Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060908a.jpg" width="353">
US light vehicle sales last month reversed all of July&#39;s revised gain and fell 6.5% to 16.07M units, according to the Autodata Corporation. During the first eight months of this year vehicle sales averaged 16.63M, down 4.3% from the first eight months of 2005.
Overall light truck sales dropped 6.6% last month. Higher gasoline prices have prompted the 9.7% decline in light truck sales year to date versus the first eight months of last year.
Sales of the relatively fuel efficient imported light trucks posted a large 11.6% (+4.2% y/y) decline last month but remained up 7.5% year to date. Domestic truck sales fell 5.7% and reversed a July gain (-9.9% y/y). During the first eight months of this year domestic light truck sales fell 12.2% from the first eight months of 2005 to an average of 7.47M.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060908b.jpg" width="353">
Auto sales fell 6.4% (-0.7% y/y) in August and fully reversed the July increase. Domestic car sales fell 4.5% (-5.9% y/y) and year to date sales were down 0.5% versus last year. Sales of imported autos also reversed the July gain with a 10.1% (+11.8% y/y) but year to date are up 10.0%.
Imports garnered 23.5% of the US light vehicle market during August, down slightly from the July monthly record. Last year, imports&#39; share of the U.S. vehicle market totaled 20.4%
Minutes of the Federal Reserve Board&#39;s discount rate meetings from July 17 through August 7, 2006 can be found <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2006/20060907/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.06</td>
<td>17.19</td>
<td>-4.7%</td>
<td>16.96</td>
<td>16.87</td>
<td>16.63</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.69</td>
<td>8.22</td>
<td>-0.7%</td>
<td>7.65</td>
<td>7.49</td>
<td>7.62</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.37</td>
<td>8.96</td>
<td>-8.1%</td>
<td>9.32</td>
<td>9.37</td>
<td>9.01</td>
</tr>
</tbody>
</table>
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US light vehicle sales last month reversed all of July's revised gain and fell 6.5% to 16.07M units, according to the Autodata Corporation. During the first eight months of this year vehicle sales averaged 16.63M, down 4.3% from the [...]

August U.S. Vehicle Sales Reversed July's Gain

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060908a.jpg" width="353">
US light vehicle sales last month reversed all of July&#39;s revised gain and fell 6.5% to 16.07M units, according to the Autodata Corporation. During the first eight months of this year vehicle sales averaged 16.63M, down 4.3% from the first eight months of 2005.
Overall light truck sales dropped 6.6% last month. Higher gasoline prices have prompted the 9.7% decline in light truck sales year to date versus the first eight months of last year.
Sales of the relatively fuel efficient imported light trucks posted a large 11.6% (+4.2% y/y) decline last month but remained up 7.5% year to date. Domestic truck sales fell 5.7% and reversed a July gain (-9.9% y/y). During the first eight months of this year domestic light truck sales fell 12.2% from the first eight months of 2005 to an average of 7.47M.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060908b.jpg" width="353">
Auto sales fell 6.4% (-0.7% y/y) in August and fully reversed the July increase. Domestic car sales fell 4.5% (-5.9% y/y) and year to date sales were down 0.5% versus last year. Sales of imported autos also reversed the July gain with a 10.1% (+11.8% y/y) but year to date are up 10.0%.
Imports garnered 23.5% of the US light vehicle market during August, down slightly from the July monthly record. Last year, imports&#39; share of the U.S. vehicle market totaled 20.4%
Minutes of the Federal Reserve Board&#39;s discount rate meetings from July 17 through August 7, 2006 can be found <a href="http://www.federalreserve.gov/boarddocs/press/monetary/2006/20060907/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.06</td>
<td>17.19</td>
<td>-4.7%</td>
<td>16.96</td>
<td>16.87</td>
<td>16.63</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.69</td>
<td>8.22</td>
<td>-0.7%</td>
<td>7.65</td>
<td>7.49</td>
<td>7.62</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.37</td>
<td>8.96</td>
<td>-8.1%</td>
<td>9.32</td>
<td>9.37</td>
<td>9.01</td>
</tr>
</tbody>
</table>
Canada Labor Market Pause into 3rd Month 
by <a href="/comment/Stone.html">Carol Stone</a> September 8, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060908c.jpg" width="353">
In August, Canadian labor markets extended into a third month their correction of the May employment spike, as shown in StatCan data reported this morning. Employment fell by 16,000 in August, after two consecutive decreases of 5,000. These followed a spurt of 97,000 in May. The unemployment rate ticked up from 6.4% in July to 6.5% last month, while participation in the labor force reverted from 67.3% of the total labor force to 67.2% (All these data cover the population 15 and over; participation for the &quot;working age&quot; population, ages 15-64, is 77.9%).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060908d.jpg" width="353">
A month ago, we tried to &quot;explain away&quot; the employment decline and bump-up in unemployment as mere corrections to the huge gains in May. Extending this interpretation to a third month may seem to be reaching or trying to evade some hint of genuine slowdown. However, the fact remains that the recent relative weakness in employment is coming in the industries that spiked the most in May: finance, insurance &amp; real estate; health care; and public administration. The finance and real estate sector is surely cyclical and subject to buffeting by market forces, but health care and government are not. Health care, though, seems to have become more volatile in the last couple of years, making it hard to draw any substantive conclusion. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060908e.jpg" width="353">
What we do see in Canada fairly unequivocally, though, is a major downward thrust in goods-producing industries. Back at the turn of the year, it looked that manufacturing might be trying to stabilize, but this was short-lived, and by May it was falling once again. Other industries in that sector -- agriculture, construction, etc. -- did show increases through the end of 2005, but they have flattened since, even the forestry and mining group, which now has 1,500 fewer workers than in December 2005. It had gained more than 25,000 over last year, but apparently the oil-price inspired build-up has faded. Provincial data seem to confirm that, showing a plateau in employment in energy-rich Alberta, British Columbia and Saskatchewan; the number of workers is falling gently from month to month in the business centers of Ontario and Quebec and contracting more definitively in the Maritimes.
Canada&#39;s nationwide data are contained in Haver&#39;s CANSIM database, and the Provinces are covered in CANSIMR.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Canada (Seasonally Adjusted)</th>
<th scope="col">Aug 2006</th>
<th scope="col">Jul 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment (000s)</td>
<td>16,489</td>
<td>16,505</td>
<td>16,510</td>
<td>16,515</td>
<td>16,201</td>
<td>16,170</td>
<td>15,947</td>
<td>15,672</td>
</tr>
<tr>
<td class="firstcol">Change, 000s/%</td>
<td>-16</td>
<td>-5</td>
<td>-5</td>
<td>+97</td>
<td>1.7%</td>
<td>1.4%</td>
<td>1.8%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods-Producing </td>
<td>-18</td>
<td>-7</td>
<td>-35</td>
<td>-10</td>
<td>-1.4%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">Service-Producing</td>
<td>+2</td>
<td>+2</td>
<td>+30</td>
<td>+106</td>
<td>2.8%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment (000s)</td>
<td>1,141</td>
<td>1,137</td>
<td>1,067</td>
<td>1,073</td>
<td>1,178</td>
<td>1,173</td>
<td>1,235</td>
<td>1,286</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>6.5</td>
<td>6.4</td>
<td>6.1</td>
<td>6.1</td>
<td>6.8</td>
<td>6.8</td>
<td>7.2</td>
<td>7.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Participation Rate (%)</td>
<td>67.2</td>
<td>67.3</td>
<td>67.2</td>
<td>67.3</td>
<td>67.2</td>
<td>67.2</td>
<td>67.5</td>
<td>67.5</td>
</tr>
</tbody>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060907a.jpg" width="353">
Initial claims for jobless insurance fell 7,000 last week to 310,000 from an upwardly revised level during the last full week of August. Consensus expectations had been for 315,000 claims.
During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims fell to 315,250 (-1.4% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060907b.jpg" width="353">
Continuing claims for unemployment insurance rose 15,000 following a decline of 6,000 the prior week that initially was reported as a modest increase.
The insured rate of unemployment was steady at 1.9% where it has been since February.
The latest Beige Book from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2006/20060906/default.htm">here</a>.
Welfare Recipiency, Job Separation Outcomes, and Postseparation Earnings: Insight from Linked Personnel and State Administrative Data from the Federal Reserve Bank of Atlanta is available <a href="http://www.frbatlanta.org/filelegacydocs/wp0607.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">Unemployment Insurance (000s)</a></th>
<th scope="col">9/02/06</th>
<th scope="col">8/26/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>310</td>
<td>319</td>
<td>-4.0%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,492</td>
<td>-3.5%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
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Initial claims for jobless insurance fell 7,000 last week to 310,000 from an upwardly revised level during the last full week of August. Consensus expectations had been for 315,000 claims. During the last ten years there has been a [...]

Initial Jobless Insurance Claims Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060907a.jpg" width="353">
Initial claims for jobless insurance fell 7,000 last week to 310,000 from an upwardly revised level during the last full week of August. Consensus expectations had been for 315,000 claims.
During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims fell to 315,250 (-1.4% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060907b.jpg" width="353">
Continuing claims for unemployment insurance rose 15,000 following a decline of 6,000 the prior week that initially was reported as a modest increase.
The insured rate of unemployment was steady at 1.9% where it has been since February.
The latest Beige Book from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2006/20060906/default.htm">here</a>.
Welfare Recipiency, Job Separation Outcomes, and Postseparation Earnings: Insight from Linked Personnel and State Administrative Data from the Federal Reserve Bank of Atlanta is available <a href="http://www.frbatlanta.org/filelegacydocs/wp0607.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">Unemployment Insurance (000s)</a></th>
<th scope="col">9/02/06</th>
<th scope="col">8/26/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>310</td>
<td>319</td>
<td>-4.0%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,492</td>
<td>-3.5%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
July Industrial Production Expands in Germany & Hungary; Industry Remains Pillar of Growth 
by <a href="/comment/Stone.html">Carol Stone</a> September 9, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060907c.jpg" width="353">
We hear so much about the development of industry in various Asian nations that it&#39;s sometimes easy to think that industry elsewhere is shriveling up and fading away. This is hardly the case, as a quick look at new production data for Germany and Hungary can show.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060907d.jpg" width="353">
Industrial production increased 1.2% in Germany in July, far more than forecast survey expectations that called for 0.5%. Analysts apparently expected June&#39;s 0.4% decline to be reversed, but not exceeded, as it was. The year-on-year growth also more than reversed its prior month&#39;s performance, surging to 4.7% from a drop of 1.2%. Since the present expansion began in mid-2003, German industrial production has grown at a 3.5% annual rate.
In Hungary, production increased 1.1% in July, a third consecutive gain after a minor dip in April. The year-on-year advance is 12.2%. Growth there since early 2004 has averaged 8.7%. These figures cover firms with five or more employees; the total dataset for July will be out September 15.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060907e.jpg" width="353">
In both of these countries, the strength has come in more industrial products than in consumer goods. Germany reports details on the &quot;market groupings&quot; of its production, and during this latest 30-month recovery period, intermediate products have averaged 4.9% annualized growth, capital goods 5.5% and consumer goods 1.5%. July&#39;s industry performance over a year ago was above average for chemicals, rubber &amp; plastics, metals, machinery, electrical equipment and transport equipment. A similar pattern obtained in Hungary in its full dataset through June, with the addition of the mining sector, leather goods and &quot;not elsewhere classified&quot;, which includes furniture.
Thus, while consumer goods production, particularly nondurable goods, may have shifted to other geographic regions, &quot;heavy industry&quot; still appears to be firmly ensconced in Europe. In fact, in both Germany and Hungary, production of these industries is a major source of growth for the entire economy.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Industrial Production*</th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">May 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany, 2000=100</td>
<td>109.5</td>
<td>108.2</td>
<td>108.6</td>
<td>104.6</td>
<td>104.1</td>
<td>101.7</td>
<td>98.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>1.2</td>
<td>-0.4</td>
<td>1.5</td>
<td>4.7</td>
<td>2.4</td>
<td>3.7</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Hungary, 2000=100</td>
<td>148.4</td>
<td>146.8</td>
<td>143.9</td>
<td>133.0</td>
<td>132.0</td>
<td>122.9</td>
<td>114.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>1.1</td>
<td>2.0</td>
<td>1.6</td>
<td>12.2</td>
<td>7.4</td>
<td>7.5</td>
<td>6.6</td>
</tr>
</tbody>
</table>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060906h.jpg" width="353">
There&#39;s a nip of autumn in the air in the New York region, and that change in the weather begins to shift our attention from the price of gasoline to heating fuel costs. Haver has three new databases that help us assess &quot;how much it costs to produce heat&quot; and many other energy questions. Coming from Energy Intelligence, a leading oil industry consulting firm, Oil Market Intelligence (OMI), Natural Gas Week (NGW) and World Gas Intelligence (WGI) contain extensive price, supply, demand and stock data for several energy sources in the US and around the world.
For instance, we can compare the cost of various fuels on a common basis, since NGW and WGI contain prices expressed in both the unit each fuel is commonly sold in, as well as in millions of Btu of energy produced. Last week, WTI Cushing crude was priced at $70.54/barrel and $12.16 per million Btu, and heating oil at the New York harbor was $1.9312/gallon and $13.92/MMBtu. By contrast, coal from Big Sandy River, Ohio, was $46.50 a ton, which translates into $1.94/MMBtu.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060906i.jpg" width="353">
These databases also facilitate comparisons across geographic markets. So in the winter of 2000/2001, we can quickly see how distorted the natural gas market was in California. As evident from the second graph, the New York &quot;City Gate&quot; price was about $4.50/MMBtu in late summer and peaked over the New Year in a range of $10-$16. It has shown seasonal spikes during the winter in most other years. However, in California, there looks to be only the mildest of seasonal swings then, as one might surmise from the temperate climate there. Except in 2001. In August 2000, the price was $5 to $6. In December it was $26, reaching a peak of $37.12 in the third week of December and remaining above $10/MMBtu until early May. A casual observer [in truth, someone just now passing by my desk] remarked, &quot;my, what was wrong in LA that winter!&quot; Lots. Similarly, it&#39;s easy to see the impact of Hurricanes Katrina and Rita in 2005.
The frequencies of these data vary, with some daily, some weekly and some monthly. Coverage of Europe is quite detailed, and supply and demand information on Asia is extensive. These databases, well established in the industry, should be very useful to Haver clients.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Selected Fuel Prices prices, $</th>
<th scope="col">9/4/06</th>
<th scope="col">8/28/06</th>
<th scope="col">July 2006</th>
<th scope="col">Aug 2005</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Heating Oil: New York Harbor, &nbsp;&nbsp; $/bbl</td>
<td>1.9312</td>
<td>1.9764</td>
<td>1.9270</td>
<td>1.7059</td>
<td>1.6109</td>
<td>1.1089</td>
<td>0.8418</td>
</tr>
<tr>
<td class="firstcol">&nbsp; $/MMBtu</td>
<td>13.92</td>
<td>14.25</td>
<td>13.89</td>
<td>12.30</td>
<td>11.82</td>
<td>8.05</td>
<td>6.13</td>
</tr>
<tr class="odd">
<td class="firstcol">Natural Gas: New York City Gate, &nbsp; $/MMBtu</td>
<td>5.92</td>
<td>7.72</td>
<td>6.85</td>
<td>9.54</td>
<td>10.01</td>
<td>6.78</td>
<td>6.41</td>
</tr>
<tr>
<td class="firstcol">Natural Gas: Los Angeles City Gate, &nbsp; $/MMBtu</td>
<td>--</td>
<td>6.81</td>
<td>6.22</td>
<td>8.04</td>
<td>7.93</td>
<td>5.93</td>
<td>5.61</td>
</tr>
<tr class="odd">
<td class="firstcol">Coal: Sandy River, Ohio, &nbsp; $/ton</td>
<td>46.50</td>
<td>47.25</td>
<td>46.85</td>
<td>57.05</td>
<td>56.26</td>
<td>54.56</td>
<td>32.96</td>
</tr>
<tr>
<td class="firstcol">&nbsp; $/MMBtu</td>
<td>1.94</td>
<td>1.97</td>
<td>1.95</td>
<td>2.40</td>
<td>2.38</td>
<td>2.28</td>
<td>1.38</td>
</tr>
</tbody>
</table>
</body>
</html>

There's a nip of autumn in the air in the New York region, and that change in the weather begins to shift our attention from the price of gasoline to heating fuel costs. Haver has three new databases that help us assess "how much it [...]

How Much Does It Cost To Produce Heat?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060906g.jpg" width="353">
The total number of mortgage applications recovered 1.8% last week, according to the Mortgage Bankers Association, after a 0.9% decline at the end of August. The gain lifted the opening September level 1.5% versus the August average which rose 2.9% from July.
A 3.7% w/w increase in purchase applications followed several weeks of decline and lifted applications 1.7% above the August average which fell 3.5% from July.
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 slipped 0.9%.
The effective interest rate on a conventional 30-year mortgage fell to 6.53% from 6.60% the prior week. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also fell to 6.25% and the peak rate was 6.75%. 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 accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">09/01/06</th>
<th scope="col">08/25/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>566.3</td>
<td>556.5</td>
<td>-26.6%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>389.7</td>
<td>375.9</td>
<td>-21.9%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,594.7</td>
<td>1,609.2</td>
<td>-26.4%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
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The total number of mortgage applications recovered 1.8% last week, according to the Mortgage Bankers Association, after a 0.9% decline at the end of August. The gain lifted the opening September level 1.5% versus the August average [...]

Mortgage Applications Recovered

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060906b.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey indicated that chain store sales rose another 0.3% last week after the 0.6% increase at the end of August.
The gains were the first back to back weekly increases in a month and lifted sales in early September 0.6% above the August average which rose 0.4% from July.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS 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 leading indicator of chain store sales from ICSC-UBS slipped another 0.1% (-2.5% y/y) in the latest week.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060906a.jpg" width="353">
The retail price for a gallon of regular unleaded gasoline dropped a sharp twelve cents to an average $2.73 (-11.1% y/y), the lowest level since early April. In spot market trading yesterday, regular unleaded gasoline prices fell again to $1.67, down twelve cents from last week&#39;s average.
Oil prices also fell with the spot price of WTI crude down to $68.61 per bbl. (+4.0% y/y). Natural gas prices similarly fell to $5.49/mmbtu (-52.6% y/y) in spot trading.
The latest Short-Term Energy Outlook from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">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">09/02/06</th>
<th scope="col">08/26/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>473.2</td>
<td>471.7</td>
<td>3.9%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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The International Council of Shopping Centers (ICSC)-UBS survey indicated that chain store sales rose another 0.3% last week after the 0.6% increase at the end of August. The gains were the first back to back weekly increases in a [...]

Chain Store Sales Up Again, Gasoline Prices Down Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060906f.jpg" width="353">
The August Business Activity Index for the non-manufacturing sector from the Institute for Supply Management (ISM) improved to 57.0 and exceeded Consensus expectations for stability near 55.0.
Since the series&#39; inception in 1997 there has been a 50% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders sub-index fell for the fourth consecutive month to the lowest level in three years while the employment index also fell to its lowest level since January. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.
Pricing power fell for the second month in the last three and was somewhat below the 2Q average. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates back to July 1997.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.
Barreling Down the Road to Recession? from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20060901/cover.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Aug &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>57.0</td>
<td>54.8</td>
<td>64.8</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>72.4</td>
<td>74.8</td>
<td>67.2</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>


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The August Business Activity Index for the non-manufacturing sector from the Institute for Supply Management (ISM) improved to 57.0 and exceeded Consensus expectations for stability near 55.0. Since the series' inception in 1997 there [...]

ISM Nonmanufacturing Index Improved

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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The Consumer Price Index increased 2.7% y/y during November, down from 2.8% in October. The 0.2% m/m increase fell short of the 0.3% gain expected in the Action Economics Forecast Survey. The y/y gain in the headline CPI was the weakest since April. It was down from September’s high of 3.0% and compared to 2.9% during 2024. The CPI excluding food & energy increased 0.1% (2.6% y/y) in November. Its y/y rise compared to 2.8% y/y in October and was the weakest rise since March 2021.	

Energy prices rose 1.6% (4.1% y/y in November. Gasoline prices strengthened 3.0% (0.9% y/y). Fuel oil prices increased 3.1% (11.3% y/y). Natural gas prices fell 2.1% (+9.1% y/y), and electricity prices strengthened 1.1% (6.9% y/y). 
Food prices rose 0.1% (2.6% y/y) during November. Egg prices declined 6.4% (-13.2% y/y). Meat, poultry & fish prices strengthened 0.8% (6.8% y/y), while dairy product prices fell 0.9% (-1.6% y/y). Cereal & bakery product costs held steady (+1.9% y/y). Fruit & vegetable prices fell 0.4% and were little changed y/y. Nonalcoholic beverage prices increased 0.9% and 4.3% y/y in November.

Goods prices less food and energy rose 0.2% and rose a steady 1.4% y/y during November. Prices of used cars and trucks increased 0.3% (3.6% y/y), and new vehicle costs rose 0.2% (0.6% y/y). Appliance prices fell 0.6% (+0.5% y/y) while home furnishings prices rose 0.4% (2.6% y/y). Recreation product costs fell 0.3% but increased 0.7% y/y in November. Apparel prices increased 0.6% (0.1% y/y) in November. Education & communication product costs declined 0.3% (-3.1% y/y). Medical care goods prices rose 0.1% (1.1% y/y) in November. 

Services prices less energy edged 0.1% higher but increased 3.0% y/y in November, down from 7.0% y/y in 2022. Shelter prices (35.5% of the CPI) rose 0.1% (3.0% y/y), as owners’ equivalent rent of primary residences also rose 0.1% (3.4% y/y). Transportation service prices fell 0.3% (1.7% y/y). The cost of medical services edged 0.1% and rose 3.3% y/y, and the cost of recreation services fell 0.3% (+2.4% y/y). Education & communication services prices increased 0.4% m/m and 2.2% y/y.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

For the release of CPI on December 18, 2025, the BLS was able to retroactively acquire most nonsurvey data for October and will publish October 2025 values where possible. However, the majority of the CPI series rely on survey data which was not collected for October 2025 due to the government shutdown. Accordingly, the BLS will not publish October values for those series. Haver Analytics has created a second set of CPI indexes and relative importance series in **USECON**. These series will contain any published BLS values for October and interpolated values for unpublished detailed indexes. We will then calculate higher aggregate series such as the All Items index and All Items less food and energy using any published indexes along with our interpolated indexes and relative importance. 


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- Year-to-year comparison is slowest in four months.
- Core price gain exhibits weakest y/y increase since 2021. 
- Services price inflation tumbles y/y; core goods price gain is stable.


U.S. Consumer Price Inflation Moderates in November

Sandy Batten

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Existing home sales rose 0.5% m/m (-1.0% y/y) in November to 4.13 million homes (SAAR) following a 1.5% monthly gain in October and a 1.3% monthly rise in September, according to the National Association of Realtors (NAR). It was the highest level of sales since February and matched expectations in the Action Economics Forecast Survey. The average effective 30-year mortgage interest rate was unchanged at 6.54% last month, but this is down markedly from 7.10% in May and accounts for some of the revival in home sales over the past several months. The sales figures are based on closings of sales contracts signed over the past couple of months.

Existing single-family home sales rose 0.8% m/m (-0.8% y/y) in November to 3.75 million units after a 1.1% m/m rise in October and a 1.4% monthly gain in September. Sales of condos and co-ops slumped 2.6% m/m (-2.6% y/y) to 380,000 in November following a 5.4% monthly jump in October.

Compared to a month ago, sales rose 4.1% m/m in the Northeast, increased 1.1% m/m in the South, were unchanged in the West and fell 2.0% m/m in the Midwest. Compared to a year ago, sales were unchanged in both the Northeast and the South, fell 3.0% y/y in the Midwest and declined 1.3% y/y in the West.

The median price of all existing homes (NSA) declined 1.4% m/m (+1.2% y/y) to $409,200 in November. The median price of an existing single-family home fell 1.4% m/m (+1.2% y/y) to $414,300 in November. Prices of single-family homes in the Northeast edged up 0.9% from a year ago. Prices in the Midwest jumped 5.8% y/y; prices in the South rose 1.0% y/y. In contrast, prices in the West declined 0.8% from a year ago.

Inventories of homes for sale continued to weaken in November. The number of existing homes for sale (NSA) slumped 5.9% m/m (+7.5% y/y) to 1.43 million units in November. The supply of homes on the market at the current selling rate (NSA) slid to 4.2 months, its lowest reading since March.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. Mortgage interest rates can be found in the **WEEKLY** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.


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- Existing home sales increased 0.5% m/m in November, the third consecutive monthly gain.
- Month-over-month sales increased in the Northeast and South, were unchanged in the West, and fell in the Midwest.
- Year-over-year sales were unchanged in the Northeast and South and decreased in the Midwest and West.


U.S. Existing Home Sales Edged Up in November

Robert Brusca

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The new UK Confederation of British Industry (CBI) survey on the distributive trades sector shows a sharp weakening of an already weak survey for December and for the outlook into January of 2026. 

The month-to-month deterioration from November was widespread across metrics for retailing as well as for wholesaling for the current month as well as for the outlook. The monthly degradation is without exception across the board - omitting the inventory metric which is a different animal in any event since inventory building is sometimes involuntary. 

**The Retail survey**
Current conditions: In December, the retail survey for sales compared to a year ago, orders compared to year ago, and sales for the time of year (a seasonal adjustment metric), all worsened month-to-month. The November readings were weak and in December sales compared to a year-ago worsened by 12 points, Orders compared to a year ago worsened by 17 points month-to-month and sales for the time of year worsened by 11 points. These metrics for December are below their respective 12-month average by 6 to 13 points, as well for these categories. The rankings tell a stark story, year-on-year sales have been lower only 5.3% of the time, Year-on-year orders have been weaker only 5.6% of the time, while time of the year sales have been lower only 13% of the time. These are all extremely low-ranking metrics.

Expected Conditions: In January expected conditions have weakened month-to-month by amounts ranging from 33 points to 16 points depending on the metric. And sales and orders compared to a year ago as well as sales for the time of year each are weaker than their respective 12-month average readings by amounts ranging from 4 points to 23 points. The rankings on expectations are even worse than for the current metrics. Expected sales compared to a year ago rank lower less than 1% of the time, the same is true of orders. While sales for the time of year have been weaker 7.7 percent of the time. 
 
**Wholesale survey** 
The rankings for wholesaling are even lower than for retailing across the current and expected metrics. The month-to-month degradation for the current readings ranges from 7 points to 17 points weaker while the reading degradation monthly ranges from 5 points to 16 points. Wholesale sales and orders compared to a year ago and sales for the time of year each rank below the 5% mark. The expectations for January shows expectations for the three categories each are at a 2.5 percentile standing or lower. 

**Summing up**
The distributive trades survey has all but crashed and burned in December. Over the last 26 years the average of the three current metrics’ rankings has been lower only 18 times. The average outlook ranking for the month ahead has been weaker only 5 times in the last 26 years (over 313 months). On a relative basis the expected sales/orders performance is more depressed than the Current results for January. The pooled rankings show current ranking over the past 26-years weaker only 5.8 percent of the time with expectations lower only 1.6 percent of the time. These are very weak metrics. It is surprising that the BOE is walking on eggshells to cut rates with mixed support for rate cuts amid such weakness. There is already a GDP decline in the monthly data for October. UK and inflation is still too high, but it is breaking lower at a relatively fast pace. Will the UK be the first economy down after Covid? 




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United Kingdom

CBI’s Distributive Trades Survey Weakens Sharply in December

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Belgian consumer confidence has been on the rise since early this year, however, in December the index has taken a step backwards with a reading of -1 compared to a November reading of +2 and then an October reading of zero. The confidence indicator, on data back to 1991 has a ranking in its 78.5 percentile, marking it as a reasonably strong reading on confidence compared to its values over that period. On the whole the trend is still solid, the month’s step-back is small. 

**The Economic Situation** 
Economic situation for the next 12 months is weaker in December on a reading of -28 compared to -26 in November. The assessment of the previous 12-months is weaker in December at -42 compared to a reading of -38 in November. The outlook is weaker and the recent legacy is assessed as being slightly weaker as well, than it was in November. The assessment of the economic situation for the next 12 months is weak at a 9.7 percentile standing and the assessment of the previous 12 months is also weak at a 23.4 percentile standing.

**Price Trends**
Price trends are seen as higher over the next 12-months at a reading of 38 compared to 27 in November. The backward-looking assessment of price trends also has them stronger in December than 
in November at a reading of 58 compared to 56 in November. Both of these price trend assessments 
are high with the outlook reading at its 94th percentile and the backward-looking assessment in its 81st percentile. Price expectations hit their low mid 2023-late 2023 and have been on the rise steadily ever since. The price metric of ‘12-months ahead’ was at zero in April of 2024 but climbed to +19 by February 2025 and currently sits at a level of 38. Price expectations are well in gear to the upside in Belgium despite relative price stability in the Euro-Area. 

**Unemployment**
Concerns about unemployment elevated slightly in December to -9 from -10 in November but these are significant readings compared to, say, the 12-month-ago reading which is at a level of +32. The sense of backtracking here is extremely weak. The sense of progress on the part of survey respondents becoming more confident about the future is clearly the prevalent feature here. The December reading for unemployment in fact has only a 2.5 percentile standing, indicating extremely weak concerns about the prospects of unemployment ahead despite the minor month-to-month step-back.

**Major Household purchase environment**
The environment for making major household purchases deteriorates slightly in December at -15 compared to -13 in November. This only puts the index back to where it was in October. The response to the question, ‘is it favorable to buy at present’ is unchanged from its November value at -19 and it has been stuck there for three months in a row. The outlook to make major household purchases in the next 12-months logs a weaker reading at -15 than its 12-month value of -13but is stronger than its 12-month level of -18. The reading for the ‘favorable to buy at present’ question, however, is weaker at a -19 compared to -14, logged 12-months ago. The environment for making a household purchase over the next 12-months has a 55.6 percentile ranking which is above its median, however, the assessment of ‘favorable to buy at present’ has only a 20th percentile standing significantly below its median reading (median readings occur at a ranking of 50%)..

**The Financial situation**
The financial situation for the next 12-months is assessed weaker at -3 in December, compared to zero in November; it compares to a - 2 in October. The assessment 12-months ago was also -2 so this is a very minor deterioration comparing the financial situation of households with the last 12-months produces another deterioration at -8 in December compared to -6 in November and that compares to 12-months ago at -5 another deterioration. However, the backward-looking assessment has a 52-percentile standing which is above its median while the outlook reading of -3 has a 23-percentile standing which puts it in the lower quarter of all expectations on data back to 1991. The current situation is appraised at 20 a step-back from November and October levels as well as from 12-months ago. But the current appraisal also has a queue standing in its 65.7 percentile which has a comfortable margin above its median reading. Households clearly have concerns about their financial situation even though their outlook for making household purchases is above median and their concerns about unemployment are low. Currently, conditions appear to be construed as solid.

**Savings**
Household savings over the next 12-months are weaker in December at a reading of 20 compared to 26 in November; they are closer to their 12-month ago reading of 21. December is still a relatively high reading, in any event, with a 91-percentile standing. The question, ‘is it favorable to save at present’ is unchanged in November compared to December at a reading of -28 although it is weaker than it was 12-months ago and the percentile standing at its 78th percentile, again, a firm reading for this metric.

**Summing up - assessment** 
The consumer confidence reading from the Belgian National Bank this month shows a slight set back month-to-month, however, there is a significant an improvement that has been underway that is quite clear from the chart. The concerns that consumers have seemed to be about their financial situation haven't translated into concerns about unemployment or their willingness to make major household purchases, with unemployment concerns very low and their willingness to make household purchases for the period ahead at essentially normal levels. Still, there is more concern about inflation that is percolating, which is interesting considering that overall inflation has been relatively stable and muted in the European monetary area. 




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Belgium

Belgian Consumer Confidence - On the Rise, but Weaker Month-to-Month

Andrew Cates

**Faster-than-Expected Monetary Easing**
Our first potential upside risk for 2026 is that monetary policy across most major advanced economies is loosened further and by more than markets and forecasters currently anticipate. Monetary policy cycles have a history of being underestimated in both length and magnitude—in large part because of the powerful feedback loops between interest rates, inflation, and economic behaviour. On the way up, higher policy rates feed into mortgage costs, debt-service burdens, rents, and the general cost of doing business, reinforcing wage pressures and inflation persistence. But these same channels work in reverse on the way down. As rates fall, debt servicing eases, housing and rental inflation softens, and cost pressures across the economy unwind more rapidly than expected—allowing inflation to decelerate faster and creating scope for further easing. A risk, therefore, is that if disinflation becomes self-reinforcing, central banks find themselves cutting rates more aggressively than currently priced, not because of economic distress, but because restrictive policy proves increasingly unnecessary.

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**Energy Supply Dynamics Prove More Supportive**
The second chart reinforces the message from the first: easing monetary policy may be accompanied—and amplified—by a more benign energy backdrop. Recent projections from the EIA point to a renewed build-up in OECD crude oil and liquids inventories over the year ahead, a dynamic that has historically been associated with downward pressure on oil prices. If inventories continue to rise as supply growth outpaces demand, spot prices for crude could undershoot current forecasts, keeping energy inflation subdued. That, in turn, would reinforce disinflationary forces already in play—lowering headline CPI, easing cost pressures for firms and households, and giving central banks greater confidence to loosen policy further. In that sense, softer oil prices would not just be a standalone positive shock, but part of a reinforcing feedback loop alongside rate cuts, supporting real incomes, financial conditions, and global growth into 2026.


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**AI-Driven Productivity Gains Materialise More Quickly** 
The third chart shows a clear pickup in US nonfinancial productivity growth, reviving the debate around whether AI-driven efficiency gains may arrive sooner than many forecasters expect. While the longer-term productivity potential of AI remains uncertain and uneven across sectors, there are reasons to think that at least some near-term gains could prove more tangible than currently assumed. Rather than transformative breakthroughs, early benefits are likely to come from incremental improvements—automation of routine processes, better scheduling and logistics, more efficient use of capital and labour, and modest reductions in overhead costs—areas where US firms are already well positioned to implement new technologies quickly. If these gains accumulate and diffuse more broadly, the implications would still be meaningful. Even a modest, sustained uplift in productivity would help contain unit labour costs, support real income growth, and raise the economy’s speed limit without generating renewed inflation pressure. In that scenario, productivity would not need to “revolutionise” the economy to matter: incremental efficiency gains could nonetheless provide a supportive backdrop for growth, earnings, and policy easing into 2026—representing a genuine upside risk to the outlook.


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**The US Economy Proves Resilient Again**
The next chart highlights a further upside risk to the 2026 outlook: the possibility that the US economy once again outperforms its peers. Unlike the typical pre-recession backdrop, there is little evidence of meaningful financial stress in the US private sector. After a prolonged period of balance-sheet repair, private-sector debt ratios have been trending lower in recent years, while the sector as a whole is running a healthy financial surplus. This stands in stark contrast to previous late-cycle episodes, which were characterised by rising leverage, widening deficits, and growing dependence on credit expansion. The absence of private-sector excesses reduces the economy’s vulnerability to higher rates and external shocks, and helps explain why growth has remained more durable than expected. If households and firms continue to prioritise balance-sheet strength rather than forced deleveraging, the usual mechanisms that tip the economy into recession may fail to materialise. In that environment, even modest easing in financial conditions could translate into renewed spending and investment, allowing the US to sustain above-trend growth into 2026—representing another upside risk to the global outlook.


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**India’s Growth Engine Accelerates Further** 
Chart 5 points to another potential upside risk for 2026 emanating from India’s economy. After a period of relative pessimism earlier in the year, consensus growth forecasts for 2026 have been revised modestly higher, even as inflation projections have continued to drift lower. This combination—firmer growth expectations alongside easing inflation pressures—creates scope for a more supportive policy backdrop than markets currently assume. With real interest rates no longer rising and financial conditions stabilising, India’s investment cycle, already underpinned by public infrastructure spending and improving corporate balance sheets, could prove more durable than forecast. If these trends persist, India may deliver growth that is both stronger and more internally driven than expected, providing a meaningful demand impulse to the broader global economy. Given India’s increasing weight in global growth, even small upside surprises would have outsized effects on trade, commodity demand, and regional activity—reinforcing the case that the global outlook for 2026 may be skewed to the upside.


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**The Global South Becomes a More Independent Source of Demand** 
The final chart points to a broader upside risk for the global economy in 2026: that economies across the so-called Global South generate more durable momentum than currently assumed. With a few notable exceptions—such as China and Thailand—many emerging economies continue to benefit from stronger growth in their working-age populations and/or faster real GDP per capita growth than their advanced-economy counterparts. These demographic and income dynamics are helping to underpin domestic consumption, support labour-force expansion, and attract capital inflows, as reflected in the pattern of net FDI across countries. In contrast, much of the advanced world faces binding demographic constraints and lower steady-state growth rates, limiting the scope for demand to re-accelerate organically. If growth in the Global South proves more resilient and internally driven—rather than overly dependent on exports to advanced economies—it could provide a more stable and geographically diversified source of global demand. In that scenario, global growth in 2026 would be less reliant on a narrow set of advanced economies, reinforcing the case that risks to the outlook may be skewed to the upside.


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_This marks our final Charts of the Week publication for 2025 The next edition will be released on Thursday 8 January._

Last week’s Charts of the Week focused on the darker tail risks hanging over the 2026 outlook: the possibility of monetary policy mis-calibration, that geopolitics and trade fragmentation further disrupt supply chains, and that elevated debt levels—particularly in the public sector—reassert themselves as a drag on growth. This week’s charts take a deliberately different tack. Taken together, they highlight a set of upside risks that are possibly underappreciated in current forecasts. For example, policy easing across advanced economies may extend further than expected as disinflation feeds on itself (chart 1); oil prices could surprise on the downside as inventories rebuild (chart 2); US productivity may deliver incremental but meaningful gains sooner than assumed (chart 3); the US economy itself could continue to benefit from an absence of private-sector financial stress (chart 4); India’s growth momentum might firm again as inflation pressures recede (chart 5); and, more broadly, parts of the Global South appear increasingly capable of generating their own demand impulse, supported by favourable demographics and income growth (chart 6). None of these forces is guaranteed, and each carries its own caveats—but together they suggest that, having spent much of the past year fixated on downside risks, the risks to global growth in 2026 may be more evenly balanced than is widely assumed.

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Economy in Brief

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