Tom Moeller

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 Building activity improved in February. An expected 1.2% rise (7.9%
 y/y) in construction put in place followed a little-revised 2.1% January
 decline. December figures, however, were lowered sharply. Improvement in
 building activity was broad-based in February.
 Private construction
 improved by 1.3% (12.6% y/y) led by 2.2% gain (20.1% y/y) in residential
 construction activity. That reflected a 4.3% rise (34.1% y/y) in new
 single-family building but multi-family construction fell 2.2% (+51.8%
 y/y). Spending on improvements ticked up 0.5% (1.1% y/y).
 In the nonresidential sector, construction activity nudged up 0.7%
 (2.6% y/y). Lodging building led the rise with a 4.2% increase (16.0% y/y)
 followed by a 3.5% gain (5.3% y/y) in highways &amp; streets. Construction
 of power facilities rose 1.0% (6.0% y/y). These gains were offset by a
 9.1% drop (-7.2% y/y) in communication building and a 2.2% fall (10.0%
 y/y) in amusement &amp; recreation.
 Public sector building activity regained some momentum with a 0.9% rise
 but it still was down 1.5% y/y. Highways &amp; streets construction rose
 3.4% (5.1% y/y). Activity here accounts for nearly one-third of public
 sector building activity. Public power construction rose 3.6% and by
 nearly one quarter y/y. Transportation building gained 3.6% (23.8% y/y)
 but educational facility building slipped 0.3% (-8.4% y/y).
 The construction spending figures are in Haver's USECON database
 and the expectations figure is contained in the AS1REPNA database.
 

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 &nbsp;



	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" >Construction Put in Place (%)</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</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 >1.2</td>
 <td >-2.1</td>
 <td >0.1</td>
 <td >7.9</td>
 <td >9.3</td>
 <td >-3.1</td>
 <td >-11.2</td>
 </tr>
 </tbody>
 <tr class="odd">
 <td class="firstcol" >Private</td>
 <td >1.3</td>
 <td >-3.1</td>
 <td >1.1</td>
 <td >12.6</td>
 <td >16.4</td>
 <td >-1.1</td>
 <td >-15.2</td>
 </tr>
 <tbody>
 <tr>
 <td class="firstcol" >Residential</td>
 <td >2.2</td>
 <td >-0.1</td>
 <td >-0.8</td>
 <td >20.1</td>
 <td >15.5</td>
 <td >-1.0</td>
 <td >-2.9</td>
 </tr>
 </tbody>
 <tr class="odd">
 <td class="firstcol" >Nonresidential</td>
 <td >0.7</td>
 <td >-3.2</td>
 <td >0.7</td>
 <td >2.6</td>
 <td >7.1</td>
 <td >-3.9</td>
 <td >-14.8</td>
 </tr>
 <tbody>
 <tr>
 <td class="firstcol" >Public</td>
 <td >0.9</td>
 <td >0.2</td>
 <td >-2.0</td>
 <td >-1.5</td>
 <td >-3.0</td>
 <td >-6.4</td>
 <td >-3.6</td>
 </tr>
 </tbody>
 
 



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Building activity improved in February. An expected 1.2% rise (7.9% y/y) in construction put in place followed a little-revised 2.1% January decline. December figures, however, were lowered sharply. Improvement in building activity [...]

U.S. Construction Spending Rebounds

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 Recent improvement in the factory sector stalled last month. The
 March composite index of manufacturing activity from the Institute for
 Supply Management fell to 51.3 from an unrevised 54.2 in
 February. The decline reversed most of two months' improvement and it
 disappointed expectations for stability at 54.0. 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 lower were the readings for production (52.2)
 and new orders (51.4). However, the new export
 orders figure (56.0) rose to its highest level since April of last year. The
 inventory index declined to 49.5 while the supplier delivery reading fell
 to its lowest level (49.4) since May of last year. That indicated faster
 delivery speeds and more economic slack. Offsetting these declines was a
 rise in the employment index to 54.2, its highest reading since June of
 last year.
 During the last ten years there has been an 88% correlation between the
 employment index and the m/m change in factory payrolls.&nbsp;
 The prices paid index (54.5) weakened sharply last month and reversed
 three months of improvement. Twenty one percent of firms raised prices while
 twelve 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.&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" >Mar</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Mar'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 >51.3</td>
 <td >54.2</td>
 <td >53.1</td>
 <td >53.3</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 >51.4</td>
 <td >57.8</td>
 <td >53.3</td>
 <td >56.8</td>
 <td >52.9</td>
 <td >56.4</td>
 <td >59.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Production</td>
 <td >52.2</td>
 <td >57.6</td>
 <td >53.6</td>
 <td >55.9</td>
 <td >53.6</td>
 <td >57.4</td>
 <td >61.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Employment</td>
 <td >54.2</td>
 <td >52.6</td>
 <td >54.0</td>
 <td >55.6</td>
 <td >53.8</td>
 <td >57.4</td>
 <td >57.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Supplier Deliveries</td>
 <td >49.4</td>
 <td >51.4</td>
 <td >53.6</td>
 <td >48.0</td>
 <td >50.0</td>
 <td >54.7</td>
 <td >58.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Inventories</td>
 <td >49.5</td>
 <td >51.5</td>
 <td >51.0</td>
 <td >50.0</td>
 <td >48.2</td>
 <td >50.1</td>
 <td >50.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Prices Paid Index (NSA)</td>
 <td >54.5</td>
 <td >61.5</td>
 <td >56.5</td>
 <td >61.0</td>
 <td >53.2</td>
 <td >65.2</td>
 <td >68.9</td>
 </tr>
 </tbody>
 </table>
 

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Recent improvement in the factory sector stalled last month. The March composite index of manufacturing activity from the Institute for Supply Management fell to 51.3 from an unrevised 54.2 in February. The decline reversed most of [...]

U.S. ISM Factory Index Posts Unexpected Decline; Pricing Power Weakens

Robert Brusca

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Japan's Tankan reading in 2013Q1 for manufacturers rose to -8 from -12 in Q4. This was just short of expectations that a -7 reading would emerge. Non-MFG improved to +6 from +4.

The readings are still weak. The MFG survey stands at the 23rd percentile of its historic queue (i.e. it is weaker only 23% of the time and stronger 77% of the time). While it's a quarter-to-quarter improvement, the index is still languishing. Non-MFG is doing better as it stands at the 47th percentile of its queue nearer to the middle or median. 

Construction is benefiting as expected in the wake of the tsunami and nuclear disasters. That sector stands in the 97th percentile of its historic queue - it has rarely been stronger. But not much of this strength seems to be filtering out to the rest of the economy.

Among the non-MFG sectors transportation, wholesaling, restaurants and hotels & retailing are the weakest - at or below their respective queue midpoint (50th percentile or lower). Personal services and services for businesses are doing quite well while real estate is just a bit above its midpoint. 

The outlook survey has higher absolute numbers compared to the current reading, but that is not very meaningful as a comparison. When we evaluate the outlook relative to its own history, the current MFG reading of -1 stands in the lower 15th percentile of all historic observations (its queue) - that's even weaker than the relative standing for its current reading for this month. The non-MFG outlook stands in the 41st percentile of its queue, just a bit lower than its current standing in Q1. There is some improvement in the large-firm environment but nearly enough. 

Medium-sized firms showed setbacks in the quarter. Manufacturing fell back to -14 from -12 to stand in the top 58th percentile of its historic queue. The MFG outlook for medium-sized companies rose to the 75th percentile of its queue. Non-MFG improved by five points and stood at the 91st percentile of its queue with the outlook rising to the 64th percentile. Medium-sized businesses are seeing big improvements in the outlook even when the current situation slipped. 

Small firms still give poor responses in the survey. Small MFG firms still register at -19 on the raw Tankan survey, and are another group that has eroded quarter to quarter dropping from a -18 reading in Q4 of 2012. The current reading is actually moderate in comparison with what the sector historically reports. That -19 reading stands in the top 43% historically of all responses, at a point above its midpoint. Non-MFG, however, improved in the month, gaining three points month-to-month in the survey to stand at the 94th percentile of its queue. The outlook for small business is stellar with the MFG reading at the 83rd percentile of its queue and the non-MFG reading at the 68th percentile as current conditions are still elevated. 

While the focus for Japan is usually on the Tankan's large companies and while there is some progress there, it is still slow and this quarter did not quite reach the degree of improvement hoped for. But the medium-sized and smaller firms reporting are showing either current progress, sharply improved expectations or both. On balance, the report is still a positive one.

Non-MFG firms are making the largest gains overall while MFG firms are more prone to be struggling. In the large company survey, the quarterly rebound still leaves the month's reading weak and below all MFG readings since Q2 of 2010. For medium-sized firms, non-MFG is making continued strong gains with non-MFG showing its best reading since 2007. Even so medium-sized MFG firms are struggling and their current situation is still eroding, but their outlook improved this month. Small businesses are clear winners with non-MFG showing continuing gains and MFG in a small set back, but at a still-moderate reading. Non-MFG small firms are showing their best values since before the financial crisis. MFG small firms are holding to their crisis threshold levels of response. 

The failure of MFG to do as well as non-MFG and the sluggishness of larger firms generally may have more to with the fact that these firms face more international competition in a world where growth is still weak and competitive forces are still daunting. Small domestic firms will benefit more directly from domestic policy shifts of the sort that are now being implemented in Japan. They seem to sense it. 

 
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Japan's Tankan reading in 2013Q1 for manufacturers rose to -8 from -12 in Q4. This was just short of expectations that a -7 reading would emerge. Non-MFG improved to +6 from +4. The readings are still weak. The MFG survey stands at [...]

Japan's Tankan Improves but is Short of Expectations

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 The University of Michigan's Index of Consumer Sentiment for March
 improved for the full month to 78.6 (3.1% y/y) from its mid-month reading
 of 71.8. The figure was up versus 77.6 in February and compared to the
 consensus forecast for a decline 72.6. It remained down, however, versus
 the November high of 82.7. During the last ten years, there has been a 61%
 correlation between the level of sentiment and the three-month change in
 real personal consumption expenditures. 
 Last month's sentiment figure reflected improvement in the consumer
 expectations reading to 70.8 (+1.4%) which was up slightly m/m but up
 sharply from the mid-month figure of 61.7. The present situations reading
 also rose m/m to 90.7 (5.5% y/y) and compared to the mid-March reading of
 87.5.
 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.
 
 <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" >&nbsp;Mar</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Mar '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 >78.6</td>
 <td >77.6</td>
 <td >&nbsp;73.8</td>
 <td >76.2</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 >90.7</td>
 <td >89.0</td>
 <td >85.0</td>
 <td >86.0</td>
 <td >85.6</td>
 <td >79.1</td>
 <td >80.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Consumer Expectations</td>
 <td >70.8</td>
 <td >70.2</td>
 <td >66.6</td>
 <td >69.8</td>
 <td >70.7</td>
 <td >59.8</td>
 <td >66.0</td>
 </tr>
 </tbody>
 </table>
 
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The University of Michigan's Index of Consumer Sentiment for March improved for the full month to 78.6 (3.1% y/y) from its mid-month reading of 71.8. The figure was up versus 77.6 in February and compared to the consensus forecast for [...]

U.S. Consumer Sentiment Improves Sharply in Late-March

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 Improvement in income is encouraging consumers to keep
 spending. Personal income jumped 1.1% last month
 (2.6% y/y) after a little-revised 3.7% January decline. The rise easily
 outpaced consensus expectations for a 0.7% increase. Last month's
 outsized gain in overall income stemmed from a 2.0% rise (12.7% y/y) in
 rental incomes (12.7% y/y). Proprietors income also was solid and
 increased 1.0% (5.5% y/y). Wage &amp; salaries grew 0.6% (2.7% y/y) following a
 0.6% January decline. These gains were partially offset by a 1.2% drop
 (+0.1% y/y) in interest earnings.&nbsp;
 With the solid gain in income, consumers increased spending by an
 expected 0.7% (3.3% y/y). This followed an upwardly revised 0.4%
 January rise. The jump in gasoline prices last month prompted an 8.1%
 surge (4.1% y/y) in outlays on fuel. However, consumers pulled back on
 the number of gallons bought and real outlays on gasoline slipped 0.4%
 (+1.0% y/y). Outlays on food &amp; beverages also jumped 1.1% (2.1% y/y)
 and the strength of the m/m increase reflected real consumption's jump.
 In the discretionary spending categories, motor vehicle outlays slipped
 0.2% (+7.9% y/y) while furniture and appliance spending gained 0.2%
 (2.7% y/y). Clothing spending rose 0.4% (2.5% y/y) and spending on
 services gained 0.4% (3.1% y/y).
 The strength in income growth relative to the monthly rise in
 spending raised the personal savings rate to 2.6% from 2.2%. These
 figures remained, however, well below the 4.0%-to-5.5% averages of the
 prior four years.
 The PCE chain price index gained 0.4% (1.3% y/y) following no
 change during the prior two months. An 8.5% rise (3.1% y/y) in the chain
 price index for gasoline &amp; energy provided the strength behind
 pricing power in February. Elsewhere, durable
 goods prices slipped 0.1% (-1.7% y/y) as all categories showed price
 declines. In the nondurables area, apparel prices slipped 0.1% (+3.0%
 y/y) but food prices gained 0.2% (1.2% y/y). Services prices inched up
 0.1% (1.8% y/y). Excluding food &amp; energy, the price index gained
 0.1% (1.3% y/y). &nbsp;
 Adjusted for price changes,&nbsp;disposable income during February
 rose 0.7% (0.9% y/y) and real spending gained 0.3% (2.0% 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.&nbsp;
 <table class="centered" border="0" cellSpacing="0" width="1231">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="631">Personal Income &amp;
 Outlays (%)</th>
 <th scope="col" align="center" width="87">Feb</th>
 <th scope="col" align="center" width="87">Jan</th>
 <th scope="col" align="center" width="87">Dec</th>
 <th scope="col" align="center" width="88">Y/Y</th>
 <th scope="col" align="center" width="88">2012</th>
 <th scope="col" align="center" width="88">2011</th>
 <th scope="col" align="center" width="88">2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="631">Personal Income</td>
 <td align="center" width="87">1.1</td>
 <td align="center" width="87">-3.7</td>
 <td align="center" width="87">2.6</td>
 <td align="center" width="88">2.6</td>
 <td align="center" width="88">3.5</td>
 <td align="center" width="88">5.1</td>
 <td align="center" width="88">3.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="631">&nbsp;&nbsp;Wages &amp; Salaries</td>
 <td align="center" width="87">0.6</td>
 <td align="center" width="87">-0.6</td>
 <td align="center" width="87">0.7</td>
 <td align="center" width="88">2.7</td>
 <td align="center" width="88">3.3</td>
 <td align="center" width="88">4.0</td>
 <td align="center" width="88">2.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="631">Disposable Personal Income</td>
 <td align="center" width="87">1.1</td>
 <td align="center" width="87">-4.0</td>
 <td align="center" width="87">2.7</td>
 <td align="center" width="88">2.3</td>
 <td align="center" width="88">3.3</td>
 <td align="center" width="88">3.8</td>
 <td align="center" width="88">3.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="631">Personal Consumption Expenditures</td>
 <td align="center" width="87">0.7</td>
 <td align="center" width="87">0.4</td>
 <td align="center" width="87">0.2</td>
 <td align="center" width="88">3.3</td>
 <td align="center" width="88">3.7</td>
 <td align="center" width="88">5.0</td>
 <td align="center" width="88">3.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="631">Personal Saving Rate</td>
 <td align="center" width="87">2.6</td>
 <td align="center" width="87">2.2</td>
 <td align="center" width="87">6.5</td>
 <td align="center" width="88">3.5 
 (Feb'12)</td>
 <td align="center" width="88">3.9</td>
 <td align="center" width="88">14.2</td>
 <td align="center" width="88">5.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="631">PCE Chain Price Index</td>
 <td width="87" align="center">0.4</td>
 <td width="87" align="center">0.0</td>
 <td width="87" align="center">0.0</td>
 <td width="88" align="center">1.3</td>
 <td width="88" align="center">1.7</td>
 <td width="88" align="center">2.4</td>
 <td width="88" align="center">1.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="631">&nbsp;&nbsp;Less Food &amp;
 Energy</td>
 <td width="87" align="center">0.1</td>
 <td width="87" align="center">0.2</td>
 <td width="87" align="center">0.0</td>
 <td width="88" align="center">1.3</td>
 <td width="88" align="center">1.7</td>
 <td width="88" align="center">1.4</td>
 <td width="88" align="center">1.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="631">Real Disposable Income</td>
 <td width="87" align="center">0.7</td>
 <td width="87" align="center">-4.0</td>
 <td width="87" align="center">2.7</td>
 <td width="88" align="center">0.9</td>
 <td width="88" align="center">1.5</td>
 <td width="88" align="center">1.3</td>
 <td width="88" align="center">1.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="631">Real Personal Consumption
 Expenditures</td>
 <td width="87" align="center">0.3</td>
 <td width="87" align="center">0.3</td>
 <td width="87" align="center">0.2</td>
 <td width="88" align="center">2.0</td>
 <td width="88" align="center">1.9</td>
 <td width="88" align="center">2.5</td>
 <td width="88" align="center">1.8</td>
 </tr>
 </tbody>
 </table>
 
 
 
 
 
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Personal income jumped 1.1% last month (2.6% y/y) after a little-revised 3.7% January decline. The rise easily outpaced consensus expectations for a 0.7% increase. Last month's outsized gain in overall income stemmed from a 2.0% rise [...]

U.S. Personal Income & Spending Are Firm

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 Improvement in income is encouraging consumers to keep
 spending. Personal income jumped 1.1% last month
 (2.6% y/y) after a little-revised 3.7% January decline. The rise easily
 outpaced consensus expectations for a 0.7% increase. Last month's
 outsized gain in overall income stemmed from a 2.0% rise (12.7% y/y) in
 rental incomes (12.7% y/y). Proprietors income also was solid and
 increased 1.0% (5.5% y/y). Wage &amp; salaries grew 0.6% (2.7% y/y) following a
 0.6% January decline. These gains were partially offset by a 1.2% drop
 (+0.1% y/y) in interest earnings.&nbsp;
 With the solid gain in income, consumers increased spending by an
 expected 0.7% (3.3% y/y). This followed an upwardly revised 0.4%
 January rise. The jump in gasoline prices last month prompted an 8.1%
 surge (4.1% y/y) in outlays on fuel. However, consumers pulled back on
 the number of gallons bought and real outlays on gasoline slipped 0.4%
 (+1.0% y/y). Outlays on food &amp; beverages also jumped 1.1% (2.1% y/y)
 and the strength of the m/m increase reflected real consumption's jump.
 In the discretionary spending categories, motor vehicle outlays slipped
 0.2% (+7.9% y/y) while furniture and appliance spending gained 0.2%
 (2.7% y/y). Clothing spending rose 0.4% (2.5% y/y) and spending on
 services gained 0.4% (3.1% y/y).
 The strength in income growth relative to the monthly rise in
 spending raised the personal savings rate to 2.6% from 2.2%. These
 figures remained, however, well below the 4.0%-to-5.5% averages of the
 prior four years.
 The PCE chain price index gained 0.4% (1.3% y/y) following no
 change during the prior two months. An 8.5% rise (3.1% y/y) in the chain
 price index for gasoline &amp; energy provided the strength behind
 pricing power in February. Elsewhere, durable
 goods prices slipped 0.1% (-1.7% y/y) as all categories showed price
 declines. In the nondurables area, apparel prices slipped 0.1% (+3.0%
 y/y) but food prices gained 0.2% (1.2% y/y). Services prices inched up
 0.1% (1.8% y/y). Excluding food &amp; energy, the price index gained
 0.1% (1.3% y/y). &nbsp;
 Adjusted for price changes,&nbsp;disposable income during February
 rose 0.7% (0.9% y/y) and real spending gained 0.3% (2.0% 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.&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" >Personal Income &amp;
 Outlays (%)</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</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 >1.1</td>
 <td >-3.7</td>
 <td >2.6</td>
 <td >2.6</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 >0.6</td>
 <td >-0.6</td>
 <td >0.7</td>
 <td >2.7</td>
 <td >3.3</td>
 <td >4.0</td>
 <td >2.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Disposable Personal Income</td>
 <td >1.1</td>
 <td >-4.0</td>
 <td >2.7</td>
 <td >2.3</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 >0.7</td>
 <td >0.4</td>
 <td >0.2</td>
 <td >3.3</td>
 <td >3.7</td>
 <td >5.0</td>
 <td >3.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Personal Saving Rate</td>
 <td >2.6</td>
 <td >2.2</td>
 <td >6.5</td>
 <td >3.5 
 (Feb'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>0.4</td>
 <td>0.0</td>
 <td>0.0</td>
 <td >1.3</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>0.1</td>
 <td>0.2</td>
 <td>0.0</td>
 <td >1.3</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>0.7</td>
 <td>-4.0</td>
 <td>2.7</td>
 <td >0.9</td>
 <td >1.5</td>
 <td >1.3</td>
 <td >1.8</td>
 </tr>
 <tr>
 <td class="firstcol" >Real Personal Consumption
 Expenditures</td>
 <td>0.3</td>
 <td>0.3</td>
 <td>0.2</td>
 <td >2.0</td>
 <td >1.9</td>
 <td >2.5</td>
 <td >1.8</td>
 </tr>
 </tbody>
 </table>




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Improvement in income is encouraging consumers to keep spending. Personal income jumped 1.1% last month (2.6% y/y) after a little-revised 3.7% January decline. The rise easily outpaced consensus expectations for a 0.7% increase. Last [...]

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	 Money and credit growth in the European Monetary Union continue to be disappointing. Money supply growth over 12 months is at a 4.3% annual rate while over three months it has slipped to a 3.5% annual rate. On unchanged velocity it is unable to support 2% growth with 2% inflation. Over the last 12 months credit to residents has fallen by 1.7% over three months it's falling at a 4.6% annual rate. Expressed in inflation-adjusted terms the growth of the real money stock in EMU is more stable at a 2.4% annual rate over 12 months and at a 2.4% annual rate over three months. However, in real terms the extension of credit continues to contract and continues to contract and a quickening pace. 

Global trends in money growth are mixed. In the US, M2 growth, which has been weaker the past year than it was over the past two years, has continued to decelerate: it's twelve-month growth rate of 6.8% is above its three-month growth rate which is running at a 4.7% annualized pace. 

The UK has had a turnaround. UK money growth had been declining. But in the middle of 2012 its negative growth rates began to diminish. Currently its twelve-month annual growth rate is a +1.6% while its three-month growth rate is a positive 6.2%. UK has exhibited clearly the most volatile money growth since the financial crisis began. Its current acceleration in sterling M4 balances represents another abrupt move in the growth rate of money supply. 

It's probably too soon to say that the new Bank of Japan policies are taking hold. However, Japan's money supply, M2 plus CDs, has stepped up its growth rate. Over the last year, as well as in the last two and three years, money growth has hovered a tick below 3% in Japan. However, over six months the growth rate in Japan has gone up to 3.5% and over three months the growth rate has stepped up to a 4.7% annual rate.

While the Eurozone may have succeeded in stabilizing the growth rate in real money balances, nominal money supply remains in a decelerating mode. More to the point, money and credit growth rates are diverging and have been diverging since the third quarter of last year. The money-credit creation process in Europe appears to have been divorced-irreconcilable differences! While money supply has been able to be placed on an upward trend the growth rate for credit has not.

While the European central bank is widely lauded (in some circles...) for its LTRO program, that program which helps to funnel money to banks and which helps banks to support the local government securities markets does not encourage banks to support the extension of credit to their local private markets. Duh!? 

The emphasis has been on keeping the government sectors afloat and there has been a neglect of the private sector. In some sense this is understandable because if 'the ship' is sinking you look to plug the hole. But these ships have been sinking for some time and the captain of the ship also needs to pay attention to the direction in the course. As with the ship it's true that, if it sinks, the course and speed don't matter much. But in this case it's the course in the speed of the private sector that matters and if the private sector could be stabilized or better yet stimulated (!), that alone would help to plug the government's fiscal hole. Neglect of the private sector is making things worse. Meanwhile, the central bank thinks that it has stabilized the situation and eliminated corrosive speculation by stabilizing the government sector! In fact, it is helping to sink the real ship.

At what point in this recovery process will the political and economic leaders of the European Union decide that it's time to put the bunker mentality of crisis-fighting behind them and to focus on letting markets do their job? Right now policy in the United States as well as in Europe - and increasingly in Japan - leans heavily on the side of making the invisible hand as invisible as possible to the point of extinction. The tremendous rounds of quantitative easing in the United States and in the UK have all but obliterated the markets' ability to create reasonable expectations about the future and, because of their tampering with market prices and yields, market signals can no longer serve central banks as indications of what longer-term interest rate expectations or inflation expectations really are.

We have come to live in a world where fiscal policy has been so overused that using it further becomes dangerous, as with an overdose of any drug. Still some argue that the dose is not yet large enough! We now live in a world where monetary policy is believed to be the solution to all problems: perhaps we will use it to cure cancer and put a man on Mars. 

In doing this, we have come to completely neglect the private sector as an engine of growth while policymakers have come to view it as a deepening well of tax revenues to solve their budget deficit problems. From getting the rich to pay their 'fair share' in the US, to President Hollande's attempt to stick a 75% tax on the super-rich in France, to say nothing of hikes in VATs across Europe, the private sector has become a stooge for revenue 'creation' (better-still: 'invention'). In this world no one seems to conceive of the potential for this well to run dry. The private sector is treated as though it lives in a world of its own. In this world it is unaffected by the fiscal shenanigans going on around it, while at the same time we are led to believe that the 'monetary' 'stimulus' that continues to show signs of being impotent eventually will work... through that same private sector Can you say 'selective perception? God help us, we know not what we do.


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Money and credit growth in the European Monetary Union continue to be disappointing. Money supply growth over 12 months is at a 4.3% annual rate while over three months it has slipped to a 3.5% annual rate. On unchanged velocity it is [...]

Money and Credit Trends Disappoint

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 Initial claims for jobless insurance rose to 357,000 during
 the week ended March 23 from 341,000 during the prior week (revised from
 336,000). Consensus expectations were for 340,000 claims. This latest
 claims figure was the highest in five weeks. The four week
 moving average of claims rose modestly to 343,000. During the last ten years,
 there has been a 75% correlation between the level of claims and the m/m
 change in nonfarm payrolls.
 Continuing claims for unemployment insurance in the week ended March 16
 dipped to 3.050M (-9.5% y/y). The four week moving average of
 continuing claims fell to another cycle low of 3.073M. The insured rate of
 unemployment held at 2.4%, the lowest level since July 2008. 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 March 9, the latest figure available, the grand
 total of all benefit recipients fell to a not seasonally adjusted 5.456M,
 -23.8% y/y. That compares to a cycle peak of 12.060M in January 2010.
 
 
 By state, the insured unemployment rate continued to vary
 greatly with South Dakota (1.16%), Virginia (1.43%), Texas (1.50%),
 Florida (1.56%), South Carolina (1.82%), Indiana (2.08%) and Ohio (2.37%) at the
 low end of the range. At the high end were New York (3.21%), Michigan
 (3.22%), Illinois (3.59%), California (3.67%), Wisconsin (3.78%), Pennsylvania
 (3.94%) and New Jersey (4.04%).
 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.
 
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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>03/23/13</th>
 <th>03/16/13</th>
 <th>03/09/13</th>
 <th>Y/Y %</th>
 <th>2012</th>
 <th>2011</th>
 <th>2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol">Initial Claims</td>
 <td>357</td>
 <td>341</td>
 <td>334</td>
 <td>-1.7</td>
 <td>375</td>
 <td>409</td>
 <td>459</td>
 </tr>
 <tr class="odd">
 <td class="firstcol">Continuing Claims</td>
 <td>--</td>
 <td>3,050</td>
 <td>3,077</td>
 <td>-9.5</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>2.4</td>
 <td>2.4</td>
 <td>2.6 
 (3/12)</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>5.456</td>
 <td>-23.8</td>
 <td>6.047M</td>
 <td>7.750M</td>
 <td>9.850M</td>
 </tr>
 </tbody>
 </table>
 
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Initial claims for jobless insurance rose to 357,000 during the week ended March 23 from 341,000 during the prior week (revised from 336,000). Consensus expectations were for 340,000 claims. This latest claims figure was the highest [...]

U.S. Initial Jobless Insurance Claims Unexpectedly Move Up

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

260213L.jpg

260213M.jpg

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.

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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.

Economy in Brief

Jump to:

U.S. Construction Spending Rebounds

U.S. ISM Factory Index Posts Unexpected Decline; Pricing Power Weakens

Japan's Tankan Improves but is Short of Expectations

U.S. Consumer Sentiment Improves Sharply in Late-March

U.S. Personal Income & Spending Are Firm

U.S. Personal Income & Spending Are Firm

Money and Credit Trends Disappoint

U.S. Initial Jobless Insurance Claims Unexpectedly Move Up