Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030a.jpg" align="left" border="0" height="265" width="353">
U.S. real GDP fell a modest 0.3% (AR)
last quarter after 2.8%
growth during 2Q. Consensus expectations had been for a decline at a
0.5% rate. The decline last quarter mirrored a 0.2% decline during the
fourth quarter of last year. The y/y rate of growth of 0.8% was the
weakest since the end of the 2001 recession.
Real final sales to domestic purchasers
were notably weak in
3Q as they posted a 1.8% (AR) decline. That was the largest quarterly
decline since the end of the 1990-91 recession. The year-to-year dip of
0.1%, while modest, was the first since 1991.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030b.jpg" align="right" border="0" height="265" width="353">
Real personal consumption declined at a
3.1% (0.0% y/y)
annual rate, reversing a 1.2% rise during 2Q. The 2Q gain presumably
was fueled by tax rebate checks but the lift seems to have been slight.
Spending on autos &amp; light trucks fell at a 25.6% (-14.7% y/y)
annual rate after declining at a 19.7% rate during 2Q. Spending on
furniture &amp; other household equipment fell at a 7.6% rate
(+2.7%
y/y) and the decline reversed roughly half of the 2Q increase. Spending
on apparel fell at an 11.0% rate (-0.4% y/y) and that reversed all of
the 2Q jump. Spending on consumer services also weakened to a 0.6%
growth rate. That about matched the 2Q rise but the y/y change of 1.3%
was the weakest since 1981. Growth in real PCE subtracted 2.3
percentage points from 3Q real GDP growth after a 0.9 point add during
2Q.
Residential construction fell again, last
quarter at a 19.1%
(-21.3% y/y) annual rate after a 13.3% rate of decline during 2Q. The
3Q drop subtracted 0.7 percentage points from GDP growth.
Growth in business fixed investment fell
for the first time
since fourth quarter, 2006. The 1.0% decline (+1.8% y/y) followed 2.5%
growth during 2Q, a 4.9% rise during 2007 and roughly 7.5% growth in
2006 and 2005. Equipment investment repeated its 2Q performance and
declined at a 5.5% rate (-2.6% y/y). Conversely, structures investment
was firm again and rose at a 7.9% annual rate (10.8% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030c.jpg" align="left" border="0" height="265" width="353">
An improved foreign trade deficit again
was the main source
of lift to GDP growth, though the 1.1 percentage point addition was
almost a third of that in 2Q. Exports grew at a slower 5.9% rate (6.9%
y/y), half that in 2Q. Growth in imports weakened with the slowdown in
overall economic growth. They fell at a 1.9% rate (-3.1% y/y).
Inventory accumulation added 0.6 percentage
points to GDP growth after three consecutive quarters of subtraction.
Spending by governments was strong again
and the 5.8% (3.1% y/y) rise was the quickest since early 2003.
The GDP chain price index surged at a 4.2%
annual rate. The
accelerated rate of increase owed to a 5.4% jump in the PCE price index
which was fueled by higher energy prices. Capital spending prices rose
at an accelerated 4.2% rate (2.2% y/y) while the residential investment
price deflator declined for the fourth straight quarter (-1.8% y/y).
Fed, Central Banks in Brazil, Mexico, Korea and
Singapore, Announce Swap Lines and the Fed's announcement
can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081029b.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained
2000$, % AR</a></th>
<th scope="col">3Q '08 (Advance)</th>
<th scope="col">2Q '08</th>
<th scope="col">3Q Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>-0.3</td>
<td>2.8</td>
<td>0.8</td>
<td>2.0</td>
<td>2.8</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>0.6</td>
<td>-1.5</td>
<td>-0.4</td>
<td>-0.4</td>
<td>0.0</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-0.8</td>
<td>4.4</td>
<td>1.3</td>
<td>2.4</td>
<td>2.8</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>1.1</td>
<td>2.9</td>
<td>1.7</td>
<td>0.6</td>
<td>0.2</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-1.8</td>
<td>1.3</td>
<td>-0.1</td>
<td>1.8</td>
<td>2.6</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>4.2</td>
<td>1.1</td>
<td>2.7</td>
<td>2.7</td>
<td>3.2</td>
<td>3.3</td>
</tr>
</tbody>
</table>
U.S. Initial Claims for
Unemployment Insurance Stable But High 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 30, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030d.jpg" align="left" border="0" height="265" width="353">
Initial claims for jobless insurance were stable last week at
479,000, near the high for this cycle. The figure was about as
expected. The four-week moving average of initial claims fell slightly
to 475,500 (44.2% y/y), still just off the cycle high.
The largest increases in initial claims for the week ending
Oct. 18
were in Tennessee (+1,956), Oregon (+1,802), Indiana (+1,297), Virginia
(+898), and Florida (+543), while the largest decreases were in New
York (-6,080), Michigan (-5,894), Illinois (-3,795), Ohio (-2,923), and
Kentucky (-2,494).
Continuing claims for unemployment insurance during the week
of
October 18 fell 12,000 after a revised 7,000 increase during the prior
week, initially reported as a slight decline. The four-week average of
continuing claims rose further to this cycle's high of 3,709,500, the
highest level since early 2003. Continuing claims provide some
indication of workers' ability to find employment and they lag the
initial claims figures by one week.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030e.jpg" align="right" border="0" height="265" width="353">
The insured rate of unemployment was stable for the third week
at
2.8%. That was this cycle's high and the highest since mid-2003. The
high in that recessionary period was 3.0% reached in late June 2003.
What Exactly Is a Recession&#8212;and Are We in One? from
the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/trends/2008/1108/01ecoact.cfm">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">10/25/08</th>
<th scope="col">10/18/08</th>
<th scope="col">10/11/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>478</td>
<td>&nbsp;479</td>
<td>463</td>
<td>44.3%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,715</td>
<td>3,727</td>
<td>43.0</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
EU Indices Are Scraping Low
Levels: It Will Get Worse&#8230; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 30, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081030f.jpg" align="left" border="0" height="265" width="353">
The news this month for the EU/EMU region is bad. The EU
reading is
in the bottom 10% of its range of value. The EMU reading is a bit
better, in the bottom 17% of its range. Both are quite weak. The drop
in the index is the largest since the data have been collected in 1991. All sectors made larger falls in Oct
compared to Sept. The main
EMU countries also saw large drops in their respective overall
sentiment indices.
By sector, services is relatively the hardest hit standing at
the
lowest point of its range since that survey began. But that only goes
back to October of 1996 instead of 1991 as for the other surveys. Still
this result parallels the sort of readings we have been getting in the
US with a very weak service sector checking in.
Is
this more than coincidence? You bet! This crisis is hitting
intrinsically domestic sectors harder like real estate and finance.
Typically banks populate every community; the same with real estate
businesses. These sectors are not like mining or autos or textiles that
may have a particular regional representation. The troubled sectors in
this cycle are spread everywhere and the troubled asset class &#8216;housing&#8217;
is everywhere, as well. It&#8217;s as true in Europe as in the US.INDUSTRY 
 

Europe&#8217;s industry reading at -18 (EMU) is only in the 32nd
percentile of its range (bottom third of its range) and so is weak but
not desperately weak. Germany and France carry percentile positions for
their respective readings in the high thirty percentiles while Spain&#8217;s
is at the 33rd percentile and the UK is at the 27Th
percentile; Italy is looking desperate at the 17Th
percentile. These are weak readings but the most troubling for Italy.
The components of the industry index show that the production
trend
is the weakest relative reading standing in the bottom 3% of its
historic range. Production
expectations are better but still weak in their 12th
percentile. For some reason Europeans think that a worse time lies
behind it not ahead of it. That explains a lot about the government
attitudes. Europe has been in and seem to remain in DENIAL. Order volumes are still relatively
firm in their 44th
range percentile; export orders are in about the same relative range
position and that is also where the expected selling price resides.
Contrarily workers are more exposed with employment expectations in the
bottom 16 percentile of their range. If worker readings are RIGHT then
the rest of the readings are too high.CONFIDENCE
By main countries confidence readings are all over the map
except
that they are limited being to all over intrinsically weak territory.
The EU&#8217;s UK reading is in the bottom 2.9% of its all-time range. Among
large EMU nations Spain is weakest posting the lowest confidence
reading ever. It is followed by France with a bottom 5 percentile
reading. Germany&#8217;s percentile reading at the 43% mark and is similar to
its industrial sector reading but at 37.5 Italy&#8217;s percentile reading is
way above its industry percentile. So, Italian consumer confidence is
more upbeat than it is for Italian industry.
As for the reason for this angst, ee find over all EMU
responses on
&#8216;time to buy&#8217; are at the very worst for making major purchases now or
in the next 12 months. The economic situation in the past 12-months is
rated as the worst ever but looking ahead for the next 12-months the
out look is &#8216;only&#8217; a bottom 13% ordeal. Respondents may want to rethink
that one. The financial situation for this past and this next 12-months
each rate in their respective 12th percentile.
In short the readings really are weak. Unemployment expectations are
&#8216;only up to the 58th percentile of their range &#8211;
elevated, but not by much.RETAIL
The retail readings across EU countries are weakest in the UK,
residing in their bottom 3 range percentile followed by Spain (bottom
13%), Germany (bottom 26%), France (bottom 43%), and Italy (63rd
percentile &#8211; still above its range midpoint). Retailers are not as
downbeat as consumers and that could spell some troubles for them and
for their inventories. Retail orders are put in the bottom 14% of their
range. The expected business situation is only a bottom 38% rating
similar to the present business situation. And maybe the retailers are
just putting up a brave front since their orders are so weak. They may
be planning for something even weaker than what they say they expect&#8230; SERVICES
Service sector reading span the gamut form bad to worst. The
UK and
Italy have the worst service sector readings ever. Spain&#8217;s reading is
in the bottom 6% of its range. German is a bottom 25% reading; for
France the reading is a bottom one-third of range reading. All of
theses are weak. For EMU the
overall reading is
the worst ever. The business climate is a bottom 7% affair, but
expected demand is worse in the bottom 2% of its range. Current demand
is rated as in only the 16th percentile. Current and expected
employment readings are in the 20th percentile
of their
respective ranges, and the reading is lower for expected unemployment.
Things will get worse. Maybe industry workers are better protected by
unions that service sector workers.CONSTRUCTION
The construction sector is the least impacted off all. For
overall sentiment, construction stands in the 49th
percentile of its range. Of course that implies a raw reading of -20.
One issue for construction it that its participants have considered it
sub-par all along. So now the outlook is being impacted construction
respondents are not looking for things to get that much worse. Spain is
an exception having had a boom its current reading; it is a bottom 19th
percentile reading. For the UK the residential property bubble busting
has helped to drag its reading to the 31st
percentile. France and Germany still carry mid range readings at or
above their expected range midpoints. Italy&#8217;s sector has a relatively
strong construction reading in the 60th
percentile.

<table border="0" cellspacing="0" width="100%"> <colgroup></colgroup>
<thead><tr>
<th colspan="12" scope="col"> EU
Sectors and Country level Overall Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">EU</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Aug 
08</td>
<td>Jul 
08</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
<td>R-SQ 
w/Overall</td>
</tr>
<tr class="even">
<td class="firstcol">Overall</td>
<td>77.5</td>
<td>84.9</td>
<td>86.7</td>
<td>88.8</td>
<td>9.8</td>
<td>209</td>
<td>116</td>
<td>73</td>
<td>43</td>
<td>99</td>
<td>1.00</td>
</tr>
<tr>
<td class="firstcol">Industrial</td>
<td>-19</td>
<td>-13</td>
<td>-10</td>
<td>-7</td>
<td>23.5</td>
<td>204</td>
<td>7</td>
<td>-27</td>
<td>34</td>
<td>-7</td>
<td>0.86</td>
</tr>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>-23</td>
<td>-19</td>
<td>-19</td>
<td>-20</td>
<td>13.8</td>
<td>205</td>
<td>2</td>
<td>-27</td>
<td>29</td>
<td>-11</td>
<td>0.83</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>-16</td>
<td>-13</td>
<td>-14</td>
<td>-11</td>
<td>18.5</td>
<td>214</td>
<td>6</td>
<td>-21</td>
<td>27</td>
<td>-6</td>
<td>0.51</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-25</td>
<td>-20</td>
<td>-18</td>
<td>-17</td>
<td>37.8</td>
<td>150</td>
<td>3</td>
<td>-42</td>
<td>45</td>
<td>-17</td>
<td>0.41</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>-10</td>
<td>-4</td>
<td>-2</td>
<td>0</td>
<td>0.0</td>
<td>145</td>
<td>32</td>
<td>-10</td>
<td>42</td>
<td>16</td>
<td>0.81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td>
Oct 
08</td>
<td colspan="2">Based on Level</td>
<td colspan="4">Level</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">EMU</td>
<td>-8.1%</td>
<td>-1.1%</td>
<td>-1.1%</td>
<td>80.4</td>
<td>16.8</td>
<td>206</td>
<td>117</td>
<td>73</td>
<td>44</td>
<td>99</td>
<td>0.94</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>-5.1%</td>
<td>-1.4%</td>
<td>-2.7%</td>
<td>88.6</td>
<td>23.5</td>
<td>186</td>
<td>121</td>
<td>79</td>
<td>42</td>
<td>99</td>
<td>0.61</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>-7.0%</td>
<td>-0.6%</td>
<td>-0.1%</td>
<td>86.5</td>
<td>31.6</td>
<td>196</td>
<td>119</td>
<td>72</td>
<td>47</td>
<td>100</td>
<td>0.79</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>-6.9%</td>
<td>0.6%</td>
<td>2.7%</td>
<td>82.1</td>
<td>21.6</td>
<td>206</td>
<td>121</td>
<td>71</td>
<td>50</td>
<td>99</td>
<td>0.78</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>-5.0%</td>
<td>-2.0%</td>
<td>-4.3%</td>
<td>66.1</td>
<td>0.0</td>
<td>220</td>
<td>118</td>
<td>66</td>
<td>52</td>
<td>99</td>
<td>0.62</td>
</tr>
<tr>
<td class="firstcol">Memo: UK</td>
<td>-7.5%</td>
<td>-5.2%</td>
<td>-6.1%</td>
<td>70.4</td>
<td>3.4</td>
<td>219</td>
<td>118</td>
<td>69</td>
<td>50</td>
<td>100</td>
<td>0.42</td>
</tr>
<tr>
<td colspan="12" class="firstcol">Since 1990
except Services (Oct
1996) 247-Count; Services: 145-Count</td>
</tr>
<tr>
<td colspan="12" class="firstcol">Sentiment
is an index, sector
readings are net balance diffusion measures.</td>
</tr>
</tbody>
</table>
</body></html>

U.S. real GDP fell a modest 0.3% (AR) last quarter after 2.8% growth during 2Q. Consensus expectations had been for a decline at a 0.5% rate. The decline last quarter mirrored a 0.2% decline during the fourth quarter of last year. The [...]

U.S. 3Q'08 GDP Fell Modestly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029f.jpg" width="353">
The Federal Open Market Committee today cut the Federal funds rate, as expected, to 1.00% from 1.50%. The discount rate also was cut to 1.25%. The latest Fed funds rate was its lowest since 2004.
The Fed indicated three specific reasons for lowering interest rates today. 1) A slowdown in U.S. economic growth due to slower consumer spending and weaker business investment spending 2) Financial market turmoil and 3) an expectation for moderation in inflation due to lower energy and other commodity prices as well as slower economic growth.
Credit market conditions were expected by the Fed to improve due to interest rate cuts around the world, &quot;extraordinary liquidity measures&quot; and actions to strengthen financial systems.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029g.jpg" width="353">
The decision was unanimous amongst FOMC voters.
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081029a.htm">link</a>.
How Economic News Moves Markets from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci14-6.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">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">September</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>1.00</td>
<td>1.50</td>
<td>2.00</td>
<td>5.05</td>
<td>4.96</td>
<td>3.19</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>1.25</td>
<td>1.75</td>
<td>2.25</td>
<td>5.86</td>
<td>5.96</td>
<td>4.19</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Open Market Committee today cut the Federal funds rate, as expected, to 1.00% from 1.50%. The discount rate also was cut to 1.25%. The latest Fed funds rate was its lowest since 2004. The Fed indicated three specific [...]

FOMC Cut Funds Rate to 1.00%; The Lowest Since 2004

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029d.jpg">
The total number of mortgage applications rose 28.5% last week and that recovered all of the prior period&#39;s decline, according to the Mortgage Bankers Association. Nevertheless, the October average fell 20.0% from September and applications were two-thirds below their peak reached this past January.
Last week, applications for a mortgage to purchase a home made up most of the prior week&#39;s decline with an 8.5% rise. For October so far, however, purchase applications reversed most of the prior month&#39;s gain with a 13.3% decline. During the latest week purchase applications were down 43% from their 2005 peak.
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. Figures covering sales of existing single-family home will be available this Friday while single-family home sales will be published early next week.
Applications to refinance a home mortgage recovered most of the prior week&#39;s decline with a 28.5% increase but applications in October overall remained 20% below September. During September, applications to refinance had risen 61.9% from August as 15-year mortgage rates fell briefly to 5.54%.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029e.jpg">
The effective interest rate on a conventional 15-year mortgage slipped last week to 6.30% following an average of 6.01% last month. For a 30-year mortgage, rates slipped w/w to 6.48%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. For an adjustable rate 1-Year mortgage the rate also slipped w/w to 6.95% after having averaged 6.70% last month.
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.
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>.
The figures for weekly mortgage applications are available in Haver&#39;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/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/24/08</th>
<th scope="col">10/17/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>476.7</td>
<td>408.1</td>
<td>-30.1%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>303.1</td>
<td>279.3</td>
<td>-26.6%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,489.4</td>
<td>1,158.8</td>
<td>-33.8%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications rose 28.5% last week and that recovered all of the prior period's decline, according to the Mortgage Bankers Association. Nevertheless, the October average fell 20.0% from September and [...]

U.S. Mortgage Applications Recovered Last Week; Off Two-Thirds From Peak

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029b.jpg" width="353">
During September, new orders for durable goods ticked up 0.8% after falling 5.5% during August, a decline revised from the -4.5% figure reported initially. Though the September rise in orders beat Consensus expectations for a 1.0% decline, there where few, if any, areas of strength. The gain mostly reflected a 21.8% (-16.6% y/y) jump in new orders for aircraft &amp; parts that offset most of a decline during August. (Nondefense aircraft orders rose 29.7% (-34.1% y/y).
Highlighting the weakness in durable goods orders last month was a 1.1% decline in new orders less the transportation sector altogether. That followed a 4.1% drop during August, initially reported at down 3.0%. The September decline about matched Consensus expectations but during the last three months, orders less the transportation sector fell at a 19.0% annual rate.
The rise in aircraft orders did lift overall orders for nondefense capital goods by 0.8%, but that followed a little-revised 7.7% plunge during August. Without aircraft, nondefense capital goods orders fell 1.4% after 2.2% drop during August. These declines lowered the three-month growth rate to -12.4%, the worst since early last year. During the last ten years there has been an 80% correlation between the y/y gain in nondefense capital goods orders and the rise 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%.
The industry detail highlights the recent weakness in factory orders. Orders for machinery ticked up just 0.5% after a 6.4% drop during August. That left the three-month growth rate at -9.5%.Primary metals orders fell sharply for the second consecutive month with a 4.5% (+1.6% y/y) drop which followed a downwardly revised 12.5% August plunge. New orders for electrical equipment increased 1.5% (1.1% y/y) after a 3.5% August decline. On a three-month basis these orders were down at a 35.0% annual rate.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029c.jpg" width="353">
New orders for computers &amp; electronic products continued on their weaker trend-line with a 1.4% drop last month. On a three-month basis these orders fell at a 15.0% annual rate after their 2.1% decline during all of last year. Orders for just computers &amp; related products fell 2.8% and on a three-month basis they were off at a 47.9% annual rate. New orders for communications equipment also have been quite weak and they fell 14.6% last month. Three-month growth was -36.6% (AR) after last year&#39;s 7.5% decline.
Reflecting past weakness in new orders was a 0.2% rise in overall shipments of durable goods which made up little of a 4.2% August fall. During the last three months growth was a negative 7.6% (AR) after last year&#39;s negligible 0.1% uptick. For comparison, industrial production of durable goods during the last three months fell at a 13.5%. During the last ten years there has been a 62% correlation between the three-month change in shipments of durable goods and the change in durables industrial production. Less transportation, shipments of durable goods fell 0.4% following a 2.9% August drop. Three-month growth fell to -4.8% (AR).
Inventories of durable goods rose just 0.4% (8.1% y/y), the weakest monthly increase since last October. Three-month growth eased slightly to a still strong 8.8%. Less transportation, inventories rose a weaker 0.5% and the three-month growth rate eased slightly to 9.4% (AR) after the 1.4% rise during 2007.
Addressing the Credit Crisis is a speech given earlier this month by Dallas Fed President Richard W. Fisher and it can be found <a href="http://dallasfed.org/news/speeches/fisher/2008/fs081012.cfm">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/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>0.8</td>
<td>-5.5</td>
<td>-3.6</td>
<td>1.4</td>
<td>6.2</td>
<td>10.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-1.1</td>
<td>-4.1</td>
<td>-0.6</td>
<td>-0.3</td>
<td>9.1</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>0.8</td>
<td>-7.7</td>
<td>-7.2</td>
<td>3.5</td>
<td>9.4</td>
<td>17.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-1.4</td>
<td>-2.2</td>
<td>0.5</td>
<td>-2.7</td>
<td>10.7</td>
<td>11.6</td>
</tr>
</tbody>
</table>
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During September, new orders for durable goods ticked up 0.8% after falling 5.5% during August, a decline revised from the -4.5% figure reported initially. Though the September rise in orders beat Consensus expectations for a 1.0% [...]

U.S. Durable Goods Orders Ticked Up

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029a.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s IP fell sharply by 3.5% in August, but it has made a
substantial rebound in September. Still the trends for IP all are
lower, as the sequential growth rates in the table below show. The
rebounds by sector in September are only about one-third of the drop
made in August.
Year-over-year, Japan&#8217;s IP is still rising at a 2.7% pace.
Consumer goods output is up by a strong 3.9% while investment goods
output is up by 0.5% at an annual rate. The investment goods side is
slowing down faster than the consumer goods side.
That trend is in place for the quarter as well. With the
September figures just in to complete the quarter, Q3 reveals that
overall IP is falling at a 5% pace in MFG. Investment goods output is
dropping at a sizeable 13.2% pace while the output of consumer goods is
still up at a 4.1% pace. Since consumers are showing weakness around
the world in terms of lower confidence and reduced spending and since
Japan is a strong exporter of consumer goods this sector is due to get
hit much harder.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">Japan Industrial Production Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
<td>Qtr-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">seas adjusted</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>% AR</td>
</tr>
<tr>
<td class="firstcol">Mining &amp; Mfg</td>
<td>1.2%</td>
<td>-3.5%</td>
<td>1.3%</td>
<td>-4.1%</td>
<td>-1.3%</td>
<td>-1.9%</td>
<td>2.7%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>1.1%</td>
<td>-3.6%</td>
<td>1.5%</td>
<td>-4.1%</td>
<td>-1.3%</td>
<td>-2.1%</td>
<td>3.0%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>1.1%</td>
<td>-3.5%</td>
<td>1.2%</td>
<td>-4.8%</td>
<td>-1.7%</td>
<td>-2.1%</td>
<td>2.8%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>-1.4%</td>
<td>-0.2%</td>
<td>-2.9%</td>
<td>-16.6%</td>
<td>-13.7%</td>
<td>-10.6%</td>
<td>-6.8%</td>
<td>-16.2%</td>
</tr>
<tr>
<td class="firstcol">T-port</td>
<td>4.4%</td>
<td>-9.8%</td>
<td>4.0%</td>
<td>-7.9%</td>
<td>-1.2%</td>
<td>-1.3%</td>
<td>10.4%</td>
<td>-7.4%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">Product Group</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.9%</td>
<td>-3.3%</td>
<td>3.6%</td>
<td>4.5%</td>
<td>4.3%</td>
<td>0.6%</td>
<td>3.9%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>0.5%</td>
<td>-2.3%</td>
<td>-0.2%</td>
<td>-7.8%</td>
<td>-3.6%</td>
<td>-1.8%</td>
<td>3.4%</td>
<td>-5.6%</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>4.7%</td>
<td>-5.2%</td>
<td>-0.5%</td>
<td>-5.1%</td>
<td>-2.4%</td>
<td>-4.9%</td>
<td>0.5%</td>
<td>-13.2%</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>-4.4%</td>
<td>1.6%</td>
<td>4.2%</td>
<td>4.7%</td>
<td>2.5%</td>
<td>-1.4%</td>
<td>1.8%</td>
<td>12.4%</td>
</tr>
<tr>
<td class="firstcol">Electricity &amp; Gas</td>
<td>2.0%</td>
<td>-7.6%</td>
<td>6.3%</td>
<td>0.4%</td>
<td>-0.8%</td>
<td>-3.9%</td>
<td>8.8%</td>
<td>-1.8%</td>
</tr>
</tbody>
</table>
</body></html>

Japan’s IP fell sharply by 3.5% in August, but it has made a substantial rebound in September. Still the trends for IP all are lower, as the sequential growth rates in the table below show. The rebounds by sector in September are only [...]

Japan’s Industrial Output Recoups Some of Loss

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029b.jpg" align="left" border="0" height="265" width="353">
During September, new orders for durable goods ticked up 0.8%
after falling 5.5% during August, a decline revised from the -4.5%
figure reported initially. Though the September rise in orders beat
Consensus expectations for a 1.0% decline, there where few, if any,
areas of strength. The gain mostly reflected a 21.8% (-16.6% y/y) jump
in new orders for aircraft &amp; parts that offset most of a
decline during August. (Nondefense aircraft orders rose 29.7% (-34.1%
y/y).
Highlighting the weakness in durable goods orders last month
was a 1.1% decline in new orders less the transportation sector
altogether. That followed a 4.1% drop during August, initially reported
at down 3.0%. The September decline about matched Consensus
expectations but during the last three months, orders less the
transportation sector fell at a 19.0% annual rate.
The rise in aircraft orders did lift overall orders for
nondefense capital goods by 0.8%, but that followed a little-revised
7.7% plunge during August. Without aircraft, nondefense capital goods
orders fell 1.4% after 2.2% drop during August. These declines lowered
the three-month growth rate to -12.4%, the worst since early last year.
During the last ten years there has been an 80% correlation between the
y/y gain in nondefense capital goods orders and the rise 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%.
The industry detail highlights the recent weakness in factory
orders. Orders for machinery ticked up just 0.5% after a 6.4% drop
during August. That left the three-month growth rate at -9.5%.Primary
metals orders fell sharply for the second consecutive month with a 4.5%
(+1.6% y/y) drop which followed a downwardly revised 12.5% August
plunge. New orders for electrical equipment increased 1.5% (1.1% y/y)
after a 3.5% August decline. On a three-month basis these orders were
down at a 35.0% annual rate.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029c.jpg" align="right" border="0" height="265" width="353">
New orders for computers &amp; electronic products
continued on their weaker trend-line with a 1.4% drop last month. On a
three-month basis these orders fell at a 15.0% annual rate after their
2.1% decline during all of last year. Orders for just computers
&amp; related products fell 2.8% and on a three-month basis they
were off at a 47.9% annual rate. New orders for communications
equipment also have been quite weak and they fell 14.6% last month.
Three-month growth was -36.6% (AR) after last year's 7.5% decline.
Reflecting past weakness in new orders was a 0.2% rise in
overall shipments of durable goods which made up little of a 4.2%
August fall. During the last three months growth was a negative 7.6%
(AR) after last year's negligible 0.1% uptick. For comparison,
industrial production of durable goods during the last three months
fell at a 13.5%. During the last ten years there has been a 62%
correlation between the three-month change in shipments of durable
goods and the change in durables industrial production. Less
transportation, shipments of durable goods fell 0.4% following a 2.9%
August drop. Three-month growth fell to -4.8% (AR).
Inventories of durable goods rose just 0.4% (8.1% y/y), the
weakest monthly increase since last October. Three-month growth eased
slightly to a still strong 8.8%. Less transportation, inventories rose
a weaker 0.5% and the three-month growth rate eased slightly to 9.4%
(AR) after the 1.4% rise during 2007.
Addressing the Credit Crisis is a speech
given earlier this month by Dallas Fed President Richard W. Fisher and
it can be found <a href="http://dallasfed.org/news/speeches/fisher/2008/fs081012.cfm">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/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS
Classification</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>0.8</td>
<td>-5.5</td>
<td>-3.6</td>
<td>1.4</td>
<td>6.2</td>
<td>10.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>-1.1</td>
<td>-4.1</td>
<td>-0.6</td>
<td>-0.3</td>
<td>9.1</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>0.8</td>
<td>-7.7</td>
<td>-7.2</td>
<td>3.5</td>
<td>9.4</td>
<td>17.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-1.4</td>
<td>-2.2</td>
<td>0.5</td>
<td>-2.7</td>
<td>10.7</td>
<td>11.6</td>
</tr>
</tbody>
</table>
U.S. Mortgage Applications
Recovered Last Week; Off Two-Thirds From Peak 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 29, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029d.jpg" align="left" border="0">
The total number of mortgage applications rose 28.5% last week
and that recovered all of the prior period's decline, according to the
Mortgage Bankers Association. Nevertheless, the October average fell
20.0% from September and applications were two-thirds below their peak
reached this past January.
Last week, applications for a mortgage to purchase a home made
up most of the prior week's decline with an 8.5% rise. For October so
far, however, purchase applications reversed most of the prior month's
gain with a 13.3% decline. During the latest week purchase applications
were down 43% from their 2005 peak.
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. Figures covering sales of
existing single-family home will be available this Friday while
single-family home sales will be published early next week.
Applications to refinance a home mortgage recovered most of
the prior week's decline with a 28.5% increase but applications in
October overall remained 20% below September. During September,
applications to refinance had risen 61.9% from August as 15-year
mortgage rates fell briefly to 5.54%.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029e.jpg" align="right" border="0">
The effective interest rate on a conventional 15-year mortgage
slipped last week to 6.30% following an average of 6.01% last month.
For a 30-year mortgage, rates slipped w/w to 6.48%. Interest rates on
15 and 30 year mortgages are closely correlated (&gt;90%) with the
rate on 10-year Treasury securities. For an adjustable rate 1-Year
mortgage the rate also slipped w/w to 6.95% after having averaged 6.70%
last month.
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.
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>.
The figures for weekly mortgage applications 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/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/24/08</th>
<th scope="col">10/17/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>476.7</td>
<td>408.1</td>
<td>-30.1%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>303.1</td>
<td>279.3</td>
<td>-26.6%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,489.4</td>
<td>1,158.8</td>
<td>-33.8%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
FOMC Cut Funds Rate to 1.00%; The
Lowest Since 2004 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 29, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029f.jpg" align="left" border="0" height="265" width="353">
The Federal Open Market Committee today cut the Federal funds
rate, as expected, to 1.00% from 1.50%. The discount rate also was cut
to 1.25%. The latest Fed funds rate was its lowest since 2004.
The Fed indicated three specific reasons for lowering interest
rates today. 1) A slowdown in U.S. economic growth due to slower
consumer spending and weaker business investment spending 2) Financial
market turmoil and 3) an expectation for moderation in inflation due to
lower energy and other commodity prices as well as slower economic
growth.
Credit market conditions were expected by the Fed to improve
due to interest rate cuts around the world, "extraordinary liquidity
measures" and actions to strengthen financial systems.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029g.jpg" align="right" border="0" height="265" width="353">
The decision was unanimous amongst FOMC voters.
For the complete text of the Fed's latest press release please
follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20081029a.htm">link</a>.
How Economic News Moves Markets from the
Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci14-6.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">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">September</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>1.00</td>
<td>1.50</td>
<td>2.00</td>
<td>5.05</td>
<td>4.96</td>
<td>3.19</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>1.25</td>
<td>1.75</td>
<td>2.25</td>
<td>5.86</td>
<td>5.96</td>
<td>4.19</td>
</tr>
</tbody>
</table>
Japan&#8217;s Industrial Output Recoups
Some of Loss 
by <a href="/comment/Brusca.html">Robert
Brusca</a> October 29, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081029a.jpg" align="left" border="0" height="265" width="353">
Japan&#8217;s IP fell sharply by 3.5% in August, but it has made a
substantial rebound in September. Still the trends for IP all are
lower, as the sequential growth rates in the table below show. The
rebounds by sector in September are only about one-third of the drop
made in August.
Year-over-year, Japan&#8217;s IP is still rising at a 2.7% pace.
Consumer goods output is up by a strong 3.9% while investment goods
output is up by 0.5% at an annual rate. The investment goods side is
slowing down faster than the consumer goods side.
That trend is in place for the quarter as well. With the
September figures just in to complete the quarter, Q3 reveals that
overall IP is falling at a 5% pace in MFG. Investment goods output is
dropping at a sizeable 13.2% pace while the output of consumer goods is
still up at a 4.1% pace. Since consumers are showing weakness around
the world in terms of lower confidence and reduced spending and since
Japan is a strong exporter of consumer goods this sector is due to get
hit much harder.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr> <th colspan="9" scope="col">Japan
Industrial Production Trends </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
<td>Qtr-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">seas adjusted</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>Jul-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>% AR</td>
</tr>
<tr>
<td class="firstcol">Mining &amp; Mfg</td>
<td>1.2%</td>
<td>-3.5%</td>
<td>1.3%</td>
<td>-4.1%</td>
<td>-1.3%</td>
<td>-1.9%</td>
<td>2.7%</td>
<td>-4.8%</td>
</tr>
<tr>
<td class="firstcol">Total Industry</td>
<td>1.1%</td>
<td>-3.6%</td>
<td>1.5%</td>
<td>-4.1%</td>
<td>-1.3%</td>
<td>-2.1%</td>
<td>3.0%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>1.1%</td>
<td>-3.5%</td>
<td>1.2%</td>
<td>-4.8%</td>
<td>-1.7%</td>
<td>-2.1%</td>
<td>2.8%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">Textiles</td>
<td>-1.4%</td>
<td>-0.2%</td>
<td>-2.9%</td>
<td>-16.6%</td>
<td>-13.7%</td>
<td>-10.6%</td>
<td>-6.8%</td>
<td>-16.2%</td>
</tr>
<tr>
<td class="firstcol">T-port</td>
<td>4.4%</td>
<td>-9.8%</td>
<td>4.0%</td>
<td>-7.9%</td>
<td>-1.2%</td>
<td>-1.3%</td>
<td>10.4%</td>
<td>-7.4%</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol">Product Group</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.9%</td>
<td>-3.3%</td>
<td>3.6%</td>
<td>4.5%</td>
<td>4.3%</td>
<td>0.6%</td>
<td>3.9%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td>0.5%</td>
<td>-2.3%</td>
<td>-0.2%</td>
<td>-7.8%</td>
<td>-3.6%</td>
<td>-1.8%</td>
<td>3.4%</td>
<td>-5.6%</td>
</tr>
<tr>
<td class="firstcol">Investment Goods</td>
<td>4.7%</td>
<td>-5.2%</td>
<td>-0.5%</td>
<td>-5.1%</td>
<td>-2.4%</td>
<td>-4.9%</td>
<td>0.5%</td>
<td>-13.2%</td>
</tr>
<tr>
<td class="firstcol">Mining</td>
<td>-4.4%</td>
<td>1.6%</td>
<td>4.2%</td>
<td>4.7%</td>
<td>2.5%</td>
<td>-1.4%</td>
<td>1.8%</td>
<td>12.4%</td>
</tr>
<tr>
<td class="firstcol">Electricity &amp; Gas</td>
<td>2.0%</td>
<td>-7.6%</td>
<td>6.3%</td>
<td>0.4%</td>
<td>-0.8%</td>
<td>-3.9%</td>
<td>8.8%</td>
<td>-1.8%</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028g.jpg" align="left" border="0" height="265" width="353">
Reflecting turbulence in the financial markets, the Conference
Board reported that its October index of consumer confidence collapsed
by more than one-third m/m to a record low level.
The latest index level of 38.0, off by two-thirds from last year,
followed a level of 61.4 during September. Consensus expectations had
been for a lesser m/m decline to a reading of 52.0.
During the last ten years there has been a 79% correlation
between the level of consumer confidence and the y/y change in real
consumer spending.
This month's decline reflected a 42.3% m/m plunge in the
expectations component of the index. The index was at a record low
level and the October drop followed increases during the prior three
months.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028h.jpg" align="right" border="0" height="265" width="353">
Fewer jobs were seen by 41.5% of respondents, the highest
since 1980. Only 4.4% planned to buy an automobile and just 3.3%
planned to buy carpet. Both of these percentages set the record low for
the series. Twenty six percent of respondents planned to buy a major
appliance within six months, near the fifteen year low. Only 2.7% of
respondents planned to buy a home within six months, down from the high
near 5% in 1999.
The percentage of respondents expecting business conditions to
worsen in six months jumped to 36.6%, the highest level since the
credit crunch of 1980. Only 9.9% expected improvement in conditions.
Down by nearly one-third m/m, the present conditions index
fell to the lowest level since 1992. Jobs were seen as hard to get by
37.2% of respondents, the highest since 1993 and jobs were seen as
plentiful by just 8.9%. Business conditions were seen as good by just
9.2%, the lowest since 1991. Those who thought it bad rose to 38.3%,
also the highest since 1992.
Expectations for the inflation rate in twelve months
surprisingly rose to 6.9%, the highest level since July. 
The Enduring Challenge of Concentrated Poverty: Case
Studies from Communities Across the U.S. from the U.S.
Federal Reserve Board is available <a href="http://www.federalreserve.gov/newsevents/press/other/20081024a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board &nbsp;(SA, 1985=100)</th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y %</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer
Confidence Index</td>
<td>38.0</td>
<td>61.4</td>
<td>-60.1</td>
<td>103.4</td>
<td>105.9</td>
<td>100.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>41.9</td>
<td>61.1</td>
<td>-64.5</td>
<td>128.8</td>
<td>130.2</td>
<td>116.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>35.5</td>
<td>61.5</td>
<td>-55.6</td>
<td>86.4</td>
<td>89.7</td>
<td>89.7</td>
</tr>
</tbody>
</table>
</body></html>

Reflecting turbulence in the financial markets, the Conference Board reported that its October index of consumer confidence collapsed by more than one-third m/m to a record low level. The latest index level of 38.0, off by two-thirds [...]

Consumer Confidence Collapses To Record Low

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028e.jpg" align="left" border="0" height="265" width="353">
The S&amp;P/Case-Shiller Composite 20
Home Price Index fell another 1.0% in August which about matched the
July drop. Since their peak in July 2006 prices have fallen
20.0% -- down 16.6% during the last twelve months. The series
dates back only to 2000. The decline in August prices was as expected.
The Case-Shiller index of 20 U.S. cities and their surrounding
areas is weighted to reflect price changes due to extensive remodeling,
home additions or extreme neglect. For example, smaller weights are
assigned to sales of homes that have undergone extensive remodeling.
The Case-Shiller composite index of homes in 10 metropolitan
areas, which has a longer history and dates back to 1987, fell 1.1% in
August, the same as during July. The index was down 17.7% year-to-year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081028f.jpg" align="right" border="0" height="265" width="353">
Home prices in Phoenix, Nevada continued quite weak and fell
2.9% during August (-30.7% y/y) and in San Diego prices fell 2.3%
(-25.8% y/y). Home prices in Las Vegas, Nevada were down 2.4% (-30.6%
y/y), about as they were in July. Prices in Miami also repeated their
August performance and fell 1.8% (-28.1% y/y) while the same was true
for home prices in Los Angeles, down 26.7% y/y. In San Francisco home
prices were off 27.3% y/y and prices in Tampa, Florida posted an 18.1%
y/y decline.
In the Northeast home prices have held up relatively well. In
New York prices fell a lesser 6.9% y/y and they were down 4.7% in
Boston. In Dallas prices also were off a modest 2.7% y/y and by 2.8% in
Charlotte, North Carolina. In Denver home prices were off 5.1% y/y and
they were down 6.6% in Cleveland Ohio.
The S&amp;P/Case-Shiller home price series can be found in
Haver's USECON database but the city data is in the
REGIONAL database.
The latest press release from Standard &amp; Poor's can be
found <a href="http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_102831.pdf">here</a>.
An overview of the S&amp;P/Case-Shiller home price series
can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (NSA, Jan 00 = 100)</th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">20 City Composite
Index</td>
<td>164.57</td>
<td>166.29</td>
<td>-16.6%</td>
<td>-3.8%</td>
<td>7.6%</td>
<td>15.8%</td>
</tr>
</tbody>
</table>
</body></html>

The S&P/Case-Shiller Composite 20 Home Price Index fell another 1.0% in August which about matched the July drop. Since their peak in July 2006 prices have fallen 20.0% -- down 16.6% during the last twelve months. The series dates [...]

Home Prices Fell 20% Indicates Case-Shiller

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

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

250430P1.jpg

250430Q1.jpg

Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

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**.

250430R1.jpg

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- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

250430A.jpg

250430B.jpg

High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

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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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

250430F20.jpg

250430G20.jpg

The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

U.S. Pending Home Sales Surge in March

Sandy Batten

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The employment cost index (ECI) for civilian workers, arguably the most accurate measure of labor compensation in the United States, rose 0.9% q/q (3.6% y/y) in Q1, the same quarterly increase as in last year’s Q4, according to the Bureau of Labor Statistics. The quarterly gains have fluctuated between 0.8% and 1.0% for the past six quarters. The Action Economics Forecast Survey had expected a 0.9% q/q increase and a 3.5% y/y gain.

Wages and salaries for civilian workers rose 0.8% q/q (3.5% y/y) in Q1, down from 1.0% q/q in Q4. This tied the Q3 2024 quarterly rise as the smallest increase since Q2 2021. It was also the smallest y/y increase since Q2 2021. Benefits increased by an outsized 1.2% q/q (3.9% y/y) in Q1 versus 0.8% q/q in Q4. This is the largest quarterly gain since Q2 2022. In general, employment cost gains remain above the pace observed prior to the pandemic but are slowing gradually.

Private industry workers’ compensation rose 0.8% q/q (3.4% y/y) in Q1, down from 0.9% q/q (3.6% y/y) in Q4. Wages and salaries for private industry workers increased 0.8% q/q (3.4% y/y) in Q1 versus 0.8% q/q (3.7% y/y) in Q4. The quarterly gain in Q1 tied that in Q3 2024 as the smallest increase since Q4 2020. Benefits for private industry workers jumped 1.2% q/q (3.6% y/y). the largest quarterly gain since Q2 2022. The acceleration in benefits in Q1 was primarily in service-producing industries.

Compensation in private goods-producing industries increased 1.0% q/q (3.2% y/y) in Q1, the largest quarterly gain in five quarters, versus a 0.7% q/q increase in Q4. Compensation in construction jumped 1.3% q/q, its largest quarterly increase since Q2 2022, up from a 0.6% q/q gain in Q4. Manufacturing compensation growth slowed to 0.7% q/q, its slowest quarterly advance since Q4 2020, from 0.8% q/q in Q4. Compensation in private service-producing industries increased 0.8% q/q (3.5% y/y), down slightly from a 0.9% q/q gain in Q4. Compensation in education and health services jumped 1.3% q/q, its largest quarterly gain since Q3 2023. In contrast, compensation in other services edged up 0.1% q/q in Q1, its smallest quarterly advance since before the pandemic.

The employment cost index measures the change in the cost of labor, free from the influence of employment shifts across occupations and industries. It is provided by the Bureau of Labor Statistics and is available in Haver’s **USECON** database. Consensus estimates from the Action Economics Forecast Survey are in Haver’s **AS1REPNA** database.

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- Compensation grew 0.9 q/q in Q1, the same pace as in Q4.
- Wage growth slowed to 0.8% q/q while benefits surged 1.2% q/q, their largest quarterly increase since Q2 2022.

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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The ADP National Employment Report indicated that nonfarm private sector payrolls rose 62,000 (1.4% y/y) during April after increasing 147,000 (1.4% y/y) during March, revised from 155,000. A 124,000 April rise in ADP employment had been expected in the Action Economics Forecast Survey.

Growth in median annual pay for "job stayers" eased to 4.5% y/y during April, from 4.6% y/y in March and from 4.7% y/y in the prior two months. Manufacturing sector pay grew 4.6% y/y during April, down from 4.8% y/y in March. Construction sector pay was unchanged at 4.7% y/y. Natural resource & mining sector pay grew 4.4% y/y. Financial sector pay rose 5.1% y/y, while education & health services pay rose 4.7% y/y. Leisure & hospitality pay also increased 4.7% y/y. Professional & business service sector pay increased 4.3% y/y as did trade, transportation & utilities pay. Information pay rose 4.1% y/y. Median annual pay for “job changers” rose 6.9% y/y after 6.7% y/y in March.

Small business hiring (less than 50 employees) rose 11,000 (0.6% y/y) after rising 18,000 (0.6% y/y) in March, revised down from 52,000. Employment at medium-sized firms (50-499,000 employees) rose 40,000 (1.1% y/y) after rising 43,000 (1.1% y/y). Large business hiring (500+ employees) rose 12,000 (3.4% y/y) in April, after rising 61,000 (3.6% y/y) in March, revised from 59,000.

Goods-producing employment rose 26,000 (1.3% y/y) in April, after rising 16,000 (1.3% y/y) during March, revised from 24,000. Manufacturing jobs rose 4,000 (-0.2% y/y) after rising 17,000 (-0.3% y/y) in March. The number of construction sector jobs rose 16,000 (3.4% y/y) in April, following a 2,000 (3.6% y/y) March increase, revised from 6,000. Natural resources & mining jobs rose 6,000 (2.8% y/y) in April after falling 3,000 (+1.9% y/y) in March.

The number of service-producing jobs rose 34,000 (1.4% y/y) during April, following a rise of 131,000 (1.4% y/y) in March. Professional & business services employment fell 2,000 (0.6% y/y) after rising 46,000 (0.7% y/y) in the prior month, revised from 57,000. Employment in the financial industry rose 20,000 (2.1% y/y) in April, after rising 38,000 (2.0% y/y) in March. Leisure and hospitality employment increased 27,000 (3.0% y/y), following a 23,000 (2.9% y/y) March increase, revised from 17,000. The number of education & health care jobs fell 23,000 (1.6% y/y) in April, following a 15,000 (1.8% y/y) rise in March, revised from 12,000. Information sector employment fell 8,000 (-0.1% y/y) after a rise of 3,000 (0.2% y/y) in March. The number of jobs in trade, transportation & utilities rose 21,000 (0.4% y/y) in April, after falling 4,000 (+0.4% y/y) in March, revised from a 6,000 fall. Employment in “other” services rose fell 1,000 (+3.2% y/y) following a 10,000 (3.4% y/y) rise in March, revised from 11,000.

By region, employment in the Northeast increased 10,000 (1.9% y/y) in April, following an increase of 95,000 (2.0% y/y) in March, revised from 89,000. Employment in the Midwest rose 42,000 (1.5% y/y) after a gain of 84,000 (1.4% y/y) in March, revised from 81,000. In the South, employment rose 3,000 (1.3% y/y) during April, after rising 10,000 (1.4% y/y) in March, revised from 27,000. In the West, employment rose 9,000 (0.6% y/y) after declining 43,000 (+0.6% y/y), revised from a 41,000 decline in March.

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

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- Employment increase is modest in both services & factory sectors.
- Wage growth for “job stayers” moderates.
- Small and medium-sized business employment slows.

Economy in Brief: October 2008

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U.S. 3Q'08 GDP Fell Modestly

FOMC Cut Funds Rate to 1.00%; The Lowest Since 2004

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U.S. Durable Goods Orders Ticked Up

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U.S. Durable Goods Orders Ticked Up

Consumer Confidence Collapses To Record Low

Home Prices Fell 20% Indicates Case-Shiller