Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030804a.jpg" width="353">
Factory orders surged 1.7% in June following a 0.3% increase in May. A 2.6% jump in durable goods orders drove the rise which was revised up slightly from an advance report of a 2.1% gain.
The strength in June durable orders reflected a 21.1% spurt in orders for civilian aircraft. Excluding the transportation sector entirely, factory orders rose 1.2% (3.3% y/y).
Manufacturing inventories fell 0.2% in June for the fourth consecutive monthly decline. The ISM inventory index in July remained below 50 and therefore suggests further decumulation.
Inventories fell in most industries in June, but the 1.0% decline (-9.0% y/y) in computers and electronic products was notable. Electrical equipment inventories dropped 0.5% (-6.3% y/y) and machinery inventories fell 0.3% (-3.7% y/y). Furniture inventories squeaked out a 0.1% m/m gain and are up 0.9% y/y.
Nondurable goods inventories rose 0.4% (+4.3% y/y) for the first gain in three months.
Factory shipments jumped 1.1% (1.2% y/y) led by higher shipments in the transportation sector.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
<tbody>
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<td class="firstcol">Inventories</td>
<td>-0.2%</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>-1.9%</td>
<td>-8.0%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>1.7%</td>
<td>0.3%</td>
<td>4.2%</td>
<td>-0.8%</td>
<td>-7.2%</td>
<td>5.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.1%</td>
<td>0.3%</td>
<td>1.2%</td>
<td>-1.1%</td>
<td>-5.3%</td>
<td>4.4%</td>
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Factory orders surged 1.7% in June following a 0.3% increase in May. A 2.6% jump in durable goods orders drove the rise which was revised up slightly from an advance report of a 2.1% gain. The strength in June durable orders reflected [...]

Factory Orders Surged in June

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030801a.jpg" width="353">
Nonfarm payrolls declined again in July and figures for May and June were revised downward to show larger declines (see table below). This result was remarkably close to forecasts, which had called for a 50,000 decrease. At the same time, the unemployment rate fell 0.2% to 6.2% after its relatively large increase the month before from 6.1% to 6.4%. Forecasters had expected only a 0.1% fall in July.
It was the manufacturing sector that again pulled down the total number of jobs, as a broad array of those industries lost jobs aggregating to 71,000. Durable goods industries were off 54,000 and nondurable goods 17,000. Retail trade (-14,000), government (-10,000) and education and health services (-1,000) were other weak sectors.
In contrast, temporary help agencies had a good gain, increasing 42,000. Including other types of employment agencies, the employment services group surged 73,000, its third consecutive notable rise. This suggests that businesses are starting to staff up, but doing so tentatively, using temp workers until they are more certain their need for workers will be sustained. Construction industries, finance, and leisure and hospitality were other industry groups adding workers in July.
The workweek edged down 0.1 hour to 33.6 hours, a new low. Shorter hours characterized many manufacturing and other goods-producing industries. Average hourly earnings rose 0.3%, the third successive gain of that magnitude after being more sluggish in the winter and early spring.
In the separate household survey, the labor force fell 556,000, basically reversing June&#146;s 611,000 increase. Such swings also characterized the number of people reporting they were employed (down 260,000 in July after a 251,000 increase in June) and those noting unemployment (down 296,000 after a 360,000 rise). About half of the July decline in the labor force occurred among people aged 16-24, suggesting there may be some seasonal influence related to summer vacations from school.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM">Employment</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-44,000</td>
<td>-72,000</td>
<td>-76,000</td>
<td>-0.3%</td>
<td>-1.1%</td>
<td>0.0%</td>
<td>2.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Reported last month</td>
<td></td>
<td>-30,000</td>
<td>-70,000</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>-71,000</td>
<td>-63,000</td>
<td>-49,000</td>
<td>-4.2%</td>
<td>-6.9%</td>
<td>-4.8%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.6</td>
<td>33.7</td>
<td>33.7</td>
<td>34.0</td>
<td>33.9</td>
<td>34.0</td>
<td>34.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.1%</td>
<td>2.9%</td>
<td>3.8%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>6.2%</td>
<td>6.4%</td>
<td>6.1%</td>
<td>5.8%</td>
<td>5.8%</td>
<td>4.8%</td>
<td>4.0%</td>
</tr>
</tbody>
</table>
Moderate Rise in U.S. Personal Income & Spending 
by <a href="/comment/Stone.html">Carol Stone</a> August 1, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030801b.jpg" width="353">
Mild increases in both personal income and expenditures marked the June performance of the consumer sector. Income rose 0.3%, giving the entire first half of 2003 a moderate 3.4% annualized gain. As in May, one of the distinctive features of income growth was another sizable advance in proprietors&#146; income; it increased 0.8% in June, yielding a whopping 11% annual rate of expansion over the last four months. Profits of small, unincorporated businesses seem to be advancing strongly. Wages and salaries, on a much steadier trend, picked up to a 0.3% gain in June from 0.2% in May and a small outright decline in April.
Consumer spending has also been steady of late, with the last two months, 0.4% in May and 0.3% in June, tracing a smoother path than the wide swings earlier in the year that resulted from uneven buying patterns for motor vehicles and the volatility in gasoline prices. Broadly, expenditures on durable goods rose 0.4% in June, almost the same increase as in May. Outlays for nondurable goods were also up 0.4% in June, but they had been flat in May; the whipsaw in gasoline purchases, down sharply in May and back up somewhat in June, caused most of the upturn in June nondurable goods buying. Spending on services slowed to a 0.2% rise in June after 0.6% in May. Outright declines in outlays for household utilities and recreation in June followed increases in May.
The saving rate remained flat at 3.3% in June, almost the same as in each of the preceding three months.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol">Personal Income</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.5%</td>
<td>2.7%</td>
<td>3.3%</td>
<td>8.0%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.3%</td>
<td>0.4%</td>
<td>4.7%</td>
<td>4.5%</td>
<td>4.5%</td>
<td>7.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>3.3%</td>
<td>3.3%</td>
<td>4.4%</td>
<td>3.7%</td>
<td>2.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">PCE Price Deflator</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.0%</td>
<td>2.5%</td>
</tr>
</tbody>
</table>
ISM Factory Index Rises Above 50 
by <a href="/comment/Stone.html">Carol Stone</a> August 1, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030801c.jpg" width="353">
After a sluggish few months that raised concerns about renewed recession, the Institute of Supply Management&#146;s Purchasing Managers&#146; Index (PMI) rose 2 points in July, crossing above the key 50% expansion/decline line for the first time since February. A 4.4-point gain in new orders was the prime mover in the July improvement, with a larger number of ISM survey participants reporting increases in their orders. Less inventories liquidation, slower deliveries by vendors and a slight pick-up in production also added to the overall index. Employment held just about steady after an encouraging rise last month.
Prices paid for materials and supplies moderated somewhat in July; they appear to be establishing a trend of increases at fewer companies than has generally be the case over the last 15 months. No item is reported &#147;in short supply&#148; and only one raw material and some energy costs were reported up in price in July. While this softening may leave commodity producers less well off, it relieves further pressure on profits of finished goods manufacturers.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
<tbody>
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<td class="firstcol">Composite Index</td>
<td>51.8</td>
<td>49.8</td>
<td>49.4</td>
<td>52.4</td>
<td>44.0</td>
<td>51.7</td>
</tr>
<tr>
<td class="firstcol">New Orders Index</td>
<td>56.6</td>
<td>52.2</td>
<td>51.9</td>
<td>56.7</td>
<td>46.2</td>
<td>52.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>53.0</td>
<td>56.5</td>
<td>51.5</td>
<td>57.6</td>
<td>42.9</td>
<td>64.8</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Improves 
by <a href="/comment/Stone.html">Carol Stone</a> August 1, 2003


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030801d.jpg">
The University of Michigan&#146;s consumer sentiment index edged slightly higher in the latter part of July to 90.9, giving it a 1.2-point increase all together from June&#146;s 89.7 level. The sub-index describing current conditions was 102.1, unchanged from the mid-month reading and up 7.4 points from June. Expectations improved slightly to 83.7 from 82.7 at mid-month, but remain 2.7 points below the June value. 
The Michigan Survey&#146;s improvement in July stands in contrast to a decrease in the Conference Board&#146;s Consumer Confidence Index reported Tuesday. That survey gives heavy weight to job-market perceptions, which deteriorated. The decline in nonfarm payrolls in the month would seem to bear out this assessment by consumers. The Michigan survey covers many fewer participants, 500 versus 5,000 for the Conference Board. But Michigan asks many more questions. It may then react more directly to stock market and political events. The better stock market conditions in July and the US&#146;s progress in finding hunted Iraqi leaders may thus have offset in the Michigan survey some of the negative factors that hurt the Conference Board&#146;s result.

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<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">July (Final)</th>
<th scope="col">Mid-July</th>
<th scope="col">June</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Sentiment</td>
<td>90.9</td>
<td>90.3</td>
<td>89.7</td>
<td>89.6</td>
<td>89.2</td>
<td>107.6</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Flat 
by <a href="/comment/Stone.html">Carol Stone</a> August 1, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030801e.jpg" width="353">
The value of total construction put in place was flat in June as a modest 0.3% decline in private building offset a 1.0% gain in public (government) projects. Within the private sector, residential construction, which accounts for about two-thirds of that sector&#146;s dollar value, fell 0.4%, while most categories of non-residential building firmed. For instance, office building rose 3.1%, commercial projects were up 2.2% and health care added 2.7%.
Among public, government-owned buildings, offices added 5.7%, health care facilities, 6.0% and power projects, 24.0%.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.
All that said, total construction activity remained sluggish through June, although it showed some signs of stabilization after a decline that had lasted since January. Notably, while residential building continued to fall through June, commercial projects do seem to be sustaining a long-awaited upturn.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.0%</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>1.1%</td>
<td>1.1%</td>
<td>2.7%</td>
<td>8.3%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>-0.3%</td>
<td>-0.8%</td>
<td>1.5%</td>
<td>0.8%</td>
<td>-0.2%</td>
<td>1.4%</td>
<td>8.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>-0.4%</td>
<td>-0.8%</td>
<td>-1.6%</td>
<td>3.5%</td>
<td>8.6%</td>
<td>3.3%</td>
<td>7.4%</td>
</tr>
<tr>
<td class="firstcol">Public</td>
<td>1.0%</td>
<td>0.5%</td>
<td>1.3%</td>
<td>1.9%</td>
<td>5.2%</td>
<td>7.4%</td>
<td>9.6%</td>
</tr>
</tbody>
</table>
U.S. Light Vehicle Sales Up Considerably 
by <a href="/comment/Stone.html">Carol Stone</a> August 1, 2003


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030801f.jpg">
Light vehicle sales picked up considerably in July compared to June, increasing by 910,000 (annual rate). However, auto company reports, which are stated on a year-to-year change basis, showed huge declines relative to July 2002. That month saw heavy sales incentives, however, making it a high base from which to measure such performance. The June-to-July gain was shared by both cars and trucks; domestic truck sales rose especially sharply, from 7.58 million units to 8.25 million. Sales of imported vehicles actually eased slightly on the month.
In recent years, vehicle sales have not shown much relation to consumer confidence measures, but they do have some tendency to move with the Conference Board&#146;s Buying Plans measure for Automobiles. Consumers anticipate their vehicle purchases to some extent; indeed the gain in the July Buying Plans gauge foretold the gain in vehicle sales experienced in the month.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>17.34</td>
<td>16.43</td>
<td>16.12</td>
<td>-4.3%</td>
<td>16.81</td>
<td>17.26</td>
<td>17.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.81</td>
<td>7.56</td>
<td>7.27</td>
<td>-10.2%</td>
<td>8.07</td>
<td>8.48</td>
<td>8.83</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Light Trucks</td>
<td>9.53</td>
<td>8.87</td>
<td>8.86</td>
<td>5.5%</td>
<td>8.74</td>
<td>8.78</td>
<td>8.56</td>
</tr>
</tbody>
</table>
</body>
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Nonfarm payrolls declined again in July and figures for May and June were revised downward to show larger declines (see table below). This result was remarkably close to forecasts, which had called for a 50,000 decrease. At the same [...]

U.S. Nonfarm Payrolls Decline

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030731a.jpg" width="353">
Real GDP grew at a 2.4% annual rate in the second quarter, after increasing only 1.4% in each of the two previous periods. Consensus forecasts for 2Q GDP were 1.8% growth.
Personal consumption expenditures were 3.3% (a.r.) higher than last quarter with the bulk of the advance in durable goods purchases (+22.6% a.r.). Fixed investment rose by 6.6% a.r. the largest increase since the second quarter of 2000. Expenditures for equipment and software (+4.8% a.r.) grew for the first time since the fourth quarter of 2000.
Federal defense spending soared by 44.1% a.r. in the second quarter, while federal nondefense and state and local government expenditures were lower.
The largest drag on second quarter GDP was the trade balance. Exports were 3.1% a.r. lower while imports increased by 9.2% a.r. causing a negative contribution of 1.56 percentage points to real GDP.
Domestic final demand was up 4.6% a.r. last quarter, the largest increase since the first quarter of 2000.
Inflation was up a modest 1.0 % with the price indexes of many consumer goods declining.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained &#39;96 $, % AR</a></th>
<th scope="col">2Q&#39;03</th>
<th scope="col">1Q&#39;03</th>
<th scope="col">4Q&#39;02</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>2.4%</td>
<td>1.4%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>0.3%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-0.8%</td>
<td>-0.8%</td>
<td>0.3%</td>
<td>0.6%</td>
<td>-1.2%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>3.2%</td>
<td>2.3%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-1.6%</td>
<td>0.8%</td>
<td>-1.6%</td>
<td>-0.7%</td>
<td>-0.2%</td>
<td>-0.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>4.6%</td>
<td>1.4%</td>
<td>2.6%</td>
<td>2.4%</td>
<td>1.6%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Deflator</td>
<td>1.0%</td>
<td>2.4%</td>
<td>1.8%</td>
<td>1.1%</td>
<td>2.4%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Advances 
by <a href="/comment/Stone.html">Carol Stone</a> July 31, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030731b.jpg" width="353">
After increasing by 1.3% in the first quarter of 2003 the employment cost index for civilian workers advanced a more modest 0.9% in the second quarter.
The components for both wages and salaries and benefit costs each showed smaller gains from March to June than in the previous three month period. The largest differences in wages and salaries were in the finance, insurance and real estate industry which had surged 5.2% in the first quarter and was 0.8% higher in Q2, and in wholesale trade (+1.6% in Q1 vs &#150;0.1% in Q2).
Benefit costs in manufacturing, which had jumped 4.0% in the first quarter, gained 1.3% in the second.
Wages and salaries account for roughly 70% of the compensation index and benefit costs comprise about 30%.

<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">2Q&#39;03</th>
<th scope="col">1Q&#39;03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Compensation</td>
<td>0.8%</td>
<td>1.4%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>4.2%</td>
<td>4.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wages &amp; Salaries</td>
<td>0.6%</td>
<td>1.0%</td>
<td>2.6%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Benefit Costs</td>
<td>1.3%</td>
<td>2.4%</td>
<td>6.2%</td>
<td>4.7%</td>
<td>5.1%</td>
<td>5.6%</td>
</tr>
</tbody>
</table>


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030731c.jpg" width="353">
Initial claims for unemployment insurance edged down 3,000 in the July 26 week to 388,000 from an upward-revised 391,000 the prior week. This move extends to a second week an encouraging decline in claims below the 400,000 often associated with slack (or even recessionary) conditions in labor markets. It also adds further evidence that the bulge in claims in late June and early July was transitory, due to seasonal plant maintenance in such manufacturing industries as auto, apparel and furniture.
At the same time, the total number of unemployment benefit recipients &#150; also called &#147;continuing claims&#148; &#150; remained high the prior week and the associated &#147;insured unemployment rate&#148; returned to 2.9% from 2.8% the week before. Thus, even as the number of layoffs seems to be receding, it is still relatively difficult for those unemployed to get the new jobs that would remove them from the ranks of the unemployed.

<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">7/26/03</th>
<th scope="col">7/19/03</th>
<th scope="col">7/12/03</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>388.0</td>
<td>391.0</td>
<td>415.0</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,648</td>
<td>3,585</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
</table>


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030731d.jpg" width="353">
The Chicago Purchasing Managers &#147;Business Barometer&#148; advanced 3.4 points in July to 55.9, its highest reading since January and well ahead of the consensus forecast for a 1.1-point rise. New orders led the gain, picking up nearly 7 points to 61.7, their highest since last November. Production increased 1.9 points, and employment, 2.2. This last however, remains below 50%, indicating the persistence of an adverse balance of layoffs and hires.
Seasonal factors for the overall index are supportive in July, accounting for some of the month-to-month firmness. However, this July&#146;s performance before seasonal adjustment is definitely better than the prior couple of years. The current July saw a decrease in the overall index of about 3 points from June, comparing favorably to declines of almost 8 points in July 2002 and 5 points in July 2001. Thus, there appears to be genuine improvement in manufacturing in the Chicago metropolitan area. Similarly, the Milwaukee Purchasing Managers Index rose from 48 in June to 58 in July. Although frequently more volatile, the Milwaukee survey indicates the geographic breadth of the improvement.

<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/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Barometer</td>
<td>55.9</td>
<td>52.5</td>
<td>52.2</td>
<td>52.7</td>
<td>41.4</td>
<td>51.8</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>61.7</td>
<td>54.8</td>
<td>54.6</td>
<td>56.3</td>
<td>42.3</td>
<td>53.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>47.9</td>
<td>49.1</td>
<td>53.7</td>
<td>56.9</td>
<td>50.4</td>
<td>65.6</td>
</tr>
</tbody>
</table>


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030731e.jpg" width="353">
The Conference Board&#146;s National Index of Help-Wanted Advertising increased slightly in June to 38 from its downward revised level of 35 in May. During the last ten years there has been a 92% correlation between the level of help-wanted advertising and the year-to-year % change in nonfarm payrolls.
The proportion of labor markets with rising want-ad volume junped to 73% in June, the highest since September, 2002.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>38</td>
<td>35</td>
<td>47</td>
</tr>
</tbody>
</table>
</body>
</html>

Real GDP grew at a 2.4% annual rate in the second quarter, after increasing only 1.4% in each of the two previous periods. Consensus forecasts for 2Q GDP were 1.8% growth. Personal consumption expenditures were 3.3% (a.r.) higher than [...]

Initial Jobless Claims Below 400,000 a Second Week

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030730a.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) improved slightly in June to &#150;0.32 from a reading of &#150;0.40 in May.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of over 3% a.r.
The June index was the highest since November, 2002. The three-month moving average of the CFNAI improved to &#150;0.58 from -0.70 in May.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders. Employment data accounted for &#150;0.35 of the &#150;0.32 June index, while output components contributed &#150;0.01 (an improvement from May) and all other components contributed +0.04 up from &#150;0.01 the previous month.
For a complete discussion of the latest Chicago Fed&#39;s National Activity Index click <a href="http://www.chicagofed.org/economicresearchanddata/national/index.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">June 2003</th>
<th scope="col">May 2003</th>
<th scope="col">June 2002</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-0.32</td>
<td>-0.40</td>
<td>-0.04</td>
<td>-0.33</td>
<td>-1.19</td>
<td>-0.13</td>
</tr>
</tbody>
</table>


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030730b.jpg" width="353">
Mortgage applications plunged last week, according to survey data compiled by the Mortgage Bankers Association of America. The overall index of mortgage applications dropped 24.3% on the week to 972.4, the lowest since last December (3/16/90 = 100). The abrupt, sharp upturn in interest rates has put a heavy brake on refinancing activity, pulling that sub-index down 32.9% this last week alone, putting it 58.4% below its all-time high of 9977.8 reached just eight weeks ago on May 30. The index for loan applications for home purchase, however, remained firm, edging down just 3.5% on the week; at 426.9, this index stands 7.3% below its record 460.5 set in that same May 30 week.
Interest rates are the main drag on this market. The contract rate on 30-year fixed rate loans tabulated by the Federal Home Loan Mortgage Corporation (&#147;Freddie Mac&#148;) was up 27 basis points last week to 5.94%, 73 basis points above its recent low set in the week ended June 20 and the highest since mid-January. The bigger part of the impact of this rapid rise in rates has been on refinancing activity, which had been used by consumers to help fund new spending and also to pay down old debt.
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 at <a href="http://www.mbaa.org/">www.mbaa.org.</a>

<table border="0" cellspacing="0" width="100%">

</table>
<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/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">7/25/03</th>
<th scope="col">7/18/03</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>972.4</td>
<td>1,284.3</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>426.9</td>
<td>442.4</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>4145.8</td>
<td>6,181.2</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The Chicago Fed National Activity Index (CFNAI) improved slightly in June to 0.32 from a reading of 0.40 in May. A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of over 3% [...]

Mortgage Applications Plunged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030725d.jpg" width="353">
After Thursday&#146;s report of strong retail sales in the UK for June, tepid growth in second quarter GDP was disappointing. The Preliminary estimate showed only a 0.3% increase from the first quarter (1.8% from a year ago).
The early GDP tabulation represents estimates of industrial value added. It indicates that oil, gas and other mineral extraction declined, and manufacturing production was probably flat. Service sector output gained about 0.4% on the quarter. Thus, while retail sales suggest that consumer demand improved, other segments of the UK economy were sluggish.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK: Constant GDP (1995=100)</th>
Q2 2003
Q1 2003
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Q/Q%Chg</td>
<td>Y/Y%Chg</td>
<td>Q/Q%Chg</td>
<td>Y/Y%Chg</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>0.3</td>
<td>1.8</td>
<td>0.1</td>
<td>2.1</td>
<td>1.9</td>
<td>2.1</td>
<td>3.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Service Industries</td>
<td>0.4</td>
<td>2.6</td>
<td>0.4</td>
<td>2.6</td>
<td>2.6</td>
<td>3.5</td>
<td>3.6</td>
</tr>
</tbody>
</table>
German Inflation Drifting Lower 
by <a href="/comment/Stone.html">Carol Stone</a> July 25, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030725e.jpg" width="353">
German consumer prices are drifting ever so slightly lower, according to the preliminary July CPI data for the six &#147;Laender&#148; (states). Their individual states&#146; price indexes rose 0.2% to 0.3% each, averaged by the Federal Statistics Office to 0.2%, which yields a 0.1% decline after seasonal adjustment. This monthly performance produced year-on-year inflation in July at just under 1% for a fourth consecutive month. Details on the sources of the moderation in July will not be reported until the final data are issued in mid-August. But a quick glance at the trend in the euro suggests that its recent strength has been a factor in the current slow pace of inflation in Germany. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">German CPI</th>
<th scope="col">July 2003, NSA</th>
<th scope="col">July 2003, SA</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">2000=100</td>
<td>0.19%</td>
<td>-0.10%</td>
<td>0.87%</td>
<td>1.37%</td>
<td>1.97%</td>
<td>1.47%</td>
</tr>
</tbody>
</table>
</body>
</html>

After Thursdays report of strong retail sales in the UK for June, tepid growth in second quarter GDP was disappointing. The Preliminary estimate showed only a 0.3% increase from the first quarter (1.8% from a year ago). The early GDP [...]

U.K. Q1 GDP Lower than Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030725a.jpg" width="353">
Durable goods orders surged 2.1% in June, double the Consensus expectation for a 1.0% rise. May figures were revised up slightly.
A 20.0% m/m jump in orders for commercial aircraft &amp; parts accounted for the upside surprise in orders. That gain lifted all transportation sector orders by 3.9%. Excluding the transportation sector, durable orders rose 1.4% (2.7% y/y) following a 0.9% gain in May.
Nondefense capital goods orders jumped 2.0% on the gain in aircraft orders. Excluding aircraft and parts, nondefense capital goods orders rose 0.6% (8.3% y/y) following an upwardly revised 0.5% May gain.
For a report from the Federal Reserve Bank of St. Louis titled &quot;Waiting for the Investment Boom? It Might Be a While&quot; click <a href="http://research.stlouisfed.org/publications/net/20030501/cover.pdf">here</a>.
During the last nine years there has been an 85% correlation between the y/y change in nondefense capital goods orders and the change in nonresidential investment in equipment &amp; software. There has been a 96% correlation between the change in shipments of these capital goods and investment.
Shipments of durable goods rose 1.3% (-0.8% y/y). Durable goods shipments were up 1.3% YTD.
Durable inventories dropped 0.6% (-1.7% y/y), the largest one month decline since March 2002. Lower inventories in the transportation sector accounted for much of the drop.

<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/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Durable Goods Orders</td>
<td>2.1%</td>
<td>0.0%</td>
<td>4.4%</td>
<td>-0.1%</td>
<td>-11.4%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nondefense Capital Goods</td>
<td>2.0%</td>
<td>0.2%</td>
<td>12.3%</td>
<td>-5.3%</td>
<td>-16.5%</td>
<td>7.9%</td>
</tr>
</tbody>
</table>
New Home Sales Stronger Still 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 25, 2003


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030725b.jpg">
Sales of new single family homes in June continued the recent surge and added 4.7% m/m to the 10.9% May gain which was revised down slightly. June sales were at a record 1.160M unit rate versus Consensus expectations for 1.100M.
Sales gains were spread across the country&#39;s regions in June but were strongest in the Northeast where sales rose 32.3% (24.6% y/y). In the Midwest sales rose 9.8% (20.3% y/y).
Elsewhere, sales in the South rose 0.9% (21.8% y/y) and in the West sales rose 2.7% (19.2% y/y).
The median price of a new home fell to $187,000 (-1.9% y/y) and the prior month&#39;s figure was revised up.
The new home sales data reflect current sales versus the existing home sale figures which reflect closings on past sales.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E90401/@E90401.HTM">Homes Sales (000s, AR)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">New Single-Family</td>
<td>1,160</td>
<td>1,108</td>
<td>21.0%</td>
<td>977</td>
<td>907</td>
<td>880</td>
</tr>
</tbody>
</table>
Existing Home Sales Dip 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 25, 2003


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030725c.jpg">
Sales of existing single family homes fell short of Consensus expectations for 6.00M. Sales in June were 5.830M, down 0.3% from May. Figures back to 1989 were revised slightly due to new seasonal factors.
Lower sales in the Northeast and in the Midwest were partially offset by a gain in the West and stability in the South.
The median price of an existing home rose to $176,500 (+7.7% y/y).
The figures reflect closings of past home sales.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;5,830</td>
<td>&nbsp;5,850</td>
<td>8.6%</td>
<td>5,595</td>
<td>5,292</td>
<td>5,158</td>
</tr>
</tbody>
</table>
</body>
</html>

Durable goods orders surged 2.1% in June, double the Consensus expectation for a 1.0% rise. May figures were revised up slightly. A 20.0% m/m jump in orders for commercial aircraft & parts accounted for the upside surprise in orders. [...]

U.S. Durable Goods Orders Surge

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Warm weather and the new &#147;Harry Potter&#148; book helped to bolster retail sales in the UK last month. The standard yardstick, the seasonally adjusted index of sales volume, surged 1.9% over May. Analysts had forecast a 0.4% gain.. Anecdotal evidence cited by the UK Office for National Statistics (ONS) highlights the role of warm, sunny weather in prompting good sales of seasonal merchandise such as barbecue equipment and summer clothes. Sales at &#147;non-specialized stores&#148; rose 3.6% and those at &#147;non-store retailers&#148;, i.e., Internet and other mail order outlets, were up 3.7%, the latter attributed by some to demand for the popular Harry Potter novel, which was released June 21. Similarly in the US, June sales at &#147;sporting goods, book, hobby and music stores&#148; jumped 3.0%, suggesting the same phenomenon at work.. The UK retail sales index was up a whopping 7.0% in June from a year ago. But the ONS notes that the Queen&#146;s Jubilee in June 2002 probably distorts that comparison, and it should be interpreted cautiously.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK: Retail Sales (1995=100)</th>
<th scope="col">June 2003</th>
<th scope="col">&nbsp;% Change &nbsp;from May</th>
<th scope="col">% Change from &nbsp;June 2002</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">All Retailing</td>
<td>140.9</td>
<td>1.9</td>
<td>7.0</td>
<td>5.4</td>
<td>5.9</td>
<td>4.5</td>
</tr>
<tr>
<td class="firstcol">Non-food Stores</td>
<td>154.9</td>
<td>2.5</td>
<td>7.9</td>
<td>6.4</td>
<td>8.0</td>
<td>6.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Non-store Retailing &amp; Repair</td>
<td>125.0</td>
<td>3.7</td>
<td>-0.1</td>
<td>5.8</td>
<td>3.1</td>
<td>0.4</td>
</tr>
</tbody>
</table>
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Warm weather and the new Harry Potter book helped to bolster retail sales in the UK last month. The standard yardstick, the seasonally adjusted index of sales volume, surged 1.9% over May. Analysts had forecast a 0.4% gain.. [...]

U.K. Retails Sales Surge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030724a.jpg" width="353">
Initial claims for unemployment insurance dropped below 400,000 for the first week since early February. Claims fell 29,000 to 386,000 versus the prior week which was revised up slightly. Consensus expectations had been for claims of 418,000.
The recent volatility in initial claims may reflect temporary, seasonal layoffs in the auto, textile and apparel industries.
The four-week moving average of initial claims dropped to 419,250 (+8.2% y/y), the lowest level since early March.
Continuing claims for unemployment insurance fell for the second week. The 24,000 decline followed a 151,000 collapse the prior week which was revised from a 117,000 drop.
During the last ten years there has been a 79% (inverse) correlation between the level of initial claims for unemployment insurance and the y/y change in nonfarm payrolls.
The insured rate of unemployment fell to 2.8% from 2.9% the week prior. It was the lowest level for this rate of unemployment since mid-April.
New research from the Federal Reserve Bank of Kansas City titled &quot;A Closer Look at Jobless Recoveries&quot; can be found <a href="http://www.kc.frb.org/Publicat/econrev/Pdf/2q03schr.pdf">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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">7/19/03</th>
<th scope="col">7/12/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>386.0</td>
<td>415.0</td>
<td>3.5%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,605</td>
<td>3.4%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
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Initial claims for unemployment insurance dropped below 400,000 for the first week since early February. Claims fell 29,000 to 386,000 versus the prior week which was revised up slightly. Consensus expectations had been for claims of [...]

Initial Claims for Jobless Insurance Below 400,000

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

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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The ADP National Employment Report indicated that nonfarm private sector payrolls during October increased 42,000 (0.7% y/y) after declining 29,000 in September, revised from -32,000, and dipping an unrevised 3,000 in August. The three-month average change of 3,000 compares to 24,000 in Q3’25, 22,000 in Q2 and 139,000 in Q1. The Action Economics Forecast Survey expected a 25,000 increase in October.

Small business hiring (less than 50 employees) fell 10,000 (+0.1% y/y) after declining 34,000 in September, revised from -40,000. Employment at medium-sized firms (50-499 employees) weakened 22,000 (+0.7% y/y) after declining 30,000 in September, revised from a 20,000 fall. Large business hiring (500+ employees) offset these declines and rose 74,000 (2.2% y/y) after increasing 31,000 in September, revised from 33,000. It was the largest gain in twelve months.

Service-producing jobs increased 32,000 (0.7% y/y) in October after falling 21,000 in September, revised from -28,000. Changes amongst industry sectors were mixed. Trade, transportation & utilities employment rose 47,000 (0.3% y/y) after falling 6,000. Financial activities employment improved 11,000 (1.9% y/y) following a 9,000 decline in September. Education & health services rose 25,000 (0.2% y/y) after increasing 32,000 in September. Working lower, leisure & hospitality employment declined 5,000 (+2.4% y/y) after falling 16,000 in September. Professional & business jobs fell 15,000 (+0.1% y/y) following a 6,000 decline. Information sector employment weakened 17,000 (-0.0% y/y) after rising 1,000 in September.

Goods-producing employment moved up by 9,000 (1.0% y/y) in October, following a 7,000 decrease, revised from a 3,000 decline. Construction jobs rose 5,000 (1.8% y/y) after falling 4,000. Manufacturing jobs fell 3,000 (+0.2% y/y) following a 2,000 increase. Natural resources and mining jobs increased 7,000 (2.7% y/y) after declining 5,000 in September.

By region, in the Midwest employment rose 9,000 (0.8% y/y) last month after falling 55,000 in September. In the West, the number of jobs improved 39,000 (0.6% y/y) following a 16,000 increase. In the South, employment rose 5,000 (0.7% y/y) following a 17,000 September increase. Working lower, the number of jobs fell 12,000 (+0.9% y/y) in the Northeast in October after falling 5,000 in September.

Wage growth for job-changers in October held steady at 6.7% y/y, well below a high of 16.1% in April 2022. Wage growth for job-stayers advanced 4.5% y/y, unchanged from September and the slowest increase since June 2021. Across major industries, wage growth for job-stayers was reduced.

The ADP National Employment Report and Pay Insights data can be found in Haver's **USECON** database. Historical figures date back to January 2010 for private employment. Pay data date back to October 2020. The expectation figure is available in Haver's **AS1REPNA** database.

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- Gain in private payrolls is first in three months.
- Service-sector & construction hirings move up, but factory jobs decline.
- Wage growth steadies.

U.S. ADP Employment Recovers in October

Winnie Tapasanun

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Mortgage applications fell 1.9% w/w (+73.6% y/y) in the week ending October 31 following a 7.1% gain in the week ending October 24, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The latest reading was the fifth w/w fall in six weeks to the index level of 332.3. Applications for loans to purchase a house declined 0.6% (+24.8% y/y) in the October 31 week, down for the fifth week in six, after a 4.5% increase in the previous week. Applications for loan refinancing dropped 2.8% (+151.4% y/y) in the October 31 week, down for the first week in three, following a 9.3% advance in the October 24 week.

The effective interest rate on a 30-year fixed-rate loan edged up to 6.48% in the week ending October 31 after declining to 6.47% in the week ending October 24; it was up from a low of 6.29% in the week of September 20, 2024 but down from a peak of 8.12% in the week of October 20, 2023. The rate on 15-year fixed-rate mortgages slipped to 5.81% in the October 31 week, the lowest since the September 12 week, after decreasing to 5.82% in the previous week; it was up from a low of 5.60% in the week of September 20, 2024 but down from a high of 7.44% in the week of October 27, 2023. The rate on 30-year jumbo loans rose 4bps to a three-week-high 6.52% in the October 31 week after declining to 6.48% in the prior week; however, it was slightly down from a low of 6.57% in the week of September 13, 2024 and below a high of 7.99% in the week of October 27, 2023. The rate on a 5-year ARM rose 4bps to 5.88% in the October 31 week, the highest since September 26 week, after rising to 5.84% in the previous week; it was above a low of 5.84% in the week of September 13, 2024 but below a high of 7.31% in the week of October 27, 2023.

The share of applications for refinancing an existing loan edged down to 57.0% of total applications in the week ending October 31 after rising to a five-week-high 57.1% in the week ending October 24; those numbers remained below a peak of 60.2% in the week of September 19. The adjustable-rate mortgage (ARM) share of activity fell to 8.7% in the October 31 week, the lowest reading since the September 26 week, after falling to 8.9% in the prior week; it was below its recent peak of 12.9% in the September 12 week and a high of 9.6% in the April 11 week but up from a low of 4.7% in the January 3 week.

The average size of a mortgage loan, up for the third week in four, increased 0.6% w/w (7.3% y/y) to $414,900 in the October 31 week, the highest level since the September 19 week, reversing a 0.6% drop to $412,300 in the October 24 week. The average size of a purchase loan fell 0.4% (-2.3% y/y) to $435,100 in the October 31 week on top of a 0.5% decline to $436,800 in the prior week, marking the fourth weekly fall in five weeks and the lowest level since the October 10 week. The average size of a loan to refinance a mortgage rose 1.5% (34.0% y/y) to $399,700 in the October 31 week after a 0.4% decline to $393,900 in the previous week, registering the third weekly rise in four weeks and the highest level since the September 19 week.

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.

- Purchase applications -0.6% w/w; refinancing loan applications -2.8% w/w.
- Effective interest rate on 30-year fixed loans ticks up to 6.48% despite ongoing downward trend.
- Average loan size rebounds to the highest level since the September 19 week.

U.S. Mortgage Applications Drop 1.9% in the October 31 Week After Previous Gain

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Retail gasoline prices for all grades slipped to $3.15 per gallon (-1.3% y/y), on average, in the week ended November 3 after rising to $3.16 in the previous week. The recent high was $3.79 in the week ending April 22, 2024. Their all-time high of $5.11 occurred in the week ending June 13, 2022. Haver Analytics seasonally adjusts the retail prices of regular grade gasoline. That price held at $3.05 last week versus $3.05 in the previous week.

The price of West Texas Intermediate crude oil rose to $60.70 per barrel (-11.2% y/y) in the week ended October 31 after improving to $59.43 per barrel in the prior week. It was the highest price in three weeks but prices remained below a recent high of $74.17 during the third week of June. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $61.05 per barrel. The price of European Brent crude increased to $65.02 per barrel (-10.5% y/y) in the week of October 31 after rising to $63.22 in the prior week. Prices remained below a recent high of $95.61 in the week of September 29, 2023 and below a peak of $127.40 in June 2022. Yesterday, the price was $65.79 per barrel.

Natural gas prices rose to an average $3.43/mmbtu (88.5% y/y) in the week ended October 31 after rising to $3.25/mmbtu in the prior week. The rise left prices at the highest level since the second week of April and well above the low of $1.40/mmbtu in the week of March 15, 2024. Yesterday, the price was $3.37 per mmbtu.

Gasoline demand declined 4.2% y/y in the four weeks ending October 24, following a 3.6% y/y decline in the prior four weeks. Demand for all petroleum products weakened 0.9% y/y in the four weeks ending October 24, after slipping 0.1% y/y in the previous four-week period. Crude oil input to refineries declined 1.7% y/y in the four weeks ending October 24, after a 0.3% y/y gain in the prior four weeks.

Gasoline inventories ease 0.1% y/y in the week ending October 24 following a 1.5% y/y gain in the prior week. Residual fuel oil inventories fell 10.0% y/y in the October 24 week after falling 13.0% y/y in the prior week. Working higher, crude oil inventories rose 1.7% y/y in the week of October 24 after rising 2.6% y/y in the previous week.

Measured in days’ supply, gasoline inventories fell to 24.3 days in the week of October 24. The recent low was 22.9 days in the week of November 8, 2024. The supply of crude oil held steady at 26.7 days in the week of October 24. The supply remained below a recent high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** and **USENERGY** databases.

- Gasoline prices are minimally changed.
- Crude oil costs rise further.
- Natural gas prices strengthen.

U.S. Energy Prices Are Mixed in Latest Week

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U.S. light vehicle sales dove 6.9% (-4.5% y/y) in October to 15.48 million units (SAAR) after holding steady at 16.62 million units in September. Sales fell broadly. 

Light truck sales slid 6.9% (-1.4% y/y) in October to 12.90 million units, after rising 0.9% in September. Purchases of domestically-made light trucks fell 7.9% (+1.4% y/y) to 10.10 million units, the lowest level since February, after rising 3.4% in September. Sales of imported light trucks fell 2.8% (-10.3% y/y) to 2.80 million units, following a 7.4% September decline.

Trucks’ 83.3% share of the light vehicle market last month was steady with September and compared to 82.6% in August, and to 80.7% in October of last year. The share has averaged 82.4% so far this year versus 56.5% ten years earlier.

Passenger car sales declined 6.9% (-17.6% y/y) last month to 2.58 million, after falling 4.8% in September. Purchases of domestically-produced cars fell 7.2% (-16.5% y/y) last month to 1.93 million units, after weakening 7.1% in September. Imported auto sales declined 4.5% (-22.0% y/y) to 0.64 million units after holding steady in September.

Imports' 22.2% share of the U.S. light vehicle market rose from 21.4% in September. These compared to a high of 26.3% in November of 2023. Imports' share of the passenger car market edged up to 24.8% last month from 24.2% in September. It reached a high of 38.1% in September 2021. Imports' share of the light truck market increased to 21.7% last month from 20.8% in September.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the **INDUSTRY** database.

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- Light truck sales and auto purchases decline m/m.
- Total sales decline sharply y/y.
- Imports' market share declines.

U.S. Light Vehicle Sales Fall Sharply in October

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Factory sector activity remains under pressure. The ISM U.S. manufacturing PMI declined to 48.7 in October after rising to 49.1 during September from 48.7 in August, according to the Institute for Supply Management. These figures are below the 50 expansion-contraction dividing line. As a result, they continue to indicate that the U.S. manufacturing sector weakened for the eighth consecutive month. The reading remained remain above, however, a low of 46.9 in October of last year. A November index of 49.4 had been expected in the Action Economics Forecast Survey.

The production component declined to 48.2 last month after rising to 51.0 in September. It remained increased from an April low of 44.0. A lessened 27.3% (NSA) of respondents reported higher production while an increased 22.0% reported lower output levels. The inventory reading fell to a 12-month low of 45.8 from 47.7 in September. A lessened 13.2% (NSA) of respondents raised inventories while a higher 21.7% shed them.

Working higher, the new orders index rose to 49.4 during October from 48.9 in September. An increased 20.4% (NSA) of respondents reported new orders improvement while 26.0% reported a decline. The employment index increased to a five-month high of 46.0 last month after rising to 45.3 in September. An increased 13.1% (NSA) of respondents more hiring while 22.3% reported less. The supplier delivery index rose to 54.2 in October from 52.6 in September. Twelve percent (NSA) of respondents reported slower product delivery speeds while 3.2% reported a quickening.

The prices index weakened to 58.0 (NSA) during October from 61.9 in September. It was below a high of 69.8 in April, and well above its low of 39.4 in December 2022. A lessened 27.3% of respondents reported higher prices, a nine month low, while an increased 8.7% reported lower.

In other series, the export orders index rose to a seasonally adjusted 44.5 in October after falling sharply to 43.0 in September. It remained up from 40.1 May low. The imports index edged up to 45.2 last month from 44.7 in September. The index is below a high of 52.6 in February.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- Decline reverses all of September increase.					
- Lower production offsets new orders rise.
- Price index falls to nine-month low.

Economy in Brief: 2003

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