Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624e.jpg" align="right" border="0" height="265" width="353">Sales
of new single-family homes during May continued the sideways movement
of 2009. Sales were stable with April at 342,000 units (AR) and have
shown little month-to-month change this year. That stability, however,
follows a one-third sales decline over the last year and a
three-quarters decline since the 2005 peak. May sales fell short of
Consensus expectations for sales of 360,000 units. The new home sales
figures are available in Haver's USECON database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624f.jpg" align="right" border="0" height="265" width="353">
Around the country sales patterns continued to vary. Sales in the
Northeast and in the Midwest rose last month but sales barely inched
higher out West. Sales in the South reversed their April gain and fell
back to near the record low.The modest firming of home sales
continued to strengthen prices. The median price for a new
single-family home rose 4.2% last month to $221,600 after a like gain
during April. Nevertheless, prices have fallen 3.5% over the last
twelve months as well as since yearend 2008. Since their peak early in
2007, new home prices have fallen by roughly
one-quarter.Price weakness has helped move the
inventory of unsold homes which has fallen by nearly one-half since the
peak during 2006. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624g.jpg" align="right" border="0" height="265" width="353">
In each of the country's regions, inventories are
down by roughly one-third just during the last year.&nbsp;The
month's supply of new homes for sale also has started to drop. In May
the months supply in inventory fell to its lowest level since last
July. But there's more inventory to move with lower prices if sales
remain low.A related development indicated that mortgage
applications for purchase of a home rose last week to the highest level
since early April (-15.9% y/y). These figures from the Mortgage Bankers
Association are available in Haver's SURVEYW
database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">US
New Homes</th>
<th scope="col">May</th>
<th scope="col">April</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 Sales
(SAAR, 000s)</td>
<td>342</td>
<td>344</td>
<td>-32.8%</td>
<td>479</td>
<td>768</td>
<td>1,049</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>27</td>
<td>21</td>
<td>&nbsp;-12.9</td>
<td>35</td>
<td>64</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>51</td>
<td>43</td>
<td>-32.0</td>
<td>69</td>
<td>118</td>
<td>161</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>184</td>
<td>201</td>
<td>-35.9</td>
<td>264</td>
<td>408</td>
<td>559</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>80</td>
<td>79</td>
<td>-31.0</td>
<td>111</td>
<td>178</td>
<td>266</td>
</tr>
<tr>
<td class="firstcol">Median Price
(NSA, $)</td>
<td>221,600</td>
<td>212,600</td>
<td>-3.4</td>
<td>230,408</td>
<td>243,742</td>
<td>243,067</td>
</tr>
</tbody>
</table>
</body></html>

Sales of new single-family homes during May continued the sideways movement of 2009. Sales were stable with April at 342,000 units (AR) and have shown little month-to-month change this year. That stability, however, follows a one- [...]

U.S. New Home Sales Stay Low As Prices Firm

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624d.jpg" align="left" border="0" height="265" width="353">
Consumer confidence in Italy has risen firmly in June.
Confidence now has risen in five of the past seven months having fallen
in only one of those months. The trend to improvement is clear. The
overall confidence measure from ISAE is not in the 35th percentile of
its range- still quiet weak but not so disastrous. 
 

The overall situation in the past 12 months is given a rating
of -68 which sounds terrible. Actually that reading is in the 55th
percentile of its range of historic outcomes and stands above the
average response of -71. For the next 12-months the rating is in the
40th percentile of range and is only slightly below the average
response for that category. It&#8217;s a return to sub-normalcy. 
 

The ability to make major purchase right now is at the index
average, but the mid point of its range at the 43.9th range percentile.
For the future the response rate is a super strong 95th percentile
reading. 
 

Despite this improved news, fears of unemployment still rate
high in 66th percentile of their range but even higher when we look at
the ranking percentile. The latter measure tells how many responses are
below the current response: that percentage is 96.2%. In other words,
unemployment fears are worse than this only about FOUR percent of the
time. Still the range reading tells us that there have been times when
the fears were much, much, greater. The ranking percentile says yes,
that maybe so, but there have not been many of those times. We can
compare the ranking and the range percentiles for each response to get
a better fix on what the raw responses man. Cleary the raw responses
taken alone can be very misleading across categories. 
 

As you can tell by surveying these responses and looking at
the percentile ranges or rankings each category has its individual
distribution of responses. Over the past 200-some months the overall
situation reading averages a -71 reading while the &#8216;overall situation
for the next 12-months&#8217; averages a -9. Go figure. Are 12-monht periods
usually that different? I don&#8217;t think so. We use the percentile and
range readings to try to shift though these responses to get a more
accurate assessment of the consumer&#8217;s mood. 
 

For now it is apparent that there is an improvement in the
Italian consumer&#8217;s mood, and also some paradox. There is still a high
fear of unemployment but apparently the social safety network is good
enough that is not raising a lot of anxiety about the future or even
about the ability to spend on consumer items. That may seem unusual but
after all this is Europe and it&#8217;s Italy. Those are simply the facts. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Italy
ISAE Consumer Confidence</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol" colspan="5">&nbsp;</td>
<td colspan="3">Since Jan 1992 Rank</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Percentile</td>
<td>Rank</td>
<td>percentile</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer Confidence</td>
<td>105.4</td>
<td>104.9</td>
<td>104.9</td>
<td>99.9</td>
<td>35.0</td>
<td>148</td>
<td>28.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">Last
12 months</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; OVERALL SITUATION</td>
<td>-68</td>
<td>-73</td>
<td>-74</td>
<td>-84</td>
<td>63.2</td>
<td>93</td>
<td>55.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; PRICE TRENDS</td>
<td>-40.5</td>
<td>-45</td>
<td>-43</td>
<td>-45</td>
<td>9.3</td>
<td>205</td>
<td>1.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">Next
12months</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; OVERALL SITUATION</td>
<td>-8</td>
<td>-17</td>
<td>-26</td>
<td>-35</td>
<td>49.2</td>
<td>123</td>
<td>40.9%&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; PRICE TRENDS</td>
<td>8.5</td>
<td>10</td>
<td>9.5</td>
<td>7</td>
<td>17.3</td>
<td>101</td>
<td>51.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; UNEMPLOYMENT</td>
<td>15</td>
<td>17</td>
<td>21</td>
<td>38</td>
<td>66.2</td>
<td>8</td>
<td>96.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; HOUSEHOLD BUDGET</td>
<td>0</td>
<td>5</td>
<td>1</td>
<td>5</td>
<td>15.6</td>
<td>200</td>
<td>3.8%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">HOUSEHOLD FIN SITUATION</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Last 12 months</td>
<td>-37</td>
<td>-34</td>
<td>-37</td>
<td>-39</td>
<td>38.8</td>
<td>126</td>
<td>39.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Next12 months</td>
<td>-4</td>
<td>-5</td>
<td>-11</td>
<td>-10</td>
<td>63.3</td>
<td>117</td>
<td>43.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">HOUSEHOLD
SAVINGS</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Current</td>
<td>60</td>
<td>59</td>
<td>60</td>
<td>69</td>
<td>72.7</td>
<td>13</td>
<td>93.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Future</td>
<td>-25</td>
<td>-29</td>
<td>-29</td>
<td>-33</td>
<td>51.1</td>
<td>145</td>
<td>30.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">MAJOR
Purchases</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Current</td>
<td>-39</td>
<td>-43</td>
<td>-41</td>
<td>-43</td>
<td>43.9</td>
<td>90</td>
<td>56.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Future</td>
<td>3</td>
<td>1</td>
<td>3</td>
<td>3</td>
<td>95.7</td>
<td>3</td>
<td>98.6%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Total number
of months: 208</td>
</tr>
</tbody>
</table>
</body></html>

Consumer confidence in Italy has risen firmly in June. Confidence now has risen in five of the past seven months having fallen in only one of those months. The trend to improvement is clear. The overall confidence measure from ISAE is [...]

Consumer Confidence Recovers In Italy

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624a.jpg" align="right" border="0" height="265" width="353">The factory
sector is showing some life recently and may be emerging from the
moribund state of the last year. The May report of durable goods orders
indicated a 1.8% jump following a little-revised 1.8% April gain. The
latest increase easily outpaced&nbsp; Consensus expectations for a
0.8% decline and during the last three months orders have risen at a
5.3% annual rate.&nbsp;That follows a 5.8% decline during all of
last year. A 3.6% rise (-25.8% y/y) in transportation equipment orders
led last month's increase in total durables bookings. That followed a
6.2% rise during April. Higher orders for commercial aircraft led the
gain with a 68.1% (-47.7% y/y) surge. Conversely, orders for motor
vehicles &amp; parts fell 8.1% (-29.3% y/y) as the auto companies
continued to suffer the effects of weak sales. Machinery orders also
posted a notable 7.7% increase (-26.9% y/y) after slight uptick in
April but electrical equipment orders fell 1.1% (-27.0% y/y) after
little change during April. Orders for primary metals rose slightly for
the second month but were off by nearly one-half from the year-ago
level. Orders for computers &amp; electronic products reversed most
of their April decline as computer orders rose 9.4% (-20.2% y/y) but
orders for communications equipment slipped m/m and have moved sideways
this year. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624b.jpg" align="right" border="0" height="265" width="353">
The capital goods sector may have begun to show life.
Orders for nondefense capital goods recovered an April decline with a
4.8% gain due to the jump in aircraft orders noted above. Nondefense
orders excluding aircraft also firmed but by just enough to return to
the level of last February. During the last ten years there has been an
80% correlation between the y/y change in nondefense capital goods
orders and the change in equipment &amp; software spending in the
GDP accounts. The correlation of the GDP figure with capital goods
shipments is, as one would expect, a larger 92%. As might be
expected, the improvement in orders has yet to show up in higher
shipments. Shipments of durable goods fell 2.1% last month (-19.5% y/y)
and have fallen in each month since February of last year. That y/y
decline in shipments has been accompanied by a 21.1% y/y drop in
industrial production of durable goods. During the last ten years,
there has been an 80% correlation between the change in shipments of
durable goods and the change in durables industrial
production.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624c.jpg" align="right" border="0" height="265" width="353">
Inventories of durable goods fell for the fifth
consecutive month. The 0.8% decline followed a 1.1% April decline that
was deeper than reported initially. On a three-month basis decumulation
of durable goods inventories has been at a near-record 13.5% rate.
Quick decumulation of inventories has been notably across industries.
Backlogs in order books have fallen in each of the last eight months
and during the last year by 7.7%, a rate of decline which is the
sharpest since 2003. The durable goods figures are available in
Haver's USECON database. Taming the Credit Cycle by
Limiting High-Risk Lending from the Federal Reserve Bank of
Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0904.html">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS
Classification</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</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">Durable Goods Orders</td>
<td>1.8</td>
<td>1.8</td>
<td>-23.3</td>
<td>-5.8</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>1.1</td>
<td>0.4</td>
<td>-22.4</td>
<td>-1.2</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>10.0</td>
<td>-2.9</td>
<td>-26.9</td>
<td>-6.8</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>4.8</td>
<td>-2.9</td>
<td>-21.8</td>
<td>-0.3</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>
</body></html>

The factory sector is showing some life recently and may be emerging from the moribund state of the last year. The May report of durable goods orders indicated a 1.8% jump following a little-revised 1.8% April gain. The latest [...]

U.S. Durable Goods Orders Surprisingly Strong For A Second Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624a.jpg" align="right" border="0" height="265" width="353">The factory
sector is showing some life recently and may be emerging from the
moribund state of the last year. The May report of durable goods orders
indicated a 1.8% jump following a little-revised 1.8% April gain. The
latest increase easily outpaced&nbsp; Consensus expectations for a
0.8% decline and during the last three months orders have risen at a
5.3% annual rate.&nbsp;That follows a 5.8% decline during all of
last year.
 A 3.6% rise (-25.8% y/y) in transportation equipment orders
led last month's increase in total durables bookings. That followed a
6.2% rise during April. Higher orders for commercial aircraft led the
gain with a 68.1% (-47.7% y/y) surge. Conversely, orders for motor
vehicles &amp; parts fell 8.1% (-29.3% y/y) as the auto companies
continued to suffer the effects of weak sales. Machinery orders also
posted a notable 7.7% increase (-26.9% y/y) after slight uptick in
April but electrical equipment orders fell 1.1% (-27.0% y/y) after
little change during April. Orders for primary metals rose slightly for
the second month but were off by nearly one-half from the year-ago
level. Orders for computers &amp; electronic products reversed most
of their April decline as computer orders rose 9.4% (-20.2% y/y) but
orders for communications equipment slipped m/m and have moved sideways
this year.
 <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624b.jpg" align="right" border="0" height="265" width="353">The
capital goods sector may have begun to show life.
Orders for nondefense capital goods recovered an April decline with a
4.8% gain due to the jump in aircraft orders noted above. Nondefense
orders excluding aircraft also firmed but by just enough to return to
the level of last February. During the last ten years there has been an
80% correlation between the y/y change in nondefense capital goods
orders and the change in equipment &amp; software spending in the
GDP accounts. The correlation of the GDP figure with capital goods
shipments is, as one would expect, a larger 92%.
 As might be
expected, the improvement in orders has yet to show up in higher
shipments. Shipments of durable goods fell 2.1% last month (-19.5% y/y)
and have fallen in each month since February of last year. That y/y
decline in shipments has been accompanied by a 21.1% y/y drop in
industrial production of durable goods. During the last ten years,
there has been an 80% correlation between the change in shipments of
durable goods and the change in durables industrial
production.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624c.jpg" align="right" border="0" height="265" width="353">Inventories
of durable goods fell for the fifth
consecutive month. The 0.8% decline followed a 1.1% April decline that
was deeper than reported initially. On a three-month basis decumulation
of durable goods inventories has been at a near-record 13.5% rate.
Quick decumulation of inventories has been notably across industries.
Backlogs in order books have fallen in each of the last eight months
and during the last year by 7.7%, a rate of decline which is the
sharpest since 2003.
 The durable goods figures are available in
Haver's USECON database.
 Taming the
Credit Cycle by
Limiting High-Risk Lending from the Federal Reserve Bank of
Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0904.html">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS
Classification</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</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">Durable Goods Orders</td>
<td>1.8</td>
<td>1.8</td>
<td>-23.3</td>
<td>-5.8</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>1.1</td>
<td>0.4</td>
<td>-22.4</td>
<td>-1.2</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>10.0</td>
<td>-2.9</td>
<td>-26.9</td>
<td>-6.8</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>4.8</td>
<td>-2.9</td>
<td>-21.8</td>
<td>-0.3</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>

Consumer Confidence Recovers In
Italy 
by <a href="/comment/Brusca.html">Robert
Brusca&nbsp;</a> June 24, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624d.jpg" align="left" border="0" height="265" width="353">
Consumer confidence in Italy has risen firmly in June.
Confidence now has risen in five of the past seven months having fallen
in only one of those months. The trend to improvement is clear. The
overall confidence measure from ISAE is not in the 35th percentile of
its range- still quiet weak but not so disastrous. 
 

The overall situation in the past 12 months is given a rating
of -68 which sounds terrible. Actually that reading is in the 55th
percentile of its range of historic outcomes and stands above the
average response of -71. For the next 12-months the rating is in the
40th percentile of range and is only slightly below the average
response for that category. It&#8217;s a return to sub-normalcy. 
 

The ability to make major purchase right now is at the index
average, but the mid point of its range at the 43.9th range percentile.
For the future the response rate is a super strong 95th percentile
reading. 
 

Despite this improved news, fears of unemployment still rate
high in 66th percentile of their range but even higher when we look at
the ranking percentile. The latter measure tells how many responses are
below the current response: that percentage is 96.2%. In other words,
unemployment fears are worse than this only about FOUR percent of the
time. Still the range reading tells us that there have been times when
the fears were much, much, greater. The ranking percentile says yes,
that maybe so, but there have not been many of those times. We can
compare the ranking and the range percentiles for each response to get
a better fix on what the raw responses man. Cleary the raw responses
taken alone can be very misleading across categories. 
 

As you can tell by surveying these responses and looking at
the percentile ranges or rankings each category has its individual
distribution of responses. Over the past 200-some months the overall
situation reading averages a -71 reading while the &#8216;overall situation
for the next 12-months&#8217; averages a -9. Go figure. Are 12-monht periods
usually that different? I don&#8217;t think so. We use the percentile and
range readings to try to shift though these responses to get a more
accurate assessment of the consumer&#8217;s mood. 
 

For now it is apparent that there is an improvement in the
Italian consumer&#8217;s mood, and also some paradox. There is still a high
fear of unemployment but apparently the social safety network is good
enough that is not raising a lot of anxiety about the future or even
about the ability to spend on consumer items. That may seem unusual but
after all this is Europe and it&#8217;s Italy. Those are simply the facts. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Italy
ISAE Consumer Confidence</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol" colspan="5">&nbsp;</td>
<td colspan="3">Since Jan 1992 Rank</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Percentile</td>
<td>Rank</td>
<td>percentile</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer Confidence</td>
<td>105.4</td>
<td>104.9</td>
<td>104.9</td>
<td>99.9</td>
<td>35.0</td>
<td>148</td>
<td>28.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">Last
12 months</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; OVERALL SITUATION</td>
<td>-68</td>
<td>-73</td>
<td>-74</td>
<td>-84</td>
<td>63.2</td>
<td>93</td>
<td>55.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; PRICE TRENDS</td>
<td>-40.5</td>
<td>-45</td>
<td>-43</td>
<td>-45</td>
<td>9.3</td>
<td>205</td>
<td>1.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">Next
12months</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; OVERALL SITUATION</td>
<td>-8</td>
<td>-17</td>
<td>-26</td>
<td>-35</td>
<td>49.2</td>
<td>123</td>
<td>40.9%&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; PRICE TRENDS</td>
<td>8.5</td>
<td>10</td>
<td>9.5</td>
<td>7</td>
<td>17.3</td>
<td>101</td>
<td>51.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; UNEMPLOYMENT</td>
<td>15</td>
<td>17</td>
<td>21</td>
<td>38</td>
<td>66.2</td>
<td>8</td>
<td>96.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; HOUSEHOLD BUDGET</td>
<td>0</td>
<td>5</td>
<td>1</td>
<td>5</td>
<td>15.6</td>
<td>200</td>
<td>3.8%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">HOUSEHOLD
FIN SITUATION</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Last 12 months</td>
<td>-37</td>
<td>-34</td>
<td>-37</td>
<td>-39</td>
<td>38.8</td>
<td>126</td>
<td>39.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Next12 months</td>
<td>-4</td>
<td>-5</td>
<td>-11</td>
<td>-10</td>
<td>63.3</td>
<td>117</td>
<td>43.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">HOUSEHOLD
SAVINGS</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Current</td>
<td>60</td>
<td>59</td>
<td>60</td>
<td>69</td>
<td>72.7</td>
<td>13</td>
<td>93.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Future</td>
<td>-25</td>
<td>-29</td>
<td>-29</td>
<td>-33</td>
<td>51.1</td>
<td>145</td>
<td>30.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">MAJOR
Purchases</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Current</td>
<td>-39</td>
<td>-43</td>
<td>-41</td>
<td>-43</td>
<td>43.9</td>
<td>90</td>
<td>56.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Future</td>
<td>3</td>
<td>1</td>
<td>3</td>
<td>3</td>
<td>95.7</td>
<td>3</td>
<td>98.6%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Total number
of months: 208</td>
</tr>
</tbody>
</table>
U.S. New Home Sales Stay Low As
Prices Firm 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 24, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624e.jpg" align="right" border="0" height="265" width="353">Sales
of new single-family homes during May continued the sideways movement
of 2009. Sales were stable with April at 342,000 units (AR) and have
shown little month-to-month change this year. That stability, however,
follows a one-third sales decline over the last year and a
three-quarters decline since the 2005 peak. May sales fell short of
Consensus expectations for sales of 360,000 units. The new home sales
figures are available in Haver's USECON database.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624f.jpg" align="right" border="0" height="265" width="353">Around the
country sales patterns continued to vary. Sales in the
Northeast and in the Midwest rose last month but sales barely inched
higher out West. Sales in the South reversed their April gain and fell
back to near the record low.
The modest firming of home sales
continued to strengthen prices. The median price for a new
single-family home rose 4.2% last month to $221,600 after a like gain
during April. Nevertheless, prices have fallen 3.5% over the last
twelve months as well as since yearend 2008. Since their peak early in
2007, new home prices have fallen by roughly
one-quarter.
Price weakness has helped move the
inventory of unsold homes which has fallen by nearly one-half since the
peak during 2006. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624g.jpg" align="right" border="0" height="265" width="353">
In each of the country's regions, inventories are
down by roughly one-third just during the last year.&nbsp;The
month's supply of new homes for sale also has started to drop. In May
the months supply in inventory fell to its lowest level since last
July. But there's more inventory to move with lower prices if sales
remain low.
A related development indicated that mortgage
applications for purchase of a home rose last week to the highest level
since early April (-15.9% y/y). These figures from the Mortgage Bankers
Association are available in Haver's SURVEYW
database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">US
New Homes</th>
<th scope="col">May</th>
<th scope="col">April</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 Sales
(SAAR, 000s)</td>
<td>342</td>
<td>344</td>
<td>-32.8%</td>
<td>479</td>
<td>768</td>
<td>1,049</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>27</td>
<td>21</td>
<td>&nbsp;-12.9</td>
<td>35</td>
<td>64</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>51</td>
<td>43</td>
<td>-32.0</td>
<td>69</td>
<td>118</td>
<td>161</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>184</td>
<td>201</td>
<td>-35.9</td>
<td>264</td>
<td>408</td>
<td>559</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>80</td>
<td>79</td>
<td>-31.0</td>
<td>111</td>
<td>178</td>
<td>266</td>
</tr>
<tr>
<td class="firstcol">Median Price
(NSA, $)</td>
<td>221,600</td>
<td>212,600</td>
<td>-3.4</td>
<td>230,408</td>
<td>243,742</td>
<td>243,067</td>
</tr>
</tbody>
</table>

FOMC Leaves Rates Unchanged; Cites
Slower Economic Contraction &amp; Subsiding Threat From Low Pricing
Power 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 24, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429e.jpg" align="left" border="0" height="265" width="353">
In an anticipated move, the Federal Open Market Committee
today left the Federal funds rate in a "range from 0 to 1/4 percent."
The discount also was left unchanged at 0.50%. The Fed funds rate
remained the lowest ever. The decision was unanimous amongst FOMC
voters.
The Fed indicated that "Information received since the Federal
Open Market Committee met in April suggests that the pace of economic
contraction is slowing. Conditions in financial markets have generally
improved in recent months.
Much of the commentary on the economy was similar to the last
meeting and concluded that "Although economic activity is likely to
remain weak for a time, the Committee continues to anticipate that
policy actions to stabilize financial markets and institutions, fiscal
and monetary stimulus, and market forces will contribute to a gradual
resumption of sustainable economic growth in a context of price
stability."
Regarding inflation, the wording of the statement was slightly
altered. The statement that "the Committee expects that inflation will
remain subdued for some time" replaced the earlier statement that "the
Committee sees some risk that inflation could persist for a time below
rates that best foster economic growth and price stability in the
longer term."
In its effort to promote economic liquidity, the Fed used the
same language as in April, "... 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. In addition, the Federal Reserve
will buy up to $300 billion of Treasury securities by autumn."<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624i.jpg" align="right" border="0" height="265" width="353">
For the complete text of the Fed's latest press release please
follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090624a.htm">link</a>.The
Haver databases USECON, WEEKLY and DAILY
contain the figures from the Federal Reserve Board.
Uncertainty About When the Fed Will Raise Interest
Rates from the Federal Reserve Bank of St. Louis is available
<a href="http://research.stlouisfed.org/publications/es/09/ES0929.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">&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>

U.S. Durable Goods OrdersSurprisingly Strong For A Second Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090723c.jpg" width="353">
The National Association of Realtors reported that sales of existing homes rose 3.6% from May to the highest level since last October. Recent sales have been helped by a tax credit for first-time home buyers. The latest increase to 4.89M (AR) units beat Consensus expectations for sales of 4.85M homes. Total sales include sales of condos and co-ops. Sales of existing single-family homes alone increased 2.4% last month and they were up 6.7% from the January low. Despite the recent gains, however, sales remained near the lowest level since July 1997. (These data have a longer history than the total sales series).
The recently enacted tax credit is for first-time home buyers of either a new or a pre-owned home. The credit of up to $8,000 extends through the rest of this year. The full details of the home-buyer tax credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>
Home affordability fell somewhat from its record high to the lowest level this year. The decline was the result of the second consecutive, 4%+ m/m increase in home prices to a median $181,800. Nevertheless, affordability remained up by one-third from the year ago level as home prices remained down 20% from the 2007 peak. The series dates back to 1971.
The number of unsold homes (condos &amp; single-family) on the market fell again, posting a 0.7% decline during June. Year-to-year inventories are down 14.9%. At the current sales rate there was a 9.4 months&#39; supply on the market which was near the lowest since late-2007. For single-family homes the inventory was unchanged m/m (-17.9% y/y). At the current sales rate there was an 8.9 month&#39;s supply of homes on the market, near the lowest since 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090723d.jpg" width="353">
The data on existing home sales, prices and affordability can be found in Haver&#39;s USECON database. The regional price, affordability and inventory data is available in the REALTOR database.
What Do We Know (And Not Know) About Potential Output from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/09/07/Basu.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">Existing Home Sales (Thous)</th>
<th scope="col">June</th>
<th scope="col">May</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>4,890</td>
<td>4,720</td>
<td>-0.2%</td>
<td>4,893</td>
<td>5,674</td>
<td>6,516</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>820</td>
<td>800</td>
<td>-4.7</td>
<td>845</td>
<td>1,010</td>
<td>1,093</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,100</td>
<td>1,090</td>
<td>-1.8</td>
<td>1,130</td>
<td>1,331</td>
<td>1,494</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,810</td>
<td>1,740</td>
<td>-3.7</td>
<td>1,860</td>
<td>2,243</td>
<td>2,577</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,160</td>
<td>1,090</td>
<td>11.5</td>
<td>1,064</td>
<td>1,095</td>
<td>1,357</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,320</td>
<td>4,220</td>
<td>0.2</td>
<td>4,341</td>
<td>4,960</td>
<td>5,712</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>181,800</td>
<td>174,700</td>
<td>-15.4</td>
<td>197,250</td>
<td>216,633</td>
<td>222,042</td>
</tr>
</tbody>
</table>


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The National Association of Realtors reported that sales of existing homes rose 3.6% from May to the highest level since last October. Recent sales have been helped by a tax credit for first-time home buyers. The latest increase to [...]

U.S. Existing Home Sales And Prices Rise

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623h.jpg" align="left" border="0" height="265" width="353">
Markit PMIs composite index rises - The
Euro Area FLASH PMI for MFG rose in June but that happy event was
partly offset by a decline in the region&#8217;s services survey. The
composite index comprised of both MFG and Services rose to 44.4, its
highest reading since September of 2008. The composite index stood at
44 in May. 
 
In Manufacturing 

In Germany the country level index for MFG rose to 40.5 from
39.58 in May, its highest level since October of last year. 
 

In France the MFG index moved up to 45.5 from 43.32 in May,
reaching its highest point since August of 2008. 
 

The moving averages for MFG show levels are still below those
of 12 months ago but the EMU trend has been improving and the current
level of the MFG index is above the 12-mo 6-mo and 3-mo moving
averages. That is very good for momentum. 
 
The Service Sector 

The services gauge for all of EMU fell in June but remains
above the level for April having only seen backsliding for one month&#8217;s
worth of gains. The same is true of the services slippage in France and
in Germany; each lost only one month&#8217;s worth of gains. Still, in
Germany the service index stands at 44.3 in the just the 15th
percentile of its historic range. For France the index is at 47.5 and
stands in the 32nd percentile of its range. In contrast Germany&#8217;s MFG
index stands in the 31st percentile of its range, not nearly as low as
for services; France&#8217;s MFG index stands in the 47th percentile of its
range also superior to its relative reading for services. For all of
EMU the services index stands near the 25th percentile of its range
compared to a standing at the 34th percentile for MFG. The
manufacturing sector is now beginning to be more of an engine of growth
after the services sector had provided the role of support when the
economic scene was unraveling in Europe. 
 
A note on MFG/Services comparison 

Note that absolute reading for services is superior to that
for MFG but that for MFG the current reading is at a higher percentile
in its range. The percentile reading is a better gauge to use to
compare one index to another since MFG indices span a broader range of
values and since the Services index has higher reading on average. The
services reading average nearly FOUR points higher than the MFG
readings. So on several bases the MFG index now is relatively stronger
than services despite the higher absolute monthly reading for services.
Over comparable periods the standard deviation of the MFG index is 5.41
compared to 4.72 for services making the MFG sector some 14% more
variable than services and 20% more volatile relative to its mean. The
service index is relatively sluggish compared to the MFG index, as we
well know. Not surprising then that MFG is the best DIRECTIONAL index.
Fortunately it is moving UP now. 
 
Perspective 

Manufacturing is now on the strongest rising gradients for
EMU. The service sector index has paused and lost some momentum. Still
the overall picture and trend remains positive. 
 

Another sign of progress this morning came from the Belgian
National Bank index which trimmed its negative reading to -23.6 in June
from -27.6 in May. For that index it is the best reading since November
2008. 
 

In terms of these index readings, we see in the Markit PMIs
the best MFG and Services (for services based on the May reading)
readings since August &#8211; October of last year and in the Belgian series
the best reading since November. On balance it is looking like a
reasonably well balanced rebound is taking place across the Zone in
these countries and across their various sectors, at least as judged by
the measures presented here. Of course, all the respective measures
still point to continuing losses. But these indices speak to the fact
that the speed of the loss has been cut sharply from the lows showing
that the pace of decline is back to the pace last seen in early Q4 or
late Q3 of 2008. 
 

The MFG ands Services PMIs each were last above 50 in May of
2008. The Belgian bank index was last positive in May of 2008 as well.
How soon we get back there depends on quickly this incipient recovery
traces its own steps. For now it is on the right path and the pace of
recovery is a good one, service sector (perhaps) excepted. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
<tr class="even">
<th colspan="3" scope="col">Markit
PMIs for the Euro
Area</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jun-09</td>
<td>42.37</td>
<td>44.49</td>
</tr>
<tr>
<td class="firstcol">May-09</td>
<td>40.68</td>
<td>44.82</td>
</tr>
<tr>
<td class="firstcol">Apr-09</td>
<td>36.83</td>
<td>43.76</td>
</tr>
<tr>
<td class="firstcol">Mar-09</td>
<td>33.93</td>
<td>40.95</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>37.15</td>
<td>44.10</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>35.55</td>
<td>42.29</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>39.92</td>
<td>44.22</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">127-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.55</td>
<td>39.24</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>32.8%</td>
<td>22.7%</td>
</tr>
</tbody>
</table>
</body></html>

Markit PMIs composite index rises - The Euro Area FLASH PMI for MFG rose in June but that happy event was partly offset by a decline in the region’s services survey. The composite index comprised of both MFG and Services rose to 44.4, [...]

Europe Continues to Make a Turn Higher: Sector Results Turn Mixed in June

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623d.jpg" width="353">
The latest data from the Mortgage Bankers Association strongly suggest that the refinancing boom has reached an end. Overall, mortgage applications dropped sharply last week to the lowest level since last November. The moderate increase in interest rates is behind the lessened attractiveness of refinancing. The 15.8% w/w drop in overall mortgage applications was led by a collapse in refis. Last week, they dropped by one-quarter from the prior week and they are off by 80% during just the last two months.
While still low by historical standards, rates indeed have moved off the lows. And it&#39;s at the margin that activity is affected most. The effective interest rate on a conventional 15-year mortgage jumped last week to 5.24% and the rate is up by more than 50 basis points from the April low. For a 30-year mortgage, rates also rose to 5.68% versus the 4.81% low. Interest rates on 15- and 30-year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. Up also were adjustable 1-Year mortgage rates at 6.56% versus the low close to 6.0% during January. The rate still was down, however, sharply from the 7.07% peak reached this past fall.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623e.jpg" width="353">
Despite the drop in re-fis, the interest in home buying appears intact. Purchase applications slipped last week but for June so far applications are 1.6% higher than during May. That follows the trend in new plus existing home sales.
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.
The figures for weekly mortgage applications are available in Haver&#39;s SURVEYW database.
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>.

<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">06/12/09</th>
<th scope="col">06/05/09</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>514.4</td>
<td>611.0</td>
<td>1.2%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>261.2</td>
<td>270.7</td>
<td>-27.5%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,998.1</td>
<td>2,605.7</td>
<td>44.9%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The latest data from the Mortgage Bankers Association strongly suggest that the refinancing boom has reached an end. Overall, mortgage applications dropped sharply last week to the lowest level since last November. The moderate [...]

U.S. Mortgage Applications Collapse As Higher Rates Stymie Refinancing

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623f.jpg" align="left" border="0" height="265" width="353">
While the World Bank has down graded its forecast for Euro
area growth this year to -4.5% from its earlier forecast of -2.7%,
indicators of French and German Business confidence have become less
pessimistic, although they are still negative. Yesterday, the German
IFO reported an improvement in its Business Climate indicator and
today, France's INSEE (National Institute of Statistics and Economic
Studies) reports that its Composite Business Indicator has risen to 73
in June from 71 in May and 68 in April. Both the Industry and Services
components of the Composite Indicator, show similar rises and the
Construction component has held steady at 92. The components of the
Composite Indicator are shown in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623g.jpg" align="right" border="0" height="265" width="353">
The June preliminary or "flash" result from the Markit
Economics Purchasing Managers' Survey for France, released today, also
suggests that business is becoming less pessimistic. The diffusion
index for the purchasing managers' views on the total economy is 47.7,
close to the 50 mark above which expansion is indicated.
The second chart shows the INSEE indicator against its long
term average* and the results of the Markit Economics Purchasing
Managers' Survey against the 50% line that divides expansion and
contraction. The purchasing managers appear to be the less pessimistic.
The INSEE indicator is so constructed that its long term
average is 100 and its standard deviation, 10.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;
&nbsp;</th>
<th scope="col">Jun 09</th>
<th scope="col">May&nbsp; 09</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar 09&nbsp;</th>
<th scope="col">Y/Y %</th>
<th scope="col">2008&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Composite Business Indicator
(LT Ave = 100)</td>
<td>73</td>
<td>71</td>
<td>68</td>
<td>69</td>
<td>70</td>
<td>78</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Industry</td>
<td>75</td>
<td>73</td>
<td>71</td>
<td>68</td>
<td>69</td>
<td>75</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Construction</td>
<td>92</td>
<td>92</td>
<td>92</td>
<td>95</td>
<td>93</td>
<td>96</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Services</td>
<td>67</td>
<td>64</td>
<td>60</td>
<td>60</td>
<td>66</td>
<td>68</td>
</tr>
</tbody>
</table>
</body></html>

While the World Bank has down graded its forecast for Euro area growth this year to -4.5% from its earlier forecast of -2.7%, indicators of French and German Business confidence have become less pessimistic, although they are still [...]

French Business Confidence: Viewed By Entrepreneurs And Purchasing Managers

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

260205Z6.jpg

Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

260206E.jpg

With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

260205X15.jpg

260205Y15.jpg

**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

260205C15.jpg

260205D15.jpg

- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

260205A2.jpg

260205B2.jpg

Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). 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.

260205C2.jpg

260205D2.jpg

- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.