Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528a.jpg" align="left" height="265" width="353">
Lower gasoline prices and a pause in auto purchases braked
consumer spending last month. Personal consumption
expenditures were unchanged during April after an unrevised
0.6% March gain. A 0.3% increase had been expected. Spending on
gasoline slipped for the third straight month due to price declines.
The price influence is clear when observing that during the last year
nominal spending rose 35.9%; but in constant dollars, spending was
roughly unchanged. A large contribution from spending on autos also is
clear, but the trend is improved. Real spending fell 1.3% in April
after an 8.9% gain in March; but versus last year, spending on motor
vehicles has increased 11.3%. 

Elsewhere, spending looked firm. April spending on home
furnishings rose 1.4% (7.4% y/y) for the third such monthly increase.
Even after allowing for higher prices, real spending was up 1.8% y/y
following the 5.9% decline during 2009. Apparel spending took a
breather, falling 0.8% last month after gains between 1.7% and 2.1%
during March &amp; February. More impressive was that spending rose
5.7% y/y after the 3.5% decline last year. Adjusting for lower prices
spending jumped 6.8% y/y after falling 4.3% in 2009. Spending on
services continued firm at 2.8% y/y following last year's 1.6%
increase. The gain still was bloated by the 4.3% y/y jump in health
care expenditures but spending on financial services (4.3% y/y),
restaurants &amp; accommodations (2.8% y/y) and recreation (0.8%
y/y) each was greatly improved.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528b.jpg" align="right" height="265" width="353">
Last month an expected 0.4% gain in personal income
accompanied the spending numbers. April disposable income rose an even
firmer 0.5% (2.8% y/y). Year-to-year, both are much improved versus
2009 but tax cuts have fueled take-home pay more. Higher gasoline
prices also cut into income growth. The 0.9% y/y gain in real
disposable income just equaled last year's increase. The outgrowth of
spending gains that exceeded income growth during the last twelve
months lowered the personal savings rate to 3.6%
from its high of 6.4% when the tax cuts were enacted. The latest rate
still was up, however, from the 1.0% low at the beginning of the last
recession. 

Employment declines left wages &amp; salaries up just 0.3%
y/y, though that followed a sharp 4.1% decline last year. Wages in the
factory sector, however, rose a firmer 0.7% in April (-3.4% y/y) and
compared to last year's 11.3% shortfall. In the private service sector,
wages increased 0.8% y/y after last year's 4.0% decline. Improvement in
the housing market pulled proprietors' income up 5.4% y/y, its
strongest gain since early 2006 while the stabilization of interest
rates left interest income up 0.3% y/y following last year's 5.3%
decline. Dividend income remained down 1.6% y/y but that compared
favorably to last year's 19.3% drop and the 10.3% 2008 decline.
Finally, gains in unemployment insurance benefits (13.1% y/y) have
tapered off with the improved labor market. 

The PCE chain price index was unchanged
with the 2.3% slip (+38.1% y/y) in gasoline prices. The core PCE price
deflator ticked up 0.1%, held back by a 0.9% decline (-1.0% y/y) in
apparel prices and a 0.4% decline (-4.3% y/y) in furniture &amp;
appliance prices. Services prices also gained 0.2% (1.7% y/y), while
health care prices rose 0.3% (2.6% y/y). 

The personal income &amp; consumption figures are
available in Haver's USECON and USNA
databases.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528c.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528d.jpg" height="265" width="314">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><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>
(%)&nbsp;</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4</td>
<td>0.4</td>
<td>0.0</td>
<td>2.5</td>
<td>-1.8</td>
<td>2.9</td>
<td>5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
&nbsp;Disposable Personal Income</td>
<td>0.5</td>
<td>0.4</td>
<td>0.0</td>
<td>2.8</td>
<td>1.0</td>
<td>3.9</td>
<td>4.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption
Expenditures</td>
<td>0.0</td>
<td>0.6</td>
<td>0.5</td>
<td>4.6</td>
<td>-0.4</td>
<td>3.1</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>3.6</td>
<td>3.1</td>
<td>3.3</td>
<td>4.9 (April '09)</td>
<td>4.2</td>
<td>2.6</td>
<td>1.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.0</td>
<td>0.1</td>
<td>0.0</td>
<td>2.0</td>
<td>0.2</td>
<td>3.3</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Less food &amp; energy</td>
<td>0.1</td>
<td>0.1</td>
<td>0.0</td>
<td>1.2</td>
<td>1.5</td>
<td>2.4</td>
<td>2.4</td>
</tr>
</tbody>
</table>
UK Consumer Confidence Is
Challenged By Electioneering 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 28, 2010


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
According to the Nationwide Building Society&#8217;s measure, U.K.
consumer confidence fell in March by the most since July 2008 as the
election due within weeks fueled Britons&#8217; doubts about the economy.
Small surprise that is: so much for politicians shoring up a feeling of
hope and security. Increasingly elections are about making the opponent
seem worse than you are. The consumer confidence polls seem to have
picked up on this, with the obvious consequences. The index of
sentiment fell 9 points from February to 72, erasing the gains in
confidence seen so far this year. A gauge measuring expectations for
the economy in the next six months fell 11 points to 105.This fall
disappointed as the market consensus level was a reading of 81.
We contrast this result with the GfK survey above. It seems to
show less of hit from the electioneering effect but it does demonstrate
some backsliding in the assessment of the economy; plenty of raw nerves
here for the politicians to tap into. The household financial situation
eroded in March as did people&#8217;s assessment of their savings. Both lower
and higher income respondents saw a worsening.
Looking ahead, fears of unemployment have been rising. The
general economic situation is seen as poorer and households expect
their financial situation to deteriorate further. There are increased
concerns about savings adequacy and growing concerns about inflation.
With this as a back-drop there is plenty of fodder for
election politicking to push all the consumers&#8217; buttons. This appears
to be in train. Still consumer confidence in the GfK measure is in the
92nd percentile of its two-year range showing considerable progress has
been made, but that compares to a standing of just 60% in its 10_year
range which emphasizes a bit more how far there is to go. Clearly the
UK consumer remains challenged and will find his and her senses
assaulted in this election season. May the least worse man win.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="7" scope="col"> GFK Consumer Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>Of 2Yr</td>
<td>Of 10Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>May-10</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>Range</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Confidence</td>
<td>-18</td>
<td>-16</td>
<td>-15</td>
<td>-14</td>
<td>80.8%</td>
<td>55.3%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Current</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Fin Sit</td>
<td>16</td>
<td>17</td>
<td>18</td>
<td>18</td>
<td>25.0%</td>
<td>18.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchases</td>
<td>-21</td>
<td>-20</td>
<td>-17</td>
<td>-16</td>
<td>71.0%</td>
<td>36.7%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Last
12
Months</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Fin Sit</td>
<td>-13</td>
<td>-14</td>
<td>-15</td>
<td>-13</td>
<td>43.8%</td>
<td>29.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">General Econ Sit</td>
<td>-45</td>
<td>-47</td>
<td>-49</td>
<td>-50</td>
<td>94.9%</td>
<td>53.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>72</td>
<td>79</td>
<td>72</td>
<td>63</td>
<td>26.9%</td>
<td>40.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings</td>
<td>-5</td>
<td>-7</td>
<td>-13</td>
<td>-6</td>
<td>37.7%</td>
<td>29.9%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">Next
12-Months</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Fin Sit</td>
<td>-3</td>
<td>2</td>
<td>4</td>
<td>6</td>
<td>62.5%</td>
<td>46.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">General Econ Sit</td>
<td>-9</td>
<td>-1</td>
<td>0</td>
<td>4</td>
<td>76.8%</td>
<td>76.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment</td>
<td>36</td>
<td>33</td>
<td>36</td>
<td>31</td>
<td>11.1%</td>
<td>27.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Major Purchases</td>
<td>-26</td>
<td>-27</td>
<td>-28</td>
<td>-31</td>
<td>82.4%</td>
<td>56.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings</td>
<td>2</td>
<td>1</td>
<td>5</td>
<td>7</td>
<td>29.4%</td>
<td>19.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI</td>
<td>71</td>
<td>67</td>
<td>63</td>
<td>60</td>
<td>60.8%</td>
<td>60.8%</td>
</tr>
<tr>
<td colspan="7" class="firstcol">By
Income</td>
</tr>
<tr class="odd">
<td class="firstcol">Lower</td>
<td>-24</td>
<td>-22</td>
<td>-21</td>
<td>-18</td>
<td>77.8%</td>
<td>50.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Upper</td>
<td>-11</td>
<td>-8</td>
<td>-5</td>
<td>-3</td>
<td>72.4%</td>
<td>55.3%</td>
</tr>
</tbody>
</table>
Michigan Consumer Sentiment
Improves 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 28,2010


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528f.jpg" align="left" height="265" width="353">
Consumers' mood has improved, but lately not by much. The
University of Michigan reported that its May reading of consumer
sentiment rose to 73.6 from 72.2 during April. The slight m/m increase
characterizes sentiment's performance during 2010. The figure has moved
sideways following sharp improvement during 2009. The latest figure was
as expected. During the last ten years there has been an 89%
correlation between the level of sentiment and the y/y change in real
consumer spending.
The index of expected economic conditions improved m/m to
68.8. Here again, the figure has moved sideways of late but is more
than one-third above the recession low. The readings for expected
change in personal finances (-3.5% y/y), business conditions during the
next twelve months (10.7% y/y) and expected five-year business
conditions (-6.8% y/y) each recently have been flat-to-lower.
Sentiment about current economic conditions recently moved
sideways, as well. Nevertheless, it remained up 19.6% from last year
and by nearly one-half from the 2008 low. The assessment of current
personal finances rose nearly one-third versus last year but buying
conditions for large household goods, including furniture,
refrigerators, stoves &amp; televisions, recently slipped (+16.8%
y/y).
Expected price inflation during the next year increased to
4.1% and was up from the December 2008 reading of 1.7%.Respondents'
view of government policy, which may eventually influence economic
expectations, nudged up m/m but was down nearly one-third from its high
last May. Thirteen percent of respondents thought that a good job was
being done by government versus 37% who thought a poor job was being
done, near the twelve-month high.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528g.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100528h.jpg" height="265" width="314">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University
of Michigan</a></th>
<th scope="col">May</th>
<th scope="col">Mid-May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>73.6</td>
<td>73.3</td>
<td>72.2</td>
<td>73.6</td>
<td>7.1%</td>
<td>66.3</td>
<td>63.8</td>
<td>85.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions</td>
<td>81.0</td>
<td>81.1</td>
<td>81.0</td>
<td>82.4</td>
<td>19.6</td>
<td>69.6</td>
<td>73.7</td>
<td>101.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations</td>
<td>68.8</td>
<td>68.3</td>
<td>66.5</td>
<td>67.9</td>
<td>-0.9</td>
<td>64.1</td>
<td>57.3</td>
<td>75.6</td>
</tr>
</tbody>
</table>
</body></html>

Lower gasoline prices and a pause in auto purchases braked consumer spending last month. Personal consumption expenditures were unchanged during April after an unrevised 0.6% March gain. A 0.3% increase had been expected. Spending on [...]

U.S. Personal Spending Mixed& Income Firm

Robert Brusca

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<img style="border: 0px solid ; width: 353px; height: 265px; float: left;" alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527h.jpg">
The Insee index of household confidence has dropped again marking the
fourth straight month of decline. This is not some garden variety
slippage in confidence from France. The four month drop marks a
cumulative drop of eight points in the index which is the 12th largest
four month decline in the series history. That makes the drop a top 5%
event. This not exactly what Europe is looking for in May. 

Until quite recently most European reports had
been upbeat. But now there are some signs of erosion. The GFK German
confidence index for June edged slightly lower on expectations decay.
The UK CBI distributive trades index also reported today plunged
sharply in May. Now in France the household confidence index that has
been slipping has continued on that path. 

Until now we had seen a fairly steady and strong
recovery of economic data in the wake of the financial crisis. The MFG
sector has been rebounding in Europe particularly strongly. The service
sector has lagged. And the household sector has lagged even further.
But in France it&#8217;s not a case of lagging but of the sector declining,
backtracking. 

The European economy is fighting off the remnants
of recession and financial crisis with a new layering of financial
crisis stemming from Greece&#8217;s problems, the knock effects to banks that
hold European debt (substantially French and German banks) and the
adverse market sentiment stemming from the need for fiscal austerity in
Europe including France. It looks like the French consumer has figured
out that the recovery will not be a bed of roses and maybe even that
sector wide strikes that make such great theater in France will serve
no purpose this time. The French consumer appears to be going down
without a fight. 
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="8" scope="col">INSEE
Household Monthly
Survey
</th>
</tr>
</thead><tbody>
<tr class="even">
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">Since
Jan 1990</td>
</tr>
<tr class="grey3">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">May-10</td>
<td style="font-weight: bold;">Apr-10</td>
<td style="font-weight: bold;">Mar-10</td>
<td style="font-weight: bold;">Feb-10</td>
<td style="font-weight: bold;">Percentile</td>
<td style="font-weight: bold;">Rank
%</td>
<td style="font-weight: bold;">Mean</td>
</tr>
<tr>
<td class="firstcol">Household
Confidence</td>
<td>-38</td>
<td>-37</td>
<td>-34</td>
<td>-33</td>
<td>15.8</td>
<td>5.7</td>
<td>-19</td>
</tr>
<tr style="font-weight: bold;" class="grey3">
<td colspan="8" class="firstcol">Living
Standards</td>
</tr>
<tr>
<td class="firstcol">past
12 Mos</td>
<td>-67</td>
<td>-68</td>
<td>-68</td>
<td>-67</td>
<td>13.3</td>
<td>10.2</td>
<td>-41</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Next
12-Mos</td>
<td>-53</td>
<td>-48</td>
<td>-43</td>
<td>-37</td>
<td>9.2</td>
<td>4.1</td>
<td>-22</td>
</tr>
<tr>
<td class="firstcol">Unemployment:
Next 12</td>
<td>62</td>
<td>63</td>
<td>63</td>
<td>58</td>
<td>77.3</td>
<td>83.7</td>
<td>33</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Price
Developments</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Past 12Mo</td>
<td>-20</td>
<td l="">-18</td>
<td>-25</td>
<td>-26</td>
<td>30.8</td>
<td>56.7</td>
<td l="">-16</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Next 12-Mos</td>
<td>-26</td>
<td>-31</td>
<td>-34</td>
<td>-37</td>
<td>37.0</td>
<td>82.4</td>
<td>-35</td>
</tr>
<tr style="font-weight: bold;" class="grey3">
<td colspan="8" class="firstcol">Savings</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Favorable to save</td>
<td>14</td>
<td>17</td>
<td>18</td>
<td>20</td>
<td>43.2</td>
<td>19.2</td>
<td l="">22</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Ability to save Next 12</td>
<td>-10</td>
<td>-10</td>
<td>-8</td>
<td>-10</td>
<td>44.8</td>
<td>49.8</td>
<td>-9</td>
</tr>
<tr style="font-weight: bold;" class="grey3">
<td colspan="8" class="firstcol">Spending</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Favorable
for major purchase</td>
<td>-24</td>
<td>-26</td>
<td>-23</td>
<td>-24</td>
<td>31.0</td>
<td>25.3</td>
<td>-14</td>
</tr>
<tr style="font-weight: bold;" class="grey3">
<td colspan="8" class="firstcol">Financial
Situation</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Current</td>
<td>16</td>
<td>16</td>
<td>16</td>
<td>16</td>
<td>61.9</td>
<td>82.9</td>
<td>12</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Past 12 MOs</td>
<td>-25</td>
<td>-25</td>
<td>-24</td>
<td>-25</td>
<td>
35.5</td>
<td>13.9</td>
<td>-17</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Next 12-Mos</td>
<td>-19</td>
<td>-16</td>
<td>-13</td>
<td>-12</td>
<td>11.8</td>
<td>3.7</td>
<td>-2</td>
</tr>
<tr class="grey1">
<td>&nbsp;</td>
<td colspan="5">Number of observations
in the period</td>
<td colspan="2">245</td>
</tr>
</tbody>
</table>

</body></html>

The Insee index of household confidence has dropped again marking the fourth straight month of decline. This is not some garden variety slippage in confidence from France. The four month drop marks a cumulative drop of eight points in [...]

Some Bad News From Europe…

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
The labor market's improvement continues. That's the message
from the Bureau of Labor Statistics report that initial claims for
jobless insurance slipped 14,000 to 460,000 following last week's
upwardly revised 28,000 increase. The latest disappointed Consensus
expectations for a decline to 455,000 claims but claims remained near
this cycle's lowest. Last week's figure was down from the recession
peak of 651,000 reached in March of 2009. The four-week moving average
of initial claims ticked up to 456,500.
A 49,000 decline in continuing claims for unemployment
insurance during the latest week followed the prior week's 3,000
decline, which was less than reported initially. Claims were near the
cycle low and down by one-third from the June '09 peak. The overall
decline is a function of the improved job market but also reflects the
exhaustion of 26 weeks of unemployment benefits. Continuing claims
provide an indication of workers' ability to find employment. The
four-week average of continuing claims at 4.637M remained near the
cycle low. This series dates back to 1966.
Extended benefits for unemployment insurance rose further w/w
to 278,953. However, they were down by roughly one-half from a peak of
597,688 reached in November.
The insured unemployment rate remained at 3.6% where it has
been since mid-February. The rate reached a high of 4.9% during May of
2009. During the last ten years, there has been a 96% correlation
between the level of the insured unemployment rate and the overall rate
of unemployment published by the Bureau of Labor Statistics.
The highest insured unemployment rates in the week ending May
8 were in Puerto Rico (6.2 percent), Alaska (5.9), Oregon (5.4), Nevada
(4.9), California (4.8), Pennsylvania (4.7), Wisconsin (4.5), North
Carolina (4.4), Montana (4.3), and Connecticut (4.2). The lowest
insured unemployment rates were in Virginia (1.8), Texas (2.1),
Tennessee (2.6), Wyoming (2.7), Georgia (2.8), Maryland (2.9), Florida
(3.0), Ohio (3.0), New York (3.3) and Maine (3.2). These data are not
seasonally adjusted but the overall insured unemployment rate is.
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
database.
Distortionary Fiscal Policy and Monetary Policy Goals
from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/RESWKPAP/PDF/rwp10-10.pdf">here</a>.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527f.jpg" style="width: 312px; height: 265px;"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Unemployment Insurance (000s)</a></th>
<th scope="col">05/22/10</th>
<th scope="col">05/15/10</th>
<th scope="col">05/08/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>460</td>
<td>472</td>
<td>446</td>
<td>-24.7%</td>
<td>572</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,607</td>
<td>4,656</td>
<td>-29.1</td>
<td>5,809</td>
<td>3,340</td>
<td>2,549</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.6</td>
<td>3.6</td>
<td>4.9 (5/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
</body></html>

The labor market's improvement continues. That's the message from the Bureau of Labor Statistics report that initial claims for jobless insurance slipped 14,000 to 460,000 following last week's upwardly revised 28,000 increase. The [...]

U.S. Initial Jobless Insurance Claims Slip

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527a.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527b.jpg" style="width: 312px; height: 265px;">
Growth in real GDP last quarter was revised slightly lower
last quarter to 3.0% from 3.2% estimated in the advance report. A
slowdown in the rate of inventory replenishment remained, however, the
dominant piece of news, slowing the economy's growth from 5.6% during
4Q '09. Consensus expectations had been for a revision upward to 3.4%
growth. Regardless, 1Q remained the third consecutive quarter of
positive growth after the recession when GDP fell a postwar-record 3.7%
peak-to-trough.
The largest piece of the downward revision was a reduced rate
of growth in business fixed investment to a still-firm 3.1%. Growth in
personal consumption and government spending also was reduced slightly.
Finally, the contribution to growth from foreign trade was deepened
somewhat. These revisions were mostly offset by slight upward revisions
to inventory accumulation and residential investment.
Price inflation was nudged up to a still-low 1.0% as measured
by the chained GDP price index. The y/y gain of just 0.5% remained the
lowest since the early-1950s. The personal consumption chain price
index rose a reduced 1.5% but year-to-year prices increased an improved
2.0%, the quickest since 2008. The price index for fixed business
investment fell 1.7% (-3.0% y/y), the fifth consecutive quarterly
decline, but the residential investment price index rose for the second
consecutive quarter (-1.0% y/y).
Released for the first time was the estimate of 1Q corporate
profits. The 5.5% gain (31.0% y/y) was the sixth increase in the last
seven quarters, a testimony to improved growth in the productivity of
human capital and plant &amp; equipment. Profits of U.S.
nonfinancial companies grew 6.0% (25.7% y/y). The annual increase was
the strongest since 2006. Financial sector profits grew a much-reduced
1.8% (77.2% y/y) while profits from abroad grew 9.6% (6.6% y/y).

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527d.jpg" style="width: 312px; height: 265px;">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><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 2005$, % AR</a></th>
<th scope="col">1Q '10 (Preliminary)</th>
<th scope="col">1Q '10 (Advance)</th>
<th scope="col">4Q '09&nbsp;</th>
<th scope="col">3Q '09</th>
<th scope="col">1Q Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>3.0</td>
<td>3.2</td>
<td>5.6</td>
<td>2.2</td>
<td>2.5</td>
<td>-2.4</td>
<td>0.4</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Inventory
Effect</td>
<td>1.7</td>
<td>1.6</td>
<td>3.8</td>
<td>0.7</td>
<td>1.1</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>1.4</td>
<td>1.6</td>
<td>1.7</td>
<td>1.5</td>
<td>1.3</td>
<td>-1.7</td>
<td>0.8</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Foreign
Trade Effect</td>
<td>-0.7</td>
<td>-0.6</td>
<td>0.3</td>
<td>-0.8</td>
<td>0.2</td>
<td>1.0</td>
<td>-1.2</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>2.0</td>
<td>2.2</td>
<td>1.4</td>
<td>2.3</td>
<td>1.2</td>
<td>-2.7</td>
<td>-0.4</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Personal
Consumption</td>
<td>3.5</td>
<td>3.6</td>
<td>1.6</td>
<td>2.8</td>
<td>1.7</td>
<td>-0.6</td>
<td>-0.2</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Business
Fixed Investment</td>
<td>3.1</td>
<td>4.0</td>
<td>5.3</td>
<td>-5.9</td>
<td>-2.0</td>
<td>-17.8</td>
<td>1.6</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Residential Investment</td>
<td>-10.7</td>
<td>-10.9</td>
<td>3.7</td>
<td>18.9</td>
<td>-4.1</td>
<td>-20.5</td>
<td>-22.9</td>
<td>-18.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Government
Spending</td>
<td>-1.9</td>
<td>-1.8</td>
<td>-1.3</td>
<td>2.7</td>
<td>1.5</td>
<td>1.8</td>
<td>3.1</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.0</td>
<td>0.9</td>
<td>0.5</td>
<td>0.4</td>
<td>0.5</td>
<td>1.2</td>
<td>2.1</td>
<td>2.9</td>
</tr>
</tbody>
</table>
</body></html>

Growth in real GDP last quarter was revised slightly lower last quarter to 3.0% from 3.2% estimated in the advance report. A slowdown in the rate of inventory replenishment remained, however, the dominant piece of news, slowing the [...]

U.S. GDP Growth Is Revised Slightly Lower But Corporate Profits Jump, Again

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527a.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527b.jpg" style="width: 312px; height: 265px;">
Growth in real GDP last quarter was revised slightly lower
last quarter to 3.0% from 3.2% estimated in the advance report. A
slowdown in the rate of inventory replenishment remained, however, the
dominant piece of news, slowing the economy's growth from 5.6% during
4Q '09. Consensus expectations had been for a revision upward to 3.4%
growth. Regardless, 1Q remained the third consecutive quarter of
positive growth after the recession when GDP fell a postwar-record 3.7%
peak-to-trough.
The largest piece of the downward revision was a reduced rate
of growth in business fixed investment to a still-firm 3.1%. Growth in
personal consumption and government spending also was reduced slightly.
Finally, the contribution to growth from foreign trade was deepened
somewhat. These revisions were mostly offset by slight upward revisions
to inventory accumulation and residential investment.
Price inflation was nudged up to a still-low 1.0% as measured
by the chained GDP price index. The y/y gain of just 0.5% remained the
lowest since the early-1950s. The personal consumption chain price
index rose a reduced 1.5% but year-to-year prices increased an improved
2.0%, the quickest since 2008. The price index for fixed business
investment fell 1.7% (-3.0% y/y), the fifth consecutive quarterly
decline, but the residential investment price index rose for the second
consecutive quarter (-1.0% y/y).
Released for the first time was the estimate of 1Q corporate
profits. The 5.5% gain (31.0% y/y) was the sixth increase in the last
seven quarters, a testimony to improved growth in the productivity of
human capital and plant &amp; equipment. Profits of U.S.
nonfinancial companies grew 6.0% (25.7% y/y). The annual increase was
the strongest since 2006. Financial sector profits grew a much-reduced
1.8% (77.2% y/y) while profits from abroad grew 9.6% (6.6% y/y).

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527c.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527d.jpg" style="width: 312px; height: 265px;">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><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
2005$, % AR</a></th>
<th scope="col">1Q '10 (Preliminary)</th>
<th scope="col">1Q '10 (Advance)</th>
<th scope="col">4Q '09&nbsp;</th>
<th scope="col">3Q '09</th>
<th scope="col">1Q Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>3.0</td>
<td>3.2</td>
<td>5.6</td>
<td>2.2</td>
<td>2.5</td>
<td>-2.4</td>
<td>0.4</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Inventory
Effect</td>
<td>1.7</td>
<td>1.6</td>
<td>3.8</td>
<td>0.7</td>
<td>1.1</td>
<td>-0.7</td>
<td>-0.4</td>
<td>-0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>1.4</td>
<td>1.6</td>
<td>1.7</td>
<td>1.5</td>
<td>1.3</td>
<td>-1.7</td>
<td>0.8</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Foreign
Trade Effect</td>
<td>-0.7</td>
<td>-0.6</td>
<td>0.3</td>
<td>-0.8</td>
<td>0.2</td>
<td>1.0</td>
<td>-1.2</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>2.0</td>
<td>2.2</td>
<td>1.4</td>
<td>2.3</td>
<td>1.2</td>
<td>-2.7</td>
<td>-0.4</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Personal
Consumption</td>
<td>3.5</td>
<td>3.6</td>
<td>1.6</td>
<td>2.8</td>
<td>1.7</td>
<td>-0.6</td>
<td>-0.2</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Business
Fixed Investment</td>
<td>3.1</td>
<td>4.0</td>
<td>5.3</td>
<td>-5.9</td>
<td>-2.0</td>
<td>-17.8</td>
<td>1.6</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;
Residential Investment</td>
<td>-10.7</td>
<td>-10.9</td>
<td>3.7</td>
<td>18.9</td>
<td>-4.1</td>
<td>-20.5</td>
<td>-22.9</td>
<td>-18.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Government
Spending</td>
<td>-1.9</td>
<td>-1.8</td>
<td>-1.3</td>
<td>2.7</td>
<td>1.5</td>
<td>1.8</td>
<td>3.1</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.0</td>
<td>0.9</td>
<td>0.5</td>
<td>0.4</td>
<td>0.5</td>
<td>1.2</td>
<td>2.1</td>
<td>2.9</td>
</tr>
</tbody>
</table>
U.S. Initial Jobless Insurance
Claims Slip 
by <a href="/comment/Moeller.html">Tom
Moeller</a> May 27, 2010


<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
The labor market's improvement continues. That's the message
from the Bureau of Labor Statistics report that initial claims for
jobless insurance slipped 14,000 to 460,000 following last week's
upwardly revised 28,000 increase. The latest disappointed Consensus
expectations for a decline to 455,000 claims but claims remained near
this cycle's lowest. Last week's figure was down from the recession
peak of 651,000 reached in March of 2009. The four-week moving average
of initial claims ticked up to 456,500.
A 49,000 decline in continuing claims for unemployment
insurance during the latest week followed the prior week's 3,000
decline, which was less than reported initially. Claims were near the
cycle low and down by one-third from the June '09 peak. The overall
decline is a function of the improved job market but also reflects the
exhaustion of 26 weeks of unemployment benefits. Continuing claims
provide an indication of workers' ability to find employment. The
four-week average of continuing claims at 4.637M remained near the
cycle low. This series dates back to 1966.
Extended benefits for unemployment insurance rose further w/w
to 278,953. However, they were down by roughly one-half from a peak of
597,688 reached in November.
The insured unemployment rate remained at 3.6% where it has
been since mid-February. The rate reached a high of 4.9% during May of
2009. During the last ten years, there has been a 96% correlation
between the level of the insured unemployment rate and the overall rate
of unemployment published by the Bureau of Labor Statistics.
The highest insured unemployment rates in the week ending May
8 were in Puerto Rico (6.2 percent), Alaska (5.9), Oregon (5.4), Nevada
(4.9), California (4.8), Pennsylvania (4.7), Wisconsin (4.5), North
Carolina (4.4), Montana (4.3), and Connecticut (4.2). The lowest
insured unemployment rates were in Virginia (1.8), Texas (2.1),
Tennessee (2.6), Wyoming (2.7), Georgia (2.8), Maryland (2.9), Florida
(3.0), Ohio (3.0), New York (3.3) and Maine (3.2). These data are not
seasonally adjusted but the overall insured unemployment rate is.
The unemployment insurance claims data is available in Haver's
WEEKLY database and the state data is in the REGIONW
database.
Distortionary Fiscal Policy and Monetary Policy Goals
from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/RESWKPAP/PDF/rwp10-10.pdf">here</a>.

<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527f.jpg" style="width: 312px; height: 265px;"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM" style="color: black;">Unemployment Insurance (000s)</a></th>
<th scope="col">05/22/10</th>
<th scope="col">05/15/10</th>
<th scope="col">05/08/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Initial Claims</td>
<td>460</td>
<td>472</td>
<td>446</td>
<td>-24.7%</td>
<td>572</td>
<td>419</td>
<td>321</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,607</td>
<td>4,656</td>
<td>-29.1</td>
<td>5,809</td>
<td>3,340</td>
<td>2,549</td>
</tr>
<tr class="odd">
<td class="firstcol">Insured Unemployment Rate (%)</td>
<td>--</td>
<td>3.6</td>
<td>3.6</td>
<td>4.9 (5/2009)</td>
<td>4.4</td>
<td>2.5</td>
<td>1.9</td>
</tr>
</tbody>
</table>
Some Bad News From Europe&#8230; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> May 27, 2010


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100527h.jpg" align="left" height="265" width="353">
The Insee index of household confidence has dropped again marking the
fourth straight month of decline. This is not some garden variety
slippage in confidence from France. The four month drop marks a
cumulative drop of eight points in the index which is the 12th largest
four month decline in the series history. That makes the drop a top 5%
event. This not exactly what Europe is looking for in May. 

Until quite recently most European reports had
been upbeat. But now there are some signs of erosion. The GFK German
confidence index for June edged slightly lower on expectations decay.
The UK CBI distributive trades index also reported today plunged
sharply in May. Now in France the household confidence index that has
been slipping has continued on that path. 

Until now we had seen a fairly steady and strong
recovery of economic data in the wake of the financial crisis. The MFG
sector has been rebounding in Europe particularly strongly. The service
sector has lagged. And the household sector has lagged even further.
But in France it&#8217;s not a case of lagging but of the sector declining,
backtracking. 

The European economy is fighting off the remnants
of recession and financial crisis with a new layering of financial
crisis stemming from Greece&#8217;s problems, the knock effects to banks that
hold European debt (substantially French and German banks) and the
adverse market sentiment stemming from the need for fiscal austerity in
Europe including France. It looks like the French consumer has figured
out that the recovery will not be a bed of roses and maybe even that
sector wide strikes that make such great theater in France will serve
no purpose this time. The French consumer appears to be going down
without a fight. 
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup><thead><tr>
<th colspan="8" scope="col">INSEE
Household Monthly
Survey
</th>
</tr>
</thead><tbody>
<tr class="even">
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;">&nbsp;</td>
<td style="font-weight: bold;" colspan="3">Since
Jan 1990</td>
</tr>
<tr class="grey3">
<td style="font-weight: bold;" class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">May-10</td>
<td style="font-weight: bold;">Apr-10</td>
<td style="font-weight: bold;">Mar-10</td>
<td style="font-weight: bold;">Feb-10</td>
<td style="font-weight: bold;">Percentile</td>
<td style="font-weight: bold;">Rank
%</td>
<td style="font-weight: bold;">Mean</td>
</tr>
<tr>
<td class="firstcol">Household
Confidence</td>
<td>-38</td>
<td>-37</td>
<td>-34</td>
<td>-33</td>
<td>15.8</td>
<td>5.7</td>
<td>-19</td>
</tr>
<tr style="font-weight: bold;" class="grey3">
<td colspan="8" class="firstcol">Living
Standards</td>
</tr>
<tr>
<td class="firstcol">past
12 Mos</td>
<td>-67</td>
<td>-68</td>
<td>-68</td>
<td>-67</td>
<td>13.3</td>
<td>10.2</td>
<td>-41</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Next
12-Mos</td>
<td>-53</td>
<td>-48</td>
<td>-43</td>
<td>-37</td>
<td>9.2</td>
<td>4.1</td>
<td>-22</td>
</tr>
<tr>
<td class="firstcol">Unemployment:
Next 12</td>
<td>62</td>
<td>63</td>
<td>63</td>
<td>58</td>
<td>77.3</td>
<td>83.7</td>
<td>33</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Price
Developments</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Past 12Mo</td>
<td>-20</td>
<td l="">-18</td>
<td>-25</td>
<td>-26</td>
<td>30.8</td>
<td>56.7</td>
<td l="">-16</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Next 12-Mos</td>
<td>-26</td>
<td>-31</td>
<td>-34</td>
<td>-37</td>
<td>37.0</td>
<td>82.4</td>
<td>-35</td>
</tr>
<tr style="font-weight: bold;" class="grey3">
<td colspan="8" class="firstcol">Savings</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Favorable to save</td>
<td>14</td>
<td>17</td>
<td>18</td>
<td>20</td>
<td>43.2</td>
<td>19.2</td>
<td l="">22</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Ability to save Next 12</td>
<td>-10</td>
<td>-10</td>
<td>-8</td>
<td>-10</td>
<td>44.8</td>
<td>49.8</td>
<td>-9</td>
</tr>
<tr style="font-weight: bold;" class="grey3">
<td colspan="8" class="firstcol">Spending</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Favorable
for major purchase</td>
<td>-24</td>
<td>-26</td>
<td>-23</td>
<td>-24</td>
<td>31.0</td>
<td>25.3</td>
<td>-14</td>
</tr>
<tr style="font-weight: bold;" class="grey3">
<td colspan="8" class="firstcol">Financial
Situation</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Current</td>
<td>16</td>
<td>16</td>
<td>16</td>
<td>16</td>
<td>61.9</td>
<td>82.9</td>
<td>12</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Past 12 MOs</td>
<td>-25</td>
<td>-25</td>
<td>-24</td>
<td>-25</td>
<td>
35.5</td>
<td>13.9</td>
<td>-17</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Next 12-Mos</td>
<td>-19</td>
<td>-16</td>
<td>-13</td>
<td>-12</td>
<td>11.8</td>
<td>3.7</td>
<td>-2</td>
</tr>
<tr class="grey1">
<td>&nbsp;</td>
<td colspan="5">Number of observations
in the period</td>
<td colspan="2">245</td>
</tr>
</tbody>
</table>

</body></html>

U.S. GDP Growth Is RevisedSlightly Lower But Corporate Profits Jump, Again

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Lower interest rates are encouraging mortgage refinancings,
but not so much new home purchases. The Mortgage Bankers Association
reported that mortgage applications jumped last week and for May
they've risen 11.5% from April. The May increase, however, just made up
an April decline.
Mortgage refinancings jumped for the third
consecutive week to the highest level since last October. Conversely,
applications to purchase a home dropped sharply
with the expiration of the Federal tax credit for home purchase. During
the last ten years there has been a 51% correlation between the y/y
change in purchase applications and the change in new plus existing
single family home sales. The correlation has lessened recently.
The effective fixed interest rate on conventional 15-year
mortgages averaged 4.50% during the latest week, the cycle low. For
30-year mortgages the rate also fell to an average 5.02%. Interest
rates on fixed 15-year and 30-year mortgages are closely correlated
(near-90%) with the rate on 10-year Treasury securities. Rates on
adjustable one-year mortgages rose during the month to 6.93%, its
highest since mid-2008.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100526h.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100526i.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM%22" style="color: black;">BA Mortgage Applications (SA,
3/16/90=100)</a></th>
<th scope="col">05/21/10</th>
<th scope="col">05/14/10</th>
<th scope="col">05/07/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>633.5</td>
<td>569.2</td>
<td>578.1</td>
<td>-19.4%</td>
<td>736.4</td>
<td>642.9</td>
<td>652.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>185.7</td>
<td>192.1</td>
<td>263.6</td>
<td>-27.6</td>
<td>263.5</td>
<td>345.4</td>
<td>424.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,257.4</td>
<td>2,783.0</td>
<td>2,430.8</td>
<td>-16.3</td>
<td>3,509.2</td>
<td>2,394.1</td>
<td>1,997.9</td>
</tr>
<tr>
<td class="firstcol">15-Year Mortgage Effective
Interest Rate (%)</td>
<td>4.50</td>
<td>4.53</td>
<td>4.52</td>
<td>4.82 (05/09)</td>
<td>4.85</td>
<td>5.9</td>
<td>6.2</td>
</tr>
</tbody>
</table>
</body></html>

Lower interest rates are encouraging mortgage refinancings, but not so much new home purchases. The Mortgage Bankers Association reported that mortgage applications jumped last week and for May they've risen 11.5% from April. The May [...]

U.S. Mortgage Refinance Applications Surge With Lower Rates

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100526e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
The April end to the Federal government's $8,000 home-buyer
tax credit, like in March, caused new home sales to surge. New
home sales jumped 14.8% m/m to 504,000 following the upwardly
revised 29.9% advance during March. The latest level was the highest
since May 2008. The latest sales level greatly exceeded Consensus
expectations for 425,000 sales.
Price discounts likely helped sales during April. The median
home price fell nearly 10% m/m for a 9.5% y/y decline. Firmer sales
&amp; lower prices have been quite successful in lowering the
number of homes on the market to the lowest level in forty years.
At the current sales rate, the months' supply of unsold homes
dropped to 5.0 from its 2009 high of 12.1 months. However, despite all
this improvement, it still took a near-record median 14.3
months to sell a new home in April.
Central Bank Independence, Transparency, and
Accountability is today's speech by Fed Chairman Ben S.
Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20100525a.htm">here</a>.

<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100526f.jpg" style="width: 312px; height: 265px;"><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100526g.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">US
New Homes</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales
(SAAR, 000s)</td>
<td>504</td>
<td>439</td>
<td>338</td>
<td>47.8%</td>
<td>372</td>
<td>481</td>
<td>769</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>39</td>
<td>39</td>
<td>31</td>
<td>85.7</td>
<td>31</td>
<td>35</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>75</td>
<td>57</td>
<td>49</td>
<td>87.5</td>
<td>54</td>
<td>69</td>
<td>118</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>278</td>
<td>251</td>
<td>170</td>
<td>38.3</td>
<td>201</td>
<td>264</td>
<td>409</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>112</td>
<td>92</td>
<td>88</td>
<td>41.8</td>
<td>87</td>
<td>113</td>
<td>178</td>
</tr>
<tr>
<td class="firstcol">Median Price
(NSA, $)</td>
<td>$198,400</td>
<td>$219,600</td>
<td>$219,700</td>
<td>-9.5</td>
<td>214,500</td>
<td>230,408</td>
<td>243,742</td>
</tr>
</tbody>
</table>
</body></html>

The April end to the Federal government's $8,000 home-buyer tax credit, like in March, caused new home sales to surge. New home sales jumped 14.8% m/m to 504,000 following the upwardly revised 29.9% advance during March. The latest [...]

U.S. New Home Sales Soar With Pending Tax Credit Expiration

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<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100526d.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left">
GFK&#8217;s confidence measure for Germany edged lower in June as
the ongoing Greek situation took a small toll on German optimism. Gfk&#8217;s
consumer confidence figure for June slipped to 3.5, a decrease on May's
revised 3.7, marking the end of the index's short 2-month up-streak.
According to the report, the key concern among German consumers is that
Greek rescue packages and the weakening euro could hamper the German
economy in its recovery.
The survey details recorded GFK&#8217;s fourth consecutive decline
in the propensity to buy index, and reversed half of prior month's
gains in the future salary expectations index. That index had recorded
the highest value since 2001 just last month.
Despite consumer concerns, German companies have not been
affected nor have they changed their business plans because of the
possibility of government debt increases resulting from Germany's
leadership of bailouts. Instead, German firms have actually benefited
in export competitiveness from a declining Euro; the macroeconomic
impact on the German budget has not been an issue.
Ironically the index and its supporting survey information
suggests that the net impact of Germany&#8217;s participation in the bailout
could be to get fiscally worried conservative German consumers to
cutback more on spending that already is weak while German firms pursue
a bonanza of opportunity abroad due to the euro&#8217;s weakening and their
improved competitiveness.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col">Germany
Consumer Climate Survey GFK </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Climate</td>
<td colspan="2">Expecations</td>
<td>Propensity to Buy</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>Economic</td>
<td>Income</td>
<td></td>
</tr>
<tr>
<td class="firstcol">Jun-10</td>
<td>3.5</td>
<td>#N/A</td>
<td>#N/A</td>
<td>#N/A</td>
</tr>
<tr>
<td class="firstcol">May-10</td>
<td>3.7</td>
<td>3.9</td>
<td>23.7</td>
<td>18.1</td>
</tr>
<tr>
<td class="firstcol">Apr-10</td>
<td>3.4</td>
<td>22.5</td>
<td>35.2</td>
<td>21.6</td>
</tr>
<tr>
<td class="firstcol">Mar-10</td>
<td>3.2</td>
<td>4.5</td>
<td>13.5</td>
<td>23.4</td>
</tr>
<tr>
<td class="firstcol">Feb-10</td>
<td>3.3</td>
<td>-5.6</td>
<td>12.0</td>
<td>24.2</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td style="font-weight: bold;">Current</td>
<td style="font-weight: bold;" colspan="3">Lagged one month</td>
</tr>
<tr>
<td class="firstcol">Average</td>
<td>3.6</td>
<td>1.4</td>
<td>-2.8</td>
<td>-4.8</td>
</tr>
<tr>
<td class="firstcol">Max</td>
<td>9.1</td>
<td>69.5</td>
<td>35.2</td>
<td>64.4</td>
</tr>
<tr>
<td class="firstcol">Min</td>
<td>-3.5</td>
<td>-32.9</td>
<td>-24.5</td>
<td>-55.4</td>
</tr>
<tr>
<td class="firstcol">% range</td>
<td>55.6%</td>
<td>35.9%</td>
<td>80.7%</td>
<td>61.4%</td>
</tr>
<tr>
<td class="firstcol">Count%</td>
<td>44.7%</td>
<td>60.6%</td>
<td>93.6%</td>
<td>76.6%</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">% range is
current
reading as a percentile of Hi/Low range</td>
</tr>
<tr class="grey1">
<td colspan="5" class="firstcol">Count 0s
current
reading ranked as a %-tile among all readings</td>
</tr>
</tbody>
</table>
</body></html>

GFK’s confidence measure for Germany edged lower in June as the ongoing Greek situation took a small toll on German optimism. Gfk’s consumer confidence figure for June slipped to 3.5, a decrease on May's revised 3.7, marking the end [...]

German Confidence Is Set Back Very Little By Greek Tragedy

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

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

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Andrew Cates

**The growth consensus for 2026** 
Consensus growth forecasts for 2026 have continued to firm over the past six months, with upward revisions most pronounced in economies that are more directly exposed to the global AI investment cycle. Taiwan stands out, reflecting its central role in advanced semiconductor manufacturing and the spillovers from sustained AI-related capex across the global tech supply chain. The US has also seen a sizeable upgrade, consistent with strong domestic investment in AI infrastructure and data-centre capacity, alongside resilient demand for high-value tech services. Elsewhere in Asia, upgrades to South Korea and, to a lesser extent, China and India point to a broader regional benefit from the AI-driven electronics and capital-goods cycle, even as underlying macro conditions remain mixed. Canada has also seen modest upward revisions, likely reflecting its close integration with US investment trends. By contrast, revisions across much of Europe and Japan have been more muted, while forecasts for Russia remain under downward pressure.

260115Z1.jpg

**The next steps for central bank policy** 
Based on responses to the special questions in the latest Blue Chip survey, the chart highlights how uncertain panelists remain about the precise timing of the next policy move, even where there is broad agreement on direction. Expectations for both the Fed and the Bank of England are now loosely centred on March 2026 as the most likely window for the next easing step, but the spread of responses points to limited conviction and a high sensitivity to incoming data. By contrast, panelists continue to see the ECB as largely through its easing cycle, with a clear majority expecting any further move only later, if at all. The Bank of Japan remains the clear outlier: while further tightening is still the central expectation, views are split on timing, with panelists divided between a March move and a hike pushed beyond April 2026—highlighting ongoing uncertainty over the durability of domestic inflation and wage dynamics.

260115Z2.jpg

**The UK economy and BoE policy** 
While Blue Chip panelists remain divided on the precise timing of the Bank of England’s next policy cut, the latest run of UK data is tilting market expectations toward an earlier move. Economic releases have increasingly fallen short of expectations, a pattern that has coincided with a steady decline in short-dated gilt yields. The negative surprise profile reflects a combination of weak household demand and softer labour-market indicators. This has generated downside momentum in the data, reinforcing the case—at least from a market perspective—for earlier or deeper policy easing.

260115Z3.jpg

**The impact of Artificial Intelligence**
Responses to the special questions in the latest Blue Chip survey also suggest that panelists are divided over the timing of AI’s macroeconomic impact in the US. A sizeable share already reports seeing noticeable effects, consistent with the rapid pace of AI-related investment and adoption over the past year. At the same time, a similarly large group expects AI’s impact to become more evident only over the next one to three years, implying a belief that productivity and growth effects will materialise with a lag. These views are notable given that a majority of panelists continue to judge anticipated AI-related gains as being overstated in financial markets, underscoring the risk of disappointment—and potential equity market volatility—if realised outcomes fail to match elevated expectations.

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**US business formation and productivity growth**
The chart points to a renewed pick-up in US productivity growth alongside a marked step-up in business applications, a combination that has naturally fuelled interest in the role of AI. The acceleration in output per hour over the past year coincides with a surge in corporate formations, potentially reflecting both heightened investment in new technologies and the emergence of new, AI-enabled business models. That said, productivity growth has historically been highly cyclical, often strengthening late in the cycle or during periods of labour hoarding and cost discipline, before fading again. As such, while AI may be contributing at the margin, it remains too early to conclude that the recent improvement marks a durable, technology-driven shift rather than another cyclical upswing.

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**China’s export growth**
This week’s China trade data revealed that its export growth has continued to rotate away from the US and toward Europe and ASEAN, a pattern that has become more pronounced over the past year. While exports to the US have fallen sharply on a year-on-year basis, shipments to both Europe and ASEAN have held up markedly better, and in recent months have returned to positive growth. This divergence is consistent with the tightening of US trade policy toward China, including higher tariffs, expanded export controls and broader efforts to “de-risk” supply chains. By contrast, trade with Europe and ASEAN appears to be benefiting from trade diversion and re-routing, as Chinese firms redirect exports toward markets where barriers remain lower and supply-chain integration is deeper.

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The global backdrop remains unsettled, reflected in rising gold prices amid geopolitical tensions—most recently around Venezuela—and renewed political noise, including questions over Federal Reserve independence. At the same time, however, many major equity indices remain at or close to all-time highs, buoyed by optimism around AI and reinforced by a run of relatively benign US inflation readings. Against this mixed backdrop, the charts this week point to a global outlook that is becoming more differentiated rather than uniformly weaker. Blue Chip forecasts for 2026 growth have edged higher over the past six months, with upgrades concentrated in economies most exposed to the AI investment cycle, notably the US and parts of Asia (chart 1). Central bank expectations remain fluid: while panelists broadly anticipate easing by the Fed and Bank of England, conviction around timing is limited, and the Bank of Japan remains an outlier with further tightening still expected (chart 2). In the UK, that uncertainty sits alongside a deteriorating data flow, with negative economic surprises increasingly tilting market expectations toward an earlier BoE rate cut (chart 3). Turning to the US, special questions highlight a divide over whether AI is already having a noticeable macro impact or whether its effects will emerge more gradually, a tension that mirrors concerns about over-optimism in financial markets (chart4). That debate is echoed in the recent pick-up in US productivity growth and the step-change in business formation—developments that may reflect AI-related dynamics but which also warrant caution given the historically cyclical nature of productivity (chart 5). Finally, China’s trade data point to a continued re-orientation of export growth away from the US and toward Europe and ASEAN, consistent with evolving US trade policy and broader supply-chain realignment (chart 6).

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Charts of the Week: Between Optimism and Uncertainty

Michael J. Moran

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The Bureau of Labor Statistics did not publish a report on export and import prices for October because of the government shutdown, and BLS was unable to construct statistics for October to include with the November report. The charts above have a gap in October, and the November figures are represented by a small dot.

Import prices have been remarkably stable in the past three years, as shown by the sideways movement in the level of the import price index (left chart). Focusing on percent changes (i.e. inflation rates) rather than the level of the index shows deflation in 2023 and early 2024 followed by higher prices more recently (right chart). Still, the net change in the past 12 months has totaled only 0.1% and the cumulative change in the past three years amounted to a decline of 0.4%.

A calm environment in the energy sector has helped to restrain import prices, as the price of crude oil showed little change in 2023 and 2024 and declined in 2025. Import prices excluding petroleum products have increased in recent years, but the changes have been modest: 0.9 in the past 12 months and 1.3% in the past three years.

The non-oil components of import prices have traced various patterns in recent years, but shifts have been largely offsetting. Prices of food and autos increased noticeably in 2023 and 2024, but they gave back much of those increases in 2025. Prices of capital goods were stable in 2023 and 2024, but they started to increase in 2025. Prices of consumer goods have been volatile, showing bursts of higher prices followed by discounting, leaving a modest net increase in the past three years.

The calm energy environment also seemed to play a role on the export side, as the industrial supply category showed little net change in prices over 2023 and 2024 before jumping in early 2025. Food prices followed a similar pattern, showing two years of restraint before moving higher in 2025. These two categories account for much of the upward movement in overall export prices in 2025. Prices of consumer goods also started to move higher in 2025 after little net change in the prior two years. Prices of capital goods and automobiles have traced reasonably steady upward paths.

Many observers might try to use the import component of this report to gain insight into the effect of tariffs on prices. That will be difficult because the figures from this report are pre-tariff; there will be no independent upward pressure on prices in this report because of tariffs. In fact, one should look for lower import prices in searching for a tariff effect. That is, if a foreign exporter were to absorb the tariff burden, that would be accomplished by reducing the pre-tariff price in order to keep the after-tariff price steady.

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Some exporters to the US may have made such efforts. The nearby chart shows the month-to-month change in import prices in 2025, and May and June both showed lower prices. These months were especially important because they followed the announcement by President Trump of marked increases in tariffs in April. Also, some of the downward pressure occurred in components that would be sensitive to price (autos and consumer goods). Of course, May and June might be too soon after the announcement of draconian tariffs for foreign exporters to assess and change their pricing strategy.

The chart on monthly changes ends in September because the absence of an October reading prevents the calculation of the month-to-month changes for October and November. However, the two-month change from September to November is easily calculated, and the increase of 0.4% suggests little or no effort to absorb the burden of tariffs.

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

- Import prices have changed little in the past three years.
- Export prices were stable in 2023-24, but moved higher in 2025.

Import & Export Prices: Generally Modest Changes

Winnie Tapasanun

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The Empire State Manufacturing Index of General Business Conditions rose to a higher-than-expected 7.7 in January following a 17.2-drop to -3.7 in December, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. A reading of 1.0 for January had been expected in the Action Economics Forecast Survey. The positive January figure indicated that the business activity in New York State expanded for the third time in four months; it was an improvement from -7.4 in January 2025 and a low of -29.7 in January 2024, though still below a high of 16.8 in November 2024. The percentage of respondents reporting an increase in general business conditions was 34.2% in January, up from 31.7% in December; the percentage reporting a decrease was 26.5%, down from December’s 35.4%. The latest survey was conducted between January 2 and January 9.

The headline index reflects the answer to a single question concerning the state of economic activity and is not calculated from the components. Haver Analytics calculates a composite index from the five major components, which is comparable to the ISM manufacturing index. This calculated index increased to 51.2 in January following a 4.2-point decline to the neutral-level 50.0 in December (the lowest level since September); it was slightly up from 50.7 in January 2025 and well above a low of 43.0 in January 2024. The index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each).

In the latest survey, the new orders index rose to 6.6 in January after a 10.6-point drop to -1.0 in December, marking the third m/m gain in orders in four months and a sharp improvement from a low of -30.7 in January 2024. The shipments index jumped to 16.3 in January, the highest level since November 2024, following a 16.5-point fall to -5.0 in December; it was well above a low of -21.7 in April 2024. The unfilled orders index improved to -8.2 in January after a 9.1-point decrease to -14.9 in December, indicating that unfilled orders contracted for the eighth straight month but at a less severe pace; the index reached a low of -24.2 in January 2024. The inventories index fell to -2.1 in January, the lowest level since September, after a 2.7-point decline to 4.0 in December, signaling the first inventory contraction since October. Meanwhile, the delivery times index increased to 0.0 in January from -5.9 in December, with 12.4% of respondents reporting longer delivery times and an identical 12.4% reporting shorter times, indicating that delivery times were unchanged.

On the labor front, the number of employees index fell to -9.0 in January after a 1.0-point increase to 7.5 in December, indicating that employment contracted for the first time since September and reached its lowest level since January 2024. The index remained well below a peak of 24.9 in February 2022. In January, only 7.9% of respondents reported an increase in employment while a higher 16.8% reported a decline. The average workweek index dropped to -5.4 in January from 2.5 in December, turning negative for the first time since October and hitting the lowest level since April 2025.

Inflation pressures eased in January but remained high. The prices paid index fell to 42.8 in January, the lowest level since March 2025, after a 5.9-point decrease to 44.2 in December. Although still well below a peak of 84.9 in April 2022, the index remained above a low of 25.9 in December 2024 and a low of 20.8 in December 2023. In January, 44.5% of respondents reported higher prices paid while only 1.7% reported lower prices paid. The prices received index fell to 14.4 in January, the lowest reading since January 2025, from 25.4 in December. The index was up from a low of 7.5 in December 2024 and a low of 7.7 in July 2023 but far below a high of 51.9 in March 2022. In January, 18.9% of respondents reported higher prices received while 4.4% reported lower prices received.

Firms remained fairly optimistic about the future business outlook in the latest survey. The index for future business conditions eased to 30.3 in January after rising to 33.5 in December, with 50.6% of respondents expecting business conditions to improve over the next six months. Future new orders edged down to 33.3 in January from 34.5 in December, while future shipments rose to 34.9—the highest level since March 2022—from December’s 30.7. Growth in future employment strengthened to 14.9, the highest reading since November 2024, from December’s 7.8. Capital spending plans remained positive for the third consecutive month in January, with the future capital expenditures index rising to 10.3 from December’s 6.9. Expected prices paid fell to 52.6 in January from 55.4 in December and expected prices received fell to 36.5 from 41.6, with both measures at their lowest levels since December 2024.

The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease with zero separating expansion from contraction.

The New York Fed survey data are contained in Haver’s **SURVEYS** database. The expectations series is in Haver’s **AS1REPNA** database.

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- General Business Conditions Index up 11.4 pts. to 7.7 in January.
- Positive: Shipments (16.3, highest since Nov. ’24) and new orders (6.6).
- Negative: Employment (-9.0, lowest since Jan. ’24), unfilled orders (-8.2), and inventories (-2.1, a four-month low).
- Prices paid at a 10-month-low 42.8 and prices received at a one-year-low 14.4.
- Firms fairly optimistic: Future Business Conditions Index down to a still-positive 30.3; future prices paid at a one-year-low 52.6.

U.S. Empire State Manufacturing Index Returns to Positive Territory in January

Sandy Batten

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The Current Activity Diffusion Index from the latest Manufacturing Business Outlook Survey (MBOS) conducted by the Federal Reserve Bank of Philadelphia rose to 12.6 in January from -8.8 in December. The survey covers the third Federal Reserve District. A reading of -4.5 for January was expected by the Action Economics Forecast Survey. Over 23% of respondents reported increases in activity in January (up from 21% last month), exceeding the 11% reporting decreases (down from 30%); 63% of the firms reported no change in current activity (up from 50%). Survey responses were collected from January 5 to January 12.

The headline index is the answer to just one question: whether activity increased, decreased or was unchanged from the previous month. Haver Analytics calculates an ISM-adjusted current activity diffusion index from the five key components using the methodology employed to construct the national ISM index. This figure rose to 52.9 in January from 52.5 in December, inching further above the critical 50 value that separates contraction from expansion.

For the component indexes, the new orders index rose to 14.4 from 5.7 in December. The percentage of respondents reporting an increase in orders edged up to 28.3% in January from 27.4% in the prior month while 13.9% reported a decrease, down markedly from 21.7% in December. The shipments index increased to 9.5 in January from 3.2 in December. The percentage of respondents reporting an increase in shipments rose slightly to 27.3% from 26.2% while the percentage reporting a decrease fell to 17.8% from 23.0%. Delivery times lengthened marginally to 7.3 in January from 5.2 in December. The inventories index fell 17 points to -8.4 in January, its lowest level since July 2024.

Respondents continued to report overall increases in employment with the employment index remaining in positive territory. However, the index fell to 9.7 in January from 13.0 in December, indicating that gains in employment slowed in the latest month. The percentage of respondents reporting an increase in employment rose to 19.8% from 13.6% in December but the percentage reporting a decline jumped to 10.1% in January from 0.6% in December. The average workweek index fell from 12.5 in December to 9.1 in January.

On balance, the firms continued to report overall increases in prices. The prices paid index edged down 2 points to 46.9 in January, its second consecutive decrease and its lowest level since June. Nearly 47% of respondents reported increases in input prices, while none reported decreases; 53% reported no change. The current prices received index ticked up 2 points to 27.8. More than 31% of respondents reported increases in the prices of their own goods, 3% reported decreases, and 66% reported no change.

The diffusion index for future general activity declined from a revised reading of 38.1 in December to 25.5 in January, its lowest reading since July. Nearly 35% of respondents expect an increase in activity over the next six months (down from 53% last month), exceeding the 9% that expect a decrease. The future new orders index fell 6 points to 32.9, while the future shipments index ticked up 1 point to 40.8. On balance, the firms continue to expect increases in employment over the next six months with the future employment index rising 4 points to 28.8. Both future price indexes were well above their long-run averages: The future prices paid index rose 2 points to 66.6; the future prices received index moved up 5 points to 61.8. The index for future capital expenditures edged up 1 point to 30.3.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The indexes range from -100 to +100 with positive values indicating an increase in activity. The series from the survey dating back to May 1968 can be found in Haver’s **SURVEYS** database. The expectations forecast figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- The headline index increased to 12.6 in January, the highest reading since September, from -8.8 in December.
- Both new orders and shipments increased in January.
- Delivery times lengthened while the pace of input price increases slowed.
- Employment decreased but remained in positive territory, indicating further gains in employment though at a slower pace.

Philly Fed Manufacturing Activity Rebounds in January

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined by 9,000 to 198,000 in the week ending January 10, from 207,000 in the week ending January 3, revised from 208,000. The four-week moving average of initial claims was 205,000 in the January 10 week, a decline of 6,500 from 211,500 in the January 3 week, revised from 211,750, and reaching is the lowest level for this average since January 20, 2024, when it was 203,250.

Federal government employees initially filed 646 (NSA) jobless insurance claims in the week ended January 3, after filing 476 claims in the week ended December 27.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” –decreased by 19,000 to 1.884 million in the week ended January 3 from 1.903 million in the December 27 week, revised from 1.914 million. The four-week moving average was 1.889 million in the week ending January 3, a decrease of 250 from the prior week, revised from 1.893 million. The insured unemployment rate stood at 1.2% in the week of January 3, unchanged from previous 5 weeks.

Federal government employees’ continuing benefits claims were 12,803 (NSA) in the week of December 27, 12,161 (NSA) from 12,129 (NSA) in the week of December 20. 

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 27, the highest unemployment rates were in Rhode Island (2.86%), New Jersey (2.85%), Washington (2.81%), Minnesota (2.74%), Massachusetts (2.59%), Oregon (2.28%), Montana (2.16%), California and Connecticut (both 2.12%) and Alaska (2.06%). The lowest rates were in Florida (0.31%), North Carolina (0.41%), Louisiana (0.43%), Alabama and Virginia (both 0.49%). Rates in other notable states include Illinois (2.18%), New York (2.10%), Pennsylvania (2.02%), and Texas (1.20%). 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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- Initial claims declined from the prior week.
- Continuing claims declined from the prior week.
- The insured unemployment rate was unchanged.