Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060928c.jpg" width="353">
Initial claims for jobless insurance fell 6,000 to 316,000 after an upwardly revised 11,000 increase during the prior week. 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 slightly to 315,500 (-16.9% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060928d.jpg" width="353">
Continuing claims for unemployment insurance fell 8,000 after a 38,000 drop the prior week that was deeper than initially reported.
The insured rate of unemployment was steady at 1.9% where it has been since February.

<table border="0" cellspacing="0" width="100%">
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<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">9/23/06</th>
<th scope="col">9/16/06</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>316</td>
<td>322</td>
<td>-11.2%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,444</td>
<td>-12.0%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
</body>
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Initial claims for jobless insurance fell 6,000 to 316,000 after an upwardly revised 11,000 increase during the prior week. Consensus expectations had been for 315,000 claims. During the last ten years there has been a (negative) 78% [...]

Initial Claims for Unemployment Insurance Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060928a.jpg" width="353">
U.S. real GDP growth last quarter was revised back to 2.6% (AR) from the preliminary report of 2.9% and the advance report of 2.5% growth. The figure fell short of Consensus expectations for an unrevised 2.9% advance.
Growth in 2Q corporate profits was revised down to 1.4% (18.5% y/y) from the initial report of a 3.2% advance. Profits at U.S. nonfinancial corporations fell a revised 3.6% (+10.7% y/y) instead of rising 0.6%. Financial corporate profits grew a stronger 9.4% (29.6% y/y) and earnings of overseas corporations grew a stronger 6.1% (29.5% y/y).
A lessened contribution from inventories, back to 0.4% from 0.6%, was the source of most of the downward revision to 2Q GDP growth. The contribution from an improved net export deficit was unrevised at 0.4 percentage points though exports grew a somewhat stronger 6.2% (8.2% y/y) and imports rose 1.4% (6.4% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060928b.jpg" width="353">
Growth in final sales to domestic purchasers was notched down slightly to 1.6% (3.0% y/y) as the decline in residential investment was deepened to 11.1% (-1.5% y/y) and that reduced 2Q GDP growth by 0.7 percentage points.
Real personal consumption expenditures was unrevised at 2.6% (3.0% y/y) while growth in business fixed investment was revised slightly lower to 4.4% (7.2% y/y).
The rise in the GDP chain price index was unrevised at 3.3%. Less final sales of computers the chain price index grew 3.5% (3.4% y/y). The chain price index for residential investment grew 2.9% (5.0% y/y), down from a peak quarterly rate of growth of 10.5% in early 2004.
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><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">2Q &#39;06 (Final)</th>
<th scope="col">2Q &#39;06 (Prelim.)</th>
<th scope="col">1Q &#39;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">GDP</td>
<td>2.6%</td>
<td>2.9%</td>
<td>5.6%</td>
<td>3.5%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.4%</td>
<td>0.6%</td>
<td>-0.0%</td>
<td>0.6%</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>2.1%</td>
<td>2.3%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>0.4%</td>
<td>0.4%</td>
<td>-0.0%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.6%</td>
<td>1.7%</td>
<td>5.4%</td>
<td>3.0%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>


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U.S. real GDP growth last quarter was revised back to 2.6% (AR) from the preliminary report of 2.9% and the advance report of 2.5% growth. The figure fell short of Consensus expectations for an unrevised 2.9% advance. Growth in 2Q [...]

US GDP Growth Revised Back to 2.6%, Profits Weaker

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060928a.jpg" width="353">
U.S. real GDP growth last quarter was revised back to 2.6% (AR) from the preliminary report of 2.9% and the advance report of 2.5% growth. The figure fell short of Consensus expectations for an unrevised 2.9% advance.
Growth in 2Q corporate profits was revised down to 1.4% (18.5% y/y) from the initial report of a 3.2% advance. Profits at U.S. nonfinancial corporations fell a revised 3.6% (+10.7% y/y) instead of rising 0.6%. Financial corporate profits grew a stronger 9.4% (29.6% y/y) and earnings of overseas corporations grew a stronger 6.1% (29.5% y/y).
A lessened contribution from inventories, back to 0.4% from 0.6%, was the source of most of the downward revision to 2Q GDP growth. The contribution from an improved net export deficit was unrevised at 0.4 percentage points though exports grew a somewhat stronger 6.2% (8.2% y/y) and imports rose 1.4% (6.4% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060928b.jpg" width="353">
Growth in final sales to domestic purchasers was notched down slightly to 1.6% (3.0% y/y) as the decline in residential investment was deepened to 11.1% (-1.5% y/y) and that reduced 2Q GDP growth by 0.7 percentage points.
Real personal consumption expenditures was unrevised at 2.6% (3.0% y/y) while growth in business fixed investment was revised slightly lower to 4.4% (7.2% y/y).
The rise in the GDP chain price index was unrevised at 3.3%. Less final sales of computers the chain price index grew 3.5% (3.4% y/y). The chain price index for residential investment grew 2.9% (5.0% y/y), down from a peak quarterly rate of growth of 10.5% in early 2004.
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><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">2Q &#39;06 (Final)</th>
<th scope="col">2Q &#39;06 (Prelim.)</th>
<th scope="col">1Q &#39;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">GDP</td>
<td>2.6%</td>
<td>2.9%</td>
<td>5.6%</td>
<td>3.5%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.4%</td>
<td>0.6%</td>
<td>-0.0%</td>
<td>0.6%</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>2.1%</td>
<td>2.3%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>0.4%</td>
<td>0.4%</td>
<td>-0.0%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.6%</td>
<td>1.7%</td>
<td>5.4%</td>
<td>3.0%</td>
<td>3.6%</td>
<td>4.0%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.3%</td>
<td>3.0%</td>
<td>2.8%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Initial Claims for Unemployment Insurance Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 28, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060928c.jpg" width="353">
Initial claims for jobless insurance fell 6,000 to 316,000 after an upwardly revised 11,000 increase during the prior week. 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 slightly to 315,500 (-16.9% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060928d.jpg" width="353">
Continuing claims for unemployment insurance fell 8,000 after a 38,000 drop the prior week that was deeper than initially reported.
The insured rate of unemployment was steady at 1.9% where it has been since February.

<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">9/23/06</th>
<th scope="col">9/16/06</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>316</td>
<td>322</td>
<td>-11.2%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,444</td>
<td>-12.0%</td>
<td>2,662</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
Retail Trade Takes Summer Break in Sweden; Mail Order Buying Is Vigorous 
by <a href="/comment/Stone.html">Carol Stone</a> September 28, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060928e.jpg" width="353">
Retail trade in Sweden was flat from month-to-month over this past summer, but Swedish consumers have shown some interesting underlying buying patterns. Total retail sales edged down 0.1% in August following a similar minuscule increase in July. The index was 137.8, seasonally adjusted, in August on a 2000 base, with not seasonally adjusted results up 8.3% from a year ago.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060928f.jpg" width="353">
Conventional consumer necessities, food and clothing, show moderate growth, with food in August up 6.1% on the year-ago, but down 1.7% from July. Sales of those stores have grown at about a 3% annual rate since the middle of 2000. Apparel, released with a month&#39;s lag, fell in July by 0.8% after a 2.3% decline in June. Apparel sales have been erratic, with, for instance, these two downs following ups of 7.7% in April and 1.0% in May. All together, since last August, clothing store sales have risen 3.3% at an annual rate (compared with August, the same year-ago period used with all other items here).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060928g.jpg" width="353">
Durable good spending, by contrast, has been strong in Sweden. It can also take a seesaw pattern, but 12-month growth rates have fluctuated in a range around 10% since April 2005, indicating quite lively demand for these items.
The feature of these retail trade data that caught our eye this morning is the strength of &quot;non-store&quot; retailing, especially mail order. The total retail trade index for August is 137.8 on a base of 2000=100. The non-store sector stands at 184.2 and the mail-order segment of that is at 187.6. These represent six-year growth rates of about 10% from the 2000 base. As we all know, the same phenomenon has gripped US shoppers: total retail sales converted to a 2000 base would stand at roughly 140, while &quot;electronic shopping and mail order houses&quot; would be just below 160. So Swedes have gone even more vigorously into this mode of buying. Cold winters may be one reason: a quick calculation of implied seasonal factors shows that mail order purchases have a high seasonal in the winter and are sluggish in the spring, compared with their total retail sales, which have the opposite pattern of mid-winter sloth but a spring revival. Shopping from home is a definite plus when it&#39;s cold outside.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Sweden: SA*, Fixed 2000 Prices</th>
<th scope="col">Aug 2006</th>
<th scope="col">July 2006</th>
<th scope="col">June 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">Total**, 2000= 100</td>
<td>137.8</td>
<td>137.9</td>
<td>137.8</td>
<td>127.5</td>
<td>126.4</td>
<td>118.0</td>
<td>112.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>-0.1</td>
<td>0.1</td>
<td>0.4</td>
<td>8.3</td>
<td>6.9</td>
<td>5.5</td>
<td>4.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Primarily Food</td>
<td>-1.7</td>
<td>0.6</td>
<td>1.3</td>
<td>6.1</td>
<td>2.9</td>
<td>0.9</td>
<td>2.4</td>
</tr>
<tr>
<td class="firstcol">Apparel</td>
<td>--</td>
<td>-0.8</td>
<td>-2.3</td>
<td>3.3***</td>
<td>6.8</td>
<td>7.6</td>
<td>3.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Primarily Durable Goods</td>
<td>1.4</td>
<td>-0.6</td>
<td>-0.3</td>
<td>10.1</td>
<td>10.1</td>
<td>9.5</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Mail Order</td>
<td>5.2</td>
<td>-1.8</td>
<td>-3.2</td>
<td>9.9</td>
<td>14.2</td>
<td>13.2</td>
<td>9.1</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/060927f.jpg" width="353">
After a surge in credit card borrowing in 2004, British consumers slowed their use of credit cards last year and most recently, in six of the last eight months, they have cut their credit card debt absolutely. This pattern emerges from data reported today through August by the British Bankers Association for their MBBG group, the &quot;Major British Banking Groups&quot;. In August, credit cards had net paydowns of &pound;399 million, following &pound;77 million in July and &pound;260 million in June. This contrasts sharply with net increases that averaged &pound;400 million in 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927g.jpg" width="353">
Noncredit card debt activity remains greater. Consumers added &pound;186 million in August, almost the same as June&#39;s advance of &pound;189 million, with July at &pound;368 million. Over the last year, these additions have averaged &pound;321 million a month. At the same time, this is less than other recent years. In fact, it is the weakest 12-month experience since 1997. The peak usage of this form of consumer credit occurred during 2002, when 12-month averages ran right at &pound;700 million in several months.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927h.jpg" width="353">
So consumers are reducing their reliance on credit. But retail sales data indicate that at least some forms of consumer spending are growing more vigorously, and these might be items consumers would buy on credit. Sales at clothing and household goods stores turned up in early 2005 and have accelerated since then. Outlays for services, as measured in the national accounts data, have slowed through Q2, though, and this may help explain the reduced use of consumer credit. 

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/UK/@U1/@U106/@U10611/@U10611.HTM">UK: Net Changes, SA, mil.&pound;*</a></th>
<th scope="col">Aug 2006</th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">Last 12 Months</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Credit Card Credit</td>
<td>-399</td>
<td>-77</td>
<td>-260</td>
<td>-50</td>
<td>+137</td>
<td>+400</td>
<td>+316</td>
</tr>
<tr class="odd">
<td class="firstcol">Noncredit Card Credit</td>
<td>+186</td>
<td>+368</td>
<td>+189</td>
<td>+321</td>
<td>+395</td>
<td>+552</td>
<td>+461</td>
</tr>
</tbody>
</table>
</body>
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After a surge in credit card borrowing in 2004, British consumers slowed their use of credit cards last year and most recently, in six of the last eight months, they have cut their credit card debt absolutely. This pattern emerges [...]

UK Consumers Pay Down Credit Cards

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927c.jpg" width="353">
The total number of mortgage applications fell 4.9% last week according to the Mortgage Bankers Association. For the month, applications nevertheless are 3.6% above the August average which fell 3.5% from July.
Purchase applications slid another 5.5% after the prior week&#39;s 3.0% decline. That dropped this month&#39;s gain to 2.7% versus a 3.5% decline during August. The latest level is 28.5% below the peak during May of 2005.
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 4.1% after the prior week&#39;s 9.5% surge. The average level of refis in September is up 4.7% from August which surged 13.3% m/m from July.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927b.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage fell a sharp 20 basis points to 6.39% and has averaged 6.51% this month versus 6.64% in August. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also fell that amount w/w to 6.10% 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.
Inflation Uncertainty and the Recent Low Level of the Long Bond Rate from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/summer2006/mehra.pdf"> here</a>.
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">09/22/06</th>
<th scope="col">09/15/06</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>566.5</td>
<td>595.8</td>
<td>-21.5%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>375.9</td>
<td>397.9</td>
<td>-22.2%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,677.5</td>
<td>1,748.7</td>
<td>-20.4%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications fell 4.9% last week according to the Mortgage Bankers Association. For the month, applications nevertheless are 3.6% above the August average which fell 3.5% from July. Purchase applications [...]

Mortgage Purchase Application Down Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927d.jpg" width="353">
Sales of new single family home sales improved 4.1% last month to 1.05M, matched expectations and recovered more than half of July&#39;s decline. But that month&#39;s sales level was revised down to 1.009 from 1.072M estimated initially.
New home sales during the first eight months of this year are down 15.2% from the first eight months of 2005 and in August were 23.2% below the monthly peak during July 2005.
Sales rose last month across the country except in the West where they fell 17.7% (-34.7% y/y). Sales in the South rose 11.1% (-10.2% y/y) and in the Northeast sales jumped 21.7% (+5.0% y/y). In the Midwest sales rose 12.2% (-19.6% y/y.
The median sales price of a new single family home rose 0.3% to $237,000 and prior month&#39;s figures were revised up, but the year to year comparison turned negative (-1.3%) for the first time since December 2003.
The number of new homes for sale edged down 0.4% m/m in August but rose 19.1% y/y. The year to year breakdown by region is as follows: Northeast, 19.0%; West, 31.5%; South, 24.4%; Midwest, -1.0%.
Recent Trends in Homeownership from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/06/09/Garriga.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/@E9/@E904/@E904.HTM">U.S. New Homes</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>
<td class="firstcol">Total Sales (AR, 000&#39;s)</td>
<td>1,050</td>
<td>1,009</td>
<td>-17.4%</td>
<td>1,280</td>
<td>1,201</td>
<td>1,091</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA)</td>
<td>$237,000</td>
<td>$236,200</td>
<td>-1.3%</td>
<td>$234,208</td>
<td>$217,817</td>
<td>$191,383</td>
</tr>
</tbody>
</table>
</body>
</html>

Sales of new single family home sales improved 4.1% last month to 1.05M, matched expectations and recovered more than half of July's decline. But that month's sales level was revised down to 1.009 from 1.072M estimated initially. New [...]

New Home Sales Up, Revisions & Prices Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927a.jpg" width="353">
New orders for durable goods fell 0.5% last month after a 2.7% decline during August which was deeper than initially reported. Consensus expectations had been for a 0.5% increase, though a weakening had been hinted by the lower ISM index for new orders.
During the last ten years there has been a 69% correlation between the y/y change in durable goods orders and the change in output of durable goods.
Durable goods orders less the transportation sector fell 2.0% after no change during July. Orders for transportation equipment rose 3.7% (-0.8% y/y) after a 9.5% July decline and benefited from a 4.4% (-3.5% y/y) rise in motor vehicle &amp; parts orders. That was offset by a 14.4% (-22.4% y/y) decline in aircraft &amp; parts.
Orders for nondefense capital goods fell 3.5% and less aircraft ticked down 0.3%. Orders for machinery fell 2.1% (+9.9% y/y) while electrical equipment &amp; appliance orders dropped 9.2% (-2.7% y/y). During the last ten years there has been an 86% correlation between the y/y change in capital goods orders less aircraft and the y/y change in business fixed investment in equipment &amp; software from the GDP accounts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927e.jpg" width="353">
Orders for computers &amp; electronic products reversed nearly all of the prior month&#39;s gain with a 4.7% (+3.2% y/y) drop. Computer orders fell 9.3% (-9.4% y/y) though orders for communications equipment recovered most of the July decline with a 7.0% (12.4% y/y) rise.
Shipments of durable goods jumped 1.9% (6.9% y/y) and less the transportation sector rose 0.5% (9.1% y/y). During the last ten years there has been an 82% correlation between the y/y change in durable goods shipments and the change in industrial production of durable goods.
Order backlogs inched up 0.4% (18.4% y/y) and less transportation rose just half (+13.7% y/y) that amount. Unfilled orders for nondefense aircraft &amp; parts dipped 0.2% (+44.8% y/y).
Durable inventories rose 0.2% (6.2% y/y) after the 1.1% July spike. Less the transportation sector inventories rose 0.6% (6.8% y/y) after an upwardly revised 1.1% July pop. The inventory to shipments ratio outside of the transportation sector rose very slightly to its highest level since April.
The Productivity of Nations from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/summer2006/duarte_restuccia.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/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</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">Durable Goods Orders</td>
<td>-0.5%</td>
<td>-2.7%</td>
<td>3.8%</td>
<td>9.0%</td>
<td>6.4%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-2.0%</td>
<td>0.0%</td>
<td>5.8%</td>
<td>9.4%</td>
<td>7.6%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-3.5%</td>
<td>-0.6%</td>
<td>0.7%</td>
<td>21.4%</td>
<td>5.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-0.3%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>12.3%</td>
<td>2.8%</td>
<td>-2.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

New orders for durable goods fell 0.5% last month after a 2.7% decline during August which was deeper than initially reported. Consensus expectations had been for a 0.5% increase, though a weakening had been hinted by the lower ISM [...]

U.S. Durable Goods Orders Unexpectedly Lost Steam

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927a.jpg" width="353">
New orders for durable goods fell 0.5% last month after a 2.7% decline during August which was deeper than initially reported. Consensus expectations had been for a 0.5% increase, though a weakening had been hinted by the lower ISM index for new orders.
During the last ten years there has been a 69% correlation between the y/y change in durable goods orders and the change in output of durable goods.
Durable goods orders less the transportation sector fell 2.0% after no change during July. Orders for transportation equipment rose 3.7% (-0.8% y/y) after a 9.5% July decline and benefited from a 4.4% (-3.5% y/y) rise in motor vehicle &amp; parts orders. That was offset by a 14.4% (-22.4% y/y) decline in aircraft &amp; parts.
Orders for nondefense capital goods fell 3.5% and less aircraft ticked down 0.3%. Orders for machinery fell 2.1% (+9.9% y/y) while electrical equipment &amp; appliance orders dropped 9.2% (-2.7% y/y). During the last ten years there has been an 86% correlation between the y/y change in capital goods orders less aircraft and the y/y change in business fixed investment in equipment &amp; software from the GDP accounts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927e.jpg" width="353">
Orders for computers &amp; electronic products reversed nearly all of the prior month&#39;s gain with a 4.7% (+3.2% y/y) drop. Computer orders fell 9.3% (-9.4% y/y) though orders for communications equipment recovered most of the July decline with a 7.0% (12.4% y/y) rise.
Shipments of durable goods jumped 1.9% (6.9% y/y) and less the transportation sector rose 0.5% (9.1% y/y). During the last ten years there has been an 82% correlation between the y/y change in durable goods shipments and the change in industrial production of durable goods.
Order backlogs inched up 0.4% (18.4% y/y) and less transportation rose just half (+13.7% y/y) that amount. Unfilled orders for nondefense aircraft &amp; parts dipped 0.2% (+44.8% y/y).
Durable inventories rose 0.2% (6.2% y/y) after the 1.1% July spike. Less the transportation sector inventories rose 0.6% (6.8% y/y) after an upwardly revised 1.1% July pop. The inventory to shipments ratio outside of the transportation sector rose very slightly to its highest level since April.
The Productivity of Nations from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/summer2006/duarte_restuccia.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/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</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">Durable Goods Orders</td>
<td>-0.5%</td>
<td>-2.7%</td>
<td>3.8%</td>
<td>9.0%</td>
<td>6.4%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-2.0%</td>
<td>0.0%</td>
<td>5.8%</td>
<td>9.4%</td>
<td>7.6%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-3.5%</td>
<td>-0.6%</td>
<td>0.7%</td>
<td>21.4%</td>
<td>5.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-0.3%</td>
<td>0.9%</td>
<td>7.2%</td>
<td>12.3%</td>
<td>2.8%</td>
<td>-2.0%</td>
</tr>
</tbody>
</table>
New Home Sales Up, Revisions & Prices Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 27, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927d.jpg" width="353">
Sales of new single family home sales improved 4.1% last month to 1.05M, matched expectations and recovered more than half of July&#39;s decline. But that month&#39;s sales level was revised down to 1.009 from 1.072M estimated initially.
New home sales during the first eight months of this year are down 15.2% from the first eight months of 2005 and in August were 23.2% below the monthly peak during July 2005.
Sales rose last month across the country except in the West where they fell 17.7% (-34.7% y/y). Sales in the South rose 11.1% (-10.2% y/y) and in the Northeast sales jumped 21.7% (+5.0% y/y). In the Midwest sales rose 12.2% (-19.6% y/y.
The median sales price of a new single family home rose 0.3% to $237,000 and prior month&#39;s figures were revised up, but the year to year comparison turned negative (-1.3%) for the first time since December 2003.
The number of new homes for sale edged down 0.4% m/m in August but rose 19.1% y/y. The year to year breakdown by region is as follows: Northeast, 19.0%; West, 31.5%; South, 24.4%; Midwest, -1.0%.
Recent Trends in Homeownership from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/06/09/Garriga.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/@E9/@E904/@E904.HTM">U.S. New Homes</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>
<td class="firstcol">Total Sales (AR, 000&#39;s)</td>
<td>1,050</td>
<td>1,009</td>
<td>-17.4%</td>
<td>1,280</td>
<td>1,201</td>
<td>1,091</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA)</td>
<td>$237,000</td>
<td>$236,200</td>
<td>-1.3%</td>
<td>$234,208</td>
<td>$217,817</td>
<td>$191,383</td>
</tr>
</tbody>
</table>
Mortgage Purchase Application Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 27, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927c.jpg" width="353">
The total number of mortgage applications fell 4.9% last week according to the Mortgage Bankers Association. For the month, applications nevertheless are 3.6% above the August average which fell 3.5% from July.
Purchase applications slid another 5.5% after the prior week&#39;s 3.0% decline. That dropped this month&#39;s gain to 2.7% versus a 3.5% decline during August. The latest level is 28.5% below the peak during May of 2005.
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 4.1% after the prior week&#39;s 9.5% surge. The average level of refis in September is up 4.7% from August which surged 13.3% m/m from July.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927b.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage fell a sharp 20 basis points to 6.39% and has averaged 6.51% this month versus 6.64% in August. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also fell that amount w/w to 6.10% 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.
Inflation Uncertainty and the Recent Low Level of the Long Bond Rate from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/summer2006/mehra.pdf"> here</a>.
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">09/22/06</th>
<th scope="col">09/15/06</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>566.5</td>
<td>595.8</td>
<td>-21.5%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>375.9</td>
<td>397.9</td>
<td>-22.2%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,677.5</td>
<td>1,748.7</td>
<td>-20.4%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
UK Consumers Pay Down Credit Cards 
by <a href="/comment/Stone.html">Carol Stone</a> September 27, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927f.jpg" width="353">
After a surge in credit card borrowing in 2004, British consumers slowed their use of credit cards last year and most recently, in six of the last eight months, they have cut their credit card debt absolutely. This pattern emerges from data reported today through August by the British Bankers Association for their MBBG group, the &quot;Major British Banking Groups&quot;. In August, credit cards had net paydowns of &pound;399 million, following &pound;77 million in July and &pound;260 million in June. This contrasts sharply with net increases that averaged &pound;400 million in 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927g.jpg" width="353">
Noncredit card debt activity remains greater. Consumers added &pound;186 million in August, almost the same as June&#39;s advance of &pound;189 million, with July at &pound;368 million. Over the last year, these additions have averaged &pound;321 million a month. At the same time, this is less than other recent years. In fact, it is the weakest 12-month experience since 1997. The peak usage of this form of consumer credit occurred during 2002, when 12-month averages ran right at &pound;700 million in several months.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060927h.jpg" width="353">
So consumers are reducing their reliance on credit. But retail sales data indicate that at least some forms of consumer spending are growing more vigorously, and these might be items consumers would buy on credit. Sales at clothing and household goods stores turned up in early 2005 and have accelerated since then. Outlays for services, as measured in the national accounts data, have slowed through Q2, though, and this may help explain the reduced use of consumer credit. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/UK/@U1/@U106/@U10611/@U10611.HTM">UK: Net Changes, SA, mil.&pound;*</a></th>
<th scope="col">Aug 2006</th>
<th scope="col">July 2006</th>
<th scope="col">June 2006</th>
<th scope="col">Last 12 Months</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
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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

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

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

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**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

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**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

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**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

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**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

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**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

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Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

Robert Brusca

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With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), and Texas (1.09%). These state data are not seasonally adjusted.

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

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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief

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