Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040107a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association last week recovered half of the prior week&#39;s 9.0% drop (-49.3% y/y).
Purchase applications rose 2.9% w/w (+6.7% y/y) following two weeks of sharp decline. Purchase applications started 2004 2.1% below the December average which fell 3.8% versus November.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance rose 6.8% w/w and gained back half of the prior week&#39;s decline (-70.1% y/y). Refis started 2004 5.1% below the December average which fell 16.3% versus November.
The effective interest rate on a conventional 30-Year mortgage rose to 6.10% versus 5.97% averaged last year. The effective rate on a 15-year mortgage also rose to 5.48% from 5.38% averaged during 2003.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">1/02/04</th>
<th scope="col">12/26/03</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>599.9</td>
<td>574.1</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>401.3</td>
<td>390.1</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,755.4</td>
<td>1,644.3</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
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The index of mortgage applications compiled by the Mortgage Bankers Association last week recovered half of the prior week's 9.0% drop (-49.3% y/y). Purchase applications rose 2.9% w/w (+6.7% y/y) following two weeks of sharp decline. [...]

Mortgage Applications Up Modestly

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040107b.jpg" width="353">
The Russian economy continues to show good growth. Although slightly below the pace of the first two quarters, gross domestic product in the third quarter of last year was 6.2% above the third quarter of 2002. Moreover, current indicators in October and November suggest the fourth quarter will be strong.
Russia publishes the monthly changes and the year over year changes in the output of five basic indicators: Agriculture, Construction, Industry, Retail Trade and Transportation Services. These indicators and industrial production frequently foreshadow changes in GDP. The sharp turn around in the increase in agriculture output, which went to positive changes in October and November from negative ones in two of the months of the third quarter, is significant. 

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<th scope="col" class="firstcol">Year over Year % Change</th>
<th scope="col">Nov 03&nbsp;</th>
<th scope="col">Oct 03</th>
<th scope="col">Sep 03</th>
<th scope="col">Aug 03</th>
<th scope="col"> July 03 </th>
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<td class="firstcol">Industrial Production</td>
<td>7.08</td>
<td>7.09</td>
<td>7.75</td>
<td>5.19</td>
<td>6.87</td>
</tr>
<tr>
<td class="firstcol">Agriculture</td>
<td>8.0</td>
<td>13.1</td>
<td>7.9</td>
<td>-16.2</td>
<td>-11.2</td>
</tr>
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<td class="firstcol">Construction</td>
<td>11.6</td>
<td>14.6</td>
<td>14.7</td>
<td>14.3</td>
<td>15.0</td>
</tr>
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<td class="firstcol">Industry</td>
<td>7.1</td>
<td>7.2</td>
<td>8.0</td>
<td>5.5</td>
<td>7.1</td>
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<td class="firstcol">Retail Sales</td>
<td>7.0</td>
<td>7.1</td>
<td>7.0</td>
<td>6.1</td>
<td>7.9</td>
</tr>
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<td class="firstcol">Transportation Services</td>
<td>7.0</td>
<td>7.0</td>
<td>6.0</td>
<td>8.3</td>
<td>7.6</td>
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The Russian economy continues to show good growth. Although slightly below the pace of the first two quarters, gross domestic product in the third quarter of last year was 6.2% above the third quarter of 2002. Moreover, current [...]

Russian Third Quarter 2003 Gross Domestic Product Is Up 6.2% 0ver a Year Ago

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040106a.jpg">
Light vehicle sales added 7.2% in December to the 7.7% November gain and rose to 18.06M, the second highest monthly selling rate for the year. Consensus expectations had been for sales of 17.0M.
For the year, light vehicle sales fell 0.6% versus 2002 to 16.71M. The peak for annual sales was in 2000 at 17.40M.
Cash rebates of up to $5,000 were successful in lifting sales of light trucks to 10.24M, up 12.9% m/m.
Car sales rose slightly in December to 7.82M. For 2003, sales fell for the third straight year to 7.64M. The peak for car sales was in 1986 at 11.41M.
Domestic light vehicle sales rose 10.3% m/m to 14.89M as truck sales jumped 15.4% m/m (3.8% y/y).
Imported vehicle sales fell 5.3% m/m to 3.16M (-6.4% y/y). Imports captured 17.5% of the US market for new vehicles in December and 19.8% for the year.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM"> Light Vehicle Sales (SAAR, Mil.Units)</a></th>
<th scope="col"> Dec</th>
<th scope="col">Nov</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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<td class="firstcol">Total</td>
<td>18.06</td>
<td>16.84</td>
<td>-1.4%</td>
<td>16.71</td>
<td>16.81</td>
<td>17.26</td>
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<td class="firstcol">&nbsp; Autos</td>
<td>7.82</td>
<td>7.77</td>
<td>-7.1%</td>
<td>7.64</td>
<td>8.07</td>
<td>8.48</td>
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<td class="firstcol">&nbsp; Light Trucks</td>
<td>10.24</td>
<td>9.07</td>
<td>3.4%</td>
<td>9.07</td>
<td>8.74</td>
<td>8.78</td>
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ISM Non-Manufacturing Index Fell Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 6, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040106c.jpg">
The Business Activity Index for the non-manufacturing sector, reported by the Institute for Supply Management, fell in December to 58.6 versus 60.1 in November and 64.7 in October. Consensus expectations had been for little change at 60.5.
Since the series&#39; inception in 1997 there has been a 58% correlation between the level of the ISM non-manufacturing business activity index and the quarterly change in real GDP for services plus construction.
The employment index dipped modestly to 54.0 versus the strong reading of 54.9 in November.
Since the series&#39; inception in 1997 there has been a 64% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing and construction industries.
New orders improved to a reading of 61.2 versus 60.1 the prior month.
Business activity for the non-manufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index weights the components.
The seasonally adjusted prices index rose to 60.0 in December and for the year stood at the highest level since 2000.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively. 

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</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>
<tbody>
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<td class="firstcol">Business Activity Index</td>
<td>58.6</td>
<td>60.1</td>
<td>54.2</td>
<td>58.3</td>
<td>55.1</td>
<td>49.0</td>
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<tr>
<td class="firstcol">Prices Index</td>
<td>60.0</td>
<td>58.0</td>
<td>55.3</td>
<td>56.7</td>
<td>53.9</td>
<td>51.6</td>
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Challenger Layoffs Lower 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 6, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040106d.jpg">
Announced job cuts in December fell 6.5% m/m and pulled the full year figure down 13.6% versus 2003 according to Challenger, Gray &amp; Christmas.
The three month moving average of job cut announcements again rose (-14.6% y/y) due to a spike in layoffs in October.
Announced layoffs fell the services (-16.0% in 2003), electronics (-18.5% in 2003), telecommunications (-58.6% in 2003) and transportation (-32.2% in 2003) industries. Job cut announcements rose m/m in the aerospace (-36.1% in 2003), apparel (+69.6% in 2003), automotive (-33.1% in 2003), chemical (+1.5% in 2003), computer (-52.6% in 2003), financial (-42.0% in 2003) and pharmaceutical (+148.3% in 2003) industries.
Job cut announcements differ from layoffs in that many are achieved through attrition or just never occur.
During the last ten years there has been an 83% (inverse) correlation between the three month average level of announced job cuts and the y/y percent change payroll employment.

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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">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
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<td class="firstcol">Announced Job Cuts</td>
<td>93,020</td>
<td>99,452</td>
<td>0.1%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
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</tbody>
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Chain Store Sales Slip 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 6, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040106b.jpg">
Chain store sales slipped 0.1% the opening week of the New Year, according to the ICSC-UBS survey. The dip followed strong gains in the prior three weeks. For the year, weak pricing power pulled the rise in sales down to 2.9% versus a 3.6% gain in 2002.
December sales fell 0.3% versus the November average. In November, sales rose 0.5% versus the prior month.
During the last five years there has been a 61% correlation between the year-to-year percent change in the ICSC-UBS measure of 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</a><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> (SA, 1977=100)</a></th>
<th scope="col">01/03/04</th>
<th scope="col">12/27/03</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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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>430.9</td>
<td>431.4</td>
<td>5.6%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Factory Orders and Inventories Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 6, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040106e.jpg">
Factory orders fell an expected 1.4% in November. The advance report of a 3.1% drop in durable goods orders was revised shallower to a 2.5% decline. Orders for computers fell 1.2% (+31.0% y/y) Non-durable goods orders fell 0.2% (+4.5% y/y).
A report titled &quot;Computer Use and Productivity Growth&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20031201/cover.pdf"> here</a>.
Manufacturing inventories fell 0.2% following the slight increase in October. Excluding the defense industry inventories fell 0.2% (-1.7% y/y) and have fallen in each of the last nine months.
Factory shipments were unchanged. Shipments excluding transportation fell 0.3% (4.2% y/y).

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM"> Factory Survey</a> (NAICS)</th>
<th scope="col">Nov</th>
<th scope="col">Oct</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">Inventories</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>-1.0%</td>
<td>-1.8%</td>
<td>-6.1%</td>
<td>3.8%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>-1.4%</td>
<td>2.4%</td>
<td>6.0%</td>
<td>-1.9%</td>
<td>-6.7%</td>
<td>5.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>0.0%</td>
<td>0.7%</td>
<td>4.1%</td>
<td>-2.0%</td>
<td>-5.4%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.7%</td>
<td>1.7%</td>
<td>3.4%</td>
<td>-6.1%</td>
<td>-5.9%</td>
<td>8.7%</td>
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</tbody>
</table>


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Light vehicle sales added 7.2% in December to the 7.7% November gain and rose to 18.06M, the second highest monthly selling rate for the year. Consensus expectations had been for sales of 17.0M. For the year, light vehicle sales fell [...]

Incentives Spur U.S. Light Vehicle Sales

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040105b.jpg" width="353">
Activity in German manufacturing showed a surprisingly large month-to-month increase in December according to the NTC Research Purchasing Managers Survey. ( NTC publishes diffusion indexes for purchasing managers surveys of manufacturing, service industries and construction for a number of countries. These diffusion indexes represent a balance that ranges from 0% to 100%, with numbers above 50 representing expansion and those below, representing contraction.)
The 3.58% rise in the German manufacturing index in December brought the index to 52.97, marking the fourth month the index was above the 50 mark and its highest level since early 2001. The level of the German index is now above those of the other major economies - France, Italy and Spain - economies that had preceded Germany into the expansionary phase.
Because of decline in the indexes for these three countries, the overall index for the Eurozone rose less than one-half of one percent in December.

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<th scope="col" class="firstcol">Manufacturing PMI</th>
<th scope="col">Dec 03</th>
<th scope="col">Nov 03</th>
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<td class="firstcol">Eurozone</td>
<td>52.40</td>
<td>52.15</td>
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<td class="firstcol">Germany</td>
<td>52.97</td>
<td>51.14</td>
</tr>
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<td class="firstcol">France</td>
<td>51.90</td>
<td>52.70</td>
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<td class="firstcol">Italy</td>
<td>51.88</td>
<td>52.34</td>
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<td class="firstcol">Spain</td>
<td>51.83</td>
<td>52.63</td>
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Activity in German manufacturing showed a surprisingly large month-to-month increase in December according to the NTC Research Purchasing Managers Survey. ( NTC publishes diffusion indexes for purchasing managers surveys of [...]

Activity in German Manufacturing Shows Strength

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040105a.jpg" width="353">
The value of total construction put in place jumped 1.2% (7.4% y/y) in November. A 0.5% rise was expected. On average, construction spending has risen 1.2% in each of the last six months.
Private residential building activity surged 2.0%. Single family home building spurted 2.9% in November (20.0% y/y).
Commercial construction managed a 0.4% gain following two months of sharp decline (+1.4% y/y but education spending fell 0.8% (-2.1% y/y). Office construction, up 1.3%, posted the fourth strong consecutive monthly gain (-4.2% y/y).
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM"> Construction Put-in-place</a></th>
<th scope="col"> Nov</th>
<th scope="col">Oct</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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</thead>
<tbody>
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<td class="firstcol">Total</td>
<td>1.2%</td>
<td>1.1%</td>
<td>7.4%</td>
<td>1.1%</td>
<td>2.7%</td>
<td>8.3%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>1.2%</td>
<td>1.4%</td>
<td>8.3%</td>
<td>-0.2%</td>
<td>1.4%</td>
<td>8.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>2.0%</td>
<td>2.2%</td>
<td>14.1%</td>
<td>8.6%</td>
<td>3.3%</td>
<td>7.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>-2.1%</td>
<td>1.6%</td>
<td>-3.6%</td>
<td>-13.0%</td>
<td>-1.3%</td>
<td>8.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>1.2%</td>
<td>0.8%</td>
<td>6.6%</td>
<td>5.3%</td>
<td>7.4%</td>
<td>9.5%</td>
</tr>
</tbody>
</table>
</body>
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The value of total construction put in place jumped 1.2% (7.4% y/y) in November. A 0.5% rise was expected. On average, construction spending has risen 1.2% in each of the last six months. Private residential building activity surged [...]

U.S. Construction Spending Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040102a.jpg" width="353">
The Purchasing Managers&#146; Composite Index (PMI) released by the Institute of Supply Management rose to 66.2 in December from 62.8 in November. It was the highest level for the Composite Index since December 1983. Consensus expectations were for a reading of 61.0.
During the last twenty years there has been a 72% correlation between the level of the PMI index and the three month growth in factory sector industrial production. There has been a 58% correlation between the level of the PMI Composite Index and quarterly growth in real GDP.
The new orders index rose to 77.6, the highest level since July 1950. The production index also jumped to 73.0, the highest level since December 1983.
The employment index at 55.5 has risen nearly 10 points during the last three months. There has been a 72% correlation during the last ten years between the ISM employment index and the one-month change in factory sector payrolls.
The inventory index fell to 47.3 and reversed half of the prior month&#39;s gain.
The prices paid index rose last month to 66.0, the highest level since May 2000. There has been a 28% correlation between the prices paid index and the y/y change in the finished goods PPI over the last ten years. The correlation with the intermediate materials PPI has been a higher 63%.

<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/@EF/@EF02/@EF02.HTM"> ISM Manufacturing Survey</a></th>
<th scope="col"> Dec</th>
<th scope="col">Nov</th>
<th scope="col">Dec &#39;02</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">Composite Index</td>
<td>66.2</td>
<td>62.8</td>
<td>55.2</td>
<td>53.5</td>
<td>52.4</td>
<td>44.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>77.6</td>
<td>73.7</td>
<td>62.9</td>
<td>58.3</td>
<td>56.7</td>
<td>46.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>66.0</td>
<td>64.0</td>
<td>55.0</td>
<td>59.6</td>
<td>57.6</td>
<td>42.9</td>
</tr>
</tbody>
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The Purchasing Managers Composite Index (PMI) released by the Institute of Supply Management rose to 66.2 in December from 62.8 in November. It was the highest level for the Composite Index since December 1983. Consensus expectations [...]

ISM Factory Index Up Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031231a.jpg" width="353">
Initial claims for jobless insurance fell last week to 339,000, the lowest level since the first week of 2001. The prior week&#39;s level was little revised at 354,000. Consensus expectations had been for claims of 350,000.
The four-week moving average of initial claims fell to 355,750 (-13.3% y/y).
Continuing claims for unemployment insurance rose 81,000 but the prior week&#39;s sharp decline was about doubled to 74,000.
The insured rate of unemployment was unchanged at 2.6% for the sixth straight week.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">12/27</th>
<th scope="col">12/20</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>339.0</td>
<td>354.0</td>
<td>-15.3%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,315</td>
<td>-4.4%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
</table>
Mortgage Applications Lower 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 31, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031231b.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association fell 9.0% last week (-39.6% y/y).
Purchase applications fell 5.2% w/w (+17.4% y/y). Purchase applications so far in December are down 3.8% from the November average.
Applications to refinance fell 13.8% week to week (-63.9% y/y). December refis are down 16.3% from November.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-Year mortgage rose slightly to 6.00%. The effective rate on a 15-year mortgage also rose to 5.36%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><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">12/26</th>
<th scope="col">12/19</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>574.1</td>
<td>631.2</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>390.1</td>
<td>411.6</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,644.3</td>
<td>1,908.3</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for jobless insurance fell last week to 339,000, the lowest level since the first week of 2001. The prior week's level was little revised at 354,000. Consensus expectations had been for claims of 350,000. The four-week [...]

Jobless Insurance Claims Lowest Since Early 2001

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031230a.jpg" width="353">
The Chicago Purchasing Managers Business Barometer for December gave back slightly more of the prior month&#39;s surge than was expected. The decline to 59.2 was versus Consensus expectations for a decline to 62.0 and followed the November jump to 64.1 from 55.0 in October.
During the last twenty years there has been a 55% correlation between the level of the Chicago PMI and quarterly growth in real GDP.
The new orders index (65.5) fell the hardest m/m but the level was still the second highest in four years. Production (63.4) gave back less of the November jump and remained at the second highest level since May 2002.
Employment (49.6) recovered some of the November decline and for the fourth quarter was at the highest level (50.4) since 1Q 2000.
The index of prices paid fell sharply and gave back much of the gains in the prior two months.

<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/@EF/@EF05/@EF05.HTM"> Chicago Purchasing Managers Index, SA</a></th>
<th scope="col"> Dec</th>
<th scope="col">Nov</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">Business Barometer</td>
<td>59.2</td>
<td>64.1</td>
<td>51.7</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>65.5</td>
<td>73.3</td>
<td>56.0</td>
<td>58.1</td>
<td>56.3</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>58.6</td>
<td>67.3</td>
<td>61.8</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
</tr>
</tbody>
</table>
Consumer Confidence Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 30, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031230c.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence fell about as expected in December to 91.3. November&#39;s level was revised up.
The 1.3% m/m decline in Confidence matched the decline in Consumer Sentiment reported by the University of Michigan.
The expectations index added to the prior month&#39;s jump and rose to 102.9. November was revised up.
The reading of the present situation retraced half of the prior month&#39;s surge and fell to 73.9.
Jobs were viewed as hard to get by 32.6% of respondents. The increase from November recouped much of that month&#39;s decline but the level remained down from the 35.1% September high.
Expectations for business conditions in six months improved to the best level since late 1992.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<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/@EF/@EF14/@EF1401/@EF1401.HTM"> Conference Board</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</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">Consumer Confidence</td>
<td>91.3</td>
<td>92.5</td>
<td>13.1%</td>
<td>79.5</td>
<td>96.6</td>
<td>106.6</td>
</tr>
</tbody>
</table>
Existing Home Sales Down Again in November 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 30, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031230d.jpg" width="353">
Sales of existing single family homes reported by the National Association of Realtors fell 4.6% in November to 6.06M. The decline about matched the 4.9% October drop and was versus Consensus expectations for an increase.
The figures reflect closings of home sales in earlier months.
Sales fell across the nation. In the Northeast sales fell 4.1% (+6.1% y/y). In the Midwest sales fell 6.6% (+1.6% y/y). Sales in the South fell 5.1% (+8.0% y/y) and in the West sales fell 2.4% (+9.3% y/y).
The median price of an existing home fell m/m to $170,900 (+5.9% y/y).
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/PublicAffairsWeb.nsf/Pages/EHSNov03?OpenDocument"> 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/@E9/@E905/@E90501/@E90501.HTM"> Existing Home Sales (000, AR)</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</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">Existing Single-Family</td>
<td>&nbsp;6,060</td>
<td>&nbsp;6,350</td>
<td>6.9%</td>
<td>5,595</td>
<td>5,292</td>
<td>5,158</td>
</tr>
</tbody>
</table>
A Very Happy Holiday for Chain Stores 
by <a href="/comment/Moeller.html">Tom Moeller</a> December 30, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031230b.jpg" width="353">
Chain store sales surged 2.0% during Christmas week, according to the ICSC-UBS survey. That increase added to 0.6% and 2.1% gains in the prior two weeks.
The late month jump pulled sales for December almost even (-0.3%) with the November average. During all of November sales rose 0.5% versus the prior month.
During the last five years there has been a 61% correlation between the year-to-year percent change in the ICSC-UBS measure of 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.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS</a><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> (SA, 1977=100)</a></th>
<th scope="col">12/27/03</th>
<th scope="col">12/20/03</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">Total Weekly Retail Chain Store Sales</td>
<td>431.4</td>
<td>423.1</td>
<td>5.5%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Chicago Purchasing Managers Business Barometer for December gave back slightly more of the prior month's surge than was expected. The decline to 59.2 was versus Consensus expectations for a decline to 62.0 and followed the [...]

Chicago Purchasing Agents' Index Down More Than Expected

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

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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Andrew Cates

**Positive Growth Surprises, Negative Inflation Surprises—For Now**
The global macro backdrop heading into the latest Middle East shock was, by recent standards, relatively constructive. As the chart shows, growth data had been consistently surprising to the upside, while inflation surprises have been in negative territory—an unusually benign combination suggesting resilient activity alongside easing price pressures. What is striking, however, is that—at least through March and into early April—this pattern has not yet been meaningfully dislodged. For now, the data flow still reflects a world that was stabilising rather than deteriorating. That said, this is almost certainly a lagging signal. Supply-side shocks of this nature—particularly those centred on energy—tend to work with a delay but can be highly disruptive once they feed through. The risk, therefore, is that the current “goldilocks” surprise dynamic proves short-lived as higher energy costs, supply chain frictions and rising uncertainty begin to reshape the incoming data in the weeks ahead.

260409Z1.jpg

**Monetary Policy Expectations Shift as Easing Bets Are Repriced**
How policymakers respond to the evolving situation in the Middle East will be critical in shaping both market dynamics and the broader global outlook. This chart, based on the latest April Blue Chip Financial Forecasts survey, suggests that expectations are already beginning to shift. Forecasters are now less inclined to anticipate policy easing in the period ahead—particularly in the euro area, where expectations for rate cuts have been scaled back. Similarly, some of the easing previously priced for the Federal Reserve and the Bank of England has been pared back over the next 12 months. While this is not yet a full pivot toward tightening, it does point to a more cautious policy backdrop, reflecting the risk that renewed energy-driven inflation pressures could constrain central banks’ ability to support growth.

260409Z2.jpg

**Delay, Don’t Tighten: Central Banks’ Likely Playbook**
If the previous chart highlights a shift in policy expectations, this one gives a clearer sense of the reaction function underpinning it. When asked how central banks would respond if energy-driven inflation proves more persistent, most panellists point not to renewed tightening, but to a more cautious delay in easing. In other words, the hurdle for rate cuts has risen, even if the bar for  hikes remains relatively high. This distinction matters. It suggests that policymakers are likely to treat the shock as a supply-driven inflation impulse—one that complicates the outlook but does not automatically warrant aggressive tightening. At the same time, the responses underscore a second important theme: divergence. A sizeable share of forecasters expect policy paths to vary significantly across regions, reflecting differences in energy exposure, inflation dynamics and domestic growth conditions. Taken together, the message is one of constrained flexibility. Central banks may want to support growth, but persistent energy pressures could keep them on hold for longer than previously anticipated—reinforcing the more cautious policy outlook already evident in market pricing.

260409Z3.jpg

**Markets Signal Fiscal Concern, Not Inflation Panic**
If central banks are likely to proceed cautiously, financial markets are already beginning to draw their own conclusions. This chart shows that the recent adjustment in US Treasury markets has been driven primarily by a rise in real yields rather than a meaningful increase in inflation expectations. In other words, markets are not yet pricing a loss of monetary policy credibility or a sharp unanchoring of inflation expectations. Instead, the move points more toward concerns around the broader policy mix—particularly the fiscal backdrop and the potential for increased borrowing needs in an environment of heightened geopolitical risk. This distinction is important. A rise in inflation expectations would suggest fears of central banks falling behind the curve. What we are seeing instead is a repricing of real rates, consistent with tighter financial conditions and a higher risk premium. For now, at least, markets appear to view the shock less as a classic inflation spiral and more as a development that complicates the growth outlook and places greater strain on policy frameworks—especially on the fiscal side.

260409Z4.jpg

**Electricity Prices Reflect Energy Dependence**
The initial response in electricity markets since the Middle East disruption has followed a familiar pattern. Economies with greater domestic energy capacity—such as Scandinavia and, to a lesser extent, the US—have seen relatively contained electricity prices. By contrast, those more reliant on imported energy—most notably the UK and parts of Europe—continue to face significantly higher costs

260409Z5.jpg

**Generation Capacity Determines Energy Resilience**
These price dynamics are closely linked to underlying differences in electricity generation capacity. As the sixth chart shows, countries with higher per capita electricity production—again including Scandinavia and the US—are structurally better positioned to absorb external shocks. In contrast, economies with more limited domestic generation capacity, such as the UK and Germany, are inherently more exposed to fluctuations in global energy markets. This structural divide is likely to prove increasingly important in the period ahead, influencing not just near-term inflation outcomes but also the relative resilience of growth across economies as energy costs remain volatile.

260409Z6.jpg

Amid further tentative signs of de-escalation—most notably President Trump’s decision on April 7th to step back from further escalation—financial markets have stabilised somewhat, but the macroeconomic implications of the Middle East crisis remain highly uncertain. As our charts show, the global economy entered this shock from a position of relative strength, with positive growth surprises and easing inflation pressures still evident in the data (chart 1). However, that benign backdrop now looks vulnerable. Central banks are already reassessing the outlook, with expectations for policy easing being pared back (chart 2) and a growing consensus that any response to persistent energy-driven inflation will likely involve delaying cuts rather than tightening aggressively—albeit with significant regional divergence (chart 3). Financial markets, for their part, are not yet signalling a loss of inflation control, but the rise in real yields suggests increasing concern around the broader policy mix, particularly fiscal pressures (chart 4). Finally, the adjustment to the shock is unlikely to be uniform. Structural differences in domestic energy capacity are already driving wide divergences in electricity prices, leaving more import-dependent economies exposed to higher costs and sharper trade-offs between growth and inflation (charts 5 and 6). Taken together, the message is clear: even if geopolitical tensions ease, the economic aftershocks are likely to be uneven, persistent and increasingly shaped by structural constraints.

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Charts of the Week: From Oil Shock to Policy Dilemma

Michael J. Moran

260409A.jpg

260409B.jpg

This monthly report is always packed with information relating to the household sector. At this time, most observers will probably be most interested in price developments, and the results for February were a bit unsettling. The headline price index rose 0.4%, influenced by a jump of 0.8% in energy prices. This increase was largely anticipated and not especially troubling when viewed in isolation. Energy prices have shown little net change in the past two years, and the latest reading of the index was comfortably within the recent range of observations. However, given developments in the Middle East, energy prices undoubtedly will surge out of that recent range in the months ahead.

Core PCE prices also rose 0.4%, a touch firmer than the expected increase of 0.3%. An increase of 0.4% in core inflation is a quick pace even when viewed in Isolation, but this advance followed a similar increase in January, and the December reading almost rounded to 0.4%. These recent changes pulled the year-over-year increase in core prices to 3.0%, a full percentage point above the Federal Reserve’s target.

Nominal personal income dipped 0.1% in February, which translated to a decline of 0.4% after adjusting for inflation (almost rounding to -0.5%). The softness is striking, but a review of the detail suggests that special factors played a role. Much of the weakness reflected a decline of 1.7% in dividend income, which followed a jump of 1.9% in January. Dividend payments in the prior two years followed the same pattern, leaving one to suspect that seasonal adjustment has gone awry. Government transfer payments also declined, with the miscellaneous category accounting for most of the drop. Medicaid payments also fell, marking the fifth consecutive decline, most likely driven by the tightening of provisions included in the One Big Beautiful Bill Act.

Nominal consumer expenditures rose 0.5%, a seemingly strong result, but the change amounted to only 0.1% in real terms. The small increase followed a flat reading in January and increases of only 0.1% in November and December. Consumers spent actively in the second and third quarters of last year, but they have become cautious recently. The data in hand suggest real outlay growth of approximately 1.0% in the first quarter, slower than the average pace of 3.0% in the middle of last year and 1.9% in 2025-Q4.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- The energy component contributed to a high-side reading on the price index for personal consumption expenditures; the core component was firm as well.
- Consumer spending showed signs of slowing.

Personal Income, Consumption, and Prices: Higher Prices Dampen Real Gains

Sandy Batten

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The third estimate of Q4 2025 GDP showed that real GDP growth slowed to 0.5% q/q saar versus 0.7% in the second estimate and 1.4% in the advance estimate. GDP had grown 4.4% in Q3. The more than one-month long shutdown of the federal government continued to have been a notable restraint on GDP growth in Q4, subtracting 1.0%-point from overall growth, the same as in the second estimate.

Revisions were very small across major expenditure categories. Growth of personal consumption expenditures was revised down slightly to 1.9% q/q saar from 2.0% previously. Nonresidential fixed investment increased 2.4%, up slightly from the 2.2% reported in the second estimate. The 0.5% q/q decline previously reported for residential investment was revised to a larger decline of 1.7%, subtracting 0.1%-point from overall growth versus 0.0%-point in the previous estimate. Inventories declined more than previously estimated, reducing their contribution to growth from 0.3%-point in the second estimate to 0.1%-point in today’s estimate.

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There were slight downward revisions to the declines previously reported for both exports and imports, leaving net exports essentially unrevised. As already noted, a 16.6% q/q saar plunge in federal government spending (revised down slightly from -16.7%) accounted for most of the weakness in Q4. This included a 24.3% q/q collapse in nondefense spending, the second largest quarterly decline in nearly forty years. By contrast, state and local government spending increased 1.5%, revised up from 1.2% in the previous estimate.

Private domestic demand growth (final sales to private domestic purchasers, a favored gauge of demand by the Federal Reserve) was revised slower to 1.8% q/q saar in Q4 from 1.9% in the second estimate and 2.4% in the advance report. However, even the revised pace of growth is respectable and close to the economy’s potential growth rate.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Q4 GDP growth revised to 0.5% q/q saar from 0.7% in the first revision and 1.4% in the advance report.
- The shutdown of the federal government still played a critical role in the slowdown, subtracting 1.0%-point from Q4 growth.
- Domestic demand slowed further with final sales to private domestic purchasers revised down to 1.8% from 1.9% in the first revision and 2.4% in the advance report.

U.S. Q4 2025 Real GDP Growth Revised Slower

Robert Brusca

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Germany’s industrial production slipped in February, driven lower by dropping output of consumer goods. Sequential growth rates over 12 months, six months, and three months show a confusing array of patterns, except for intermediate goods, where annualized growth rates for output sequentially weaken and show declines on each horizon. All German sector growth rates for the quarter-to-date are showing declines, and the growth rankings by sector are below 50% across the broad, indicating below median performance across German sectors.  It’s a very unimpressive report.

Real manufacturing orders rose modestly in February against the backdrop of a very sharp drop in January. Real manufacturing sales have been erratic.

German output and industrial gauges, ranked on annual sales growth against historic norms, have been very weak. Only real orders post a standing above 50%, which represents the median.
 
France, Spain, Portugal, Sweden, and Norway provide some perspective on European growth. The northern European non-EMU member countries are much stronger than the EMU reporters, two of which have standings below their median levels (rankings below 50).

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Germany

German IP Is Weak in February

Kathleen Stephansen, CBE

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Mortgage applications declined 0.8% w/w (-5.6% y/y) in the week ending April 3. The weekly decline eased relative to the prior three weeks, when mortgage applications dropped by 10.4% w/w (+14.2% y/y) in the week ending March 27, and by 10.5% and 10.9% in the March 20 and 13 weeks, respectively, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house rose 1.1% w/w (-6.7% y/y) in the April 3 week, after declining 2.6% w/w (+0.8% y/y) in the week ending March 27.  Applications for loan refinancing dropped by a smaller 2.8% w/w (-4.3% y/y) in the latest week, following weekly declines of 17.3% (+33.2% y/y) in the March 27 week, 14.6% in the March 20 week, and of 18.5% in the week ending March 13.

The effective interest rate on a 30-year fixed-rate loan declined 8bps to 6.68% in the week ending April 3 from 6.76% in the week ending March 27 and after having risen by 52bps since the February 27 week. The rate on 15-year fixed-rate mortgages rose 1bp to 6.09% in the latest week from 6.08% in the prior week. The 30-year Jumbo rate declined 6bps to 6.65% in the week ending April 3 from 6.71% in the March 27 week. The rate on a 5-year ARM eased 3bps to 5.85% in the latest week from 5.88% in the week ending March 27.

The share of applications for refinancing an existing loan declined to 44.3% of total applications in the week of April 3, from 45.3% in the March 27 week. The adjustable-rate mortgage (ARM) share of activity rose to 8.6% in the week ending April 3 from 8.0% in the week ending March 27.

The average size of a mortgage loan edged up 0.2% w/w (-9.1% y/y) to $390,100 in the week ending April 3, after declining 1.3% w/w (-1.9% y/y) to $389,200 in the week ending March 27. The average size of a purchase loan edged down 0.3% w/w (-0.9% y/y) to $448,100 in the latest week, following a decline of 0.8% w/w (+0.4% y/y) to $449,400 in the March 27 week. The average size of a loan to refinance a mortgage edged up 0.1% w/w (-20.7% y/y) to $317,000 in the week ending April 3 after declining 5.5% w/w (+0.3% y/y) to $316,600 in the March 27 week. From the week ending February 27 to the week ending March 27, the average size of a loan to refinance a mortgage had declined 21.8%.

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

- Signs of stabilization in mortgage applications emerged in the latest week.
- Applications for loans to purchase posted a small increase, while applications for loan refinancing posted a small decline in the latest week.
- Interest rate on 30-year fixed-rate loans eased 8bps to 6.68%. 
- Average loan size edged up.