Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041216a.jpg" width="353">
Housing starts in November fell a sharp 13.1% m/m to 1.771M, reversing all of a 7.0% rise in October.Consensus expectations had been for 1.98M starts. The latest was the lowest level of starts since May 2003.
Single-family starts fell 11.7% to 1.448M, also the lowest since May 2003, and multi-family starts dropped 19.0%.
Building permits fell 1.5% m/m to 1.988M after an upwardly revised gain October.
The Composite Housing Market Index from the National Association of Home Builders (NAHB) rose to 71 in December from a downwardly revised November level of 70.
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.
The index of current single family home sales was stable at its highest in over a year and the index of expected sales in six months rose.

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<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">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">Total</td>
<td>1,771</td>
<td>2,039</td>
<td>-13.8%</td>
<td>1,8 53</td>
<td>1,7 10</td>
<td>1,601</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,448</td>
<td>1,640</td>
<td>-13.3%</td>
<td>1,505</td>
<td>1,3 63</td>
<td>1,272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>3 23</td>
<td>399</td>
<td>-15.9%</td>
<td>348</td>
<td>347</td>
<td>330</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,988</td>
<td>2,018</td>
<td>3.5%</td>
<td>1,8 89</td>
<td>1,749</td>
<td>1,637</td>
</tr>
</tbody>
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U.S. Current Account Deficit Deepened 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 16, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041216c.jpg" width="353">
The US current account deficit deepened slightly in 3Q04 to a record $164.7B versus $164.4B the prior quarter, originally reported at $166.2B. Consensus expectations had been for a 3Q deficit of $171.0B. 
The deficit in merchandise trade deteriorated to $166.7B from an unrevised $163.6B in 2Q. A 14.8% y/y gain in exports lagged an 18.7% rise in imports.
The surplus on services fell to $11.4B from a downwardly revised to $12.5B in 2Q. Exports of services rose 9.7% y/y while imports rose 13.1%.
From the capital account, US foreign direct investment abroad fell to $43.5B (-3.8% y/y) and foreign direct investment in the US surged to $53.1B, the highest level since 2Q01. The balance of $9.6B was the first positive balance since 2Q01.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Int&#39;l Balance of Payments</a></th>
<th scope="col">3Q &#39;04</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">Current Account Deficit</td>
<td>$164.7B</td>
<td>$164.4B</td>
<td>$133.9B</td>
<td>$530.7B</td>
<td>$473.9B</td>
<td>$385.7B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Goods/Services/Income Deficit</td>
<td>$150.1B</td>
<td>$146.0B</td>
<td>$115.0B</td>
<td>$463.2B</td>
<td>$414.6B</td>
<td>$339.1B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>2.7%</td>
<td>3.6%</td>
<td>16.1%</td>
<td>5.8%</td>
<td>-3.9%</td>
<td>-9.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>2.7%</td>
<td>6.7%</td>
<td>19.8%</td>
<td>7.3%</td>
<td>1.5%</td>
<td>-8.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unilateral Transfers Deficit</td>
<td>$14.6B</td>
<td>$18.3B</td>
<td>$16.6B</td>
<td>$67.4</td>
<td>$59.4B</td>
<td>$46.6B</td>
</tr>
</tbody>
</table>
Initial Claims for Unemployment Insurance Dropped Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 16, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041216b.jpg" width="353">
Initial unemployment insurance claims dropped a sharp 43,000 to 317,000 and more than reversed all of the gains during the prior two weeks. The latest was the lowest claims level since early July and the prior week was revised up slightly. The Consensus expectation had been for 345,000 claims.
The four week moving average of initial claims fell to 337,750 (-8.2% 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 dropped 50,000 following a downwardly revised 69,000 rise the prior week.
The insured rate of unemployment remained at 2.2%, where it&#39;s been since early October.

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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">12/11/04</th>
<th scope="col">12/04/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
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<td class="firstcol">Initial Claims</td>
<td>317</td>
<td>360</td>
<td>-12.4%</td>
<td>402</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,737</td>
<td>-17.8%</td>
<td>3,531</td>
<td>3,570</td>
<td>3,018</td>
</tr>
</tbody>
</table>
Philadelphia Fed Activity Index Improved 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 16, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041216d.jpg" width="353">
The Philadelphia Fed&#146;s index of general business conditions in the manufacturing sector improved in December to 29.6 from 20.7 the prior month. Only a slight rise to 21.1 had been the Consensus expectation.
During the last ten years there has been a 68% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 53% correlation with q/q growth in real GDP.
Each of the sub indexes improved m/m with the exception of the index for inventories as well as for the number of employees.
The business conditions index reflects a separate survey question, not the sub indexes.
The separate index of expected business conditions in six months reversed about half of the sharp improvement in November and fell to 41.2.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041216e.jpg" width="353">
The prices paid index fell for the second month, to 52.2, although expectations for prices surged. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the PPI for intermediate goods. The correlation with the finished goods PPI has been 41% and with the CPI it&#39;s been 45%.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos1204.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Dec &#39;03</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">General Activity Index</td>
<td>29.6</td>
<td>20.7</td>
<td>30.3</td>
<td>27.5</td>
<td>10.6</td>
<td>7.7</td>
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<td class="firstcol">Prices Paid Index</td>
<td>52.2</td>
<td>53.9</td>
<td>30.9</td>
<td>51.2</td>
<td>16.7</td>
<td>12.2</td>
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Housing starts in November fell a sharp 13.1% m/m to 1.771M, reversing all of a 7.0% rise in October.Consensus expectations had been for 1.98M starts. The latest was the lowest level of starts since May 2003. Single-family starts fell [...]

Housing Starts Fell Sharply

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/041215d.jpg" width="353">
In the December TANKAN Survey, released today by the Bank of Japan, large Japanese manufacturers reported their overall business conditions at +22, off from September&#39;s +26 rating, but slightly more than the +21 they had forecast for this quarter. Large non-manufacturing concerns maintained their Q3 conditions, with +11, modestly beating their expectation of +10. All businesses in all size categories edged down to +1 from the +2 last quarter, but did marginally better than their forecast for a 0 rating, or flat business. Medium-sized firms fell moderately short of both their Q3 performance and their forecast for this quarter, but small firms improved, albeit still in negative territory.
Individual industries had really mixed results. Among large manufacturing firms, eight industries saw business soften this quarter, while five are improving and two maintaining their Q3 pace. There seems to be no general classification of strength or weakening: such diverse groups as textiles, nonferrous metals and shipbuilding slowed, while petroleum and several machinery categories picked up. In non-manufacturing industries, retailing was sluggish but did better than expected; wholesale activity was somewhat slower than in Q3, but that sector still had one of the highest growth rates.
Despite the reduced vigor of Japanese business conditions as shown in the TANKAN, the Japanese stock market and currency both firmed following publication of the report. Apparently investors focused on components describing expected profits and business investment. Large manufacturing companies now project that their profits are rising 24.0% this fiscal year (ending March 31), 5.1 percentage points higher than the previous forecast. They also anticipate raising investment outlays by 23.4%, 2.2 points more than forecast before and 18 points more than last year&#39;s growth. Both of these results would likely raise corporate valuations and enhance the health of Japan&#39;s economy.
In the Haver databases, we present the TANKAN data two ways. Owing to the restructuring of the survey classification scheme and new sampling last March, we have segregated the recent detail data into new series in the &quot;Japan&quot; database. In summary data in the &quot;G10&quot; database, we link the all industry-all enterprise data with the history that uses the old methodology. This broad aggregate is less affected by the Bank of Japan&#39;s reorganization of the categories. By this special, linked measure, even though the Q4 result is down a point from Q3, it is still, at +1, only the second positive reading since Q1 of 1992, nearly 13 years ago.

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<colgroup><col><col><col></colgroup>
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<th scope="col" class="firstcol">Business Conditions:&nbsp; % Favorable minus % Unfavorable</th>
December 2004
September 2004
June 2004
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Forecast &nbsp;for Mar</td>
<td>Actual</td>
<td>Forecast for Dec</td>
<td>Actual</td>
<td>Forecast for Sep</td>
<td>Actual</td>
</tr>
<tr>
<td class="firstcol">All Firms</td>
<td>-3</td>
<td>1</td>
<td>0</td>
<td>2</td>
<td>-1</td>
<td>0</td>
</tr>
<tr class="odd">
<td class="firstcol">Large Firms*</td>
<td>12</td>
<td>16</td>
<td>15</td>
<td>19</td>
<td>16</td>
<td>16</td>
</tr>
<tr>
<td class="firstcol">Manufacturing (&quot;Headline Series&quot;)</td>
<td>15</td>
<td>22</td>
<td>21</td>
<td>26</td>
<td>21</td>
<td>22</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-manufacturing</td>
<td>10</td>
<td>11</td>
<td>10</td>
<td>11</td>
<td>11</td>
<td>9</td>
</tr>
<tr>
<td class="firstcol">Medium-sized Firms**</td>
<td>-1</td>
<td>2</td>
<td>3</td>
<td>5</td>
<td>1</td>
<td>3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>2</td>
<td>11</td>
<td>10</td>
<td>14</td>
<td>7</td>
<td>11</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-manufacturing</td>
<td>-3</td>
<td>-4</td>
<td>-2</td>
<td>-2</td>
<td>-3</td>
<td>-1</td>
</tr>
<tr class="odd">
<td class="firstcol">Small Firms***</td>
<td>-12</td>
<td>-7</td>
<td>-9</td>
<td>-9</td>
<td>-10</td>
<td>-10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-1</td>
<td>5</td>
<td>3</td>
<td>5</td>
<td>2</td>
<td>2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-manufacturing</td>
<td>-18</td>
<td>-14</td>
<td>-16</td>
<td>-17</td>
<td>-18</td>
<td>-18</td>
</tr>
</tbody>
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In the December TANKAN Survey, released today by the Bank of Japan, large Japanese manufacturers reported their overall business conditions at +22, off from September's +26 rating, but slightly more than the +21 they had forecast for [...]

Japan "TANKAN" Eases in Q4, but Still Better Than Forecast

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<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 slipped 1.0% last week and so far in December are 3.6% below the November average.
Purchase applications eased 0.4% after the prior week&#39;s 6.6% rise and in December are 3.9% ahead of 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.
Applications to refinance slid for the fifth week in the last six, by 2.0%, and are down 13.1% versus November.
The effective interest rate on a conventional 30-year mortgage fell to 5.90% and the effective rate on a 15-year mortgage also fell to 5.35%.
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>.

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<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">12/10/04</th>
<th scope="col">12/03/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
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<td class="firstcol">Total Market Index</td>
<td>689.0</td>
<td>696.2</td>
<td>1.7%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>488.9</td>
<td>490.9</td>
<td>11.8%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,852.4</td>
<td>1,890.6</td>
<td>-10.6%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
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According to the Mortgage Bankers Association (MBA) Survey, mortgage applications slipped 1.0% last week and so far in December are 3.6% below the November average. Purchase applications eased 0.4% after the prior week's 6.6% rise and [...]

Mortgage Applications Slip

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041215b.jpg" width="353">
In December, the Empire State Index of General Business Conditions in New York&#39;s manufacturing industries jumped 11.1 points to 29.93, the highest level since July.
The new orders component more than doubled to a record 40.15 while the employment measure also doubled the November reading. In addition, shipments were quite strong rising 17 points. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The prices paid index recovered most of the November decline with a 4.4 point gain.
Expectations for business conditions in six months again fell sharply to the lowest level since April 2003.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Dec &#39;03</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>29.93</td>
<td>18.86</td>
<td>36.16</td>
<td>28.57</td>
<td>16.30</td>
<td>7.02</td>
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In December, the Empire State Index of General Business Conditions in New York's manufacturing industries jumped 11.1 points to 29.93, the highest level since July. The new orders component more than doubled to a record 40.15 while [...]

Empire State Index Jumped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041215a.jpg" width="353">
In October, the Index of Leading Indicators for the Major Seven OECD Countries fell slightly for the third straight month. The declines pulled the six-month growth rate down to 0.4%, its lowest since May 2003.
During the last ten years there has been a 77% correlation between the leaders&#39; growth rate and the two quarter change in the GDP Volume Index for the Big 7 countries in the OECD.
The leading index in Japan turned negative for the third straight month, with six-month growth falling to -1.5% There has been a 45% correlation during the last ten years between the leaders and real GDP growth in Japan. Net foreign trade has contributed significantly to the leaders&#39; deterioration.
The leaders for the United States fell for the third straight month and six month growth fell to just 0.2% with a tighter yield curve, lower consumer sentiment &amp; a lower business climate indicator offsetting other component gains.
The leading index growth rate for the European Union has held up well relative to other countries, with gains logged during the last four months, though six-month growth fell to 2.5% from a peak of 6.2% late last year. Growth in the German leaders fell to 2.0% in October versus 8.3% in January as a result of a tighter yield curve and a slower orders inflow. Leaders in Italy improved some with the six-month growth rate slightly positive after several months negative; the decline in consumer confidence stabilized. In France, the leading index growth rate decelerated to 3.7% versus 8.2% at the start of the year and growth in the UK leaders improved to 1.1% after two months negative during the summer.
In Canada the leaders went further negative with a tighter yield curve.
Visit the OECD at this <a href="http://www.oecd.org/home/">website</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/OECDMEI/OECDMEI.HTM">OECD Main Economic Indicators</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">6-Mth Chg</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">OECD Major Seven - Leading Index (Trend Restored)</td>
<td>102.0</td>
<td>102.1</td>
<td>0.4%</td>
<td>2.6%</td>
<td>2.3%</td>
<td>-3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; European Union</td>
<td>106.1</td>
<td>105.8</td>
<td>2.5%</td>
<td>2.3%</td>
<td>3.5%</td>
<td>-2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Japan</td>
<td>97.4</td>
<td>97.7</td>
<td>-1.5%</td>
<td>1.9%</td>
<td>0.5%</td>
<td>-4.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; United States</td>
<td>102.4</td>
<td>102.5</td>
<td>0.2%</td>
<td>3.7%</td>
<td>2.0%</td>
<td>-3.3%</td>
</tr>
</tbody>
</table>
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In October, the Index of Leading Indicators for the Major Seven OECD Countries fell slightly for the third straight month. The declines pulled the six-month growth rate down to 0.4%, its lowest since May 2003. During the last ten [...]

OECD Leaders Declined For Third Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041215a.jpg" width="353">
In October, the Index of Leading Indicators for the Major Seven OECD Countries fell slightly for the third straight month. The declines pulled the six-month growth rate down to 0.4%, its lowest since May 2003.
During the last ten years there has been a 77% correlation between the leaders&#39; growth rate and the two quarter change in the GDP Volume Index for the Big 7 countries in the OECD.
The leading index in Japan turned negative for the third straight month, with six-month growth falling to -1.5% There has been a 45% correlation during the last ten years between the leaders and real GDP growth in Japan. Net foreign trade has contributed significantly to the leaders&#39; deterioration.
The leaders for the United States fell for the third straight month and six month growth fell to just 0.2% with a tighter yield curve, lower consumer sentiment &amp; a lower business climate indicator offsetting other component gains.
The leading index growth rate for the European Union has held up well relative to other countries, with gains logged during the last four months, though six-month growth fell to 2.5% from a peak of 6.2% late last year. Growth in the German leaders fell to 2.0% in October versus 8.3% in January as a result of a tighter yield curve and a slower orders inflow. Leaders in Italy improved some with the six-month growth rate slightly positive after several months negative; the decline in consumer confidence stabilized. In France, the leading index growth rate decelerated to 3.7% versus 8.2% at the start of the year and growth in the UK leaders improved to 1.1% after two months negative during the summer.
In Canada the leaders went further negative with a tighter yield curve.
Visit the OECD at this <a href="http://www.oecd.org/home/">website</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/OECDMEI/OECDMEI.HTM">OECD Main Economic Indicators</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">6-Mth Chg</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">OECD Major Seven - Leading Index (Trend Restored)</td>
<td>102.0</td>
<td>102.1</td>
<td>0.4%</td>
<td>2.6%</td>
<td>2.3%</td>
<td>-3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; European Union</td>
<td>106.1</td>
<td>105.8</td>
<td>2.5%</td>
<td>2.3%</td>
<td>3.5%</td>
<td>-2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Japan</td>
<td>97.4</td>
<td>97.7</td>
<td>-1.5%</td>
<td>1.9%</td>
<td>0.5%</td>
<td>-4.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; United States</td>
<td>102.4</td>
<td>102.5</td>
<td>0.2%</td>
<td>3.7%</td>
<td>2.0%</td>
<td>-3.3%</td>
</tr>
</tbody>
</table>
Empire State Index Jumped 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 15, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041215b.jpg" width="353">
In December, the Empire State Index of General Business Conditions in New York&#39;s manufacturing industries jumped 11.1 points to 29.93, the highest level since July.
The new orders component more than doubled to a record 40.15 while the employment measure also doubled the November reading. In addition, shipments were quite strong rising 17 points. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The prices paid index recovered most of the November decline with a 4.4 point gain.
Expectations for business conditions in six months again fell sharply to the lowest level since April 2003.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Dec &#39;03</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>29.93</td>
<td>18.86</td>
<td>36.16</td>
<td>28.57</td>
<td>16.30</td>
<td>7.02</td>
</tr>
</tbody>
</table>
Mortgage Applications Slip 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 15, 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 slipped 1.0% last week and so far in December are 3.6% below the November average.
Purchase applications eased 0.4% after the prior week&#39;s 6.6% rise and in December are 3.9% ahead of 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.
Applications to refinance slid for the fifth week in the last six, by 2.0%, and are down 13.1% versus November.
The effective interest rate on a conventional 30-year mortgage fell to 5.90% and the effective rate on a 15-year mortgage also fell to 5.35%.
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">12/10/04</th>
<th scope="col">12/03/04</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>689.0</td>
<td>696.2</td>
<td>1.7%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>488.9</td>
<td>490.9</td>
<td>11.8%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,852.4</td>
<td>1,890.6</td>
<td>-10.6%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041214f.jpg" width="353">
The Federal Open Market Committee raised the target rate for federal funds by 25 basis points to 2.25%, as expected. The discount rate also was raised 25 basis points to 3.25%.
The decision was unanimous.
Today&#39;s press release from the Fed continued to contain a comment suggesting that rates could be raised again. &quot;The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity.&quot;
For the complete text of the Fed&#39;s latest press release please <a href="http://www.federalreserve.gov/BoardDocs/Press/monetary/2004/20041214/default.htm"> click</a>.
&quot;Will the U.S. Productivity Resurgence Continue?&quot; from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci10-13.pdf"> here</a>.

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The Federal Open Market Committee raised the target rate for federal funds by 25 basis points to 2.25%, as expected. The discount rate also was raised 25 basis points to 3.25%. The decision was unanimous. Today's press release from [...]

FOMC Raised Funds Rate to 2.25%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041214d.jpg" width="353">
The Small Business Optimism Index for November published by the National Federation of Independent Business (NFIB) surged 3.7% to 107.7 in November, the highest level in twenty years.
During the last ten years there has been a 68% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms expecting the economy to improve ballooned to 47%, the highest level since last year and the percent of firms planning to raise employment rose to 19% near last year&#39;s high. During the last ten years there has been a 63% correlation between these hiring plans and the three month growth in nonfarm payrolls.
An elevated 35% of firms expected higher real sales in 6 months. The net of firms expecting higher earnings this quarter was stable at -7 and sustained the recent sharp improvement.
The percentage of firms raising average selling prices fell to 18%, well below the averages for 2Q &amp; 3Q.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">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">Small Business Optimism Index (1986=100)</td>
<td>107.7</td>
<td>103.9</td>
<td>2.3%</td>
<td>101.3</td>
<td>101.2</td>
<td>98.4</td>
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The Small Business Optimism Index for November published by the National Federation of Independent Business (NFIB) surged 3.7% to 107.7 in November, the highest level in twenty years. During the last ten years there has been a 68% [...]

Small Business Optimism At 20 Year High

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

260401V4.jpg

260401W4.jpg

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**.

260401X4.jpg

260401Y4.jpg

- 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

260401J35.jpg

260401K35.jpg

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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