Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119e.jpg" width="353">
Chain store sales fell another 0.9% last week ion top of the 0.6% decline the week earlier, according to the International Council of Shopping Centers (ICSC)-UBS survey.
Despite the weekly declines, sales in January are 1.6% ahead of the December average.
During the last ten years there has been a 58% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department.
The leading indicator of chain store sales from ICSC dropped for the third consecutive week (-1.4% y/y).
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">01/15/05</th>
<th scope="col">01/08/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>443.9</td>
<td>447.9</td>
<td>4.1%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
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Chain store sales fell another 0.9% last week ion top of the 0.6% decline the week earlier, according to the International Council of Shopping Centers (ICSC)-UBS survey. Despite the weekly declines, sales in January are 1.6% ahead of [...]

Chain Store Sales Slipped Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119d.jpg" width="353">
With a 48,000 w/w decline to 319,000 last week, initial claims for unemployment insurance reversed all of the gains during the prior two weeks and fell to the lowest level in a month. Consensus expectations had been for 345,000 claims.
The latest figure is for the survey period for January nonfarm payrolls and it was 12,000 (3.6%) below the December period.
The four week moving average of initial claims fell to 341,000 (-4.1% y/y).
During the last ten years there has been a (negative) 82% correlation between the level of initial claims and the y/y change in payroll employment.
Continuing claims for unemployment insurance rose 47,000 and reversed just some of the huge 209,000 drop the week prior.
The insured rate of unemployment was stable at 2.1%.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">01/15/05</th>
<th scope="col">01/08/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Initial Claims</td>
<td>319</td>
<td>367</td>
<td>-10.6%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,694</td>
<td>-15.4%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
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</tbody>
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With a 48,000 w/w decline to 319,000 last week, initial claims for unemployment insurance reversed all of the gains during the prior two weeks and fell to the lowest level in a month. Consensus expectations had been for 345,000 [...]

Initial Claims for Unemployment Insurance Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119c.jpg" width="353">
Housing starts rose 10.9% in December to 2.004M, were upwardly revised for November and beatConsensus expectations for 1.91M starts. Starts for all of last year of 1.948M were the most since 2.001M homes were started in 1978.
Higher single-family starts led the gain in December with a 13.1% m/m rise to 1.678M which more than reversed the sharp decline in November, capping off a record year. Single family starts of 1.601M in 2004 were a 6.4% improvement on the old record set the year prior.
Multi family starts also edged higher in December but just modestly. For the full year they ended slightly below the 2003 average.
Building permits slipped in December by 0.3% m/m to 2.021M after an upwardly revised gain in November.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
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<td class="firstcol">Total</td>
<td>2,004</td>
<td>1,807</td>
<td>-3.0%</td>
<td>1,948</td>
<td>1,853</td>
<td>1,7 10</td>
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<td class="firstcol">&nbsp; Single-family</td>
<td>1,678</td>
<td>1,483</td>
<td>1.3%</td>
<td>1,601</td>
<td>1,505</td>
<td>1,3 63</td>
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<td class="firstcol">&nbsp; Multi-family</td>
<td>3 26</td>
<td>324</td>
<td>-20.5%</td>
<td>346</td>
<td>348</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,021</td>
<td>2,028</td>
<td>2.1%</td>
<td>1,996</td>
<td>1,8 89</td>
<td>1,749</td>
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Housing starts rose 10.9% in December to 2.004M, were upwardly revised for November and beatConsensus expectations for 1.91M starts. Starts for all of last year of 1.948M were the most since 2.001M homes were started in 1978. Higher [...]

Housing Starts Firm: 2004 The Highest Since 1978

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119a.jpg" width="353">
Consumer Prices (CPI-U) declined 0.1% in December, the first decline since July. Consensus expectations had been for no change. During 2004 prices logged the largest increase in some time. December to December, the 3.4% gain was the strongest since 2000 and the 2.7% rise for the whole year was the largest since 2001.
Prices less food &amp; energy rose an expected 0.2% in December for the third consecutive month. Again, 2004 was the strongest year for &quot;core&quot; pricing in years; the 2.3% gain December to December the largest since 2001 and the 2.7% gain for the full year was the strongest since 1996. The firming was, however, not due to stronger price increases but to less deflation of goods prices.
&quot;Core&quot; commodities price inflation weakened in December as lower prices for furniture (-0.5% y/y), apparel (-0.4% y/y) and computers (-13.2% y/y) offset higher tobacco prices. The 0.9% full year decline in core goods prices was the third in a row but it was less of a fall than during the prior two years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119b.jpg" width="353">
Services prices less energy also were tame last month, rising the same 0.2% as during the prior two. The full year increase of 2.8% was the weakest since 1999 as lower public transportation prices and lower communication prices offset faster gains in prices for shelter (2.7% y/y), medical care services (5.0% y/y) and tuition (7.1% y/y).
Lower energy prices pulled the CPI down last month, led lower by gasoline prices which fell 3.7% (+18.1% y/y) and lower fuel oil prices ((+15.5% y/y). Natural gas prices rose slightly (+3.8% y/y).
Food prices were unchanged in December but the full year gain of 3.5% was the strongest since 1990.
The chained CPI, which adjusts for shifts in the mix of consumer purchases, fell 0.4% in December. Similar to the PCE price deflator, core chain prices also fell last month and for the full year firmed moderately versus 2003.

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<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Total&nbsp;</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
</tr>
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<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.6%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-1.8%</td>
<td>0.2%</td>
<td>16.5%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>3.5%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
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<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>-0.4%</td>
<td>0.0%</td>
<td>2.9%</td>
<td>2.2%</td>
<td>1.9%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>1.1%</td>
<td>1.9%</td>
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</tbody>
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Consumer Prices (CPI-U) declined 0.1% in December, the first decline since July. Consensus expectations had been for no change. During 2004 prices logged the largest increase in some time. December to December, the 3.4% gain was the [...]

December CPI Fell. 2004 Average Raised by Less Goods Price Deflation

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119a.jpg" width="353">
Consumer Prices (CPI-U) declined 0.1% in December, the first decline since July. Consensus expectations had been for no change. During 2004 prices logged the largest increase in some time. December to December, the 3.4% gain was the strongest since 2000 and the 2.7% rise for the whole year was the largest since 2001.
Prices less food &amp; energy rose an expected 0.2% in December for the third consecutive month. Again, 2004 was the strongest year for &quot;core&quot; pricing in years; the 2.3% gain December to December the largest since 2001 and the 2.7% gain for the full year was the strongest since 1996. The firming was, however, not due to stronger price increases but to less deflation of goods prices.
&quot;Core&quot; commodities price inflation weakened in December as lower prices for furniture (-0.5% y/y), apparel (-0.4% y/y) and computers (-13.2% y/y) offset higher tobacco prices. The 0.9% full year decline in core goods prices was the third in a row but it was less of a fall than during the prior two years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119b.jpg" width="353">
Services prices less energy also were tame last month, rising the same 0.2% as during the prior two. The full year increase of 2.8% was the weakest since 1999 as lower public transportation prices and lower communication prices offset faster gains in prices for shelter (2.7% y/y), medical care services (5.0% y/y) and tuition (7.1% y/y).
Lower energy prices pulled the CPI down last month, led lower by gasoline prices which fell 3.7% (+18.1% y/y) and lower fuel oil prices ((+15.5% y/y). Natural gas prices rose slightly (+3.8% y/y).
Food prices were unchanged in December but the full year gain of 3.5% was the strongest since 1990.
The chained CPI, which adjusts for shifts in the mix of consumer purchases, fell 0.4% in December. Similar to the PCE price deflator, core chain prices also fell last month and for the full year firmed moderately versus 2003.

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<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/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.6%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-1.8%</td>
<td>0.2%</td>
<td>16.5%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>3.5%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>-0.4%</td>
<td>0.0%</td>
<td>2.9%</td>
<td>2.2%</td>
<td>1.9%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>1.1%</td>
<td>1.9%</td>
</tr>
</tbody>
</table>
Housing Starts Firm: 2004 The Highest Since 1978 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119c.jpg" width="353">
Housing starts rose 10.9% in December to 2.004M, were upwardly revised for November and beatConsensus expectations for 1.91M starts. Starts for all of last year of 1.948M were the most since 2.001M homes were started in 1978.
Higher single-family starts led the gain in December with a 13.1% m/m rise to 1.678M which more than reversed the sharp decline in November, capping off a record year. Single family starts of 1.601M in 2004 were a 6.4% improvement on the old record set the year prior.
Multi family starts also edged higher in December but just modestly. For the full year they ended slightly below the 2003 average.
Building permits slipped in December by 0.3% m/m to 2.021M after an upwardly revised gain in November.

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</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>2,004</td>
<td>1,807</td>
<td>-3.0%</td>
<td>1,948</td>
<td>1,853</td>
<td>1,7 10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,678</td>
<td>1,483</td>
<td>1.3%</td>
<td>1,601</td>
<td>1,505</td>
<td>1,3 63</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>3 26</td>
<td>324</td>
<td>-20.5%</td>
<td>346</td>
<td>348</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,021</td>
<td>2,028</td>
<td>2.1%</td>
<td>1,996</td>
<td>1,8 89</td>
<td>1,749</td>
</tr>
</tbody>
</table>
Initial Claims for Unemployment Insurance Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119d.jpg" width="353">
With a 48,000 w/w decline to 319,000 last week, initial claims for unemployment insurance reversed all of the gains during the prior two weeks and fell to the lowest level in a month. Consensus expectations had been for 345,000 claims.
The latest figure is for the survey period for January nonfarm payrolls and it was 12,000 (3.6%) below the December period.
The four week moving average of initial claims fell to 341,000 (-4.1% y/y).
During the last ten years there has been a (negative) 82% correlation between the level of initial claims and the y/y change in payroll employment.
Continuing claims for unemployment insurance rose 47,000 and reversed just some of the huge 209,000 drop the week prior.
The insured rate of unemployment was stable at 2.1%.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">01/15/05</th>
<th scope="col">01/08/05</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>
<td class="firstcol">Initial Claims</td>
<td>319</td>
<td>367</td>
<td>-10.6%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,694</td>
<td>-15.4%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
Chain Store Sales Slipped Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119e.jpg" width="353">
Chain store sales fell another 0.9% last week ion top of the 0.6% decline the week earlier, according to the International Council of Shopping Centers (ICSC)-UBS survey.
Despite the weekly declines, sales in January are 1.6% ahead of the December average.
During the last ten years there has been a 58% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department.
The leading indicator of chain store sales from ICSC dropped for the third consecutive week (-1.4% y/y).
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">01/15/05</th>
<th scope="col">01/08/05</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>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>443.9</td>
<td>447.9</td>
<td>4.1%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
Mortgage Applications Rebound 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 19, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050119f.jpg" width="353">
Mortgage applications rebounded 16.2% last week following three weeks of decline according to the Mortgage Bankers Association (MBA) Survey.
Refi&#39;s led the gain with a 19.1% rise and so far this year are 2.4% higher than in December.
Purchase applications also rose 14.0% w/w. Nevertheless, the level of purchase applications were 10.6% below the December average which fell 0.3% from November. During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-year mortgage slipped to 5.89% versus an average 6.05% during 2004 and 5.95% in December. The effective rate on a 15-year mortgage also fell to 5.44% last week.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">01/14/05</th>
<th scope="col">01/07/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>682.9</td>
<td>587.8</td>
<td>-25.5%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>448.1</td>
<td>393.1</td>
<td>-10.7%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,048.6</td>
<td>1,720.5</td>
<td>-38.4%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118e.jpg" width="353">
The Bank of Canada released the findings of its Winter 2004-5 Business Outlook Survey today. The Survey is one of the inputs used by the Bank in its determinations of monetary policy that will be discussed at its next interest rate setting meeting on January 25. The Bank raised its overnight target rate on September 8, 2004 to 2.25% from 2% and on October 19 to 2.50% where it has since remained.
Business is still optimistic, but less so than in the Fall survey. The balance of firms who expect increases over those who expect declines in future sales growth fell from 21.8% in the third quarter to 7.9% in the fourth quarter.
The Survey revealed that more firms expect to encounter some difficulty in meeting unexpected increases in demand, although fewer firms expect significant difficulty. The percent balance of those firms expecting some difficulty in meeting unexpected demand rose from 33% in the third quarter to 38% in the fourth quarter. While the percent balance expecting significant difficulty declined from 10% to 7% in the same period, the trend in those expecting significant difficulty has definitely been rising, though irregularly, since the last half of 2001. In all, the excess of firms expecting difficulty in meeting unexpected demand was 45%, up from 43% in the previous quarter. The balance of firms expecting to encounter some difficulty in meeting demand is a reasonably good indicator of business capacity utilization, as shown in the attached chart.
With increased capacity utilization, it is not surprising that business expects to increase employment and expenditures on machinery and equipment In the latest survey, the balance of firms expecting to increase machinery and equipment expenditures rose from 16.8% to 21.8% and the balance of firms expecting to increase employment rose from 32.7% to 37.6% even though the balance of firms experiencing a labor shortage fell from 44% to 36%
While the increase in the balance of firms expecting difficulty in meeting demand suggests an increase in inflationary pressures, the Survey showed a lessening of inflationary pressure from business pricing expectations. There was a significant decline in the balance of firms experiencing a decline in input prices--due, no doubt, to the rising Canadian dollar-- and an even larger decline in the balance of firms expecting to raise their output prices. The balance expecting a decline in input prices fell 22.8 percentage points and those expecting to raise output prices fell 24.8 percentage points from the Fall to the Winter survey. With regard to general inflation, the Survey revealed that the percentage of firms expecting inflation to be between 1 and 2% declined from 33% to 29% while the percentage of firms expecting inflation to between 2 and 3% rose from 54% to 56% and those expecting inflation of over 3% rose from 9% to12%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Percent Balance</th>
<th scope="col">Q4 04</th>
<th scope="col">Q3 O4</th>
<th scope="col">Q4 03</th>
<th scope="col">Q/Q Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">&nbsp;2004&nbsp;</th>
<th scope="col">&nbsp;2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Future Sales Growth</td>
<td>7.9</td>
<td>21.8</td>
<td>32.0</td>
<td>13.9</td>
<td>24.1</td>
<td>17.9</td>
<td>22.0</td>
<td>21.8</td>
<td>-1.4</td>
</tr>
<tr>
<td class="firstcol">Investment in machinery and equipment</td>
<td>21.8</td>
<td>16.8</td>
<td>11.0</td>
<td>5.0</td>
<td>10.8</td>
<td>17.0</td>
<td>3.0</td>
<td>10.7</td>
<td>-2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Future employment</td>
<td>37.6</td>
<td>32.7</td>
<td>27.0</td>
<td>5.0</td>
<td>10.6</td>
<td>33.4</td>
<td>18.0</td>
<td>29.2</td>
<td>14.8</td>
</tr>
<tr>
<td class="firstcol">Some difficulty in meeting demand</td>
<td>38</td>
<td>33</td>
<td>32</td>
<td>5</td>
<td>6</td>
<td>34</td>
<td>33</td>
<td>33</td>
<td>31</td>
</tr>
<tr class="odd">
<td class="firstcol">Significant difficulty in meeting demand</td>
<td>7</td>
<td>10</td>
<td>6</td>
<td>-3</td>
<td>1</td>
<td>7</td>
<td>6</td>
<td>5</td>
<td>4</td>
</tr>
<tr>
<td class="firstcol">Labor shortage &quot;Yes&quot;</td>
<td>36</td>
<td>44</td>
<td>30</td>
<td>-8</td>
<td>6</td>
<td>38</td>
<td>33</td>
<td>37</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">Input prices</td>
<td>-22.8</td>
<td>-1.0</td>
<td>-4.0</td>
<td>-21.8</td>
<td>-18.8</td>
<td>-3.5</td>
<td>-6.5</td>
<td>7.7</td>
<td>-19.3</td>
</tr>
<tr>
<td class="firstcol">Output prices</td>
<td>-14.8</td>
<td>9.9</td>
<td>-19.0</td>
<td>-24.8</td>
<td>4.1</td>
<td>-3.2</td>
<td>-6.0</td>
<td>3.7</td>
<td>-13.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Inflation expectations</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 0%</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>1</td>
<td>1</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; 1-2%</td>
<td>29</td>
<td>33</td>
<td>40</td>
<td>-4</td>
<td>-11</td>
<td>32</td>
<td>34</td>
<td>37</td>
<td>39</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 2-3%</td>
<td>56</td>
<td>54</td>
<td>54</td>
<td>2</td>
<td>2</td>
<td>53</td>
<td>55</td>
<td>54</td>
<td>49</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; over 3%</td>
<td>12</td>
<td>9</td>
<td>3</td>
<td>3</td>
<td>9</td>
<td>11</td>
<td>10</td>
<td>5</td>
<td>4</td>
</tr>
</tbody>
</table>
</body>
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The Bank of Canada released the findings of its Winter 2004-5 Business Outlook Survey today. The Survey is one of the inputs used by the Bank in its determinations of monetary policy that will be discussed at its next interest rate [...]

Canadian Business Outlook Survey Provides Food for Thought for The Bank of Canada's Interest Rate Meeting on January 25

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118d.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) Composite Housing Market Index fell slightly in January to 70 versus December&#39;s level of 71. Through 2004 the index drifted higher from 67 in 1Q to 69 in 2Q to 68 in 3Q to 70 in 4Q. The average of 68 rose 7.3% from 2003.
During the last twenty years, annual changes in the composite index had an 83% correlation with the change in new home sales. There&#39;s been an 86% correlation with the change in single family housing starts.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Each of the components of the composite fell in January with the largest declines logged in home builders&#39; read of prospective activity in six months and in traffic of prospective buyers of new homes.
Visit the National Association of Home Builders using this <a href="http://www.nahb.org">link</a>.
Philadelphia Federal Reserve Bank President Anthony M Santomero&#39;s speech today on the economic outlook is available <a href="http://www.philadelphiafed.org/publicaffairs/speeches/2005_santomero1.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>7 0</td>
<td>71</td>
<td>68</td>
<td>68</td>
<td>64</td>
<td>61</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Home Builders' (NAHB) Composite Housing Market Index fell slightly in January to 70 versus December's level of 71. Through 2004 the index drifted higher from 67 in 1Q to 69 in 2Q to 68 in 3Q to 70 in 4Q. [...]

NAHB Housing Market Index Off

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118b.jpg" width="353">
The 4Q&#39;04 Composite Business Index published by the Manufacturers&#39; Alliance/MAPI fell to 70 from 75 the prior quarter. Despite moderate declines both last quarter and in 3Q, the average level for 2004 set a series&#39; record indicating sharp improvement in US factory sector output.
Since 1992 there has been a 68% correlation between the Composite Index Level and quarterly growth in factory sector output.
The current orders index fell modestly to 89 but the average of 91 for 2004 by far set a record. The export orders index for 4Q moved to a new record.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050118c.jpg" width="353">
The profit margins index likewise moved lower but the annual level in 2004 set a new record.Capital spending intentions for the coming year moved higher and since 1992 there has been a 75% correlation between the capital spending index a y/y growth in business investment in equipment &amp; software.
For the latest press release from the MAPI click <a href="http://www.mapi.net/html/prelease.cfm?release_id=1064"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveys/@SE/@SE.HTM">Manufacturers&#39; Alliance/MAPI Survey</a></th>
<th scope="col">4Q &#39;04</th>
<th scope="col">3Q &#39;04</th>
<th scope="col">4Q03</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Business Index</td>
<td>70</td>
<td>75</td>
<td>77</td>
<td>76</td>
<td>67</td>
<td>60</td>
</tr>
</tbody>
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</body>
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The 4Q'04 Composite Business Index published by the Manufacturers' Alliance/MAPI fell to 70 from 75 the prior quarter. Despite moderate declines both last quarter and in 3Q, the average level for 2004 set a series' record indicating [...]

MAPI Business Outlook Survey Lower in 4Q, 2004 Set Record

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

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

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Andrew Cates

**Global shipping costs**
The Baltic Dirty Tanker Index has surged to multi-year highs, reflecting a sharp tightening in global oil shipping markets. The primary driver is the escalation in Middle East tensions, particularly the effective disruption to flows through the Strait of Hormuz—a critical artery for roughly a fifth of global oil trade. Heightened security risks, including missile and drone attacks on vessels and port infrastructure, have forced rerouting, increased insurance premia and reduced effective tanker supply. At the same time, longer voyage distances—especially for Gulf exports diverted around the Cape—are tying up capacity and amplifying rate pressures. The result is a classic squeeze: constrained supply of available ships meeting elevated demand for transport, pushing freight costs sharply higher.

260401Z1.jpg

**Supply Chain Bottlenecks**
Flash PMI data point to a renewed build-up of supply chain pressures across the major economies. Supplier delivery times—where readings below 50 indicate slower deliveries—have deteriorated in both the US and UK, with the latter showing a particularly sharp decline. The euro area, while more stable, is also drifting in the same direction. This broad-based softening suggests that the disruptions visible in energy and shipping markets are now feeding into the real economy. Longer delivery times are typically an early indicator of tightening supply conditions, rising input costs and, ultimately, renewed pipeline inflation pressures. While not yet at the extremes seen during the pandemic, the direction of travel is clear: supply chains are becoming less efficient just as geopolitical risks intensify.

260401Z2.jpg

**Policy Uncertainty Versus Market Volatility**
A striking divergence is emerging between policy uncertainty and financial market volatility. The US Economic Policy Uncertainty Index has risen sharply, reflecting the intensifying geopolitical backdrop, trade disruptions and an increasingly complex policy environment. By contrast, the VIX—while off its lows—remains relatively contained by historical standards. This gap suggests that financial markets may be underpricing the scale and persistence of current risks. Either uncertainty begins to recede, or market volatility has further to rise. For now, the message is clear: policymakers are operating in a far more uncertain world than markets appear to be discounting.

260401Z3.jpg

**Oil Prices and Monetary Policy** 
The sharp rise in oil prices is once again feeding directly into short-term interest rate expectations, with a strong positive correlation evident between WTI and US 2-year Treasury yields. As energy prices surge, markets are reassessing the near-term inflation outlook and the likely policy response, pushing yields higher. This reflects a familiar dynamic: energy shocks tighten financial conditions not just directly, but via expectations of more restrictive monetary policy. That said, there are important caveats. Medium-term market-based inflation expectations remain relatively well contained, suggesting credibility in central banks’ ability to anchor inflation over time. Moreover, recent communication from Fed Chair Powell indicates that the Federal Reserve is in no immediate hurry to raise rates, pointing instead to a more cautious, data-dependent approach in the face of heightened uncertainty.

260401Z4.jpg

**Loose Labour Markets**
Wage growth across the US, UK and euro area continues to moderate, pointing to a gradual loosening in labour market conditions. The sharp post-pandemic surge in wage pressures—particularly pronounced in the US—has clearly faded, with all three regions now on a downward trajectory. This matters in the current context: while the oil shock is pushing headline inflation higher and complicating the near-term outlook, easing wage dynamics reduce the risk of persistent second-round effects. In turn, this lessens the urgency for central banks to respond aggressively with tighter policy. The result is a more nuanced policy backdrop—one where energy-driven inflation pressures are rising, but underlying domestic cost pressures are moving in the opposite direction.

260401Z5.jpg

**Headline Inflation in Advanced Economies**
Despite the recent energy shock, broader inflation dynamics across advanced economies remain relatively well behaved. The euro area HICP flash estimate rose from 1.9% in February to 2.5% in March, driven largely by higher energy prices. However, core inflation edged down to 2.3% from 2.4%, suggesting that pass-through into underlying price pressures remains limited for now. More generally, inflation across many advanced economies continues to hover close to central bank targets—a marked contrast to the peaks seen in 2022. While higher oil prices will almost certainly continue to lift headline inflation in the near term, and the risk is clearly tilted toward further upside, the broader picture for now remains one of relatively contained underlying pressures. This suggests the current shock is more likely to complicate the disinflation process—potentially slowing or interrupting it—rather than decisively reversing it, though the balance of risks has become less favourable.

260401Z6.jpg

Amid tentative signs of de-escalation from the US administration over the past 48 hours—including suggestions that the conflict with Iran could conclude relatively quickly—financial markets have begun to retrace some of last week’s sharp repricing of Middle East risk. Oil prices have come off their highs, while equities and bonds have rallied as risk premia ease. That said, the earlier phase of the week saw a decisive adjustment: oil surged, front-end yields moved higher, and uncertainty rose as investors grappled with the implications of disrupted energy flows. Even now, the overall adjustment has been uneven—volatility has picked up, but not to levels typically associated with sustained geopolitical stress—raising questions about how fully markets are internalising both the risks and the rapidly shifting outlook. Our charts this week capture these cross-currents. Tanker rates have spiked as shipping routes are disrupted and capacity tightens (chart 1), while PMI delivery times point to early signs of supply chain strain feeding into the real economy (chart 2). At the same time, the divergence between elevated policy uncertainty and relatively contained market volatility suggests there could have been a degree of complacency (chart 3). The rise in oil prices is already feeding into higher short-term yields, though this is being tempered by cooling labour markets, anchored inflation expectations and more cautious central bank signalling (charts 4 and 5). Meanwhile, euro area flash CPI has picked up, but core inflation remains relatively benign, suggesting underlying price pressures are still contained for now (chart 6).

Charts of the Week: Strait Stress

Sandy Batten

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Total retail sales rebounded in February, rising a larger-than-expected 0.6% m/m (+3.7% y/y) following an upwardly revised 0.1% monthly decline in January (previously -0.2% m/m), according to data from the U.S. Census Bureau. The Action Economics Forecast Survey expected a 0.4% monthly increase. Excluding autos, other sales were up 0.5% m/m (+3.6% y/y), the first monthly increase in three months. The Action Economics Forecast Survey looked for a 0.3% m/m increase.

The control group of sales (those categories that the BEA uses to construct PCE in the national accounts) increased 0.5% m/m in February following a 0.2% increase in January. The January/February average for this variable is 2.1% annualized above the Q4 average. In Q4, the control group rose 2.8% saar from Q3. So, today’s figures point to a slight slowdown in PCE growth in the first quarter. Note, however, that the data released today predates the escalation of the conflict between the US/Israel and Iran which has led to a marked rise in gasoline/energy prices. The increase in energy prices to date, if maintained, could stress household finances and thereby significantly slow consumer spending ahead.

Sales of motor vehicles and parts jumped 1.2% m/m in February, their first monthly gain in three months and their largest monthly increase since last July. Furniture sales declined 1.0% m/m in February while sales of electronics and appliances rose 0.5% m/m. Sales of building materials increased 0.4% m/m, their fourth consecutive monthly gain. Sales at health and personal care stores jumped 2.3% m/m, their first monthly gain in five months. Sales at gasoline stations rose 0.9% m/m in February, their third monthly gain in the past four months, ahead of the sharp price increases that occurred in March. Clothing store sales jumped 2.0% m/m, their first monthly increase in three months. Department store sales gained 3.0% m/m, their first monthly increase in four months. Food sales slumped 1.0% m/m in February, their first monthly decline in three months. Sales of nonstore retailers increased 0.7% m/m in February on top of a 1.4% m/m jump in January. Eating out sales rose 0.4% m/m, their first monthly gain in three months.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Total sales increased 0.6% m/m after a 0.1% m/m decline in January
- Excluding autos, sales increase 0.5% m/m in February after having been unchanged in January.
- Sales of the retail control group that is used to construct PCE rose 0.5% m/m in February.

U.S. Retail Sales Rebounded in February

Winnie Tapasanun

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U.S. nonfarm private sector payrolls rose a larger-than-expected 62,000 (0.3% y/y) in March after increases of 66,000 in February (+63,000 initially) and 11,000 in January (unrevised), according to the ADP National Employment Report. The three-month average change was +46,000 in March, up from +38,000 in February and +41,000 in January. The Action Economics Forecast Survey expected a 40,000 increase in March.

Small business hiring (less than 50 employees) climbed a solid 85,000 (0.7% y/y) in March—the ninth straight m/m increase and the largest since August—after a 61,000 gain in February (+60,000 initially), with employment in very small firms (1-19 employees) surging 112,000, the strongest m/m rise since February 2024, and employment in small firms (20-49 employees) down 27,000. Employment at medium-sized firms (50-499 employees) fell 20,000 (-0.4% y/y) in March following a 6,000 decline in February (-7,000 initially) and two consecutive m/m increases. Large business hiring (500+ employees) slipped 4,000 (+1.0% y/y) after an 11,000 February rebound (+10,000 initially).

Service-producing jobs rose 32,000 (0.5% y/y) in March, the 10th straight m/m gain, on top of a 50,000 advance in February (+47,000 initially). March’s rise was led by education & health services (+58,000), followed by information (+16,000), leisure & hospitality (+7,000), financial activities (+4,000), other services (+4,000), and professional & business services (+1,000). To the downside, m/m employment fell in trade, transportation & utilities (-58,000).

Goods-producing employment advanced 30,000 (-0.4% y/y) in March, the biggest m/m increase since October 2022, after a 16,000 rise in February (unrevised). March’s gain was led by construction (+30,000) and natural resources & mining (+11,000), while manufacturing (-11,000) continued to decline.

By region, nonfarm private payroll employment rose m/m in March in the South (+101,000; +0.5% y/y) and West (+16,000; +0.4% y/y). In contrast, employment fell m/m in the Northeast (-29,000; +0.4% y/y) and Midwest (-26,000; -0.1% y/y).

Wage growth for job changers accelerated to a three-month-high 6.6% y/y in March from 6.3% y/y in February, remaining well below a high of 16.1% in April 2022. Wage growth for job stayers held steady at 4.5% y/y for the third consecutive month in March, holding in a narrow 4.4%-4.5% range since April 2025. Pay growth also remained steady in major industries, including financial activities (5.2% y/y), manufacturing (4.9% y/y), construction (4.7% y/y), leisure & hospitality (4.6% y/y), education & health services (4.3% y/y), and professional & business services (4.3% y/y).

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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- Private payrolls +62K in March, ninth straight m/m gain.
- Hiring increase driven by small businesses (+85K), strongest since August.
- Service-sector jobs up (+32K), led by education & health svs. (+58K) and information (+16K), partly offset by trade, transp. & utilities (-58K).
- Goods-producing jobs up (+30K), driven by construction (+30K).
- Wage growth accelerates y/y for job changers (6.6%, a three-month high) but steady for job stayers (4.5%).

U.S. ADP Private Employment Growth in March Above Forecasts

Kathleen Stephansen, CBE

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Mortgage applications dropped 10.4% w/w (+14.2% y/y) in the week ending March 27, after declining 10.5% w/w (+25.5% y/y) in the week ending March 20, and by 10.9% w/w in the week ending March 13, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house declined 2.6% w/w (+0.8% y/y) in the latest week, after dropping 5.4% w/w (+5.0% y/y) in the week ending March 20.  Applications for loan refinancing plunged 17.3% w/w (+33.2% y/y) in the March 27 week, following a drop of 14.6% w/w (+52.2% y/y) in the week ending March 20, and a decline of 18.5% w/w in the week ending March 13.

The effective interest rate on a 30-year fixed-rate loan rose 14bps to 6.76% in the week ending March 27 from 6.62% in the week ending March 20. The rate on the 30-year fixed-rate loan has risen 52bps since the February 27 week. The rate on 15-year fixed-rate mortgages rose 5bps to 6.08% in the latest week from 6.03% in the prior week. The 30-year Jumbo rate rose 10bps to 6.71% in the March 27 week from 6.61% in the week ending March 20. The rate on a 5-year ARM dropped 12bps to 5.88% in the latest week from 6.00% in the week ending March 20.

The share of applications for refinancing an existing loan dropped to 45.3% of total applications in the week of March 27 from 49.6% in the March 20 week. The adjustable-rate mortgage (ARM) share of activity eased to 8.0% in the week ending March 27 from 8.1% in the week ending March 20.

The average size of a mortgage loan declined 1.3% w/w (-1.9% y/y) to $389,200 in the week ending March 27, after declining 2.4% w/w (-0.9% y/y) to $394,500 in the week ending March 20. The average size of a purchase loan edged down 0.8% w/w (+0.4% y/y) to $449,400 in the latest week, after declining 0.5% w/w (+2.3% y/y) to $453,200 in the March 20 week. The average size of a loan to refinance a mortgage declined 5.5% w/w (+0.3% y/y) to $316,600 in the March 27 week following a drop of 6.3% w/w (+1.0% y/y) to $334,900 in the March 20 week. Since the week of February 27, the average size of a loan to refinance a mortgage has 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.

- Both applications for loans to purchase and for loan refinancing dropped in the latest week.
- Interest rate on 30-year fixed-rate loans rose 14bps to 6.76% 
- Average loan size declined.

U.S. Mortgage Applications Dropped in the March 27 Week

Robert Brusca

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The unemployment rate in the European monetary union picked up to 6.2% in February from 6.1% in January, when it had declined from 6.2% in December. The 6.1% reading is the all-time low, so at 6.2% the unemployment rate remains extremely low in the monetary union.

The number of unemployed in February rose by about 1% in both the EU and the monetary union; however, over broader spans of three months, six months, and 12 months, the number of unemployed is still falling.

February is a low month for the number of reporters on the table showing a decline in the unemployment rate. Among the 12 member reporters listed in the table, only Spain had a lower unemployment rate in February than in January, and Spain continues to show declines in unemployment as it also saw its unemployment rate drop in January and December, as well as on balance over three months, six months, and 12 months. Spain is the only country in the monetary union showing this kind of ongoing progress in reducing unemployment.

For the most part, unemployment rates seem to be stuck at relatively low levels among these 12 monetary union reporters. Four show net declines over 12 months, while six show declines over six months and four show declines over three months. Only three—Austria, Finland, and Luxembourg—report unemployment rates that rank above their respective medians, above a ranking of 50% on data back to 2000.

Although the EMU unemployment rate ticked up in February, it remains exceptionally low. Unemployment in Italy also ticked higher and has the exceptionally low ranking of 0.2%, having just moved up from its all-time low. Country-reported unemployment rates are in the bottom 10 percentile of their range over this period in Spain and Greece. You will remember these as the countries with the structurally highest unemployment rates typically in double digits prior to the formation of the European Union; now the Greek unemployment rate is 8.5% and the Spanish unemployment rate is 9.8%, and they are gradually folding into the community norms.

Despite the uptick in the unemployment rate, it's another excellent unemployment report for the monetary union, with unemployment rates below the medians up and down the line with few exceptions and with both countries brandishing unemployment rates that are substantially below their historic medians. Inflation rate in the monetary union remains broadly controlled, and the progress on the unemployment rate has been spectacular. Despite the other problems that the monetary union has encountered, these are true successes of the formation of the monetary union.

Economy in Brief

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