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/030724b.jpg" width="353">
Consumer sentiment in Japan recovered somewhat in the second quarter, rising 1.2 points to 37.3, the first increase in a year. Better employment conditions made the largest contribution, as that survey component advanced 2.3 points from a first quarter low. People&#146;s sense of their overall standard of living gained 1.0 point, perhaps reflecting the continuing improvement in the Japanese stock market. The Nikkei 225 stock price index stood at just 7608 on April 28 but by the time the sentiment survey was taken as of June 15, it had rebounded some 18% to 8981.[In subsequent weeks, these key stocks have added another 635 points.]. Despite the latest quarter&#146;s improvement in survey participants&#146; feelings about their well-being, they maintain a general malaise about economic prospects. The consumer confidence index is at a very low level. People are still worried about income growth and their expectations about leisure pursuits have eroded consistently. However, there is better news elsewhere in Japan: GDP has risen for five quarters and the widely watched TANKAN survey of business prospects indicates less concern among business executives. Along with the better stock market, these improvements, taken together, show at least some stabilization in the Japanese economy.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol">Japan: Consumer Behavior Survey</th>
<th scope="col">Q2 2003</th>
<th scope="col">&nbsp;Q1&nbsp; 2003</th>
<th scope="col">Q4 2002</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment Index</td>
<td>37.3</td>
<td>36.1</td>
<td>38.1</td>
<td>38.8</td>
<td>38.7</td>
<td>43.0</td>
</tr>
<tr>
<td class="firstcol">Job Situation</td>
<td>27.3</td>
<td>25.0</td>
<td>27.1</td>
<td>27.7</td>
<td>25.2</td>
<td>38.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Standard of Living</td>
<td>37.7</td>
<td>36.7</td>
<td>38.2</td>
<td>39.0</td>
<td>39.4</td>
<td>43.6</td>
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</tbody>
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Consumer sentiment in Japan recovered somewhat in the second quarter, rising 1.2 points to 37.3, the first increase in a year. Better employment conditions made the largest contribution, as that survey component advanced 2.3 points [...]

Japanese Consumer Sentiment Improves

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030723b.jpg" width="353">
Prices for crude oil and natural gas have fallen substantially from their highs set earlier this year. Reports of improved inventory conditions and events in Iraq prompted the declines.
Yesterday, the domestic spot market price for West Texas Intermediate crude oil fell $1.60 to $30.18. That price still was up roughly 15% y/y.
A report from the Federal Reserve Bank of St. Louis titled &quot;A Case for Oil&quot; can be found <a href="http://research.stlouisfed.org/publications/net/20030601/cover.pdf">here</a>.
The spot price for natural gas very recently has been stable near $5.00/mmbtu. That is down sharply from over $6.00/mmbtu in June and down from the spike to $19.00 in February.

Rates Up, Mortgage Applications Down Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 23, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030723a.jpg" width="353">
As interest rates rose, the index of mortgage applications compiled by the Mortgage Bankers Association fell a sharp 5.4% last week following a slight blip up the week earlier.
The latest decline in the index for all mortgage applications pulled it down by nearly one third from the peak level in late May.
Applications to refinance fell 7.2% last week and were down 38.1% from the peak in late May.
The decline in mortgage refinancings came as interest rates surged. Rates on a conventional 30-Year mortgage jumped 40 basis points w/w to 6.02%, the first week over 6.0% since early April. The effective rate on a 15-year mortgage also surged to 5.46%.
Applications for home purchase remained firm, down only 1.1% last week following an 8.0% jump the week prior. So far in July mortgage applications for home purchase are up 3.0% from June (16.1% y/y) and are setting a new record.
During the last ten years there has been a 53% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders.
Visit the Mortgage Bankers Association site at <a href="http://www.mbaa.org/">www.mbaa.org.</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">7/18/03</th>
<th scope="col">7/11/03</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>1,284.3</td>
<td>1,358.2</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>442.4</td>
<td>447.2</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>6,181.2</td>
<td>6,657.2</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
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Prices for crude oil and natural gas have fallen substantially from their highs set earlier this year. Reports of improved inventory conditions and events in Iraq prompted the declines. Yesterday, the domestic spot market price for [...]

Oil & Gas Prices Well Off Highs

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030722a.jpg" width="353">
Chain store sales rose another 0.3% last week. The gain added to sharp increases in each of the prior two weeks according to the BTM-UBSW survey.
So far in July, sales are 1.4% ahead of the June average which was barely changed from May.
During the last five years there has been a 60% correlation between the year-to-year percent change in chain store sales and the change in nonauto retail sales less gasoline.
The BTM-UBSW retail chain-store sales index is constructed from the sales results reported by 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">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">7/19/03</th>
<th scope="col">7/12/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>425.2</td>
<td>423.9</td>
<td>2.2%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
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Chain store sales rose another 0.3% last week. The gain added to sharp increases in each of the prior two weeks according to the BTM-UBSW survey. So far in July, sales are 1.4% ahead of the June average which was barely changed from [...]

Chain Stores Add To Sales Gain

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030722b.jpg" width="353">
Consumer confidence in Italy rose 1.62% in July after reaching a seven and a half year low in June. Confidence is, however, still low. It is 5.74% below the level reached a year ago and 15% below the peak reached in June, 2001.. Only 16% percent of the respondents expect economic conditions to improve over the next twelve months, 46% expect little or no change, 34% expect conditions to worsen and 4% are unsure.. In appraising their present ability to purchase goods, only 6% of the respondents found conditions favorable, 36% rated them unchanged, 53% found them unfavorable and 5% were unsure.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol">Consumer Confidence</th>
<th scope="col">July 2003</th>
<th scope="col">&nbsp;June 2003</th>
<th scope="col">July 2002</th>
<th scope="col">M/M</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td>%</td>
<td>%</td>
<td></td>
<td></td>
<td></td>
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<tr>
<td class="firstcol">1980=100</td>
<td>106.7</td>
<td>105.0</td>
<td>113.2</td>
<td>1.62</td>
<td>-5.74</td>
<td>115.8</td>
<td>122.6</td>
<td>119.4</td>
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<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
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Consumer confidence in Italy rose 1.62% in July after reaching a seven and a half year low in June. Confidence is, however, still low. It is 5.74% below the level reached a year ago and 15% below the peak reached in June, 2001.. Only [...]

Italian Consumer Confidence Improves But Still Tenuous

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030721c.jpg" width="353">
Preliminary data on foreign trade of the Euro-zone for May show a decline in exports from 86,019 million euros in April to 83,831 million euros. Imports declined by a slightly larger amount, from 82,547 million euros in April to 80,149 million euros in May. As a result, the balance of trade increased by 209 million euros from 3,473 million euros in April to 3,682 million euros in May.
Comparisons with a year ago, however, show a substantial deterioration in the balance of trade. Exports have declined 8.59% from May of a year ago, while imports have also declined 3.30% over the same period, resulting in a decline in the balance of trade of 5,137 million euros over the year.. The 24% rise in the Euro over the past year has taken its toll on Euro Zone&#39;s exports. The rise in the euros has not, however, led to a surge in imports. Imports have actually declined by 3.30% over the past year as the slow down in economic activity has more than offset the increase in import demand that would ordinarily have been expected with the rise in the euro.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Trade in Goods in Euro-zone (Mil. euros)</th>
<th scope="col">May 2003</th>
<th scope="col">&nbsp;April 2003</th>
<th scope="col">May 2002</th>
<th scope="col">M/M</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td>%</td>
<td>%</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Exports&nbsp;</td>
<td>83,831&nbsp;</td>
<td>86,019</td>
<td>91,707</td>
<td>-2.59</td>
<td>-8.59</td>
<td>1,077,908</td>
<td>1,061,771</td>
<td>1,000,208</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>80,149</td>
<td>82,547</td>
<td>82,888</td>
<td>-2.91</td>
<td>-3.30</td>
<td>977,242</td>
<td>1,011,882</td>
<td>1,021,213</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td>Euros</td>
<td>Euros</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Balance&nbsp;</td>
<td>3,682</td>
<td>3,473</td>
<td>8,819</td>
<td>209</td>
<td>-5,137</td>
<td>100,669</td>
<td>49,890</td>
<td>-21,005</td>
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</tbody>
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Preliminary data on foreign trade of the Euro-zone for May show a decline in exports from 86,019 million euros in April to 83,831 million euros. Imports declined by a slightly larger amount, from 82,547 million euros in April to [...]

May Trade Data for the Euro-zone Show Declines in Exports and Imports

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030721a.jpg" width="353">
The Conference Board reported that the Composite Index of Leading Economic Indicators rose for the third consecutive month in June. The 0.1% gain was as expected and the prior month&#39;s increase was revised up slightly.
Gains amongst the leaders&#39; component series fell back to a still-high 55% from the 80% breadth of gain in May. The percentage of leading components rising over a six month period dropped to 30% from 50% in the prior two months.
A higher money supply and higher stock prices had large positive influences on theJune leading index. These were offset by negative influences from a narrower yield curve and lower consumer expectations.
The Leading index is based on eight previously reported economic data series and two that are estimated.
The coincident indicators rose slightly for the second month.
The ratio of coincident-to-lagging indicators surged 0.6%, again to a new high. The ratio is an indicator of excess relative to actual economic performance.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.1%</td>
<td>1.1%</td>
<td>0.5%</td>
<td>2.1%</td>
<td>-0.9%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.2%</td>
<td>-0.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>-2.0%</td>
<td>-4.4%</td>
<td>-1.3%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
U.S. June Budget in Small Surplus  
by <a href="/comment/Moeller.html">Tom Moeller</a> July 21, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030721b.jpg" width="353">
The U.S. Government budget was in surplus last month by $21.2B. The surplus was about as expected by most analysts but it was the smallest surplus for the month of June since 1995.
The Federal government&#39;s deficit totaled $270.5B through the first nine months of this fiscal year. That is versus a deficit of $116.3B through the first nine months of FY2002.
The latest update of the outlook for the US Budget from the Office of Management &amp; Budget is available <a href="http://www.whitehouse.gov/omb/pubpress/071503_press_briefing_midsession.html">here</a>.
Net receipts for the first nine months of FY03 fell 3.5% versus last year. Individual tax payments fell 6.0% and corporate income taxes were down 15.8%. Social insurance contributions rose a small 1.7% but excise taxes fell slightly. 
Federal net expenditures rose 6.9% versus last fiscal year&#39;s first nine months led by higher defense spending which rose 15.7%. Spending on health programs also was strong, up 10.5%. Spending on education surged 17.3%. Spending on income security rose 8.8% while Medicare outlays rose 8.8%. Social Security outlays rose just 4.1% and interest expense fell 8.1% y/y.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;02</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
<th scope="col">FY2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$21.2B</td>
<td>$-90.0B</td>
<td>$29.1B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
<td>$236.4B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$193.1B</td>
<td>$103.4B</td>
<td>5.7%</td>
<td>-6.9%</td>
<td>-1.7%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$171.9B</td>
<td>$193.5B</td>
<td>11.9%</td>
<td>7.9%</td>
<td>4.2%</td>
<td>5.1%</td>
</tr>
</tbody>
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The Conference Board reported that the Composite Index of Leading Economic Indicators rose for the third consecutive month in June. The 0.1% gain was as expected and the prior month's increase was revised up slightly. Gains amongst [...]

Leading Indicators Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030718b.jpg" width="353">
The mid-July reading of Consumer Sentiment from the University of Michigan rose 0.7% from June to 90.3. Consensus expectations were for a reading of 91.0.
Consumer Sentiment rose as consumer&#39;s read of current conditions jumped 7.8%, the largest one month rise in over ten years. The index of consumer expectations fell 4.3% for the second consecutive monthly decline.
Over the last ten years there has been a 66% correlation between the level of consumer sentiment and the y/y change in real PCE. The correlation over the last five years has been 82%.
The University of Michigan survey is not seasonally adjusted.It is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mid-July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Sentiment</td>
<td>90.3</td>
<td>89.7</td>
<td>2.5%</td>
<td>89.6</td>
<td>89.2</td>
<td>107.6</td>
</tr>
</tbody>
</table>
More Whiffs of U.S. Reflation 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 18, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030718a.jpg" width="353">
Two &quot;market based indicators of monetary policy&quot; recently have further flashed a signal that the Federal Reserve&#39;s attempts to reflate the U.S. economy will succeed. 
The yield curve (the ratio of the rate on the 10 year Treasury note to Federal funds) steepened sharply last month then took another leg up earlier this week after Chairman Greenspan suggested that short term interest rates would be held low for some time.
The prepared text of the Chairman&#39;s testimony on Tuesday is available <a href="http://www.federalreserve.gov/BoardDocs/HH/2003/July/Testimony.htm">here</a>.
A report from the Federal Reserve Bank of San Francisco titled &quot;What Makes the Yield Curve Move? is available <a href="http://www.frbsf.org/publications/economics/letter/2003/el2003-15.html">here</a>.
Commodity prices also have recently signaled reflation. The price index complied by the Economic Cycle Research Institute (ECRI) is up roughly 7% from its lows this past Spring. Higher prices for metals, textiles and &quot;miscellaneous,&quot; including petroleum products, have contributed to the gain.
The higher value of the dollar, up more than 4% since early June, has reversed some of the indication of reflation it flashed earlier this year and in 2002. Much of the rise has been against the Euro and is a reversal of prior sharp declines. But the dollar also is up versus the UK pound and stable versus the Japanese yen.

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The mid-July reading of Consumer Sentiment from the University of Michigan rose 0.7% from June to 90.3. Consensus expectations were for a reading of 91.0. Consumer Sentiment rose as consumer's read of current conditions jumped 7.8%, [...]

Consumer Sentiment Up Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030717c.jpg" width="353">
The Business Cycle Dating Committee at the National Bureau of Economic Research (NBER) reported that &quot;a trough in economic activity occurred in November 2001.&quot;
Earlier this month, Haver Analytics began using November 2001 as the trough date for purposes of shading the last economic cycle in its graphs.
Click <a href="http://release.nber.org/recessions.html">here</a> for the memo from NBER&#39;s Business Cycle Dating Committee.

Housing Starts Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 17, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030717b.jpg" width="353">
Housing starts were much stronger than expected last month, rising 3.7% to 1.80 mil. units. Consensus expectations had been for starts of 1.75 mil. June was the second highest level of starts this year.
Single family starts rose 5.3% m/m to the third highest level since the late 1970s. So far this year single family starts are up 2.9% from the 2002 average. 
Multi-family starts fell 2.6% last month following a 29.6% surge in May. Multi-family starts this year are down 6.1% versus 2002.
Building permits ticked higher by 0.8%, adding to strong gains in the prior two months. Single family permits were quite strong and rose 5.3% (8.6% y/y) while multi family permits fell.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,803</td>
<td>1,738</td>
<td>5.5%</td>
<td>1,711</td>
<td>1,601</td>
<td>1,573</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family</td>
<td>1,462</td>
<td>1,388</td>
<td>7.6%</td>
<td>1,364</td>
<td>1,272</td>
<td>1,232</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi Family</td>
<td>341</td>
<td>350</td>
<td>-2.6%</td>
<td>347</td>
<td>330</td>
<td>341</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,817</td>
<td>1,803</td>
<td>4.1%</td>
<td>1,750</td>
<td>1,637</td>
<td>1,598</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 17, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030717a.jpg" width="353">
Initial claims for unemployment insurance fell more than expected last week. The 29,000 drop to 412,000 erased virtually all of the gains in the prior two weeks. Consensus expectations had been for claims of 430,000.
The latest claims data is for the July survey period for nonfarm payrolls. Initial claims fell 14,000 from the June survey period.
The four-week moving average of initial claims dropped to 424,000 (+8.4% y/y).
Continuing claims for unemployment insurance collapsed by 117,000 (-3.1%) w/w and the prior week&#39;s surge was roughly halved to 43,000.
During the last ten years there has been a 79% (inverse) correlation between the level of initial claims for unemployment insurance and the y/y change in nonfarm payrolls.
The insured rate of unemployment fell to 2.9% from 3.0% the week prior.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">7/12/03</th>
<th scope="col">7/5/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>412.0</td>
<td>441.0</td>
<td>6.5%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,654</td>
<td>2.6%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Improved 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 17, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030717d.jpg" width="353">
The Philadelphia Fed&#146;s index of general business conditions for July rose slightly more than expected to 8.3 from 4.0 in June. Consensus expectations had been for a reading of 7.0.
Gains amongst the sub indexes were broad based. New orders improved substantially to 10.4, the first month in five the index was not in negative territory. Shipments also surged to 9.1, the first positive reading in four months. The employment index even indicated positive growth for only the third month since October 2000.
During the last twenty years there has been a 67% correlation between the level of the Philadelphia Fed Business Conditions Index and quarterly growth in real GDP. The correlation with quarterly growth in factory sector industrial production has been 79%.
The business conditions index reflects a separate survey question, not the components.
A separate survey of expected business conditions in six months rose to 56.9, the highest reading since November 1992.
The prices paid index fell to -6.5, the first negative reading since February 2002.
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 Fed can be found <a href="http://www.phil.frb.org/media/newsreleases/071703.html">here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>8.3</td>
<td>4.0</td>
<td>5.9</td>
<td>7.7</td>
<td>-17.2</td>
<td>8.3</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-6.5</td>
<td>5.8</td>
<td>19.2</td>
<td>12.2</td>
<td>-0.9</td>
<td>27.2</td>
</tr>
</tbody>
</table>
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The Business Cycle Dating Committee at the National Bureau of Economic Research (NBER) reported that "a trough in economic activity occurred in November 2001." Earlier this month, Haver Analytics began using November 2001 as the [...]

NBER Determined the Recession Ended in November 2001

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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Business in the service sector recovered last month. The Services PMI rose to 52.4 during October after falling to 50.0 in September, following a rise to 52.0 in August, according to the Institute for Supply Management. The index hit a recent high of 55.8 in October of last year and remains below the all-time high of 67.5 in November 2021. The Action Economics Forecast Survey expected a reading of 50.9 in October.

The ISM Composite Index, developed by Haver Analytics, combines the services index and the ISM manufacturing index released on Monday. This index rose to 52.0 in October, the highest level since February, after declining to 49.9 in September.

Most components of the services index increased last month. The business activity index rose to 54.3 last month after falling to 49.9 in September. It remained below its high of 70.9 in both October & November of 2021. Twenty-three percent (NSA) of respondents reported improved activity while 15.3% reported decline. The new orders index surged to a twelve month high of 56.2 after falling to 50.4 in September. Twenty-eight percent (NSA) of respondents reported improved orders while a 16.3% reported decline. Also working higher, the employment series rose to 48.2, its highest level in five months, after rising to 47.2 in September. A higher 14.3% (NSA) of respondents reported increased employment while 17.9% reported declines. Working lower, the supplier delivery series fell to 50.8 in October after rising to 52.6 in September. A lessened 3.5% of respondents (NSA) reported faster delivery speeds while a much lower 5.1% reported slower speeds.

On the inflation front, the prices index rose to a three-year high of 70.0 in October after rising to 69.4 in September. The index has increased from its March 2024 low of 53.5. An increased 43.2% (NSA) of respondents reported higher prices while 5.4% reported lower prices.

Additionally, the new export orders index rose to 47.8 (NSA) in October following a decline to 46.5 in September. A higher 14.1% of survey respondents reported higher exports while a steady 18.6% reported decline. The imports index fell to 43.7 last month after falling to 49.2 in September. A lessened 6.9% of respondents reported higher imports while an increased 19.6% reported decline. The inventory change index rose to 49.5 after falling to 47.8 and the order backlog index declined sharply to 40.8 and reversed its September rise. These series are not seasonally adjusted and not included in the ISM Services PMI total.

The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector, while below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries.

The ISM figures are available in Haver's **USECON** database, with additional detail in the **SURVEYS** database. The expectations figure from Action Economics is in the **AS1REPNA** database.

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- Total services index is highest since February.
- Business activity, new orders and employment increase.
- Prices index continues upward trend from 2024 low.

U.S. ISM Services PMI Rebounda in October; Price Index Advances

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

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

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

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

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

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

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

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

U.S. ADP Employment Recovers in October

Winnie Tapasanun

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

U.S. Energy Prices Are Mixed in Latest Week

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

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

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

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

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

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

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

Economy in Brief: 2003

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