Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070125c.jpg" width="353">
Sales of existing homes fell 0.8% to 6.220M last month after two consecutive months of slight gain. Sales remained down 14.4% from the peak during June of 2005 and during all of last year sales fell 8.0% from the 2005 average.
Sales of single family homes fell a sharper 1.3% last month after no change during November. Sales were 14.1% lower than during the peak month of June 2005 and sales fell 7.7% for the full year.
Existing single family home prices in December firmed 2.3% for after four consecutive months of decline. Prices remained down 4.0% from the peak this past July but for all of last year posted a 2.3% gain, the weakest on record.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070125d.jpg" width="353">
By region, single family home sales fell 1.3% (-2.5% y/y) in the Northeast and were off 5.9% for all of 2005. Out West sales dropped 9.9% (-14.8% y/y) in December but cratered 16.7% for the full year. Sales in the Midwest actually rose 3.2% (-5.1% y/y) in December but posted a 6.1% decline for 2006 and in the South sales ticked up 0.4% (-6.6% y/y), off 3.8% for the year.
The inventory of &quot;homes on the market&quot; dropped a sharp 7.9% (+23.3% y/y) in December, the fourth decline in the last five month. At current sales rates, the inventory of homes for sale amounts to 6.8 months, down from the 7.4 month peak in October.
The broad aggregate data on existing home sales are included in Haver&#39;s USECON database; details about prices by region and inventories are available in the REALTOR database. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Home Sales (SAAR, 000s)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales</td>
<td>6,220</td>
<td>6,270</td>
<td>-7.9%</td>
<td>6,500</td>
<td>7,064</td>
<td>6,722</td>
</tr>
<tr>
<td class="firstcol">Single-Family Sales</td>
<td>5,440</td>
<td>5,510</td>
<td>-7.2%</td>
<td>5,697</td>
<td>6,170</td>
<td>5,912</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Single-Family Home Price (NSA,000s)</td>
<td>$221.6</td>
<td>$216.7</td>
<td>0.0%</td>
<td>$222.4</td>
<td>$217.5</td>
<td>$192.8</td>
</tr>
</tbody>
</table>
</body>
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Sales of existing homes fell 0.8% to 6.220M last month after two consecutive months of slight gain. Sales remained down 14.4% from the peak during June of 2005 and during all of last year sales fell 8.0% from the 2005 average. Sales [...]

December Existing Home Sales Fell, 2006 Price Gain Weakest on Record

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070125c.jpg" width="353">
Sales of existing homes fell 0.8% to 6.220M last month after two consecutive months of slight gain. Sales remained down 14.4% from the peak during June of 2005 and during all of last year sales fell 8.0% from the 2005 average.
Sales of single family homes fell a sharper 1.3% last month after no change during November. Sales were 14.1% lower than during the peak month of June 2005 and sales fell 7.7% for the full year.
Existing single family home prices in December firmed 2.3% for after four consecutive months of decline. Prices remained down 4.0% from the peak this past July but for all of last year posted a 2.3% gain, the weakest on record.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070125d.jpg" width="353">
By region, single family home sales fell 1.3% (-2.5% y/y) in the Northeast and were off 5.9% for all of 2005. Out West sales dropped 9.9% (-14.8% y/y) in December but cratered 16.7% for the full year. Sales in the Midwest actually rose 3.2% (-5.1% y/y) in December but posted a 6.1% decline for 2006 and in the South sales ticked up 0.4% (-6.6% y/y), off 3.8% for the year.
The inventory of &quot;homes on the market&quot; dropped a sharp 7.9% (+23.3% y/y) in December, the fourth decline in the last five month. At current sales rates, the inventory of homes for sale amounts to 6.8 months, down from the 7.4 month peak in October.
The broad aggregate data on existing home sales are included in Haver&#39;s USECON database; details about prices by region and inventories are available in the REALTOR database. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Existing Home Sales (SAAR, 000s)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales</td>
<td>6,220</td>
<td>6,270</td>
<td>-7.9%</td>
<td>6,500</td>
<td>7,064</td>
<td>6,722</td>
</tr>
<tr>
<td class="firstcol">Single-Family Sales</td>
<td>5,440</td>
<td>5,510</td>
<td>-7.2%</td>
<td>5,697</td>
<td>6,170</td>
<td>5,912</td>
</tr>
<tr class="odd">
<td class="firstcol">Median Single-Family Home Price (NSA,000s)</td>
<td>$221.6</td>
<td>$216.7</td>
<td>0.0%</td>
<td>$222.4</td>
<td>$217.5</td>
<td>$192.8</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Finally Popped 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 25, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070125e.jpg" width="353">
The Conference Board reported that its Index of Help-Wanted Advertising in December popped upwards to 33, its highest level since June.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume also surged to 77%, the highest level since July of 2005.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">December &#39;05</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>33</td>
<td>29</td>
<td>38</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Jumped 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 25, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070125a.jpg" width="353">
Initial unemployment insurance claims jumped 36,000 to 325,000 last week and reversed all of the declines over the prior two weeks. Consensus expectations had been for a lesser increase to 310,000.
During the last ten years there has been a (negative) 77% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four-week moving average of initial claims increased modestly to 309,250 (7.1% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070125b.jpg" width="353">
Continuing claims for unemployment insurance fell 39,000 and reversed part of the prior week&#39;s 113,000 surge.
The insured rate of unemployment remained at 1.9%, about where it&#39;s been since February.
The Budget &amp; Economic Outlook: Fiscal Years 2007 to 2016 from the Congressional Budget Office can be found<a href="http://www.cbo.gov/ftpdocs/70xx/doc7027/01-26-BudgetOutlook.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">01/20/07</th>
<th scope="col">01/13/07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>325</td>
<td>289</td>
<td>15.7%</td>
<td>313</td>
<td>332</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,484</td>
<td>-3.2%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
China GDP Grows 10.7% in 2006, But Manufacturing Gains Appear To Moderate Late in the Year 
by <a href="/comment/Stone.html">Carol Stone</a> January 25, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070125g.jpg" width="353">
China&#39;s economy continued to expand rapidly in Q4, according to GDP data reported today (Jan 25). The Q4 GDP was 10.4% above that for Q4 2005, making the whole year 10.7% above 2005. This was the strongest yearly performance since 1995.
China, of course, has become the world&#39;s manufacturing center, and it is that industrial sector that drove the further acceleration in the annual outcome. This is called secondary industry by the Chinese national accounts compilers; the product of that segment expanded by 12.5% in the year, about the same as 12.7% in 2003, and otherwise the largest growth since 1995. The secondary industries are manufacturing, mining, utilities and construction. Primary industries, which include agriculture, forestry and fishing, expanded 5.0%, and tertiary industries, basically the service sector, grew 10.3%, about in line with the last seven or eight years&#39; gains. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070125h.jpg" width="353">
While these data are &quot;provisional&quot; according to China&#39;s National Bureau of Statistics, they do contain a hint of slowing in the key secondary industry sector. Its gross product had been up as much as 13.2% in Q2, year-to-date over the comparable year-ago period. So there has apparently been moderate easing through the second half of the year to the cumulative total of 12.5%. This is also apparent in monthly data on industrial production. Year-on-year growth rates in the autumn months had decreased to 14-3/4% from 18% in the spring. This of course still shows dramatic strength -- which indeed may elicit interest rate increases from the Central Bank -- but the less ebullient performance does suggest that there may be some capacity limits on Chinese activity. We could guess they are at least partially energy-related.

<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/EMERGEPR/@P1/@P12/@P12.HTM">CHINA</a></th>
<th scope="col">Q4 2006</th>
<th scope="col">Q3 2006</th>
<th scope="col">Q2 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP: Yr/Yr % Change</td>
<td>10.4</td>
<td>10.6</td>
<td>11.5</td>
<td>9.9</td>
<td>10.7</td>
<td>9.9</td>
<td>9.5</td>
</tr>
<tr>
<td class="firstcol">Year-to-Date % Change</td>
<td>10.7</td>
<td>10.7</td>
<td>10.9</td>
<td>10.4</td>
<td>10.7</td>
<td>10.4</td>
<td>10.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Primary Industries</td>
<td>5.0</td>
<td>4.9</td>
<td>5.1</td>
<td>5.2</td>
<td>5.0</td>
<td>5.2</td>
<td>6.3</td>
</tr>
<tr>
<td class="firstcol">Secondary Industries</td>
<td>12.5</td>
<td>13.0</td>
<td>13.2</td>
<td>11.7</td>
<td>12.5</td>
<td>11.7</td>
<td>11.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Tertiary Industries</td>
<td>10.3</td>
<td>9.5</td>
<td>9.4</td>
<td>10.5</td>
<td>10.3</td>
<td>10.5</td>
<td>10.0</td>
</tr>
<tr>
<td class="firstcol">Nominal GDP: Bil.Yuan</td>
<td>5,659.6</td>
<td>5,129.3</td>
<td>5,024.1</td>
<td>4,820.0</td>
<td>20,834.0</td>
<td>18,232.1</td>
<td>15,987.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Bil.US$</td>
<td>719.9</td>
<td>644.0</td>
<td>627.2</td>
<td>596.3</td>
<td>2,614.7</td>
<td>2,226.1</td>
<td>1,931.6</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/060125h.jpg" width="353">
The &quot;preliminary&quot; estimate of GDP in the UK shows an improvement in growth for Q4, to 0.6%, from 0.4% in Q3. This result might surprise observers in light of several reports, the latest only yesterday, of deteriorating business sentiment in that economy. The answer appears to be a mixed one. Output at the so-called &quot;production&quot; industries, that is, manufacturing, mining and utilities, shrank in the quarter by 0.6%. The overall gain in GDP came from a notable pickup in the service sector to 0.9%, its strongest performance since the spring of 2004. Further, even among the production industries, the erratic mining industry whipped around from a steep -7.7% in Q3 to +1.3% in Q4. Several service industries also showed growth spurts of over 1% after more moderated gains in previous quarters. So the improvement in the total GDP figure in Q4 may be more transitory than a sign of a firming trend.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/UK/@U2/@U2.HTM">UK GDP&nbsp;</a>SA, % Changes</th>
<th scope="col">Q4 2005 &quot;Prel&quot;&nbsp;</th>
<th scope="col">Q3 2005&nbsp;</th>
<th scope="col">Q2 2005</th>
<th scope="col">Year/Year</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>0.6</td>
<td>0.4</td>
<td>0.5</td>
<td>1.7</td>
<td>1.8</td>
<td>3.2</td>
<td>2.5</td>
<td>2.0</td>
</tr>
<tr>
<td class="firstcol">Manufacturing </td>
<td>-0.8</td>
<td>0.3</td>
<td>-0.2</td>
<td>-1.6</td>
<td>-0.6</td>
<td>1.9</td>
<td>0.1</td>
<td>-3.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining incl Oil Extraction</td>
<td>1.3</td>
<td>-7.7</td>
<td>0.2</td>
<td>-7.1</td>
<td>-8.4</td>
<td>-8.1</td>
<td>-5.1</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">Electricity, Gas &amp; Water Supply</td>
<td>-0.2</td>
<td>-1.0</td>
<td>1.0</td>
<td>-1.8</td>
<td>-1.6</td>
<td>2.1</td>
<td>1.2</td>
<td>-0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>0.9</td>
<td>0.7</td>
<td>0.6</td>
<td>2.9</td>
<td>2.6</td>
<td>3.6</td>
<td>2.7</td>
<td>2.7</td>
</tr>
</tbody>
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The "preliminary" estimate of GDP in the UK shows an improvement in growth for Q4, to 0.6%, from 0.4% in Q3. This result might surprise observers in light of several reports, the latest only yesterday, of deteriorating business [...]

UK GDP Rises 0.6% in Q4: A Brief Summary

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060125f.jpg" width="353">
While business in the UK appears to be flagging, as reported here yesterday by Louise Curley, on the Continent, affairs look more favorable. Ifo, an independent research institute in Germany, relates today that its Business Climate Index for January moved up to +3.0 from -1.7 in December. This was only the 21st positive monthly reading in just over 15 years of survey data. The two components, the Business Situation and Business Expectations also improved, with Expectations at +10.8 from +2.6 last month. The Situation measure, a gauge of current conditions, remained negative, but less so, at -4.5 from -6.0 in December. Among types of businesses, manufacturers, construction companies and retailers participated in the advance. Wholesalers&#39; sentiments eroded a bit, from -0.8 to -2.1, but these were still the best two readings in this sector since May 2000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060125g.jpg" width="353">
In a similar survey covering manufacturers and other industrial firms in France, sentiments changed little in the month, but their modest move pushed their diffusion index to +1, the first positive reading since November 2004. Conducted by INSEE, the French Government statistical office, this monthly business survey, measuring the outlook for the trend in industrial production, is much more variable than the Ifo data in Germany. So less significance can be taken from this latest swing in the French figures. Even so, French managers are considerably more sanguine about manufacturing prospects than they were through much of 2005. Foreign orders look to be a major ingredient.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Indexes, 2000=100, SA</th>
<th scope="col">Jan 2006</th>
<th scope="col">Dec 2005</th>
<th scope="col">Nov 2005</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: Ifo Business Climate</td>
<td>102.0</td>
<td>99.6</td>
<td>97.8</td>
<td>96.2</td>
<td>95.6</td>
<td>95.7</td>
<td>91.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Diffusion %</td>
<td>+3.0</td>
<td>-1.7</td>
<td>-5.3</td>
<td>-8.6</td>
<td>-9.7</td>
<td>-9.6</td>
<td>-17.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Business Situation</td>
<td>100.4</td>
<td>99.6</td>
<td>97.8</td>
<td>95.1</td>
<td>95.4</td>
<td>94.0</td>
<td>88.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Diffusion %</td>
<td>-4.5</td>
<td>-6.0</td>
<td>-9.5</td>
<td>-14.7</td>
<td>-14.2</td>
<td>-17.0</td>
<td>-27.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Business Expectations</td>
<td>103.6</td>
<td>99.6</td>
<td>97.8</td>
<td>97.2</td>
<td>95.8</td>
<td>97.4</td>
<td>95.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Diffusion %</td>
<td>+10.8</td>
<td>+2.6</td>
<td>-1.1</td>
<td>-2.2</td>
<td>-5.1</td>
<td>-1.8</td>
<td>-6.5</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">France: INSEE Business Survey*</td>
<td>1</td>
<td>-2</td>
<td>0</td>
<td>-5</td>
<td>-12</td>
<td>+5</td>
<td>-29</td>
</tr>
</tbody>
</table>
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While business in the UK appears to be flagging, as reported here yesterday Louise Curley Curley, on the Continent, affairs look more favorable. Ifo, an independent research institute in Germany, relates today that its Business Climate [...]

German Ifo Business Climate Index Turns Positive in January; Prospects in France Modestly Favorable

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060125c.jpg" width="353">
Mass layoffs jumped 8.5% in December following a like rise during November. The latest was the highest level since January of 2005. For the year, the number of mass layoffs fell by 1.4%.
During the last ten years there has been a (negative) 87% correlation between the three month average level of layoff announcements and the y/y change in payroll employment.
The number of persons affected in December by mass layoffs jumped 23.8% m/m. During the latest two months layoffs in the construction industry have soared. Elsewhere by industry, the number of factory sector layoff announcements rose 10.1% (49.9% y/y) in December due to a tripling in transportation and in retail the number of affected persons doubled m/m (34.2% y/y).
The Mass Layoff Statistics (MLS) program collects reports on mass layoff actions that result in workers being separated from their jobs. Monthly mass layoff numbers are from establishments which have at least 50 initial claims for unemployment insurance (UI) filed against them during a 5-week period

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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Mass Layoffs</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</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">All US Industries (# Events, SA)</td>
<td>1,308</td>
<td>1,205</td>
<td>10.1%</td>
<td>15,662</td>
<td>15,877</td>
<td>19,155</td>
</tr>
<tr>
<td class="firstcol">Total (# Persons, SA)</td>
<td>149,565</td>
<td>120,783</td>
<td>24.0%</td>
<td>1,714,433</td>
<td>1,589,446</td>
<td>1,936,463</td>
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Mass layoffs jumped 8.5% in December following a like rise during November. The latest was the highest level since January of 2005. For the year, the number of mass layoffs fell by 1.4%. During the last ten years there has been a [...]

Mass Layoffs Jumped in December

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060125b.jpg" width="353">
The National Activity Index (CFNAI) compiled by the Federal Reserve Bank of Chicago fell sharply in December to 0.08 from 0.59 in November but the three-month moving average of the CFNAI rose to 0.55, the highest level since April 2004.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
Recent movements in the index have been exaggerated due to the damaging economic effects of last year&#39;s hurricanes.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
During the last twenty years there has been a 74% correlation between the level of the CFNAI and q/q growth in real GDP.
The latest CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_January2006.pdf">here</a>.
Ill Winds Can&#39;t Blow U.S. Economy Off Course from the Federal Reserve Bank of Atlanta can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=7C786700-5056-9F06-99C2D0ABAFEBBC55&amp;method=display"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Dec &#39;04</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.08</td>
<td>0.59</td>
<td>0.72</td>
<td>0.16</td>
<td>0.38</td>
<td>-0.11</td>
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The National Activity Index (CFNAI) compiled by the Federal Reserve Bank of Chicago fell sharply in December to 0.08 from 0.59 in November but the three-month moving average of the CFNAI rose to 0.55, the highest level since April [...]

Chicago Fed Nat'l Activity Index Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060125d.jpg" width="353">
The total number of mortgage applications rose 7.7% last week for the third consecutive weekly gain. For the month of January mortgage applications are 5.1% higher than during December.
The effective interest rate on a conventional 30-year mortgage dipped to 6.29%, down for the seventh straight week versus an average 6.48% in December and a high November average of 6.52%. The effective rate on a 15-year mortgage increased slightly to 5.95%. The interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
Higher applications to refinance again led the week&#39;s rise with a 7.8% increase which lifted the level of refis this month 15.8% above December.
Purchase applications recovered all of the prior week&#39;s decline with a 6.7% increase that pulled purchase applications in January 0.6% ahead of the December average.
During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales
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>.

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<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">01/20/06</th>
<th scope="col">01/13/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
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<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>660.5</td>
<td>613.3</td>
<td>0.4%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>473.7</td>
<td>443.9</td>
<td>7.9%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,773.9</td>
<td>1,645.2</td>
<td>-8.2%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
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The total number of mortgage applications rose 7.7% last week for the third consecutive weekly gain. For the month of January mortgage applications are 5.1% higher than during December. The effective interest rate on a conventional [...]

Mortgage Applications Up As Interest Rates Remain Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060125a.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index remained stable, but depressed, in January at 57; the lowest level since April 2003.
During the last twenty years the y/y change in the annual composite index has had an 85% correlation with the change in single family housing starts and there has been a 75% correlation between the current sales index and new single family home sales.
The January index for current sales of single family homes fell further to 62, down 20% from the January &#39;05 level of 77 though the index for sales in six months remained for the third month at 65versus an average of 75 during all of last year
Traffic of prospective home buyers remained quite depressed at an index level of 40, the lowest level since April 2003.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">&nbsp;Jan &#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">Composite Housing Market Index</td>
<td>57</td>
<td>57</td>
<td>70</td>
<td>67</td>
<td>68</td>
<td>64</td>
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The National Association of Home Builders' (NAHB) Composite Housing Market Index remained stable, but depressed, in January at 57; the lowest level since April 2003. During the last twenty years the y/y change in the annual composite [...]

NAHB Housing Market Index Stable at Low Level

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

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Michael J. Moran

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The Consumer Price Index rose 0.9% in March, easily the sharpest monthly rise since the inflation burst in 2022. Although pronounced in magnitude, the increase was not surprising, as essentially all analysts had built in pressure from the energy sector. Energy prices jumped 10.9%, led by a surge of 21.2% in gasoline prices. Other energy components wiggled: charges for electricity services rose 0.8%, offsetting declines in the prior two months; a drop 0.9% in the price of natural gas services followed sharp increases in the prior three months.

The press report from the Bureau of Labor Statistics showed food prices as unchanged, but calculating the shift to more than one decimal point showed a marginal decline (-0.005%) The dip was almost imperceptible, but it nevertheless was a welcome rarity. The decline occurred in the food-at-home component (i.e. grocery store prices, -0.2%); prices of food away from home (i.e. at restaurants and bars) rose 0.2%.

Core prices rose 0.2 percent, softer than the expected increase of 0.3%. Only two areas posted high-side readings. Apparel prices increased 1.0% after a jump of 1.3% in February, perhaps reflecting hope for an active spring selling season. Airfares jumped 2.7%, hardly surprising in light of recent energy developments. Sharper increases are likely in coming months because of higher fuel prices. Most other core items were contained, including declines of 1.0% in medical-care commodities and 0.4% in the prices of used motor vehicles. Prices of medical-care commodities have been quiet since the middle of 2024; the latest year-over-year change totaled only 0.3%. Prices of used cars and trucks have declined for four consecutive months, leaving a year-over-year decline of 3.2%.

Although core prices were well contained in March, the outlook is uncertain because of potential passthrough from higher energy prices. At the same time, recent trends in the inflation rates for core goods and core services offer a reason to be optimistic, as both are decelerating. As shown in the left chart below, core goods prices in the past six months have been subdued, which has pulled the year-over-year change from 1.5% last fall (August to October) to 1.2% in March. Core service prices, shown in the right chart below, have registered changes of 0.3% or 0.4% in the three months before the 0.2% reading in March. However, results for October and November were restrained, and changes in the past six months in total show deceleration. The year-over-year change of 3.0% in core service prices in March reflects an advance of 3.3% in the first six months of this span (annual rate) and 2.7% in the past six months. The pattern is choppy, but it traces a decelerating trend.

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

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- Gasoline prices drove the energy component higher; electricity prices also contributed.
- Food prices provided a surprise by posting a fractional decline.
- Core prices rose less than expected; both goods and services components were contained.

March CPI: Pressure in the Energy Sector (as Expected); Tame Elsewhere (Surprisingly)

Winnie Tapasanun

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Total factory orders were virtually unchanged m/m in February following a flat reading in January and a 0.4% decline in December, data from the U.S. Census Bureau showed. The Action Economics Forecast Survey had expected a 0.2% m/m February increase. The year-on-year growth rate eased to 3.7% in February, the lowest since October, from 4.2% in January (+3.0% in February 2025), remaining far below the April 2021 peak of 39.6%. Notably, orders for nondefense aircraft & parts plunged 28.6% m/m in February following decreases of 1.7% in January and 22.7% in December, while orders for defense aircraft & parts fell 2.1% after a 26.9% January slump and an 11.8% December jump. Factory orders excluding defense edged up 0.1% (3.6% y/y), the third m/m increase in four months, following a 0.4% January rebound. Factory orders excluding the transportation sector rose 1.2% (2.5% y/y), the strongest of four consecutive m/m gains, after a 0.5% January increase.

Durable goods orders fell 1.3% (+7.4% y/y) in February after a 0.4% decline in January (in line with a 1.4% m/m decrease in the advance report on April 7), marking the fourth m/m decline in five months. The February m/m fall reflected a 5.3% orders drop (+10.2% y/y) in transportation equipment following a 1.9% January decrease, alongside m/m declines of 0.5% (+2.4% y/y) in furniture & related products and 0.3% (+4.9% y/y) in electrical equipment, appliances & components. Other major durable goods orders categories rose m/m in February, led by a 2.4% gain (10.5% y/y) in primary metals, followed by increases of 1.7% (9.5% y/y) in machinery, 0.5% (5.4% y/y) in fabricated metal products, and 0.2% (7.7% y/y) in computers & electronic products.

Nondurable goods orders, which equal nondurable goods shipments, advanced 1.5% (0.1% y/y) in February, the biggest of three successive m/m gains, after a 0.5% increase in January. The February m/m rise was led by a 6.2% jump (-6.4% y/y) in petroleum & coal products, followed by gains of 5.9% (-5.8% y/y) leather & allied products, 1.2% (-2.8% y/y) in textile mills, 1.0% (1.6% y/y) in paper products, 0.9% (1.2% y/y) in plastics & rubber products, 0.6% (3.7% y/y) in beverage & tobacco products, 0.5% (3.2% y/y) in chemical products, 0.4% (3.2% y/y) in apparel, and 0.2% (0.5% y/y) in food products. To the downside, nondurable goods shipments for textile products (-1.4%; -1.5% y/y) and printing (-0.4%; -0.9% y/y) fell m/m in February following their January increases.

Total shipments rose 1.4% (3.5% y/y) in February after gains of 0.7% in January and December, registering the fourth m/m rise in five months. Excluding transportation, shipments advanced 1.4% (2.3% y/y), the fifth m/m gain in six months, after a 0.5% January increase. Shipments of durable goods industries also rose 1.4% (6.9% y/y), up for the fifth time in six months, after a 0.9% January gain. This reflected m/m increases across nearly all durable goods shipments categories, led by a 2.5% rise (10.1% y/y) in primary metals, followed by gains of 1.7% (5.5% y/y) in electrical equipment, appliances & components, 1.7% (4.0% y/y) in furniture & related products, 1.6% (9.7% y/y) in transportation equipment, 1.4% (7.6% y/y) in machinery, 1.3% (3.8% y/y) in nonmetallic mineral products, 1.0% (6.1% y/y) in computers & electronic products, 1.0% (2.5% y/y) in miscellaneous durable goods, and 0.9% (5.4% y/y) in fabricated metal products. In contrast, durable goods shipments for wood products were the only category with a monthly decline in February, easing 0.1% (-2.9% y/y) following a flat January reading.

Unfilled orders edged up 0.1% (11.1% y/y) in February, the smallest of seven consecutive m/m increases, following a 0.6% rise in January. Excluding transportation, unfilled orders grew 0.2% (1.9% y/y), up for the seventh straight month, after a 0.3% January increase. Backlogs of durable goods ticked up 0.1% (11.1% y/y) in February, led by gains of 0.5% (2.0% y/y) in machinery and 0.2% (4.9% y/y) in electrical equipment, appliances & components, partially offset by declines of 0.7% (+1.5% y/y) in furniture & related products and 0.1% (+2.3% y/y) in primary metals.

Inventories inched up 0.1% (0.8% y/y) in February, the fourth successive m/m increase, following matching 0.1% gains in January and December. Excluding transportation, inventories edged up 0.1% (1.0% y/y) after no change in January. Durable goods inventories increased 0.1% (1.8% y/y) in February after rising 0.2% for four straight months, while nondurable goods inventories were virtually unchanged (-0.8% y/y) after declining 0.3% in January and December.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Factory orders virtually unchanged (+3.7% y/y) in Feb. for second straight month; still 7.6% above the Jan. ’24 low.
- Durable goods orders (-1.3%), fourth m/m fall in five mths.; nondurable goods orders (+1.5%), largest of three successive m/m gains; shipments (+1.4%), fourth m/m rise in five mths.
- Transportation orders -5.3% m/m, led by a 28.6% plunge in nondefense aircraft orders.
- Unfilled orders +0.1%, smallest of seven straight m/m increases.
- Inventories +0.1%, holding within a narrow 0.1%-0.2% range for four consecutive mths.

U.S. Factory Orders Flat in February on Weak Nondefense Aircraft Orders

Andrew Cates

**Positive Growth Surprises, Negative Inflation Surprises—For Now**
The global macro backdrop heading into the latest Middle East shock was, by recent standards, relatively constructive. As the chart shows, growth data had been consistently surprising to the upside, while inflation surprises have been in negative territory—an unusually benign combination suggesting resilient activity alongside easing price pressures. What is striking, however, is that—at least through March and into early April—this pattern has not yet been meaningfully dislodged. For now, the data flow still reflects a world that was stabilising rather than deteriorating. That said, this is almost certainly a lagging signal. Supply-side shocks of this nature—particularly those centred on energy—tend to work with a delay but can be highly disruptive once they feed through. The risk, therefore, is that the current “goldilocks” surprise dynamic proves short-lived as higher energy costs, supply chain frictions and rising uncertainty begin to reshape the incoming data in the weeks ahead.

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**Monetary Policy Expectations Shift as Easing Bets Are Repriced**
How policymakers respond to the evolving situation in the Middle East will be critical in shaping both market dynamics and the broader global outlook. This chart, based on the latest April Blue Chip Financial Forecasts survey, suggests that expectations are already beginning to shift. Forecasters are now less inclined to anticipate policy easing in the period ahead—particularly in the euro area, where expectations for rate cuts have been scaled back. Similarly, some of the easing previously priced for the Federal Reserve and the Bank of England has been pared back over the next 12 months. While this is not yet a full pivot toward tightening, it does point to a more cautious policy backdrop, reflecting the risk that renewed energy-driven inflation pressures could constrain central banks’ ability to support growth.

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**Delay, Don’t Tighten: Central Banks’ Likely Playbook**
If the previous chart highlights a shift in policy expectations, this one gives a clearer sense of the reaction function underpinning it. When asked how central banks would respond if energy-driven inflation proves more persistent, most panellists point not to renewed tightening, but to a more cautious delay in easing. In other words, the hurdle for rate cuts has risen, even if the bar for  hikes remains relatively high. This distinction matters. It suggests that policymakers are likely to treat the shock as a supply-driven inflation impulse—one that complicates the outlook but does not automatically warrant aggressive tightening. At the same time, the responses underscore a second important theme: divergence. A sizeable share of forecasters expect policy paths to vary significantly across regions, reflecting differences in energy exposure, inflation dynamics and domestic growth conditions. Taken together, the message is one of constrained flexibility. Central banks may want to support growth, but persistent energy pressures could keep them on hold for longer than previously anticipated—reinforcing the more cautious policy outlook already evident in market pricing.

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**Markets Signal Fiscal Concern, Not Inflation Panic**
If central banks are likely to proceed cautiously, financial markets are already beginning to draw their own conclusions. This chart shows that the recent adjustment in US Treasury markets has been driven primarily by a rise in real yields rather than a meaningful increase in inflation expectations. In other words, markets are not yet pricing a loss of monetary policy credibility or a sharp unanchoring of inflation expectations. Instead, the move points more toward concerns around the broader policy mix—particularly the fiscal backdrop and the potential for increased borrowing needs in an environment of heightened geopolitical risk. This distinction is important. A rise in inflation expectations would suggest fears of central banks falling behind the curve. What we are seeing instead is a repricing of real rates, consistent with tighter financial conditions and a higher risk premium. For now, at least, markets appear to view the shock less as a classic inflation spiral and more as a development that complicates the growth outlook and places greater strain on policy frameworks—especially on the fiscal side.

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**Electricity Prices Reflect Energy Dependence**
The initial response in electricity markets since the Middle East disruption has followed a familiar pattern. Economies with greater domestic energy capacity—such as Scandinavia and, to a lesser extent, the US—have seen relatively contained electricity prices. By contrast, those more reliant on imported energy—most notably the UK and parts of Europe—continue to face significantly higher costs

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**Generation Capacity Determines Energy Resilience**
These price dynamics are closely linked to underlying differences in electricity generation capacity. As the sixth chart shows, countries with higher per capita electricity production—again including Scandinavia and the US—are structurally better positioned to absorb external shocks. In contrast, economies with more limited domestic generation capacity, such as the UK and Germany, are inherently more exposed to fluctuations in global energy markets. This structural divide is likely to prove increasingly important in the period ahead, influencing not just near-term inflation outcomes but also the relative resilience of growth across economies as energy costs remain volatile.

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Amid further tentative signs of de-escalation—most notably President Trump’s decision on April 7th to step back from further escalation—financial markets have stabilised somewhat, but the macroeconomic implications of the Middle East crisis remain highly uncertain. As our charts show, the global economy entered this shock from a position of relative strength, with positive growth surprises and easing inflation pressures still evident in the data (chart 1). However, that benign backdrop now looks vulnerable. Central banks are already reassessing the outlook, with expectations for policy easing being pared back (chart 2) and a growing consensus that any response to persistent energy-driven inflation will likely involve delaying cuts rather than tightening aggressively—albeit with significant regional divergence (chart 3). Financial markets, for their part, are not yet signalling a loss of inflation control, but the rise in real yields suggests increasing concern around the broader policy mix, particularly fiscal pressures (chart 4). Finally, the adjustment to the shock is unlikely to be uniform. Structural differences in domestic energy capacity are already driving wide divergences in electricity prices, leaving more import-dependent economies exposed to higher costs and sharper trade-offs between growth and inflation (charts 5 and 6). Taken together, the message is clear: even if geopolitical tensions ease, the economic aftershocks are likely to be uneven, persistent and increasingly shaped by structural constraints.

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Charts of the Week: From Oil Shock to Policy Dilemma

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This monthly report is always packed with information relating to the household sector. At this time, most observers will probably be most interested in price developments, and the results for February were a bit unsettling. The headline price index rose 0.4%, influenced by a jump of 0.8% in energy prices. This increase was largely anticipated and not especially troubling when viewed in isolation. Energy prices have shown little net change in the past two years, and the latest reading of the index was comfortably within the recent range of observations. However, given developments in the Middle East, energy prices undoubtedly will surge out of that recent range in the months ahead.

Core PCE prices also rose 0.4%, a touch firmer than the expected increase of 0.3%. An increase of 0.4% in core inflation is a quick pace even when viewed in Isolation, but this advance followed a similar increase in January, and the December reading almost rounded to 0.4%. These recent changes pulled the year-over-year increase in core prices to 3.0%, a full percentage point above the Federal Reserve’s target.

Nominal personal income dipped 0.1% in February, which translated to a decline of 0.4% after adjusting for inflation (almost rounding to -0.5%). The softness is striking, but a review of the detail suggests that special factors played a role. Much of the weakness reflected a decline of 1.7% in dividend income, which followed a jump of 1.9% in January. Dividend payments in the prior two years followed the same pattern, leaving one to suspect that seasonal adjustment has gone awry. Government transfer payments also declined, with the miscellaneous category accounting for most of the drop. Medicaid payments also fell, marking the fifth consecutive decline, most likely driven by the tightening of provisions included in the One Big Beautiful Bill Act.

Nominal consumer expenditures rose 0.5%, a seemingly strong result, but the change amounted to only 0.1% in real terms. The small increase followed a flat reading in January and increases of only 0.1% in November and December. Consumers spent actively in the second and third quarters of last year, but they have become cautious recently. The data in hand suggest real outlay growth of approximately 1.0% in the first quarter, slower than the average pace of 3.0% in the middle of last year and 1.9% in 2025-Q4.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- The energy component contributed to a high-side reading on the price index for personal consumption expenditures; the core component was firm as well.
- Consumer spending showed signs of slowing.

Personal Income, Consumption, and Prices: Higher Prices Dampen Real Gains

Sandy Batten

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The third estimate of Q4 2025 GDP showed that real GDP growth slowed to 0.5% q/q saar versus 0.7% in the second estimate and 1.4% in the advance estimate. GDP had grown 4.4% in Q3. The more than one-month long shutdown of the federal government continued to have been a notable restraint on GDP growth in Q4, subtracting 1.0%-point from overall growth, the same as in the second estimate.

Revisions were very small across major expenditure categories. Growth of personal consumption expenditures was revised down slightly to 1.9% q/q saar from 2.0% previously. Nonresidential fixed investment increased 2.4%, up slightly from the 2.2% reported in the second estimate. The 0.5% q/q decline previously reported for residential investment was revised to a larger decline of 1.7%, subtracting 0.1%-point from overall growth versus 0.0%-point in the previous estimate. Inventories declined more than previously estimated, reducing their contribution to growth from 0.3%-point in the second estimate to 0.1%-point in today’s estimate.

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There were slight downward revisions to the declines previously reported for both exports and imports, leaving net exports essentially unrevised. As already noted, a 16.6% q/q saar plunge in federal government spending (revised down slightly from -16.7%) accounted for most of the weakness in Q4. This included a 24.3% q/q collapse in nondefense spending, the second largest quarterly decline in nearly forty years. By contrast, state and local government spending increased 1.5%, revised up from 1.2% in the previous estimate.

Private domestic demand growth (final sales to private domestic purchasers, a favored gauge of demand by the Federal Reserve) was revised slower to 1.8% q/q saar in Q4 from 1.9% in the second estimate and 2.4% in the advance report. However, even the revised pace of growth is respectable and close to the economy’s potential growth rate.

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

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- Q4 GDP growth revised to 0.5% q/q saar from 0.7% in the first revision and 1.4% in the advance report.
- The shutdown of the federal government still played a critical role in the slowdown, subtracting 1.0%-point from Q4 growth.
- Domestic demand slowed further with final sales to private domestic purchasers revised down to 1.8% from 1.9% in the first revision and 2.4% in the advance report.

Economy in Brief

Jump to:

December Existing Home Sales Fell, 2006 Price Gain Weakest on Record

December Existing Home Sales Fell, 2006 Price Gain Weakest on Record

UK GDP Rises 0.6% in Q4: A Brief Summary

German Ifo Business Climate Index Turns Positive in January; Prospects in France Modestly Favorable

Mass Layoffs Jumped in December

Chicago Fed Nat'l Activity Index Down

Mortgage Applications Up As Interest Rates Remain Down

NAHB Housing Market Index Stable at Low Level