Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051109a.jpg" width="353">
Last week, the total number of mortgage applications recovered about half of the prior period&#39;s decline with a 2.3% rise according to the Mortgage Bankers Association. The modest increase followed weekly declines from June to October and left applications 17.5% below the monthly peak during June.
Purchase applications rose for just the second week in the last eight and the 6.4% rise reversed nearly all of the prior week&#39;s decline. Nevertheless purchase applications remained 6.0% below the July peak. During the last ten years there has been a 49% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance continued down another 3.4% leaving the level of refi&#39;s nearly one third below the recent peak in June and 79.5% below the monthly high during 2003.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051109b.jpg" width="353">
The Federal Home Loan Mortgage Corporation reported that 72% of refinances resulted in a 5% higher loan amount during 3Q &#39;05, nearly double the percentage during 2003.
The effective interest rate on a conventional 30-year mortgage rose to 6.58% from 6.46% the prior week while the effective rate on a 15-year mortgage rose to 6.19%, the highest since July 2002. The interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
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>.
A rising housing tide from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/pubs/fedgaz/05-05/cover.cfm"> 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">11/04/05</th>
<th scope="col">10/28/05</th>
<th scope="col">Y/Y</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">Total Market Index</td>
<td>661.3</td>
<td>646.7</td>
<td>-9.1%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>465.7</td>
<td>437.6</td>
<td>-3.6%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,798.8</td>
<td>1,862.8</td>
<td>-16.3%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
</body>
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Last week, the total number of mortgage applications recovered about half of the prior period's decline with a 2.3% rise according to the Mortgage Bankers Association. The modest increase followed weekly declines from June to October [...]

Mortgage Applications Rose

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051109a.jpg" width="353">
Last week, the total number of mortgage applications recovered about half of the prior period&#39;s decline with a 2.3% rise according to the Mortgage Bankers Association. The modest increase followed weekly declines from June to October and left applications 17.5% below the monthly peak during June.
Purchase applications rose for just the second week in the last eight and the 6.4% rise reversed nearly all of the prior week&#39;s decline. Nevertheless purchase applications remained 6.0% below the July peak. During the last ten years there has been a 49% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance continued down another 3.4% leaving the level of refi&#39;s nearly one third below the recent peak in June and 79.5% below the monthly high during 2003.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051109b.jpg" width="353">
The Federal Home Loan Mortgage Corporation reported that 72% of refinances resulted in a 5% higher loan amount during 3Q &#39;05, nearly double the percentage during 2003.
The effective interest rate on a conventional 30-year mortgage rose to 6.58% from 6.46% the prior week while the effective rate on a 15-year mortgage rose to 6.19%, the highest since July 2002. The interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
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>.
A rising housing tide from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/pubs/fedgaz/05-05/cover.cfm"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">11/04/05</th>
<th scope="col">10/28/05</th>
<th scope="col">Y/Y</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">Total Market Index</td>
<td>661.3</td>
<td>646.7</td>
<td>-9.1%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>465.7</td>
<td>437.6</td>
<td>-3.6%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,798.8</td>
<td>1,862.8</td>
<td>-16.3%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
France: The Riots Come Just When Unemployment Was Starting To Ease 
by <a href="/comment/Stone.html">Carol Stone</a> November 9, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051109c.jpg" width="353">
The riots in France are widely believed to be linked to unemployment conditions, particularly among young people from North African immigrant families. As we discussed here September 30, national unemployment stands at just under 10%, and the rate for workers under 25 is more than twice this, at about 23%. This morning, the French Government statistical agency INSEE reported regional unemployment rates, which we carry in the FRANCE database. These cover the total labor force and are not broken down by age-group. These, along with September&#39;s monthly national data reported ten days ago, indicate that rates have been decreasing, now since June.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051109d.jpg" width="353">
In the accompanying charts and table, we highlight &quot;departments&quot; that the New York Times reports today contain cities on a list authorized by the central police to impose a curfew, that is, where the violence is deemed to be greatest. These include Paris, Nice, Marseille, Dijon, Toulouse, Strasbourg, Nancy, Rouen, Avignon. Ironically, as seen in the exhibits, unemployment rates in the relevant departments had started to ease in Q3. The national rate fell from 10.1% to 9.8%, and every department we show here was down by at least 0.1% on the quarter. Still, these decreases are a very recent development, with the longer runs of these series still generally headed upward. Only in Provence, in the South, is unemployment even steady with its level three years ago. Another fact of irony is the situation in Alsace, with one of the lowest unemployment levels in the country; it is also the locale with the largest increase, from just 6.6% on average in 2002 to 8.7% in Q3 2005. So conditions of relative prosperity there eroded markedly, at least through the middle of this year.
It&#39;s clearly too soon to see the effect of the disturbances on any other French economic data, but a final irony of course is that the situation is likely to be dampening activity, just when the worst of the unemployment conditions might have been starting to stabilize on their own. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/FRANCE/@F05/@F05.HTM">France &amp; Selected Departments:</a> SA, %</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q2 2005</th>
<th scope="col">Q3 2004</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">France: Total</td>
<td>9.8</td>
<td>10.1</td>
<td>10.0</td>
<td>10.0</td>
<td>9.8</td>
<td>9.1</td>
</tr>
<tr>
<td class="firstcol">Ile-de-France (Paris)</td>
<td>13.3</td>
<td>13.4</td>
<td>13.2</td>
<td>13.1</td>
<td>12.7</td>
<td>12.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Bourgogne (Dijon)</td>
<td>8.5</td>
<td>8.8</td>
<td>8.7</td>
<td>8.7</td>
<td>8.6</td>
<td>7.9</td>
</tr>
<tr>
<td class="firstcol">Haut-Normandie (Rouen)</td>
<td>10.8</td>
<td>11.0</td>
<td>11.0</td>
<td>10.9</td>
<td>10.6</td>
<td>10.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Alsace (Strasbourg)</td>
<td>8.7</td>
<td>8.9</td>
<td>8.6</td>
<td>8.5</td>
<td>7.8</td>
<td>6.6</td>
</tr>
<tr>
<td class="firstcol">Pyrenees (Toulouse)</td>
<td>9.8</td>
<td>9.9</td>
<td>9.9</td>
<td>9.9</td>
<td>9.9</td>
<td>9.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Provence (Avignon, Nice, Marseilles)</td>
<td>11.7</td>
<td>11.9</td>
<td>11.9</td>
<td>11.9</td>
<td>12.1</td>
<td>11.7</td>
</tr>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108f.jpg" width="353">
About a week ago, the Japanese Cabinet Office&#39;s synthetic indexes of some of the components of Gross Domestic Product intimated that third quarter GDP growth might slow from the second quarter and could even be negative. Another indicator of economic growth was released today by the Teikoku Data Bank, Ltd*. Their monthly survey, conducted over the internet, of more than 20,000 domestic Japanese firms shows how business men appraise current conditions and the prospects of conditions three, six and twelve months ahead.
TDB&#39;s economic trends research is a fairly recent endeavor. Data for current conditions are available from May 2002 and those for conditions three, six and twelve months ahead are available only form April, 2004. The first chart shows the available data for the appraisals of current conditions for the whole economy and for conditions expected in three months. Like most survey respondents, respondents to the TDB survey tend to believe things will be better in the future as a result the three month ahead index has generally been higher than that of current conditions. Atypically, however, the October diffusion index of current conditions improved while that for conditions three months ahead declined.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108g.jpg" width="353">
Throughout their limited histories the diffusion indexes in the TDB&#39;s economic trends series have rarely been above the 50% mark that would indicates a neutral or positive appraisal of conditions. They have, however, improved from the extreme pessimism of the early years. In addition to an appraisal of economic trends for the economy as a whole, there are appraisals by large and small firms and appraisals for conditions in a number of industries. Small and medium sized firms are becoming less negative on the general outlook. In October the index for current conditions for the economy by small firms rose .67 percentage points or more than the .11 percentage points for the large firms. Two of the industries--manufacturing and retail-for which there are diffusion indexes of current conditions are shown in the second chart. While continued improvement is seen in manufacturing, there is less enthusiasm for the retail sector. In October, the manufacturing index increased by .46 percentage points while that for the retail sector declined by .13 percentage points.
On balance it would seem that the data contained in the TDB&#39;s October economic trend series point to a lackluster performance.

<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/JAPAN/@J8/@J812/@J812.HTM">Teikoku Data Bank, Ltd. Economic Trends Diffusion Indexes</a></th>
<th scope="col">Oct 05&nbsp;</th>
<th scope="col">Sep 05</th>
<th scope="col">Oct 04</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2004 &nbsp; &nbsp;</th>
<th scope="col">2003 &nbsp;</th>
<th scope="col">May 2002&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Economy</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current conditions</td>
<td>46.01</td>
<td>45.45</td>
<td>43.86</td>
<td>0.56</td>
<td>2.15</td>
<td>43.58</td>
<td>32.49</td>
<td>26.91</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Conditions 3-months ahead</td>
<td>49.71</td>
<td>50.11</td>
<td>47.99</td>
<td>-0.40</td>
<td>1.72</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Large Firms</td>
<td>48.35</td>
<td>48.24</td>
<td>46.13</td>
<td>0.11</td>
<td>2.22</td>
<td>46.21</td>
<td>34.16</td>
<td>28.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Small to Medium Firms</td>
<td>45.22</td>
<td>44.55&nbsp;</td>
<td>43.11</td>
<td>0.67&nbsp;</td>
<td>2.11&nbsp;</td>
<td>42.72&nbsp;</td>
<td>31.93</td>
<td>&nbsp;26.38</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>47.76&nbsp;</td>
<td>43.30&nbsp;</td>
<td>45.96&nbsp;</td>
<td>0.46&nbsp;</td>
<td>1.80&nbsp;</td>
<td>46.05&nbsp;</td>
<td>34.18&nbsp;</td>
<td>26.90&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail&nbsp;</td>
<td>41.70&nbsp;</td>
<td>41.83&nbsp;</td>
<td>40.36&nbsp;</td>
<td>-0.13&nbsp;</td>
<td>1.34&nbsp;</td>
<td>40.21&nbsp;</td>
<td>31.59&nbsp;</td>
<td>29.00&nbsp;</td>
</tr>
</tbody>
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About a week ago, the Japanese Cabinet Office's synthetic indexes of some of the components of Gross Domestic Product intimated that third quarter GDP growth might slow from the second quarter and could even be negative. Another [...]

Teikoku Data Bank's Current Economic Trends: Another Indicator for Japanese Economic Growth

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108d.jpg" width="353">
The Bureau of Labor Statistics reported that the job openings rate, from the Job Openings &amp; Labor Turnover Survey (JOLTS), rose in September to 2.7% from 2.5% in August. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings. A 190,000 increase (12.6% y/y) in the total number of job openings more than reversed the declines of the prior two months.
The hires rate remained steady at 3.4% for the second consecutive month and equaled the 2004 average. The hires rate is the number of hires during the month divided by employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108e.jpg" width="353">
The job separations rate also remained steady at 3.4% but this year&#39;s levels have been elevated versus the 3.2% 2004 average. Total separations include quits, layoffs, discharges, and other separations as well as retirements. The total separations, or turnover, rate is the total number of separations during the month divided by employment.
The survey dates only to December 2000 but has since followed the movement in nonfarm payrolls.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/jolts.nr0.htm">here</a>.
The Economic Role of Cities in the 21st Century from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/Q3_05_Carlino.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Sept &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>2.7%</td>
<td>2.5%</td>
<td>2.4%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.4%</td>
<td>3.4%</td>
<td>3.3%</td>
<td>3.4%</td>
<td>3.2%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
</body>
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The Bureau of Labor Statistics reported that the job openings rate, from the Job Openings & Labor Turnover Survey (JOLTS), rose in September to 2.7% from 2.5% in August. The job openings rate is the number of job openings on the last [...]

JOLTS: U.S. Job Openings & Hires Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108a.jpg" width="353">
Last week, chain store sales posted the largest gain since April according to the International Council of Shopping Centers (ICSC)-UBS survey. The 1.0% jump pulled the starting point for November sales 1.3% above the October average which rose just 0.1% from the prior month
The sales jump was aided by another ten cent drop in the average US retail price of regular gasoline to $2.38 per gallon (+18.7 y/y). Retail gas prices are down 22.5% since the early September peak of $3.07 but during the last several days the spot market price for gasoline has bottomed out, suggesting that further retail price declines will be limited. 
During the last ten years there has been a 56% 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 from ICSC fell 0.6% (-3.4% y/y) during the latest week following an upwardly revised 0.2% gain the prior week.
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></colgroup>
<thead>
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<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">11/05/05</th>
<th scope="col">10/29/05</th>
<th scope="col">Y/Y</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>456.1</td>
<td>451.6</td>
<td>4.1%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

Last week, chain store sales posted the largest gain since April according to the International Council of Shopping Centers (ICSC)-UBS survey. The 1.0% jump pulled the starting point for November sales 1.3% above the October average [...]

Chain Store Sales Jumped As Gas Prices Fell Another Dime

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108b.jpg" width="353">
The index of small business optimism from the National Federation of Independent Business (NFIB) jumped 3.7% in October, despite the devastation wreaked by three Hurricanes.
The economic outlook brightened as 14% of firms expected the economy to improve, the best reading since June, although the percentage remained well below the 34-37% range from 2002 to 2004. Plans for adding to employment held steady at 17%, the same as during the last three months. On the negative side, the percentage of firms planning to raise capital expenditures fell back to the lowest level of the year.
During the last ten years there has been a 70% correlation between the level of the NFIB index and the two quarter change in real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108c.jpg" width="353">
The percentage of firms planning to raise average selling prices fell to 23% from 27% during the prior two months and from 26% during all of last year. The percentage of firm actually raising prices also dipped to 22% from 25% in September but those readings remained up versus 19% averaged in 2004. During the last ten years there has been a 60% correlation between the change in the producer price index and the level of the NFIB price index.
The percentage of firms with one or more job openings fell two points to 21%, last year&#39;s average. During the last ten years there has been a 67% correlation between hiring plans and the three month growth in nonfarm payrolls.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.
The latest press release from the NFIB is available <a href="http://www.nfib.com/object/IO_24996.html">here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>103.7</td>
<td>100.0</td>
<td>-0.2%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
</tr>
</tbody>
</table>
</body>
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The index of small business optimism from the National Federation of Independent Business (NFIB) jumped 3.7% in October, despite the devastation wreaked by three Hurricanes. The economic outlook brightened as 14% of firms expected the [...]

Small Business Optimism Up, Pricing Intentions Cool

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108b.jpg" width="353">
The index of small business optimism from the National Federation of Independent Business (NFIB) jumped 3.7% in October, despite the devastation wreaked by three Hurricanes.
The economic outlook brightened as 14% of firms expected the economy to improve, the best reading since June, although the percentage remained well below the 34-37% range from 2002 to 2004. Plans for adding to employment held steady at 17%, the same as during the last three months. On the negative side, the percentage of firms planning to raise capital expenditures fell back to the lowest level of the year.
During the last ten years there has been a 70% correlation between the level of the NFIB index and the two quarter change in real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108c.jpg" width="353">
The percentage of firms planning to raise average selling prices fell to 23% from 27% during the prior two months and from 26% during all of last year. The percentage of firm actually raising prices also dipped to 22% from 25% in September but those readings remained up versus 19% averaged in 2004. During the last ten years there has been a 60% correlation between the change in the producer price index and the level of the NFIB price index.
The percentage of firms with one or more job openings fell two points to 21%, last year&#39;s average. During the last ten years there has been a 67% correlation between hiring plans and the three month growth in nonfarm payrolls.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.
The latest press release from the NFIB is available <a href="http://www.nfib.com/object/IO_24996.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/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>103.7</td>
<td>100.0</td>
<td>-0.2%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
</tr>
</tbody>
</table>
Chain Store Sales Jumped As Gas Prices Fell Another Dime 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 8, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108a.jpg" width="353">
Last week, chain store sales posted the largest gain since April according to the International Council of Shopping Centers (ICSC)-UBS survey. The 1.0% jump pulled the starting point for November sales 1.3% above the October average which rose just 0.1% from the prior month
The sales jump was aided by another ten cent drop in the average US retail price of regular gasoline to $2.38 per gallon (+18.7 y/y). Retail gas prices are down 22.5% since the early September peak of $3.07 but during the last several days the spot market price for gasoline has bottomed out, suggesting that further retail price declines will be limited. 
During the last ten years there has been a 56% 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 from ICSC fell 0.6% (-3.4% y/y) during the latest week following an upwardly revised 0.2% gain the prior week.
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></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">11/05/05</th>
<th scope="col">10/29/05</th>
<th scope="col">Y/Y</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>456.1</td>
<td>451.6</td>
<td>4.1%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
JOLTS: U.S. Job Openings & Hires Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 8, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108d.jpg" width="353">
The Bureau of Labor Statistics reported that the job openings rate, from the Job Openings &amp; Labor Turnover Survey (JOLTS), rose in September to 2.7% from 2.5% in August. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings. A 190,000 increase (12.6% y/y) in the total number of job openings more than reversed the declines of the prior two months.
The hires rate remained steady at 3.4% for the second consecutive month and equaled the 2004 average. The hires rate is the number of hires during the month divided by employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108e.jpg" width="353">
The job separations rate also remained steady at 3.4% but this year&#39;s levels have been elevated versus the 3.2% 2004 average. Total separations include quits, layoffs, discharges, and other separations as well as retirements. The total separations, or turnover, rate is the total number of separations during the month divided by employment.
The survey dates only to December 2000 but has since followed the movement in nonfarm payrolls.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/jolts.nr0.htm">here</a>.
The Economic Role of Cities in the 21st Century from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/Q3_05_Carlino.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Sept &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>2.7%</td>
<td>2.5%</td>
<td>2.4%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.4%</td>
<td>3.4%</td>
<td>3.3%</td>
<td>3.4%</td>
<td>3.2%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
Teikoku Data Bank's Current Economic Trends: Another Indicator for Japanese Economic Growth  
by <a href="/comment/Curley.html">Louise Curley</a> November 8, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108f.jpg" width="353">
About a week ago, the Japanese Cabinet Office&#39;s synthetic indexes of some of the components of Gross Domestic Product intimated that third quarter GDP growth might slow from the second quarter and could even be negative. Another indicator of economic growth was released today by the Teikoku Data Bank, Ltd*. Their monthly survey, conducted over the internet, of more than 20,000 domestic Japanese firms shows how business men appraise current conditions and the prospects of conditions three, six and twelve months ahead.
TDB&#39;s economic trends research is a fairly recent endeavor. Data for current conditions are available from May 2002 and those for conditions three, six and twelve months ahead are available only form April, 2004. The first chart shows the available data for the appraisals of current conditions for the whole economy and for conditions expected in three months. Like most survey respondents, respondents to the TDB survey tend to believe things will be better in the future as a result the three month ahead index has generally been higher than that of current conditions. Atypically, however, the October diffusion index of current conditions improved while that for conditions three months ahead declined.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051108g.jpg" width="353">
Throughout their limited histories the diffusion indexes in the TDB&#39;s economic trends series have rarely been above the 50% mark that would indicates a neutral or positive appraisal of conditions. They have, however, improved from the extreme pessimism of the early years. In addition to an appraisal of economic trends for the economy as a whole, there are appraisals by large and small firms and appraisals for conditions in a number of industries. Small and medium sized firms are becoming less negative on the general outlook. In October the index for current conditions for the economy by small firms rose .67 percentage points or more than the .11 percentage points for the large firms. Two of the industries--manufacturing and retail-for which there are diffusion indexes of current conditions are shown in the second chart. While continued improvement is seen in manufacturing, there is less enthusiasm for the retail sector. In October, the manufacturing index increased by .46 percentage points while that for the retail sector declined by .13 percentage points.
On balance it would seem that the data contained in the TDB&#39;s October economic trend series point to a lackluster performance.

<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/JAPAN/@J8/@J812/@J812.HTM">Teikoku Data Bank, Ltd. Economic Trends Diffusion Indexes</a></th>
<th scope="col">Oct 05&nbsp;</th>
<th scope="col">Sep 05</th>
<th scope="col">Oct 04</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2004 &nbsp; &nbsp;</th>
<th scope="col">2003 &nbsp;</th>
<th scope="col">May 2002&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Economy</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current conditions</td>
<td>46.01</td>
<td>45.45</td>
<td>43.86</td>
<td>0.56</td>
<td>2.15</td>
<td>43.58</td>
<td>32.49</td>
<td>26.91</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Conditions 3-months ahead</td>
<td>49.71</td>
<td>50.11</td>
<td>47.99</td>
<td>-0.40</td>
<td>1.72</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Current Conditions</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Large Firms</td>
<td>48.35</td>
<td>48.24</td>
<td>46.13</td>
<td>0.11</td>
<td>2.22</td>
<td>46.21</td>
<td>34.16</td>
<td>28.45</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Small to Medium Firms</td>
<td>45.22</td>
<td>44.55&nbsp;</td>
<td>43.11</td>
<td>0.67&nbsp;</td>
<td>2.11&nbsp;</td>
<td>42.72&nbsp;</td>
<td>31.93</td>
<td>&nbsp;26.38</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>47.76&nbsp;</td>
<td>43.30&nbsp;</td>
<td>45.96&nbsp;</td>
<td>0.46&nbsp;</td>
<td>1.80&nbsp;</td>
<td>46.05&nbsp;</td>
<td>34.18&nbsp;</td>
<td>26.90&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Retail&nbsp;</td>
<td>41.70&nbsp;</td>
<td>41.83&nbsp;</td>
<td>40.36&nbsp;</td>
<td>-0.13&nbsp;</td>
<td>1.34&nbsp;</td>
<td>40.21&nbsp;</td>
<td>31.59&nbsp;</td>
<td>29.00&nbsp;</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/051107b.jpg" width="353">
September industrial production data for Germany, Denmark, Norway and the United Kingdom were released today. All, except Norway showed a rise in total production from August and all except the UK were higher than September, 2004. Manufacturing production increased in Germany and Norway, but declined in the UK. (Data on total manufacturing are not available for Denmark.)<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051107c.jpg" width="353">
The August decline in manufacturing in the UK was more than offset by a sharp increase of 6.69% in the mining and refining sector, where activity in the oil industry is recorded. Although England&#39;s oil industry has been declining it is still a significant factor in overall production. The oil industry is even more important in Norway and the swings in oil production there have had a more pronounced effect on total production. The first chart compares total production in the UK and in Norway. (In order to facilitate the comparison between Norwegian and the UK production indexes, we have rebased the original Norwegian data based on 1995=100 to 2002=100, the basis for the UK index. This can be done easily in DXLVG3, using the advanced functions.)
Industrial production in Denmark for the past five years has shown little evidence of a trend, but it has been extremely volatile even on a seasonally adjusted basis. Germany, by contrast has shown a moderately rising trend and less volatility as can be seen in the second 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/G10/@GZ/@GZ3/@GZ301/@GZ301.HTM">Industrial Production</a></th>
<th scope="col">Sep 05&nbsp;</th>
<th scope="col">Aug 05</th>
<th scope="col">Sep 04</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2004 &nbsp; </th>
<th scope="col">2003 &nbsp;</th>
<th scope="col">2002&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany (2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Total</td>
<td>104.3</td>
<td>103.1</td>
<td>101.0</td>
<td>1.16</td>
<td>3.27</td>
<td>100.8</td>
<td>98..4</td>
<td>98.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>107.3</td>
<td>105.9</td>
<td>103.2</td>
<td>1.32</td>
<td>3.97</td>
<td>102.7</td>
<td>99.5</td>
<td>99.3</td>
</tr>
<tr>
<td class="firstcol">Denmark 2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Total</td>
<td>105</td>
<td>101</td>
<td>103</td>
<td>3.96</td>
<td>1.94</td>
<td>102</td>
<td>102</td>
<td>103</td>
</tr>
<tr>
<td class="firstcol">United Kingdom (2002=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Total</td>
<td>98.6</td>
<td>98.2&nbsp;</td>
<td>99.7&nbsp;</td>
<td>0.41&nbsp;</td>
<td>-1.10&nbsp;</td>
<td>100.3&nbsp;</td>
<td>99.5&nbsp;</td>
<td>&nbsp;100.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Mining and Quarrying</td>
<td>78.3</td>
<td>76.2</td>
<td>81.3</td>
<td>6.69</td>
<td>-3.94</td>
<td>87.2</td>
<td>94.9</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>&nbsp;101.4</td>
<td>101.7&nbsp;</td>
<td>102.1&nbsp;</td>
<td>-0.29&nbsp;</td>
<td>-0.69&nbsp;</td>
<td>102.0&nbsp;</td>
<td>100.1&nbsp;</td>
<td>&nbsp;100.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Norway (2002=100)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Total</td>
<td>&nbsp;100.0</td>
<td>100.1&nbsp;</td>
<td>96.3&nbsp;</td>
<td>-0.09</td>
<td>3.86&nbsp;</td>
<td>97.8</td>
<td>96.0&nbsp;</td>
<td>100.0&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Mining and Quarrying</td>
<td>94.3</td>
<td>94.9</td>
<td>98.7</td>
<td>-0.62</td>
<td>-4.40</td>
<td>100.8</td>
<td>105.7</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>&nbsp;99.8</td>
<td>97.6&nbsp;</td>
<td>97.9&nbsp;</td>
<td>2.23&nbsp;</td>
<td>1.92&nbsp;</td>
<td>97.1&nbsp;</td>
<td>95.8&nbsp;</td>
<td>100.0&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

September industrial production data for Germany, Denmark, Norway and the United Kingdom were released today. All, except Norway showed a rise in total production from August and all except the UK were higher than September, 2004. [...]

September Industrial Production in Denmark, Germany, Norway and the UK

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

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

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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

Michael J. Moran

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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.

U.S. Q4 2025 Real GDP Growth Revised Slower

Robert Brusca

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Germany’s industrial production slipped in February, driven lower by dropping output of consumer goods. Sequential growth rates over 12 months, six months, and three months show a confusing array of patterns, except for intermediate goods, where annualized growth rates for output sequentially weaken and show declines on each horizon. All German sector growth rates for the quarter-to-date are showing declines, and the growth rankings by sector are below 50% across the broad, indicating below median performance across German sectors.  It’s a very unimpressive report.

Real manufacturing orders rose modestly in February against the backdrop of a very sharp drop in January. Real manufacturing sales have been erratic.

German output and industrial gauges, ranked on annual sales growth against historic norms, have been very weak. Only real orders post a standing above 50%, which represents the median.
 
France, Spain, Portugal, Sweden, and Norway provide some perspective on European growth. The northern European non-EMU member countries are much stronger than the EMU reporters, two of which have standings below their median levels (rankings below 50).

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Germany

German IP Is Weak in February

Kathleen Stephansen, CBE

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Mortgage applications declined 0.8% w/w (-5.6% y/y) in the week ending April 3. The weekly decline eased relative to the prior three weeks, when mortgage applications dropped by 10.4% w/w (+14.2% y/y) in the week ending March 27, and by 10.5% and 10.9% in the March 20 and 13 weeks, respectively, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house rose 1.1% w/w (-6.7% y/y) in the April 3 week, after declining 2.6% w/w (+0.8% y/y) in the week ending March 27.  Applications for loan refinancing dropped by a smaller 2.8% w/w (-4.3% y/y) in the latest week, following weekly declines of 17.3% (+33.2% y/y) in the March 27 week, 14.6% in the March 20 week, and of 18.5% in the week ending March 13.

The effective interest rate on a 30-year fixed-rate loan declined 8bps to 6.68% in the week ending April 3 from 6.76% in the week ending March 27 and after having risen by 52bps since the February 27 week. The rate on 15-year fixed-rate mortgages rose 1bp to 6.09% in the latest week from 6.08% in the prior week. The 30-year Jumbo rate declined 6bps to 6.65% in the week ending April 3 from 6.71% in the March 27 week. The rate on a 5-year ARM eased 3bps to 5.85% in the latest week from 5.88% in the week ending March 27.

The share of applications for refinancing an existing loan declined to 44.3% of total applications in the week of April 3, from 45.3% in the March 27 week. The adjustable-rate mortgage (ARM) share of activity rose to 8.6% in the week ending April 3 from 8.0% in the week ending March 27.

The average size of a mortgage loan edged up 0.2% w/w (-9.1% y/y) to $390,100 in the week ending April 3, after declining 1.3% w/w (-1.9% y/y) to $389,200 in the week ending March 27. The average size of a purchase loan edged down 0.3% w/w (-0.9% y/y) to $448,100 in the latest week, following a decline of 0.8% w/w (+0.4% y/y) to $449,400 in the March 27 week. The average size of a loan to refinance a mortgage edged up 0.1% w/w (-20.7% y/y) to $317,000 in the week ending April 3 after declining 5.5% w/w (+0.3% y/y) to $316,600 in the March 27 week. From the week ending February 27 to the week ending March 27, the average size of a loan to refinance a mortgage had declined 21.8%.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Signs of stabilization in mortgage applications emerged in the latest week.
- Applications for loans to purchase posted a small increase, while applications for loan refinancing posted a small decline in the latest week.
- Interest rate on 30-year fixed-rate loans eased 8bps to 6.68%. 
- Average loan size edged up.

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