Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923d.jpg" align="right" border="0" height="265" width="353">The Mortgage
Bankers Association indicated that mortgage applications overall
increased 12.8% last week as lower interest rates spurred strength in
refinancings. Applications to refinance jumped 17.4% last week and in
September they have risen 29.3% from August. Nevertheless, since their
peak this past January refinance applications have fallen by nearly
two-thirds.I tandem, there has been lesser strength in
purchase applications. Applications rose 5.6% last week and that made
up roughly half of the prior week's decline. So far this month purchase
applications have risen 4.6% from August after that month's 3.4%
increase. Since the early-February low purchase applications have risen
22% as new and existing home sales have recovered. During the last ten
years there has been a (negative) 79% correlation between the level of
applications for purchase and the effective interest rate on a 30-year
mortgage. Moreover, during the last ten years there has been a 61%
correlation between the y/y change in purchase applications and the
change in new plus existing single family home sales.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923e.jpg" align="right" border="0" height="265" width="353">
The effective
interest rate on a conventional 15-year mortgage fell last week to
4.67%, down from the high of 5.21% averaged during June. These figures
are near the lowest since 2003. For a 30-year mortgage the rate also
fell last week to 5.19% after reaching a high of 5.79% in early-June.
Interest rates on 15-year and 30-year mortgages are closely correlated
(&gt;90%) with the rate on 10-year Treasury securities. Rates on
adjustable 1-Year mortgages averaged 6.66% this month versus the low
near 6.0% during January. Nevertheless, the rate remained down from the
7.07% peak reached last fall. Though they have recovered of
late, since the beginning of this year fixed-rate mortgage applications
have fallen by slightly more than one-half while adjustable-rate
mortgages have more than doubled. The number of conventional loans has
fallen nearly two-thirds but gov't backed loans.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923f.jpg" align="right" border="0" height="265" width="353">
The Mortgage
Bankers Association surveys between 20 to 35 of the top lenders in the
U.S. housing industry to derive its refinance, purchase and market
indexes. The weekly survey covers roughly 50% of all U.S. residential
mortgage applications processed each week by mortgage banks, commercial
banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.&nbsp;The figures for weekly
mortgage applications are available in Haver's SURVEYW
database.TALF:
Jump-Starting the Securitization Markets from the Federal
Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0906.html%A0">
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/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">09/18/09</th>
<th scope="col">09/11/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>668.5</td>
<td>592.8</td>
<td>13.0%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>288.3</td>
<td>272.9</td>
<td>-15.8</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,881.5</td>
<td>2,454.5</td>
<td>41.0</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
<tr>
<td class="firstcol">15-Year Effective Interest Rate
(%)</td>
<td>4.7%</td>
<td>4.7%</td>
<td>6.1% (9/08)</td>
<td>5.9%</td>
<td>6.2%</td>
<td>6.3%</td>
</tr>
</tbody>
</table>
</body></html>

The Mortgage Bankers Association indicated that mortgage applications overall increased 12.8% last week as lower interest rates spurred strength in refinancings. Applications to refinance jumped 17.4% last week and in September they [...]

U.S. Weekly Mortgage Applications Strengthen As Interest Rates Near The Lowest Since 2003

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923c.jpg" align="left" border="0">
The EMU PMIs are up again &#8211; and, for the second month running,
the overall business index is over 50, showing positive growth. The two
main PMI components improved again in September with MFG index up to
40.04 from 48.24 and the services index up to 50.61 from 49.92. 
 

The MFG PMI is at its highest since June of 2008. The services
index is at its best value since April 2008. 
 
The more detailed results show that Germany is suffering some setbacks
and cross currents. That is in-keeping with other German indicators we
have recently seen. In France the improvement continues to move ahead,
with a national index of business sentiment also up sharply in
September. 
 

&#8216; V-shaped&#8217; recovery -- Europe&#8217;s PMIs
continue to sketch out a recovery that is very &#8220;V-shaped.&#8217; The MFG PMI
fell from 50 to its cycle low in eight months. Now after eight months
it has risen from its low to 49.04 , nearly back to 50. The Services
PMI slipped to its cycle low in nine months. Now, seven months later,
it is above the neutral mark of 50. 
 

Beyond the diffusion world of the PMIs - Of
course the indices are not yet back to their respective cycle peaks.
But that typically does not happen until the cycle itself actually
peaks which is a long way off (we hope). For now the recovery has been
unfolding apace. The more detailed news from Germany suggests that the
pace of recovery may be in store for some slowing, from a diffusion
standpoint. But there is plenty of room for the expansion to spread in
terms of real readings like orders and industrial output and job
growth, even if the PMIs do not advance very fast from now on. PMIs are
economic indicators; formally, they are measures of breadth- the answer
the question, &#8220;what proportion of the industries are doing better, in
terms of jobs, orders, overall performance and so on?&#8221; The PMIs do not
answer the question, &#8220;how strong is the gain?&#8221; That is the next
challenge, to expand the increase in orders and in output that has
begun, and to extend the expansion to include job gains. Then the task
is to continue to show staying power across sectors. Indicators like
the diffusion-based PMIs can be very useful, but they fall short of
giving us the true welfare picture of the economy. 
 

Shifting the focus - For this cycle the PMIs have mostly done
their job. They flagged the slow down and the move lower in the economy
ahead of most traditional economic variables and they also showed the
way for the pick up. Now they will give us some indication of how the
various sectors change speed. But the key reports from here on out will
be the traditional reports that reveal true strength instead of just
diffusion or breadth. 


 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="3" class="firstcol">Markit
PMIs for the E-Zone</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr class="grey4">
<td class="firstcol">Sep-09</td>
<td>49.04</td>
<td>50.61</td>
</tr>
<tr class="grey4">
<td class="firstcol">Aug-09</td>
<td>48.24</td>
<td>49.92</td>
</tr>
<tr class="grey4">
<td class="firstcol">Jul-09</td>
<td>46.25</td>
<td>45.69</td>
</tr>
<tr class="grey4">
<td class="firstcol">Jun-09</td>
<td>42.62</td>
<td>44.65</td>
</tr>
<tr class="grey3">
<td colspan="3" class="firstcol">Seqment
averages</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-Mo</td>
<td>45.70</td>
<td>48.57</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-Mo</td>
<td>41.43</td>
<td>46.34</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-Mo</td>
<td>39.34</td>
<td>44.31</td>
</tr>
<tr class="grey3">
<td colspan="3" class="firstcol">127-Mo
Range</td>
</tr>
<tr class="grey1">
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr class="grey1">
<td class="firstcol">Low</td>
<td>33.55</td>
<td>39.24</td>
</tr>
<tr class="grey1">
<td class="firstcol">% Range</td>
<td>57.5%</td>
<td>49.2%</td>
</tr>
</tbody>
</table>
</body></html>

The EMU PMIs are up again – and, for the second month running, the overall business index is over 50, showing positive growth. The two main PMI components improved again in September with MFG index up to 40.04 from 48.24 and the [...]

PMIS Show Continued Growth In Europe

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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923a.jpg" align="left" border="0">
Released yesterday was the U.S. House Price Index from the
Federal Housing and Finance Agency (FHFA). The Purchase Only Index for
July rose 0.3% from June and it was the third consecutive monthly
increase. Moreover, the latest gain eased the year-to-year decline in
the nationwide average of home prices to 4.2% from its worst reading of
negative 8.9% last November. Since their peak in early-2007 home prices
nationwide have fallen 10.5%. The FHFA uses data provided by Fannie Mae
and Freddie Mac and it is not value-weighted.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923b.jpg" align="right" border="0">
Most notable during July was the 1.6% gain in home prices in
the Pacific region of the country. It followed similarly strong 0.7%
and 1.6% increases during the prior two months. Nevertheless these
increases follow earlier home price declines that were amongst the
sharpest in the country. Versus last July prices in the region were
still down 9.0% after having fallen 17.3% during all of 2008. Recent
improvement in home prices also was evident in a 1.0% July increase in
the Mid-Atlantic region. That gain, however, only recouped the decline
during June and left prices roughly even with the year-end 2008 level.
More moderate monthly gain in home prices were logged in the West North
Central, South Atlantic and Mountain Regions of the country. In the
latter two regions, however, prices continued notably below the
year-ago level.
Continuing weak were home prices in several of the country's
regions. Despite a 0.3% July increase, prices in the Mountain states
remained off 9.8% from the year ago level and they were off 16.1% from
the 2007 peak. In the South Atlantic region prices also posted a gain
during July but the 0.6% uptick still left them off by 5.6% from one
year ago. Since their early-2007 peak prices here have fallen 12.8%. In
the populous East North Central region prices slipped another 0.3%
during July and they were flat year-to-date.
Cross-Country Causes and Consequences of the 2008
Crisis: Early Warning Signals from the Federal Reserve Bank
of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/papers/2009/wp09-17bk.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">FHFA
U.S. House Price Index Purchase Only (%)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3</td>
<td>0.1</td>
<td>-4.2</td>
<td>-5.8</td>
<td>1.3</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New England</td>
<td>-0.1</td>
<td>0.3</td>
<td>-2.5</td>
<td>-4.6</td>
<td>-1.7</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Middle Atlantic</td>
<td>1.0</td>
<td>-1.1</td>
<td>-2.9</td>
<td>-2.3</td>
<td>1.9</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; East North Central</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-3.3</td>
<td>-4.4</td>
<td>-1.3</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West North Central</td>
<td>0.3</td>
<td>-0.3</td>
<td>-1.5</td>
<td>-2.8</td>
<td>1.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South Atlantic</td>
<td>0.6</td>
<td>-0.2</td>
<td>-5.6</td>
<td>-7.1</td>
<td>1.4</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; East South Central</td>
<td>-0.9</td>
<td>2.3</td>
<td>-1.7</td>
<td>-1.4</td>
<td>3.8</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West South Central</td>
<td>-0.2</td>
<td>1.1</td>
<td>0.1</td>
<td>0.7</td>
<td>4.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mountain</td>
<td>0.3</td>
<td>-1.0</td>
<td>-9.8</td>
<td>-6.0</td>
<td>4.0</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Pacific</td>
<td>1.6</td>
<td>0.7</td>
<td>-9.0</td>
<td>-17.3</td>
<td>0.1</td>
<td>9.8</td>
</tr>
</tbody>
</table>
</body></html>

Released yesterday was the U.S. House Price Index from the Federal Housing and Finance Agency (FHFA). The Purchase Only Index for July rose 0.3% from June and it was the third consecutive monthly increase. Moreover, the latest gain [...]

FHFA Home Price Index Strengthens Due To Notable Gains In The Pacific & Mid-Atlantic Regions

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923a.jpg" align="left" border="0">
Released yesterday was the U.S. House Price Index from the
Federal Housing and Finance Agency (FHFA). The Purchase Only Index for
July rose 0.3% from June and it was the third consecutive monthly
increase. Moreover, the latest gain eased the year-to-year decline in
the nationwide average of home prices to 4.2% from its worst reading of
negative 8.9% last November. Since their peak in early-2007 home prices
nationwide have fallen 10.5%. The FHFA uses data provided by Fannie Mae
and Freddie Mac and it is not value-weighted.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923b.jpg" align="right" border="0">
Most notable during July was the 1.6% gain in home prices in
the Pacific region of the country. It followed similarly strong 0.7%
and 1.6% increases during the prior two months. Nevertheless these
increases follow earlier home price declines that were amongst the
sharpest in the country. Versus last July prices in the region were
still down 9.0% after having fallen 17.3% during all of 2008. Recent
improvement in home prices also was evident in a 1.0% July increase in
the Mid-Atlantic region. That gain, however, only recouped the decline
during June and left prices roughly even with the year-end 2008 level.
More moderate monthly gain in home prices were logged in the West North
Central, South Atlantic and Mountain Regions of the country. In the
latter two regions, however, prices continued notably below the
year-ago level.
Continuing weak were home prices in several of the country's
regions. Despite a 0.3% July increase, prices in the Mountain states
remained off 9.8% from the year ago level and they were off 16.1% from
the 2007 peak. In the South Atlantic region prices also posted a gain
during July but the 0.6% uptick still left them off by 5.6% from one
year ago. Since their early-2007 peak prices here have fallen 12.8%. In
the populous East North Central region prices slipped another 0.3%
during July and they were flat year-to-date.
Cross-Country Causes and Consequences of the 2008
Crisis: Early Warning Signals from the Federal Reserve Bank
of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/papers/2009/wp09-17bk.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">FHFA
U.S. House Price Index Purchase Only (%)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.3</td>
<td>0.1</td>
<td>-4.2</td>
<td>-5.8</td>
<td>1.3</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New England</td>
<td>-0.1</td>
<td>0.3</td>
<td>-2.5</td>
<td>-4.6</td>
<td>-1.7</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Middle Atlantic</td>
<td>1.0</td>
<td>-1.1</td>
<td>-2.9</td>
<td>-2.3</td>
<td>1.9</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; East North Central</td>
<td>-0.3</td>
<td>-0.2</td>
<td>-3.3</td>
<td>-4.4</td>
<td>-1.3</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West North Central</td>
<td>0.3</td>
<td>-0.3</td>
<td>-1.5</td>
<td>-2.8</td>
<td>1.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South Atlantic</td>
<td>0.6</td>
<td>-0.2</td>
<td>-5.6</td>
<td>-7.1</td>
<td>1.4</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; East South Central</td>
<td>-0.9</td>
<td>2.3</td>
<td>-1.7</td>
<td>-1.4</td>
<td>3.8</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West South Central</td>
<td>-0.2</td>
<td>1.1</td>
<td>0.1</td>
<td>0.7</td>
<td>4.7</td>
<td>7.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Mountain</td>
<td>0.3</td>
<td>-1.0</td>
<td>-9.8</td>
<td>-6.0</td>
<td>4.0</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Pacific</td>
<td>1.6</td>
<td>0.7</td>
<td>-9.0</td>
<td>-17.3</td>
<td>0.1</td>
<td>9.8</td>
</tr>
</tbody>
</table>
PMIS Show Continued Growth In
Europe 
by <a href="/comment/Brusca.html">Robert
Brusca&nbsp;</a> September 23, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923c.jpg" align="left" border="0">
The EMU PMIs are up again &#8211; and, for the second month running,
the overall business index is over 50, showing positive growth. The two
main PMI components improved again in September with MFG index up to
40.04 from 48.24 and the services index up to 50.61 from 49.92. 
 

The MFG PMI is at its highest since June of 2008. The services
index is at its best value since April 2008. 
 
The more detailed results show that Germany is suffering some setbacks
and cross currents. That is in-keeping with other German indicators we
have recently seen. In France the improvement continues to move ahead,
with a national index of business sentiment also up sharply in
September. 
 

&#8216; V-shaped&#8217; recovery -- Europe&#8217;s PMIs
continue to sketch out a recovery that is very &#8220;V-shaped.&#8217; The MFG PMI
fell from 50 to its cycle low in eight months. Now after eight months
it has risen from its low to 49.04 , nearly back to 50. The Services
PMI slipped to its cycle low in nine months. Now, seven months later,
it is above the neutral mark of 50. 
 

Beyond the diffusion world of the PMIs - Of
course the indices are not yet back to their respective cycle peaks.
But that typically does not happen until the cycle itself actually
peaks which is a long way off (we hope). For now the recovery has been
unfolding apace. The more detailed news from Germany suggests that the
pace of recovery may be in store for some slowing, from a diffusion
standpoint. But there is plenty of room for the expansion to spread in
terms of real readings like orders and industrial output and job
growth, even if the PMIs do not advance very fast from now on. PMIs are
economic indicators; formally, they are measures of breadth- the answer
the question, &#8220;what proportion of the industries are doing better, in
terms of jobs, orders, overall performance and so on?&#8221; The PMIs do not
answer the question, &#8220;how strong is the gain?&#8221; That is the next
challenge, to expand the increase in orders and in output that has
begun, and to extend the expansion to include job gains. Then the task
is to continue to show staying power across sectors. Indicators like
the diffusion-based PMIs can be very useful, but they fall short of
giving us the true welfare picture of the economy. 
 

Shifting the focus - For this cycle the PMIs have mostly done
their job. They flagged the slow down and the move lower in the economy
ahead of most traditional economic variables and they also showed the
way for the pick up. Now they will give us some indication of how the
various sectors change speed. But the key reports from here on out will
be the traditional reports that reveal true strength instead of just
diffusion or breadth. 


 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="3" class="firstcol">Markit
PMIs for the E-Zone</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr class="grey4">
<td class="firstcol">Sep-09</td>
<td>49.04</td>
<td>50.61</td>
</tr>
<tr class="grey4">
<td class="firstcol">Aug-09</td>
<td>48.24</td>
<td>49.92</td>
</tr>
<tr class="grey4">
<td class="firstcol">Jul-09</td>
<td>46.25</td>
<td>45.69</td>
</tr>
<tr class="grey4">
<td class="firstcol">Jun-09</td>
<td>42.62</td>
<td>44.65</td>
</tr>
<tr class="grey3">
<td colspan="3" class="firstcol">Seqment
averages</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-Mo</td>
<td>45.70</td>
<td>48.57</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-Mo</td>
<td>41.43</td>
<td>46.34</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-Mo</td>
<td>39.34</td>
<td>44.31</td>
</tr>
<tr class="grey3">
<td colspan="3" class="firstcol">127-Mo
Range</td>
</tr>
<tr class="grey1">
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr class="grey1">
<td class="firstcol">Low</td>
<td>33.55</td>
<td>39.24</td>
</tr>
<tr class="grey1">
<td class="firstcol">% Range</td>
<td>57.5%</td>
<td>49.2%</td>
</tr>
</tbody>
</table>
U.S. Weekly Mortgage Applications
Strengthen As Interest Rates Near The Lowest Since 2003 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 23, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923d.jpg" align="right" border="0" height="265" width="353">The Mortgage
Bankers Association indicated that mortgage applications overall
increased 12.8% last week as lower interest rates spurred strength in
refinancings. Applications to refinance jumped 17.4% last week and in
September they have risen 29.3% from August. Nevertheless, since their
peak this past January refinance applications have fallen by nearly
two-thirds.
I tandem, there has been lesser strength in
purchase applications. Applications rose 5.6% last week and that made
up roughly half of the prior week's decline. So far this month purchase
applications have risen 4.6% from August after that month's 3.4%
increase. Since the early-February low purchase applications have risen
22% as new and existing home sales have recovered. During the last ten
years there has been a (negative) 79% correlation between the level of
applications for purchase and the effective interest rate on a 30-year
mortgage. Moreover, during the last ten years there has been a 61%
correlation between the y/y change in purchase applications and the
change in new plus existing single family home sales.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923e.jpg" align="right" border="0" height="265" width="353">The
effective
interest rate on a conventional 15-year mortgage fell last week to
4.67%, down from the high of 5.21% averaged during June. These figures
are near the lowest since 2003. For a 30-year mortgage the rate also
fell last week to 5.19% after reaching a high of 5.79% in early-June.
Interest rates on 15-year and 30-year mortgages are closely correlated
(&gt;90%) with the rate on 10-year Treasury securities. Rates on
adjustable 1-Year mortgages averaged 6.66% this month versus the low
near 6.0% during January. Nevertheless, the rate remained down from the
7.07% peak reached last fall.
 Though they have recovered of
late, since the beginning of this year fixed-rate mortgage applications
have fallen by slightly more than one-half while adjustable-rate
mortgages have more than doubled. The number of conventional loans has
fallen nearly two-thirds but gov't backed loans.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923f.jpg" align="right" border="0" height="265" width="353">The
Mortgage
Bankers Association surveys between 20 to 35 of the top lenders in the
U.S. housing industry to derive its refinance, purchase and market
indexes. The weekly survey covers roughly 50% of all U.S. residential
mortgage applications processed each week by mortgage banks, commercial
banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.&nbsp;The figures for weekly
mortgage applications are available in Haver's SURVEYW
database.
TALF:
Jump-Starting the Securitization Markets from the Federal
Reserve Bank of Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0906.html%A0">
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/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">09/18/09</th>
<th scope="col">09/11/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>668.5</td>
<td>592.8</td>
<td>13.0%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>288.3</td>
<td>272.9</td>
<td>-15.8</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,881.5</td>
<td>2,454.5</td>
<td>41.0</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
<tr>
<td class="firstcol">15-Year Effective Interest Rate
(%)</td>
<td>4.7%</td>
<td>4.7%</td>
<td>6.1% (9/08)</td>
<td>5.9%</td>
<td>6.2%</td>
<td>6.3%</td>
</tr>
</tbody>
</table>

FOMC Cites Economic Improvement
But Leaves Rates Unchanged 
by <a href="/comment/Moeller.html">Tom
Moeller</a> September 23, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923g.jpg" align="left" border="0" height="265" width="353">
In an anticipated and unanimous vote, the Federal Open Market
Committee today left the Federal funds rate in a "range from 0 to 1/4
percent." The discount rate also was left unchanged at 0.5%. The action
was as expected and left the Fed funds rate at its lowest level ever.
The Fed indicated that "economic activity has picked up
following its severe downturn." In addition, as at earlier meetings, it
noted "Although economic activity is likely to remain weak for a time,
the Committee anticipates that policy actions to stabilize financial
markets and institutions, fiscal and monetary stimulus, and market
forces will support a strengthening of economic growth and a gradual
return to higher levels of resource utilization in a context of price
stability."
Regarding inflation the FOMC statement indicated that "With
substantial resource slack likely to continue to dampen cost pressures
and with longer-term inflation expectations stable, the Committee
expects that inflation will remain subdued for some time."<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090923h.jpg" align="right" border="0" height="265" width="353">
In its effort to promote economic liquidity, the Fed used
similar language as in June that "... to provide support to mortgage
lending and housing markets and to improve overall conditions in
private credit markets, the Federal Reserve will purchase a total of up
to $1.25 trillion of agency mortgage-backed securities and up to $200
billion of agency debt by the end of the year. As previously indicated,
the Committee indicated that the Federal Reserve&#8217;s purchases
of $300billion of Treasury securities will be completed by the end of
October 2009. Moreover, "The Committee will continue to evaluate the
timing and overall amounts of its purchases of securities in light of
the evolving economic outlook and conditions in financial markets. The
Federal Reserve is monitoring the size and composition of its balance
sheet and will make adjustments to its credit and liquidity programs as
warranted.
For the complete text of the Fed's latest press release please
follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090923a.htm">link</a>.
The Haver databases USECON, WEEKLY and DAILY
contain the figures from the Federal Reserve Board.
Against the backdrop of monetary ease, forward indicators are
signaling the possibility of future inflationary risk. The CRB
Commodity Price Index has risen roughly 25% since yearend while the
trade-weighted value of the dollar has fallen 13% since March.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">December</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.16</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>0.50</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>
</body></html>

FHFA Home Price Index StrengthensDue To Notable Gains In The Pacific & Mid-Atlantic Regions

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922f.jpg" align="right" border="0" height="265" width="353">
Quarterly unemployment data for the second quarter for Ireland
and Italy, and monthly data for August for Finland and Taiwan were
released today. The attached two charts show the year over year changes
in the unemployment rates for the four countries: monthly data for
Finland and Taiwan and quarterly data for Ireland and Italy. Ireland
has the highest rate of unemployment, 12%, of the four countries and
the largest increase, 6.3 percentage points, over the same period of a
year ago. The other three countries show year over year increases of
2.6 percentage points or less. The big rise in unemployment in Ireland
is another indicator of the severity of the recession hitting that
country.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922g.jpg" align="right" border="0" height="265" width="353">
The rise in unemployment in Ireland has undoubtedly played a
part in the dramatic change in its net migration. The Irish Central
Statistics Office reported today that in the year ending April, 2009,
emigrants exceeded immigrants by 7,800, compared with an excess of
immigrants of 38,500 in the previous year. This was the first excess of
emigrants since 1995. Ireland's long history of net emigration, was
reversed beginning in 1996 and continued through 2008 as the economy
prospered. Net migration reached a high of 71,800 in 2006 at the height
of the economic boom.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Unemployment Rates (NAS %)</th>
<th scope="col">Q2 09</th>
<th scope="col">Q1 09</th>
<th scope="col">Q4 09</th>
<th scope="col">Q3 08</th>
<th scope="col">Q2 08</th>
<th scope="col">Q1 08</th>
<th scope="col">Q4 07</th>
<th scope="col">Q3 07</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>12.0</td>
<td>10.2</td>
<td>7.6</td>
<td>7.0</td>
<td>5.7</td>
<td>4.9</td>
<td>4.5</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>7.4</td>
<td>7.9</td>
<td>7.1</td>
<td>6.1</td>
<td>6.7</td>
<td>7.1</td>
<td>6.6</td>
<td>5.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Aug 09</td>
<td>Jul&nbsp; 09</td>
<td>Jun 09</td>
<td>May 09&nbsp;</td>
<td>Apr 09&nbsp;</td>
<td>Mar 09&nbsp;</td>
<td>Feb 09 </td>
<td> Jan 09 </td>
</tr>
<tr class="odd">
<td class="firstcol">Finland</td>
<td>7.6</td>
<td>7.7</td>
<td>9.1</td>
<td>10.9</td>
<td>8.8</td>
<td>8.3</td>
<td>7.6</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Taiwan</td>
<td>6.1</td>
<td>6.1</td>
<td>5.9</td>
<td>5.8</td>
<td>5.8</td>
<td>5.8</td>
<td>5.8</td>
<td>5.3</td>
</tr>
</tbody>
</table>
</body></html>

Quarterly unemployment data for the second quarter for Ireland and Italy, and monthly data for August for Finland and Taiwan were released today. The attached two charts show the year over year changes in the unemployment rates for [...]

Unemployment In Ireland, Italy, Finland, And Taiwan

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922e.jpg" align="left" border="0" height="265" width="353">
Retail sales in Canada fell by 0.6% in July following a surge
in growth of 1% in June and of 1.1% in May. In the new quarter retail
sales are expanding at a 3% pace in nominal terms. For the quarter
supermarket sales are dropping. Sales of new car dealers are surging in
double digits. Clothing sales are up at a 3.4% nominal pace. Excluding
autos the annual rate gain early in Q3 are 0.9%. 
 

More broadly, sales trends show gains that are gathering pace
over three-months and mixed to the positive side over six months.
Overall sales are expanding at a rate of 6.4% over three months at a
pace of 3.6% excluding autos and at a 6.4% pace for overall sales. 
 

The chart shows how Canada&#8217;s retail sales simply fell off a
cliff at the end of 2008 when the US economy&#8217;s financial crisis took
hold. Since then ex-auto sales are showing a more consistent rebound.
Overall sales have only really reduced their rate of decline and the
trend drop still seems to be operative for year-over year calculations.
However over that short spans memorialized in the table both overall
and ex-auto sales are hosing that progress is in train. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">Canada Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td colspan="4">Saar</td>
<td>New QTR</td>
</tr>
<tr>
<td class="firstcol">Nominal %</td>
<td>Jul-09</td>
<td>Jun-09</td>
<td>May-09</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-MO</td>
<td>Yr-Ago</td>
<td>Saar</td>
</tr>
<tr class="odd">
<td class="firstcol">Total RTL</td>
<td>-0.6%</td>
<td>1.0%</td>
<td>1.1%</td>
<td>6.4%</td>
<td>2.5%</td>
<td>-4.9%</td>
<td>5.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">New Car Dealerss</td>
<td>0.2%</td>
<td>0.5%</td>
<td>3.5%</td>
<td>18.0%</td>
<td>15.1%</td>
<td>-6.6%</td>
<td>-5.8%</td>
<td>10.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Supermarkets</td>
<td>-1.6%</td>
<td>0.8%</td>
<td>-0.2%</td>
<td>-3.9%</td>
<td>-2.5%</td>
<td>4.3%</td>
<td>3.1%</td>
<td>-6.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing Stores</td>
<td>0.1%</td>
<td>0.5%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>-2.1%</td>
<td>-4.1%</td>
<td>2.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail less MVs</td>
<td>-0.8%</td>
<td>1.1%</td>
<td>0.6%</td>
<td>3.6%</td>
<td>0.2%</td>
<td>-4.7%</td>
<td>7.9%</td>
<td>0.9%</td>
</tr>
</tbody>
</table>
</body></html>

Retail sales in Canada fell by 0.6% in July following a surge in growth of 1% in June and of 1.1% in May. In the new quarter retail sales are expanding at a 3% pace in nominal terms. For the quarter supermarket sales are dropping. [...]

Canadian Retail Sales Are Digging Out Slowly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922c.jpg" width="353">
Encouraging indications that consumer spending was improving faded further during September. During the latest week, chain store sales fell 2.0% and that was enough to pull sales for the month so far to their lowest level since June.
During the last ten years there has been a 69% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. The weekly figures are available in Haver&#39;s SURVEYW database.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Prospects for improvement in sales seem limited. The leading indicator of sales slipped 0.5% (-2.0% y/y) during the latest week though it had risen somewhat earlier this summer.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922d.jpg" width="353">
The Johnson Redbook also reported soft sales of late. General merchandise store sales so far this month increased a seasonally adjusted 0.4% from August (-2.1% y/y) following three months of sometimes sharp decline. Department store sales were down 4.8% y/y on a same-store basis while discount store sales slipped just 0.2% as shoppers searched for bargains.
The Dynamics of Automobile Expenditures from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr394.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/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">09/19/09</th>
<th scope="col">09/12/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>484.6</td>
<td>494.5</td>
<td>0.6%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

Encouraging indications that consumer spending was improving faded further during September. During the latest week, chain store sales fell 2.0% and that was enough to pull sales for the month so far to their lowest level since June. [...]

Weekly Chain Store Sales Trend Lower During September

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922a.jpg" align="left" border="0" height="265" width="353">
Since June, improvement in the U.S. economy and aggressive
measures by the Federal Reserve to stimulate growth have supported
gasoline prices from their lows of last December. However, any
incremental strength in prices has topped out. The pump price
for regular gasoline dipped slightly last week to an average
$2.55 per gallon, roughly where it's been since early June. These
prices compare to the December low of $1.61. Yesterday, prices
backpedaled even further as speculation mounted that the Fed may soon
rein in its simulative policies. The wholesale gasoline price fell to
$1.76 per gallon. Prices had reached a high in early-August of $2.03.
The figures are reported by the U.S. Department of Energy and can be
found in Haver's WEEKLY &amp; DAILY databases.
During August, the consumer price index for gasoline recouped
the July decline with a not seasonally adjusted 3.3% increase.
Seasonally adjusted gas prices were quite firm and rose 9.1% m/m, up
40.3% YTD.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090922b.jpg" align="right" border="0" height="265" width="353">
Crude oil prices have followed a similar
pattern. Light sweet crude oil prices (WTI) held last week near the
high at $71.36 per barrel, up from the December low of $32.37.
Yesterday, however, the spot market price for light sweet crude oil
fell to $69.71 per barrel versus a daily high of $72.51 last week.
Earlier strength in gasoline prices reflected incremental
improvement in the demand for gasoline. Seasonal factors accounted for
much of demand's incremental improvement, but in September demand has
remained firm. The y/y uptick of 0.1% is the first positive comparison
since early-2008. Demand for residual fuel oil also has improved. It
shows a positive 8.6% y/y comparison but distillate demand is off 14.9%
y/y). Finally, oil remains plentiful as evidenced by a 13.5% y/y rise
in inventories of crude oil &amp; petroleum products. Inventories
of gasoline recently have dropped somewhat but they have strengthened
by 12.5% versus last year, the strongest gain in ten years. The figures
on crude oil production and inventories are available in Haver's OILWKLY
database.
Natural gas prices continued to be the weakest part of the
energy sector's pricing environment. Though they increased last week to
an average of $3.22 per mmbtu (-59.3% y/y), they remained down by
three-quarters from the high reached in early-July of last year of
$13.19/mmbtu. Yesterday prices held at the $3.38 level.
Predicting Crises, Part I: Do Coming Crises Cast
Their Shadows Before? from the Federal Reserve Bank of San
Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-29.html">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/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">09/21/09</th>
<th scope="col">09/14/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.55</td>
<td>2.58</td>
<td>-31.4%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>71.36</td>
<td>70.91</td>
<td>-26.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body></html>

Since June, improvement in the U.S. economy and aggressive measures by the Federal Reserve to stimulate growth have supported gasoline prices from their lows of last December. However, any incremental strength in prices has topped [...]

Weekly Gasoline Prices Slip Just Modestly As Trend Remains Firm

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.

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**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.

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**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.

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**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.

260115Z5.jpg

**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

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.

U.S. Initial Claims for Unemployment Insurance Declined in Latest Week

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Existing home sales jumped 5.1% m/m (+1.4% y/y) in December to 4.35 million units (SAAR). This was the fourth consecutive monthly gain and was well above the 1.7% m/m increase expected by the Action Economics Forecast Survey. December sales were the highest since February 2023. For all of 2025, sales remained anemic, totaling just 4.084 million and only up slightly from 4.067 million in 2024, which was the lowest annual total in the history of the series dating back to 1999. The average effective 30-year mortgage interest rate fell to 6.51% in December from 6.54% in November. This is down markedly from 7.10% in May and accounts for some of the revival in home sales over the past several months. The sales figures are based on closings of sales contracts signed over the past couple of months.

Existing single-family home sales rose 5.1% m/m (+1.8% y/y) in December to 3.95 million. This was the fourth consecutive monthly increase and highest level of single-family sales since February 2023. Sales of condos and co-ops surged 5.3% m/m (-2.4% y/y) in December to 400,000, more than reversing a 2.6% monthly drop in November. For all of 2025, sales of single-family homes edged up to 3.706 million from 3.673 million in 2024. By contrast, sales of condos and co-ops declined to 378,333 from 393,333 in 2024.

Compared to a month ago, sales rose 2.0% m/m in the Northeast, increased 2.0% m/m in the Midwest, jumped 6.9% m/m in the South (the largest monthly gain since February 2024), and surged 6.6% m/m in the West (the largest monthly gains since February). Year-over-year comparisons were less flattering. Compared to a year ago, sales were unchanged in both the Midwest and the West and fell 1.9% y/y in the Northeast. By contrast, sales rose 3.6% y/y in the South.

The median price of all existing homes (NSA) declined 1.1% m/m (+0.4% y/y) to $405,400 in December. The median price of an existing single-family home fell 1.3% m/m (+0.2% y/y) to $409,500 in December. Prices of single-family homes in the Northeast were essentially unchanged in December from November. However, prices in the other three regions fell: -3.6% m/m in the Midwest, -0.3% m/m in the South, -1.9% m/m in the West.

Inventories of homes for sale continued to weaken in December. The number of existing homes for sale (NSA) plummeted 18.1% m/m (+3.5% y/y) to 1.18 million units, the lowest level since January. The supply of homes on the market at the current selling rate (NSA) fell to 3.3 months, its lowest reading since last December.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. Mortgage interest rates can be found in the **WEEKLY** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.

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- Existing home sales jumped a much larger-than-expected 5.1% m/m in December, the fourth consecutive monthly gain.
- Month-over-month sales increased in each of the four major areas.
- But year-over-year sales rose only in the South.
- For all of 2025, sales totaled 4.084 million, up slightly from 4.067 million in 2024.