Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223g.jpg" width="353">
The University of Michigan&#39;s reading of consumer sentiment for the full month of December rose to 97.1, up 4.6% from November. Consensus expectations had expected 95.7.
During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.
Consumers&#39; reading of current economic conditions rose 1.9% m/m but consumer expectations jumped 6.7%.
Sentiment amongst families earning less than $50,000 per year surged 9.5% m/m (5.3% y/y. Consumer sentiment amongst families earning more than $50,000 per year fell slightly m/m but rose 2.0% y/y.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.
&quot;Consumer Sentiment and the Media&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-29.pdf">here</a>.

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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">Dec</th>
<th scope="col">Mid-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">Consumer Sentiment</td>
<td>97.1</td>
<td>95.7</td>
<td>92.8</td>
<td>4.9%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>106.7</td>
<td>106.3</td>
<td>104.7</td>
<td>10.0%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>90.0</td>
<td>88.8</td>
<td>85.2</td>
<td>1.2%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
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The University of Michigan's reading of consumer sentiment for the full month of December rose to 97.1, up 4.6% from November. Consensus expectations had expected 95.7. During the last ten years there has been a 75% correlation [...]

U.S. Consumer Sentiment Rose Throughout December

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223e.jpg" width="353">
Personal income rose a moderate 0.3% last month following the unrevised 0.6% spurt in October. Consensus expectations had been for a 0.2% rise.
The gain in wages &amp; salaries eased to 0.2% (+4.6% y/y) after the 0.6% surge in October. Factory sector wages eked out a 0.1% (1.1% y/y) gain after falling 0.1% the prior month.
Personal disposable income rose 0.3% (4.9% y/y), half the gain in October. Disposable income growth adjusted for inflation was stable m/m at 0.2% (2.2% y/y).
Personal consumption eased as well, growing 0.2%, one quarter the rise in October. A 2.4% decline in durable goods spending reflected a 3.4% m/m drop in total sales of light motor vehicles. Spending on nondurables also eased, up 0.4% after a 1.6% spike in October. However, services spending picked up and grew 0.6% (5.6% y/y), up from the 0.4%-0.5% range of the prior three months.
The PCE chain price index rose just 0.1%, reflecting the recent decline in gasoline prices. Less food &amp; energy prices rose 0.1% (1.5% y/y), the average for the last eight months.
&quot;Open Mouth Operations: A Swiss Case Study&quot; of a central bank&#39;s impact on the slope of the yield curve from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20050101/cover.pdf"> here</a>.

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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">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.3%</td>
<td>0.6%</td>
<td>4.9%</td>
<td>3.2%</td>
<td>1.8%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.2%</td>
<td>0.8%</td>
<td>6.1%</td>
<td>5.2%</td>
<td>4.6%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>0.3%</td>
<td>0.1%</td>
<td>1.3%</td>
<td>1.4%</td>
<td>2.0%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1%</td>
<td>0.4%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
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Personal income rose a moderate 0.3% last month following the unrevised 0.6% spurt in October. Consensus expectations had been for a 0.2% rise. The gain in wages & salaries eased to 0.2% (+4.6% y/y) after the 0.6% surge in October. [...]

U.S. Personal Income Rebounded

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223d.jpg" width="353">
Durable goods orders rebounded 1.6% following a 0.9% decline in October that was twice the advance indication. The Consensus expectation had been for a 0.6% gain. Less transportation, orders fell 0.8% (+11.8% y/y) and added to a 1.3% decline in October.
Transportation equipment orders rose 8.2% reflecting a 41.9% spurt in aircraft &amp; parts orders. Primary metals orders rose 3.9% (+23.6% y/y) but orders for fabricated metals eased 0.4% (+12.5% y/y).
Nondefense capital goods orders surged 8.1% m/m led by a 64.2% jump in aircraft. Excluding aircraft, orders rose 1.8% and recouped about half of the decline in October. A 4.6% (9.8% y/y) rise in orders for electrical equipment &amp; appliances led the gain, however, that was offset by a 4.2% decline (+12.6% y/y) in orders for computers &amp; electronic products, off for the second consecutive month. Machinery orders fell as well by 3.3% (+16.3% y/y).
Unfilled orders rose 1.2% (9.2% y/y), double the gain in October. Shipments fell for the second month in the last three so the rise in unfilled orders pulled the ratio of backlogs to shipments up sharply.
Inventories of durable goods surged 1.0% (8.3% y/y) after the 0.9% October gain which was revised up sharply. The inventory to shipments ratio rose to its highest level in a year.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223b.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223c.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
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<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">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Durable Goods Orders</td>
<td>1.6%</td>
<td>-0.9%</td>
<td>9.7%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">Nondefense Capital Goods</td>
<td>8.1%</td>
<td>-3.4%</td>
<td>21.2%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Excluding Aircraft</td>
<td>1.8%</td>
<td>-4.1%</td>
<td>14.3%</td>
<td>6.6%</td>
<td>-7.1%</td>
<td>-12.9%</td>
</tr>
</tbody>
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Durable goods orders rebounded 1.6% following a 0.9% decline in October that was twice the advance indication. The Consensus expectation had been for a 0.6% gain. Less transportation, orders fell 0.8% (+11.8% y/y) and added to a 1.3% [...]

U.S. Durable Goods Orders Rebounded

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223d.jpg" width="353">
Durable goods orders rebounded 1.6% following a 0.9% decline in October that was twice the advance indication. The Consensus expectation had been for a 0.6% gain. Less transportation, orders fell 0.8% (+11.8% y/y) and added to a 1.3% decline in October.
Transportation equipment orders rose 8.2% reflecting a 41.9% spurt in aircraft &amp; parts orders. Primary metals orders rose 3.9% (+23.6% y/y) but orders for fabricated metals eased 0.4% (+12.5% y/y).
Nondefense capital goods orders surged 8.1% m/m led by a 64.2% jump in aircraft. Excluding aircraft, orders rose 1.8% and recouped about half of the decline in October. A 4.6% (9.8% y/y) rise in orders for electrical equipment &amp; appliances led the gain, however, that was offset by a 4.2% decline (+12.6% y/y) in orders for computers &amp; electronic products, off for the second consecutive month. Machinery orders fell as well by 3.3% (+16.3% y/y).
Unfilled orders rose 1.2% (9.2% y/y), double the gain in October. Shipments fell for the second month in the last three so the rise in unfilled orders pulled the ratio of backlogs to shipments up sharply.
Inventories of durable goods surged 1.0% (8.3% y/y) after the 0.9% October gain which was revised up sharply. The inventory to shipments ratio rose to its highest level in a year.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223b.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223c.jpg" width="353">

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<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">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>1.6%</td>
<td>-0.9%</td>
<td>9.7%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">Nondefense Capital Goods</td>
<td>8.1%</td>
<td>-3.4%</td>
<td>21.2%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Excluding Aircraft</td>
<td>1.8%</td>
<td>-4.1%</td>
<td>14.3%</td>
<td>6.6%</td>
<td>-7.1%</td>
<td>-12.9%</td>
</tr>
</tbody>
</table>
U.S. Personal Income Rebounded 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 23, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223e.jpg" width="353">
Personal income rose a moderate 0.3% last month following the unrevised 0.6% spurt in October. Consensus expectations had been for a 0.2% rise.
The gain in wages &amp; salaries eased to 0.2% (+4.6% y/y) after the 0.6% surge in October. Factory sector wages eked out a 0.1% (1.1% y/y) gain after falling 0.1% the prior month.
Personal disposable income rose 0.3% (4.9% y/y), half the gain in October. Disposable income growth adjusted for inflation was stable m/m at 0.2% (2.2% y/y).
Personal consumption eased as well, growing 0.2%, one quarter the rise in October. A 2.4% decline in durable goods spending reflected a 3.4% m/m drop in total sales of light motor vehicles. Spending on nondurables also eased, up 0.4% after a 1.6% spike in October. However, services spending picked up and grew 0.6% (5.6% y/y), up from the 0.4%-0.5% range of the prior three months.
The PCE chain price index rose just 0.1%, reflecting the recent decline in gasoline prices. Less food &amp; energy prices rose 0.1% (1.5% y/y), the average for the last eight months.
&quot;Open Mouth Operations: A Swiss Case Study&quot; of a central bank&#39;s impact on the slope of the yield curve from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20050101/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.3%</td>
<td>0.6%</td>
<td>4.9%</td>
<td>3.2%</td>
<td>1.8%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.2%</td>
<td>0.8%</td>
<td>6.1%</td>
<td>5.2%</td>
<td>4.6%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>0.3%</td>
<td>0.1%</td>
<td>1.3%</td>
<td>1.4%</td>
<td>2.0%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1%</td>
<td>0.4%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>1.4%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Rose Throughout December 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 23, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223g.jpg" width="353">
The University of Michigan&#39;s reading of consumer sentiment for the full month of December rose to 97.1, up 4.6% from November. Consensus expectations had expected 95.7.
During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.
Consumers&#39; reading of current economic conditions rose 1.9% m/m but consumer expectations jumped 6.7%.
Sentiment amongst families earning less than $50,000 per year surged 9.5% m/m (5.3% y/y. Consumer sentiment amongst families earning more than $50,000 per year fell slightly m/m but rose 2.0% y/y.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.
&quot;Consumer Sentiment and the Media&quot; from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2004/el2004-29.pdf">here</a>.

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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">Dec</th>
<th scope="col">Mid-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">Consumer Sentiment</td>
<td>97.1</td>
<td>95.7</td>
<td>92.8</td>
<td>4.9%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>106.7</td>
<td>106.3</td>
<td>104.7</td>
<td>10.0%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>90.0</td>
<td>88.8</td>
<td>85.2</td>
<td>1.2%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
New Home Sales Softer 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 23, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223f.jpg" width="353">
Sales of new single-family homes fell 12.0% to 1.125M last month from an upwardly revised level in October. Consensus estimates had been for a decline in sales to 1.200M. 
Sales fell throughout the country except in the South where they recovered 13.6% (11.5% y/y) following a sharp decline in October.
The median price of a new single family home slipped 8.2% m/m to $206,300 (-0.4% y/y).

<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">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">New Single-Family</td>
<td>1,125</td>
<td>1,278</td>
<td>3.6%</td>
<td>1,089</td>
<td>976</td>
<td>907</td>
</tr>
</tbody>
</table>
Initial Unemployment Insurance Claims Bounced Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 23, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041223a.jpg" width="353">
Initial unemployment insurance claims bounced up 17,000 to 333,000 last week following the sharp 45,000 drop the week prior. Consensus expectations had been for 335,000 claims.
The latest figure is for the December survey period of nonfarm payrolls and claims fell a slight 2,000 (-0.6%) from the November survey period.
The four week moving average of initial claims rose to 340,000 (-7.6% 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 fell another 9,000 and added to the deepened 57,000 decline the prior week.
The insured rate of unemployment remained at 2.2%, where it&#39;s been since early October.

<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">12/18/04</th>
<th scope="col">12/11/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>333</td>
<td>316</td>
<td>-8.0%</td>
<td>402</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,721</td>
<td>-16.9%</td>
<td>3,531</td>
<td>3,570</td>
<td>3,018</td>
</tr>
</tbody>
</table>
</body>
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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/041222c.jpg" width="353">
Germany&#39;s IFO Business Climate Index rose 2.3 points in December to 96.2, the highest in eight months. Both the Business Situation (Current Conditions) and Expectations components participated in the gain. This was only the third month during all of 2004 that both increased at the same time. And only the second time that the two major German business surveys, the IFO and ZEW, had positive results simultaneously. This was also the largest monthly increase in the IFO since the winter of 2002. [Preliminary &quot;headline&quot; IFO data were reported last Friday, and more detail were published this morning.]
Is the upturn in the IFO of any consequence? Do German business executives express a realistic vision about business conditions they face?Apparently they do, at least where production is concerned. Over the last five years, there has been an 80% correlation between the Business Situation (current conditions) Index and the year-to-year percentage change in industrial production. This is helpful, since the survey takes place two months ahead of the publication of the production data; that is, while this is the December IFO survey, industrial production is available only through October.
Further, the business expectations component appears to be a reliable leading indicator of production growth. In the coincident month, expectations have only a 53% correlation with production. But if expectations behave as intended, they should point to the upcoming trend in production. We can check this easily in Haver DLXVG3; this software enables us to examine simple lead/lag relationships. Using &lt;CNTL&gt; together with the right or left arrow key, we can move the primary series back and forth across the graph; the correlation ratio displayed on the graph will change as we do that. This simple exercise shows that the expectations index has its maximum correlation with production growth, a respectable 81%, five months ahead of the production data. So company leaders appear to have a good grasp of the basic trends in their business, not only in the present, but also looking ahead several months.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Indexes, 2000=100</th>
<th scope="col">Dec 2004</th>
<th scope="col">Nov 2004</th>
<th scope="col">Oct&nbsp; 2004</th>
<th scope="col">Year Ago</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">IFO Business Climate</td>
<td>96.2</td>
<td>94.1</td>
<td>95.3</td>
<td>96.9</td>
<td>91.7</td>
<td>89.4</td>
<td>92.1</td>
</tr>
<tr>
<td class="firstcol">IFO Business Situation (Current Conditions)</td>
<td>96.0</td>
<td>93.9</td>
<td>94.7</td>
<td>91.8</td>
<td>94.0</td>
<td>88.4</td>
<td>85.3</td>
</tr>
<tr class="odd">
<td class="firstcol">IFO Business Expectations</td>
<td>96.4</td>
<td>94.3</td>
<td>95.9</td>
<td>102.3</td>
<td>95.1</td>
<td>93.9</td>
<td>91.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Industrial Production, Yr/Yr % Chg</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>2.4</td>
<td>1.2</td>
<td>0.1</td>
<td>-1.2</td>
<td>-0.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Germany's IFO Business Climate Index rose 2.3 points in December to 96.2, the highest in eight months. Both the Business Situation (Current Conditions) and Expectations components participated in the gain. This was only the third [...]

German IFO Improves in December

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041222b.jpg" width="353">
According to the Mortgage Bankers Association (MBA) Survey, mortgage applications were about unchanged last week but applications to refinance rose 5.7% after several weeks of decline.
Refi&#39;s rose despite an uptick in the effective interest rate on a conventional 30-year mortgage to 5.97% from 5.90% the prior week. The effective rate on a 15-year mortgage also rose to 5.43%.
Purchase applications fell 3.6% w/w but a 6.6% jump early in the month raised December&#39;s average so far 2.5% versus 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 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">12/17/04</th>
<th scope="col">12/10/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>689.3</td>
<td>689.0</td>
<td>9.2%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>471.1</td>
<td>488.9</td>
<td>14.5%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,958.2</td>
<td>1,852.4</td>
<td>2.6%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
</html>

According to the Mortgage Bankers Association (MBA) Survey, mortgage applications were about unchanged last week but applications to refinance rose 5.7% after several weeks of decline. Refi's rose despite an uptick in the effective [...]

Total Mortgage Applications Unchanged but Refi's Rose

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041222a.jpg" width="353">
The &quot;final&quot; revision to US real GDP last quarter indicated 4.0% (AR) growth, up from the preliminary reading of 3.9% and the advance report of 3.7% growth. The Consensus expectation had been for no change at 3.9% growth.
The decline reported last month in corporate profits w/inventory (IVA) and capital consumption adjustments (CCAdj) was doubled to -4.8% (+5.8% y/y), the first quarterly decline since 1Q03. US nonfinancial corporate sector profits were little revised and rose 1.5% (18.8% y/y) but the decline in financial sector earnings was deepened to 19.8% (-17.0% y/y) from -13.4%.
Revisions to growth in domestic final demand were minimal. Personal consumption grew at a 5.1% (3.6% y/y) rate and business investment grew at a 13.0% rate (10.1% y/y). Residential investment grew at a 1.6% rate (8.0% y/y).
Slower accumulation of inventories subtracted slightly more than estimated earlier and twice the 0.5 percentage points estimated in the advance report and the drag from foreign trade was eased as import growth was lessened to 4.6% (11.1% y/y).
The estimate of price inflation was raised slightly to 1.4% (AR) as the PCE chain price index rose 1.3% (2.2% y/y) and the private fixed investment index rose 3.0% (3.0% y/y). A 5.1% gain in import prices held back the gain in GDP chain price index.
&quot;Productivity Gains Showing Up in Services&quot; from the Federal Reserve Bank of Dallas is available <a href="http://www.dallasfed.org/research/swe/2004/swe0406b.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;04 (Final)</th>
<th scope="col">3Q &#39;04 (Prelim.)</th>
<th scope="col">2Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>4.0%</td>
<td>3.9%</td>
<td>3.3%</td>
<td>4.0%</td>
<td>3.0%</td>
<td>1.9%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-1.0%</td>
<td>-0.9%</td>
<td>0.8%</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>-0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>5.0%</td>
<td>4.9%</td>
<td>2.5%</td>
<td>3.6%</td>
<td>3.1%</td>
<td>1.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>-1.0%</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-0.7%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>4.9%</td>
<td>4.9%</td>
<td>3.5%</td>
<td>4.1%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.4%</td>
<td>1.3%</td>
<td>3.2%</td>
<td>2.3%</td>
<td>1.8%</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The "final" revision to US real GDP last quarter indicated 4.0% (AR) growth, up from the preliminary reading of 3.9% and the advance report of 3.7% growth. The Consensus expectation had been for no change at 3.9% growth. The decline [...]

US 3Q GDP Revised Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041130a.jpg" width="353">
The &quot;final&quot; revision to US real GDP last quarter indicated 4.0% (AR) growth, up from the preliminary reading of 3.9% and the advance report of 3.7% growth. The Consensus expectation had been for no change at 3.9% growth.
The decline reported last month in corporate profits w/inventory (IVA) and capital consumption adjustments (CCAdj) was doubled to -4.8% (+5.8% y/y), the first quarterly decline since 1Q03. US nonfinancial corporate sector profits were little revised and rose 1.5% (18.8% y/y) but the decline in financial sector earnings was deepened to 19.8% (-17.0% y/y) from -13.4%.
Revisions to growth in domestic final demand were minimal. Personal consumption grew at a 5.1% (3.6% y/y) rate and business investment grew at a 13.0% rate (10.1% y/y). Residential investment grew at a 1.6% rate (8.0% y/y).
Slower accumulation of inventories subtracted slightly more than estimated earlier and twice the 0.5 percentage points estimated in the advance report and the drag from foreign trade was eased as import growth was lessened to 4.6% (11.1% y/y).
The estimate of price inflation was raised slightly to 1.4% (AR) as the PCE chain price index rose 1.3% (2.2% y/y) and the private fixed investment index rose 3.0% (3.0% y/y). A 5.1% gain in import prices held back the gain in GDP chain price index.
&quot;Productivity Gains Showing Up in Services&quot; from the Federal Reserve Bank of Dallas is available <a href="http://www.dallasfed.org/research/swe/2004/swe0406b.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">3Q &#39;04 (Final)</th>
<th scope="col">3Q &#39;04 (Prelim.)</th>
<th scope="col">2Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>4.0%</td>
<td>3.9%</td>
<td>3.3%</td>
<td>4.0%</td>
<td>3.0%</td>
<td>1.9%</td>
<td>0.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>-1.0%</td>
<td>-0.9%</td>
<td>0.8%</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>-0.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>5.0%</td>
<td>4.9%</td>
<td>2.5%</td>
<td>3.6%</td>
<td>3.1%</td>
<td>1.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>-1.0%</td>
<td>-0.5%</td>
<td>-0.3%</td>
<td>-0.7%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>4.9%</td>
<td>4.9%</td>
<td>3.5%</td>
<td>4.1%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>1.4%</td>
<td>1.3%</td>
<td>3.2%</td>
<td>2.3%</td>
<td>1.8%</td>
<td>1.7%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
Total Mortgage Applications Unchanged but Refi's Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 22, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041215c.jpg" width="353">
According to the Mortgage Bankers Association (MBA) Survey, mortgage applications were about unchanged last week but applications to refinance rose 5.7% after several weeks of decline.
Refi&#39;s rose despite an uptick in the effective interest rate on a conventional 30-year mortgage to 5.97% from 5.90% the prior week. The effective rate on a 15-year mortgage also rose to 5.43%.
Purchase applications fell 3.6% w/w but a 6.6% jump early in the month raised December&#39;s average so far 2.5% versus 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 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">12/17/04</th>
<th scope="col">12/10/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>689.3</td>
<td>689.0</td>
<td>9.2%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>471.1</td>
<td>488.9</td>
<td>14.5%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,958.2</td>
<td>1,852.4</td>
<td>2.6%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
</html>

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.

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**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.

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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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U.S. Consumer Sentiment Rose Throughout December

U.S. Personal Income Rebounded

U.S. Durable Goods Orders Rebounded

U.S. Durable Goods Orders Rebounded

German IFO Improves in December

Total Mortgage Applications Unchanged but Refi's Rose

US 3Q GDP Revised Up

US 3Q GDP Revised Up