Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070208d.jpg" width="353">
With increasing attention to &quot;climate change&quot;, some very simple data take on more prominence. The National Climatic Data Center, a division of the National Oceanic and Atmospheric Administration of the Commerce Department, maintains temperature and precipitation records for the nation, regions and states. We wrote about these data last June, which was a particularly hot, dry month. Yesterday, the averages were published for January. Haver has for some time had these in both USECON for the national average and in REGIONAL for 9 regions and 48 states.
January&#39;s average temperature was 31.8&deg;F, compared with an average since 1921 of 31.1&deg;F. A year ago, which we recall as a mild winter, the January average temperature was 39.0&deg;F. While this current period seems close to &quot;normal&quot;, the regional breakdown shows considerable variation: of 9 regions, only one, the Northwest, was within a degree of its long-term January average, while three regions were chillier and five were warmer.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070208e.jpg" width="353">
The amount of precipitation in January was 2.02&quot;, slightly less than the average of 2.18&quot; since 1921. Last year and the year before were both somewhat wetter, at 2.46&quot; and 2.65&quot;, respectively. Among the regions, there&#39;s a tendency toward dryness, as five regions had at least a quarter inch less precipitation than average, with two regions within 0.1&quot; of average and two wetter than average.
When we examined these data in early July for June, we did so using Haver&#39;s DLX Excel add-in to make a spreadsheet full of June figures. The add-in entered the series codes we highlighted in DLXVG3 and traced out the range in which DLX would place the figures in the spreadsheet. So today, we simply revised that spreadsheet using a simple &quot;replace&quot; procedure to change the dates from yyyy06 to yyyy01 and adding a row to the bottom for 2007&#39;s entry. These two changes got us 87 years of January data for the 48-state total and 9 climate regions, along with means, medians and other statistics, within just a couple of minutes.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070208f.jpg" width="353">
This array can help us tell quickly, for instance, that January 2006 was the warmest on record and was also the warmest for three regions, Central states, East North Central and West North Central. However, the warmest January in the South was way back in 1923 and in the Northeast, it was in 1932. What about so-called &quot;global warming&quot;? In the overall scheme of these things, 87 years isn&#39;t long. But in the third graph here, we show a 12-month moving average of the national temperature since 1921. This yearly average has clearly been rising since 1980, albeit from a low level then, and has been almost continuously above the long-term average since 1998.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">U.S. Weather</th>
<th scope="col">January 2007</th>
<th scope="col">January 2006</th>
<th scope="col">January 2005</th>
Averages of Januaries
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2001-2007</td>
<td>1976-2000</td>
<td>1951-1975</td>
<td>1921-2007</td>
</tr>
<tr>
<td class="firstcol">Temperature (degrees F)</td>
<td>31.8</td>
<td>39.0</td>
<td>33.2</td>
<td>33.39</td>
<td>30.93</td>
<td>30.73</td>
<td>31.08</td>
</tr>
<tr class="odd">
<td class="firstcol">Precipitation (inches)</td>
<td>2.02</td>
<td>2.46</td>
<td>2.65</td>
<td>1.99</td>
<td>2.25</td>
<td>2.14</td>
<td>2.18</td>
</tr>
</tbody>
</table>
</body>
</html>

With increasing attention to "climate change", some very simple data take on more prominence. The National Climatic Data Center, a division of the National Oceanic and Atmospheric Administration of the Commerce Department, maintains [...]

U.S. Weather in January Not Far from "Normal", But Regions Show Wide Variations

Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070208a.jpg" width="353">
Initial unemployment insurance claims inched up 3,000 last week to 311,000 after a little revised 19,000 decline the week prior. The figure about matched Consensus expectations for 310,000 claims.
During the last ten years there has been a (negative) 77% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims rose slightly to 308,250 (8.3% y/y).
A 54,000 (-2.3% y/y) drop in continuing claims for unemployment insurance reversed most of a downwardly revised 62,000 jump the week prior.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070208b.jpg" width="353">
The insured rate of unemployment remained at 1.9%, about where it&#39;s been since February.
In the latest week, initial claims rose sharply in California (16.5% y/y) but fell in most other states. In New York claims fell (2.7%) y/y but in Illinois claims rose 13.7% y/y, in Michigan they fell 10.8% y/y and in Massachusetts claims rose 4.2% y/y. These weekly figures are available in Haver&#39;s REGIONW database.
The Role of Labor Market Intermittency in Explaining Gender Wage Differentials from the Federal Reserve Bank of Atlanta is available <a href="http://www.frbatlanta.org/filelegacydocs/wp0701.pdf"> here</a>.
The Economics of Immigration from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/econed/essay/"> 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">Unemployment Insurance (000s)</a></th>
<th scope="col">02/03/07</th>
<th scope="col">01/27/07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>311</td>
<td>308</td>
<td>6.5%</td>
<td>313</td>
<td>332</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,490</td>
<td>-2.3%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial unemployment insurance claims inched up 3,000 last week to 311,000 after a little revised 19,000 decline the week prior. The figure about matched Consensus expectations for 310,000 claims. During the last ten years there has [...]

Initial Claims for Unemployment Insurance Inched Up

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070201c.jpg" width="353">
Initial unemployment insurance claims inched up 3,000 last week to 311,000 after a little revised 19,000 decline the week prior. The figure about matched Consensus expectations for 310,000 claims.
During the last ten years there has been a (negative) 77% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims rose slightly to 308,250 (8.3% y/y).
A 54,000 (-2.3% y/y) drop in continuing claims for unemployment insurance reversed most of a downwardly revised 62,000 jump the week prior.
The insured rate of unemployment remained at 1.9%, about where it&#39;s been since February.
In the latest week, initial claims rose sharply in California (16.5% y/y) but fell in most other states. In New York claims fell (2.7%) y/y but in Illinois claims rose 13.7% y/y, in Michigan they fell 10.8% y/y and in Massachusetts claims rose 4.2% y/y. These weekly figures are available in Haver&#39;s REGIONW database.
The Role of Labor Market Intermittency in Explaining Gender Wage Differentials from the Federal Reserve Bank of Atlanta is available <a href="http://www.frbatlanta.org/filelegacydocs/wp0701.pdf"> here</a>.
The Economics of Immigration from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/econed/essay/"> 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">Unemployment Insurance (000s)</a></th>
<th scope="col">02/03/07</th>
<th scope="col">01/27/07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>311</td>
<td>308</td>
<td>6.5%</td>
<td>313</td>
<td>332</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,490</td>
<td>-2.3%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
U.S. Weather in January Not Far from "Normal", But Regions Show Wide Variations 
by <a href="/comment/Stone.html">Carol Stone</a> February 8, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070208d.jpg" width="353">
With increasing attention to &quot;climate change&quot;, some very simple data take on more prominence. The National Climatic Data Center, a division of the National Oceanic and Atmospheric Administration of the Commerce Department, maintains temperature and precipitation records for the nation, regions and states. We wrote about these data last June, which was a particularly hot, dry month. Yesterday, the averages were published for January. Haver has for some time had these in both USECON for the national average and in REGIONAL for 9 regions and 48 states.
January&#39;s average temperature was 31.8&deg;F, compared with an average since 1921 of 31.1&deg;F. A year ago, which we recall as a mild winter, the January average temperature was 39.0&deg;F. While this current period seems close to &quot;normal&quot;, the regional breakdown shows considerable variation: of 9 regions, only one, the Northwest, was within a degree of its long-term January average, while three regions were chillier and five were warmer.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070208e.jpg" width="353">
The amount of precipitation in January was 2.02&quot;, slightly less than the average of 2.18&quot; since 1921. Last year and the year before were both somewhat wetter, at 2.46&quot; and 2.65&quot;, respectively. Among the regions, there&#39;s a tendency toward dryness, as five regions had at least a quarter inch less precipitation than average, with two regions within 0.1&quot; of average and two wetter than average.
When we examined these data in early July for June, we did so using Haver&#39;s DLX Excel add-in to make a spreadsheet full of June figures. The add-in entered the series codes we highlighted in DLXVG3 and traced out the range in which DLX would place the figures in the spreadsheet. So today, we simply revised that spreadsheet using a simple &quot;replace&quot; procedure to change the dates from yyyy06 to yyyy01 and adding a row to the bottom for 2007&#39;s entry. These two changes got us 87 years of January data for the 48-state total and 9 climate regions, along with means, medians and other statistics, within just a couple of minutes.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070208f.jpg" width="353">
This array can help us tell quickly, for instance, that January 2006 was the warmest on record and was also the warmest for three regions, Central states, East North Central and West North Central. However, the warmest January in the South was way back in 1923 and in the Northeast, it was in 1932. What about so-called &quot;global warming&quot;? In the overall scheme of these things, 87 years isn&#39;t long. But in the third graph here, we show a 12-month moving average of the national temperature since 1921. This yearly average has clearly been rising since 1980, albeit from a low level then, and has been almost continuously above the long-term average since 1998.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">U.S. Weather</th>
<th scope="col">January 2007</th>
<th scope="col">January 2006</th>
<th scope="col">January 2005</th>
Averages of Januaries
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2001-2007</td>
<td>1976-2000</td>
<td>1951-1975</td>
<td>1921-2007</td>
</tr>
<tr>
<td class="firstcol">Temperature (degrees F)</td>
<td>31.8</td>
<td>39.0</td>
<td>33.2</td>
<td>33.39</td>
<td>30.93</td>
<td>30.73</td>
<td>31.08</td>
</tr>
<tr class="odd">
<td class="firstcol">Precipitation (inches)</td>
<td>2.02</td>
<td>2.46</td>
<td>2.65</td>
<td>1.99</td>
<td>2.25</td>
<td>2.14</td>
<td>2.18</td>
</tr>
</tbody>
</table>
</body>
</html>

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070207e.jpg" width="353">
European industry is trying hard to grow and some sectors are more successful than others, according to data for December 2006 reported today by various statistical agencies. German production fell by 0.7% after a 1.8% surge in November. Its growth has moderated since August, but analysts were surprised by today&#39;s drop, having projected a gain for the month of about 0.5%. The VAT went up on January 1, so activity was expected to be strong through the end of 2006, but it appears to have tailed off earlier. Even so, industrial output for 2006 as a whole was up 6.1%, the strongest since the tech boom period in 2000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070207d.jpg" width="353">
In the UK, basic manufacturing has done fairly well in 2006, with that sector&#39;s production index up 2.4% from a year ago (based on seasonally adjusted data) and the year total up 1.3% from 2005, more than reversing a decline in 2005. Machinery, especially electrical equipment, was the strongest segment. In Britain, mining is in a decline as oil production decreases. This is weighing significantly on total industrial production, which was up in December by only 0.5% from December 2005 and actually down modestly for the year as a whole compared with 2005. That year, it fell 1.8%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070207f.jpg" width="353">
Denmark&#39;s industrial production fell back in December by 3 points (2.7%), but it enjoyed vigorous expansion through most of the rest of 2006. Wood products, clothing, oil refining and machinery all contributed sizable gains.
In Hungary, the number reported today is an advance estimate for a subset of the larger companies. Their production advanced 2.2% in December, bringing the gain to 11.2% for the year as a whole. Details for December will be reported on February 15. Through November, the breakdown looked similar to other neighboring nations, with strength greatest in machinery and equipment. In Hungary, rubber and plastics production has also been strong.
Sometimes, with all the publicity favoring manufacturing in Asia, one can get the impression that industry elsewhere is languishing. But as we see here, that is not so and especially for machinery, European companies are experiencing sizable growth.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">IP: Indexes, 2000=100</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Oct 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany: Total IP*</td>
<td>115.2</td>
<td>116.0</td>
<td>113.8</td>
<td>108.6</td>
<td>112.9</td>
<td>106.4</td>
<td>102.6</td>
</tr>
<tr>
<td class="firstcol">UK: Total IP**</td>
<td>95.2</td>
<td>95.3</td>
<td>95.1</td>
<td>94.8</td>
<td>95.2</td>
<td>95.3</td>
<td>97.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing**</td>
<td>99.3</td>
<td>99.1</td>
<td>98.9</td>
<td>97.0</td>
<td>98.5</td>
<td>97.2</td>
<td>98.3</td>
</tr>
<tr>
<td class="firstcol">Denmark: Total</td>
<td>109</td>
<td>112</td>
<td>111</td>
<td>109</td>
<td>108</td>
<td>104</td>
<td>102</td>
</tr>
<tr class="odd">
<td class="firstcol">Hungary: Total, 5 or more Employees</td>
<td>155.6</td>
<td>152.2</td>
<td>152.3</td>
<td>134.4</td>
<td>145.8</td>
<td>131.1</td>
<td>122.1</td>
</tr>
</tbody>
</table>
</body>
</html>

European industry is trying hard to grow and some sectors are more successful than others, according to data for December 2006 reported today by various statistical agencies. German production fell by 0.7% after a 1.8% surge in [...]

Machinery Output Leads Industrial Production in Several European Nations

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070207c.jpg" width="353">
The total number of mortgage applications were about flat last week after a 3.2% jump at the end of January according to the Mortgage Bankers Association.
Purchase applications fell 0.8% marking the third decline in the last four weeks.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance were roughly unchanged after a sharp 4.9% gain during the prior week.
The effective interest rate on a conventional 30-year mortgage fell sharply to 6.44% and reversed most of the prior week&#39;s increase. Rates averaged 6.40% last month and 6.28% in December. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also fell to 6.23%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
Monetary Policy Inertia and Recent Fed Actions from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-03.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">02/02/07</th>
<th scope="col">01/26/07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>630.1</td>
<td>631.1</td>
<td>1.7%</td>
<td>584.2</td>
<td>708.6</td>
<td>735.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>404.7</td>
<td>408.0</td>
<td>-4.8%</td>
<td>406.9</td>
<td>470.9</td>
<td>454.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,943.4</td>
<td>1,940.2</td>
<td>11.0%</td>
<td>1,634.0</td>
<td>2,092.3</td>
<td>2,366.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications were about flat last week after a 3.2% jump at the end of January according to the Mortgage Bankers Association. Purchase applications fell 0.8% marking the third decline in the last four [...]

Mortgage Applications About Flat

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070207a.jpg" width="353">
Nonfarm labor productivity grew 3.0% last quarter after a downwardly revised 0.1% downtick during 3Q06. The gain was well ahead of Consensus expectations and raised growth of 2.1% for the whole year about even with the 2.3% increase during 2005.
The implications of productivity growth were addressed directly in The Level and Distribution of Economic Well-Being, yesterday&#39;s speech by Fed Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/BoardDocs/Speeches/2007/20070206/default.htm"> here</a>.
Compensation per hour last quarter grew an accelerated 4.8% after an upwardly revised 3.1% gain during 3Q. Together, these growth rates pulled compensation growth for the year to 5.3% which was the strongest since a 7.2% increase during 2000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070207b.jpg" width="353">
Unit labor cost growth moderated sharply to 1.7% from an upwardly revised 3.2% during 3Q as a result of the improvement in productivity. The full year gain in unit labor costs of 3.2% was the strongest since a 4.2% increase during 2000. During the last thirty years there has been an 85% correlation between labor cost growth the growth in the GDP chain price deflator, although that correlation has fallen sharply in recent years.
Factory sector productivity growth last quarter decelerated sharply to 2.2% from a little revised 6.3% jump during 3Q. The annual gain in factory sector productivity also fell to a still firm 3.9% from 4.7% in 2005. Factory sector compensation per hour jumped 7.3% after 3.3% growth during 3Q. The annual gain in compensation of 4.1% was down just a bit from 4.6% growth during 2005. Unit labor costs jumped 5.0% last quarter as a result of the surge in compensation. The surge nevertheless left the annual gain at a modest 0.2% after a 0.1% decline during 2005.
The Economic Outlook: Prospects for 2007 from Charles I Plosser, President, Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/publicaffairs/speeches/plosser/2007/02-07-07_phila-chamber.cfm"> 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/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">4Q &#39;06</th>
<th scope="col">3Q &#39;06</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>3.0%</td>
<td>-0.1%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>2.3%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>4.8%</td>
<td>3.1%</td>
<td>4.9%</td>
<td>5.3%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>1.7%</td>
<td>3.2%</td>
<td>2.8%</td>
<td>3.2%</td>
<td>2.0%</td>
<td>0.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

Nonfarm labor productivity grew 3.0% last quarter after a downwardly revised 0.1% downtick during 3Q06. The gain was well ahead of Consensus expectations and raised growth of 2.1% for the whole year about even with the 2.3% increase [...]

U.S. Productivity Stronger Than Expected in 4Q

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070207a.jpg" width="353">
Nonfarm labor productivity grew 3.0% last quarter after a downwardly revised 0.1% downtick during 3Q06. The gain was well ahead of Consensus expectations and raised growth of 2.1% for the whole year about even with the 2.3% increase during 2005.
The implications of productivity growth were addressed directly in The Level and Distribution of Economic Well-Being, yesterday&#39;s speech by Fed Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/BoardDocs/Speeches/2007/20070206/default.htm"> here</a>.
Compensation per hour last quarter grew an accelerated 4.8% after an upwardly revised 3.1% gain during 3Q. Together, these growth rates pulled compensation growth for the year to 5.3% which was the strongest since a 7.2% increase during 2000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070207b.jpg" width="353">
Unit labor cost growth moderated sharply to 1.7% from an upwardly revised 3.2% during 3Q as a result of the improvement in productivity. The full year gain in unit labor costs of 3.2% was the strongest since a 4.2% increase during 2000. During the last thirty years there has been an 85% correlation between labor cost growth the growth in the GDP chain price deflator, although that correlation has fallen sharply in recent years.
Factory sector productivity growth last quarter decelerated sharply to 2.2% from a little revised 6.3% jump during 3Q. The annual gain in factory sector productivity also fell to a still firm 3.9% from 4.7% in 2005. Factory sector compensation per hour jumped 7.3% after 3.3% growth during 3Q. The annual gain in compensation of 4.1% was down just a bit from 4.6% growth during 2005. Unit labor costs jumped 5.0% last quarter as a result of the surge in compensation. The surge nevertheless left the annual gain at a modest 0.2% after a 0.1% decline during 2005.
The Economic Outlook: Prospects for 2007 from Charles I Plosser, President, Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/publicaffairs/speeches/plosser/2007/02-07-07_phila-chamber.cfm"> 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/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">4Q &#39;06</th>
<th scope="col">3Q &#39;06</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>3.0%</td>
<td>-0.1%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>2.3%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Compensation per Hour</td>
<td>4.8%</td>
<td>3.1%</td>
<td>4.9%</td>
<td>5.3%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>1.7%</td>
<td>3.2%</td>
<td>2.8%</td>
<td>3.2%</td>
<td>2.0%</td>
<td>0.7%</td>
</tr>
</tbody>
</table>
Mortgage Applications About Flat 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 7, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070207c.jpg" width="353">
The total number of mortgage applications were about flat last week after a 3.2% jump at the end of January according to the Mortgage Bankers Association.
Purchase applications fell 0.8% marking the third decline in the last four weeks.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance were roughly unchanged after a sharp 4.9% gain during the prior week.
The effective interest rate on a conventional 30-year mortgage fell sharply to 6.44% and reversed most of the prior week&#39;s increase. Rates averaged 6.40% last month and 6.28% in December. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also fell to 6.23%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
Monetary Policy Inertia and Recent Fed Actions from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-03.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">02/02/07</th>
<th scope="col">01/26/07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>630.1</td>
<td>631.1</td>
<td>1.7%</td>
<td>584.2</td>
<td>708.6</td>
<td>735.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>404.7</td>
<td>408.0</td>
<td>-4.8%</td>
<td>406.9</td>
<td>470.9</td>
<td>454.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,943.4</td>
<td>1,940.2</td>
<td>11.0%</td>
<td>1,634.0</td>
<td>2,092.3</td>
<td>2,366.8</td>
</tr>
</tbody>
</table>
Machinery Output Leads Industrial Production in Several European Nations 
by <a href="/comment/Stone.html">Carol Stone</a> February 7, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070207e.jpg" width="353">
European industry is trying hard to grow and some sectors are more successful than others, according to data for December 2006 reported today by various statistical agencies. German production fell by 0.7% after a 1.8% surge in November. Its growth has moderated since August, but analysts were surprised by today&#39;s drop, having projected a gain for the month of about 0.5%. The VAT went up on January 1, so activity was expected to be strong through the end of 2006, but it appears to have tailed off earlier. Even so, industrial output for 2006 as a whole was up 6.1%, the strongest since the tech boom period in 2000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070207d.jpg" width="353">
In the UK, basic manufacturing has done fairly well in 2006, with that sector&#39;s production index up 2.4% from a year ago (based on seasonally adjusted data) and the year total up 1.3% from 2005, more than reversing a decline in 2005. Machinery, especially electrical equipment, was the strongest segment. In Britain, mining is in a decline as oil production decreases. This is weighing significantly on total industrial production, which was up in December by only 0.5% from December 2005 and actually down modestly for the year as a whole compared with 2005. That year, it fell 1.8%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070207f.jpg" width="353">
Denmark&#39;s industrial production fell back in December by 3 points (2.7%), but it enjoyed vigorous expansion through most of the rest of 2006. Wood products, clothing, oil refining and machinery all contributed sizable gains.
In Hungary, the number reported today is an advance estimate for a subset of the larger companies. Their production advanced 2.2% in December, bringing the gain to 11.2% for the year as a whole. Details for December will be reported on February 15. Through November, the breakdown looked similar to other neighboring nations, with strength greatest in machinery and equipment. In Hungary, rubber and plastics production has also been strong.
Sometimes, with all the publicity favoring manufacturing in Asia, one can get the impression that industry elsewhere is languishing. But as we see here, that is not so and especially for machinery, European companies are experiencing sizable growth.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">IP: Indexes, 2000=100</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Oct 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany: Total IP*</td>
<td>115.2</td>
<td>116.0</td>
<td>113.8</td>
<td>108.6</td>
<td>112.9</td>
<td>106.4</td>
<td>102.6</td>
</tr>
<tr>
<td class="firstcol">UK: Total IP**</td>
<td>95.2</td>
<td>95.3</td>
<td>95.1</td>
<td>94.8</td>
<td>95.2</td>
<td>95.3</td>
<td>97.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing**</td>
<td>99.3</td>
<td>99.1</td>
<td>98.9</td>
<td>97.0</td>
<td>98.5</td>
<td>97.2</td>
<td>98.3</td>
</tr>
<tr>
<td class="firstcol">Denmark: Total</td>
<td>109</td>
<td>112</td>
<td>111</td>
<td>109</td>
<td>108</td>
<td>104</td>
<td>102</td>
</tr>
<tr class="odd">
<td class="firstcol">Hungary: Total, 5 or more Employees</td>
<td>155.6</td>
<td>152.2</td>
<td>152.3</td>
<td>134.4</td>
<td>145.8</td>
<td>131.1</td>
<td>122.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070206h.jpg" width="353">
Japan&#39;s Cabinet Office released today preliminary diffusion and composite indexes of business cyclical developments for December. Final figures will be released on February 16, one day after the release of data for the fourth quarter GDP.
Diffusion indexes aggregate the direction of changes in selected series that indicate a phase of the business cycle--leading, coincident and lagging. (The leading, coincident and lagging series are shown in the Composite Indexes in the Indexes of Business Cycles in Haver&#39;s JAPAN data base.) A diffusion index number below 50% is a sign that the economy may slow in three to six months. The leading diffusion index is not, however, by itself, a particularly good forecaster of Gross National Product. In the first chart the leading diffusion index aggregated on a quarterly basis is shown with GDP. The correlation between the two series is a mere 22%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070206g.jpg" width="353">
Composite indexes aggregate the percentage changes in the selected series to indicate the volume of economic activity. When the composite coincident index is rising, the economic cycle is considered to be in the expansion phase, and when declining, in the contraction phase.The Cabinet Office suggests that because of the volatility in all the series, that one should use three month moving averages. On this basis the year to year change in the composite coincident index appears to be a better indicator of the year to year changes in GDP as can be seen in the second chart, where the correlation between the two series is 77%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070206i.jpg" width="353">.The leading diffusion index is signaling caution. Although the index increased in December to 25% from 18.2% in November, it marked the second month that the index was below 50%. Except for October when the index was 54.5%, the index has been below 50% in last half of 2006 and on a three month average basis, the index has been below 50 since July, 2006. The composite coincident index, however, suggests that the economy is still in the expansion phase. Although this indicator dipped slightly in December to 113.4 from 113.5, on a three month average basis, it rose from 112.8 in November to 113.3 in December. The three month moving averages of the leading diffusion index and the coincident composite index are shown in the third chart. Even on a three month moving average, the leading diffusion index is still highly volatile, suggesting that its use in forecasting GDP may entail a wider band of error than the use of the composite coincident indicator.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN:&nbsp; DIFFUSION AND COMPOSITE INDEXES&nbsp;</th>
<th scope="col">Dec&nbsp; 06</th>
<th scope="col">Nov 06</th>
<th scope="col">Dec 05</th>
<th scope="col">M/M DIF</th>
<th scope="col">Y/Y DIF</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Diffusion Indexes (%)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Leading</td>
<td>25.0</td>
<td>18.2</td>
<td>66.7</td>
<td>6.8</td>
<td>-11.7</td>
<td>49.1</td>
<td>55.2</td>
<td>58.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Coincident</td>
<td>61.1</td>
<td>65.0</td>
<td>90.9</td>
<td>-3.9</td>
<td>-29.8</td>
<td>66.4</td>
<td>71.6</td>
<td>61.4</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Lagging </td>
<td>50.0</td>
<td>60.0</td>
<td>66.7</td>
<td>-10.</td>
<td>-16.7</td>
<td>64.3</td>
<td>72.2</td>
<td>77.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Composite Indexes (2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Leading</td>
<td>102.5</td>
<td>104.2</td>
<td>104.8</td>
<td>-1.7</td>
<td>-2.3</td>
<td>105.5</td>
<td>102.8</td>
<td>103.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Coincident</td>
<td>113.4</td>
<td>113.5</td>
<td>110.9</td>
<td>-0.1</td>
<td>7.5</td>
<td>111.6</td>
<td>107.7</td>
<td>105.2</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Lagging </td>
<td>124.3</td>
<td>126.2</td>
<td>120.5</td>
<td>-1.9</td>
<td>3.8</td>
<td>124.6</td>
<td>119.7</td>
<td>114.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Japan's Cabinet Office released today preliminary diffusion and composite indexes of business cyclical developments for December. Final figures will be released on February 16, one day after the release of data for the fourth quarter [...]

Leading Diffusion and Coincident Composite Indicators in Japan Give Mixed Signals

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Michael J. Moran

260428N.jpg

260428O.jpg

The Conference Board’s index of Consumer Confidence inched higher in April from an upwardly revised reading in March. The combined changes left the measure 1.1% higher than the preliminary tally in March. Despite the improvement, the index remained in the low end of the range for the current expansion. The index in April totaled 92.8, down from an average of 96.1 in 2025 and an annual cyclical high of 105.4 in 2023.

The Improvement in April reflected a pickup in the expectations component, which rose 1.7%. The current conditions component inched 0.2% lower. Overall views on current conditions slipped despite more favorable assessments of the labor market. The so-called measure of the jobs gap (share of respondents indicating that jobs are plentiful less the share saying that jobs are hard to get) rose 1.4 percentage points higher to 7.5%. The pickup reflected a drop in the share indicating that jobs are hard to get (down 1.5 percentage points to 19.8%). The share indicating that jobs are plentiful eased 0.1 percentage point to 27.3%.

Although expectations improved in April, from a long-term perspective they could be viewed as the more important factor restraining the headline measure of confidence. As shown in the left chart below, the expectations component of confidence shows considerably less volatility than the current conditions component does. The contrasting patterns suggest that individuals realize that the economy will undergo possibly sharp cyclical swings, but they expect conditions at some point to return to an underlying norm.

The current conditions index in the current cycle has indeed dropped noticeably, but it is still above the long run average (123.8 in April versus the average of approximately 108 from 1990 to 2025). The expectations component, as usual, has eased less than the current conditions component, but its shift has pushed the measure to the low end of its long-run range (72.2 in April versus an average of approximately 88).

Interestingly, concern about the labor market seems to be a factor affecting expectations. While current views on the labor market are favorable (plentiful less hard to get jobs gap of 7.5%), Individual are concerned about the future. The survey asks respondents if they expect more jobs or fewer jobs six months hence. The share indicating fewer jobs has moved well into the upper end of the historical range. Such observations in the past were typically seen only during recession (chart, below right). An unfavorable view on interest rates also seems to be playing a role in depressing the expectations component. More than 60% of respondents to the current survey expect higher interest rates 12 months from now.

The results from the Conference Board survey of consumers differ markedly from those of the University of Michigan Survey Research Center. The Michigan results show consumer sentiment at a record low, while the Conference Board index is only slightly below its long-run average. The difference most likely reflects the nature of the questions in the surveys. The Conference Board focuses on business and employment conditions, while Michigan emphasizes personal finances. The focus on finances, along with questions on inflation, probably picks up concerns about affordability.

The Consumer Confidence data are available in Haver’s **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

260428P.jpg

260428Q.jpg

- Expectations improved slightly in April, but are still subdued relative to norms.
- Moderately favorable view of current conditions.

Consumer Confidence: Modest Change in April

Winnie Tapasanun

260428J35.jpg

260428K35.jpg

U.S. house prices were essentially unchanged m/m in February after rises of 0.2% in January (+0.1% initially) and 0.3% in December (unrevised), according to the Federal Housing Finance Agency (FHFA) House Price Index. February marked the first flat reading since September following four consecutive m/m increases. The HPI was at 441.43 in February, up 14.8% from its August 2022 low of 384.59. The year-on-year growth rate eased to 1.7% in February—the lowest since March 2012—from 1.8% in January (+4.1% in February 2025), down from a high of 6.9% in February 2024 and well below a peak of 18.5% in February 2022.

By region, February FHFA house prices showed a mixed performance. House prices fell m/m in February (vs. January) in four of the nine census divisions. Declines were led by Mountain (-1.1% vs. +0.4%), followed by Pacific (-0.5% vs. +0.6%), West North Central (-0.4% vs. +0.3%), and Middle Atlantic (-0.1% vs. +0.3%). To the upside, house prices rose m/m in four census divisions in February (vs. January): South Atlantic (+0.6% vs. -0.2%), East South Central (+0.2% vs. +1.2%), New England (+0.2% vs. +0.6%), and West South Central (+0.2% vs. -0.3%). Meanwhile, house prices in East North Central were virtually unchanged m/m for the second successive month in February following seven straight m/m gains.

Year-on-year house prices continued to rise in February in most regions, except Mountain, Pacific, and West South Central. The y/y growth rate accelerated in February (vs. January) in only two of the nine census divisions: East South Central (+4.0% vs. +3.2%) and South Atlantic (+0.9% vs. +0.4%). Meanwhile, house price growth decelerated y/y in February (vs. January) in four regions: New England (+3.1% vs. +3.9%), West North Central (+3.1% vs. +3.6%), East North Central (+3.8% vs. +4.5%), and Middle Atlantic (+4.2% vs. +4.5%). To the downside, Mountain (-0.7% vs. 0.0%), Pacific (-0.4% vs. -0.3%), and West South Central (-0.1% vs. -0.4%) posted y/y declines in February.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The FHFA data are available in Haver’s **USECON** database.

260428L35.jpg

260428M35.jpg

- February FHFA HPI 0.0% m/m; +1.7% y/y, lowest since Mar. ’12.
- House prices down m/m in four of nine census divisions, led by Mountain (-1.1%); up in four, driven by South Atlantic (+0.6%); flat in East North Central.
- House prices up y/y in six of nine regions, led by Middle Atlantic (+4.2%), but down in Mountain (-0.7%), Pacific (-0.4%), and West South Central (-0.1%).

U.S. FHFA House Prices Flat in February After Four Straight M/M Gains

Tian Yong Woon

In this week’s Letter, we cover the latest developments and implications of the Middle East conflict for Asia, while also making space for other important themes, including artificial intelligence (AI). The Middle East conflict remains in a no deal state coming out of the weekend, though some early Monday optimism emerged in Asian markets following Iran’s reported offer to reopen the Strait of Hormuz (chart 1). Nonetheless, as the Strait closure drags on, so too do the fiscal costs of domestic fossil fuel subsidies across Asia, which have been shown to move closely with crude oil prices (chart 2). While such measures offer direct relief by cushioning household energy costs, they remain difficult to sustain over the long haul.

Over the week, we also saw a further fraying in regional monetary policy trends, with the Philippines hiking its policy rate for the first time in about two years amid inflation concerns, while Indonesia stood pat on rates (chart 3). Investor attention is likely to remain fixed on monetary policy this week, with the Bank of Japan due to decide on policy. Expectations for an April hike have faded amid the persistent Middle East conflict, though yen weakness continues to present a source of concern (chart 4). The week also brings China’s latest PMI readings (chart 5), adding to the recent run of hard data accompanying the Q1 GDP release.

Beyond the Middle East conflict, the evolution of AI continues to demand close attention. Before geopolitical tensions took centre stage, AI was the dominant market narrative — and that enthusiasm has hardly faded. If anything, recent developments suggest the story is broadening: use cases are expanding, scalability is improving, and access is widening beyond large corporates to the mass market — increasingly spilling into the realm of physical AI. It may well be this persistent wave of optimism that is helping to underpin equity valuations, even as the geopolitical backdrop darkens (chart 6).

**The Middle East conflict**
About two months in, we remain stuck in the limbo of the US-Iran conflict, which has left the Strait of Hormuz largely closed and much of the world starved of the critical oil flows needed to power the global economy. The back and forth between the US and Iran has persisted in recent weeks, with both sides again failing to reach a peace deal over the weekend, though Monday’s news of Iran offering to reopen the Strait has revived some hope in markets. In truth, commodity and market valuations do not hinge so much on a peace deal itself, but rather on the resumption of oil flows through the Strait, something that could materialise even in the absence of a formal deal, though any agreement that includes and credibly delivers such a reopening would likely be warmly received by markets. Until then, market gyrations are likely to persist, with prices fluctuating in response to each new snippet of news. And until then, the world will continue both to be starved of, while gradually adapting to, the drip feed of oil flows emerging from the Strait.

260427T1.jpg

**The fiscal costs of the Middle East conflict**
As the Middle East conflict drags on, so too does the strain on fiscal resources across parts of Asia, as the costs of energy-related subsidy programmes continue to mount. While such programmes have an immediate, direct, and tangible impact in shielding households from surging energy costs, they are far from sustainable, particularly if oil prices remain well above targeted levels or stay elevated for an extended period. As chart 2 illustrates, the costs of these explicit subsidy programmes tend to rise closely with crude oil prices, as seen in India and Indonesia. Other measures adopted elsewhere, such as drawing down oil reserves, may be less fiscally costly, but are similarly difficult to sustain indefinitely. In both respects, the clock is ticking, and the world continues to hold its breath as the conflict drags on.

260427T2.jpg

**The latest central bank responses to the conflict**
Over the past week, Asia saw two central bank decisions. The Philippines’ (BSP) opted to deliver its first rate hike in about two years, while Indonesia’s (BI) chose to stand pat on policy rates and instead committed to stepped up FX intervention (chart 3). This latest round of decisions points to a further fraying of what had been a broad regional monetary policy consensus, namely that central banks would delay additional easing while maintaining a high bar for outright tightening. Domestic considerations, however, remain paramount. In the Philippines’ case, the central bank has moved to rein in inflation, which is already showing notable signs of price pass through stemming from disruptions linked to the Strait of Hormuz. That said, BSP is not the first in the region to buck the reluctance to tighten. Singapore’s central bank had already tightened policy in mid-April, albeit through its own distinct framework, given its use of the exchange rate rather than policy rates as the primary channel for monetary policy.

260427T3.jpg

**The week ahead**
Looking to the week ahead, a major central bank decision looms in Japan. Market expectations for the Bank of Japan to deliver a rate hike at its April meeting have ebbed amid the persistence of the Middle East conflict, to which Japan remains particularly vulnerable given its reliance on oil imports flowing through the Strait of Hormuz. At the same time, inflation in Japan has yet to become a major concern, with recent readings having picked up but not yet entering troubling territory. One potential source of concern, however, lies with the Japanese yen, which has remained on a weakening trend since early last year (chart 4). That depreciation has been one of the key arguments underpinning calls for further rate hikes.

260427T4.jpg

The week also brings China’s latest PMIs into focus. March saw a divergence between China’s official PMI readings, which improved, and the unofficial readings from RatingDog, which instead pulled back. Nonetheless, both official and unofficial gauges remained in expansionary territory (chart 5), with investors now watching closely to see whether that resilience can be sustained amid ongoing stresses from the Middle East, or whether offsetting drivers can continue to keep Chinese business sentiment and prospects buoyant.

260427T5.jpg

**Beyond the strait**
Moving beyond the Middle East conflict, a whole host of developments continue to unfold globally, many of which have in fact helped offset some of the pessimism wrought by the Strait’s chokehold. One such development is artificial intelligence (AI), which had dominated headlines before the outbreak of the conflict and continues to advance at breakneck pace. AI capabilities are still rapidly evolving, while practical applications, such as physical AI embodied in humanoid robots, are beginning to show broader and stronger use cases. Production of such robots is also becoming increasingly scalable and within reach not just for industrial complexes and healthcare, but for the mass market as well. It is perhaps growing optimism around these prospects that has helped keep equity valuations buoyant, even in the face of the festering conflict in the Middle East. Moreover, while concerns over AI-driven job displacement persist, new opportunities are emerging as well, particularly for AI adopters, with a growing share of job postings in Western economies increasingly referencing AI-related skills, as shown in chart 6.

260427T6.jpg

Asia

Economic Letter from Asia: Not Just About the Strait

Robert Brusca

260427E.jpg

**The Distributive Trades Survey**

The U.K. Distributive Trades Survey for April 2026 and the look-ahead expectation readings for May paint an extremely soured outlook for the U.K. economy.

**Retail ranking**: Surveys for retail sales compared to a year ago, orders compared to a year ago, and sales evaluated for the time of year all have rankings near zero, which is the worst result on this timeline. This zero distinction applies to retail sales compared to a year ago. The best ranking is 11.6%; that is for sales evaluated for the time of year. Orders compared to a year ago have a 4.2 percentile standing. The stock-to-sales ratio—which is a completely different concept—shows that the inventory-to-sales ratio has a 29.9 percentile standing.

**Retail diffusion**: The raw April diffusion readings (up minus down diffusion) show that sales compared to a year ago slipped to a reading of -68 in April from -52 in March. Orders fell to -46 in April from -26 in March. Sales evaluated for the time of year fell to -32 April from -23 in March. All three measures weakened, and all three weakened decisively, resulting in extremely weak rankings. All of the rankings are executed on data back to 2002.

**Expectations for retailing**: The expectations readings for May show slippage again across all three metrics: expected sales compared to a year ago, expected orders compared to a year ago, and expected sales for the time of year. Expected sales compared to a year ago fell to -60 in May from -49 in April. Orders compared to a year ago declined to -45 in May from -30 in April, and sales for the time of year slipped to -43 from -19. In May, these readings have rankings in a 0.4 percentile standing for sales compared to a year ago, a 1.8 percentile standing for sales evaluated relative to the time of year, and a 4.6 percentile standing for orders compared to a year ago. These two panels on current and expected retail sales volumes are just simply terrible: weak monthly, weak in ranking terms, and showing slipping momentum.

The distributor trade series also provides data on the wholesale sector. While the wholesale sector is not quite as beat up as the retail sector, it's still extremely weak. There is no cause for any kind of hope that things are getting better based on wholesaling trends.

**Wholesaling**: The wholesale survey for sales compared to a year ago edged lower to -32 in April from -31 in March. Orders compared to a year ago remained at a reading of -41 in April. Sales evaluated for the time of year improved to a reading of -20 in April from -39 in March—a significant step up, but still very weak. The percentile standings for these three categories show sales compared to a year ago at the 8.8 percentile, orders compared to a year ago at the 5.6 percentile, and sales evaluated for the time of year at the 14.8 percentile.

**Wholesale Expectations**: The look-ahead observations, which provide expectations for wholesaling in May, show a similar constellation of readings, with sales compared to a year ago falling to -37 in May from -27 in April and orders compared to a year ago falling to -42 from -38, while sales evaluated for the time of year improved to  16 from  37. That category for wholesale sales improved both in April in real time and in May for expectations; however, it continues to have a very weak percentile standing, at the 17.9 percentile in May, while sales for a year ago have a 6.7 percentile standing and orders for a year ago have a 6.0 percentile standing.

260427.jpg

While some of the global PMI data have improved, these survey data for the U.K. are particularly dour. The war in Ukraine drags on, and there's a new conflict in Iran that has shut the Strait of Hormuz, creating energy problems for much of Europe. More broadly, supply chains have been harmed. In addition, the U.K. is undergoing a bout of political instability, as its Prime Minister is under pressure and a good deal of political uncertainty is being worsened by deteriorating economic performance.

Both the U.K. and the European Monetary Union had been showing some progress on inflation until the Iran war hit. Now, as the oil prices are up so sharply, headline inflation is going to be worse everywhere and there will probably be a bit more attention directed to the core inflation rate. However, the U.K. has had inflation too hot for a while, and it has failed to settle down. At its last meeting, the Bank of England’s Monetary Policy Committee warned that if the war was still ongoing at the next meeting, there would be a risk of a rate hike. So, it would seem that a rate hike is going to be in play unless the economy falls off a cliff first, which, based on the distributive trades data, is also something that could happen. The U.K. economy appears to be on very unsound footing, and what happens next is just about anybody's guess.

United Kingdom

U.K. Retail Sales: Worse Than During Covid

260424E.jpg

The onset of the war in Iran appears to have hit the German economy extremely hard as the Ifo survey shows very substantial and broad-based decline across its survey in April. The Ifo survey features readings for five sectors as well as an aggregate reading, and it surveys them for climate, current conditions, and expectations. The decline in the Ifo survey is present for all three concepts and across all five sectors, marking the weakening in April as a highly significant and extremely disturbing development. Only manufacturing in the current conditions survey escapes a month-to-month decline.

**The Ifo sequences**: The **climate** reading fell both overall and across each of the five sectors. **Current conditions** declined for the overall and for four of the five sectors, with manufacturing the sole exception. **Expectations** declined for the overall and for all sectors. Several of the sector declines were for a very substantial magnitude, especially when compared to historic changes in these indexes.

**Monthly changes in readings—severe broad deterioration**
The month-to-month change in the climate reading has weakened more month-to-month 19% of the time. That overall result, however, is boosted by manufacturing where the monthly change has been weaker 35% of the time (on data back to 2011). However, all other sectors have seen climate weaker m/m only 2.3% to 6.3% of the time! The current situation readings weakened, with the headline weakening more m/m 11% of the time. This was boosted by manufacturing, the only sector that improved on the month; its ranking on change was in its 85th percentile—quite good and truly stand-alone good news. The other current changes by sector ranged from construction being weaker 1.7% of the time, to retailing that has been weaker about 30% of the time in terms of m/m changes. Expectation changes were uniformly terrible, with the headline drop weaker only 6.3% of the time and sector change month-to-month weaker between 9% and 1.7% of the time. The monthly weakening was uniform and substantial. I document it with these calculations, but you can also see it on the chart above.

**Climate**: The bottom line is that the all-sector index for climate fell to -20.3 in April from -18 in March, placing it at a 10.5 percentile standing on data since 1993. The sector ranking is the highest for construction with a 42.2 percentile standing and the weakness for services at a 1.1 percentile standing—weaker than the table reading nearly 99% of the time. In terms of percentile standing levels or monthly changes, conditions are closing in on grim.

**Current conditions**: Current conditions saw the all-sector index slip to -5.3 in April from -2.4 in March. The headline ranking stands at a 9.8 percentile mark, making it—like the climate reading—weaker than its current reading only about 10% of the time. The strongest reading under current conditions is for construction which has a 60.6 percentile standing; it is the only ranking in the table above its historic median. Manufacturing, the only sector in the survey that improved month-to-month, has a 22.5 percentile standing, while services record the weakest percentile standing under current conditions, at an 8.4 percentile standing.

**Expectations:** The all-sector index for expectations fell to -25.3 in April from -19.9 in March, placing it at a 6.3 percentile standing. The percentile standings across sectors range from a high of 9.5% for manufacturing to a low of 1.5% for retailing. Up until earlier this year, the Ifo was showing signs of improvement; however, all of that has simply collapsed in the last month. Weakness is across economic concepts and sectors, as documented above. For reference, the table also gives a separate set of rankings on where the various indexes stand since the invasion of Ukraine, since that was another marked event that drove the index, that had been improving after Covid, down to lower levels.  Ranked even on this reduced scale looking at conditions only since the invasion of Ukraine, when conditions have generally been weaker, the current rankings across the Ifo survey remained extremely weak. This is a very disturbing survey for the German economy.

Economy in Brief

Jump to:

U.S. Weather in January Not Far from "Normal", But Regions Show Wide Variations

Initial Claims for Unemployment Insurance Inched Up

Initial Claims for Unemployment Insurance Inched Up

Machinery Output Leads Industrial Production in Several European Nations

Mortgage Applications About Flat

U.S. Productivity Stronger Than Expected in 4Q

U.S. Productivity Stronger Than Expected in 4Q

Leading Diffusion and Coincident Composite Indicators in Japan Give Mixed Signals