Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028g.jpg" width="353">
Inflation appears to be no worse for October than it was in September, according to very preliminary data released today and, for Germany, this past Tuesday. The overall Euro-Zone harmonized CPI (HICP) &quot;Flash&quot; was up 2.5% on the year ago, compared with 2.6% in September. An increase in the base-period amount is partly responsible for this month&#39;s downtick in the 12-month inflation rate, but even after accounting for that, prices did not accelerate in October. Among the countries available so far, Germany&#39;s 12-month inflation was stable in the two months at 2.6% and Spain&#39;s decreased to 3.5% in October from 3.8% in September. In Italy, by contrast, October&#39;s rate is 2.5%, relative to 2.2% the previous month. [All figures here reflect the HICP definition of CPI.]
Elsewhere, the Japanese sub-index for the Tokyo region fell more, 1.0%, this month than the -0.6% in September.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028h.jpg" width="353">
Little detail is available with these early reports, so it is hard to analyze the forces producing the latest reading on world inflation. Two regions provided some breakdown, Italy and Tokyo, Japan. Considering Tokyo first, where prices weakened, there was a notable advance in the base period level, establishing a bias toward a drop in year-on-year inflation. Weaker prices appeared in food, housing, apparel and recreation; they firmed for utilities -- hardly surprising -- furniture and &quot;other&quot;. Pretty much of a mixed bag, then. The same seems to be the case in Italy. First, the base-period effect contributes to the increase in the 12-month pace, as inflation slowed in October last year. This year, the month-to-month CPI change was 0.5% in both September and October. In Italy, prices accelerated in housing, transportation and hotels and restaurants, and they fell less in health care and communications. They increased at basically a steady rate in food and &quot;other&quot; categories. On the other side, they slowed in apparel, recreation and culture, and education. So a mixed performance here too. There is one encouraging note that applies to both of these far-flung places: food and apparel costs remained slow. Thus, as people face a squeeze on their energy bills this winter, the budget burden from other basic necessities seems to lighten. Further, energy itself may have already started to moderate.

<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/G10/@GZ/@GZ5/@GZ501/@GZ501.HTM">Consumer Price Index:</a>&nbsp; Yr/Yr % Change, NSA</th>
<th scope="col">Oct 2005</th>
<th scope="col">Sept 2005</th>
<th scope="col">Aug 2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro-Zone &quot;Flash&quot;</td>
<td>2.5</td>
<td>2.6</td>
<td>2.2</td>
<td>2.4</td>
<td>2.0</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>2.6</td>
<td>2.6</td>
<td>1.9</td>
<td>2.2</td>
<td>1.1</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>2.5</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
<td>2.6</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>3.5</td>
<td>3.8</td>
<td>3.3</td>
<td>3.3</td>
<td>2.7</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Japan: Tokyo Area</td>
<td>-1.0</td>
<td>-0.6</td>
<td>-0.5</td>
<td>0.0</td>
<td>-0.4</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">Japan: Total</td>
<td>--</td>
<td>-0.3</td>
<td>-0.3</td>
<td>0.2</td>
<td>-0.4</td>
<td>-0.3</td>
</tr>
</tbody>
</table>
</body>
</html>

Inflation appears to be no worse for October than it was in September, according to very preliminary data released today and, for Germany, this past Tuesday. The overall Euro-Zone harmonized CPI (HICP) "Flash" was up 2.5% on the year [...]

World Inflation Apparently No Worse in October

Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028c.jpg" width="353">
The October reading of consumer sentiment from the University of Michigan settled at 74.2. That was down marginally from the mid-month reading of 75.4 but it was down 3.5% from September which fell 13.7% from August. Consensus expectations had been for improvement to 76.0 and the latest was the lowest reading since October 1992.
During the last ten years there has been a 78% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
The current conditions index fell 7.0% m/m (-12.3% y/y) for the third consecutive sharp monthly decline. Consumers&#39; opinion of the government&#39;s economic policy fell to its lowest since 1996 and the read of personal finances fell 6.8% m/m (-14.3% y/y), a significant deterioration from the mid-month read.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028d.jpg" width="353">
Consumer expectations fell just 0.2% after two months of double digit decline. Expected personal finances fell 2.6% (-11.8% y/y) and expected business conditions during the next five years fell 5.3% (-25.8% y/y).
The mean expected inflation rate for the next twelve months was stable at 5.5% and that was a slight nudge up from the 5.4% expectation at mid-month. The mean expected rate of inflation of 3.8% during the next five to ten years is the highest since 1997.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<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/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</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 class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>74.2</td>
<td>76.9</td>
<td>-19.1%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>91.2</td>
<td>98.1</td>
<td>-12.3%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>63.2</td>
<td>63.3</td>
<td>-24.6%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The October reading of consumer sentiment from the University of Michigan settled at 74.2. That was down marginally from the mid-month reading of 75.4 but it was down 3.5% from September which fell 13.7% from August. Consensus [...]

U.S. Consumer Sentiment Lowest Since 1992

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028e.jpg" width="353">
The employment cost index for private industry workers rose 0.8% last quarter. The increase was up from the 0.6% 2Q gain and equaled Consensus expectations.Year to year, the ECI&#39;s gain of 3.0% was the slowest since early 1999.
Benefit costs increased 1.3%, up from the slow 0.8% 2Q gain and it was the quickest this year. Benefit costs in service occupations rose 1.1% (2.8% y/y) and benefit costs in manufacturing rose 1.6% (5.5% y/y).
<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028f.jpg" width="353"> The y/y gain in the cost of health benefits rose to 6.7% but that remained down from a 7.3% increase last year and a 10.5% gain in 2003.
Wage and salary growth was stable at 0.6% for the third straight quarter. Wages account for roughly 70% of the compensation index.
It&#39;s Who You Are and What You Do: Explaining the IT Industry Wage Premium from the Federal Reserve Bank of Atlanta is available <a href="http://www.frbatlanta.org/filelegacydocs/erq305_robertson.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/@EB08/@EB08.HTM">ECI- Private Industry Workers</a></th>
<th scope="col">3Q &#39;05</th>
<th scope="col">2Q &#39;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">Compensation</td>
<td>0.8%</td>
<td>0.6%</td>
<td>3.0%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.6%</td>
<td>0.6%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>3.0%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>1.3%</td>
<td>0.8%</td>
<td>4.8%</td>
<td>6.9%</td>
<td>6.4%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

The employment cost index for private industry workers rose 0.8% last quarter. The increase was up from the 0.6% 2Q gain and equaled Consensus expectations.Year to year, the ECI's gain of 3.0% was the slowest since early 1999. Benefit [...]

Employment Cost Index Boosted By Benefit Costs

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028b.jpg" width="353">
US real GDP grew 3.8% (AR) last quarter and slightly beat Consensus expectations for 3.6% growth. That strength versus 3.3% growth during 2Q &#39;05 came despite an unspecified subtraction (perhaps 0.2 percentage points) due to Hurricanes and the Boeing strike.
Domestic demand growth remained firm at 4.1% due to 3.9% (3.8% y/y) growth in real PCE which was powered by a 17.6% (4.6% y/y) jump in motor vehicle purchases. Spending on furniture &amp; household appliances also jumped 12.1% (9.0% y/y) and services spending rose 3.2%. (3.0% y/y).
Investment spending remained strong. Business fixed investment rose 6.2% (7.8% y/y) due to an 8.9% (10.1% y/y) gain in equipment &amp; software. Structures spending fell 1.4% (+1.0% y/y). Residential investment continued higher yet the 4.8% (6.6% y/y) increase lagged the 10.8% growth during 2Q.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028a.jpg" width="353">
Inventory accumulation continued to have a negative effect on GDP growth. The 0.6 percentage point subtraction was lower than during 2Q but it was the fourth subtraction in the last five quarters.
A shallower foreign trade deficit added marginally to GDP growth following the 1.1 percentage point add during 2Q. Exports continued higher although the 0.7% (6.5% y/y) rise was well off the pace of the prior two years during which quarterly export growth averaged 7.7%.Imports fell slightly (+4.5% y/y) for the second consecutive quarter.
The chain price index rose 3.1%, elevated from 2Q due to the surge in energy prices. Less food &amp; energy the GDP chain price index rose 2.5%, the same as during the prior two years. The chain price index for domestic final demand rose 4.0% after an elevated 3.3% gain in 2Q yet less food &amp; energy the 2.2% gain was a hair below the 2.5% averaged during the prior two years.

<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/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;05 (Advance)</th>
<th scope="col">2Q &#39;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">GDP</td>
<td>3.8%</td>
<td>3.3%</td>
<td>3.6%</td>
<td>4.2%</td>
<td>2.7%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.6%</td>
<td>-2.1%</td>
<td>-0.6%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>4.4%</td>
<td>5.6%</td>
<td>4.2%</td>
<td>3.9%</td>
<td>2.7%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>0.1%</td>
<td>1.1%</td>
<td>0.2%</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>4.1%</td>
<td>4.2%</td>
<td>4.0%</td>
<td>4.4%</td>
<td>3.0%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.1%</td>
<td>2.6%</td>
<td>2.9%</td>
<td>2.6%</td>
<td>2.0%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>


</html>

US real GDP grew 3.8% (AR) last quarter and slightly beat Consensus expectations for 3.6% growth. That strength versus 3.3% growth during 2Q '05 came despite an unspecified subtraction (perhaps 0.2 percentage points) due to Hurricanes [...]

US 3Q GDP Grew 3.8%

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028b.jpg" width="353">
US real GDP grew 3.8% (AR) last quarter and slightly beat Consensus expectations for 3.6% growth. That strength versus 3.3% growth during 2Q &#39;05 came despite an unspecified subtraction (perhaps 0.2 percentage points) due to Hurricanes and the Boeing strike.
Domestic demand growth remained firm at 4.1% due to 3.9% (3.8% y/y) growth in real PCE which was powered by a 17.6% (4.6% y/y) jump in motor vehicle purchases. Spending on furniture &amp; household appliances also jumped 12.1% (9.0% y/y) and services spending rose 3.2%. (3.0% y/y).
Investment spending remained strong. Business fixed investment rose 6.2% (7.8% y/y) due to an 8.9% (10.1% y/y) gain in equipment &amp; software. Structures spending fell 1.4% (+1.0% y/y). Residential investment continued higher yet the 4.8% (6.6% y/y) increase lagged the 10.8% growth during 2Q.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028a.jpg" width="353">
Inventory accumulation continued to have a negative effect on GDP growth. The 0.6 percentage point subtraction was lower than during 2Q but it was the fourth subtraction in the last five quarters.
A shallower foreign trade deficit added marginally to GDP growth following the 1.1 percentage point add during 2Q. Exports continued higher although the 0.7% (6.5% y/y) rise was well off the pace of the prior two years during which quarterly export growth averaged 7.7%.Imports fell slightly (+4.5% y/y) for the second consecutive quarter.
The chain price index rose 3.1%, elevated from 2Q due to the surge in energy prices. Less food &amp; energy the GDP chain price index rose 2.5%, the same as during the prior two years. The chain price index for domestic final demand rose 4.0% after an elevated 3.3% gain in 2Q yet less food &amp; energy the 2.2% gain was a hair below the 2.5% averaged during the prior two years.

<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/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;05 (Advance)</th>
<th scope="col">2Q &#39;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">GDP</td>
<td>3.8%</td>
<td>3.3%</td>
<td>3.6%</td>
<td>4.2%</td>
<td>2.7%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.6%</td>
<td>-2.1%</td>
<td>-0.6%</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>4.4%</td>
<td>5.6%</td>
<td>4.2%</td>
<td>3.9%</td>
<td>2.7%</td>
<td>1.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>0.1%</td>
<td>1.1%</td>
<td>0.2%</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>4.1%</td>
<td>4.2%</td>
<td>4.0%</td>
<td>4.4%</td>
<td>3.0%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.1%</td>
<td>2.6%</td>
<td>2.9%</td>
<td>2.6%</td>
<td>2.0%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>
Employment Cost Index Boosted By Benefit Costs 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 28, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028e.jpg" width="353">
The employment cost index for private industry workers rose 0.8% last quarter. The increase was up from the 0.6% 2Q gain and equaled Consensus expectations.Year to year, the ECI&#39;s gain of 3.0% was the slowest since early 1999.
Benefit costs increased 1.3%, up from the slow 0.8% 2Q gain and it was the quickest this year. Benefit costs in service occupations rose 1.1% (2.8% y/y) and benefit costs in manufacturing rose 1.6% (5.5% y/y).
<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028f.jpg" width="353"> The y/y gain in the cost of health benefits rose to 6.7% but that remained down from a 7.3% increase last year and a 10.5% gain in 2003.
Wage and salary growth was stable at 0.6% for the third straight quarter. Wages account for roughly 70% of the compensation index.
It&#39;s Who You Are and What You Do: Explaining the IT Industry Wage Premium from the Federal Reserve Bank of Atlanta is available <a href="http://www.frbatlanta.org/filelegacydocs/erq305_robertson.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/@EB08/@EB08.HTM">ECI- Private Industry Workers</a></th>
<th scope="col">3Q &#39;05</th>
<th scope="col">2Q &#39;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">Compensation</td>
<td>0.8%</td>
<td>0.6%</td>
<td>3.0%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.6%</td>
<td>0.6%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>3.0%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>1.3%</td>
<td>0.8%</td>
<td>4.8%</td>
<td>6.9%</td>
<td>6.4%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Lowest Since 1992 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 28, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028c.jpg" width="353">
The October reading of consumer sentiment from the University of Michigan settled at 74.2. That was down marginally from the mid-month reading of 75.4 but it was down 3.5% from September which fell 13.7% from August. Consensus expectations had been for improvement to 76.0 and the latest was the lowest reading since October 1992.
During the last ten years there has been a 78% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
The current conditions index fell 7.0% m/m (-12.3% y/y) for the third consecutive sharp monthly decline. Consumers&#39; opinion of the government&#39;s economic policy fell to its lowest since 1996 and the read of personal finances fell 6.8% m/m (-14.3% y/y), a significant deterioration from the mid-month read.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028d.jpg" width="353">
Consumer expectations fell just 0.2% after two months of double digit decline. Expected personal finances fell 2.6% (-11.8% y/y) and expected business conditions during the next five years fell 5.3% (-25.8% y/y).
The mean expected inflation rate for the next twelve months was stable at 5.5% and that was a slight nudge up from the 5.4% expectation at mid-month. The mean expected rate of inflation of 3.8% during the next five to ten years is the highest since 1997.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<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/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</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 class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>74.2</td>
<td>76.9</td>
<td>-19.1%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>91.2</td>
<td>98.1</td>
<td>-12.3%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>63.2</td>
<td>63.3</td>
<td>-24.6%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
World Inflation Apparently No Worse in October 
by <a href="/comment/Stone.html">Carol Stone</a> October 28, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028g.jpg" width="353">
Inflation appears to be no worse for October than it was in September, according to very preliminary data released today and, for Germany, this past Tuesday. The overall Euro-Zone harmonized CPI (HICP) &quot;Flash&quot; was up 2.5% on the year ago, compared with 2.6% in September. An increase in the base-period amount is partly responsible for this month&#39;s downtick in the 12-month inflation rate, but even after accounting for that, prices did not accelerate in October. Among the countries available so far, Germany&#39;s 12-month inflation was stable in the two months at 2.6% and Spain&#39;s decreased to 3.5% in October from 3.8% in September. In Italy, by contrast, October&#39;s rate is 2.5%, relative to 2.2% the previous month. [All figures here reflect the HICP definition of CPI.]
Elsewhere, the Japanese sub-index for the Tokyo region fell more, 1.0%, this month than the -0.6% in September.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051028h.jpg" width="353">
Little detail is available with these early reports, so it is hard to analyze the forces producing the latest reading on world inflation. Two regions provided some breakdown, Italy and Tokyo, Japan. Considering Tokyo first, where prices weakened, there was a notable advance in the base period level, establishing a bias toward a drop in year-on-year inflation. Weaker prices appeared in food, housing, apparel and recreation; they firmed for utilities -- hardly surprising -- furniture and &quot;other&quot;. Pretty much of a mixed bag, then. The same seems to be the case in Italy. First, the base-period effect contributes to the increase in the 12-month pace, as inflation slowed in October last year. This year, the month-to-month CPI change was 0.5% in both September and October. In Italy, prices accelerated in housing, transportation and hotels and restaurants, and they fell less in health care and communications. They increased at basically a steady rate in food and &quot;other&quot; categories. On the other side, they slowed in apparel, recreation and culture, and education. So a mixed performance here too. There is one encouraging note that applies to both of these far-flung places: food and apparel costs remained slow. Thus, as people face a squeeze on their energy bills this winter, the budget burden from other basic necessities seems to lighten. Further, energy itself may have already started to moderate.

<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/G10/@GZ/@GZ5/@GZ501/@GZ501.HTM">Consumer Price Index:</a>&nbsp; Yr/Yr % Change, NSA</th>
<th scope="col">Oct 2005</th>
<th scope="col">Sept 2005</th>
<th scope="col">Aug 2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro-Zone &quot;Flash&quot;</td>
<td>2.5</td>
<td>2.6</td>
<td>2.2</td>
<td>2.4</td>
<td>2.0</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>2.6</td>
<td>2.6</td>
<td>1.9</td>
<td>2.2</td>
<td>1.1</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>2.5</td>
<td>2.2</td>
<td>2.2</td>
<td>2.3</td>
<td>2.6</td>
<td>3.0</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>3.5</td>
<td>3.8</td>
<td>3.3</td>
<td>3.3</td>
<td>2.7</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Japan: Tokyo Area</td>
<td>-1.0</td>
<td>-0.6</td>
<td>-0.5</td>
<td>0.0</td>
<td>-0.4</td>
<td>-0.3</td>
</tr>
<tr>
<td class="firstcol">Japan: Total</td>
<td>--</td>
<td>-0.3</td>
<td>-0.3</td>
<td>0.2</td>
<td>-0.4</td>
<td>-0.3</td>
</tr>
</tbody>
</table>


</html>

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051027g.jpg" width="353">
The mortgage market in the UK picked up some steam once again in September, according to data reported this morning by the British Bankers&#39; Association (BBA). The number of new mortgage loans approved for home purchase was 70,105, up 17% from the amount in September 2004. Loans for refinancing -- known as remortgaging in the UK -- were 72,485, up 3.2% from a year ago and the largest number since March 2004.
These BBA data cover &quot;major British banking groups&quot;, a subset of all UK mortgage lenders accounting for about 70% of total volume. Complete data on new and outstanding mortgages will be reported Monday, October 31 by the Bank of England. But the BBA figures are a good indicator of the overall direction and magnitude of this activity. As seen in the first chart, this activity has picked up dramatically in recent years, giving this sector added attention in the markets. Indeed, this data set was added to Haver&#39;s UK database some months ago in response to British clients&#39; requests for more extensive mortgage market coverage. We also carry the corresponding BOE tables and the Council of Mortgage Lenders&#39; monthly survey.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051027h.jpg" width="353">
As with mortgage lending in the US, the UK market is quite interest-rate sensitive -- perhaps even more so, since mortgage loans are generally shorter than those in the US. The key BOE base rate shows an 89% correlation with the net change in mortgage loans outstanding since 1995. This rate was at its recent lows in 2003 and mortgage lending was strong. As rates rose from late 2003 through the middle of 2004, lending slowed; the number of loan approvals fell steeply for both purchase and refinancing. Subsequently, and especially after the BOE&#39;s rate cut in August, the number of approvals and the net change in loans outstanding have picked up once again.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/UK/@U1/@U106/@U106.HTM">United Kingdom:&nbsp; BBA Mortgage Lending Data</a></th>
<th scope="col">Sept 2005</th>
<th scope="col">Aug 2005</th>
<th scope="col">Sept 2004</th>
Monthly Average
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Loans Approved:&nbsp; House Purchase (Number)</td>
<td>70,105</td>
<td>69,499</td>
<td>59,905</td>
<td>69,231</td>
<td>76,105</td>
<td>83,915</td>
</tr>
<tr class="odd">
<td class="firstcol">Loans Approved:&nbsp; Remortgaging (Number)</td>
<td>72,485</td>
<td>69,145</td>
<td>70,209</td>
<td>68,299</td>
<td>77,482</td>
<td>67,108</td>
</tr>
<tr>
<td class="firstcol">Net Change in Mortgage Loans Outstanding (SA, Bil.&pound;)</td>
<td>4.899</td>
<td>4.393</td>
<td>4.407</td>
<td>5.094</td>
<td>5.184</td>
<td>4.707</td>
</tr>
<tr class="odd">
<td class="firstcol">Bank of England Base Rate</td>
<td>4.50%</td>
<td>4.53%</td>
<td>4.75%</td>
<td>4.38%</td>
<td>3.69%</td>
<td>4.00%</td>
</tr>
</tbody>
</table>
</body>
</html>

The mortgage market in the UK picked up some steam once again in September, according to data reported this morning by the British Bankers' Association (BBA). The number of new mortgage loans approved for home purchase was 70,105, up [...]

UK Mortgage Lending on the Upswing, According to September BBA Data

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051027f.jpg" width="353">
Initial claims for unemployment insurance fell 28,000 to 328,000 last week versus a little revised 35,000 decline during the prior period. Consensus expectations had been for 340,000 claims.
The four-week moving average of initial claims fell to 366,500 (+7.8% y/y).
Continuing claims for unemployment insurance rose 42,000 following a downwardly revised 4,000 gain during the prior week.
The insured rate of unemployment rose to 2.3% from 2.2% during the prior four weeks. The low in early September was 2.0%.

<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">10/22/05</th>
<th scope="col">10/15/05</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">Initial Claims</td>
<td>328</td>
<td>356</td>
<td>-3.5%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Hurricane Related Claims (000, NSA)</td>
<td>40</td>
<td>75</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,904</td>
<td>3.2%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance fell 28,000 to 328,000 last week versus a little revised 35,000 decline during the prior period. Consensus expectations had been for 340,000 claims. The four-week moving average of initial [...]

Initial Claims for Jobless Insurance Again Down Sharply

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051027e.jpg" width="353">
The Index of Help-Wanted Advertising from the Conference Board edged up in September to 39 from 38 in August which was upwardly revised.
During the last ten years there has been a 61% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume rose to 39% from 22% in August.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Sept &#39;04</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>39</td>
<td>38</td>
<td>36</td>
</tr>
</tbody>
</table>
</body>
</html>

The Index of Help-Wanted Advertising from the Conference Board edged up in September to 39 from 38 in August which was upwardly revised. During the last ten years there has been a 61% correlation between the level of help-wanted [...]

Help-Wanted Advertising Edged Up

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Andrew Cates

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

260409Z1.jpg

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

260409Z2.jpg

**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.

260409Z3.jpg

**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.

260409Z4.jpg

**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

260409Z5.jpg

**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.

260409Z6.jpg

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.

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/4qBjHX7OmdXmxVN2oRe1nB?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: From Oil Shock to Policy Dilemma

Michael J. Moran

260409A.jpg

260409B.jpg

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**.

260409C.jpg

260409D.jpg

- 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

260409N1.jpg

260409C1.jpg

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.

260409O1.jpg

260409P1.jpg

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**.

260409Q1.jpg

260409S1.jpg

- 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

Kathleen Stephansen, CBE

260408A0.jpg

260408B0.jpg

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.

U.S. Mortgage Applications Edged Down in the April 3 Week

Robert Brusca

260408E.jpg

**Chaotic trends**
Producer price trends for the European Monetary Union in February show great deal of weakness. The headline measure in February for total PPI prices (excluding construction) fell 0.5% after rising 0.5% in January. The three-month annualized change was -1.3%, over six months it was -0.7%, and year-over-year it was -3.1%. The trend is not particularly conclusive although the table also produces the trend for the HICP-core on the same timeline where there is acceleration in train. Despite this report and any trends, it may show that the risk to inflation in the PPI is now through elevated Brent crude prices, which we see in the chart has been historically well correlated with changes in the PPI.

**The past may not be prologue**
The chart offers some insight into this matter as we see that recently the spike in Brent crude is substantial—and the chart doesn't even take us up-to-date to what we're dealing with in the markets today! We can see that in 2021 when all prices went up sharply, that preceded a spike in the PPI as well. However, in 2017 when there was a short-lived spike, there wasn't much impact on producer prices at all. Then, later in 2018, when prices spiked not quite so high or suddenly, but had a bit more sustained growth, there also was a very small knock-on impact on producer prices. One of the key features for whether the Brent rise gets into producer prices or not is how long-lived the spike remains in force and how people perceive it. In this case, there's closing of the Strait of Hormuz and a war in place; there's a good chance that investors are going to treat this as a real event and one with potential longevity. That means that this spike will elevate producer prices.

**Overall PPI is tempered but, by country...not so much**
However, the table is based on data through February, and so oil spiking prices really haven't entered the picture as far as the table is concerned. On that basis, we're seeing a lot of price declines: an annualized three-month decline of 7.9% in Spain, 7.3% in Portugal, 3.6% in Germany, and so on. These figures clearly do not reflect what will be the lasting effect on oil prices as we get deeper into 2026. Even despite this weakness in headline inflation across countries in the monetary union, and in Europe generally, inflation is tempered year-over-year where it only rises compared to a year earlier for 7.7% of the reporters, but then over six months inflation accelerates for all of the reporters compared to its 12-month pace, and then, over three months it accelerates for about 70% of the reporters compared to the six-month pace.

**PPI headline vs. core... where available**
There are two observations at the bottom of the table for the PPI excluding energy—for France and Germany. In both cases, the difference between the excluding energy price and the headline price is remarkable. For Germany, the ex-energy price is rising and clearly accelerating; in contrast, the headline trends show prices declining or a tendency toward deceleration. For France, the ex-energy prices are rising and sustaining larger increases over six months and three months than over 12 months. However, for France, in the table, the total PPI headline inflation rate declines on all horizons although the pace of decline is undergoing erosion. Once we set aside the weighting scheme for the monetary union, the PPI is looking instead at the average result of the countries in the table (an average that includes some non-monetary union members) where the inflation rate is clearly headed higher, not lower.

260408.jpg

**The trend and the future**
Despite the controversies implicit in these data, at its last meeting the European Central Bank put markets on notice that, if the war were still ongoing, there was a high likelihood that the ECB would raise interest rates at its next meeting. It's easy to see why since the inflation picture isn't particularly glowing. Even before the new oil price impact is factored in, there is evidence of acceleration in producer prices.

**War! And price trends**
War creates a lot of uncertainty. In addition to oil prices, there are going to be knock-on effects for weakness across the global economy and also a tendency for oil prices to spread increases since the oil price increase is high enough that it's likely to have a significant impact on transportation costs for all goods. Central banks are clearly going to be on notice and wary. Even so, it's also true that spiking oil prices, even if they spread inflation, tend to spread economic weakness. Policymaking in 2026 is going to be far more contentious and difficult than it was in 2025, everywhere globally.

Economy in Brief

Jump to:

World Inflation Apparently No Worse in October

U.S. Consumer Sentiment Lowest Since 1992

Employment Cost Index Boosted By Benefit Costs

US 3Q GDP Grew 3.8%

US 3Q GDP Grew 3.8%

UK Mortgage Lending on the Upswing, According to September BBA Data

Initial Claims for Jobless Insurance Again Down Sharply

Help-Wanted Advertising Edged Up