Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129a.jpg" width="353">
The labor market remained under pressure last week as indicated by another rise in continuing claims for unemployment insurance. During the week of January 17 they rose 159,000 and that followed an upwardly revised 102,000 increase during the prior period. To emphasize the labor market&#39;s weakness, the latest increase raised continuing claims above their 1982 high to a new record for the series which dates back to 1966. The four-week average of continuing claims rose 66,500 to 4,630,000. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
Though the latest level of continuing claims was a record, the labor force has grown as well. Therefore, the insured rate of unemployment was not at a new high. It did, however, rise to 3.6%, the highest since 1983. The highest insured unemployment rates in the week ending January 10 were in Michigan (7.3 percent), Oregon (6.7), Idaho (6.5), South Carolina (6.0), Pennsylvania (5.8), Wisconsin (5.7), Indiana (5.5), Nevada (5.3), Montana (5.2), Puerto Rico (5.2), and Rhode Island (5.2).
Initial claims for unemployment insurance also pointed to severe labor market weakness with a 3,000 rise to 588,000 during last week. The prior week&#39;s gain was revised down slightly but the latest level surpassed Consensus expectations for 575,000 claims. It was the highest since late during the sharp recession of 1981-82. During that recession, real GDP fell by 2.9% peak-to-trough.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129b.jpg" width="353">
The Labor Department indicated that the largest increases in initial claims for the week ending January 17 were in Florida (+6,500), California (+1,826), Puerto Rico (+1,308), Texas (+537), and Massachusetts (+86), while the largest decreases were in Michigan (-33,365), North Carolina (-25,516), Georgia (-12,635), New York (-12,432), and Pennsylvania (-10,077).
World Growth Grinds to Virtual Halt, IMF Urges Decisive Global Policy Response. The report from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/RES012809A.htm">here</a>.
Behavior of Libor in the Current Financial Crisis from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-04.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">01/24/09</th>
<th scope="col">01/17/09</th>
<th scope="col">01/10/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>588</td>
<td>585</td>
<td>527</td>
<td>60.7%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,776</td>
<td>4,617</td>
<td>76.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
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The labor market remained under pressure last week as indicated by another rise in continuing claims for unemployment insurance. During the week of January 17 they rose 159,000 and that followed an upwardly revised 102,000 increase [...]

U.S. Weekly Continuing Claims For Jobless Insurance At Record High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129c.jpg" width="353">
The factory sector continued to be hard hit by recession last month. New orders for durable goods fell during December for the fourth month in the last five. The 2.6% drop followed declines of 3.7% in November and 8.5% during October. But since July new orders have plummeted 19.0%, the largest five-month drop since 1975. The December decline far exceeded Consensus expectations for a 2.0% shortfall.
Lower new orders for computers &amp; electronic products led last month&#39;s decline with a 7.2% drop (-10.0% y/y). Orders for just computers &amp; related products were quite weak, down 3.0% for the month and off 19.6% during the last twelve months. New orders for communications equipment also were down by a significant 4.9% (-9.9% y/y).
Severe weakness showed through in other industries. Orders for primary metals fell 6.9% last month and they&#39;re down 28.7% during the last twelve. Machinery orders fell hard for the fourth month in the last five and they are off 18.3% for the year. Electrical equipment bookings actually rose 9.4% last month but they&#39;re down by that amount December-to-December.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129d.jpg" width="353">
Capital equipment orders fell just 1.1%, but the 23.8% y/y decline reflected a 27.0% y/y drop in orders for nondefense capital goods. That decline was due to the severe weakness in aircraft orders which nearly halved last year. Still, without aircraft, nondefense capital goods orders were down a sharp 11.2% y/y to their lowest level since 2005. During the last ten years there has been an 80% correlation between the y/y change in nondefense capital goods orders and the change in equipment &amp; software spending in the GDP accounts. The correlation of the GDP figure with capital goods shipments is, as one would expect, a larger 92%.
Reflecting this weakness in new orders was overall shipments of durable goods. They fell 0.7% last month and were down 9.5% for the year. For comparison, industrial production of durable goods fell 12.8% during 2008. During the last ten years there has been an 81% correlation between the twelve-month change in shipments of durable goods and the change in durables industrial production. Less transportation, shipments of durable goods fell 1.4% last month, off 7.0% for the year. 
Lower orders have led inventories to back up. Inventories of manufactured durables rose 0.4% in December and the 7.0% y/y rate of increase has been fairly stable since the summer. That has been accompanied by lower order backlogs which have fallen sharply during the last three months. The year-to-year rise of 3.9% is the weakest since 2005.

<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/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a> (%)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>-2.6</td>
<td>-3.7</td>
<td>-21.1</td>
<td>-5.6</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-3.6</td>
<td>-1.7</td>
<td>-14.0</td>
<td>-1.0</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-5.9</td>
<td>-4.6</td>
<td>-27.2</td>
<td>-6.4</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-2.8</td>
<td>1.7</td>
<td>-11.2</td>
<td>0.1</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>
December U.S. New Home Sales Lowest Since 1963 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 29, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129e.jpg" width="353">
Last month, sales of new single-family homes fell to their lowest level in the series&#39; history which dates back to 1963. The 14.7% m/m December decline to 331,000 followed a downwardly revised November. December-to-December, new home sales were off by half and down by three-quarters from their peak during July 2005. They fell short of Consensus expectations for 400,000.
December-to-December sales fell hard around the country, down by one-third to one-half.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129f.jpg" width="353">
The median price for a new single-family home continued to fall hard to $206,500 as homebuilders attempted to move inventory. In fact, that effort has been quite successful and the inventory of unsold homes is down by more than one-quarter during the last year to its lowest level since 2003. In each of the country&#39;s regions, the inventory is down by roughly one-quarter during the last year.
The month&#39;s supply of new homes for sale surged to 12.9, a record.
New Adjustable-Rate Mortgages and the Libor Surprise From the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/commentary/2009/012109.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">US New Homes</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y (%)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales (SAAR, 000s)</td>
<td>331</td>
<td>388</td>
<td>-44.8</td>
<td>479</td>
<td>768</td>
<td>1,049</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>28</td>
<td>39</td>
<td>&nbsp;-50.0</td>
<td>35</td>
<td>64</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>51</td>
<td>54</td>
<td>-31.1</td>
<td>69</td>
<td>118</td>
<td>161</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>181</td>
<td>206</td>
<td>-46.0</td>
<td>264</td>
<td>408</td>
<td>559</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>71</td>
<td>89</td>
<td>-47.4</td>
<td>111</td>
<td>178</td>
<td>266</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA, $)</td>
<td>206,500</td>
<td>219,700</td>
<td>-9.3</td>
<td>228,350</td>
<td>243,742</td>
<td>243,067</td>
</tr>
</tbody>
</table>
U.S. Weekly Continuing Claims For Jobless Insurance At Record High 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 29, 2009


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129a.jpg" width="353">
The labor market remained under pressure last week as indicated by another rise in continuing claims for unemployment insurance. During the week of January 17 they rose 159,000 and that followed an upwardly revised 102,000 increase during the prior period. To emphasize the labor market&#39;s weakness, the latest increase raised continuing claims above their 1982 high to a new record for the series which dates back to 1966. The four-week average of continuing claims rose 66,500 to 4,630,000. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
Though the latest level of continuing claims was a record, the labor force has grown as well. Therefore, the insured rate of unemployment was not at a new high. It did, however, rise to 3.6%, the highest since 1983. The highest insured unemployment rates in the week ending January 10 were in Michigan (7.3 percent), Oregon (6.7), Idaho (6.5), South Carolina (6.0), Pennsylvania (5.8), Wisconsin (5.7), Indiana (5.5), Nevada (5.3), Montana (5.2), Puerto Rico (5.2), and Rhode Island (5.2).
Initial claims for unemployment insurance also pointed to severe labor market weakness with a 3,000 rise to 588,000 during last week. The prior week&#39;s gain was revised down slightly but the latest level surpassed Consensus expectations for 575,000 claims. It was the highest since late during the sharp recession of 1981-82. During that recession, real GDP fell by 2.9% peak-to-trough.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090129b.jpg" width="353">
The Labor Department indicated that the largest increases in initial claims for the week ending January 17 were in Florida (+6,500), California (+1,826), Puerto Rico (+1,308), Texas (+537), and Massachusetts (+86), while the largest decreases were in Michigan (-33,365), North Carolina (-25,516), Georgia (-12,635), New York (-12,432), and Pennsylvania (-10,077).
World Growth Grinds to Virtual Halt, IMF Urges Decisive Global Policy Response. The report from the International Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/RES012809A.htm">here</a>.
Behavior of Libor in the Current Financial Crisis from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-04.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">01/24/09</th>
<th scope="col">01/17/09</th>
<th scope="col">01/10/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>588</td>
<td>585</td>
<td>527</td>
<td>60.7%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,776</td>
<td>4,617</td>
<td>76.7%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>


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The factory sector continued to be hard hit by recession last month. New orders for durable goods fell during December for the fourth month in the last five. The 2.6% drop followed declines of 3.7% in November and 8.5% during October. [...]

U.S. Durable Goods Orders Slumped Further

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128e.jpg" align="right" border="0" height="265" width="353">
The
Federal Open Market Committee today left the Federal funds rate in a
"range from 0 to 1/4 percent." The discount also was left unchanged at
0.50%. The Fed funds rate remained the lowest ever and the lack of
action at this meeting was generally anticipated by economists.
Regarding economic growth, the Fed indicated that "the economy has
weakened further.&nbsp;Industrial production, housing starts, and
employment have continued to decline steeply, as consumers and
businesses have cut back spending ... The Committee anticipates that a
gradual recovery in economic activity will begin later this year, but
the downside risks to that outlook are significant." Regarding
inflation it was indicated that "the Committee sees some risk that
inflation could persist for a time below rates that best foster
economic growth and price stability in the longer term."<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128f.jpg" align="right" border="0" height="265" width="353">
The Fed
emphasized its concern about the recent turmoil in the credit markets.
"The Federal Reserve will employ all available tools to promote the
resumption of sustainable economic growth and to preserve price
stability ... The Federal Reserve continues to purchase large
quantities of agency debt and mortgage-backed securities to provide
support to the mortgage and housing markets, and it stands ready to
expand the quantity of such purchases and the duration of the purchase
program as conditions warrant.&nbsp;The Committee also is prepared
to purchase longer-term Treasury securities if evolving circumstances
indicate that such transactions would be particularly effective in
improving conditions in private credit markets." The decision was
unanimous amongst FOMC voters except that Jeffrey M. Lacker, President
of the Federal Reserve Bank of Richmond, preferred to expand the
monetary base at this time by purchasing U.S. Treasury securities
rather than through targeted credit programs. For the complete text of
the Fed's latest press release please follow this&nbsp;<a href="http://www.federalreserve.gov/newsevents/press/monetary/20090128a.htm">link</a>.
Growth in economic liquidity has risen. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128g.jpg" align="right" border="0" height="265" width="353">
The money stock measure M2 rose
at a 17.0% rate over the last three months, up from a 5% growth rate
earlier this year. The level of demand deposits has surged by
two-thirds since the Spring.&nbsp; In addition, the monetary base
has roughly doubled since last Spring.&nbsp;&nbsp;At the same
time, inflation expectations have fallen sharply. The Haver databases USECON,
WEEKLY and DAILY contain the figures
from the Federal Reserve Board.Need to Fix
Banking Sector for Stimulus to Work is a recent article
published in the IMF Survey Magazine: In the News
and it can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW012609A.htm">here</a>.
Money, Liquidity, and Monetary Policy from the
Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr360.pdf">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">November</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.39</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>1.25</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>
</body></html>

The Federal Open Market Committee today left the Federal funds rate in a "range from 0 to 1/4 percent." The discount also was left unchanged at 0.50%. The Fed funds rate remained the lowest ever and the lack of action at this meeting [...]

FOMC Leaves Rates Unchanged

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128d.jpg" align="left" border="0" height="265" width="353">
While business sentiment is falling to new lows and very low
lows in Italy , the good news is that the pace of decline is letting
up. Italy &#8217;s businesses are clearly in bad shape and concerned. But
maybe the rate of deterioration and adverse assessment is slowing down.
In the table below we rank the various components of this
measure since 1996 and we find for just about very category there is a
new low being made. Inventories are the sole exception and there the
bad news is that inventories are generally regarded as high.
In Italy , Silvio Berlusconi's government has approved a
stimulus package to kick-start the economy with measures it says are
worth 80 billion Euros, but this program largely recycles existing
funds and the plan has failed to lift the pessimism that has imbued the
Italian economy.
The Italian results fit in with a new leading index result for
Europe that finds conditions are still set to deteriorate further.
Confidence a for businesses and consumers is still generally either
very low and stuck three or has declined across most of the e-Zone.

 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Italy ISAE
Business Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="grey6">
<td colspan="7">Since Oct 1996</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Percentile</td>
<td>Rank</td>
</tr>
<tr class="grey4">
<td class="firstcol">Biz Confidence</td>
<td>65.5</td>
<td>66.8</td>
<td>71.7</td>
<td>76.5</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey3">
<td class="firstcol">TOTAL INDUSTRY</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp; Order books
&amp; Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Total</td>
<td>-58</td>
<td>-54</td>
<td>-45</td>
<td>-38</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>-63</td>
<td>-58</td>
<td>-47</td>
<td>-39</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Foreign</td>
<td>-59</td>
<td>-54</td>
<td>-44</td>
<td>-33</td>
<td>0.0</td>
<td>148&nbsp;&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Inventories</td>
<td>9</td>
<td>9</td>
<td>8</td>
<td>6</td>
<td>83.3</td>
<td>14&nbsp;&nbsp;&nbsp;&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Production</td>
<td>-55</td>
<td>-46</td>
<td>-37</td>
<td>-29</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey3">
<td class="firstcol">INTERMEDIATE</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp; Order books
&amp; Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Total</td>
<td>-74</td>
<td>-68</td>
<td>-52</td>
<td>-42</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>-74</td>
<td>-69</td>
<td>-53</td>
<td>-40</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Foreign</td>
<td>-73</td>
<td>-67</td>
<td>-50</td>
<td>-38</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Inventories</td>
<td>12</td>
<td>7</td>
<td>10</td>
<td>9</td>
<td>93.1</td>
<td>4&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Production</td>
<td>-65</td>
<td>-58</td>
<td>-43</td>
<td>-29</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey3">
<td class="firstcol">INVESTMENT GOODS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp; Order books
&amp; Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Total</td>
<td>-62</td>
<td>-62</td>
<td>-52</td>
<td>-39</td>
<td>0.0</td>
<td>147</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>-65</td>
<td>-64</td>
<td>-56</td>
<td>-44</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Foreign</td>
<td>-54</td>
<td>-56</td>
<td>-45</td>
<td>-27</td>
<td>2.5</td>
<td>147</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Inventories</td>
<td>7</td>
<td>9</td>
<td>11</td>
<td>6</td>
<td>63.2</td>
<td>40</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Production</td>
<td>-54</td>
<td>-50</td>
<td>-41</td>
<td>-28</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey3">
<td class="firstcol">CONSUMER GOODS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp; Order books
&amp; Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Total</td>
<td>-47</td>
<td>-36</td>
<td>-32</td>
<td>-33</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>-48</td>
<td>-39</td>
<td>-32</td>
<td>-34</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Foreign</td>
<td>-54</td>
<td>-42</td>
<td>-36</td>
<td>-32</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Inventories</td>
<td>7</td>
<td>10</td>
<td>5</td>
<td>3</td>
<td>69.2</td>
<td>35</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Production</td>
<td>-42</td>
<td>-28</td>
<td>-27</td>
<td>-29</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey1">
<td colspan="4">Total number of months:</td>
<td>148</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body></html>

While business sentiment is falling to new lows and very low lows in Italy , the good news is that the pace of decline is letting up. Italy ’s businesses are clearly in bad shape and concerned. But maybe the rate of deterioration and [...]

Italy's Business Confidence Continues To Drop

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128a.jpg" align="right" border="0" height="265" width="353">According to
the Mortgage Bankers Association, the total number of mortgage
applications fell by more than one-third last week and since their peak
two weeks ago are down by almost one-half.&nbsp; Applications had
been boosted by lower interest rates which have risen 25 to 30 basis
points on average.
The index of applications to refinance a home mortgage fell by more
than one-half during the last two periods.Applications for a mortgage
to purchase a home also fell but the decline only reversed an increase
during the prior week. Since their peak early last year applications
are down 25%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128b.jpg" align="right" border="0" height="265" width="353">
The effective interest rate on a conventional 15-year
mortgage was roughly stable week-to-week at 5.27% which was up from the
low of 4.92% during the week prior. For a 30-year mortgage, rates also
were roughly stable w/w at 5.43%, up from the low of 5.13% two weeks
ago. Interest rates on 15 and 30 year mortgages are closely correlated
(&gt;90%) with the rate on 10-year Treasury securities. For an
adjustable 1-Year mortgage, the rate also held about steady for the
fourth week at 5.97%, down a full percentage point from this past
Fall. During the last ten years there has been a (negative)
79% correlation between the level of applications for purchase and the
effective interest rate on a 30-year mortgage. Moreover, during the
last ten years there has been a 61% correlation between the y/y change
in purchase applications and the change in new plus existing single
family home sales.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128c.jpg" align="right" border="0" height="265" width="353">
The figures for weekly mortgage applications are
available in Haver's SURVEYW
database.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 covers
roughly 50% of all U.S. residential mortgage applications processed
each week by mortgage banks, commercial banks and thrifts. Visit the
Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.&nbsp;The Congressional
Budget Office Cost Estimate of the American Recovery and Reinvestment
Act of 2009 can be found <a href="http://www.cbo.gov/ftpdocs/99xx/doc9968/hr1.pdf">here</a>.&nbsp;



<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">01/23/09</th>
<th scope="col">01/16/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>732.1</td>
<td>1,195.3</td>
<td>-30.6%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>294.3</td>
<td>303.1</td>
<td>-18.7%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,373.9</td>
<td>6,491.8</td>
<td>-33.9%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body></html>

According to the Mortgage Bankers Association, the total number of mortgage applications fell by more than one-third last week and since their peak two weeks ago are down by almost one-half. Applications had been boosted by lower [...]

U.S. Mortgage Applications Fall as Refinancing Boom Ends

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<html><head>
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<body>
 




<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128a.jpg" align="right" border="0" height="265" width="353">According to
the Mortgage Bankers Association, the total number of mortgage
applications fell by more than one-third last week and since their peak
two weeks ago are down by almost one-half.&nbsp; Applications had
been boosted by lower interest rates which have risen 25 to 30 basis
points on average.
The index of applications to refinance a home mortgage fell by
more
than one-half during the last two periods.
Applications for a mortgage
to purchase a home also fell but the decline only reversed an increase
during the prior week. Since their peak early last year applications
are down 25%.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128b.jpg" align="right" border="0" height="265" width="353">The
effective interest rate on a conventional 15-year
mortgage was roughly stable week-to-week at 5.27% which was up from the
low of 4.92% during the week prior. For a 30-year mortgage, rates also
were roughly stable w/w at 5.43%, up from the low of 5.13% two weeks
ago. Interest rates on 15 and 30 year mortgages are closely correlated
(&gt;90%) with the rate on 10-year Treasury securities. For an
adjustable 1-Year mortgage, the rate also held about steady for the
fourth week at 5.97%, down a full percentage point from this past
Fall.
 During the last ten years there has been a (negative)
79% correlation between the level of applications for purchase and the
effective interest rate on a 30-year mortgage. Moreover, during the
last ten years there has been a 61% correlation between the y/y change
in purchase applications and the change in new plus existing single
family home sales.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128c.jpg" align="right" border="0" height="265" width="353">The
figures for weekly mortgage applications are
available in Haver's SURVEYW
database.
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 covers
roughly 50% of all U.S. residential mortgage applications processed
each week by mortgage banks, commercial banks and thrifts. Visit the
Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.&nbsp;
The Congressional
Budget Office Cost Estimate of the American Recovery and Reinvestment
Act of 2009 can be found <a href="http://www.cbo.gov/ftpdocs/99xx/doc9968/hr1.pdf">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">01/23/09</th>
<th scope="col">01/16/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>732.1</td>
<td>1,195.3</td>
<td>-30.6%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>294.3</td>
<td>303.1</td>
<td>-18.7%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,373.9</td>
<td>6,491.8</td>
<td>-33.9%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>

Italy's Business Confidence
Continues To Drop 
by <a href="/comment/Brusca.html">Robert
Brusca</a> January 28, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128d.jpg" align="left" border="0" height="265" width="353">
While business sentiment is falling to new lows and very low
lows in Italy , the good news is that the pace of decline is letting
up. Italy &#8217;s businesses are clearly in bad shape and concerned. But
maybe the rate of deterioration and adverse assessment is slowing down.
In the table below we rank the various components of this
measure since 1996 and we find for just about very category there is a
new low being made. Inventories are the sole exception and there the
bad news is that inventories are generally regarded as high.
In Italy , Silvio Berlusconi's government has approved a
stimulus package to kick-start the economy with measures it says are
worth 80 billion Euros, but this program largely recycles existing
funds and the plan has failed to lift the pessimism that has imbued the
Italian economy.
The Italian results fit in with a new leading index result for
Europe that finds conditions are still set to deteriorate further.
Confidence a for businesses and consumers is still generally either
very low and stuck three or has declined across most of the e-Zone.

 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col">Italy ISAE
Business Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="grey6">
<td colspan="7">Since Oct 1996</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp;</td>
<td>Jan-09</td>
<td>Dec-08</td>
<td>Nov-08</td>
<td>Oct-08</td>
<td>Percentile</td>
<td>Rank</td>
</tr>
<tr class="grey4">
<td class="firstcol">Biz Confidence</td>
<td>65.5</td>
<td>66.8</td>
<td>71.7</td>
<td>76.5</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey3">
<td class="firstcol">TOTAL INDUSTRY</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp; Order books
&amp; Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Total</td>
<td>-58</td>
<td>-54</td>
<td>-45</td>
<td>-38</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>-63</td>
<td>-58</td>
<td>-47</td>
<td>-39</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Foreign</td>
<td>-59</td>
<td>-54</td>
<td>-44</td>
<td>-33</td>
<td>0.0</td>
<td>148&nbsp;&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Inventories</td>
<td>9</td>
<td>9</td>
<td>8</td>
<td>6</td>
<td>83.3</td>
<td>14&nbsp;&nbsp;&nbsp;&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Production</td>
<td>-55</td>
<td>-46</td>
<td>-37</td>
<td>-29</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey3">
<td class="firstcol">INTERMEDIATE</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp; Order books
&amp; Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Total</td>
<td>-74</td>
<td>-68</td>
<td>-52</td>
<td>-42</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>-74</td>
<td>-69</td>
<td>-53</td>
<td>-40</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Foreign</td>
<td>-73</td>
<td>-67</td>
<td>-50</td>
<td>-38</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Inventories</td>
<td>12</td>
<td>7</td>
<td>10</td>
<td>9</td>
<td>93.1</td>
<td>4&nbsp;</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Production</td>
<td>-65</td>
<td>-58</td>
<td>-43</td>
<td>-29</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey3">
<td class="firstcol">INVESTMENT GOODS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp; Order books
&amp; Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Total</td>
<td>-62</td>
<td>-62</td>
<td>-52</td>
<td>-39</td>
<td>0.0</td>
<td>147</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>-65</td>
<td>-64</td>
<td>-56</td>
<td>-44</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Foreign</td>
<td>-54</td>
<td>-56</td>
<td>-45</td>
<td>-27</td>
<td>2.5</td>
<td>147</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Inventories</td>
<td>7</td>
<td>9</td>
<td>11</td>
<td>6</td>
<td>63.2</td>
<td>40</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Production</td>
<td>-54</td>
<td>-50</td>
<td>-41</td>
<td>-28</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey3">
<td class="firstcol">CONSUMER GOODS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey5">
<td class="firstcol">&nbsp; Order books
&amp; Demand</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Total</td>
<td>-47</td>
<td>-36</td>
<td>-32</td>
<td>-33</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Domestic</td>
<td>-48</td>
<td>-39</td>
<td>-32</td>
<td>-34</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Foreign</td>
<td>-54</td>
<td>-42</td>
<td>-36</td>
<td>-32</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Inventories</td>
<td>7</td>
<td>10</td>
<td>5</td>
<td>3</td>
<td>69.2</td>
<td>35</td>
</tr>
<tr class="grey4">
<td class="firstcol">&nbsp; Production</td>
<td>-42</td>
<td>-28</td>
<td>-27</td>
<td>-29</td>
<td>0.0</td>
<td>148</td>
</tr>
<tr class="grey1">
<td colspan="4">Total number of months:</td>
<td>148</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
 
FOMC Leaves Rates Unchanged 
by <a href="/comment/Moeller.html">Tom
Moeller</a> January 28, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128e.jpg" align="right" border="0" height="265" width="353">The
Federal Open Market Committee today left the Federal funds rate in a
"range from 0 to 1/4 percent." The discount also was left unchanged at
0.50%. The Fed funds rate remained the lowest ever and the lack of
action at this meeting was generally anticipated by economists.
Regarding economic growth, the Fed indicated that "the economy
has
weakened further.&nbsp;Industrial production, housing starts, and
employment have continued to decline steeply, as consumers and
businesses have cut back spending ... The Committee anticipates that a
gradual recovery in economic activity will begin later this year, but
the downside risks to that outlook are significant."
 Regarding
inflation it was indicated that "the Committee sees some risk that
inflation could persist for a time below rates that best foster
economic growth and price stability in the longer term."
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128f.jpg" align="right" border="0" height="265" width="353">The Fed
emphasized its concern about the recent turmoil in the credit markets.
"The Federal Reserve will employ all available tools to promote the
resumption of sustainable economic growth and to preserve price
stability ... The Federal Reserve continues to purchase large
quantities of agency debt and mortgage-backed securities to provide
support to the mortgage and housing markets, and it stands ready to
expand the quantity of such purchases and the duration of the purchase
program as conditions warrant.&nbsp;The Committee also is prepared
to purchase longer-term Treasury securities if evolving circumstances
indicate that such transactions would be particularly effective in
improving conditions in private credit markets."
 The decision was
unanimous amongst FOMC voters except that Jeffrey M. Lacker, President
of the Federal Reserve Bank of Richmond, preferred to expand the
monetary base at this time by purchasing U.S. Treasury securities
rather than through targeted credit programs.
 For the complete text of
the Fed's latest press release please follow this&nbsp;<a href="http://www.federalreserve.gov/newsevents/press/monetary/20090128a.htm">link</a>.
Growth in economic liquidity has risen. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090128g.jpg" align="right" border="0" height="265" width="353">
The money stock measure M2 rose
at a 17.0% rate over the last three months, up from a 5% growth rate
earlier this year. The level of demand deposits has surged by
two-thirds since the Spring.&nbsp; In addition, the monetary base
has roughly doubled since last Spring.&nbsp;&nbsp;At the same
time, inflation expectations have fallen sharply.
 The Haver databases USECON,
WEEKLY and DAILY contain the figures
from the Federal Reserve Board.
Need to Fix
Banking Sector for Stimulus to Work is a recent article
published in the IMF Survey Magazine: In the News
and it can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW012609A.htm">here</a>.
Money, Liquidity, and Monetary Policy from
the
Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr360.pdf">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">November</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.39</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>1.25</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090127d.jpg" align="left" border="0" height="265" width="353">
The German IFO index made a small rebound in January and that
has caused some excited stirring in markets. Still the IFO Business
climate index is very weak and the EMU sentiment index for Germany
(Dec) is even lower than it was in 2001 at the bottom. There should be
little excitement is such low persisting readings and on such a weak
rebound. 
 

The table above shows that the Biz Climate, Current Situation
and Biz Expectations indices all are down about 20% Yr/Yr. Taken as a
percent of their respective ranges since early 1991 the business
climate index is in at the bottom one-percentile of its range, the
current situation is in the bottom 12% of its range and business
expectations are in the bottom nine percent of their range. These are
all weak global range positions and year over year standings. 
 

That markets want to put a positive spin on such a poor
showing tells us of the poor state of market psychology right now.
Clearly the chart (above) shows little to cheer about. In any event we
would expect a much more substantial rebound in expectations even
before the current situation improves. Nothing like that is in train.
The optimism registered today, is just that based on nothing in
particular. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">IFO
Survey: Germany</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="5">Percent: Yr/Yr</td>
<td colspan="4">Index Numbers</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jan 
09</td>
<td>Dec 
08</td>
<td>Nov 
08</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Current</td>
<td>Dec 
08</td>
<td>Curr/ Avg</td>
<td>Percentile</td>
</tr>
<tr class="grey2">
<td class="firstcol">Biz Climate</td>
<td>-19.8%</td>
<td>-20.0%</td>
<td>-17.8%</td>
<td>-13.4%</td>
<td>-11.0%</td>
<td>83.0</td>
<td>82.7</td>
<td>86.3%</td>
<td>1.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Current Situation</td>
<td>-19.8%</td>
<td>-18.1%</td>
<td>-14.2%</td>
<td>-8.9%</td>
<td>-9.4%</td>
<td>86.8</td>
<td>88.8</td>
<td>90.3%</td>
<td>11.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol"> Biz Expectations</td>
<td>-19.8%</td>
<td>-21.9%</td>
<td>-21.3%</td>
<td>-17.6%</td>
<td>-12.6%</td>
<td>79.4</td>
<td>76.9</td>
<td>82.4%</td>
<td>8.7%</td>
</tr>
<tr class="grey1">
<td colspan="10" class="firstcol">average
&amp; range since Apr-91</td>
</tr>
</tbody>
</table>
</body></html>

The German IFO index made a small rebound in January and that has caused some excited stirring in markets. Still the IFO Business climate index is very weak and the EMU sentiment index for Germany (Dec) is even lower than it was in [...]

German Biz Confidence In a Small Rebound: What's All the Fuss?

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090127c.jpg" align="left" border="0" height="265" width="353">
Chain store sales last week retraced the prior week's
increase, and more, with a 1.8% decline, according to the International
Council of Shopping Centers-Goldman Sachs Index. The drop followed the
prior week's 1.1% increase and it left sales in January about even with
the December average. The year-to year change of -2.4% stands
as the weakest in the series' history which extends back to 1990.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


During the last ten years there has been a 64% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales.
The outlook for sales weakened recently. The weekly leading
indicator of chain store sales from ICSC-Goldman Sachs fell 0.7% after
a 1.6% decline during the prior week. The average level so far in
January is up 1.0% from December, which rose 2.1% versus November.
Since the lows of one month ago the index has recovered
3.1%.
The chain store sales figures are available in Haver's SURVEYW
database.
<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
(SA, 1977=100)</a></th>
<th scope="col">01/24/09</th>
<th scope="col">01/17/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>471.0</td>
<td>479.8</td>
<td>-2.4%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
</body></html>

Chain store sales last week retraced the prior week's increase, and more, with a 1.8% decline, according to the International Council of Shopping Centers-Goldman Sachs Index. The drop followed the prior week's 1.1% increase and it [...]

U.S. Chain Store Sales Fell Back; 2.4% Yearly Decline a Record

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

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Nonfarm labor productivity fell 0.8% (SAAR) during Q1’25 after increasing 1.7% in Q4’24, revised from 1.5%. A 0.6% decline had been expected in the Action Economics Forecast Survey. It was the first productivity decline since Q2’22. The y/y increase during Q1 fell to 1.4% from 2.1% in Q4. It was below a 3.3% high in the first quarter of last year. Productivity fell as real value-added output dropped 0.3% last quarter (+2.2% y/y) after increasing 2.5% in Q4, and hours worked lengthened 0.6% (0.8% y/y) following a 0.8% gain.

Compensation per hour increased 4.8% last quarter following a 3.7% Q4 rise. Despite the strength of these last two increases, y/y growth decelerated to 2.7% from a 6.8% high one year earlier. Nevertheless, the productivity decline raised unit labor costs by 5.7% (1.3% y/y) in Q1 versus expectations for a 5.2% increase. It followed a 2.0% gain during Q4 and was the strongest quarterly increase in a year.

Factory sector productivity surged 4.5% (1.5% y/y) during Q1’25 following three consecutive increases of roughly 0.5%. This strength was accompanied by a 6.2% rise (2.2% y/y) in hourly compensation which came after two consecutive increases of approximately 4.1%. The strength in productivity lowered the rise in unit labor costs to 1.6% from 3.8% in Q4. The y/y gain fell to 0.7% from 2.0% in Q4 and stood below the 6.2% y/y increase in Q1’24.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Productivity declines with lower output.
- Compensation surge exacerbates labor market stress.
- Factory sector productivity surge lessens cost pressure.

U.S. Productivity Declines in Q1’25; Unit Labor Costs Surge

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) rose 0.6% (3.2% y/y) in March to 103.2 after rising 0.9% to 102.6 in February and rising 0.8% in January to 101.7. The level of home affordability has risen 14.8% from its low of 89.9 in October 2023. It remains 42.4% below the high of 179.2 in April 2020.

The rise in affordability in March occurred as the median price of an existing single-family home rose 1.8% (2.9% y/y) to $408,000 which was offset by a decline in mortgage rates to 6.73% from 6.92% in February. The price compared to the record $432,900 in June 2024. The decline in mortgage rates compared to a recent low of 6.26% in September of last year and a 7.70% high during October of 2023. It remained well above a December 2020 low of 2.73%. These changes lowered the principal & interest payment by 0.2% (+1.1% y/y) to $2,113 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a lessened 24.2% of income during March. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in March was accompanied by improvement in median family income. It increased 0.4% (4.4% y/y) to a record $104,705 after rising 0.4% in February and 0.7% in January.

Housing affordability improved m/m across the country in March. The index edged 0.1% higher (2.8% y/y) to 134.5 in the Midwest. It remains the most affordable region of the country. In the South, the index 0.9% (5.4% y/y) to 106.6 and the affordability index in the Northeast increased 2.1% (-2.6% y/y) to 95.7. In the West, where homes are the least affordable, the index rose 0.8% (3.3% y/y) to 71.8 in March.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013; since then, it fell below 100 for the first time in June 2022.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

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- Home prices rise but mortgage rates decline.
- Median income improves.
- Affordability increases across the country.

U.S. Housing Affordability Improves Slightly in March

Carol Stone, CBE

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Initial claims for unemployment insurance were 228,000 seasonally adjusted in the week ended May 3, down from 241,000 in the previous week, which was unrevised. For the latest week, the Action Economics Forecast Survey had expected a smaller decline to 233,000.

In the week ended April 26, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – was 1.879 million, down from 1.908 million in the April 19 week.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, returned to its longstanding rate of 1.2% in the April 26 week; this rate has held that amount since continuously since the week of January 6, 2024, except for the prior week’s 1.3%.

As we do highlight in every week’s discussion, economic conditions vary widely across individual states and territories. In the week ended April 19, the highest unemployment rates were in New Jersey and Rhode Island (both at 2.48%), California (2.26%), Washington (2.14%) and New York (1.85%). The lowest were in Florida (0.36%), South Dakota (0.37%), Alabama (0.41%), Virginia (0.45%) and Nebraska (0.47%). Rates in other notable states include Illinois (1.78%), Pennsylvania (1.53%) and Texas (1.14%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Continued claims for unemployment insurance decreased 29, 000 in the week ended April 26.
- Insured unemployment rate returns to longstanding 1.2%.
- Across the states, the insured unemployment rate ranges from 0.36% to 2.48%.

U.S. Initial Unemployment Insurance Claims Ease 13,000 in the May 3 Week

Andrew Cates

**The global business cycle** 
The recent sharp decline in the Future Output Balance in the global composite PMI survey reflects a sudden deterioration in global business expectations. The sweeping tariffs, introduced in April 2025, have generated heightened uncertainty around trade policy and sparked fears of retaliatory actions from key trading partners. As a result, businesses worldwide are scaling back their expectations for future output, wary of rising costs, disrupted demand flows, and a broader shift toward protectionism that could undermine global economic momentum.

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Note: The extreme declines in the Future Output Balance that were recorded in the early months of 2020 (at the height of the COVID pandemic) have been removed from this chart.

**Global supply chain pressures**
Still, despite the marked deterioration in global business expectations, this second chart below provides a reassuring counterpoint: as of now, there is little evidence that global supply chain pressures have materially intensified. Both the New York Fed’s Global Supply Chain Pressure Index and the Baltic Exchange Dry Index remain relatively subdued, especially compared to the pandemic-era spikes of 2020–2022. While there has been heightened concern following the April 2025 US tariff announcements, these trade policy shifts have yet to translate into measurable physical disruption in logistics or freight rates. The stability of these indices suggests that although sentiment has taken a hit, global shipping networks and supply flows are, for now, absorbing the shock. However, this calm may prove fragile if the policy environment hardens further or retaliatory trade actions begin to compound the strain.

250507Z2.jpg

**Expectations for central banks’ policy rates** 
Adding to the picture of mounting economic caution, the latest Blue Chip Financial Forecasts survey reveals that expectations for policy easing over the next 12 months have become even more pronounced than in previous months. While earlier surveys had already pointed to a further extension of the global rate-cutting cycle, the latest results suggest forecasters now anticipate a deeper and more aggressive round of monetary easing—most notably from the US Federal Reserve, which is now expected to deliver nearly a full percentage point in rate cuts over the next 12 months. The sharp deterioration in business sentiment is reshaping the macro narrative: central banks are no longer simply guiding inflation lower, but are instead preparing to confront the risk of a deeper, demand-driven slowdown.

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**Energy prices and inflation** 
Adding further context to the growing expectations for policy easing, oil prices have dropped sharply in recent weeks—driven by mounting concerns over global growth, as reflected in weakening business sentiment and softer demand indicators. The chart below provides a longer-run perspective on why this matters: energy prices have historically played a central role in shaping the global inflation trajectory. The strong positive correlation (r = 0.83) between median world energy price inflation and median core consumer price inflation underscores the powerful pass-through effects energy costs can have on broader price dynamics. While core inflation tends to be stickier, this historical relationship makes clear that sustained declines in energy prices often foreshadow broader disinflationary trends.

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**Intangibles versus tangibles** 
Shifting focus from short-term cyclical risks to longer-term structural dynamics, the next chart below underscores a fundamental transformation in the composition of US investment: the economy has increasingly been built on intangibles. Over the past several decades, investment in intangible assets—such as software, intellectual property, R&D, and brand equity—has steadily climbed and, since the mid-2010s, has overtaken investment in both structures and equipment as a share of GDP. This shift reflects the rise of a knowledge-based, innovation-driven economy, but it also introduces new forms of vulnerability. Unlike physical capital, intangible assets rely heavily on trust, reputation, legal protections, and global openness. In this context, escalating trade frictions and a more confrontational US economic stance—as signalled by the recent tariff wave—risk eroding the goodwill and institutional credibility that underpin much of the value created by intangibles. If geopolitical uncertainty undermines the perceived reliability of US intellectual property protections or weakens global collaboration, it could pose a deeper structural challenge to future growth than any immediate cyclical downturn.

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**Investment in Artificial Intelligence**
The centrality of intangibles to the US growth model is nowhere more evident than in the explosion of private investment in artificial intelligence. As this chart illustrates, global AI investment has surged over the past decade—reaching new highs in 2024—and the United States has consistently accounted for the lion’s share of that spending. This reflects not only America’s previous leadership in frontier technologies but also its dependence on intangible capital, from algorithms and data infrastructure to human expertise and institutional trust. However, this dominance also underscores the strategic stakes of current policy choices. In an environment of rising trade tensions and potential fragmentation, the foundations of US leadership in AI—cross-border collaboration, data openness, and global market access—could be at risk.

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Financial market sentiment has rebounded in recent weeks, buoyed by signs of de-escalation in the US-led trade war and growing confidence that central banks—particularly the Federal Reserve—will step in with more rate cuts to cushion any fallout. Yet beneath the surface, a more sobering picture of the global economy persists. For example, latest PMI surveys reveal that global business expectations have slumped to their lowest levels since the pandemic, reflecting widespread unease about the growth outlook (chart 1). While supply chain pressures have so far remained contained, suggesting no repeat of the logistical chaos seen during the pandemic (chart 2), the latest Blue Chip Financial Forecasts survey reveals that forecasters are now pencilling in deeper and more widespread monetary easing than previously anticipated—an acknowledgment that demand is faltering (chart 3). Falling oil prices further reinforce this view: they are both a symptom of weakening global demand and a potential source of disinflation, reducing the urgency for central banks to maintain tight policy (chart 4). At the structural level, the US economy's increasing reliance on intangible assets—ranging from intellectual property to reputation—has made it more vulnerable to geopolitical frictions and the erosion of global trust (chart 5). This risk is compounded by America's dominant role in AI investment, a sector symbolic of both its economic strengths and its exposure to international perceptions (chart 6). The longer-term challenge, then, is not just navigating the current downturn, but ensuring that the institutional goodwill and cross-border openness that support the modern US economy are not sacrificed in a more fragmented and uncertain global order.

Charts of the Week: Relief Rally Meets Recession Risk

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At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was left unchanged at 4.25% to 4.50%. This followed reductions at three consecutive meetings in the fall of 2024. Rates remain below the high of 5.25% to 5.50% in place in mid-September. Today’s target range matched expectations in the Action Economics Forecast Survey.

The statement following the meeting indicated that, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”

“The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”

The Fed continued, “The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities.”

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- FOMC holds funds rate target at late-December level.
- Risk assessments include higher unemployment & inflation.

Economy in Brief: January 2009

Jump to:

U.S. Weekly Continuing Claims For Jobless Insurance At Record High

U.S. Durable Goods Orders Slumped Further

FOMC Leaves Rates Unchanged

Italy's Business Confidence Continues To Drop

U.S. Mortgage Applications Fall as Refinancing Boom Ends

U.S. Mortgage Applications Fall as Refinancing Boom Ends

German Biz Confidence In a Small Rebound: What's All the Fuss?

U.S. Chain Store Sales Fell Back; 2.4% Yearly Decline a Record