Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203g.jpg" align="left" border="0" height="265" width="353">
German nominal and real ex-auto retail sales are off for the
third month in a row. In the fourth quarter nominal retail sales are
off at a 4% pace; ex-auto real retail sales are dropping at a 2.1%
pace. The sequential growth rates show an accelerating pattern of
losses from 12-months to 6-months to 3-months, across the main
categories in the table. 
 

The downturn has spreading across other measures as well, as
manufacturing has been notoriously weak. German consumers have not been
much of a prop to this economy for a long time. In the quarter ended
Sept 2008 they did rise by 1.9% Q/Q (saar), but that was after falling
by 3.2% (saar) in the previous quarter. Yr/Yr quarterly average real
(ex auto) retail sales have been negative in German since the quarter
ended December 2006. Ironically the 2008-Q4 retail sales figures on
this same basis are up by 0.1%, the first quarterly increase since
Q4-2008 and it comes as sales have turned tail to move sharply lower in
the quarter. 
 

The German retailing association HDE is looking for retail
sales to decline in real terms in 2009. Manufacturing is coming apart
at the seams. Construction is weak, The German economy, Europe&#8217;s
largest, is under fire. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> German Real and Nominal Retail Sales</th>
<th scope="col">QTR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Nominal</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAgo</td>
<td>Saar</td>
</tr>
<tr>
<td class="firstcol">Retaill Ex auto</td>
<td> -0.6%</td>
<td> -0.8%</td>
<td> -0.9%</td>
<td> -8.7%</td>
<td> -0.4%</td>
<td>1.2%</td>
<td> -4.6%</td>
<td> -4.0%</td>
</tr>
<tr>
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td> -1.5%</td>
<td> -1.6%</td>
<td>0.0%</td>
<td> -11.6%</td>
<td> -1.1%</td>
<td>1.2%</td>
<td> -3.2%</td>
<td> -2.6%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td> -0.9%</td>
<td>1.1%</td>
<td> -4.4%</td>
<td> -15.9%</td>
<td>4.3%</td>
<td>1.1%</td>
<td> -2.7%</td>
<td> -5.</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">&nbsp; Real</td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td> -0.2%</td>
<td> -0.1%</td>
<td> -0.9%</td>
<td> -4.6%</td>
<td>0.6%</td>
<td>0.2%</td>
<td> -6.5%</td>
<td> -2.1%</td>
</tr>
</tbody>
</table>
</body></html>

German nominal and real ex-auto retail sales are off for the third month in a row. In the fourth quarter nominal retail sales are off at a 4% pace; ex-auto real retail sales are dropping at a 2.1% pace. The sequential growth rates [...]

German Retail Sales Head South For The Winter

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203f.jpg" width="353">
With a 1.6% increase last week chain store sales recovered nearly all of the prior week&#39;s decline, according to the International Council of Shopping Centers-Goldman Sachs Index. Nevertheless, the year-to year change of -2.5% continued as the weakest in the series&#39; history which extends back to 1990. For January as a whole, sales ticked up 0.1% from December after that month&#39;s 0.3% gain.
During the last ten years there has been a 64% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The outlook for sales weakened further as the weekly leading indicator of chain store sales from ICSC-Goldman Sachs fell 0.7% and it was the third straight week of decline. The average level in January was up 0.6% from December, which rose 2.1% versus November. Since the lows of one month ago the index has recovered 3.0%.
The chain store sales figures are available in Haver&#39;s SURVEYW database.
The January 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/boarddocs/SnLoanSurvey/200902/fullreport.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">01/30/09</th>
<th scope="col">01/23/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>478.5</td>
<td>471.0</td>
<td>-2.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

With a 1.6% increase last week chain store sales recovered nearly all of the prior week's decline, according to the International Council of Shopping Centers-Goldman Sachs Index. Nevertheless, the year-to year change of -2.5% [...]

U.S. Chain Store Sales Recovered Last Week

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203d.jpg" width="353">
Despite the U.S. recession and reduced demand, regular gasoline prices again moved higher last week to an average $1.89 per gallon prices. That was up from 10 cents from the January average and up 28 cents from the December low, according to the U.S. Department of Energy survey. Yesterday, the spot market price for regular gasoline fell sharply backward from Friday&#39;s level to $1.17 per gallon (where it began the month of January). Spot prices still were up, however, by 32 cents from their December low.
Weekly gasoline prices can be found in Haver&#39;s WEEKLY database. Daily prices are in the DAILY database.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203e.jpg" width="353">
Demand continued quite weak for gasoline in reaction to the economy&#39;s weakness. The U.S. Department of Energy reported that the demand for gasoline fell by 3.5% during the latest four weeks. While the rate of decline remained nearly the fastest since late-1995 (the latest four weeks versus the same four weeks in 2008) it has been stable since November. The demand for all petroleum products also is down a sharp 4.0% y/y. These numbers are available in Haver&#39;s OILWKLY database.
The source for that reduced demand for gasoline is the cutback in vehicle miles driven which have fallen 5.3% year-to-year during the twelve months ended November. The rate of decline has been accelerating since late 2007 and it is nearly unprecedented. These Department of Transportation figures are available in Haver&#39;s OGJ database.
The price for a barrel of West Texas Intermediate crude moved slightly higher last week to $42.52 per barrel and it was up 10 dollars from the low reached late in December. Prices reached a high of $145.66 last July. In futures trading yesterday, the one-month price for crude oil fell versus last week to $40.08 per barrel, down sharply from one week ago.
The price of natural gas fell again, last week to $4.75 per mmbtu (-40.9% y/y). The latest average price was down roughly two-thirds from the high reached in early-July of $13.19/mmbtu.
Labor Supply Responses to Changes in Wealth and Credit from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-05.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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">02/02/09</th>
<th scope="col">01/25/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon)</td>
<td>1.89</td>
<td>1.84</td>
<td>-36.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>42.52</td>
<td>42.18</td>
<td>-53.3%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Despite the U.S. recession and reduced demand, regular gasoline prices again moved higher last week to an average $1.89 per gallon prices. That was up from 10 cents from the January average and up 28 cents from the December low, [...]

U.S. Gasoline Prices Up Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203d.jpg" align="left" border="0" height="265" width="353">
Despite the U.S. recession and reduced demand, regular
gasoline prices again moved higher last week to an average
$1.89 per gallon prices. That was up from 10 cents from the January
average and up 28 cents from the December low, according to the U.S.
Department of Energy survey. Yesterday, the spot market price for
regular gasoline fell sharply backward from Friday's level to $1.17 per
gallon (where it began the month of January). Spot prices still were
up, however, by 32 cents from their December low.
Weekly gasoline prices can be found in Haver's WEEKLY
database. Daily prices are in the DAILY
database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203e.jpg" align="right" border="0" height="265" width="353">
Demand continued quite weak for gasoline in reaction to the
economy's weakness. The U.S. Department of Energy reported that the demand
for gasoline fell by 3.5% during the latest four weeks.
While the rate of decline remained nearly the fastest since late-1995
(the latest four weeks versus the same four weeks in 2008) it has been
stable since November. The demand for all petroleum
products also is down a sharp 4.0% y/y. These numbers are available in
Haver's OILWKLY database.
The source for that reduced demand for gasoline is the cutback
in vehicle miles driven which have fallen 5.3% year-to-year during the
twelve months ended November. The rate of decline has been accelerating
since late 2007 and it is nearly unprecedented. These Department of
Transportation figures are available in Haver's OGJ database.
The price for a barrel of West Texas Intermediate crude moved
slightly higher last week to $42.52 per barrel and it was up 10 dollars
from the low reached late in December. Prices reached a high of $145.66
last July. In futures trading yesterday, the one-month price for crude
oil fell versus last week to $40.08 per barrel, down sharply from one
week ago.
The price of natural gas fell again, last week to $4.75 per
mmbtu (-40.9% y/y). The latest average price was down roughly
two-thirds from the high reached in early-July of $13.19/mmbtu.
Labor Supply Responses to Changes in Wealth and
Credit from the Federal Reserve Bank of San Francisco
is available <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-05.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/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">02/02/09</th>
<th scope="col">01/25/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon)</td>
<td>1.89</td>
<td>1.84</td>
<td>-36.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>42.52</td>
<td>42.18</td>
<td>-53.3%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
 U.S. Chain Store Sales Recovered
Last Week 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 3, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203f.jpg" align="left" border="0" height="265" width="353">
With a 1.6% increase last week chain store sales recovered
nearly all of the prior week's decline, according to the International
Council of Shopping Centers-Goldman Sachs Index. Nevertheless, the
year-to year change of -2.5% continued as the weakest in the series'
history which extends back to 1990. For January as a whole,
sales ticked up 0.1% from December after that month's 0.3% gain.
During the last ten years there has been a 64% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


The outlook for sales weakened further as the weekly leading
indicator of chain store sales from ICSC-Goldman Sachs fell 0.7% and it
was the third straight week of decline. The average level in January
was up 0.6% from December, which rose 2.1% versus November. Since the
lows of one month ago the index has recovered 3.0%.
The chain store sales figures are available in Haver's SURVEYW
database.
The January 2009 Senior Loan Officer Opinion
Survey on Bank Lending Practices from the Federal
Reserve Board can be found <a href="http://www.federalreserve.gov/boarddocs/SnLoanSurvey/200902/fullreport.pdf">here.</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">01/30/09</th>
<th scope="col">01/23/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>478.5</td>
<td>471.0</td>
<td>-2.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
 German Retail Sales Head South For
The Winter 
by <a href="/comment/Brusca.html">Robert
Brusca&nbsp;</a> February 3, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203g.jpg" align="left" border="0" height="265" width="353">
German nominal and real ex-auto retail sales are off for the
third month in a row. In the fourth quarter nominal retail sales are
off at a 4% pace; ex-auto real retail sales are dropping at a 2.1%
pace. The sequential growth rates show an accelerating pattern of
losses from 12-months to 6-months to 3-months, across the main
categories in the table. 
 

The downturn has spreading across other measures as well, as
manufacturing has been notoriously weak. German consumers have not been
much of a prop to this economy for a long time. In the quarter ended
Sept 2008 they did rise by 1.9% Q/Q (saar), but that was after falling
by 3.2% (saar) in the previous quarter. Yr/Yr quarterly average real
(ex auto) retail sales have been negative in German since the quarter
ended December 2006. Ironically the 2008-Q4 retail sales figures on
this same basis are up by 0.1%, the first quarterly increase since
Q4-2008 and it comes as sales have turned tail to move sharply lower in
the quarter. 
 

The German retailing association HDE is looking for retail
sales to decline in real terms in 2009. Manufacturing is coming apart
at the seams. Construction is weak, The German economy, Europe&#8217;s
largest, is under fire. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> German
Real and Nominal Retail Sales</th>
<th scope="col">QTR</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Nominal</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAgo</td>
<td>Saar</td>
</tr>
<tr>
<td class="firstcol">Retaill Ex auto</td>
<td> -0.6%</td>
<td> -0.8%</td>
<td> -0.9%</td>
<td> -8.7%</td>
<td> -0.4%</td>
<td>1.2%</td>
<td> -4.6%</td>
<td> -4.0%</td>
</tr>
<tr>
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td> -1.5%</td>
<td> -1.6%</td>
<td>0.0%</td>
<td> -11.6%</td>
<td> -1.1%</td>
<td>1.2%</td>
<td> -3.2%</td>
<td> -2.6%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td> -0.9%</td>
<td>1.1%</td>
<td> -4.4%</td>
<td> -15.9%</td>
<td>4.3%</td>
<td>1.1%</td>
<td> -2.7%</td>
<td> -5.</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="9">&nbsp;
Real</td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td> -0.2%</td>
<td> -0.1%</td>
<td> -0.9%</td>
<td> -4.6%</td>
<td>0.6%</td>
<td>0.2%</td>
<td> -6.5%</td>
<td> -2.1%</td>
</tr>
</tbody>
</table>
 U.S. Pending Home Sales Up in
December But Down For 2008. Affordability At New High With Lower Rates
&amp; Prices 
by <a href="/comment/Moeller.html">Tom
Moeller</a> February 3, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203i.jpg" align="left" border="0" height="265" width="353">
The National Association of Realtors indicated that pending
sales of existing homes in December rose 6.3% The increase reversed
most of the declines during the prior two months. Consensus
expectations were for no change in sales m/m. For the year as a whole,
sales fell 9.3% after declines of 14.6% and 9.8% during the prior two
years. Despite the monthly sales increase, the December level was near
the series' low.
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.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203j.jpg" align="right" border="0" height="265" width="353">
Lower prices continued to bolster home sales. The median sales
price of an existing home in December fell for the sixth straight month
and was down 15.3% year-to-year. Prices were down 23.4% from their peak
during June of last year. For single-family homes only, prices fell
2.9% during December and they were off 23.8% from their peak. Lower
prices combined with lower interest rates significantly raised the
affordability index of a home. It reached a record high for the series
which extends back to 1970.
A 13.0% December rise in the South led the latest increase in
total sales but were still off 16.2% for the year. Sales in the Midwest
also posted a 12.8% gain in December but that was not enough to keep
full-year sales from falling 9.7%. December sales in the West fell 3.7%
in December but rose 7.8% for the full year. Home sales in the
Northeast ticked lower by 1.7% for the month but repeated their decline
of 2007 and fell 15.2%.
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 11.7% last month, down 7.5% for the full year.
At the current sales rate there was a 9.3 months' supply of
homes on the market and there was a 10.4 months' 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 an 8.7 months' supply
in December versus a full-year figure of 10.0 months.
The pending home sales data are available in Haver's PREALTOR
database. The number of homes on the market and prices are in
the REALTOR database.
The American Recovery and Reinvestment Act of 2009
from the Congressional Budget Office can be found <a href="http://www.cbo.gov/ftpdocs/99xx/doc9977/hr1senate.pdf">here.</a>
The Term Structure of Inflation Expectations from
the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr362.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/WEEKLY/@W5/@W507/@W507.HTM">Pending
Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">December</th>
<th scope="col">November</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>87.7</td>
<td>82.5</td>
<td>&nbsp;&nbsp; 2.1%</td>
<td>86.8</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>62.1</td>
<td>63.2</td>
<td>-14.5</td>
<td>72.6</td>
<td>85.6</td>
<td>98.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>83.7</td>
<td>74.2</td>
<td>-1.2</td>
<td>80.9</td>
<td>89.6</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>96.8</td>
<td>85.7</td>
<td>1.6</td>
<td>89.8</td>
<td>107.3</td>
<td>127.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>97.5</td>
<td>101.2</td>
<td>17.5</td>
<td>99.3</td>
<td>92.1</td>
<td>109.5</td>
</tr>
</tbody>
</table>
</body></html>

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203a.jpg" align="right" border="0" height="265" width="353">
South Korea announced today that its January exports fell
32.7% below a year ago, the largest year to year percentage decline on
record. Except for September 2007, when exports fell 1.1%, Korea's
exports have shown double digit year to year percent increases in
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203b.jpg" align="right" border="0" height="265" width="353">
practically every month since July 2002 until November of last year
when double digit declines began to appear, as shown in the first chart.
Imports have also declined, but at a somewhat slower pace with
the results that the ten year stretch of South Korean trade surpluses
begun in 1998 has come to a stop. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090203c.jpg" align="right" border="0" height="265" width="353">
There was a $12.7 billion trade
deficit in 2008, compared with a surplus of $14.6 billion in 2007.
Annual data for exports, imports and balances of trade from 1998
through 2008 are shown in the second chart.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">South
Korea&nbsp;</th>
<th scope="col">Jan 09</th>
<th scope="col">Dec 08</th>
<th scope="col">Nov&nbsp; 08&nbsp;</th>
<th scope="col">Oct 08&nbsp;</th>
<th scope="col">Sep 08&nbsp;</th>
<th scope="col">Aug 08</th>
<th scope="col">July 08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Exports (NSA, Bil US$)</td>
<td>21.7</td>
<td>27.3</td>
<td>29.2</td>
<td>37.4</td>
<td>39.1</td>
<td>36.6</td>
<td>41.0</td>
<td>422.9</td>
<td>371.5</td>
</tr>
<tr class="even">
<td class="firstcol">Imports (NSA, Bil US$)</td>
<td>24.7</td>
<td>26.8</td>
<td>28.9</td>
<td>35.8</td>
<td>39.4</td>
<td>40.1</td>
<td>43.7</td>
<td>435.6</td>
<td>356.9</td>
</tr>
<tr class="even">
<td class="firstcol">Balance (NSA, Bil US$)</td>
<td>-3.0</td>
<td>0.7</td>
<td>0.3</td>
<td>1.2</td>
<td>-2.2</td>
<td>-3.8</td>
<td>-2.0</td>
<td>-12.7</td>
<td>14.6</td>
</tr>
<tr class="even">
<td class="firstcol">Exports (Y/Y % Chg</td>
<td>-32.8</td>
<td>-17.4</td>
<td>-18.2</td>
<td>8.53</td>
<td>27.7</td>
<td>18.2</td>
<td>35.6</td>
<td>14.1</td>
<td>13.8</td>
</tr>
<tr class="even">
<td class="firstcol">Imports (Y/Y % Chg</td>
<td>-32.1</td>
<td>-21.5</td>
<td>-14.7</td>
<td>10.4</td>
<td>45.8</td>
<td>36.4</td>
<td>47.4</td>
<td>15.4</td>
<td>22.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports to US Y/Y % Chg</td>
<td>--</td>
<td>-9.4</td>
<td>-14.3</td>
<td>5.0</td>
<td>19.3</td>
<td>1.0</td>
<td>9.3</td>
<td>11.5</td>
<td>18.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; To China
Y/Y % Chg</td>
<td>--</td>
<td>-36.4</td>
<td>-33.7</td>
<td>-3.5</td>
<td>15.0</td>
<td>19.3</td>
<td>30.1</td>
<td>3.2</td>
<td>10.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; To Taiwan
Y/Y %
Chg&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>--</td>
<td>-56.9</td>
<td>-45.2</td>
<td>-17.0</td>
<td>1.3</td>
<td>-15.0</td>
<td>-1.4</td>
<td>-12.0</td>
<td>0.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; To Malaysia
Y/Y % Chg</td>
<td>--</td>
<td>-30.5</td>
<td>-21.4</td>
<td>-24.8</td>
<td>8.2</td>
<td>10.8</td>
<td>27.6</td>
<td>1.6</td>
<td>9.1</td>
</tr>
</tbody>
</table>


</body></html>

South Korea announced today that its January exports fell 32.7% below a year ago, the largest year to year percentage decline on record. Except for September 2007, when exports fell 1.1%, Korea's exports have shown double digit year [...]

South Korean Exports Plummet: Sharp Fall in Exports to Pacific Rim

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202f.jpg" width="353">
The value of construction put in place during December dropped another 1.4%. The decline followed a 1.2% November drop which was double the decline originally estimated. These declines pulled overall construction down 5.2% for the full year 2008 which was the weakest performance since 1991. It followed a 2.7% decline during 2007. Last month&#39;s decline about matched Consensus expectations.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202g.jpg" width="353">
Residential building activity led the latest monthly decline with a 3.2% drop which pulled 2008 activity off by roughly one-quarter from the full year from 2007. That was a record decline for the series which extends back to 1965. Single-family construction activity fell 8.1% last month after a 6.1% November drop. It pulled the full-year level down 39.0% after a 26.8% drop during 2007. Building activity on multi-family units also fell hard. The 3.2% December decline lowered activity by 8.5% for the full year, about the same as the 2007 drop. Spending on improvements, however, recouped a 2.0% November fall but still ended the year posting a 7.2% decline.
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 has remained firm relative to the residential sector. Though the 0.4% December slip was the fifth in the last six months, activity rose 15.3% for the full year or about the same as during 2007. Spending on office construction rose<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202h.jpg" width="353"> 8.3% for the year, but that was roughly half the growth during the prior three years. Building in the multi-retail sector, however, fell 3.8% for the year after a 17.0% gain during 2007 and a 28.3% surge during 2006. Spending on health care facilities rose 8.1% for the year, about as it has since 2003. Building activity of educational facilities rose 10.2% last year after a 22.9% 2007 gain
Public construction fell 0.8% in December. But for the year activity rose a firm 7.1% after a 12.3% 2007 rise. Office building led the gain with 30.8% rise for the full year while the value of spending on educational facilities rose 7.8%. Spending on highways &amp; streets rose 5.1% the full year, about as it did in 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 dealers 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.

<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">December</th>
<th scope="col">November</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>-1.4</td>
<td>-1.2</td>
<td>-3.6</td>
<td>-5.2</td>
<td>-2.7</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-1.7</td>
<td>-2.3</td>
<td>-7.6</td>
<td>-9.3</td>
<td>-6.9</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-3.2</td>
<td>-4.1</td>
<td>-22.9</td>
<td>-27.1</td>
<td>-19.8</td>
<td>1.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-0.4</td>
<td>-0.8</td>
<td>8.9</td>
<td>15.3</td>
<td>19.6</td>
<td>16.2</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>-0.8</td>
<td>1.2</td>
<td>7.0</td>
<td>7.1</td>
<td>12.3</td>
<td>9.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The value of construction put in place during December dropped another 1.4%. The decline followed a 1.2% November drop which was double the decline originally estimated. These declines pulled overall construction down 5.2% for the [...]

U.S. Construction Spending Fell For Second Year

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<div align="left"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202i.jpg" align="left" border="0" height="265" width="353">

The PMIs for Europe reside very near the bottom of their
respective ranges. Generally the readings are bottom 10% of range or
less across large EMU members and the UK. Germany is now one of the
relative weakest countries on this measure &#8211; it is at its range low
point. Germany is one of four countries to see its MFG PMI drop further
in January. 
 

PMIs: what they are: 
PMIs are super sensitive gauges of activity. And they usually detect
turning points in a sector before more convention indicators do. The
MFG PMIs have only just stopped their declining ways for the EMU
region; for several countries the bottom has not yet been hit (as far
as we know). Even for those that have rebounded this month we do not
know with any degree of confidence that they have firmly put their past
low point behind them for the duration of this cycle. 
 

Too soon for the end? 
It is too soon to call this a turning point signal. But the first step
to getting to a turning point is to build a base that signals that the
PACE OF decline has bottomed out. Remember that these are diffusion
indices and even if they move &#8216;sideways&#8217;, as long as the value is below
50 it is signaling further declines in the sector they measure. Also
recall that PMIs are formally indicators of the breadth of a decline or
the breadth of an increase in industry; they are not indicators of
STRENGTH. 
 

What about the beginning of the end? 
It may also be too soon to look even for bottoming, but it may also be
that such a bottoming process has begun. The levels of the PMIs are
extremely low, and that is the sort of pace we would expect a true
stabilization process to begin at in a cycle such as this. We know MFG
is hard-hit so unless the PMIs reached very low readings we would
continue to think that worse results would still lay ahead. Now that a
first criterion for stabilization has been met (new all-time lows or
readings near to that) we can look for a second, namely a period of
time in which the PMIs either make modest gains or establish a base by
moving sideways. The final step would be for them to rise and
eventually to poke their heads above the level of 50. That one is still
quite a way off. 

</div>



<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>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Euro-13</td>
<td>34.42</td>
<td>33.88</td>
<td>35.58</td>
<td>34.63</td>
<td>39.58</td>
<td>44.98</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>31.96</td>
<td>32.66</td>
<td>35.66</td>
<td>33.43</td>
<td>40.03</td>
<td>46.69</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>37.90</td>
<td>34.91</td>
<td>37.28</td>
<td>36.70</td>
<td>39.91</td>
<td>45.34</td>
<td>10.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>36.06</td>
<td>35.54</td>
<td>34.95</td>
<td>35.52</td>
<td>39.62</td>
<td>43.86</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>31.51</td>
<td>28.49</td>
<td>29.42</td>
<td>29.81</td>
<td>34.12</td>
<td>38.89</td>
<td>10.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Austria</td>
<td>33.12</td>
<td>35.01</td>
<td>38.26</td>
<td>35.46</td>
<td>40.74</td>
<td>45.43</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td>39.98</td>
<td>40.96</td>
<td>42.25</td>
<td>41.06</td>
<td>45.77</td>
<td>49.44</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland</td>
<td>38.94</td>
<td>37.87</td>
<td>37.10</td>
<td>37.97</td>
<td>40.36</td>
<td>43.00</td>
<td>10.1%</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>36.29</td>
<td>38.42</td>
<td>38.71</td>
<td>37.81</td>
<td>42.80</td>
<td>46.99</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td colspan="8" class="firstcol">EU</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>35.78</td>
<td>34.91</td>
<td>34.48</td>
<td>35.06</td>
<td>38.64</td>
<td>43.65</td>
<td>6.0%</td>
</tr>
<tr class="odd">
<td colspan="6">percentile is over range since March
2000</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

The PMIs for Europe reside very near the bottom of their respective ranges. Generally the readings are bottom 10% of range or less across large EMU members and the UK. Germany is now one of the relative weakest countries on this [...]

MFG PMIs Stop Their Descent

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202d.jpg" width="353">
The Institute for Supply Management (ISM) reported that its January Composite Index of Activity in the manufacturing sector improved slightly to 35.6 from it&#39;s December low of 32.4. 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.you
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three-month growth in factory sector industrial production.
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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090202e.jpg" width="353">
The separate index of prices paid also improved moderately to 29.0. That, however, was not much 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 latest increase in the composite index recouped only a bit of the declines during the prior five months. That suggests the recent 10% rate of decline in industrial output will continue.
The new orders index during January improved slightly as 15% of survey participants reported higher orders but 52% reported that orders fell. The export order index improved, but only at the margin 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.

<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">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">Composite Index</td>
<td>35.6</td>
<td>32.9</td>
<td>50.8</td>
<td>45.5</td>
<td>51.1</td>
<td>53.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>33.2</td>
<td>23.1</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>29.9</td>
<td>29.9</td>
<td>47.9</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>18.0</td>
<td>76.0</td>
<td>66.5</td>
<td>64.6</td>
<td>65.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The Institute for Supply Management (ISM) reported that its January Composite Index of Activity in the manufacturing sector improved slightly to 35.6 from it's December low of 32.4. The latest was still near the lowest level since the [...]

ISM Index Improved Slightly From Historic 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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Andrew Cates

**US trade with Europe** 
Geopolitical tensions surrounding Greenland have abruptly sharpened investor sensitivity to US trade and foreign-policy risk. What might once have been dismissed as rhetorical brinkmanship has taken on greater macro-financial relevance as Donald Trump has coupled renewed interest in Greenland’s strategic importance with explicit threats of higher tariffs on European imports. The first chart below highlights that the US is materially more exposed to EU goods than the EU is to US trade, making any escalation asymmetrically more costly for the US economy. Beyond the direct inflationary impact of higher tariffs, the more immediate risk lies in confidence effects and capital flows: early signs of capital reallocation away from US assets over the past 24 hours suggest that markets could be beginning to price a broader erosion of policy predictability. In this environment, tariffs risk functioning less as a targeted trade tool and more as a systemic confidence shock—tightening financial conditions, unsettling the dollar’s safe-haven status and increasing downside risks to US growth via weaker investment and higher risk premia.

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**Japan’s JGB yields**
That said, recent capital outflows from US assets may owe as much to developments in Japan as to geopolitical and trade-related shocks. While tariff threats and policy unpredictability have clearly unsettled sentiment, an underappreciated driver of the sell-off in US Treasuries has been the sharp repricing in the Japanese government bond market. Renewed domestic political uncertainty and intensifying concerns over Japan’s debt dynamics have triggered a rapid rise in JGB yields, prompting portfolio rebalancing by Japanese investors and reducing the relative appeal of US duration. Given Japan’s role as one of the largest foreign holders of US Treasuries, yield gyrations at home can translate quickly into capital repatriation, hedging adjustments and reduced demand for US bonds. In this sense, recent moves in US yields may reflect less a direct reaction to geopolitical risk and more a globally transmitted capital-flow shock—originating in Japan but felt most acutely in US financial markets.

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**Inflation expectations and oil prices**
Capital-flow dynamics may have also begun to spill over into how markets are pricing US inflation risk and monetary credibility. Historically, medium-term US inflation expectations have remained closely anchored to global energy prices, as illustrated by the strong co-movement between the 5-year forward inflation rate and Brent crude prices. More recently, however, that relationship has begun to fray: inflation expectations have proven notably resilient even as oil prices have softened, suggesting that markets are increasingly pricing political and policy risk rather than cost-push fundamentals alone. Renewed tariff threats under President Trump, combined with heightened geopolitical tensions involving Greenland and transatlantic relations, risk reinforcing concerns that future inflation outcomes could be shaped as much by political intervention as by macroeconomic conditions. Any perception that the Federal Reserve may face constraints on its operational independence would compound this shift—loosening inflation anchors, raising term premia and increasing the sensitivity of capital flows to US policy credibility.

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**UK inflation** 
UK inflation data released this week show a small upside surprise in headline CPI at year-end. Headline CPI inflation specifically rose from 3.2% y/y in November to 3.4% in December, a little more than expected. The chart below shows that the pickup was driven by persistent underlying pressures—most notably in services. While a negative drag from energy prices has largely faded, services inflation continues to account for a disproportionate share of overall price growth, probably reflecting ongoing wage pressures and limited slack in parts of the domestic economy.

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**Wage growth in the US and Europe** 
Labour-market data from the Indeed Hiring Lab reinforce the picture of persistent services-side pressure in the UK inflation mix. As the chart shows, UK posted wage growth remains elevated relative to both the euro area and the US, even though momentum has eased from its 2023 peak. At around the mid-5% range on a three-month moving average basis, UK wage growth is still running at a pace that is difficult to reconcile with a rapid return of services inflation to target. By contrast, posted wage growth in the euro area has slowed more decisively, while the US has seen a sharper deceleration from earlier extremes.

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**China’s property market**
Finally, the Q4 GDP figures released in China this week sit uneasily alongside continued weakness in its domestic property sector, which remains a key drag on both investment and consumption. While Q4 growth of 4.5% y/y brought full-year GDP broadly in line with the authorities’ 5% target, the chart highlights how property-market adjustment is still running deep beneath the surface. Prices of existing homes across China’s 70 cities remain in year-on-year decline, while real estate investment continues to contract sharply, underscoring the scale and persistence of the sector’s retrenchment. This helps explain why fixed asset investment has softened further and why household demand remains subdued, despite more resilient industrial output.

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This week’s data and market moves have been framed by an abrupt escalation in geopolitical tensions surrounding Greenland, which has served as a catalyst for broader financial unease rather than a standalone shock. The episode has sharpened investor focus on US policy predictability, amplifying concerns already evident in the charts on EU–US trade exposure, where tariff threats risk feeding directly into confidence effects and capital flows. At the same time, recent turbulence in Japanese government bonds appears to have been an underappreciated driver of the sell-off in US Treasuries, highlighting how global capital reallocation—rather than geopolitics alone—has contributed to higher US yields. These forces intersect with growing questions around the durability of US monetary credibility, as inflation expectations have shown signs of decoupling from traditional oil-price anchors, raising the sensitivity of markets to any perceived constraints on the Federal Reserve. Beyond the US, UK data delivered a modest upside surprise in headline inflation, with persistent services and wage pressures reinforcing a cautious policy backdrop for the Bank of England. In China, meanwhile, Q4 GDP growth of 4.5% y/y kept full-year expansion aligned with the government’s target, but continued weakness in the property sector remains a significant drag on investment and household confidence. Taken together, the week’s developments point to a global outlook increasingly shaped by geopolitical risk, capital-flow dynamics and domestic  structural constraints, rather than by straightforward cyclical momentum alone.

Charts of the Week: Seeing Green

Sandy Batten

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Real GDP increased 4.4% q/q saar in the third quarter of 2025 in the final estimate, up marginally from 4.3% in the first release. The Action Economics Forecast Survey expected no revision. Growth from a year ago was unrevised at 2.3% y/y. Growth of corporate profits was revised up to 4.5% q/q not annualized from 4.2% in the previous report.

The revision to GDP mostly reflected slightly stronger nonresidential fixed investment, a larger increase in exports and a smaller decrease in inventory investment. Nonresidential fixed investment increased a revised 3.2% q/q saar versus a 2.8% gain in the previous release. This reflected a smaller decline in structures, a smaller increase in equipment and a larger increase in intellectual property products than previously estimated. Residential investment was revised weaker with a 7.1% quarterly decline versus -5.1% in the previous estimate.

Upon revision, exports rose 9.6% q/q in Q3 versus 8.8% in the first estimate. Consequently, the trade deficit narrowed a little more than in the first estimate, resulting in net exports adding 1.62%-points to overall growth, 0.03%-point more previously estimated. The decline in inventory investment in Q3 was smaller than previously estimated, reducing the drag from inventories by 0.1%-point versus the previous estimate. The decline in inventories subtracted 0.12%-point in Q3 on top of a 3.44%-point subtraction in Q2.

Domestic demand growth remained solid in Q3 but was revised down 0.1%-point. Final sales to domestic purchasers grew a revised 2.8% q/q saar in Q3 versus 2.9% in the first estimate. Final sales to private domestic purchasers increased 2.9% q/q, down slightly from 3.0% previously.

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The primary driver of overall growth continued to be personal consumption expenditures. They increased an unrevised 3.5% q/q saar in Q3, adding 2.34%-points to total GDP growth. This reflected a 3.0% increase in spending on goods versus 3.1% previously and a 3.6% gain in spending on services versus 3.7% previously. The rise in government spending was unrevised at 2.2% q/q. However, spending by the federal government was revised slightly slower to 2.7% from 2.9% while spending by state and local governments was revised up slightly to 2.0% from 1.8%.

Key measures of inflation were unrevised. Inflation as measured by the GDP price index remained at 3.8% q/q saar in Q3, but this was up markedly from 2.1% in Q2. Similarly, PCE inflation in Q3 was unrevised at 2.8% versus 2.1% in Q2. Core PCE inflation was also unrevised at 2.9% in Q3.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Real GDP grew 4.4% q/q saar in Q3 2025, up slightly from 4.3% previously reported.
- The modest upward revision was due mostly to slightly stronger nonresidential fixed investment, a larger increase in exports and a smaller decrease in inventories.
- Growth of domestic demand remained solid in Q3 but was revised down 0.1%-point.
- GDP and PCE inflation were unrevised at 3.8% and 2.8%, respectively. Both are meaningful accelerations from Q2.

U.S. Q3 GDP Growth Revised Slightly Faster

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance edged up 1,000 to 200,000 in the week ending January 17, from 199,000 in the week ending January 10, revised from 198,000. The four-week moving average of initial claims was 201,500 in the January 17 week, down 3,750 from 205,250 in the January 10 week, revised from 205,000, and reaching the lowest level for this average since January 13, 2024, when it was 200,000.

Federal government employees initially filed 1010 (NSA) jobless insurance claims in the week ended January 10, after filing 646 (NSA) claims in the week ended January 3.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” –decreased by 26,000 to 1.849 million in the week ended January 10 from 1.875 million in the week ending January 3, revised from 1.884 million. The four-week moving average was 1.871 million in the latest week, down from 1.887 million in the January 3 week, revised from 1.889 million. The insured unemployment rate remained at 1.2% in the week of January 10, unchanged from previous 6 weeks.

Federal government employees’ continuing benefits claims were 12,977 (NSA) in the week ending January 3, from 12,803 (NSA) in the week of December 27.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 3, the highest unemployment rates were in Rhode Island (3.27%), New Jersey (3.17%), Washington (2.85%), Minnesota (2.75%), Massachusetts (2.74%), Oregon (2.37%), Connecticut (2.31%), Montana (2.26%), California (2.21%), and Alaska (2.06%). The lowest rates were in Florida (0.29%), North Carolina (0.40%), and Louisiana (0.43%). Rates in other notable states include New York (2.28%), Pennsylvania (2.23%), Illinois (2.21%), and Texas (1.14%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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U.S. Initial Claims for Unemployment Insurance Edged Up in Latest Week

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

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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.

Economy in Brief

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