Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090311e.jpg" align="left" border="0" height="265" width="353">
The U.S. government ran a budget deficit of $192.8 billion
during February and for the first five months of this fiscal year the
deficit swelled to $764.5B. Both figures are substantially higher than
the deficits of $175.6B last February and $264.5B for the first five
months of FY08. The latest figure came in slightly below Consensus
projections for a February deficit of $203B.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090311f.jpg" align="right" border="0" height="265" width="353">
Year-to-date the budget deficit is running at roughly 5.5% of
GDP. The Congressional Budget Office's recent deficit estimate of $1.2
trillion for FY09 amounts to 8.3% of GDP. It assumes that revenues will
fall 6.6% year-to-year and that outlays will increase 19.0%.
Net revenues during February fell 17.4% from February of last
year and for the first five months of FY09 they were down 11.0% y/y.
Individual income tax receipts fell 13.1 % y/y through February
reflecting higher unemployment. Corporate tax receipts mirror the
drying up of profitability and fell by nearly one-half. Growth in
employment taxes dropped to 0.9%, the least since late 2003, and
unemployment insurance tax receipts fell 9.9%. Real estate taxes fell
6.2% after 10.5% growth last year.
Swelled by TARP, U.S. government outlays surged by 32.0% from
last fiscal year's first five months. Outlays under the Government's
Troubled Asset Relief Program (TARP) amounted to $37.8B last month and
for the first four months of the program totaled $280.3B. The U.S.
Treasury has adopted the view that these TARP expenditures should be
counted like any other spending. When the banks repay the Treasury,
these funds will be counted as revenue. Accounted for in this way, TARP
causes a surge in the budget deficit when the funds are distributed to
the banks, but leads to a smaller deficit, or perhaps a surplus, when
repayments are received.
Defense spending (19% of total outlays) rose 7.1%. Medicare
expenditures (12% of outlays) increased by 10.9% and "income security"
spending (11% of outlays) jumped 21.1% after 7.5% growth last year.
Social security payments rose a steady 7.1% but net interest payments
continued to fall by more than one-quarter with lower interest rates.
The Government's financial data are available in Haver's USECON
database, with extensive detail available in the specialized GOVFIN.
The Economic Crisis and the Fiscal Crisis: 2009 and
Beyond from Alan J. Auerbach, University of California,
Berkeley, and William G. Gale, Brookings Institution, is available <a href="http://www.taxpolicycenter.org/UploadedPDF/411843_economic_crisis.pdf">here.
</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US
Government Finance</a> &nbsp;</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2008</th>
<th scope="col">FY 2007</th>
<th scope="col">FY 2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>-192.8B</td>
<td>$-86.5B</td>
<td>$-175.6B 
(2/08)</td>
<td>-$454.8B</td>
<td>-$161.5B</td>
<td>-$248.2B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$87.3B</td>
<td>$226.1B</td>
<td>-17.4%</td>
<td>-1.7%</td>
<td>6.7%</td>
<td>11.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$280.1B</td>
<td>$131.3B</td>
<td>-0.4%</td>
<td>9.1%</td>
<td>2.8%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
</body></html>

The U.S. government ran a budget deficit of $192.8 billion during February and for the first five months of this fiscal year the deficit swelled to $764.5B. Both figures are substantially higher than the deficits of $175.6B last [...]

U.S. Budget Deficit Grows Sharply With Recession & TARP

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090311a.jpg" width="353">
The Bureau of Labor Statistics indicated in its January report on Job Openings &amp; Labor Turnover Survey (JOLTS) that job availability fell 7.2% from December and by more than one-third from the June 2007 peak. The latest level was a record low for the series which dates back to December 2000.
The job openings rate also fell. The January rate was down to 2.2% versus an upwardly revised 2.3% rate in December, down from more than a 3% rate in 2007. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.
The actual number of job openings in the construction and manufacturing sectors fell by roughly two-thirds from the 2007 averages. Professional &amp; business services job openings fell by one-third year-to-year while openings in the education &amp; health sectors also were weak and they fell 7.6%. Openings in retail trade fell a slight 0.3% y/y.
By region, openings in the South, the Midwest and the West were down by roughly one third year-to-year and in the Northeast they were down by one quarter.
The hires rate held steady versus December at 3.3% which was still near the lowest in the series&#39; short eight year history.The hires rate is the number of hires during the month divided by employment.The actual number of hires fell by 11.9% year-to-year. The construction sector showed a 4.3% increase versus last year but elsewhere hires were quite weak. In the factory sector, hires fell 33.5% y/y and in the professional &amp; business services sector they fell 14.8%. In the leisure and hospitality sector, hires fell 18.1% y/y. Even in the educational &amp; health sector hires fell 5.0%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090311b.jpg" width="353">
The job separations rate held steady at 3.6%, about where it&#39;s been since early 2008. Separations include quits, layoffs, discharges, and other separations as well as retirements. The level of job separations fell 3.5% y/y.
The JOLTS survey dates only to December 2000 but has followed the movement in nonfarm payrolls, though the actual correlation between the two series is low.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/pdf/jolts.pdf">here</a> and the figures are available in Haver&#39;s USECON database.
Explaining trends in wages, work and occupations from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cflapril2009_261.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor &nbsp;Turnover Survey)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">January &#39;08</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">Job Openings, Total&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>2.2</td>
<td>2.3</td>
<td>3.0</td>
<td>2.3</td>
<td>3.1</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>2,991</td>
<td>3,224</td>
<td>4,332</td>
<td>3,224</td>
<td>4,382</td>
<td>4,606</td>
</tr>
<tr class="odd">
<td class="firstcol">Hires, Total</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>3.3</td>
<td>3.3</td>
<td>3.6</td>
<td>41.1</td>
<td>46.1</td>
<td>47.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>4,399</td>
<td>4,508</td>
<td>4,995</td>
<td>56,486</td>
<td>63,666</td>
<td>64,879</td>
</tr>
</tbody>
</table>
</body>
</html>

The Bureau of Labor Statistics indicated in its January report on Job Openings & Labor Turnover Survey (JOLTS) that job availability fell 7.2% from December and by more than one-third from the June 2007 peak. The latest level was a [...]

JOLTS: U.S. Job Openings Fall Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090311c.jpg" width="353">
The total number of mortgage applications recovered last week after three consecutive weeks of decline, reported the Mortgage Bankers Association. The 11.3% increase nevertheless left applications 45.4% below the peak reached this past January when applications were boosted by the precipitous decline in interest rates to near the lows of 2003.
The index of applications to refinance a home mortgage recovered 13.3% last week and that reversed nearly all of the prior period&#39;s 15.3% decline. While these applications are down by one-half from their January high, the trend still is up due to the decline in interest rates.
Applications for a mortgage to purchase a home also rose last week. The 7.1% increase was enough to recover nearly all of the decline during the prior two weeks. The falloff in home sales continued, however, to pull purchase applications sharply lower. Since their peak early last year these applications are down nearly 50%.
The effective interest rate on a conventional 15-year mortgage fell week-to-week to 4.84%. That was near the lowest level since 2003 after which home sales surged. For a 30-year mortgage, rates held near their recent lows at 5.19%. Interest rates on 15- and 30-year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. For an adjustable 1-Year mortgage, the rate ticked up slightly week-to-week to 6.25% but the rate still was down 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/090311d.jpg" width="353">
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>.
The Affordability of Homeownership to Middle-Income Americans from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/4q08Rappaport.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/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/06/09</th>
<th scope="col">02/27/09</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>723.4</td>
<td>649.7</td>
<td>7.7%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>253.3</td>
<td>236.4</td>
<td>-31.3%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,470.7</td>
<td>3,063.4</td>
<td>41.8%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications recovered last week after three consecutive weeks of decline, reported the Mortgage Bankers Association. The 11.3% increase nevertheless left applications 45.4% below the peak reached this [...]

U.S. Weekly Mortgage Applications Rise

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090311c.jpg" align="left" border="0" height="265" width="353">
The total number of mortgage applications recovered last week
after three consecutive weeks of decline, reported the Mortgage Bankers
Association. The 11.3% increase nevertheless left applications 45.4%
below the peak reached this past January when applications were boosted
by the precipitous decline in interest rates to near the lows of 2003.
The index of applications to refinance a home mortgage
recovered 13.3% last week and that reversed nearly all of the prior
period's 15.3% decline. While these applications are down by one-half
from their January high, the trend still is up due to the decline in
interest rates.
Applications for a mortgage to purchase a home also rose last
week. The 7.1% increase was enough to recover nearly all of the decline
during the prior two weeks. The falloff in home sales continued,
however, to pull purchase applications sharply lower. Since their peak
early last year these applications are down nearly 50%.
The effective interest rate on a conventional 15-year mortgage
fell week-to-week to 4.84%. That was near the lowest level since 2003
after which home sales surged. For a 30-year mortgage, rates held near
their recent lows at 5.19%. Interest rates on 15- and 30-year mortgages
are closely correlated (&gt;90%) with the rate on 10-year Treasury
securities. For an adjustable 1-Year mortgage, the rate ticked up
slightly week-to-week to 6.25% but the rate still was down sharply from
the 7.07% peak reached this past Fall.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090311d.jpg" align="right" border="0" height="265" width="353">
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'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>.
The Affordability of Homeownership to
Middle-Income Americans from the Federal Reserve Bank
of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/4q08Rappaport.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/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/06/09</th>
<th scope="col">02/27/09</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>723.4</td>
<td>649.7</td>
<td>7.7%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>253.3</td>
<td>236.4</td>
<td>-31.3%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,470.7</td>
<td>3,063.4</td>
<td>41.8%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
JOLTS: U.S. Job Openings Fall
Further 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 11, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090311a.jpg" align="left" border="0" height="265" width="353">
The Bureau of Labor Statistics indicated in its January report
on Job Openings &amp; Labor Turnover Survey (JOLTS) that job
availability fell 7.2% from December and by more than one-third from
the June 2007 peak. The latest level was a record low for the series
which dates back to December 2000.
The job openings rate also fell. The
January rate was down to 2.2% versus an upwardly revised 2.3% rate in
December, down from more than a 3% rate in 2007. The job
openings rate is the number of job openings on the last business day of
the month as a percent of total employment plus job openings.
The actual number of job openings in the construction and
manufacturing sectors fell by roughly two-thirds from the 2007 averages. Professional &amp; business
services job openings fell by one-third year-to-year while openings in
the education &amp; health sectors also were weak and they fell
7.6%. Openings in retail trade fell a slight 0.3% y/y.
By region, openings in the South, the Midwest and the West
were down by roughly one third year-to-year and in the Northeast they
were down by one quarter.
The hires rate held steady versus December
at 3.3% which was still near the lowest in the series' short eight year
history.The hires rate is the number of hires during the month
divided by employment.The actual number of hires fell by
11.9% year-to-year. The construction sector showed a 4.3% increase
versus last year but elsewhere hires were quite weak. In the factory
sector, hires fell 33.5% y/y and in the professional &amp; business
services sector they fell 14.8%. In the leisure and hospitality sector,
hires fell 18.1% y/y. Even in the educational &amp; health sector
hires fell 5.0%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090311b.jpg" align="right" border="0" height="265" width="353">
The job separations rate held steady at
3.6%, about where it's been since early 2008. Separations
include quits, layoffs, discharges, and other separations as well as
retirements. The level of job separations fell 3.5% y/y.
The JOLTS survey dates only to December 2000 but has followed
the movement in nonfarm payrolls, though the actual correlation between
the two series is low.
A description of the Jolts survey and the latest release from
the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/pdf/jolts.pdf">here</a>
and the figures are available in Haver's USECON
database.
Explaining trends in wages, work and occupations from
the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cflapril2009_261.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a>
(Job Openings &amp; Labor &nbsp;Turnover Survey)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">January '08</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">Job Openings, Total&nbsp;&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>2.2</td>
<td>2.3</td>
<td>3.0</td>
<td>2.3</td>
<td>3.1</td>
<td>3.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>2,991</td>
<td>3,224</td>
<td>4,332</td>
<td>3,224</td>
<td>4,382</td>
<td>4,606</td>
</tr>
<tr class="odd">
<td class="firstcol">Hires, Total</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rate (%)</td>
<td>3.3</td>
<td>3.3</td>
<td>3.6</td>
<td>41.1</td>
<td>46.1</td>
<td>47.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total (000s)</td>
<td>4,399</td>
<td>4,508</td>
<td>4,995</td>
<td>56,486</td>
<td>63,666</td>
<td>64,879</td>
</tr>
</tbody>
</table>
U.S. Budget Deficit Grows Sharply With Recession &amp; TARP 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 11, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090311e.jpg" align="left" border="0" height="265" width="353">
The U.S. government ran a budget deficit of $192.8 billion
during February and for the first five months of this fiscal year the
deficit swelled to $764.5B. Both figures are substantially higher than
the deficits of $175.6B last February and $264.5B for the first five
months of FY08. The latest figure came in slightly below Consensus
projections for a February deficit of $203B.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090311f.jpg" align="right" border="0" height="265" width="353">
Year-to-date the budget deficit is running at roughly 5.5% of
GDP. The Congressional Budget Office's recent deficit estimate of $1.2
trillion for FY09 amounts to 8.3% of GDP. It assumes that revenues will
fall 6.6% year-to-year and that outlays will increase 19.0%.
Net revenues during February fell 17.4% from February of last
year and for the first five months of FY09 they were down 11.0% y/y.
Individual income tax receipts fell 13.1 % y/y through February
reflecting higher unemployment. Corporate tax receipts mirror the
drying up of profitability and fell by nearly one-half. Growth in
employment taxes dropped to 0.9%, the least since late 2003, and
unemployment insurance tax receipts fell 9.9%. Real estate taxes fell
6.2% after 10.5% growth last year.
Swelled by TARP, U.S. government outlays surged by 32.0% from
last fiscal year's first five months. Outlays under the Government's
Troubled Asset Relief Program (TARP) amounted to $37.8B last month and
for the first four months of the program totaled $280.3B. The U.S.
Treasury has adopted the view that these TARP expenditures should be
counted like any other spending. When the banks repay the Treasury,
these funds will be counted as revenue. Accounted for in this way, TARP
causes a surge in the budget deficit when the funds are distributed to
the banks, but leads to a smaller deficit, or perhaps a surplus, when
repayments are received.
Defense spending (19% of total outlays) rose 7.1%. Medicare
expenditures (12% of outlays) increased by 10.9% and "income security"
spending (11% of outlays) jumped 21.1% after 7.5% growth last year.
Social security payments rose a steady 7.1% but net interest payments
continued to fall by more than one-quarter with lower interest rates.
The Government's financial data are available in Haver's USECON
database, with extensive detail available in the specialized GOVFIN.
The Economic Crisis and the Fiscal Crisis: 2009 and
Beyond from Alan J. Auerbach, University of California,
Berkeley, and William G. Gale, Brookings Institution, is available <a href="http://www.taxpolicycenter.org/UploadedPDF/411843_economic_crisis.pdf">here.
</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US
Government Finance</a> &nbsp;</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2008</th>
<th scope="col">FY 2007</th>
<th scope="col">FY 2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>-192.8B</td>
<td>$-86.5B</td>
<td>$-175.6B 
(2/08)</td>
<td>-$454.8B</td>
<td>-$161.5B</td>
<td>-$248.2B</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>$87.3B</td>
<td>$226.1B</td>
<td>-17.4%</td>
<td>-1.7%</td>
<td>6.7%</td>
<td>11.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Outlays</td>
<td>$280.1B</td>
<td>$131.3B</td>
<td>-0.4%</td>
<td>9.1%</td>
<td>2.8%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
UK Trade Picture Show More
Deterioration 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 11, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090311g.jpg" align="left" border="0" height="265" width="353">
In the UK both export and import flows are losing momentum
fast. Weak exports tell a tale of weakening growth in UK export
markets. Dropping imports tell of still weakening domestic demand. Both
series are quite weak and have a record of tracking one another
relatively closely. The deficit in goods and services trade widened
this month but the trends still seems to show a contraction phase is in
train (see chart). While exports fell more steeply than imports in
January, the two months of January and December taken together show
much more similar behavior. 
 

The trade gap is currently 41% of exports which is not far
from its peak ratio of nearly 45% (since 1990). The deficit is also 29%
of imports which is close to its max ratio of 31%. So while the deficit
has been gradually on the decline the size of the deficit relative to
the trade flows is expanding, effectively increasing its burden. 
 

Year-over-year UK export and import values are lower by about
7% and 6% respectively. But over the recent periods we get a better
taste of what is really in train. The annualized rate drop for exports
is 38% over three months compared to 28% for imports. Over six months
it&#8217;s 31% for exports compared to 25% for imports. Obviously the
unraveling has been recent and has some on with great vigor. Sterling
has dropped during this period, something that should help the UK to
hold its trade competitiveness. However, that makes things more
difficult for exporters based in the euro-Zone, trying to penetrate the
UK market and it has been the source of some UK e-Zone tensions. 


UK Trade trends for goods
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
</tr>
</thead>
<tbody>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% Saar</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="grey3">
<td class="firstcol">Balance*</td>
<td>-££ 7.75</td>
<td>-££ 7.23</td>
<td>-££ 7.61</td>
<td>-££ 7.66</td>
<td>-££ 7.72</td>
</tr>
<tr class="grey2">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">All Exp</td>
<td>-4.0%</td>
<td>-1.8%</td>
<td>-37.8%</td>
<td>-31.0%</td>
<td>-6.7%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Capital gds</td>
<td>-6.7%</td>
<td>0.5%</td>
<td>-24.7%</td>
<td>-13.0%</td>
<td>-5.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Road Vehicles</td>
<td>-6.0%</td>
<td>-12.2%</td>
<td>-68.0%</td>
<td>-58.9%</td>
<td>-34.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Basic Materials</td>
<td>-14.6%</td>
<td>7.9%</td>
<td>-79.6%</td>
<td>-75.2%</td>
<td>-23.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food Feed Bev &amp; Tbco</td>
<td>-0.3%</td>
<td>7.3%</td>
<td>13.5%</td>
<td>5.4%</td>
<td>8.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">All IMP</td>
<td>-1.0%</td>
<td>-3.5%</td>
<td>-27.9%</td>
<td>-25.5%</td>
<td>-5.7%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Capital gds</td>
<td>-4.8%</td>
<td>-4.8%</td>
<td>-20.1%</td>
<td>-13.9%</td>
<td>-8.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Road Vehicles</td>
<td>-0.3%</td>
<td>-11.9%</td>
<td>-70.3%</td>
<td>-57.1%</td>
<td>-43.9%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Basic Materials</td>
<td>-15.2%</td>
<td>-4.5%</td>
<td>-61.8%</td>
<td>-53.4%</td>
<td>-30.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Food Feed Bev &amp; Tbco</td>
<td>3.2%</td>
<td>-4.1%</td>
<td>14.4%</td>
<td>5.3%</td>
<td>10.9%</td>
</tr>
<tr class="grey2">
<td colspan="6">*Stg Blns; mo or period average</td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310k.jpg" width="353">
The latest survey of hiring intentions by 31,800 employers, performed by Manpower Inc., indicates the weakest plans since the &quot;credit crunch&quot; recession of 1980. The Manpower Index level of -1 for 2Q09 follows a string of steadily declining readings since the series&#39; peak in 2005-06. These figures are seasonally adjusted.
During the last ten years there has been a 70% correlation between the level of the Manpower Index and the quarterly change in nonfarm payroll employment.Only the overall figure is seasonally adjusted while industry detail is not.
On a not seasonally adjusted basis, the 2Q level indicates that 15% of firms intend to raise employment and 14% expected to lower the number of jobs. No change in employment is expected by 67% of firms. This is up from an average 59% who expected no change from 2006 to 2008.
Plans for the second quarter in the manufacturing sector are quite weak with a net reading of -7. This reflects 13% of employers who expect to raise employment versus 20% who expect to decrease it. In the construction industries, 16% expect to increase hiring while 20% expect to cut. In financial businesses, 12% expect higher employment while 10% expect a lower number of jobs.
Weakness in hiring plans is evenly spread across the nation&#39;s regions.
The Manpower figures can be found in Haver&#39;s SURVEYS database.

<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/SURVEYS/@S7/@S7.HTM">Manpower Inc Employment Outlook Surey</a></th>
<th scope="col">2Q 09</th>
<th scope="col">1Q 09</th>
<th scope="col">2Q 08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Net Higher (SA, %)</td>
<td>-1</td>
<td>10</td>
<td>15</td>
<td>13</td>
<td>18</td>
<td>21</td>
</tr>
</tbody>
</table>
</body>
</html>

The latest survey of hiring intentions by 31,800 employers, performed by Manpower Inc., indicates the weakest plans since the "credit crunch" recession of 1980. The Manpower Index level of -1 for 2Q09 follows a string of steadily [...]

Manpower Survey: 2Q09 Employment Seen As Weakest Since Credit Crunch Recession

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310f.jpg" align="left" border="0" height="265" width="353">
IP drops sharply &#8211; Record drop in France 
Industrial production continues to show steep declines in the Zone.
France reported the largest decline to day since 1990 when the INSEE
series first began. Spain&#8217;s volatile index fell by 8.4% in January.
Italy&#8217;s index dropped by 2.8%. For these three countries of the EU,
three month declines in output range from an annual pace of -45% in
Spain to -26% in France. Over the past year Spain is off by 23% while
France and the UK see IP however by about 13%. Quarter-to-date in
January of 2009 IP is falling at an annual rate drop of greater than
20% in each of these countries and as much as -35% in Spain. 
 

Europe is STILL in denial: What? Me worry? 
Despite all this and despite new warnings of slower growth and a global
decline in growth from the IMF Europe seems distant. Trichet sounds
upbeat. Weber says there is no reason for the ECBs key lending rate to
go below 1%. Europe has spurned the US request for more stimulus. The
German&#8217;s have tuned a cold shoulder to France&#8217;s idea of cutting back
the VAT tax. Yet the EU commission, that bastion of fiscal
responsibility, is issuing a warning to Germany about excess spending. 
 

Alfred E Newman meets Euroland: Europe is
not on the same page as the IMF, the World Bank, or the US. Economists
in the US are talking about the prospect of DEPRESSION. In Europe they
are &#8216;la tee da&#8217; about the downturn treating it like a minor
inconvenience, not even as the powerful recession that it clearly is,
let alone acknowledging the risk of worsening. The EU Commission is
concerned about the Mass-Trick criterion for debt to GDP and about
annual fiscal deficits as if Europe were out of sorts with its fiscal
pledges in a boom year. A boom year it is not. Europe is in denial from
the EU Commission to the ECB itself. 
 

The industrial output index is not out of touch. It is taking
noting lightly, it is taking it on the chin. And that raises some
issues for Europe if policy is not going to be responsive to its
clearly deteriorating situation. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Main E-zone Countries and UK IP in MFG
</th></tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo</td>
<td>3-Mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Jan-09</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Only</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Jan-09</td>
<td>Jan-09</td>
<td>Jan-09</td>
<td>Q-2-Date</td>
</tr>
<tr>
<td class="firstcol">France: IP excl Construction</td>
<td>-3.1%</td>
<td>-1.5%</td>
<td>-2.8%</td>
<td>-26.0%</td>
<td>-21.3%</td>
<td>-13.8%</td>
<td>-26.9%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-8.4%</td>
<td>3.8%</td>
<td>-9.5%</td>
<td>-45.1%</td>
<td>-38.0%</td>
<td>-23.7%</td>
<td>-34.7%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-2.8%</td>
<td>-1.9%</td>
<td>-3.0%</td>
<td>-26.8%</td>
<td>-19.9%</td>
<td>-12.8%</td>
<td>-23.2%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Mo/Mo are simple percent changes
others are at SAARs</td>
</tr>
</tbody>
</table>
</body></html>

IP drops sharply – Record drop in France Industrial production continues to show steep declines in the Zone. France reported the largest decline to day since 1990 when the INSEE series first began. Spain’s volatile index fell by 8.4% [...]

IP Drops Sharply in the Euro Area's Early Reports

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310g.jpg" align="right" border="0" height="265" width="353">Country after country has
been reporting declines in its
foreign trade. Imports are down as a result of falling incomes at home,
and exports are down as a result of falling incomes abroad. Today
France reported a 6.7% decline in exports in January from December
while Germany reported a 4.4% decline. From January 2008 to January
2009, French exports declined 21% while those in Germany declined
18.4%. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310h.jpg" align="right" border="0" height="265" width="353">
Imports in France were down17.6% in January from a year ago and
imports in Germany were down 11.1% over the same period. Exports from
France and Germany are shown in the first chart and imports into France
and Germany are shown in the second chart.
Germany typically runs a substantial trade surplus. It reached
a peak of 19.34 billion euros in November 2007. With exports declining
at a faster rate than imports, the balance on trade in goods has
trended downward and in January, 2009 was only 8.3 billion euros.
France, on the other hand has been running a growing trade deficit
since early 2004. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310i.jpg" align="right" border="0" height="265" width="353">
The deficit improved in December to minus 2.95
billion euro from minus 5.67 billion in November but has worsened again
in January and is now at minus 4.55 billion euros. The balances on
trade in goods for France and Germany are shown in the third chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310j.jpg" align="right" border="0" height="265" width="353">
Automobiles and related products have been responsible for a
good part of the decline in exports in France and Germany. The fourth
chart shows exports of these products. The data only go through
December, but even by then the exports of these products were down
31.6% in Germany from a year ago and 44.4% in France. The fourth chart
shows these exports for France and Germany. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">FOREIGN
TRADE (Bil Euros)</th>
<th scope="col">Jan 09</th>
<th scope="col">Dec 08&nbsp;</th>
<th scope="col">Jan&nbsp; 08&nbsp;</th>
<th scope="col">M/M CHG&nbsp;</th>
<th scope="col">Y/Y CHG</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GERMANY</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Exports&nbsp;</td>
<td>68.95</td>
<td>72.13</td>
<td>84.25</td>
<td>-4.41%</td>
<td>-18.35%</td>
<td>990.18</td>
<td>968.36</td>
</tr>
<tr>
<td class="firstcol">Imports&nbsp;&nbsp;</td>
<td>60.64</td>
<td>61.11</td>
<td>68.23</td>
<td>-0.77%</td>
<td>-11.12%</td>
<td>813.46</td>
<td>771.96</td>
</tr>
<tr>
<td class="firstcol">Balance</td>
<td>8.31</td>
<td>11.02</td>
<td>16.22</td>
<td>-2.71</td>
<td>-7.91</td>
<td>176.7</td>
<td>196.40</td>
</tr>
<tr class="odd">
<td class="firstcol">FRANCE</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Exports (Bil Euros)</td>
<td>28.74</td>
<td>30.80</td>
<td>36.37</td>
<td>-6.70%</td>
<td>-20.99%</td>
<td>412.00</td>
<td>403.12</td>
</tr>
<tr>
<td class="firstcol">Imports&nbsp;&nbsp;</td>
<td>33.28</td>
<td>33.75</td>
<td>40.38</td>
<td>-1.38%</td>
<td>-17.57%</td>
<td>465.40</td>
<td>443.07</td>
</tr>
<tr>
<td class="firstcol">Balance</td>
<td>-4.55</td>
<td>-2.95</td>
<td>-4.01</td>
<td>-1.59</td>
<td>-0.54</td>
<td>-53.4</td>
<td>-39.95</td>
</tr>
</tbody>
</table>
</body></html>

Country after country has been reporting declines in its foreign trade. Imports are down as a result of falling incomes at home, and exports are down as a result of falling incomes abroad. Today France reported a 6.7% decline in [...]

Foreign Trade in France and Germany: Casualties of the Recession

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310d.jpg" width="353">
According to the National Federation of Independent Business (NFIB), small business optimism fell even further last month. The index level of 82.6 was down 1.8% month-to-month after a slightly revised 1.3% January decline. The latest level was 8.0% below the 2008 average and it was the second lowest level on record.
During the last ten years there has been a 49% correlation between the level of the NFIB index and the two-quarter change in real GDP.
The percentage of firms planning to raise prices dropped to 1%, a new record low. Price discounts were evident as the percentage of firms actually raising prices fell further into negative territory, and the reading was a record low. During the last ten years there has been a 69% correlation between the y/y change in the producer price index and the level of the NFIB price index.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090310e.jpg" width="353">
The percent expecting credit conditions to ease fell further and was near its lowest level since 1980. The percent expecting higher real sales in six months fell to a net negative 29%, a record low.
The percentage expecting the economy to improve fell further into negative territory. The percentage reporting that now is a good time to expand the business fell to 3% which was the second lowest reading on record. During the next 3-6 months, plans for capital spending fell slightly and was still near the lowest level since 1975.
The percentage planning to raise employment improved just slightly to a net negative 3% while the percentage of respondents with one or more job openings was stable at 11%, the least since 1992. During the last ten years there has been a 71% correlation between the NFIB employment percentage and the y/y change in nonfarm payrolls.
The largest, single most important problems seen by business were poor sales (33%), taxes (19%), government requirements (10%), insurance cost and availability (8%), competition from large businesses (6%) and inflation (6%).
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.
The NFIB figures can be found in Haver&#39;s SURVEYS database. 
Financial Reform to Address Systemic Risk is this morning&#39;s speech by Fed Chairman Ben S. Bernanke at the Council on Foreign Relations, Washington, D.C. It is available <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20090310a.htm">here</a>.

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">February</th>
<th scope="col">January</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">Small Business Optimism Index (SA, 1986=100)</td>
<td>82.6</td>
<td>84.1</td>
<td>-11.1%</td>
<td>89.8</td>
<td>96.7</td>
<td>98.9</td>
</tr>
</tbody>
</table>
</body>
</html>

According to the National Federation of Independent Business (NFIB), small business optimism fell even further last month. The index level of 82.6 was down 1.8% month-to-month after a slightly revised 1.3% January decline. The latest [...]

U.S. Small Business Optimism Nearing All-time Low

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

US production rebounded in Q2, but demand continued to slow

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

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Sandy Batten

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Total construction spending fell 0.6% m/m (-1.5% y/y) in September to $2,164.3 billion following a 0.4% monthly gain in August. However, it rebounded in October, rising 0.5% m/m (-1.0% y/y) to $2,175.2 billion (saar). This is the ninth consecutive month that construction spending has been lower than a year ago. A 0.1% m/m decline in September and an unchanged reading in October had been expected in the Action Economics Forecast Survey. Over the first ten months of this year, construction spending amounted to $1,825.3 billion, 1.4% below the $1,851.4 billion for the same period in 2024.

Spending on private construction was at a seasonally adjusted annual rate of $1,651.3 billion in October, 0.6% above the September estimate of $1,640.8 billion (-3.0% y/y), which fell 0.9% m/m from August. Private residential construction was at a seasonally adjusted annual rate of $913.9 billion in October, up 1.3% m/m from September, which declined 1.4% from August. Private nonresidential construction was at a seasonally adjusted annual rate of $737.4 billion in October, down 0.2% m/m from September, which also had declined 0.2% in September from August.

The October increase in private residential investment was due entirely to a 4.5% m/m increase in spending on improvements, its largest monthly gain since April 2024, following a 2.2% monthly decline in September. Single family construction fell 1.3% m/m in October, its eight consecutive monthly decline, while multi-family construction slipped 0.2% m/m, its first monthly decline in five months. The decline in private nonresidential construction was more than accounted for by a 0.9% m/m drop in manufacturing construction, its ninth consecutive monthly decline.

The value of public construction spending edged up 0.1% m/m in October to $524.0 billion after having risen 0.4% m/m in September. Of particular importance, educational construction was at a seasonally adjusted annual rate of $114.8 billion, up 0.7% m/m in October on top of a 1.1% m/m increase in September. Highway construction was at a seasonally adjusted annual rate of $141.6 billion, 0.1% m/m above the September estimate after a 0.4% monthly decline in September from August. Spending on highways and educational facilities are by far the two largest components of public construction spending. Spending on water supply construction at $35.2 billion was also important in October, up 1.2% m/m on top of a 1.5% monthly gain in September.

The construction figures can be found in Haver’s **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- Total construction spending fell 0.6% m/m in September but rebounded 0.5% m/m in October.
- Private construction spending slumped 0.9% m/m in September but rose 0.6% m/m in October.
- Private nonresidential construction fell for the fourth consecutive month while private residential construction posted a 1.3% m/m gain.

U.S. Construction Spending Slipped in September but Rebounded in October

Winnie Tapasanun

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The Pending Home Sales Index, a forward-looking measure of home sales based on contract signings, fell 9.3% m/m to 71.8 in December following unrevised increases of 3.3% in November and 2.4% in October, according to the National Association of Realtors (NAR). December marked the first m/m fall since July and the steepest since April 2020. The year-on-year rate was -3.0% in December, the first negative y/y reading since September, compared to +2.6% in November and -5.0% in December 2024. The index had fallen 42.6% since its October 2021 high of 125.1. In 2025, the PHSI declined 0.9% after drops of 3.0% in 2024 and 16.1% in 2023.

The m/m fall in December pending home sales occurred alongside a decline in the average 30-year mortgage rate to 6.20% in December, the lowest since September 2024, down from 6.24% in November and 6.25% in October. These rates, while below a peak of 7.62% in October 2023, had remained higher than a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales decreased m/m in December across all four major regions. The Midwest recorded the sharpest drop, with sales plunging 14.9% (-9.8% y/y) in December—the first m/m decline since September and the deepest since April 2020—after a 1.3% increase in November. Sales in the West slumped 13.3% (-5.1% y/y), the third m/m decrease in four months, following a 9.2% November rebound. Sales in the Northeast slid 11.0% (-3.6% y/y), the first m/m slide since August, after a 1.8% November rise. Sales in the South fell 4.0% (+2.0% y/y), the first m/m fall since June, after a 2.5% November gain.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- PHSI -9.3% m/m (-3.0% y/y) to 71.8 in Dec., lowest index level since July.
- Home sales m/m down in all four major regions, w/ the Midwest seeing the steepest drop (-14.9%).
- Home sales y/y down in the Northeast, Midwest, and West, but up in the South (+2.0%).

U.S. Pending Home Sales Drop in December Following Four Consecutive M/M Gains

Kathleen Stephansen, CBE

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Mortgage applications rose 14.1% w/w (76.8% y/y) in the week ending January 16, after soaring 28.5% w/w (55.1% y/y) in the week ending January 9, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house rose 5.1% w/w (19.1% y/y) in the week ending January 16, after rising 15.9% w/w (14.0% y/y) in the week ending January 9.  Applications for loan refinancing jumped 20.4% w/w (182.9% y/y) in the latest week, following a surge of 40.1% w/w (128.1% y/y) in the January 9 week.

The effective interest rate on a 30-year fixed-rate loan fell 3bps to 6.32% in the week ending January 16 from 6.35% in the week ending January 9. The rate on 15-year fixed-rate mortgages dropped 4bps to 5.71% in the latest week from 5.75% in the prior week. The 30-year Jumbo rate also fell 4bps to 6.50% in the January 16 week from 6.54% in the January 9 week. The rate on a 5-year ARM rose 5bps to 5.65% in the latest week from 5.60% in the January 9 week.

The share of applications for refinancing an existing loan rose to 61.9% of total applications in the January 16 week from 60.2% in the week ending January 9. The adjustable-rate mortgage (ARM) share of activity rose to 7.1% in the week ending January 16 from 7.0% in the week ending January 9.

The average size of a mortgage loan rose 2.9% w/w (11.1% y/y) to $415,300 in the week ending January 16, after rising 6.3% w/w (9.9% y/y) to $403,600 in the week ending January 9. The average size of a purchase loan edged down 0.7% w/w (+1.3% y/y) to $437,100 in the latest week after rising 7.7% w/w (4.9% y/y) to $440,300 in the January 9 week. The average size of a loan to refinance a mortgage rose 6.0% w/w (39.4% y/y) to $401,900 in the week ending January 16, after rising 6.0% w/w (27.8% y/y) to $379,200 in the week ending January 9.

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

- Purchase and refinancing loan applications posted healthy rises in the latest week.
- Effective interest rate on 30-year fixed loans fell to 6.32%.
- Average loan size rose.

U.S. Mortgage Applications Continue to Surge in the Week of January 16

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The ZEW survey for January showed improvement all around with both economic expectations and macroeconomic conditions showing improvements in the United States, Germany, and the euro area.

The economic situation in January in the euro area improved to a reading of -18.1 from -28.5 in December. In Germany, the reading improved to -72.7 from -81 in December, while in the United States the reading improved to +17.7 from -0.6 in December. The message here clearly is the month-to-month improvement. Still, the January readings leave the assessments of conditions in these three areas as quite different. The percentile-queue standings place each one of these topical readings in their queue of data back to December 1992, expressing the standing in percentile terms. Viewed in this way, the euro area has a 57.2 percentile standing, the U.S. has nearly a 45-percentile standing, while Germany has a 22.6 percentile standing, leaving each of these areas in their own distinctive positions relative to their historic norms. The euro area has a firm and above-median ranking since the reading is above the 50th percentile (where the median is located). The U.S. is slightly weaker than that, with a reading that's marginally below its median. Germany has a reading between the lower quartile and the one-fifth mark of its historic data, branding it as weak.

Macroeconomic expectations find that Germany in January moved up to a positive reading of 59.6 from 45.8 in December. The U.S. also improved, moving up to -3 from -12 in December. The macro-expectations find Germany and the U.S. in very different places with German expectations in an 80.4 percentile of their queue, placing them in the top 20% while the U.S. has a 45-percentile standing, below its historic median and essentially the same relative position as its current situation ranking. In contrast, Germany has a weak current economic assessment versus a stronger expectations assessment.

Inflation expectations weaken across the board in January, with the euro area falling to -7.6 from -4.6 in December, Germany falling to -6.0 from -1.7 and the U.S. falling to 44.2 from 54.9. The ZEW experts see a disinflationary environment, and they see that despite the pickup in current conditions and improved macroeconomic expectations. Expectations in the U.S. have a 61.1 percentile standing; the German and the euro area readings are much weaker and closer together, with the German standing at its 31.2 percentile and the euro area at its 25.8 percentile.

On the back of these expectations, short-term interest rates in the euro area are less weak, with the January reading at -7.7, up from -10.8 in December. The U.S. has a -65.6 reading, stronger than Decembers -73.9. On a ranking basis, the euro area’s short-term rates have a 37.4 percentile standing The U.S. has a 9.3 percentile standing. The interest rate assessment is that short-term rates are going to be modest to lower over the outlook.

Long-term interest rates in Germany and the U.S. weaken slightly in January from December to 44.5 in January for Germany, compared to 49.2 in December, and in the U.S., there is a very modest ‘decimal point’ change to 44.1 in January from 44.9 in December. German long-term rates have a 58.8 percentile standing while the U.S. has rates at about a 50-percentile standing, placing them just about on top of their historic median. Neither one of these expectations has long-term expectations different from historic norms.

Stock market expectations from December to January, however, are little changed and mostly weaker, with the euro area gauge falling to 35.2 from 41.3 in December. The German gauge slips to 35.9 from 36.3 in December. The January gauge for the U.S. is ticking slightly higher to 31.5 January from 30.2 in December. The rankings for the January gauges show the U.S. above its median at a 59.3 percentile mark, the euro area slightly below its median with a 44.9 percentile reading; the German stock market still scores as the weakest at a 39.7 percentile standing.

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On balance, there are improvements expected in the macroeconomic realm as well as improvements detected in the current economic situation. Inflation is expected to remain tame; short-term interest rates are expected to continue declining, while long-term interest rates are going to be showing some pressure or in the case of the U.S. will continue to oscillate around current levels or firm slightly. Stock market conditions in the U.S. are modestly higher than their historic norms; however, the euro area stocks are in for modest weakness; German stocks weakened and are historically weak. Looking ahead, the thing to do is to watch the market metrics in particular to see how the recent U.S.-European rift over Greenland is going to play out in markets and how much it's going to affect expectations. That's the newest trend in play. How quickly they forget drug running boat sinkings, Maduro’s capture, threats on Iran, and cage rattling the Fed Chair. It’s all about Greenland now- at least for now, don’t blink!

ZEW Survey Shows Advancement All Around

Tian Yong Woon

This week, we dive into several key developments across Asia. China’s Q4 GDP marked a further extension of its recent growth slowdown, yet full-year growth still came in exactly at the government’s 5% target for 2025 (chart 1). That said, the road ahead remains challenging, as December’s data delivered a mixed set of outcomes. Encouragingly, new external inroads, starting with Canada’s opening up of EV trade with China, could pave the way for additional opportunities (chart 2). In semiconductors, the latest US tariff measures proved far more limited in scope than initially feared, helping to explain the muted market reaction to the announcement (chart 3). Relatedly, commitments by major Taiwanese chipmakers to expand investment in the US have brought Washington and its largest chip supplier closer together, culminating in a US–Taiwan trade deal (chart 4).

In Japan, attention has turned to the possibility of a snap Lower House election in February. The interim political uncertainty, alongside expectations around future policy, has weighed on the yen and pushed Japanese yields higher (chart 5), with some observers increasingly concerned about the narrowing window to pass the FY2026 budget by April, given the likely dissolution of the Lower House. In South Korea, President Lee’s recent visits to China and Japan point to improving bilateral ties, although he continues to navigate a delicate balancing act amid still-elevated China–Japan tensions. Domestically, elevated house prices and high household debt continue to limit the scope for further monetary policy easing (chart 6).

**China**
Alongside its regular slate of monthly economic releases, China unveiled its Q4 GDP figures earlier today, with the economy expanding by 4.5% y/y during the quarter. While Q4 growth continues the recent trend of deceleration seen over the past few quarters, the outcome brings China’s full-year growth for 2025 right in line with the government’s 5% target (chart 1). This defied expectations among some investors that the economy would fall short. This outcome aligns with earlier discussions that China remained within reach of its growth target despite slowing momentum. That said, the outlook ahead remains challenging. December’s monthly data painted a mixed picture, with declines in fixed asset investment accelerating and retail sales growth cooling further, even as industrial production growth remained relatively resilient.

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On China’s external developments, another high-profile outcome followed Canadian Prime Minister Carney’s visit to Beijing. Canada and China unveiled a trade deal lowering tariffs on Canada’s imports of 49,000 Chinese EVs to 6.1% from 100%, in exchange for China easing tariffs on Canadian agricultural products. Carney remarked that China is now a “more predictable” trading partner than the US and that “a new world order” is taking hold. These comments likely reflect longstanding trade frictions between the US and Canada, as US President Trump has sought to renegotiate what he views as unfair trade arrangements. The new Canada–China agreement is also expected to catalyse significant Chinese joint-venture investment in Canada over the coming years. The move marks a notable shift for Canada, which has traditionally been an exceptionally close partner of the US, not only economically (chart 2). That Ottawa has inked a trade deal with Beijing while US–China tensions remain elevated represents a clear break from its previous stance and has, unsurprisingly, drawn criticism from Washington.

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**US semiconductor tariffs**
Turning to US-originated developments, President Trump signed a proclamation last week imposing a 25% tariff on certain advanced computing chips, including Nvidia’s H200 and AMD’s MI325X. The tariff will not apply to chips imported to support the buildout of the US tech supply chain or to strengthen domestic manufacturing capacity for semiconductor derivatives. The move stops short of a blanket tariff on all AI chips and semiconductor imports, easing—at least for now—initial investor concerns and likely explaining the market’s relatively muted reaction to the announcement (chart 3). A broader tariff would have had far more severe implications, given the  US economy’s substantial imports of semiconductor goods. In the case of Nvidia’s H200—designed to comply with US export restrictions and primarily targeted at the Chinese market—the tariff appears intended to capture a 25% levy before the chips are shipped onward to China. That said, China’s demand response remains uncertain, particularly as the H200 is reportedly banned in China.

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Not long after the tariff announcement, the US and Taiwan — the largest source of US semiconductor imports, as shown in chart 4 — were reported to have reached a trade deal. Under the agreement, Taiwanese chipmakers such as TSMC that expand production in the US will face lower tariffs on semiconductors and related manufacturing equipment, with duty-free treatment applying to some imports. In addition, tariffs on most other Taiwanese exports to the US will be reduced to 15% from 20%. In return, Taiwanese companies will invest $250 billion in the US, including an expanded manufacturing footprint by TSMC in Arizona, aimed at boosting domestic production of semiconductors, energy, and AI. As illustrated in chart 4, Taiwan already dominates US semiconductor imports, with its share having risen sharply in recent years and far outstripping contributions from other major suppliers such as Southeast Asian economies and South Korea.

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**Japan snap elections**
Turning to Japan, the country is drumming up for an anticipated February Lower House snap election as Prime Minister Takaichi looks poised to capitalize on her strong approval ratings to secure a firmer parliamentary footing. In reaction, opposition parties have already started galvanizing for the expected upcoming electoral fight, with the opposition Constitutional Democratic Party (CDP) and the ruling party’s former coalition partner, Komeito, having announced a plan to form a new Centrist Reform Alliance (CRA) to fight the current ruling bloc. Given this interim bout of uncertainty, there is now some doubt cast on whether Japan’s budget this year can be debated robustly and passed in time by April 2026 (when the new fiscal year starts), especially if the Lower House gets dissolved soon, meaning less parliamentary time will be available for the purpose. Tracking such developments, the yen had extended its recent slide, whilst Japanese yields have firmed further (chart 5).

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**South Korea**
Lastly, we turn to South Korea, where President Lee has embarked on visits to China and Japan that point to a warming of regional ties. In China, Lee’s meeting with President Xi yielded agreements to restore strategic dialogue channels and deepen cooperation in areas such as critical minerals, with Lee calling for a “full restoration” of bilateral relations. In Japan, his visit similarly signalled a thaw in ties following previous periods of tension. Overall, South Korea appears to be seeking closer relations with its two major Asian neighbours even as China–Japan tensions remain elevated. Domestically, however, while the semiconductor sector has benefited from the AI-driven upswing, South Korea continues to face challenges such as elevated house prices and high household debt. These factors have constrained the scope for further monetary policy easing (chart 6).

Economy in Brief

Jump to:

U.S. Budget Deficit Grows Sharply With Recession & TARP

JOLTS: U.S. Job Openings Fall Further

U.S. Weekly Mortgage Applications Rise

U.S. Weekly Mortgage Applications Rise

Manpower Survey: 2Q09 Employment Seen As Weakest Since Credit Crunch Recession

IP Drops Sharply in the Euro Area's Early Reports

Foreign Trade in France and Germany: Casualties of the Recession

U.S. Small Business Optimism Nearing All-time Low