queue. And Spain that has had an absolute construction disaster has fallen below 1% of its historic queue for the construction sector.
Employment expectations...generally 
Employment expectations up-and-down the Zone's sectors whether measured in the current environment or for expectations - cut and presented many different ways - are generally ranking from the 30th to the 13th percentile of their respective historic queues. The exception is for industry where employment expectations are in the 43rd percentile which is still not a good reading but it's by far the best of the lot. From the consumer sentiment report unemployment expectations are, as mentioned earlier, in the top 22% of their historic queue.
Summing up 
The picture for EMU this month is of a region that is slightly better than it was in the last month or two but still generally worse than it was three months ago. While, there is a rather broad-based bounce recorded in May, we need to be careful about getting too carried away about what that signal really means. It certainly is too soon to say we turned the corner and to try to extrapolate trends. If you look at the chart at the top and try to block out particular calculations for particular months, most of the lines on the chart appear to have moved up from their lowest points of this cycle. For some, like France, it's a one month move. For most of the rest it's a multi month move but on a very shallow gradient. That shallow gradient means that the signal is not strong. It also indicates ongoing vulnerability. 

Away from the sheer numbers we continue to hear divisive language out of leaders from the various countries in the monetary union. France, Spain, Poland, Portugal, the Netherlands and Slovenia are all being given more time to complete their austerity plans by the EU. We can be hopeful that the worst of this might be behind us, but it would be foolish to expect to see improvement at anything other than a very slow pace at least based on the momentum that we see in this report. 

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The indices of sentiment and confidence in the EU area, for the Monetary Union sub-set, as well as for their key individual members, showed surprising resilience and strength in May. The overall EU index rose as the sentiment index [...]

EU Indices largely improve in May.

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 According to the National Association of Realtors (NAR), pending sales
 of single-family homes during April ticked up 0.3% (10.3% y/y) after a
 1.5% gain during March. The latest level was the highest since April 2010.
 The sales rebound since the removal in 2010 of the home buyers tax credit
 has raised home sales by more than one-third from the low.
 Last month's sales gain again reflected mixed performance around the
 country. Sales in the Northeast rose 11.5% (17.7% y/y) to a three-year high.
 Sales in the Midwest gained 3.2% (15.0% y/y) to the highest level of the
 economic expansion. To the downside, sales in the West plummeted 7.6% (-2.7%
 y/y) while sales in the South were down 1.1% (+12.2% y/y).
 Pending home sales figures are analogous to the new home sales
 data from the Commerce Department in that they measure existing home sales
 when the sales contract is signed, not at the time the sale is closed. The
 series dates back to 2001 and the data are available in Haver's PREALTOR database.&nbsp;
 

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 &nbsp;


<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" >Pending Home Sales
 (2001=100)</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >Feb</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</td>
 <td >106.0</td>
 <td >105.7</td>
 <td >104.1</td>
 <td >10.3</td>
 <td >100.3</td>
 <td >90.2</td>
 <td >89.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Northeast</td>
 <td >92.3</td>
 <td >82.8</td>
 <td >82.8</td>
 <td >17.7</td>
 <td >79.1</td>
 <td >67.9</td>
 <td >70.9</td>
 </tr>
 <tr>
 <td class="firstcol" >Midwest</td>
 <td >107.1</td>
 <td >103.8</td>
 <td >103.5</td>
 <td >15.0</td>
 <td >95.9</td>
 <td >81.5</td>
 <td >79.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >South</td>
 <td >119.2</td>
 <td >120.5</td>
 <td >116.9</td>
 <td >12.2</td>
 <td >110.7</td>
 <td >98.3</td>
 <td >97.0</td>
 </tr>
 <tr>
 <td class="firstcol" >West</td>
 <td >94.6</td>
 <td >102.4</td>
 <td >101.4</td>
 <td >-2.7</td>
 <td >105.0</td>
 <td >104.1</td>
 <td >100.7</td>
 </tr>
 </tbody>
 </table>
 
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According to the National Association of Realtors (NAR), pending sales of single-family homes during April ticked up 0.3% (10.3% y/y) after a 1.5% gain during March. The latest level was the highest since April 2010. The sales rebound [...]

U.S. Pending Home Sales Reach a New High

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 Initial unemployment insurance claims increased to 354,000 (-7.3%
 y/y) during the week ended May 25 from a revised 344,000, initially
 reported as 340,000. Consensus expectations were for 340,000 claims. The
 four week moving average of claims rose to 347,250 from 340,500. During
 the last ten years, there has been a 74% correlation between the level
 of claims and the m/m change in nonfarm payrolls.
 Continuing claims for unemployment insurance in the week ended May 18
 increased to 2.986M (-9.0% y/y) from the low of 2.923M. The four week
 moving average of continuing claims fell to a cycle-low of&nbsp; 2.987M.
 The insured rate of unemployment held at 2.3% where it's been for six
 weeks. This particular count covers only &quot;regular&quot; programs
 and does not include all extended benefit and other specialized jobless
 insurance programs. In the week of May 11, the latest figure available,
 the grand total of all benefit recipients ticked up w/w to 4.579M, (-25.4%
 y/y. That compares to a cycle peak of 12.060M in January 2010. The
 number of individuals who are collecting emergency and extended payments
 fell to a new low of 1.727 million (-34.1% y/y).
 By state, the insured unemployment rate continued to vary
 greatly with Nebraska (1.04%), Louisiana (1.13%), Virginia (1.22%),
 Texas (1.48%), Florida (1.53%), Tennessee (1.55%), South Carolina (1.67%)
 and Ohio (1.77%) at the low end of the range. At the high end were
 Michigan (2.10%), Maryland (2.29%), New York (2.52%), Illinois (2.67%),
 Wisconsin (2.62%), (Nevada 2.85%), California (2.89%) and New Jersey
 (3.15%).
 Data on weekly unemployment insurance are contained in Haver's WEEKLY
 database and they are summarized monthly in USECON. Data for
 individual states are in REGIONW. The consensus estimates come
 from the Action Economics survey, carried in the AS1REPNA
 database.&nbsp;&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" >Unemployment
 Insurance (000s)</th>
 <th scope="col" >05/25/13</th>
 <th scope="col" >05/18/13</th>
 <th scope="col" >05/11/13</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>
 <td class="firstcol" >Initial Claims</td>
 <td>354</td>
 <td>344</td>
 <td>363</td>
 <td>-7.3</td>
 <td>375</td>
 <td>409</td>
 <td>459</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Continuing Claims</td>
 <td>--</td>
 <td>2,986</td>
 <td>2,923</td>
 <td>-9.0</td>
 <td>3,318</td>
 <td>3,744</td>
 <td>4,544</td>
 </tr>
 <tr>
 <td class="firstcol" >Insured Unemployment Rate (%)</td>
 <td>--</td>
 <td>2.3</td>
 <td>2.3</td>
 <td>2.6 
 (5/12)</td>
 <td>2.6</td>
 <td>3.0</td>
 <td>3.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Total &quot;All Programs&quot;
 (NSA)</td>
 <td>--</td>
 <td>--</td>
 <td>4.579M</td>
 <td>-25.4</td>
 <td>6.047M</td>
 <td>7.750M</td>
 <td>9.850M</td>
 </tr>
 </tbody>
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Initial unemployment insurance claims increased to 354,000 (-7.3% y/y) during the week ended May 25 from a revised 344,000, initially reported as 340,000. Consensus expectations were for 340,000 claims. The four week moving average of [...]

U.S. Initial Claims for Unemployment Insurance Unexpectedly Notch Higher

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 Real GDP growth for last quarter was marginally
 revised to 2.4% (1.8% y/y) from the advance estimate of a 2.5% rise.
 Nevertheless, growth still improved from 0.4% at the end of the year.
 Expectations were for a 2.5% gain. Fewer military outlays and a smaller
 deterioration in the foreign trade account&nbsp; restrained growth last
 quarter. Inventory rebuilding, consumer spending and residential
 investment were firm. The increase in the GDP chain price index also was
 little-revised at a modest 1.1% (1.6% y/y).
 Posted for the first time, after tax corporate
 profits fell 2.0% (+4.0% y/y) following a 1.8% Q4 rise. The decline
 reflected weakness across sectors. Rest of world profits fell 7.3% (+4.1%
 y/y), domestic nonfinancial earnings were off 0.8% (+2.8% y/y) while
 earnings in the financial sector slipped 0.4% (+5.3% y/y).&nbsp;&nbsp; 
 The effect on GDP growth from inventory
 rebuilding was lessened to 0.6 percentage points from 1.0 points. This
 still did not recoup the 1.5 point subtraction during Q4. Trade deficit
 deterioration, however, lowered growth by a reduced 0.2 percentage points.
 It occurred as imports rose at an easier 1.9% rate (-0.1% y/y) while
 exports rose at a 0.8% rate (1.1% y/y), also lessened from the initial
 tally.

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 Final sales to domestic purchasers grew at an unrevised 1.9% rate (1.7%
 y/y). The advance continued to be held back by a 4.9% decline (-2.3% y/y)
 in government purchases. This drop reflected a 12.1% shortfall (-6.3% y/y)
 in national defense spending. It was accompanied by a deepened 2.4%
 decline (-1.2% y/y) in state &amp; local government outlays.&nbsp; 
 Growth in final sales to private domestic purchasers was unrevised at a
 firm 3.3% (2.6% y/y). That followed Q4's 3.6% increase. Consumer spending
 rose at a firmed 3.4% rate (2.1% y/y) led by a lessened 9.1% advance (7.3%
 y/y) in motor vehicle purchases. Consumption of home furnishings growth,
 however, was raised to 5.2% (3.6% y/y) while apparel consumption increased
 a little-changed 1.7% rate (0.1% y/y). Residential investment growth
 continued strong at a slightly-lessened 12.0% rate (12.8% y/y). Business
 fixed investment growth remained easier at 2.2% (4.1% y/y) following a
 13.1% rise during Q4.&nbsp;&nbsp;
 The GDP chain price index grew at a modest and marginally-changed 1.1%
 rate (1.6% y/y). That followed a 1.0% Q4 rise. This modest gain was
 largely influenced by a 1.0% increase (1.2% y/y) in the PCE price index,
 held back by lower energy prices. A firmed 6.7% rise (3.5% y/y) in the
 residential price index was countered by an unchanged 0.6% uptick (1.0%
 y/y) in the business fixed investment price index.&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;
 
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 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
	
 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM" ;>Chained
 2005 $, %, AR</a></th>
 <th scope="col" >Q1'13 (2nd Estimate)</th>
 <th scope="col" >Q1'13 (Advance)</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 >2.4</td>
 <td >2.5</td>
 <td >0.4</td>
 <td >3.1</td>
 <td >1.8</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 >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 >1.8</td>
 <td >1.5</td>
 <td >1.9</td>
 <td >2.4</td>
 <td >1.9</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 >-0.2</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 >1.9</td>
 <td >1.9</td>
 <td >1.5</td>
 <td >1.9</td>
 <td >1.7</td>
 <td >1.9</td>
 <td >1.8</td>
 <td >1.3</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" >Demand Components</td>
 </tr>
 <tr>
 <td class="firstcol" >Personal Consumption</td>
 <td >3.4</td>
 <td >3.2</td>
 <td >1.8</td>
 <td >1.6</td>
 <td >2.1</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 >2.2</td>
 <td >2.1</td>
 <td >13.1</td>
 <td >-1.8</td>
 <td >4.1</td>
 <td >8.0</td>
 <td >8.6</td>
 <td >0.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Residential Investment</td>
 <td >12.0</td>
 <td >12.6</td>
 <td >17.5</td>
 <td >13.6</td>
 <td >12.8</td>
 <td >12.1</td>
 <td >-1.4</td>
 <td >-3.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Government Spending</td>
 <td >-4.9</td>
 <td >-4.1</td>
 <td >-7.0</td>
 <td >3.9</td>
 <td >-2.3</td>
 <td >-1.7</td>
 <td >-3.1</td>
 <td >0.6</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" >Chain-Type Price
 Index</td>
 </tr>
 <tr>
 <td class="firstcol" >GDP</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 >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 >1.2</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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Real GDP growth for last quarter was marginally revised to 2.4% (1.8% y/y) from the advance estimate of a 2.5% rise. Nevertheless, growth still improved from 0.4% at the end of the year. Expectations were for a 2.5% gain. Fewer [...]

U.S. GDP Growth Remains Moderate but Profits Decline

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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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.

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- 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.

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**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.

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**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.

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**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.

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**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.

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**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.

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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.