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/041208c.jpg" width="353">
Revised data for Japan&#39;s Q3 GDP were reported today by the Cabinet Office. This is the usual &quot;second preliminary&quot; report, but it also included the previously announced shift to chain-linking and the rebasing from 1995 to 2000. Now, technically as in other countries that use chain-weighting, there is no &quot;base year&quot;. 2000 is known as the &quot;reference year&quot; and only means that is the period when price indexes are set equal to 100, and therefore nominal and &quot;real&quot; chain-weighted items are equal.
Real GDP rose 0.06% in Q3, minimally less than the original Q3 compilation showing an 0.08% increase. An interim calculation using chain-weighting, which was published on November 18, showed a decrease of 0.03%. Today&#39;s press reports highlight the comparison with the original data, and so conclude that growth is slower. However, in the new data released today, more current input data actually lifted the quarter&#39;s overall performance by a tiny amount from the Interim figure. Longer-run comparisons show that the technical shift in weighting procedures yielded slower growth, but this was to be expected. It isn&#39;t that the economy is actually weaker than thought before, but that there is now a more accurate numerical representation.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041208d.jpg" width="353">
For Q3, more distinguishable shifts occurred in individual GDP components. As seen in the table below, consumer spending is now seen as weaker than before; effects of chain-weighting eroded some of the growth and the routine quarterly revision cut further into it. In contrast, plant and equipment investment was stronger. As we noted in our commentary on the shift to chain-linking in mid-November, the chaining procedure did subtract some investment growth in recent periods. However, new input data brought significant gains to the latest two quarters while diminishing the prior two periods. Thus, although growth over the last year has been the same as in the Interim data, the shift in the quarterly distribution leaves more forward momentum. With other varied economic indicators looking less healthy, this uptrend in Japanese business investment gives some encouragement that business conditions there are not uniformly deteriorating.
As in November, these data were again updated in &quot;real time&quot; by our Asian shift staff. Clients in the Far East and in Europe then had access to the information early in their own workdays. Updates for many series in China, Korea and Hong Kong, among others, are coming now in what for New Yorkers is the evening or middle of the night.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">% Changes</th>
<th scope="col">3 Qtr 2004</th>
<th scope="col">2 Qtr 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">GDP: Chain Weighted, 2000 Yen</td>
<td>0.1</td>
<td>-0.1</td>
<td>2.6</td>
<td>1.3</td>
<td>-0.3</td>
<td>0.2</td>
</tr>
<tr>
<td class="firstcol">Chain Weighted, 1995 Yen</td>
<td>-0.0</td>
<td>0.0</td>
<td>2.7</td>
<td>1.3</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Fixed Weighted, 1995 Prices</td>
<td>0.1</td>
<td>0.3</td>
<td>3.8</td>
<td>2.5</td>
<td>-0.2</td>
<td>0.6</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>
</tr>
<tr class="odd">
<td class="firstcol">Household Consumption: Chain Weighted, 2000 Yen</td>
<td>0.2</td>
<td>0.3</td>
<td>2.1</td>
<td>0.2</td>
<td>0.5</td>
<td>1.0</td>
</tr>
<tr>
<td class="firstcol"> Chain Weighted, 1995 Yen</td>
<td>0.6</td>
<td>0.6</td>
<td>3.0</td>
<td>0.2</td>
<td>0.7</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Fixed Weighted, 1995 Prices</td>
<td>0.9</td>
<td>0.8</td>
<td>4.0</td>
<td>0.8</td>
<td>1.0</td>
<td>2.2</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>
</tr>
<tr class="odd">
<td class="firstcol">Private Investment, Plant &amp; Equipment: Chain Weighted, 2000 Yen</td>
<td>1.1</td>
<td>4.3</td>
<td>7.4</td>
<td>6.2</td>
<td>-6.7</td>
<td>0.8</td>
</tr>
<tr>
<td class="firstcol"> Chain Weighted, 1995 Yen</td>
<td>-0.8</td>
<td>0.2</td>
<td>7.4</td>
<td>6.8</td>
<td>-6.3</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Fixed Weighted, 1995 Prices</td>
<td>-0.2</td>
<td>0.6</td>
<td>9.2</td>
<td>9.6</td>
<td>-6.9</td>
<td>1.7</td>
</tr>
</tbody>
</table>
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Revised data for Japan's Q3 GDP were reported today by the Cabinet Office. This is the usual "second preliminary" report, but it also included the previously announced shift to chain-linking and the rebasing from 1995 to 2000. Now, [...]

Revisions Bring Modestly Lower Japanese GDP Growth; Data Now Chain-Linked, Rebased to 2000

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041208a.jpg" width="353">
According to the Mortgage Bankers Association (MBA) Survey, mortgage applications rose 3.4% last week following declines during November that, by the end of the month, had pulled the total market index down 11.6%.
Purchase applications rose 6.6% following several weeks of decline that lowered the month-end level 7.3% versus October. 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 added 1.1% to November declines that totaled 17.0%.
The effective interest rate on a conventional 30-year mortgage fell to 5.94% and averaged 5.97% last month versus 5.92% in October. The effective rate on a 15-year mortgage also fell to 5.40% versus 5.42% averaged in November.
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>.
&quot;Perfecting Housing Finance&quot; from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20041101/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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">12/03/04</th>
<th scope="col">11/26/04</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>696.2</td>
<td>673.3</td>
<td>15.7%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>490.9</td>
<td>460.3</td>
<td>22.8%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,890.6</td>
<td>1,912.3</td>
<td>6.5%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
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According to the Mortgage Bankers Association (MBA) Survey, mortgage applications rose 3.4% last week following declines during November that, by the end of the month, had pulled the total market index down 11.6%. Purchase [...]

Mortgage Applications Bounce Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041208b.jpg" width="353">
The Job Openings &amp; Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics indicated that through October, the job openings rate rose to 2.5% in October versus a monthly low of 2.0% in August 2003. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.
The number of job openings in October rose to 3.330 million, up 18.0% y/y.
The latest hires rate rose to 3.3% versus a low of 3.0% during the spring of 2003. The hires rate is the number of hires during the month divided by employment.
The survey dates only to December 2000 but has since followed the movement in nonfarm payrolls.
Job separations rose to 4.159 million (+7.8% y/y) and the separation rate was unchanged at 3.2%, up from 3.0% last October. Total separations include quits, layoffs, discharges, and other separations including retirements. The total separations, or turnover, rate is the total number of separations during the month divided by employment.
From the U.S. Department of Labor, a description of the Jolts survey and the latest release is available <a href="http://www.bls.gov/news.release/jolts.nr0.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>2.5%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.3%</td>
<td>3.2%</td>
<td>3.2%</td>
<td>3.1%</td>
<td>3.2%</td>
<td>3.5%</td>
</tr>
</tbody>
</table>
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The Job Openings & Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics indicated that through October, the job openings rate rose to 2.5% in October versus a monthly low of 2.0% in August 2003. The job openings rate is [...]

JOLTS: Job Openings & Hires Up in the US

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041208b.jpg" width="353">
The Job Openings &amp; Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics indicated that through October, the job openings rate rose to 2.5% in October versus a monthly low of 2.0% in August 2003. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.
The number of job openings in October rose to 3.330 million, up 18.0% y/y.
The latest hires rate rose to 3.3% versus a low of 3.0% during the spring of 2003. The hires rate is the number of hires during the month divided by employment.
The survey dates only to December 2000 but has since followed the movement in nonfarm payrolls.
Job separations rose to 4.159 million (+7.8% y/y) and the separation rate was unchanged at 3.2%, up from 3.0% last October. Total separations include quits, layoffs, discharges, and other separations including retirements. The total separations, or turnover, rate is the total number of separations during the month divided by employment.
From the U.S. Department of Labor, a description of the Jolts survey and the latest release is available <a href="http://www.bls.gov/news.release/jolts.nr0.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>2.5%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.3%</td>
<td>3.2%</td>
<td>3.2%</td>
<td>3.1%</td>
<td>3.2%</td>
<td>3.5%</td>
</tr>
</tbody>
</table>
Mortgage Applications Bounce Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 8, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041208a.jpg" width="353">
According to the Mortgage Bankers Association (MBA) Survey, mortgage applications rose 3.4% last week following declines during November that, by the end of the month, had pulled the total market index down 11.6%.
Purchase applications rose 6.6% following several weeks of decline that lowered the month-end level 7.3% versus October. 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 added 1.1% to November declines that totaled 17.0%.
The effective interest rate on a conventional 30-year mortgage fell to 5.94% and averaged 5.97% last month versus 5.92% in October. The effective rate on a 15-year mortgage also fell to 5.40% versus 5.42% averaged in November.
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>.
&quot;Perfecting Housing Finance&quot; from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20041101/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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">12/03/04</th>
<th scope="col">11/26/04</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>696.2</td>
<td>673.3</td>
<td>15.7%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>490.9</td>
<td>460.3</td>
<td>22.8%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,890.6</td>
<td>1,912.3</td>
<td>6.5%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041207d.jpg" width="353">
Institutional investors and analysts in Germany have become slightly less pessimistic. The December ZEW indicator showed that the balance of optimists over pessimists was 14.4%, 0.5 percentage points above November, The increase is hardly significant. The best interpretation may be to say that confidence has stopped declining.
The balance of optimists over pessimists remains well below the long run average of 34.5%. Moreover, the balance is 59 points below its December 2003 value. The recent peak in the balance was 48.4% in July. The indicator has been trending down since then with ever increasing differences from a year ago, as can be seen in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041207e.jpg" width="353">
The decline in confidence has been attributed, in large part, to the increases in oil prices and in the euro. The weekly value of the euro in terms of the dollar and the weekly price (dollars per gallon) of Brent Crude oil for the past two years are shown in the second chart. Both have risen relentlessly since the beginning of this year through October. The euro has since continued to climb, but the price of oil dipped 14% from the last week in October to the last week in November and may have contributed to the slight increase of optimists over pessimists in the December ZEW survey of institutional investors and analysts.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Dec 04</th>
<th scope="col">Nov 04</th>
<th scope="col">Oct&nbsp;04</th>
<th scope="col">Sep 04</th>
<th scope="col">Aug 04</th>
<th scope="col">Jul 04&nbsp;&nbsp;</th>
<th scope="col">Jun 04&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">ZEW (Percent balance)</td>
<td>14.4</td>
<td>13.9</td>
<td>31.3</td>
<td>38.4</td>
<td>45.3</td>
<td>48.4</td>
<td>47.4</td>
</tr>
<tr>
<td class="firstcol">% Points change from Year Ago</td>
<td>-59</td>
<td>-53</td>
<td>-29</td>
<td>-22.5</td>
<td>-7.2</td>
<td>6.5</td>
<td>26.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Price as of last week in</td>
<td>&nbsp;</td>
<td>Nov 04</td>
<td>Oct&nbsp;04</td>
<td>Sep 04</td>
<td>Aug 04</td>
<td>Jul 04&nbsp;&nbsp;</td>
<td>Jun 04&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Brent Crude Oil ($</td>
<td>&nbsp;</td>
<td>44.04</td>
<td>51.43</td>
<td>47.09</td>
<td>39.75</td>
<td>40.09</td>
<td>34.62</td>
</tr>
<tr>
<td class="firstcol">Dollar/euro</td>
<td>&nbsp;</td>
<td>1.3147&nbsp;&nbsp;</td>
<td>1.2754</td>
<td>1.2250</td>
<td>1.2099</td>
<td>1.2068</td>
<td>1.21221</td>
</tr>
</tbody>
</table>
</body>
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Institutional investors and analysts in Germany have become slightly less pessimistic. The December ZEW indicator showed that the balance of optimists over pessimists was 14.4%, 0.5 percentage points above November, The increase is [...]

German Investor Confidence Stops Falling After Four Months of Decline

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041207f.jpg" width="353">
Job cut announcements reported in November rose 2.6% from October and 5.1% from a year ago according to Challenger, Gray &amp; Christmas. The monthly tally of 104,530 pulled the three month moving average of job cut announcements to 104,744 (-9.7% y/y), the highest this year.
During the last ten years there has been an 86% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Job cut announcements in the automotive industry more than doubled and rose 10 fold in E-Commerce &amp; Dot com to the highest level since January 2003. Government layoffs also surged and layoffs rose in insurance, electronics, services, telecommunication, transportation and energy.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</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">Announced Job Cuts</td>
<td>104,530</td>
<td>101,840</td>
<td>5.1%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
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Job cut announcements reported in November rose 2.6% from October and 5.1% from a year ago according to Challenger, Gray & Christmas. The monthly tally of 104,530 pulled the three month moving average of job cut announcements to [...]

Challenger Layoff Count Rose Further

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Chain store sales following Thanksgiving week slumped another 1.7% on top of the 1.5% skid during the Holiday period, according to the International Council of Shopping Centers (ICSC)-UBS.
The decline pulled November sales just 0.1% ahead of October and sales began December down 2.5% m/m.
The leading indicator of chain store sales from ICSC fell by 0.5% in the latest week for the third time in the last four periods.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">12/04/04</th>
<th scope="col">11/27/04</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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<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>425.6</td>
<td>432.9</td>
<td>3.3%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Chain store sales following Thanksgiving week slumped another 1.7% on top of the 1.5% skid during the Holiday period, according to the International Council of Shopping Centers (ICSC)-UBS. The decline pulled November sales just 0.1% [...]

Chain Store Sales Slumped Further

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Non-farm labor productivity growth last quarter was little revised at 1.8% and about matched Consensus expectations for 2.0% growth.
Growth in hours worked by all persons (employment times hours) was revised up to 2.4% (1.5% y/y) from 2.1% but output growth also was revised up to 4.2% (4.7% y/y), the same as in 2Q.
Unit labor costs grew 1.8% as compensation growth was left unchanged at 3.6% (4.0% y/y).
Productivity in the manufacturing sector was revised up to 4.6% (4.7% y/y) from 4.3%. Unit labor cost growth in the factory sector was revised down slightly to no change (-1.5% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041207b.jpg" width="353">
In the nonfinancial corporate sector productivity growth accelerated to 4.2% (3.1% y/y) from 3.3% in 2Q. This is the first release of figures for 3Q. Output, a figure derived from the income side of the National Income &amp; Product Accounts, grew at a 5.6% (4.8% y/y) rate versus 4.2% growth in 2Q. Hours worked grew at a 1.3% rate (1.7% y/y).
During the last ten years there has been an 86% (inverse) correlation between y/y growth in unit labor costs in the nonfinancial corporate sector and profit growth.
From The Federal Reserve Bank of Chicago is <a href="http://www.chicagofed.org/publications/economicperspectives/ep_1qtr2004_part4_fernald_ramnath.pdf"> this</a> paper titled &quot;The acceleration in U.S. total factor productivity after 1995: The role of information technology.&quot;

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EC/@EC02/@EC02.HTM">Non-farm Business Sector</a> (SAAR)</th>
<th scope="col">3Q &#39;04 (Revised)</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>
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</thead>
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<tr class="odd">
<td class="firstcol">Output per Hour</td>
<td>1.8%</td>
<td>1.9%</td>
<td>3.9%</td>
<td>3.1%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Compensation</td>
<td>3.6%</td>
<td>3.6%</td>
<td>5.9%</td>
<td>4.0%</td>
<td>4.1%</td>
<td>3.3%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unit Labor Costs</td>
<td>1.8%</td>
<td>1.6%</td>
<td>1.9%</td>
<td>0.8%</td>
<td>-0.4%</td>
<td>-1.1%</td>
<td>1.5%</td>
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Non-farm labor productivity growth last quarter was little revised at 1.8% and about matched Consensus expectations for 2.0% growth. Growth in hours worked by all persons (employment times hours) was revised up to 2.4% (1.5% y/y) from [...]

U.S. Productivity Growth Little Revised for 3Q

PMIs showing widespread revival of global economy

Crude oil price has returned to pre-conflict level but traffic through Hormuz still subpar

Surging orders for computers and electronics propelling durable goods orders

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

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Winnie Tapasanun

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Existing home sales unexpectedly fell 2.4% m/m (+2.8% y/y) to 4.09 million units (SAAR) in June, the first monthly decline since March, following an upwardly revised 3.7% increase to 4.19 million in May (previously +3.2%; 4.17 mil.), according to the National Association of Realtors (NAR). The Action Economics Forecast Survey had expected June sales of 4.20 million units. Sales remained 36.4% below a high of 6.43 million in January 2022 and 38.0% below a peak of 6.60 million in January 2021. The June decline coincided with a rise in the average 30-year fixed mortgage rate to 6.49% in June, the highest since August 2025, after increasing to 6.44% in May, according to Freddie Mac. The sales figures are based on closings of sales contracts signed over the past couple of months.

Existing single-family home sales fell 2.4% (+3.3% y/y) to 3.73 million units in June, the first m/m fall in three months, following a 4.1% gain to 3.82 million in May, remaining 34.6% below a high of 5.70 million in January 2022. Sales of condos and co-ops decreased 2.7% (-2.7% y/y) to 360,000 in June, the lowest level since May 2025, after being unchanged m/m for the third successive month at 370,000, remaining 50.7% below a high of 730,000 in January 2022.

Regionally, June existing home sales declined m/m in all regions except the Northeast. Sales in the South dropped 3.6% (+3.8% y/y) to 1.89 million in June, a three-month low, after a 3.2% rise in May, and sales in the Midwest slid 3.0% (+2.1% y/y) to 980,000 following a 7.4% May advance; both posted the first m/m decrease in three months. Sales in the West fell 1.3% (+2.8% y/y) to 740,000, the lowest level since January, after being flat m/m at 750,000 in May. In contrast, sales in the Northeast increased 2.1% (0.0% y/y) to 480,000 after a 4.4% May gain. Notably, the South remained the dominant region, accounting for 46.2% of total U.S. existing home sales.

The median price of all existing homes (NSA) rose 2.2% (1.8% y/y) to $440,600 in June, the fifth consecutive m/m rise, on top of an upwardly revised 3.3% increase to $431,200 in May ($429,300 previously). Prices were 22.1% above a low of $360,800 in January 2023. The median price of an existing single-family home climbed 2.3% (1.8% y/y) to $446,400 in June, the fifth straight m/m increase, after a 3.4% advance to $436,400 in May. The median price of condos and co-ops, up for the sixth time in seven months, grew 0.6% (1.6% y/y) to $380,000 following a 1.0% May gain to $377,800. Regionally, overall prices rose m/m and y/y in June in the Northeast (+5.6%; +3.9% y/y), Midwest (+2.1%; +2.7% y/y), South (+1.0%; +0.9% y/y), and West (+0.8%; +0.9% y/y). All these price series were at their record highs.

Inventories of homes for sale fell m/m in June for the first time since December. The number of existing homes for sale (NSA) declined 0.6% (+1.3% y/y) to 1.56 million units following an upwardly revised 4.7% May rise to 1.57 million (the highest level since November 2019). The supply of homes on the market at the current selling rate (NSA) increased to 4.6 months in June from 4.5 months in May and April, matching the highest level since August 2025. A record low in supply of 1.6 months was in January 2022.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. Mortgage interest rates can be found in the **WEEKLY** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.

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- June sales -2.4% m/m to 4.09 mil., first drop in three mths.; +2.8% y/y, third straight y/y rise.
- Sales m/m down in the South (-3.6%), Midwest (-3.0%), and West (-1.3%); up in the Northeast (+2.1%).
- Sales y/y up in all regions except the Northeast w/ a flat reading.
- Median sales price +2.2% (+1.8% y/y) to $440,600, a record high.
- Unsold inventory -0.6% (+1.3% y/y) to 1.56 mil. units, first m/m decline since Dec.; 4.6 months' supply, highest since Aug. ’25.

U.S. Existing Home Sales Unexpectedly Fall in June from a Five-Month High

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined 2,000 to 215,000 in the week ending July 4, from 217,000 in the week ending June 27, revised from 215,000. The four-week average was 218,750 in the July 4 week, down from 222,500 in the week ending June 27. The Action Economics/Haver Analytics Survey looked for 218,000 claims to have been filed. 

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 8,000 to 1.814 million in the week ending June 27, from 1.806 million in the week ending June 20, revised from 1.814 million. The four-week moving average rose to 1.808 million in the June 27 week from 1.801 million in the June 20 week. The insured unemployment rate was unchanged at 1.2% in the week of June 27. Except for a one-week dip to 1.1% in the week of April 25, the insured unemployment rate has been at 1.2% since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending June 20, the highest unemployment rates were in Washington (2.03%), New Jersey (2.11%), Minnesota (2.15%), and Puerto Rico (2.45%). The lowest rates were in South Dakota (0.28%), Florida (0.35%), Alabama and North Carolina (both 0.41%), Louisiana (0.42%), and Arkansas (0.49%). Rates in other notable states include California (1.88%), Pennsylvania (1.63%), Illinois (1.58%), New York (1.52%), and Texas (1.12%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- New claims declined by 2,000 to 215,000 in the week ending July 4.
- Continuing claims rose by 8,000 to 1.814 million in the week ending June 27.
- The insured unemployment rate was unchanged at 1.2% in the week of June 27.

U.S. Initial Unemployment Claims Declined in the Week of July 4

Robert Brusca

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The German trade surplus surged in May to €19.1 billion from €14.7 billion in April. Exports rose by 0.9% in May while imports fell by 2.5%, creating a jump in the surplus month-to-month. In April, exports increased by 0.8% while imports rose by 1.1%.

Details on exports and imports lag by one month. In April, exports for motor vehicles and consumer goods declined, while exports of capital goods and other exports rose. On the import side, there were increases in imports ranging from 2.8% to 4.3% month-to-month across capital goods, motor vehicles, and consumer goods, but for the catch-all category ‘other’ imports fell by 2.7% month-to-month.

Flows adjusted for inflation showed an increase in exports of 0.4% in May while real imports fell by 3.3%. In April, real exports were flat while real imports fell by 0.2%.

The sequential behavior of real exports and real imports show independent activity. Imports log a clear weakening, rising 0.1% over 12 months, falling at a 5% annual rate over six months, and then falling at a 10.3% annual rate over three months. On the export side, real exports rose by 2.6% over 12 months, accelerated to a 7.2% annual rate over six months, but over three months have pulled back and fallen at a 1.6% annual rate. However, export growth still exceeds import growth over each of these horizons: 12 months, six months, and three months.

Trade trends paint a darkening picture of the German economy, with imports weak in real terms and trending even weaker, while activity on the export side of the equation pops over 12 months and six months but takes a hit over three months.

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The situation in the Strait of Hormuz continues to muddy the waters for the future. Passage through the strait has been sharply stopped, stabilized, revived, and now is back to being destabilized. That makes the strait a major uncertainty zone; it's hard to tell how these effects are going to play out over the coming months for German trade results and everyone else's. The deterioration of conditions in the Strait of Hormuz is now unknowable because Iran has decided to start shooting at ships, further destabilizing the outlook.

Germany

German Trades Surplus Balloons

Andrew Cates

**Growth Surprises Continue to Underpin Equity Resilience**
Global equity markets have proved remarkably resilient in recent weeks, shrugging off intermittent bouts of geopolitical and policy uncertainty to grind higher. Chart 1 below helps explain why: it tracks the relationship between global growth-versus-inflation surprises and world equity markets, and on that measure the recent run of global growth data has continued to surprise on the upside relative to inflation outturns — a combination that has historically been supportive for risk assets. Whether that resilience persists will depend on whether the growth-surprise advantage evident in the chart below can be sustained in the face of the inflationary pressures explored below.

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**PMIs Confirm a Broadly Solid Global Expansion**
This week's final composite PMI readings for June reinforced the broader impression of resilient global growth. As chart 2 below shows, most major economies posted readings comfortably in expansionary territory, with India continuing to lead the pack and the US not far behind. Even the laggards in the sample are hovering close to the expansion threshold rather than falling decisively below it, suggesting stabilisation rather than outright contraction (and with the UK a notable exception).

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**Inflation Surprises Are Creeping Back, and Bond Yields Are Taking Notice**
The US growth picture painted by Haver's surprise indices broadly echoes the message from the global PMI data. Chart 3 below shows the combined growth-and-inflation surprise index drifting higher this week, and closer inspection suggests growth is doing most of that work, with activity data continuing to outperform expectations. That is, on the face of it, good news. But it has not stopped bond markets from taking notice: short-dated Treasury yields have remained elevated in recent weeks, as stronger growth keeps alive the possibility that the Federal Reserve holds rates higher for longer or even lifts them in coming weeks.

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**Supply Chains Are Tightening** 
Latest data show that global supply chain pressures tightened by less in June than they had the month before, likely reflecting the easing of Middle East tensions through much of the period. Chart 4 below shows that pressures troughed in the middle of last year and have been building gradually since, though June's slower pace of tightening suggests that easing had started to feed through. Still, today's flare-up threatens to undo that improvement, particularly if it affects shipping routes or energy flows through the region once again.

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**Extreme Weather: An Old Supply-Side Risk Returns**
Geopolitics is not the only source of supply-side risk currently in play. Large parts of Europe have been gripped this week by another intense and prolonged heatwave, with temperatures in several major cities running well above seasonal norms. Extreme heat of this kind carries real economic costs: it depresses labour productivity, particularly in outdoor and manufacturing-adjacent sectors, strains electricity grids as air-conditioning demand spikes, and can disrupt agricultural output and river-based transport when water levels fall. Episodes like this have become more frequent in recent years, and while any single heatwave rarely shifts the macro picture on its own, the cumulative effect of more frequent and more severe weather events could start showing up in productivity and inflation data across the advanced economies. It is a reminder that the supply side of the global economy faces structural as well as cyclical challenges, and that climate-related disruption deserves a permanent place alongside geopolitics and demographics in any assessment of medium-term inflation risk.

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**AI Investment: The Other Side of the Supply Equation**
Set against these supply-side headwinds is a genuinely positive structural development: the extraordinary scale of private investment now flowing into artificial intelligence. Chart 6 below shows just how sharply that investment has grown in recent years, reaching a fresh high last year. If even a fraction of that investment translates into genuine productivity gains, it could provide a meaningful long-run offset to the energy, climate and geopolitical constraints highlighted elsewhere in this week's charts. The scale of the bet now being placed on AI is large enough that it is beginning to show up in aggregate investment and capital expenditure data across the advanced economies, and it is likely to remain one of the defining structural themes shaping the global growth outlook over the remainder of this decade.

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Global markets head into this week’s closing stages digesting a mixed set of signals. Last week's US non-farm payrolls report undershot expectations, adding to questions about the durability of the US labour market even as broader activity data have continued to hold up well. Compounding that picture, news broke today of renewed instability in the Middle East, reintroducing a geopolitical risk premium into markets just as investors had begun to look past it. Global equity markets have nonetheless remained resilient, continuing to track the broadly encouraging tone of incoming activity data (chart 1). That resilience was reinforced by a solid set of global PMIs across most major economies over the past few days (chart 2). Haver's surprise indices tell a similar story of positive growth momentum in the US, but with an important caveat: incoming inflation data have also been surprising to the upside, driven largely by higher oil prices (chart 3). These inflation risks could persist moreover, as global supply chain pressures have picked up in recent months and today's flare-up in the Middle East threatens to add further strain (chart 4). The world economy remains vulnerable to other supply-side shocks too, such as the extreme heat gripping much of Europe this week (chart 5). Still, on the other side of the ledger the enormous scale of investment now flowing into artificial intelligence could be a genuine source of supply-side potential (chart 6).

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Charts of the Week: Growth Holds Firm

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Mortgage applications dropped 2.2% w/w (-5.4% y/y) in the week ending July 3, following no change in the week ending June 26, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house edged down 0.6% w/w (-6.3% y/y) in the latest week, after rising 0.5% w/w (3.2% y/y) in the June 26 week.  Applications for loan refinancing dropped 4.1% w/w (-4.2% y/y) in the week ending July 3, after declining 0.7% w/w (+9.1% y/y) in the June 26 week.

The effective interest rate on a 30-year fixed-rate loan rose 1bp to 6.77% in the week ending July 3 from 6.76% in the week ending June 26. The rate on 15-year fixed-rate mortgages edged down 2bps to 6.17% in the July 3 week from 6.19% in the June 26 week. The 30-year Jumbo rate edged down 1bp to 6.62% in the latest week from 6.63% in the June 26 week. The rate on a 5-year ARM rose 5bps to 6.19% in the July 3 week from 6.14% in the June 26 week.

The share of applications for refinancing an existing loan declined to 40.6% of total applications in the week of July 3 from 41.4% in the June 26 week. The adjustable-rate mortgage (ARM) share of activity edged up to 7.8% in the July 3 week from 7.6% in the June 26 week.

The average size of a mortgage declined 0.4% w/w (+1.3% y/y) to $391,500 in the week ending July 3, after rising 1.1% w/w (0.4% y/y) to $393,200 in the week ending June 26. The average size of a purchase loan declined 1.0% w/w (+4.3% y/y) to $451,000 in the latest week, after rising 1.2% w/w (2.7% y/y) to $455,600 in the June 26 week. The average size of a loan to refinance a mortgage edged down 0.1% w/w (-3.9% y/y) to $304,600 in the week ending July 3, after rising 0.5% w/w (-2.8% y/y) to $304,900 in the June 26 week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Both applications for loans to purchase and applications for loan refinancing declined in the latest week.
- Interest rate on 30-year fixed-rate loans rose 1bp to 6.77%. 
- Average loan size edged down.

Economy in Brief

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Revisions Bring Modestly Lower Japanese GDP Growth; Data Now Chain-Linked, Rebased to 2000

Mortgage Applications Bounce Up

JOLTS: Job Openings & Hires Up in the US

JOLTS: Job Openings & Hires Up in the US

German Investor Confidence Stops Falling After Four Months of Decline

Challenger Layoff Count Rose Further

Chain Store Sales Slumped Further

U.S. Productivity Growth Little Revised for 3Q