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/060119e.jpg" width="353">
Industrial sales and orders rebounded markedly in Italy in November after pausing in October, according to data reported today by Istat, the Italian national statistical agency. Total orders gained 1.8% and stand 4.0% above a year ago, while sales (often called &#147;turnover&#148; there) were up 1.6% in the month and 4.4% on the year.
As the case in much of Europe, the foreign sector is tending to run ahead of the domestic economy. For the entire period since the index base year of 2000, foreign orders are up 14.5%, while domestic orders have been virtually flat. In the past year, foreign orders are up 5.8% and foreign sales by 7.6%, compared with somewhat over 3% for domestic orders and sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119f.jpg" width="353">
Individual industries are experiencing mixed fortunes, with electrical equipment, furniture and chemicals advancing in the last year. Metals and machinery see slowing growth, and transportation equipment and wood products have been flat. Finally, textiles and paper products are declining.
By type, consumer goods turnover seems recently to have the most consistent growth, albeit less dramatic expansion. Capital goods are tending to expand, but very unevenly from month-to-month, so there is little identifiable momentum. Energy products are very strong, but other intermediate goods have been erratic and trendless.
A reminder that these data appear in several Haver databases: most obviously in ITALY, our comprehensive and detailed country-source database. But also, a summary is presented in G10, a collection of major industrial countries in Europe plus the US, Canada, and Japan. And EUROSTAT, compiled from Eurostat, the EU statistical agency, contains an array of industrial orders throughout Europe. <span style="font-size:10.0pt;mso-bidi-font-size:12.0pt;font-family:Verdana;
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/ITALY/@I06/@I06.HTM">Italy Industry</a> </th>
Nov 2005 
<th scope="col">Oct 2005 </th>
<th scope="col">Year Ago </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">Index* </td>
<td>% Chg </td>
</tr>
<tr>
<td class="firstcol"><h1>Sales </h1></td>
<td>109.6 </td>
<td>1.6 </td>
<td>-0.6 </td>
<td>4.4 </td>
<td>3.1 </td>
<td>-1.0 </td>
<td>1.1 </td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic </td>
<td>108.2 </td>
<td>1.4 </td>
<td>-0.3 </td>
<td>3.3 </td>
<td>2.9 </td>
<td>-0.6 </td>
<td>0.8 </td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign </td>
<td>113.5 </td>
<td>2.0 </td>
<td>-1.4 </td>
<td>7.6 </td>
<td>3.6 </td>
<td>-2.3 </td>
<td>1.7 </td>
</tr>
<tr class="odd">
<td class="firstcol">Orders </td>
<td>104.1 </td>
<td>1.8 </td>
<td>-0.9 </td>
<td>4.0 </td>
<td>4.7 </td>
<td>-3.8 </td>
<td>2.3 </td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic </td>
<td>99.5 </td>
<td>2.1 </td>
<td>-1.3 </td>
<td>3.1 </td>
<td>3.9 </td>
<td>-3.5 </td>
<td>1.0 </td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Foreign </td>
<td>114.5 </td>
<td>1.1 </td>
<td>-0.1 </td>
<td>5.8 </td>
<td>6.3 </td>
<td>-4.2 </td>
<td>5.1 </td>
</tr>
</tbody>
</table>
</body>
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Industrial sales and orders rebounded markedly in Italy in November after pausing in October, according to data reported today by Istat, the Italian national statistical agency. Total orders gained 1.8% and stand 4.0% above a year [...]

Italian Industry Moves Unevenly Higher Through November

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119g.jpg" width="353">
The Index of General Business Conditions in the manufacturing sector for January from the Philadelphia Fed fell sharply to 3.3 from 10.9 in December. Consensus expectations had been for improvement to 13.1. It was the lowest level for the index since last June.
During the last ten years there has been a 68% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 50% correlation with q/q growth in real GDP.
The business conditions index reflects a separate survey question, not the sub indexes, and most of the sub indexes improved this month versus December.
The sub index measuring new orders rose to 11.1, its highest since October, from 5.8. Shipments also rose to 18.6 from 9.4 while the index covering the number of employees advanced to 11.7 from 7.9. During the last ten years there has been a 64% correlation between the employment index and the three month growth in factory payrolls.
The separate index of expected business conditions in six months fell moderately, reversing most of the revised rise in December. Expectations for employment also backpedaled after sharp improvement during December.
The prices paid index fell moderately and the index of future prices fell to its lowest level since last June. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the intermediate goods PPI. The correlation with the finished goods PPI has been 50% and with the CPI it&#39;s been 43%.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0106.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
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<td class="firstcol">General Activity Index</td>
<td>3.3</td>
<td>10.9</td>
<td>11.0</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>44.9</td>
<td>47.1</td>
<td>64.1</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
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The Index of General Business Conditions in the manufacturing sector for January from the Philadelphia Fed fell sharply to 3.3 from 10.9 in December. Consensus expectations had been for improvement to 13.1. It was the lowest level for [...]

Philadelphia Fed Business Activity Off Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119a.jpg" width="353">
Initial claims for unemployment insurance dropped 36,000 to 271,000 last week following a downwardly revised 15,000 increase the prior week. Consensus expectations had been for 315,000 claims.
The latest figure covers the survey period for January nonfarm payrolls and initial claims fell a sharp 48,000 (15.0%) from the December period to the lowest level since March 2000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119b.jpg" width="353">
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.
The four-week moving average of initial claims fell sharply to 299,000 (-11.2% y/y), its lowest level since July 2000.
Continuing unemployment insurance claims dropped a sharp 158,000 to the lowest level since February 2001.
The insured rate of unemployment fell to 2.0% after four weeks at 2.1%.

<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">01/14/06</th>
<th scope="col">01/07/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>271</td>
<td>307</td>
<td>-16.9%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,534</td>
<td>-6.4%</td>
<td>2,663</td>
<td>2,924</td>
<td>3,532</td>
</tr>
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Initial claims for unemployment insurance dropped 36,000 to 271,000 last week following a downwardly revised 15,000 increase the prior week. Consensus expectations had been for 315,000 claims. The latest figure covers the survey [...]

Initial Jobless Insurance Claims Dropped Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119d.jpg" width="353">
Housing starts slumped 8.0% m/m last month to 1.933M units following a little revised 3.4% increase in November. The decline was to the lowest level since March but did not prevent starts for all of 2005 from rising 6.0% to a record 2.066M. Consensus expectations had been for a lesser decline in December to 2.05M starts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119c.jpg" width="353">
Single-family starts plummeted 12.3% m/m to 1.577M from the near record November level. The gain was most pronounced in the West where starts fell 21.7% (-17.1% y/y) and in the Midwest where single family starts dropped 22.6% (-23.8% y/y). In the Northeast single family starts fell for the fifth month in the last six, down 4.5% (-9.3% y/y) and in the South starts fell 4.2% (+4.3% y/y).
Multi family starts rose 10.2% m/m following a downwardly revised gain during November. Building permits fell 4.4% to the lowest level since May.
The latest Beige Book covering regional economic conditions in the US from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2006/20060118/default.htm"> here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, 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</td>
<td>1,933</td>
<td>2,121</td>
<td>-5.7%</td>
<td>2,066</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,577</td>
<td>1,798</td>
<td>-7.9%</td>
<td>1,713</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>356</td>
<td>323</td>
<td>5.6%</td>
<td>353</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,068</td>
<td>2,163</td>
<td>-0.6%</td>
<td>2,121</td>
<td>2,058</td>
<td>1,8 88</td>
</tr>
</tbody>
</table>
</body>
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Housing starts slumped 8.0% m/m last month to 1.933M units following a little revised 3.4% increase in November. The decline was to the lowest level since March but did not prevent starts for all of 2005 from rising 6.0% to a record [...]

Housing Starts Fell To Lowest Level Since March

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119d.jpg" width="353">
Housing starts slumped 8.0% m/m last month to 1.933M units following a little revised 3.4% increase in November. The decline was to the lowest level since March but did not prevent starts for all of 2005 from rising 6.0% to a record 2.066M. Consensus expectations had been for a lesser decline in December to 2.05M starts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119c.jpg" width="353">
Single-family starts plummeted 12.3% m/m to 1.577M from the near record November level. The gain was most pronounced in the West where starts fell 21.7% (-17.1% y/y) and in the Midwest where single family starts dropped 22.6% (-23.8% y/y). In the Northeast single family starts fell for the fifth month in the last six, down 4.5% (-9.3% y/y) and in the South starts fell 4.2% (+4.3% y/y).
Multi family starts rose 10.2% m/m following a downwardly revised gain during November. Building permits fell 4.4% to the lowest level since May.
The latest Beige Book covering regional economic conditions in the US from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2006/20060118/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<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/@E901/@E90101/@E90101.HTM">Housing Starts (000s, 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</td>
<td>1,933</td>
<td>2,121</td>
<td>-5.7%</td>
<td>2,066</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,577</td>
<td>1,798</td>
<td>-7.9%</td>
<td>1,713</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>356</td>
<td>323</td>
<td>5.6%</td>
<td>353</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,068</td>
<td>2,163</td>
<td>-0.6%</td>
<td>2,121</td>
<td>2,058</td>
<td>1,8 88</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Dropped Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119a.jpg" width="353">
Initial claims for unemployment insurance dropped 36,000 to 271,000 last week following a downwardly revised 15,000 increase the prior week. Consensus expectations had been for 315,000 claims.
The latest figure covers the survey period for January nonfarm payrolls and initial claims fell a sharp 48,000 (15.0%) from the December period to the lowest level since March 2000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119b.jpg" width="353">
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.
The four-week moving average of initial claims fell sharply to 299,000 (-11.2% y/y), its lowest level since July 2000.
Continuing unemployment insurance claims dropped a sharp 158,000 to the lowest level since February 2001.
The insured rate of unemployment fell to 2.0% after four weeks at 2.1%.

<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">01/14/06</th>
<th scope="col">01/07/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>271</td>
<td>307</td>
<td>-16.9%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,534</td>
<td>-6.4%</td>
<td>2,663</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
Philadelphia Fed Business Activity Off Sharply  
by <a href="/comment/Moeller.html">Tom Moeller</a> January 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119g.jpg" width="353">
The Index of General Business Conditions in the manufacturing sector for January from the Philadelphia Fed fell sharply to 3.3 from 10.9 in December. Consensus expectations had been for improvement to 13.1. It was the lowest level for the index since last June.
During the last ten years there has been a 68% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 50% correlation with q/q growth in real GDP.
The business conditions index reflects a separate survey question, not the sub indexes, and most of the sub indexes improved this month versus December.
The sub index measuring new orders rose to 11.1, its highest since October, from 5.8. Shipments also rose to 18.6 from 9.4 while the index covering the number of employees advanced to 11.7 from 7.9. During the last ten years there has been a 64% correlation between the employment index and the three month growth in factory payrolls.
The separate index of expected business conditions in six months fell moderately, reversing most of the revised rise in December. Expectations for employment also backpedaled after sharp improvement during December.
The prices paid index fell moderately and the index of future prices fell to its lowest level since last June. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the intermediate goods PPI. The correlation with the finished goods PPI has been 50% and with the CPI it&#39;s been 43%.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0106.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">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">General Activity Index</td>
<td>3.3</td>
<td>10.9</td>
<td>11.0</td>
<td>12.4</td>
<td>28.0</td>
<td>10.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>44.9</td>
<td>47.1</td>
<td>64.1</td>
<td>43.5</td>
<td>51.2</td>
<td>16.8</td>
</tr>
</tbody>
</table>
Italian Industry Moves Unevenly Higher Through November 
by <a href="/comment/Stone.html">Carol Stone</a> January 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119e.jpg" width="353">
Industrial sales and orders rebounded markedly in Italy in November after pausing in October, according to data reported today by Istat, the Italian national statistical agency. Total orders gained 1.8% and stand 4.0% above a year ago, while sales (often called &#147;turnover&#148; there) were up 1.6% in the month and 4.4% on the year. 
As the case in much of Europe, the foreign sector is tending to run ahead of the domestic economy. For the entire period since the index base year of 2000, foreign orders are up 14.5%, while domestic orders have been virtually flat. In the past year, foreign orders are up 5.8% and foreign sales by 7.6%, compared with somewhat over 3% for domestic orders and sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060119f.jpg" width="353">
Individual industries are experiencing mixed fortunes, with electrical equipment, furniture and chemicals advancing in the last year. Metals and machinery see slowing growth, and transportation equipment and wood products have been flat. Finally, textiles and paper products are declining.
By type, consumer goods turnover seems recently to have the most consistent growth, albeit less dramatic expansion. Capital goods are tending to expand, but very unevenly from month-to-month, so there is little identifiable momentum. Energy products are very strong, but other intermediate goods have been erratic and trendless.
A reminder that these data appear in several Haver databases: most obviously in ITALY, our comprehensive and detailed country-source database. But also, a summary is presented in G10, a collection of major industrial countries in Europe plus the US, Canada, and Japan. And EUROSTAT, compiled from Eurostat, the EU statistical agency, contains an array of industrial orders throughout Europe.<span style="font-size:10.0pt;mso-bidi-font-size:12.0pt;font-family:Verdana;
mso-fareast-font-family:&quot;Times New Roman&quot;;mso-bidi-font-family:&quot;Times New Roman&quot;;
mso-ansi-language:EN-US;mso-fareast-language:EN-US;mso-bidi-language:AR-SA"> 

<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/ITALY/@I06/@I06.HTM">Italy Industry</a> </th>
Nov 2005 
<th scope="col">Oct 2005 </th>
<th scope="col">Year Ago </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">Index* </td>
<td>% Chg </td>
</tr>
<tr>
<td class="firstcol"><h1>Sales </h1></td>
<td>109.6 </td>
<td>1.6 </td>
<td>-0.6 </td>
<td>4.4 </td>
<td>3.1 </td>
<td>-1.0 </td>
<td>1.1 </td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic </td>
<td>108.2 </td>
<td>1.4 </td>
<td>-0.3 </td>
<td>3.3 </td>
<td>2.9 </td>
<td>-0.6 </td>
<td>0.8 </td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign </td>
<td>113.5 </td>
<td>2.0 </td>
<td>-1.4 </td>
<td>7.6 </td>
<td>3.6 </td>
<td>-2.3 </td>
<td>1.7 </td>
</tr>
<tr class="odd">
<td class="firstcol">Orders </td>
<td>104.1 </td>
<td>1.8 </td>
<td>-0.9 </td>
<td>4.0 </td>
<td>4.7 </td>
<td>-3.8 </td>
<td>2.3 </td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic </td>
<td>99.5 </td>
<td>2.1 </td>
<td>-1.3 </td>
<td>3.1 </td>
<td>3.9 </td>
<td>-3.5 </td>
<td>1.0 </td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Foreign </td>
<td>114.5 </td>
<td>1.1 </td>
<td>-0.1 </td>
<td>5.8 </td>
<td>6.3 </td>
<td>-4.2 </td>
<td>5.1 </td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060118f.jpg" width="353">
Employment has begun to falter in the UK, according to the latest Labor Force Survey, published today by the Office of National Statistics (ONS). In the 3 months centered on October, the number of people employed fell 49,000 from September&#39;s 3-month average and stood only 0.8% above a year ago. As recently as August the year-on-year gain was 1.3%. The employment rate decreased 0.2 percentage points in the October reading to 74.5% from 74.7% in September and 74.8 in the October period of 2004. This rate, the number employed compared to the population of &quot;working age&quot; (16-59 for women and 16-64 for men), peaked at 75.0% last January. Commensurately, the unemployment rate has risen, reaching 5.0% most recently, up from a low of 4.7% recorded in August.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060118g.jpg" width="353">
Associated wage and unemployment insurance data also show softening. The average earnings index, watched by many in the UK as a harbinger of inflation pressures, had just a 3.4% yearly growth rate in the three months ended November, slowing from 4.6% as recently as April. The number of claimants for Jobseeker&#39;s Allowance benefits rose in the month of December to 909,100 from 901,900 in November and 825,000 in December 2004.
There are other scattered signs of softening in the UK. Consumer confidence turned negative in October, and industrial production declined irregularly through much of 2005. The CBI industrial trends survey shows marked declines in order books continuously since March. GDP growth slowed to below 2% year-on-year in Q2 and Q3. [Q4 data are due to be reported next Wednesday, January 25.] Exports, by contrast, have been rising as have retail sales. So there is some mixed quality to UK economic activity, but the basic industry appears sluggish and it&#39;s hardly surprising that the labor market is sharing in this.

<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/@U7/@U7.HTM">UK Labor Force Survey (SA)</a></th>
<th scope="col">Dec 2005</th>
<th scope="col">Nov 2005</th>
<th scope="col">Oct 2005</th>
<th scope="col">Sept 2005</th>
<th scope="col">Year Ago</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">Employment (Thous)</td>
<td>--</td>
<td>--</td>
<td>28,764</td>
<td>28,813</td>
<td>28,542</td>
<td>28,465</td>
<td>28,183</td>
<td>27,917</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Change (Thous/%)</td>
<td>--</td>
<td>--</td>
<td>-49</td>
<td>-12</td>
<td>0.8</td>
<td>1.0</td>
<td>1.0</td>
<td>0.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment Rate (%)</td>
<td>--</td>
<td>--</td>
<td>74.5</td>
<td>74.7</td>
<td>74.8</td>
<td>74.8</td>
<td>74.6</td>
<td>74.5</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%)</td>
<td>--</td>
<td>--</td>
<td>5.0</td>
<td>4.9</td>
<td>4.7</td>
<td>4.8</td>
<td>5.0</td>
<td>5.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Earnings Index (Yr/Yr %) </td>
<td>--</td>
<td>3.4</td>
<td>3.6</td>
<td>4.1</td>
<td>4.3</td>
<td>4.3</td>
<td>3.4</td>
<td>3.5</td>
</tr>
<tr>
<td class="firstcol">Claimant Count (Thous)</td>
<td>909.1</td>
<td>901.9</td>
<td>891.5</td>
<td>878.0</td>
<td>825.0</td>
<td>853.6</td>
<td>933.3</td>
<td>946.7</td>
</tr>
</tbody>
</table>
</body>
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Employment has begun to falter in the UK, according to the latest Labor Force Survey, published today by the Office of National Statistics (ONS). In the 3 months centered on October, the number of people employed fell 49,000 from [...]

UK Labor Market Weakens in Late 2005

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060118b.jpg" width="353">
The total number of mortgage applications rose 2.2% last week, the second up week following four consecutive weeks down. This year, mortgage applications are 2.1% higher than during December.
Higher applications to refinance accounted for all of last week&#39;s rise. A 9.9% w/w gain followed a like increase which opened the new year and lifted the level of refis 11.0% this month above December.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060118a.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage fell for the eighth week in the last nine to 6.31% versus an average 6.48% in December. The effective rate on a 15-year mortgage also fell to 5.94%, the second week below 6% since October. The interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
Purchase applications fell 3.0% following a 9.3% surge the prior week. The decline pulled purchase applications in January 1.1% below 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>.
Are Banks Vulnerable to a Housing Bust from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20060201/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">01/13/06</th>
<th scope="col">01/06/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>613.3</td>
<td>600.1</td>
<td>-10.2%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>443.9</td>
<td>457.4</td>
<td>-0.9%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,645.2</td>
<td>1,497.5</td>
<td>-19.7%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications rose 2.2% last week, the second up week following four consecutive weeks down. This year, mortgage applications are 2.1% higher than during December. Higher applications to refinance accounted [...]

Mortgage Applications Up With More Refinancing

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060118c.jpg" width="353">
Chain store sales fell 1.4% last week following the modest 0.1% rise which opened the new year according to the International Council of Shopping Centers (ICSC)-UBS survey.
Solid increases throughout December pulled the yearend level up. Therefore, despite recent weakness, sales in January are 1.5% ahead of December.
During the last ten years there has been a 51% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales rose strongly for the second consecutive week. The 0.6% gain pulled January 1.2% ahead of December which rose 0.8% from November.
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.

<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">01/14/06</th>
<th scope="col">01/07/06</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>457.7</td>
<td>464.3</td>
<td>3.1%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

Chain store sales fell 1.4% last week following the modest 0.1% rise which opened the new year according to the International Council of Shopping Centers (ICSC)-UBS survey. Solid increases throughout December pulled the yearend level [...]

Chain Store Sales Fell Last Week

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

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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

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