Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303a.jpg" width="353">
The news on building activity continues grim. The value of construction put-in-place tumbled 3.3% during January for the third consecutive, sharp decline. The drop was was roughly double the Consensus expectation.
Residential building activity continued its downward march with a 2.9% shortfall which started 2009 activity 18.6% below the 2008 average. Single-family construction activity fell 9.3% and remained off by nearly one half year-to-year. Building activity on multi-family units also was weak and it posted a 1.2% decline (-9.1% y/y). Spending on improvements did increase 3.8% from December but versus one year ago it fell 1.5%.
During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP.
The value of nonresidential building activity continued lower, down for the sixth month in the last seven. January activity fell 4.3% led by a 5.8% decline in the health care sector (+6.4% y/y). Spending on office construction fell another 1.5% and it was off 10.4% from one year earlier. Building in the multi-retail sector flopped 1.8% and that decline pulled activity down 20.2% from last January.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303b.jpg" width="353">
Public construction may have started to suffer the recession&#39;s effect of tax revenues. Activity fell 2.3% and that lowered year-to-year growth to 4.4%, the least since early 2005. To amplify the notion of weakness, the level of activity began this year 0.9% below 2008. The value of spending on transportation facilities fell 2.6% (-2.4% y/y), down hard for the third straight month. Spending on highways &amp; streets also fell for the second month but the 1.0% decline still left activity up 6.1% y/y, in line with the firm gains since early 2007. The value of construction on highways &amp; streets is roughly one-third of the value of total public construction spending.
The more detailed categories of construction represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002, and that constant-dollar data are no longer computed.
The construction put-in-place figures are available in Haver&#39;s USECON 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/USECON/@E9/@E907/@E907.HTM">Construction</a> (%)</th>
<th scope="col">January</th>
<th scope="col">December</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>-3.3</td>
<td>-2.4</td>
<td>-9.1</td>
<td>-5.6</td>
<td>-2.7</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-3.7</td>
<td>-2.6</td>
<td>-14.1</td>
<td>-9.8</td>
<td>-6.9</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-2.9</td>
<td>-4.4</td>
<td>-28.0</td>
<td>-27.6</td>
<td>-19.8</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-4.3</td>
<td>-1.2</td>
<td>0.3</td>
<td>14.9</td>
<td>19.6</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>-2.3</td>
<td>-1.8</td>
<td>4.4</td>
<td>6.8</td>
<td>12.3</td>
<td>9.3</td>
</tr>
</tbody>
</table>
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The news on building activity continues grim. The value of construction put-in-place tumbled 3.3% during January for the third consecutive, sharp decline. The drop was was roughly double the Consensus expectation. Residential building [...]

U.S. Construction Spending Fell Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303c.jpg" width="353">
The National Association of Realtors indicated that pending sales of existing homes fell 7.7% in January to a record low. The decline left sales 7.4% below the 2008 average and it was roughly twice the Consensus expectation.
The home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.
Lower prices continued to bolster home sales. The median sales price of an existing home fell in January for the seventh straight month and was down 14.8% year-to-year. Prices were down 25.7% from their peak during June 2007. For single-family homes alone, prices fell 2.9% during January and they were off 25.9% from their peak. Lower prices combined with lower interest rates significantly raised the affordability index of a home by 24.9% year-to-year. The latest level was a record high for the series which extends back to 1970.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090303d.jpg" width="353">
Weak home sales are encouraging potential sellers to keep their homes off the market. The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale fell by 13.5% last month versus January of last year.
At the current sales rate there was a 9.6 months&#39; supply of homes on the market and there was a 10.4 months&#39; supply during all of last year, up from the 8.9 months supply during 2007 and 6.5 months during 2006. For single family homes, there was a 9.2 months&#39; supply in January versus a full-year figure of 10.0 months.
The pending home sales data are available in Haver&#39;s PREALTOR database. The number of homes on the market and prices are in the REALTOR database.
Current economic and financial conditions and the federal budget is today&#39;s testimony by Fed Chairman Ben S. Bernanke and it is available <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20090303a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>80.4</td>
<td>87.1</td>
<td>&nbsp;&nbsp; -6.4%</td>
<td>86.8</td>
<td>95.8</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>57.8</td>
<td>66.2</td>
<td>-19.7</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Midwest</td>
<td>72.6</td>
<td>80.0</td>
<td>-13.8</td>
<td>80.6</td>
<td>89.5</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>82.2</td>
<td>93.3</td>
<td>-9.1</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; West</td>
<td>103.6</td>
<td>101.1</td>
<td>13.5</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
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The National Association of Realtors indicated that pending sales of existing homes fell 7.7% in January to a record low. The decline left sales 7.4% below the 2008 average and it was roughly twice the Consensus expectation. The home [...]

Falling Rates & Prices Push Affordability to New High

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302f.jpg" align="left" border="0" height="265" width="353">
Industrial production in South Korea increased 1.35% in
January, the first increase in four months. However, compared to a year
ago, the unadjusted index is down some 25%. Production of motor
vehicles continues to be the biggest drag with production down more
than 10% in January and down over 40% from a year ago. Production in
Electronic equipment and devices increased 22% in January, but was
still 32% below the year ago figure. Production in the Pharmaceuticals,
medical chemicals and botanical products industry was up only 2.5% in
January, but production in this industry has held relatively steady
and, although only 4% above January 2007,it is one of the few
industries where production is greater than a year ago. These four
indexes are shown in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302g.jpg" align="right" border="0" height="265" width="353">
Data on international trade in goods in US dollars and Korean
won were released yesterday. The Bank of Korea publishes balance of
payments data in USD and much of the discussion of Korea's trade takes
place in USD terms. However, for domestic considerations the won data
may be more relevant. The two series can differ significantly when
there is a substantial appreciation or depreciation in the won. For
example, in February seasonally unadjusted data on exports in USD show
a year to year decline of 17%, while the seasonally unadjusted data in
won show and increase of 26%. The difference is due to the change that
has taken place in the won over the year. As can be seen in the third
chart which shows the won versus the USD on an inverted scale, the won
has depreciated substantially over the past year. As a result, the
increase in exports in yen, when converted to USD, turn into a decline.
Recent data are shown in the table below.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SOUTH
KOREA&nbsp;</th>
<th scope="col">Jan&nbsp; 09&nbsp;</th>
<th scope="col">Dec 08&nbsp;</th>
<th scope="col">Nov 08&nbsp;</th>
<th scope="col">Oct 08</th>
<th scope="col">Sep 08</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Industrial Production
(2005=100)&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>97.9</td>
<td>*6.6</td>
<td>106.8</td>
<td>118.8</td>
<td>121.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Pharmaceuticals, medical chemicals and botanic products</td>
<td>140.1</td>
<td>136.7</td>
<td>124.6</td>
<td>129.5</td>
<td>130.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Motor
Vehicles</td>
<td>69.2</td>
<td>77.5</td>
<td>102.2</td>
<td>117.2</td>
<td>103.3</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Electronic
equipment and devices&nbsp;</td>
<td>117.2</td>
<td>96.2</td>
<td>119.8</td>
<td>143.9</td>
<td>159.9</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>Feb 09</td>
<td>Jan&nbsp; 09&nbsp;</td>
<td>Dec 08&nbsp;</td>
<td>Nov 08&nbsp;</td>
<td>Oct 08</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Y/Y %
Change in Yen Exports</td>
<td>25.55</td>
<td>-4.83</td>
<td>20.06</td>
<td>22.61</td>
<td>56.57</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Y/Y %
Change in Yen Depreciation</td>
<td>52.50</td>
<td>43.70</td>
<td>42.03</td>
<td>52.57</td>
<td>45.05</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Y/Y $
Change in USD Exports</td>
<td>-17.67</td>
<td>-33.76</td>
<td>-18.36</td>
<td>-19.64</td>
<td>7.94</td>
</tr>
</tbody>
</table>
</body></html>

Industrial production in South Korea increased 1.35% in January, the first increase in four months. However, compared to a year ago, the unadjusted index is down some 25%. Production of motor vehicles continues to be the biggest drag [...]

South Korea: Industrial Production Improves a Bit; Exports in Won Rise, but in USD, Fall

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302e.jpg" align="left" border="0" height="265" width="353">
Despite the slippage some consolidation is evident. 
 

Germany Spain and Austria were among the ground hogs that left
their heads in February and did not scurry lower for the winter. There,
MFG PMIs managed to stay higher even though for most of the region
manufacturing was seeing darker days in February. France, a country
that had been holding off the declines succumbed in February with its
MFG index dropping to 34.81 from 37.90; Ireland&#8217;s MFG sector made a
similarly large drop. EMU as a whole, France, Ireland and The
Netherlands this month sport MFG PMI readings that are the lowest ever.
The UK, Italy and Germany each are less than 1% up from their
respective lows. To be sure it remains a very weak February for
European manufacturing. But the good news is that the downturn is NOT
getting worse in several key countries and that the pace of
deterioration where things are unraveling is largely slowing. France
and Ireland are to be taken as notable exceptions. Looks like the Irish
have run out of luck and the French continue to buck the trends to
which everyone else is subject. 
 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">NTC/Markit MFG Indices</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-09</td>
<td> Jan-09</td>
<td> Dec-08</td>
<td> 3Mo</td>
<td> 6Mo</td>
<td> 12Mo</td>
<td> Percentile</td>
</tr>
<tr>
<td class="firstcol"> Euro-13</td>
<td> 33.55</td>
<td> 34.42</td>
<td> 33.87</td>
<td> 33.95</td>
<td> 37.25</td>
<td> 43.41</td>
<td> 0.0%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>32.14</td>
<td> 31.96</td>
<td> 32.66</td>
<td>32.25</td>
<td>37.11</td>
<td>44.84</td>
<td> 0.7%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td> 34.81</td>
<td>37.90</td>
<td> 34.91</td>
<td>35.87</td>
<td>38.08</td>
<td>43.75</td>
<td> 0.0%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td> 34.99</td>
<td>36.06</td>
<td>35.54</td>
<td>35.53</td>
<td>37.61</td>
<td>42.55</td>
<td> 0.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>31.85</td>
<td>31.51</td>
<td> 28.49</td>
<td>30.62</td>
<td>32.37</td>
<td>37.65</td>
<td> 11.7%</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>34.58</td>
<td> 33.12</td>
<td> 35.01</td>
<td>34.24</td>
<td>38.40</td>
<td>43.95</td>
<td> 5.7%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td> 33.20</td>
<td>38.94</td>
<td>37.87</td>
<td>36.67</td>
<td>38.42</td>
<td>41.62</td>
<td> 0.0%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td> 35.47</td>
<td> 36.29</td>
<td> 38.42</td>
<td>36.73</td>
<td>40.41</td>
<td>45.62</td>
<td> 0.0%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol"> EU</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td> 34.68</td>
<td>35.79</td>
<td>34.94</td>
<td>35.14</td>
<td>36.94</td>
<td>42.26</td>
<td> 0.2%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">percentile is over range since March
2000</td>
</tr>
</tbody>
</table>
</body></html>

Despite the slippage some consolidation is evident. Germany Spain and Austria were among the ground hogs that left their heads in February and did not scurry lower for the winter. There, MFG PMIs managed to stay higher even though for [...]

Euro Area MFG PMIs Drop

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302c.jpg" width="353">
For February, the Institute for Supply Management (ISM) reported that its Composite Index of Activity in the manufacturing sector remained about unchanged at 35.8 versus the 35.6 January reading. The latest was still near the lowest level since the recession year of 1980. The break-even level for this diffusion index of factory sector activity is a level of 50.
During the last twenty years there has been a 72% correlation between the level of the Composite Index and the three-month growth in factory sector industrial production. The latest reading of the composite index suggests that the recent 10% rate of decline in industrial output will continue.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302d.jpg" width="353">
It is appropriate to correlate the ISM index level with factory sector growth because the ISM index is a diffusion index. It measures growth by using all of the positive changes in activity added to one half of the zero change in activity measures.
The separate index of prices paid also was unchanged from January and still barely above the lowest level since 1949. During the last twenty years there has been a 79% correlation between the price index and the three-month change in the PPI for intermediate goods.
The February new orders index was about unchanged from January as 13% of survey participants reported higher orders but 44% reported that orders fell. The export order index also was unchanged as economic weakness outside of the U.S. continued. It was still near the lowest level in this index&#39;s short twenty year history. During the last ten years there has been a 53% correlation between the index and the q/q change in real exports of goods in the GDP accounts.
The ISM data is available in Haver&#39;s USECON 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/@S2/@S201/@S201.HTM">ISM Mfg</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February &#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">Composite Index</td>
<td>35.8</td>
<td>35.6</td>
<td>48.8</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>33.1</td>
<td>33.2</td>
<td>48.9</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>26.1</td>
<td>29.9</td>
<td>47.0</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>29.0</td>
<td>29.0</td>
<td>75.5</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
</body>
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For February, the Institute for Supply Management (ISM) reported that its Composite Index of Activity in the manufacturing sector remained about unchanged at 35.8 versus the 35.6 January reading. The latest was still near the lowest [...]

ISM Index Flat Month-To-Month, Still Near Low

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<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302a.jpg" width="353">
The personal &amp; outlays report from the U.S. Bureau of Economic Analysis indicated that the savings rate continued its recent improvement. During January, individuals pared spending against the background of the current economic uncertainties and the personal savings rate rose to 5.0%, up from the monthly low of 0.0% reached last April. The saving rate averaged less than 1.0% from 2005 to 2007.
The personal income &amp; consumption figures are available in Haver&#39;s USECON and USNA databases.
Life expectancy and old age savings from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/workingpapers/wp2008_18.pdf"> here</a>
Personal consumption expenditures did rise last month, but the 0.6% increase was the first monthly increase since last June. The figure was slightly better than expectations for a 0.4% increase. Nevertheless, the three-month annualized rate of growth of -4.9% followed even more negative growth rates during the prior three months. The recent figures have been very much influenced by the change in energy prices. Real personal spending rose 0.4% during January and three-month growth amounted to 0.7%. The latest monthly increase was only the second since May.
Real spending on discretionary items continued weak. Motor vehicle &amp; parts purchases fell 0.8% in January after a 13.3% decline during all of last year. Real spending on household furniture &amp; appliances rose a moderate 0.6% and it has been flat since last summer while real spending on apparel fell 0.5% (-2.7% year-to-year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302b.jpg" width="353">
The pullback in personal spending continues to reflect the weakness in personal income. Though it rose 0.4% last month, it was the first monthly increase since September and the three month growth rate stood at -1.0%. The latest monthly figure was better than expectations for a 0.2% monthly decline. Disposable personal income also firmed and rose 1.7% last month (4.0% y/y) thanks to a 9.3% monthly drop in taxes. Real disposable income growth increased by 1.5% last month (3.3% y/y).
Wages &amp; salaries continued to move lower last month. Declines in employment levels dropped wage income by 0.2% during January and at a 3.3% rate during the last three months. That was the weakest growth rate since 2004. Private sector wages fell at a 5.2% rate during those three months while government sector wages remained immune to the recession and rose at a 5.9% annual rate.
Lower interest rates caused another decline in interest income which is down at a 17.6% annual rate during the last three months. Dividend income also fell at a 3.7% annual rate during that three-month period as corporate profits fell.
The PCE chain price index continued to reflect the weakness in income &amp; spending and rose just 0.2%. Prices rose 0.7% year-to-year, held back by the decline in energy prices. Core power logged just a 0.1% rise following the slight decline in December. The dip matched Consensus expectations. Durable goods prices fell 0.1% (-1.9% y/y).
The U.S. Treasury and Federal Reserve Board Announce Participation in AIG Restructuring Plan can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20090302a.htm">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/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a> (%)&nbsp;</th>
<th scope="col">January</th>
<th scope="col">December</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">Personal Income</td>
<td>0.4</td>
<td>-0.2</td>
<td>1.9</td>
<td>3.8</td>
<td>6.1</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable Personal Income</td>
<td>1.7</td>
<td>-0.2</td>
<td>4.0</td>
<td>4.7</td>
<td>5.5</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption Expenditures</td>
<td>0.6</td>
<td>-1.0</td>
<td>-1.0</td>
<td>3.6</td>
<td>5.5</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>5.0</td>
<td>3.9</td>
<td>0.1 (Jan. 08)</td>
<td>1.8</td>
<td>0.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2</td>
<td>-0.5</td>
<td>0.7</td>
<td>3.3</td>
<td>2.6</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1</td>
<td>-0.0</td>
<td>1.6</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The personal & outlays report from the U.S. Bureau of Economic Analysis indicated that the savings rate continued its recent improvement. During January, individuals pared spending against the background of the current economic [...]

U.S. January Personal Savings Rate Highest Since 1995

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302a.jpg" align="left" border="0" height="265" width="353">
The personal &amp; outlays report from the U.S. Bureau of
Economic Analysis indicated that the savings rate continued its recent
improvement. During January, individuals pared spending against the
background of the current economic uncertainties and the personal
savings rate rose to 5.0%, up from the monthly low of 0.0% reached last
April. The saving rate averaged less than 1.0% from 2005 to 2007.
The personal income &amp; consumption figures are
available in Haver's USECON and USNA
databases.
Life expectancy and old age savings from
the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/workingpapers/wp2008_18.pdf">
here</a>
Personal consumption expenditures did rise last month, but the
0.6% increase was the first monthly increase since last June. The
figure was slightly better than expectations for a 0.4% increase.
Nevertheless, the three-month annualized rate of growth of -4.9%
followed even more negative growth rates during the prior three months.
The recent figures have been very much influenced by the change in
energy prices. Real personal spending rose 0.4% during January and
three-month growth amounted to 0.7%. The latest monthly increase was
only the second since May.
Real spending on discretionary items continued weak. Motor
vehicle &amp; parts purchases fell 0.8% in January after a 13.3%
decline during all of last year. Real spending on household furniture
&amp; appliances rose a moderate 0.6% and it has been flat since
last summer while real spending on apparel fell 0.5% (-2.7%
year-to-year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302b.jpg" align="right" border="0" height="265" width="353">
The pullback in personal spending continues to reflect the
weakness in personal income. Though it rose 0.4% last month, it was the
first monthly increase since September and the three month growth rate
stood at -1.0%. The latest monthly figure was better than expectations
for a 0.2% monthly decline. Disposable personal income
also firmed and rose 1.7% last month (4.0% y/y) thanks to a 9.3%
monthly drop in taxes. Real disposable income growth increased by 1.5%
last month (3.3% y/y).
Wages &amp; salaries continued to move lower last month.
Declines in employment levels dropped wage income by 0.2% during
January and at a 3.3% rate during the last three months. That was the
weakest growth rate since 2004. Private sector wages fell at a 5.2%
rate during those three months while government sector wages remained
immune to the recession and rose at a 5.9% annual rate.
Lower interest rates caused another decline in interest income
which is down at a 17.6% annual rate during the last three months.
Dividend income also fell at a 3.7% annual rate during that three-month
period as corporate profits fell.
The PCE chain price index continued to
reflect the weakness in income &amp; spending and rose just 0.2%.
Prices rose 0.7% year-to-year, held back by the decline in energy
prices. Core power logged just a 0.1% rise following the slight decline
in December. The dip matched Consensus expectations. Durable goods
prices fell 0.1% (-1.9% y/y).
The U.S. Treasury and Federal Reserve Board Announce
Participation in AIG Restructuring Plan can be found <a href="http://www.federalreserve.gov/newsevents/press/other/20090302a.htm">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/@E7/@E711/@E71102/@E71102.HTM">Disposition
of Personal Income</a> (%)&nbsp;</th>
<th scope="col">January</th>
<th scope="col">December</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">Personal Income</td>
<td>0.4</td>
<td>-0.2</td>
<td>1.9</td>
<td>3.8</td>
<td>6.1</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Disposable
Personal Income</td>
<td>1.7</td>
<td>-0.2</td>
<td>4.0</td>
<td>4.7</td>
<td>5.5</td>
<td>6.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Personal Consumption
Expenditures</td>
<td>0.6</td>
<td>-1.0</td>
<td>-1.0</td>
<td>3.6</td>
<td>5.5</td>
<td>5.9</td>
</tr>
<tr>
<td class="firstcol">Saving Rate</td>
<td>5.0</td>
<td>3.9</td>
<td>0.1 (Jan. 08)</td>
<td>1.8</td>
<td>0.5</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2</td>
<td>-0.5</td>
<td>0.7</td>
<td>3.3</td>
<td>2.6</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food
&amp; energy</td>
<td>0.1</td>
<td>-0.0</td>
<td>1.6</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
</tr>
</tbody>
</table>
ISM Index Flat Month-To-Month,
Still Near Low 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 2, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302c.jpg" align="left" border="0" height="265" width="353">
For February, the Institute for Supply Management (ISM)
reported that its Composite Index of Activity in the manufacturing
sector remained about unchanged at 35.8 versus the 35.6 January
reading. The latest was still near the lowest level since the recession
year of 1980. The break-even level for this diffusion index of factory
sector activity is a level of 50.
During the last twenty years there has been a 72% correlation
between the level of the Composite Index and the three-month growth in
factory sector industrial production. The latest reading of the
composite index suggests that the recent 10% rate of decline in
industrial output will continue.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302d.jpg" align="right" border="0" height="265" width="353">
It is appropriate to correlate the ISM index level
with factory sector growth because the ISM index
is a diffusion index. It measures growth by using all of the positive
changes in activity added to one half of the zero change in activity
measures.
The separate index of prices paid also was unchanged from
January and still barely above the lowest level since 1949.
During the last twenty years there has been a 79% correlation between
the price index and the three-month change in the PPI for intermediate
goods.
The February new orders index was about unchanged from January
as 13% of survey participants reported higher orders but 44% reported
that orders fell. The export order index also was unchanged as economic
weakness outside of the U.S. continued. It was still near the lowest
level in this index's short twenty year history. During the last ten
years there has been a 53% correlation between the index and the q/q
change in real exports of goods in the GDP accounts.
The ISM data is available in Haver's USECON 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/@S2/@S201/@S201.HTM">ISM
Mfg</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February '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">Composite Index</td>
<td>35.8</td>
<td>35.6</td>
<td>48.8</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>33.1</td>
<td>33.2</td>
<td>48.9</td>
<td>42.1</td>
<td>54.3</td>
<td>55.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Employment Index</td>
<td>26.1</td>
<td>29.9</td>
<td>47.0</td>
<td>43.2</td>
<td>50.5</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>29.0</td>
<td>29.0</td>
<td>75.5</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
Euro Area MFG PMIs Drop 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 2, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302e.jpg" align="left" border="0" height="265" width="353">
Despite the slippage some consolidation is evident. 
 

Germany Spain and Austria were among the ground hogs that left
their heads in February and did not scurry lower for the winter. There,
MFG PMIs managed to stay higher even though for most of the region
manufacturing was seeing darker days in February. France, a country
that had been holding off the declines succumbed in February with its
MFG index dropping to 34.81 from 37.90; Ireland&#8217;s MFG sector made a
similarly large drop. EMU as a whole, France, Ireland and The
Netherlands this month sport MFG PMI readings that are the lowest ever.
The UK, Italy and Germany each are less than 1% up from their
respective lows. To be sure it remains a very weak February for
European manufacturing. But the good news is that the downturn is NOT
getting worse in several key countries and that the pace of
deterioration where things are unraveling is largely slowing. France
and Ireland are to be taken as notable exceptions. Looks like the Irish
have run out of luck and the French continue to buck the trends to
which everyone else is subject. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">NTC/Markit
MFG Indices</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-09</td>
<td> Jan-09</td>
<td> Dec-08</td>
<td> 3Mo</td>
<td> 6Mo</td>
<td> 12Mo</td>
<td> Percentile</td>
</tr>
<tr>
<td class="firstcol"> Euro-13</td>
<td> 33.55</td>
<td> 34.42</td>
<td> 33.87</td>
<td> 33.95</td>
<td> 37.25</td>
<td> 43.41</td>
<td> 0.0%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>32.14</td>
<td> 31.96</td>
<td> 32.66</td>
<td>32.25</td>
<td>37.11</td>
<td>44.84</td>
<td> 0.7%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td> 34.81</td>
<td>37.90</td>
<td> 34.91</td>
<td>35.87</td>
<td>38.08</td>
<td>43.75</td>
<td> 0.0%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td> 34.99</td>
<td>36.06</td>
<td>35.54</td>
<td>35.53</td>
<td>37.61</td>
<td>42.55</td>
<td> 0.2%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>31.85</td>
<td>31.51</td>
<td> 28.49</td>
<td>30.62</td>
<td>32.37</td>
<td>37.65</td>
<td> 11.7%</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>34.58</td>
<td> 33.12</td>
<td> 35.01</td>
<td>34.24</td>
<td>38.40</td>
<td>43.95</td>
<td> 5.7%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td> 33.20</td>
<td>38.94</td>
<td>37.87</td>
<td>36.67</td>
<td>38.42</td>
<td>41.62</td>
<td> 0.0%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td> 35.47</td>
<td> 36.29</td>
<td> 38.42</td>
<td>36.73</td>
<td>40.41</td>
<td>45.62</td>
<td> 0.0%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol"> EU</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td> 34.68</td>
<td>35.79</td>
<td>34.94</td>
<td>35.14</td>
<td>36.94</td>
<td>42.26</td>
<td> 0.2%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">percentile
is over range since March
2000</td>
</tr>
</tbody>
</table>
South Korea: Industrial Production
Improves a Bit; Exports in Won Rise, but in USD, Fall
 
by <a href="/comment/Curley.html">Louise
Curley</a> March 2, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302f.jpg" align="left" border="0" height="265" width="353">
Industrial production in South Korea increased 1.35% in
January, the first increase in four months. However, compared to a year
ago, the unadjusted index is down some 25%. Production of motor
vehicles continues to be the biggest drag with production down more
than 10% in January and down over 40% from a year ago. Production in
Electronic equipment and devices increased 22% in January, but was
still 32% below the year ago figure. Production in the Pharmaceuticals,
medical chemicals and botanical products industry was up only 2.5% in
January, but production in this industry has held relatively steady
and, although only 4% above January 2007,it is one of the few
industries where production is greater than a year ago. These four
indexes are shown in the first chart.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090302g.jpg" align="right" border="0" height="265" width="353">
Data on international trade in goods in US dollars and Korean
won were released yesterday. The Bank of Korea publishes balance of
payments data in USD and much of the discussion of Korea's trade takes
place in USD terms. However, for domestic considerations the won data
may be more relevant. The two series can differ significantly when
there is a substantial appreciation or depreciation in the won. For
example, in February seasonally unadjusted data on exports in USD show
a year to year decline of 17%, while the seasonally unadjusted data in
won show and increase of 26%. The difference is due to the change that
has taken place in the won over the year. As can be seen in the third
chart which shows the won versus the USD on an inverted scale, the won
has depreciated substantially over the past year. As a result, the
increase in exports in yen, when converted to USD, turn into a decline.
Recent data are shown in the table below.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">SOUTH
KOREA&nbsp;</th>
<th scope="col">Jan&nbsp; 09&nbsp;</th>
<th scope="col">Dec 08&nbsp;</th>
<th scope="col">Nov 08&nbsp;</th>
<th scope="col">Oct 08</th>
<th scope="col">Sep 08</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Industrial Production
(2005=100)&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>97.9</td>
<td>*6.6</td>
<td>106.8</td>
<td>118.8</td>
<td>121.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Pharmaceuticals, medical chemicals and botanic products</td>
<td>140.1</td>
<td>136.7</td>
<td>124.6</td>
<td>129.5</td>
<td>130.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Motor
Vehicles</td>
<td>69.2</td>
<td>77.5</td>
<td>102.2</td>
<td>117.2</td>
<td>103.3</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; Electronic
equipment and devices&nbsp;</td>
<td>117.2</td>
<td>96.2</td>
<td>119.8</td>
<td>143.9</td>
<td>159.9</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>Feb 09</td>
<td>Jan&nbsp; 09&nbsp;</td>
<td>Dec 08&nbsp;</td>
<td>Nov 08&nbsp;</td>
<td>Oct 08</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Y/Y %
Change in Yen Exports</td>
<td>25.55</td>
<td>-4.83</td>
<td>20.06</td>
<td>22.61</td>
<td>56.57</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Y/Y %
Change in Yen Depreciation</td>
<td>52.50</td>
<td>43.70</td>
<td>42.03</td>
<td>52.57</td>
<td>45.05</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Y/Y $
Change in USD Exports</td>
<td>-17.67</td>
<td>-33.76</td>
<td>-18.36</td>
<td>-19.64</td>
<td>7.94</td>
</tr>
</tbody>
</table>
</body></html>

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 CBI (Confederation of British Industry) Industrial Trends Survey showed slight improvement in orders in January 2026 as the survey reading rose to -30 on a net basis from -32 in December and -37 in November. However, the 12-month average of the order series is -31 and so the improvement compared to conditions that prevailed over the last 12 months is not significant.

Export orders, on the other hand, deteriorated to -30 in January from -27 in December although that reading was slightly better than the -31 print in November. Once again, the -30 reading for January is only slightly better than the 12-month average of -32.

Stock-building slowed in January at +3 compared to +8 in December and +16 in November. That, actually, could be good news suggesting that industries are getting control of their inventories at a time when sales have been weak.

Looking ahead for output volume over the next three months improved to -14 in January from -17 in December and -30 in November, a substantial pick up over this period. But the reading for January at -14 is still slightly more negative than the 12-month average of -11.

The unequivocally stronger reading in the table, unfortunately, is for prices with average prices over the next three months at a +29 net reading, up from +19 in December and up from +7 in November. The reading of +29 in January compares to a 12-month average of +18 indicating a significant pickup compared to conditions that prevailed over the last 12 months.

Evaluating these readings by ranking the queue standings of the net values and data back to 1992 shows total orders have a 20th percentile standing, export orders have a 28.4 percentile standing, while the stocks of finished goods have a 9.8 percentile standing, and expected output - despite its recent improvement - is quite weak with an 8.3 percentile standing.  Average prices, on the other hand, are quite strong with a 91.7 percentile standing, indicating that the forces of inflation looking ahead are quite strong despite relatively weak demand and output conditions that are expected.

CBI data compared to annual growth rates in manufacturing and to the manufacturing PMI show rankings actually much better than the CBI survey. The manufacturing PMI has a 53.7 percentile standing that's only on data back over the last four years. The manufacturing production data have a 48.3 percentile standing, which is still very close to its 50-percentile standing, which would be its historic median. So, we have another case here of the accounting data being stronger than the survey data from the CBI. The strength in manufacturing industrial output does not compare favorably with the weakness portrayed in the CBI survey even though the manufacturing data are only up-to-date through November. The CBI data are up-to-date through January. And since CBI data generally show some stability or improvement from November to January, that data time mismatch with industrial production doesn't seem to be the reason for these readings being so vastly different. We’re going to have to keep an eye on other metrics for manufacturing to see which one of these surveys is giving us the best information.

For now, we don't know which of these series is the best and what we're looking at is a CBI series that is touting a great deal of economic weakness and portraying significant increases in prices over the next three months.

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United Kingdom

U.K. CBI Industrial Survey Flags Trouble Ahead

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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!

Economy in Brief

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U.S. Construction Spending Fell Further

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