Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060125e.jpg" width="353">
 According to the National Association of Realtors, total existing home sales fell 5.7% m/m to 6.600M (AR) in December from November which was revised down slightly. Consensus expectations for sales last month had been for a lesser decline to 6.90M. 
The decline was third in as many months and lowered sales to a level 10.2% below the June peak. Nevertheless, sales of existing homes set a record last year at 7.049M, up 4.9% year to year.
Sales of single-family homes dropped a sharp 6.8% to 5.73M. This third consecutive monthly decline left sales 10.5% below the June peak. Annual sales last year of 6.157M (4.1%) set a new record. Lower sales of condos &amp; co-ops rose 2.3% (4.8% y/y) in December.
The data cover sales closed in the latest and previous months, and contrast to the new home sales data which count sales at the signing of a contract. 
December single family home sales fell throughout the country. Sales in the West broke 11.1% lower (-11.7% y/y), 19.0% off the June peak but for the year up 3.0%. Sales in the Northeast sales dropped 2.5% (-6.1% y/y), 11.5% below the June peak. In the South, sales fell 7.5% (+1.3% y/y) and in the Midwest, single family sales were down for the fifth month in the last six. The 3.6% (-4.3% y/y) decline was to a level 10.8% below the August peak.
The median price of an existing single-family home dropped for the third month from the peak in August. Despite the 1.8% decline to $209,300 (+10.8% y/y), prices for the full year rose 12.8%. Prices are not seasonally adjusted.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">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/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</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 class="odd">
<td class="firstcol">Total Home Sales</td>
<td>6,600</td>
<td>7,000</td>
<td>-3.1%</td>
<td>7,049</td>
<td>6,723</td>
<td>6,170</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>5,720</td>
<td>6,140</td>
<td>-4.2%</td>
<td>6,157</td>
<td>5,913</td>
<td>5,441</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price ($,000) </td>
<td>$209.3 </td>
<td>$213.1 </td>
<td>10.8% </td>
<td>$206.3</td>
<td>$182.8 </td>
<td>$169.1 </td>
</tr>
</tbody>
</table>


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According to the National Association of Realtors, total existing home sales fell 5.7% m/m to 6.600M (AR) in December from November which was revised down slightly. Consensus expectations for sales last month had been for a lesser [...]

U.S. Existing Home Sales Fell A Third Month

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/070124f.jpg" width="353">
GDP in the UK gained 0.8% in Q4, the largest quarterly increase in 2-1/2 years, according to preliminary data reported today by the Office for National Statistics. The pick-up from 0.7% in Q3 occurred in the services sector. Contrary to at least one press report, this did not happen in the financial industries. Instead it was in old-line, traditional activities, including wholesale and retail trade, hotels and restaurants, and transportation and communications; these surged from marginal increases in Q3 to 1.4-1.8% in Q4. Finance and business services were hardly slow, at 1.0% growth in Q4, but they had been stronger at 1.3-1.4% earlier in the year.
Manufacturing had three firm quarter running, but came to a dead halt in Q4, with virtually no change at all. Even so, this put Q4/Q4 at 2.3%, the strongest since 1999. The mining sector (which includes oil production) stabilized after two quarters of steep decline, while utility output continued to contract. In fact, electricity, gas and water supply fell 5.2% Q4/Q4 and 3.2% for 2006 as a whole, the weakest performance since the massive coal miners&#39; strike in 1984.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070124h.jpg" width="353"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070124g.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK GDP&nbsp;SA, % Changes</th>
<th scope="col">Q4 2006 &quot;Prel&quot;&nbsp;</th>
<th scope="col">Q3 2006&nbsp;</th>
<th scope="col">Q2 2006</th>
<th scope="col">Year/Year</th>
<th scope="col">2006</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>0.8</td>
<td>0.7</td>
<td>0.7</td>
<td>3.0</td>
<td>2.7</td>
<td>2.0</td>
<td>3.2</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Manufacturing </td>
<td>0.0</td>
<td>0.6</td>
<td>0.9</td>
<td>2.3</td>
<td>1.2</td>
<td>-1.1</td>
<td>2.0</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining inc Oil Extraction</td>
<td>-0.1</td>
<td>-3.8</td>
<td>-3.7</td>
<td>-7.6</td>
<td>-8.0</td>
<td>-8.7</td>
<td>-7.9</td>
<td>-5.1</td>
</tr>
<tr>
<td class="firstcol">Electricity, Gas &amp; Water Supply</td>
<td>-2.3</td>
<td>-0.2</td>
<td>-2.7</td>
<td>-5.2</td>
<td>-3.2</td>
<td>0.3</td>
<td>1.2</td>
<td>1.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>1.0</td>
<td>0.8</td>
<td>1.0</td>
<td>3.6</td>
<td>3.7</td>
<td>2.9</td>
<td>3.9</td>
<td>3.1</td>
</tr>
</tbody>
</table>
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GDP in the UK gained 0.8% in Q4, the largest quarterly increase in 2-1/2 years, according to preliminary data reported today by the Office for National Statistics. The pick-up from 0.7% in Q3 occurred in the services sector. Contrary [...]

UK GDP Rises 0.8% 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/070124e.jpg" width="353">
Sweden&#39;s labor market conditions were favorable during 2006, with growth in employment and declining unemployment. The December labor force survey, reported today by Statistics Sweden, shows growth in the labor force of 1.1% year/year and growth in employment of 1.9%. The unemployment rate was 4.6%, the fourth consecutive month below 5% and down markedly from 5.4% in December 2005.
For the year as a whole, employment expanded by 2.0%, the best performance since before dot.com-related recessionary conditions struck Sweden in late 2001. The employment rate was 74.3%, up from 73.7% in December 2005 and the highest December since 2001.
Sweden&#39;s labor force data were harmonized with the rest of the EU beginning in April 2005. Earlier data were not restated. So historical comparisons are a bit tenuous. Even so, the growth in employment is a genuine and positive development for the nation&#39;s economy and its people.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SWEDEN: NSA (000s)</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Dec 2005*</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">Labor Force</td>
<td>4,556</td>
<td>4,568</td>
<td>4,508</td>
<td>4,586</td>
<td>4,517</td>
<td>4,459</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>1.1%</td>
<td>0.8%</td>
<td>2.0%</td>
<td>1.5%</td>
<td>1.3%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment</td>
<td>4,345</td>
<td>4,370</td>
<td>4,264</td>
<td>4,340</td>
<td>4,254</td>
<td>4,213</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>1.9%</td>
<td>1.5%</td>
<td>1.9%</td>
<td>2.0%</td>
<td>1.0%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>4.6%</td>
<td>4.3%</td>
<td>5.4%</td>
<td>5.3%</td>
<td>5.8%</td>
<td>5.5%</td>
</tr>
</tbody>
</table>
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Sweden's labor market conditions were favorable during 2006, with growth in employment and declining unemployment. The December labor force survey, reported today by Statistics Sweden, shows growth in the labor force of 1.1% year/year [...]

Sweden Employment Gain Best in 5 Years; Unemployment Holds Below 5%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070124b.jpg" width="353">
The composite index of leading economic indicators increased 0.3% last month after a downwardly revised no change during November, according to the Conference Board. October&#39;s gain also was revised away to a minus 0.1%. Consensus expectations had been for a 0.2% gain during December.
During the last ten years there has been a 59% correlation between the y/y change in the leading indicators and the lagged change in real GDP.
The lagging indicators rose a firm 0.9% after an upwardly revised 0.6% increase during November. December&#39;s gain was the largest increase since January of last year. It was led by higher C&amp;I loans and a longer duration of unemployment. The ratio of coincident to lagging indicators, which is a measure of actual economic performance versus excess, fell sharply to the lowest level since late 2000.
The breadth of one month gain amongst the 10 components of the leading index improved sharply to 70%, its best since March, but over the last six months only 40% of the component series rose.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070124a.jpg" width="353">
Lower initial claims for unemployment insurance, higher building permits and higher stock prices made the largest contributions to last month&#39;s gain in the leading index.
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators increased 0.2% for the third straight month. Over the last ten years there has been a 91% correlation between the y/y change in the coincident indicators and real GDP growth.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a></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>
<td class="firstcol">Leading</td>
<td>0.3%</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>1.2%</td>
<td>2.5%</td>
<td>7.1%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>2.1%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
</body>
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The composite index of leading economic indicators increased 0.3% last month after a downwardly revised no change during November, according to the Conference Board. October's gain also was revised away to a minus 0.1%. Consensus [...]

U.S. Leading Economic Indicators Rose, Signs of Excess Surfaced

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070124b.jpg" width="353">
The composite index of leading economic indicators increased 0.3% last month after a downwardly revised no change during November, according to the Conference Board. October&#39;s gain also was revised away to a minus 0.1%. Consensus expectations had been for a 0.2% gain during December.
During the last ten years there has been a 59% correlation between the y/y change in the leading indicators and the lagged change in real GDP.
The lagging indicators rose a firm 0.9% after an upwardly revised 0.6% increase during November. December&#39;s gain was the largest increase since January of last year. It was led by higher C&amp;I loans and a longer duration of unemployment. The ratio of coincident to lagging indicators, which is a measure of actual economic performance versus excess, fell sharply to the lowest level since late 2000.
The breadth of one month gain amongst the 10 components of the leading index improved sharply to 70%, its best since March, but over the last six months only 40% of the component series rose.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070124a.jpg" width="353">
Lower initial claims for unemployment insurance, higher building permits and higher stock prices made the largest contributions to last month&#39;s gain in the leading index.
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators increased 0.2% for the third straight month. Over the last ten years there has been a 91% correlation between the y/y change in the coincident indicators and real GDP growth.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a></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>
<td class="firstcol">Leading</td>
<td>0.3%</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>1.2%</td>
<td>2.5%</td>
<td>7.1%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>2.5%</td>
<td>2.1%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
Mortgage Applications Down Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 24, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070124d.jpg" width="353">
The total number of mortgage applications fell a sharp 8.4% last week, after a slight decline the prior week according to the Mortgage Bankers Association.
Purchase applications slumped 8.4% after the prior period&#39;s sharp 7.0% fall. Nevertheless, as a result of a 16.2% surge at the beginning of January, the average level of purchase applications this month is up 3.2% from December which rose 4.7%.
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 also fell a sharp 9.6%. Applications to refinance in January are 2.0% above the December average which was unchanged from November.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070124c.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage rose w/w to 6.41% to the highest level this year and compared to the December average of 6.28%. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also rose to 6.19%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<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">01/19/07</th>
<th scope="col">01/12/07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>611.3</td>
<td>667.2</td>
<td>-7.4%</td>
<td>584.2</td>
<td>708.6</td>
<td>735.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>402.7</td>
<td>439.7</td>
<td>-15.0%</td>
<td>406.9</td>
<td>470.9</td>
<td>454.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,848.8</td>
<td>2,045.8</td>
<td>4.2%</td>
<td>1,634.0</td>
<td>2,092.3</td>
<td>2,366.8</td>
</tr>
</tbody>
</table>
Sweden Employment Gain Best in 5 Years; Unemployment Holds Below 5% 
by <a href="/comment/Stone.html">Carol Stone</a> January 24, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070124e.jpg" width="353">
Sweden&#39;s labor market conditions were favorable during 2006, with growth in employment and declining unemployment. The December labor force survey, reported today by Statistics Sweden, shows growth in the labor force of 1.1% year/year and growth in employment of 1.9%. The unemployment rate was 4.6%, the fourth consecutive month below 5% and down markedly from 5.4% in December 2005.
For the year as a whole, employment expanded by 2.0%, the best performance since before dot.com-related recessionary conditions struck Sweden in late 2001. The employment rate was 74.3%, up from 73.7% in December 2005 and the highest December since 2001.
Sweden&#39;s labor force data were harmonized with the rest of the EU beginning in April 2005. Earlier data were not restated. So historical comparisons are a bit tenuous. Even so, the growth in employment is a genuine and positive development for the nation&#39;s economy and its people.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SWEDEN: NSA (000s)</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Dec 2005*</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">Labor Force</td>
<td>4,556</td>
<td>4,568</td>
<td>4,508</td>
<td>4,586</td>
<td>4,517</td>
<td>4,459</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>1.1%</td>
<td>0.8%</td>
<td>2.0%</td>
<td>1.5%</td>
<td>1.3%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment</td>
<td>4,345</td>
<td>4,370</td>
<td>4,264</td>
<td>4,340</td>
<td>4,254</td>
<td>4,213</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>1.9%</td>
<td>1.5%</td>
<td>1.9%</td>
<td>2.0%</td>
<td>1.0%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>4.6%</td>
<td>4.3%</td>
<td>5.4%</td>
<td>5.3%</td>
<td>5.8%</td>
<td>5.5%</td>
</tr>
</tbody>
</table>
UK GDP Rises 0.8% in Q4: A Brief Summary 
by <a href="/comment/Stone.html">Carol Stone</a> January 24, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070124f.jpg" width="353">
GDP in the UK gained 0.8% in Q4, the largest quarterly increase in 2-1/2 years, according to preliminary data reported today by the Office for National Statistics. The pick-up from 0.7% in Q3 occurred in the services sector. Contrary to at least one press report, this did not happen in the financial industries. Instead it was in old-line, traditional activities, including wholesale and retail trade, hotels and restaurants, and transportation and communications; these surged from marginal increases in Q3 to 1.4-1.8% in Q4. Finance and business services were hardly slow, at 1.0% growth in Q4, but they had been stronger at 1.3-1.4% earlier in the year.
Manufacturing had three firm quarter running, but came to a dead halt in Q4, with virtually no change at all. Even so, this put Q4/Q4 at 2.3%, the strongest since 1999. The mining sector (which includes oil production) stabilized after two quarters of steep decline, while utility output continued to contract. In fact, electricity, gas and water supply fell 5.2% Q4/Q4 and 3.2% for 2006 as a whole, the weakest performance since the massive coal miners&#39; strike in 1984. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070124g.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070124h.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK GDP&nbsp;SA, % Changes</th>
<th scope="col">Q4 2006 &quot;Prel&quot;&nbsp;</th>
<th scope="col">Q3 2006&nbsp;</th>
<th scope="col">Q2 2006</th>
<th scope="col">Year/Year</th>
<th scope="col">2006</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>0.8</td>
<td>0.7</td>
<td>0.7</td>
<td>3.0</td>
<td>2.7</td>
<td>2.0</td>
<td>3.2</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Manufacturing </td>
<td>0.0</td>
<td>0.6</td>
<td>0.9</td>
<td>2.3</td>
<td>1.2</td>
<td>-1.1</td>
<td>2.0</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining inc Oil Extraction</td>
<td>-0.1</td>
<td>-3.8</td>
<td>-3.7</td>
<td>-7.6</td>
<td>-8.0</td>
<td>-8.7</td>
<td>-7.9</td>
<td>-5.1</td>
</tr>
<tr>
<td class="firstcol">Electricity, Gas &amp; Water Supply</td>
<td>-2.3</td>
<td>-0.2</td>
<td>-2.7</td>
<td>-5.2</td>
<td>-3.2</td>
<td>0.3</td>
<td>1.2</td>
<td>1.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>1.0</td>
<td>0.8</td>
<td>1.0</td>
<td>3.6</td>
<td>3.7</td>
<td>2.9</td>
<td>3.9</td>
<td>3.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060124e.jpg" width="353">
Last week Carol Stone commented on the signs of weakness in the United Kingdom&#39;s economy. Lower employment, reduced confidence, declining orders and industrial production. Today the Confederation of British Industries cast further gloom with the releases of their monthly and quarterly surveys of industrial trends. The latest survey was conducted between December 12, 2005 and January 11, 2006. During this period the pound averaged $1.75 and the price of Brent crude averaged $59.02 per barrel.
The balance between those reporting an increase in orders and those reporting a decrease was -28% in January, 6 percentage points more negative than December and 15 percentage points more negative than January, a year ago. Export orders fared somewhat better. The balance between those reporting an increase in export orders and those reporting a decrease was -10 0% in January, significant improvements from the -23% in December and the -26% in January, 2005. There have been very few months in the past five years when the balances on the total order book or the export order book have been positive, as can be seen in the first chart. In general more manufacturers have reported decreases in orders than have reported increases over this period.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060124f.jpg" width="353">
While there has been a slight decline in pessimism in the current quarter survey, pessimists continue to outweigh the optimists, as they have since late 2004. The balance of those expecting an improvement in the business situation was -14% in the first quarter, compared with -21% in the fourth quarter, 2005 and -22% in the first quarter, 2005. Again, there is a somewhat better outlook for the export situation. The balance of those expecting a decrease in the export situation was -5% in the first quarter, an improvement from the -11% of the fourth quarter. The balances for optimism for the whole economy and for exports are shown in the second chart.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060124g.jpg" width="353">
Manufacturers are having trouble passing higher input prices on to the final consumer. Although there was some reduction in the balance of those expecting lower final prices in the first quarter to -4% from -8% in the fourth quarter of 2005, there was an increase to 23% in the balance of those expecting higher costs. Since early last year, the year over year increases in costs have exceeded those of final prices as can be seen in the third chart. 

<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/@U9/@U9.HTM">Confederation of British Industries (% Balances)</a></th>
<th scope="col">Q1 06 %</th>
<th scope="col">Q4 05 % </th>
<th scope="col">Q1 05 %</th>
<th scope="col">Q/Q dif</th>
<th scope="col">Y/Y dif</th>
<th scope="col">2005 %</th>
<th scope="col">2004 %</th>
<th scope="col">2003 %&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Optimism -General Business Situation</td>
<td>-14</td>
<td>-21</td>
<td>-22</td>
<td>7</td>
<td>8</td>
<td>-19</td>
<td>7</td>
<td>-17</td>
</tr>
<tr>
<td class="firstcol">Optimism-Exports</td>
<td>-5</td>
<td>-11</td>
<td>-6</td>
<td>6</td>
<td>1</td>
<td>-6</td>
<td>7</td>
<td>-1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices</td>
<td>-4</td>
<td>-8</td>
<td>11</td>
<td>4</td>
<td>-15</td>
<td>2</td>
<td>-4</td>
<td>-16</td>
</tr>
<tr>
<td class="firstcol">Costs</td>
<td>23</td>
<td>20</td>
<td>23</td>
<td>3</td>
<td>0</td>
<td>22</td>
<td>9</td>
<td>3</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Jan 06 %</td>
<td>Dec 05 % </td>
<td>Jan 05 %</td>
<td>M/M dif</td>
<td>Y/Y dif</td>
<td>2005 %</td>
<td>2004 %</td>
<td>2003 %&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Order Book</td>
<td>-28</td>
<td>-22</td>
<td>-13</td>
<td>-6</td>
<td>-15</td>
<td>-21</td>
<td>-9</td>
<td>-29&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Export Order Book</td>
<td>&nbsp;-10</td>
<td>-23</td>
<td>-26</td>
<td>13</td>
<td>16&nbsp;</td>
<td>-21&nbsp;</td>
<td>-13&nbsp;</td>
<td>-33&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

Last week Carol Stone commented on the signs of weakness in the United Kingdom's economy. Lower employment, reduced confidence, declining orders and industrial production. Today the Confederation of British Industries cast further [...]

CBI (Confederation of British Industries): Orders Decline, Price Squeeze Continues

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060124d.jpg" width="353">
Chain store sales edged 0.3% higher last week following the sharp 1.4% drop during the prior period, according to the International Council of Shopping Centers (ICSC)-UBS survey.
The increase left sales in January 1.3% ahead of December.
The leading indicator of chain store sales slipped 0.1% following two weeks of strong increase and the January average remained 1.2% ahead of December which rose 0.8%.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060124c.jpg" width="353">
Redbook Research reported that chain store sales in January were 0.4% below (+3.6% y/y) December. The Redbook survey samples same-store sales at general merchandise retailers representing about 9,000 stores. Same-store sales measure revenue at stores open at least a year.
During the last ten years there has been a 67% correlation between the y/y change in the Redbook tally of chain store sales and the change in non-auto retail sales less gasoline.
The latest store sales were accompanied by another rise in gasoline prices at the pump. Last week&#39;s two cent increase to an average $2.34 per gallon of regular unleaded followed a slight dip the prior week and pulled the January average to $2.31. In spot market trading yesterday gasoline fell three cents after a four cent rise on Friday, but declines early last week left the latest level two cents below last week&#39;s average.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">01/21/06</th>
<th scope="col">01/14/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>459.0</td>
<td>457.7</td>
<td>3.3%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

Chain store sales edged 0.3% higher last week following the sharp 1.4% drop during the prior period, according to the International Council of Shopping Centers (ICSC)-UBS survey. The increase left sales in January 1.3% ahead of [...]

Chain Store Sales Edged Up, With Gasoline Prices

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

260410F.jpg

260410G.jpg

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.

260409Z1.jpg

**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:

U.S. Existing Home Sales Fell A Third Month

U.S. Existing Home Sales Fell A Third Month

UK GDP Rises 0.8% in Q4: A Brief Summary

Sweden Employment Gain Best in 5 Years; Unemployment Holds Below 5%

U.S. Leading Economic Indicators Rose, Signs of Excess Surfaced

U.S. Leading Economic Indicators Rose, Signs of Excess Surfaced

CBI (Confederation of British Industries): Orders Decline, Price Squeeze Continues

Chain Store Sales Edged Up, With Gasoline Prices