Tom Moeller

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131a.jpg" width="353">
Personal income slightly beat Consensus expectations last month with a 0.5% rise. Three-month growth in income totaled 4.4% (AR), a growth rate that has been roughly steady.
Wage &amp; salary income rose 0.4% (4.8% y/y) after a 0.6% November rise. Three-month growth amounted to 4.1% which has been a roughly steady rate of growth. Factory sector wages, however, fell 0.3% (+0.9% y/y) after rising 0.3% during the prior month.Wage &amp; salary income in the private service-providing industries rose 0.5% (5.8% y/y). Wages in the government sector again increased 0.3% (4.8% y/y).
Lower interest rates caused the third straight 0.3% decline in interest income (+6.7% y/y). Dividend income held steady at 0.9% (12.4% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080131b.jpg" width="353">
Personal current taxes rose 0.5% (7.1% y/y. That y/y growth rate is less than one half the rate of rise during 2005. That left disposable personal income to rise 0.5% (5.6% y/y). Adjusted for inflation, disposable personal income increased 0.2% (2.1% y/y). The three-month growth in remained negative at -0.5%.
Personal consumption expenditures rose a hair more than the Consensus expectation for a 0.1% uptick. The 0.2% rise, however, left spending real spending during December down slightly and the three-month growth rate fell to 1.3%, its lowest since July.
Spending on discretionary items slipped as real spending on autos (-0.4% y/y) fell for the third straight month. Growth in real spending on household furniture &amp; appliances also fell back to 0.1% (7.1 y/y) after a 1.5% pop in November. Spending on apparel, however, was quite weak and fell 2.0% (+1.8% y/y). Medical care spending rose 0.3% (2.8% y/y. The detailed spending figures are available in Haver&#39;s USNA database.
The PCE chain price index rose 0.2% after the 0.6 surge during November. The gain in the core PCE price index held steady for the third month at 0.2%. However, the three-month growth in core prices recently has been far from steady, rising to 2.7% from its low in May due to faster growth in services prices.
IMF Sees World Growth Slowing, With U.S. Marked Down from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2008/RES012908A.htm"> here</a>.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.5%</td>
<td>0.4%</td>
<td>5.8%</td>
<td>6.2%</td>
<td>6.6%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.2%</td>
<td>1.0%</td>
<td>5.7%</td>
<td>5.5%</td>
<td>5.9%</td>
<td>6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Saving Rate</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.3% (Dec. 06)</td>
<td>0.5%</td>
<td>0.4%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2%</td>
<td>0.6%</td>
<td>3.5%</td>
<td>2.5%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.2%</td>
</tr>
</tbody>
</table>
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Personal income slightly beat Consensus expectations last month with a 0.5% rise. Three-month growth in income totaled 4.4% (AR), a growth rate that has been roughly steady. Wage & salary income rose 0.4% (4.8% y/y) after a 0.6% [...]

U.S. Personal Income Firm, Spending Light

Personal income slightly beat Consensus expectations last month with a 0.5% rise. Three- month growth in income totaled 4.4% (AR), a growth rate that has been roughly steady. Wage & salary income rose 0.4% (4.8% y/y) after a 0.6% [...]

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130g.jpg" align="left" border="0" height="265" width="353">
<div align="left">

According to the S&amp;P/Case-Shiller
Composite 10 home price index, U.S. home prices fell
another 2.2% m/m in November to the lowest level since April 2005. Home
prices have fallen in every month since June of 2006 and the total
decline over that period amounts to 9.4%. The November decline pulled
the y/y comparison to a negative 8.4%.

The index of 10 U.S. cities and their surrounding areas is not
adjusted for the quality or the size of the home. The home price index
from the Office of Federal Housing Enterprise Oversight (OFHEO) does
make these adjustments. This series indicates that through the third
quarter home prices still were rising, but at a reduced 1.8% y/y rate.
The composite index of homes in 20 metropolitan areas fell
2.1% (-7.7% y/y) last month.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130f.jpg" align="right" border="0" height="265" width="353">
Home prices in San Diego California continued quite weak and
registered a 13.4% y/y decline and they have fallen 16.3% from the late
2005 peak. Prices in Miami Florida also are down sharply, by 15.1% y/y.
Home prices in Las Vegas Nevada registered a 13.2% y/y decline and in
Los Angeles prices fell 11.9% y/y.
Relatively moderate declines were registered in New York
(-4.8% y/y), Chicago (-3.39% y/y) and Denver (-3.1%).
An overview of the S&amp;P/Case-Shiller home price series
can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">
here</a>.
The S&amp;P/Case-Shiller home price series can be found in
Haver's REGIONAL database.
Masters of Illusion from the Federal
Reserve Bank of Minneapolis explores why home prices soar in both high
and low inflation eras? It is available <a href="http://www.minneapolisfed.org/pubs/region/07-12/masters.cfm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (NSA, Jan 00 = 100)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Ten City
Composite Index</td>
<td>205.09</td>
<td>209.75</td>
<td>-8.4%</td>
<td>224.56</td>
<td>209.16</td>
<td>178.90</td>
</tr>
</tbody>
</table>
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According to the S&P/Case-Shiller Composite 10 home price index, U.S. home prices fell another 2.2% m/m in November to the lowest level since April 2005. Home prices have fallen in every month since June of 2006 and the total decline [...]

Case-Shiller Home Price Index Lowest Since 2005

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<img align="left" border="0" height="264" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130e.jpg" width="353">
The Federal Open Market Committee today lowered the Federal funds rate by fifty basis points to 3.0%. The move was as expected following the seventy-five basis point reduction last week. The rate was last at 3.0% in June of 2005.
The discount rate also was reduced fifty basis points to 3.50%.
The Fed indicated that &quot;Financial markets remain under considerable stress, and credit has tightened further for some businesses and households. Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets.&quot;
The Fed further indicated that &quot;The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.&quot;
Voting against taking the action was Richard W. Fisher, President of the Federal Reserve Bank of Dallas, who preferred no change in the target for the federal funds rate at this meeting.
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080130a.htm">link</a>.
Credit Derivatives: An Overview from the Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/filelegacydocs/erq407_mengle.pdf"> here</a>.
Booms and Busts: The Case of Subprime Mortgages from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/4q07Gramlich.pdf"> here</a>.

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The Federal Open Market Committee today lowered the Federal funds rate by fifty basis points to 3.0%. The move was as expected following the seventy-five basis point reduction last week. The rate was last at 3.0% in June of 2005. The [...]

FOMC Lowers Interest Rates Further

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130c.jpg" align="left" border="0" height="265" width="353">
The ADP National Employment Report, reported by the payroll
processor, indicated that private nonfarm payroll growth improved
sharply to 130,000 in January from a revised 37,000 worker advance in
December.
The U.S. Bureau of Labor Statistics employment figure for
January will be published this coming Friday.Last
month, the 37,000 gain ADP's measure of private nonfarm payrolls was
followed by a decline of 13,000 in the BLS measure of private nonfarm
payrolls.
According to ADP and Macro Advisers, the correlation between
the monthly percentage change in the ADP estimate and that in the BLS
data is 0.90
The ADP sub-index for large payrolls nudged up 8,000 after a
35,000 worker collapse during December

Medium sized payrolls showed great improvement by 52,000 after
a 5,000 December increase.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130d.jpg" align="right" border="0" height="265" width="353">
Growth in small payrolls of 70,000 was near the very recent
rate but there has been a halving of the annual growth rate over the
last three years.
Employment in the goods producing industries continued to
decline (-1.7% y/y) while services rose (1.5% y/y).
ADP compiled the estimate from its database of individual
companies' payroll information. Macroeconomic Advisers, LLC, the St.
Louis economic consulting firm, developed the methodology for
transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in
Haver's USECON database; historical data
go back to December 2000. The figures in this report cover only private
sector jobs and exclude employment in the public sector, which rose an
average 11,083 during the last twelve months. 
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/FINAL_Report_DEC_07.pdf">here</a>,
and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Nonfarm Private Payroll
Employment (m/m Chg.)</td>
<td>130,000</td>
<td>37,000</td>
<td>0.9%</td>
<td>1.7%</td>
<td>1.8%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
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The ADP National Employment Report, reported by the payroll processor, indicated that private nonfarm payroll growth improved sharply to 130,000 in January from a revised 37,000 worker advance in December. The U.S. Bureau of Labor [...]

ADP Report: Private Payroll Growth Much Improved

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130a.jpg" width="353">
U.S. real GDP in the last quarter of 2007 rose at a 0.6% annual rate. The figure from the Commerce Department contrasted slightly with the Consensus expectation for a 1.2% advance. The figure contrasted sharply, however, with an average rate of growth during the prior two quarters of 4.4%.
Each of the economy&#39;s sectors including domestic demand, foreign trade and inventories contributed to the slowdown.
Inventories subtracted 1.3 percentage points from 4Q GDP growth as a rate of accumulation turned negative. That contrasted with an average 0.6 percentage point addition during 2Q &amp; 3Q.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130b.jpg" width="353">
An improved foreign trade account added much less to real GDP growth last quarter. The 0.4 point addition was down from an average 1.4 percentage point contribution during the prior two quarters. Growth in exports slowed to a still quite firm 10.2% rate from 18.3% and that meant that exports contributed just 0.5 percentage points to GDP, half the 1.5 point add during the two prior periods. Real imports grew 13.1%, a very slight pickup from 10.5% growth during 2Q &amp; 3Q. That sapped 0.1 points from GDP growth, the same as during the prior two quarters.
Financial Globalization and the U.S. Current Account Deficit from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci13-11.html">here</a>.
Growth in final sales to domestic purchasers totaled just 1.4%, down from a 2.3% rate of advance during the prior two quarters. The decline in residential construction at a -23.9% rate was an acceleration from a -16.3% rate during the prior two quarters. It was notable in that it pulled 1.2 percentage points out of GDP growth versus a 0.9 point lowering during 2Q &amp; 3Q. The slowdown in growth in business fixed investment to a 7.5% rate from a 2 Qtr change of 10.2% also was notable in that it added a lesser 0.8 percentage points last quarter versus 1.0 points during the prior two. Growth in real personal consumption held fairly steady at a 2.0% rate of growth versus an average of 2.1% in 2Q &amp; 3Q. That added 1.4 percentage points to growth last quarter in contrast to a 1.5 point add during the prior two.
The GDP chain price index rose 2.6% (AR), up from a 1.8% rate of advance during the prior two quarters. The PCE price index grew at a 3.9% rate. That was up a point from the prior two quarters not only due to higher energy prices. Less food &amp; energy, a measure relevant to those who don&#39;t eat or drive, rose at an accelerated 2.7% rate versus an average 1.7% rate in 2Q &amp; 3Q.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">4Q &#39;07</th>
<th scope="col">3Q &#39;07</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>0.6</td>
<td>4.9</td>
<td>2.5</td>
<td>2.2</td>
<td>2.9</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-1.3</td>
<td>0.9</td>
<td>-0.2</td>
<td>-0.3</td>
<td>0.1</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>1.9</td>
<td>4.0</td>
<td>2.7</td>
<td>2.5</td>
<td>2.8</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>0.4</td>
<td>1.4</td>
<td>0.8</td>
<td>0.7</td>
<td>-0.1</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.4</td>
<td>2.5</td>
<td>1.9</td>
<td>1.8</td>
<td>2.7</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.6</td>
<td>1.0</td>
<td>2.6</td>
<td>2.7</td>
<td>3.2</td>
<td>3.2</td>
</tr>
</tbody>
</table>


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U.S. real GDP in the last quarter of 2007 rose at a 0.6% annual rate. The figure from the Commerce Department contrasted slightly with the Consensus expectation for a 1.2% advance. The figure contrasted sharply, however, with an [...]

US 4Q GDP Weaker Than Expected At 0.6%. Exports & Inventories Added Less

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130a.jpg" align="left" border="0" height="265" width="353">
U.S. real GDP in the last quarter of 2007
rose at a 0.6% annual rate. The figure from the Commerce Department
contrasted slightly with the Consensus expectation for a 1.2% advance.
The figure contrasted sharply, however, with an average rate of growth
during the prior two quarters of 4.4%.
Each of the economy's sectors including domestic demand,
foreign trade and inventories contributed to the slowdown.
Inventories subtracted 1.3 percentage
points from 4Q GDP growth as a rate of accumulation turned negative.
That contrasted with an average 0.6 percentage point addition during 2Q
&amp; 3Q.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130b.jpg" align="right" border="0" height="265" width="353">
An improved foreign trade account added
much less to real GDP growth last quarter. The 0.4 point addition was
down from an average 1.4 percentage point contribution during the prior
two quarters. Growth in exports slowed to a still quite firm 10.2% rate
from 18.3% and that meant that exports contributed just 0.5 percentage
points to GDP, half the 1.5 point add during the two prior periods.
Real imports grew 13.1%, a very slight pickup from 10.5% growth during
2Q &amp; 3Q. That sapped 0.1 points from GDP growth, the same as
during the prior two quarters.
Financial Globalization and the U.S. Current Account
Deficit from the Federal Reserve Bank of New York can be
found <a href="http://www.newyorkfed.org/research/current_issues/ci13-11.html">here</a>.
Growth in final sales to domestic purchasers
totaled just 1.4%, down from a 2.3% rate of advance during the prior
two quarters. The decline in residential construction at
a -23.9% rate was an acceleration from a -16.3% rate during the prior
two quarters. It was notable in that it pulled 1.2 percentage points
out of GDP growth versus a 0.9 point lowering during 2Q &amp; 3Q.
The slowdown in growth in business fixed investment
to a 7.5% rate from a 2 Qtr change of 10.2% also was notable in that it
added a lesser 0.8 percentage points last quarter versus 1.0 points
during the prior two. Growth in real personal consumption
held fairly steady at a 2.0% rate of growth versus an average of 2.1%
in 2Q &amp; 3Q. That added 1.4 percentage points to growth last
quarter in contrast to a 1.5 point add during the prior two.
The GDP chain price index rose 2.6% (AR),
up from a 1.8% rate of advance during the prior two quarters. The PCE
price index grew at a 3.9% rate. That was up a point from the prior two
quarters not only due to higher energy prices. Less food &amp;
energy, a measure relevant to those who don't eat or drive, rose at an
accelerated 2.7% rate versus an average 1.7% rate in 2Q &amp; 3Q.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained
2000$, % AR</a></th>
<th scope="col">4Q '07</th>
<th scope="col">3Q '07</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>0.6</td>
<td>4.9</td>
<td>2.5</td>
<td>2.2</td>
<td>2.9</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>-1.3</td>
<td>0.9</td>
<td>-0.2</td>
<td>-0.3</td>
<td>0.1</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>1.9</td>
<td>4.0</td>
<td>2.7</td>
<td>2.5</td>
<td>2.8</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>0.4</td>
<td>1.4</td>
<td>0.8</td>
<td>0.7</td>
<td>-0.1</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.4</td>
<td>2.5</td>
<td>1.9</td>
<td>1.8</td>
<td>2.7</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.6</td>
<td>1.0</td>
<td>2.6</td>
<td>2.7</td>
<td>3.2</td>
<td>3.2</td>
</tr>
</tbody>
</table>
ADP Report: Private Payroll
GrowthMuch Improved 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 30, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130c.jpg" align="left" border="0" height="265" width="353">
The ADP National Employment Report, reported by the payroll
processor, indicated that private nonfarm payroll growth improved
sharply to 130,000 in January from a revised 37,000 worker advance in
December.
The U.S. Bureau of Labor Statistics employment figure for
January will be published this coming Friday.Last
month, the 37,000 gain ADP's measure of private nonfarm payrolls was
followed by a decline of 13,000 in the BLS measure of private nonfarm
payrolls.
According to ADP and Macro Advisers, the correlation between
the monthly percentage change in the ADP estimate and that in the BLS
data is 0.90
The ADP sub-index for large payrolls nudged up 8,000 after a
35,000 worker collapse during December
Medium sized payrolls showed great improvement by 52,000 after
a 5,000 December increase.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130d.jpg" align="right" border="0" height="265" width="353">
Growth in small payrolls of 70,000 was near the very recent
rate but there has been a halving of the annual growth rate over the
last three years.
Employment in the goods producing industries continued to
decline (-1.7% y/y) while services rose (1.5% y/y).
ADP compiled the estimate from its database of individual
companies' payroll information. Macroeconomic Advisers, LLC, the St.
Louis economic consulting firm, developed the methodology for
transforming the raw data into an economic indicator.
The ADP National Employment Report data is maintained in
Haver's USECON database; historical data
go back to December 2000. The figures in this report cover only private
sector jobs and exclude employment in the public sector, which rose an
average 11,083 during the last twelve months. 

The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/FINAL_Report_DEC_07.pdf">here</a>,
and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Nonfarm Private Payroll
Employment (m/m Chg.)</td>
<td>130,000</td>
<td>37,000</td>
<td>0.9%</td>
<td>1.7%</td>
<td>1.8%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>
FOMC Lowers Interest Rates Further 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 30, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130e.jpg" align="left" border="0" height="264" width="353">
The Federal Open Market Committee today lowered the Federal
funds rate by fifty basis points to 3.0%. The move was as expected
following the seventy-five basis point reduction last week. The rate
was last at 3.0% in June of 2005.
The discount rate also was reduced fifty basis points to 3.50%.
The Fed indicated that "Financial markets remain under
considerable stress, and credit has tightened further for some
businesses and households. Moreover, recent information indicates a
deepening of the housing contraction as well as some softening in labor
markets."
The Fed further indicated that "The Committee will continue to
assess the effects of financial and other developments on economic
prospects and will act in a timely manner as needed to address those
risks."
Voting against taking the action was Richard W. Fisher,
President of the Federal Reserve Bank of Dallas, who preferred no
change in the target for the federal funds rate at this meeting.
For the complete text of the Fed's latest press release please
follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080130a.htm">link</a>.
Credit Derivatives: An Overview from the
Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/filelegacydocs/erq407_mengle.pdf">
here</a>.
Booms and Busts: The Case of Subprime Mortgages
from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/4q07Gramlich.pdf">
here</a>.

Case-Shiller Home Price IndexLowest Since 2005 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 30, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130g.jpg" align="left" border="0" height="265" width="353">
<div align="left">

According to the S&amp;P/Case-Shiller
Composite 10 home price index, U.S. home prices fell
another 2.2% m/m in November to the lowest level since April 2005. Home
prices have fallen in every month since June of 2006 and the total
decline over that period amounts to 9.4%. The November decline pulled
the y/y comparison to a negative 8.4%.
The index of 10 U.S. cities and their surrounding areas is not
adjusted for the quality or the size of the home. The home price index
from the Office of Federal Housing Enterprise Oversight (OFHEO) does
make these adjustments. This series indicates that through the third
quarter home prices still were rising, but at a reduced 1.8% y/y rate.
The composite index of homes in 20 metropolitan areas fell
2.1% (-7.7% y/y) last month.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080130f.jpg" align="right" border="0" height="265" width="353">
Home prices in San Diego California continued quite weak and
registered a 13.4% y/y decline and they have fallen 16.3% from the late
2005 peak. Prices in Miami Florida also are down sharply, by 15.1% y/y.
Home prices in Las Vegas Nevada registered a 13.2% y/y decline and in
Los Angeles prices fell 11.9% y/y.
Relatively moderate declines were registered in New York
(-4.8% y/y), Chicago (-3.39% y/y) and Denver (-3.1%).
An overview of the S&amp;P/Case-Shiller home price series
can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">
here</a>.
The S&amp;P/Case-Shiller home price series can be found in
Haver's REGIONAL database.
Masters of Illusion from the Federal
Reserve Bank of Minneapolis explores why home prices soar in both high
and low inflation eras? It is available <a href="http://www.minneapolisfed.org/pubs/region/07-12/masters.cfm">
here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (NSA, Jan 00 = 100)</th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Ten City
Composite Index</td>
<td>205.09</td>
<td>209.75</td>
<td>-8.4%</td>
<td>224.56</td>
<td>209.16</td>
<td>178.90</td>
</tr>
</tbody>
</table>
</div></body></html>

Louise Curley

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080129i.jpg" align="left" border="0" height="265" width="353">
The French National Institute for Statistics and Economic
Studies (INSEE) released the results of its survey of consumer
confidence today. The summary indicator declined by 4 percentage points
in January from December, continuing a series of declines that began in
July of last year. The recent increase in inflation added to earlier
concerns over the strong euro and the fallout from the sub prime crisis
in the U. S. has taken its toll on the French consumers' optimism.
According to INSEE, the level of the balance is not open to
direct interpretation; it is the change in the balance that is
important. For this reason, we show both the balance and the month to
month changes in the balance in the first chart.
All five of the components of the indicator declined in
January. The French consumer's chief concern was the outlook for living
standards. The appraisal of the outlook for living standards over the
next 12 months fell by 12 basis points. In spite of concerns for future
living standards the French consumer saw little change, 1 basis point
decline, in the appraisal of the favorability of conditions for major
purchases. The second chart shows the appraisal of living standards
over the past 12 month and over the next 12 months, together with the
appraisal of the favorability of condition for major purchases.
The third chart shows the financial position over the past 12
months and its position over the next 12 months. The financial position
over the past 12 months has declined in each month since June 2007 The
financial position over the next 12 months has been declining since May
and at a faster rate than the financial position of the past 12 months.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080129j.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080129k.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">INSEE'S
CONSUMER CONFIDENCE SURVEY 
&nbsp;(% Balance)&nbsp;</th>
<th scope="col">Jan 08</th>
<th scope="col">Dec 07&nbsp;</th>
<th scope="col">Jan 07&nbsp;</th>
<th scope="col">M/M&nbsp; Dif&nbsp;</th>
<th scope="col">Y/Y&nbsp;Dif&nbsp;</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Summary Indicator</td>
<td>-34</td>
<td>-30</td>
<td>-22</td>
<td>-4</td>
<td>-12</td>
<td>-21</td>
<td>-25</td>
<td>-28</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Financial
Position over Past&nbsp;12 months&nbsp;</td>
<td>-25</td>
<td>-23</td>
<td>-18</td>
<td>-2</td>
<td>-7</td>
<td>-17</td>
<td>-19</td>
<td>-22</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Financial
Position over Next 12 months</td>
<td>-13</td>
<td>-10</td>
<td>-1</td>
<td>-3</td>
<td>-12</td>
<td>-3</td>
<td>-4</td>
<td>-6</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;Living
Standards over Past 12 months</td>
<td>-64</td>
<td>-62</td>
<td>-55</td>
<td>-2</td>
<td>-9</td>
<td>-53</td>
<td>-57</td>
<td>-61</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Living
Standards over Next 12 months&nbsp;</td>
<td>-44</td>
<td>-32</td>
<td>-24</td>
<td>-12</td>
<td>-20</td>
<td>-20</td>
<td>-34</td>
<td>-37</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Favorable
Conditions for Major Purchases</td>
<td>-24</td>
<td>-23</td>
<td>-9</td>
<td>-1</td>
<td>-15</td>
<td>-11</td>
<td>-13</td>
<td>-15</td>
</tr>
</tbody>
</table>
</body></html>

The French National Institute for Statistics and Economic Studies (INSEE) released the results of its survey of consumer confidence today. The summary indicator declined by 4 percentage points in January from December, continuing a [...]

French Consumer Confidence Continues to Decline

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

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Retail gasoline prices for all grades rose to an average $3.19 per gallon (0.3% y/y) in the week ended November 10 after easing to $3.15 in the previous week. The recent high was $3.79 in the week ending April 22, 2024. Their all-time high of $5.11 occurred in the week ending June 13, 2022. Haver Analytics seasonally adjusts the retail price of regular grade gasoline. That price rose to $3.10 last week from $3.05 in the previous week. Diesel fuel prices rose to $3.84 per gallon last week (9.0% y/y) after increasing to $3.75 per gallon in the prior week.

The price of West Texas Intermediate crude oil fell to an average $60.08 per barrel (-16.1% y/y) in the week ended November 7 after improving to $60.70 per barrel in the prior week. Prices remained below a recent high of $74.17 during the third week of June. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $61.04 per barrel. The price of European Brent crude declined to $64.30 per barrel (-15.0% y/y) in the week of November 7 after rising to $65.02 in the prior week. Prices remained below a recent high of $95.61 in the week of September 29, 2023 and below a peak of $127.40 in June 2022. Yesterday, the price was $63.86 per barrel.

Natural gas prices strengthened to an average $3.54/mmbtu (137.6% y/y) in the week ended November 7 after rising to $3.43/mmbtu in the prior week. The rise left prices at the highest level since the second week of April and well above the low of $1.40/mmbtu in the week of March 15, 2024. Yesterday, the price was $3.80 per mmbtu.

Gasoline demand declined 2.1% y/y in the four weeks ending October 31, following a 4.2% y/y decline in the prior four weeks. Demand for all petroleum products weakened 1.2% y/y in the four weeks ending October 31, after falling 0.9% y/y in the previous four-week period. Crude oil input to refineries declined 4.5% y/y in the four weeks ending October 31, after falling 1.7% y/y in the prior four weeks.

Gasoline inventories fell 2.5% y/y in the week ending October 31 following a 0.1% y/y slip in the prior week. Residual fuel oil inventories fell 7.1% y/y in the October 31 week after falling 10.0% y/y in the prior week. Working higher, crude oil inventories rose 1.9% y/y in the week of October 31 after increasing 1.7% y/y in the previous week.

Measured in days’ supply, gasoline inventories fell to 23.7 days in the week of October 31 from 24.3 days in the prior week. The recent low was 22.9 days in the week of November 8, 2024. The supply of crude oil rose to 27.5 days in the week of October 31 from 26.7 days in the prior week. The supply remained below a recent high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** and **USENERGY** databases.

- Gasoline prices rise to four-week high.
- Crude oil prices decline.
- Natural gas prices move to highest level since April.
- Demand for gasoline & all petroleum products falls.

U.S. Energy Prices Remain Mixed in Latest Week

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251112B1.jpg

The number of weekly mortgage loan edged 0.6% higher (73.7% y/y) during the week ended November 7 after falling 1.9% during the prior week and rising 7.1% one week earlier.

The effective interest rate on a 30-year fixed-rate mortgage rose to 6.52% after rough stability at 6.48% during the prior week. These rates stand below their January average of 7.20%. Rates on a 15-year fixed rate loan were 5.86% while interest rates on a 30-year JUMBO loan averaged 6.57%. Rates on a 5-year ARM eased to 5.82%.

Purchase loan applications last week increased 5.8% (29.6% y/y) after falling 0.6% in the prior week and rising 4.5% one week earlier. Applications to refinance an existing loan declined 3.4% (+146.5% y/y) following a 2.8% decline in the prior week and rising 9.3% one week earlier.

Loans to refinance an existing mortgage fell to 55.6% of total applications from 57.0% in the prior week. The percentage of total loans that were ARMs declined to 7.8% from 8.7% one week earlier.

The average loan size declined to $396,500 last week from $414,900. The size of conventional purchase loans declined to $431,400 from $435,100 while the size of refinanced loans declined to $368,700 from $399,700 one week earlier.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Mortgage interest rates rise to three-week high.
- Purchase loans surge but refinancing declines.

U.S. Weekly Mortgage Applications & Interest Rates Edge Higher

Robert Brusca

251112E.jpg

Global money supply growth boomed during COVID. Then growth ‘busted,’ decelerating sharply with the United States, the United Kingdom, and the European Monetary Union all showing monetary contraction to some degree throughout 2023. The only country to buck this trend was Japan which had a more modest boost in money supply during COVID and then more modest growth rates that decelerated and continued to gravitate toward near zero growth, until recently, when Japanese money supply started to accelerate very slightly.

**Euro Area**
Recent trends show nominal money growth in the euro area decelerating slightly from a 2.5% growth rate over 12 months to growth rates around 2% or a bit lower over three months and six months. Monetary union private credit has also decelerated from a growth rate of 2.4% over 12 months to 1.7% over six months and to a 1.3% annual rate over three-months.

**United States, United Kingdom, and Japan**
Nominal money supply growth in the U.S. remains fairly steady, growing 4.5% over 12 months and an annual rate of 5 to 5.4% over three months and six months. The U.K. nominal money supply growth is 3.5% over 12 months, 2.8% at an annual rate over six months and 3.6% at an annual rate over three months. Japan's M2 plus CDs has been stepping up its growth from 1.6% over 12 months to a 2% pace over six months to 4% at an annual rate over three months. Nominal money supply growth is mostly fluctuating between steady and stronger across these monetary center countries.

**Real balances in EMU**
Real money balances, however, are looking significantly weaker. In the European monetary Union, real M2 grows 0.3% over 12 months and then its growth rate slips to -0.6% at an annual rate over both three months and six months. Private credit in the euro area rises by 0.1% over 12 months, declines by 0.5% at an annual rate over six months, and declines at a 1.3% annual rate over three months. Real credit is weakening.

**More real balances**
In the U.S., real money supply growth is fluctuating, growing at 1.4% over 12 months, stepping up to 2.3% over six months and back to a 1.4% annual rate over three months. U.K. real money balances are simply shrinking at a -0.6% annual rate over 12 months and a -0.7% annual rate over three months. In Japan, real money balances are actually accelerating; real money growth is -1.3% over 12 months, which rises to plus 0.4% over six months with an annual rate of 2.9% at an annual rate over three months.


251112.jpg

**Global monetary growth conditions**
Global monetary conditions simply don't show a great deal of change over the last year. The perception is that nominal money growth has been relatively stable; however, we can see that real money growth and real credit growth are declining in the euro area and in the U.K. Real balances are growing at a relatively modest rate but also accelerating in Japan. On the whole, money supply doesn't seem to be playing a significant role in charting a new path for monetary policy- except perhaps in Japan.

Global Money Supplies Deliver Growth-Rate Plateau

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The NFIB Small Business Optimism Index eased 0.6% (+4.8%) to 98.2 in October after falling 2.0% to a 98.8 in September and rising 0.5% to 100.8 in August, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. Four of the ten index components increased last month while five fell and one was unchanged. The NFIB Small Business Uncertainty Index fell 12.0% (-20.0% y/y) last month to 88 after rising 7.5% in September.

The outlook for business conditions was mixed in the latest survey. The net balance of respondents planning to add to inventories declined to a six-month low of -2% from +1% in September. The net percent expecting the economy to improve fell to 20% last month after weakening to 23% in September. A lessened 6% expected higher real sales in six months, compared to 8% in September. A lessened 15% of respondents indicated that now was a good time to increase employment compared to 16% in September. Earnings trends deteriorated sharply.

Offsetting these declines, plans to make capital outlays rose to a ten-month high of 23% of firms after steadying at 21%. The index of expected credit conditions jumped to -3% from -7%. It remained up from a low of -11 in November 2023. A modestly increased 13% of respondents felt that now was a good time to expand. Inventories were assessed as being too low by a lessened 4% of respondents after 7% in September.

On the labor front, 49% of businesses reported few or no qualified workers to fill job openings in October, down slightly from 50% in September. That remained up, however, from a low of 43% in August. These readings remained below a high of 56% in August of 2024.

251111V5.jpg

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The net percent raising their average selling prices fell to 21% last month compared to 24% in September. It had grown to 32% in February. The percentage planning to raise prices eased to 30% in October, down from a 32% high in June. Worker compensation deteriorated as a net 26% of respondents lifted compensation during the last three months versus 31% in the last survey. Compensation gains peaked at 50% of firms in January 2022. A steady net 19% of firms are making plans to raise worker compensation in the next three months, below the November 2024 high of 28%.

The quality of labor was reported by 27% of member firms as the single most important issue facing small businesses. That was increased from 18% in September, and the highest in five years. Moving lower, the cost of labor was ranked by 8% of respondents as the largest problem, compared to 11% in September, while financial & interest rates worries dropped to 2%, the lowest in two years. A lessened 12% cited inflation as the most important problem. Other major concerns were taxes (16%) and poor sales (10%). 

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s **SURVEYS** database.

- Inventory, economy & employment concerns weigh on optimism.
- Percentage of respondents raising prices moves down; price expectations ease.
- Concerns about quality of labor surge but labor cost worries recede.

U.S. NFIB Small Business Optimism Index Slips in October

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Macroeconomic expectations in the ZEW survey backtracked slightly in Germany while improving slightly in the United States in November. The economic situation improved slightly in the euro area and Germany while backtracking in the United States. That's the assessments of the current economic situation and expectations for Germany or the EMU that are moving in different directions in the U.S. and in Germany or in the U.S. vs. the European Monetary Union in November.

Inflation expectations backed off across the board easing slightly in the euro area, Germany, and also in the United States. While that happened, expectations for short-term interest rates became less focused on rate cuts in the euro area and slightly less tilted toward the expectation for rate cuts in the U.S. as well. Long-term rate expectations receded somewhat in both Germany and in the U.S. in November by small amounts. Stock market expectations picked up in the euro area, Germany, and the U.S., and in most cases, somewhat significantly.

**The queue standings**
The queue standings are ranked standings of these various metrics, and they tell a clear story of how the ZEW experts see current conditions and policy tradeoffs. The euro area has an economic situation where the queue standing is at its 51st percentile, slightly above its historic median (on data since the early 1990s). However, Germany and the U.S. have very weak percentile standings with Germany in its 14.5 percentile and the U.S. in its 35th percentile. Macroeconomic expectations, however, find Germany at a solid 63.6 percentile while the U.S. is at a 23.3 percentile. ZEW experts are far more upbeat on prospects for German recovery right now than in the United States – and that seems odd to me with a lot of fiscal stimulus in train in the U.S. and tons of ‘AI’ investment.

Inflation expectations are high in the U.S. at an 85.5 percentile standing, well above the historic median, and clearly showing threatening conditions. This compares to a 30% queue standing for the euro area and Germany.

Short-term rate expectations are significantly below the median for both the euro area and the U.S. with the euro area at a 26.8 percentile and the U.S. at a 9.3 percentile standing. Long-term rate expectations have Germany at a 43-percentile and the U.S. at a more similar 35-percentile. Stock market expectations are fairly similar across the lot with the euro area at a 38-percentile standing, Germany at a 35-percentile standing and the U.S. at a 38-percentile standing.

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**Summing up**
These metrics remind us that ZEW experts see different inflation circumstances in the U.S. compared to Europe as well as very different current economic situations, especially between the U.S. and the euro area and very different macroeconomic expectations between the U.S. and Germany. The U.S. is seen more as a place that's percolating inflation despite the fact that the Federal Reserve continues to say inflation is under control and inflation expectations are well anchored. Apparently, they are not well-anchored among the ZEW financial experts. We might add, nor are they well-anchored among participants in the University of Michigan survey, or for respondents to the NFIB survey that was just released. Maybe it's the Fed that is not very well anchored to reality when it comes to inflation expectations assessments?

Economy in Brief: 2008

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U.S. Personal Income Firm, Spending Light

U.S. Personal Income Firm, Spending Light

Case-Shiller Home Price Index Lowest Since 2005

FOMC Lowers Interest Rates Further

ADP Report: Private Payroll Growth Much Improved

US 4Q GDP Weaker Than Expected At 0.6%. Exports & Inventories Added Less

US 4Q GDP Weaker Than Expected At 0.6%. Exports & Inventories Added Less

French Consumer Confidence Continues to Decline