Robert Brusca

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<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Manufacturing orders are up by 0.8% in December but the
sequential growth rates do not show that the growth of orders continues
to accelerate. MFG sales are also slowing as capital goods and
intermediate goods sales rates over three-months are weaker than sales
rates for six months</p>
<p>In December domestic orders have been especially strong rising
by 6.1% while foreign orders advanced by 2.2%. But over three months
Domestic orders are up at just a 0.8% rate while foreign orders are up
at an 11.9% pace. The pattern of growth rates in the chart shows us
that domestic and foreign growth rates peaked about six months ago and
have since been slowing down even though they continue to grow. This is
one reason for concern about whether the recovery is building momentum
or not.</p>
<p>Among large EU/EMU countries Italy and the UK are
demonstrating still accelerating orders from 12-months to six months
and again from six months to the three-month horizon. In France orders
accelerated in six months compared to 12-months and have stayed near
that mark for 3-month growth rates. Germany shows a decided
deceleration with growth rates rising in six-months compared to
12-months then submerging and going negative for the recent three-month
period. Still the Yr/Yr growth rates moved sharply higher in December
compared to November everywhere but in the UK. But the sequential
growth rates do give more of an up-close view of growth and on that
basis momentum truly is fading.</p>
<p>Obviously the various EU/EMU countries have some differences.
But the overriding message is that orders growth is slowing. It is
still positive but it is slowing. Europe now will be burdened with the
growing and festering problems of Greece and possibly other debt
ladened e-Zone members. The European consumer does not seem to have
gotten in gear. The recent German IFO survey was weak but it may have
been impacted by weather. We are always on a bit of a weather watch at
this time of year. But apart from weather there are ample trends that
tell us to be cautious about depending on the European recovery being
too strong.</p>
</span>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">Selected Euro-Area and UK Industrial Orders </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Dec<br>09</td>
<td>Nov<br>09</td>
<td>Dec<br>09</td>
<td>Nov<br>09</td>
<td>Dec<br>09</td>
<td>Nov<br>09</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-Area Detail</td>
<td>Dec<br>09</td>
<td>Nov<br>09</td>
<td>Oct<br>09</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
</tr>
<tr>
<td class="firstcol">MFG
Orders</td>
<td>0.8%</td>
<td>2.7%</td>
<td>-2.1%</td>
<td>5.6%</td>
<td>9.2%</td>
<td>16.9%</td>
<td>21.5%</td>
<td>9.5%</td>
<td>-3.2%</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>-0.4%</td>
<td>1.4%</td>
<td>0.4%</td>
<td>6.1%</td>
<td>4.3%</td>
<td>8.8%</td>
<td>7.9%</td>
<td>-2.8%</td>
<td>-9.2%</td>
</tr>
<tr>
<td class="firstcol">
Consumer</td>
<td>0.7%</td>
<td>1.0%</td>
<td>-0.2%</td>
<td>6.1%</td>
<td>-3.4%</td>
<td>3.7%</td>
<td>-0.4%</td>
<td>-2.6%</td>
<td>-5.3%</td>
</tr>
<tr>
<td class="firstcol">
Capital</td>
<td>-1.9%</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>-7.2%</td>
<td>6.4%</td>
<td>5.1%</td>
<td>5.8%</td>
<td>-5.7%</td>
<td>-10.3%</td>
</tr>
<tr>
<td class="firstcol">
Intermediate</td>
<td>6.1%</td>
<td>1.3%</td>
<td>-6.8%</td>
<td>0.8%</td>
<td>4.1%</td>
<td>18.6%</td>
<td>20.0%</td>
<td>7.7%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td colspan="10" class="firstcol">Memo:MFG</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>0.8%</td>
<td>2.7%</td>
<td>-2.1%</td>
<td>5.6%</td>
<td>9.2%</td>
<td>16.9%</td>
<td>21.5%</td>
<td>9.5%</td>
<td>-3.2%</td>
</tr>
<tr>
<td class="firstcol">E-13
Domestic MFG orders</td>
<td>6.1%</td>
<td>1.3%</td>
<td>-6.8%</td>
<td>0.8%</td>
<td>4.1%</td>
<td>18.6%</td>
<td>20.0%</td>
<td>7.7%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">E-13
Foreign MFG orders</td>
<td>2.2%</td>
<td>3.0%</td>
<td>-2.3%</td>
<td>11.9%</td>
<td>35.2%</td>
<td>20.8%</td>
<td>34.2%</td>
<td>10.0%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Countries:</td>
<td>Dec09</td>
<td>Nov09</td>
<td>Oct09</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
</tr>
<tr>
<td class="firstcol">Germany
(MFG):</td>
<td>-1.8%</td>
<td>3.2%</td>
<td>-2.1%</td>
<td>-3.4%</td>
<td>9.9%</td>
<td>10.3%</td>
<td>23.7%</td>
<td>4.2%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">France(Ind):</td>
<td>17.1%</td>
<td>0.5%</td>
<td>-8.2%</td>
<td>36.4%</td>
<td>-7.3%</td>
<td>40.5%</td>
<td>4.5%</td>
<td>15.5%</td>
<td>-4.2%</td>
</tr>
<tr>
<td class="firstcol">Italy
(Ind):</td>
<td>4.7%</td>
<td>2.9%</td>
<td>0.7%</td>
<td>38.5%</td>
<td>47.6%</td>
<td>18.5%</td>
<td>15.4%</td>
<td>5.3%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">UK
(Engineering Industy):</td>
<td>8.5%</td>
<td>-15.6%</td>
<td>14.1%</td>
<td>19.1%</td>
<td>-18.1%</td>
<td>7.1%</td>
<td>-9.9%</td>
<td>-16.2%</td>
<td>-3.8%</td>
</tr>
</tbody>
</table>
</body></html>

Manufacturing orders are up by 0.8% in December but the sequential growth rates do not show that the growth of orders continues to accelerate. MFG sales are also slowing as capital goods and intermediate goods sales rates over three- [...]

Orders Continue In Their Upswing

Tom Moeller

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224c.jpg" style="width: 353px; height: 265px;" align="right">
The housing
market's upturn increasingly looks to have lost steam. The Mortgage
Bankers Association reported that mortgage applications slipped 8.5%
last week for the third week consecutive weekly decline. Nevertheless,
it's not all bad news since a late-January jump in applications was not
wholly unwound. The February average of applications still is up 8.8%
from January.&nbsp;&nbsp; &nbsp;</p><p>For last week,
applications to <i>refinance</i> mortgages fell 8.9% and
applications to <i>purchase</i> a home fell 7.3%, the
third down week. Overall, there has been a downtrend in purchase
applications despite an uplift provided by an up-to $8,000 Federal tax
credit for first-time homebuyers. During the last ten years there has
been a 51% correlation between the y/y change in purchase applications
and the change in new plus existing single family home sales. The
correlation has lessened recently.</p><p>The effective fixed interest rate
on conventional 15-year mortgages moved higher again to 4.68%. For the
month overall rates have been near the six year low. For 30-year
mortgages the rate also ticked up to 5.30% from a November average of
5.06%. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224d.jpg" style="width: 353px; height: 265px;" align="right">
Rates reached a high of 5.79% in early-June. Interest rates on
fixed 15-year and 30-year mortgages are closely correlated (near-90%)
with the rate on 10-year Treasury securities. Rates on adjustable
one-year mortgages fell to 6.64% last week from a November average of
6.81%.&nbsp;</p><p>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>.<span class="title">&nbsp;</span>The figures for weekly
mortgage applications are available in Haver's <b>SURVEYW</b>
database.</p>
<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/SURVEYW/@S5/@S5.HTM%22" style="color: black;"><b>MBA Mortgage Applications
(SA, 3/16/90=100)</b></a></th>
<th scope="col"><b>02/19/10</b></th>
<th scope="col"><b>02/12/10</b></th>
<th scope="col"><b>02/05/10</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>549.5</td>
<td>600.5</td>
<td>613.1</td>
<td>-26.1%</td>
<td>736.4</td>
<td>642.9</td>
<td>652.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>196.8</td>
<td>212.3</td>
<td>221.2</td>
<td>-21.4</td>
<td>263.5</td>
<td>345.4</td>
<td>424.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,605.3</td>
<td>2,860.1</td>
<td>2,893.9</td>
<td>-28.0</td>
<td>3,509.2</td>
<td>2,394.1</td>
<td>1,997.9</td>
</tr>
<tr>
<td class="firstcol">15-Year Mortgage Effective
Interest Rate (%)</td>
<td>4.68</td>
<td>4.59</td>
<td>4.57</td>
<td>5.07 (02/09)</td>
<td>4.85</td>
<td>5.9</td>
<td>6.2</td>
</tr>
</tbody>
</table>
</span></body></html>

The housing market's upturn increasingly looks to have lost steam. The Mortgage Bankers Association reported that mortgage applications slipped 8.5% last week for the third week consecutive weekly decline. Nevertheless, it's not all [...]

U.S. Weekly Mortgage Applications Slip Again

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224a.jpg" style="width: 353px; height: 265px;" align="right">Whether
record snowfall this season hurt housing activity is tough to say. This
morning's report that new home sales fell 11.2% from December to
309,000 (AR) following that month's moderate decline suggests that it
did, but January single-family housing starts were reported last week
to have risen. Perhaps builders have thicker skin than buyers? It
remains to be seen. Nevertheless, January sales fell well short of
Consensus expectations for 355,000 and reached a record low for the
series which dates back to 1963.&nbsp;</p>
<p> The one-third m/m drop in
home sales in the Northeast certainly suggests a strong weather factor
after they rose sharply during December. Conversely, Mid-West sales
rose 2.1% following their sharp December decline. In the West, sales
drifted lower and neared their record low while sales in the South fell
for the fifth month in the last six.</p><p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224b.jpg" style="width: 353px; height: 265px;" align="right">
Home prices
also were quite weak last month posting a 5.6% decline from December to
$203,500. Prices fell 2.4% during the last twelve months to the lowest
level since late-2003. Since the 2007 peak prices have fallen
22.5%.</p>
<p>Price discounts had been lowering the inventory of
unsold homes, but weakness in sales and stable starts recently have
lifted the inventory to&nbsp;&nbsp; its highest level since
May. The months' supply of unsold homes also has increased to 11.1
months from its July low of 7.2 months though that remained down from
the high of 12.4 months in January '09. Despite the shrinkage of
inventory, it still took a record median 13.9 months to sell a new home
as of December.</p>
<p>Fed Chairman Ben S. Bernanke's <b>Semiannual
Monetary Policy Report to the Congress</b> can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20100224a.htm">here</a>.&nbsp;</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>US
New Homes</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>Total Sales</b>
(SAAR, 000s)</td>
<td>309</td>
<td>348</td>
<td>362</td>
<td>-6.1%</td>
<td>372</td>
<td>481</td>
<td>769</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>24</td>
<td>37</td>
<td>30</td>
<td>-20.0</td>
<td>31</td>
<td>35</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>49</td>
<td>48</td>
<td>68</td>
<td>-7.5</td>
<td>54</td>
<td>69</td>
<td>118</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>162</td>
<td>179</td>
<td>187</td>
<td>-10.5</td>
<td>201</td>
<td>264</td>
<td>409</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>74</td>
<td>84</td>
<td>77</td>
<td>13.8</td>
<td>87</td>
<td>113</td>
<td>178</td>
</tr>
<tr>
<td class="firstcol"><b>Median Price</b>
(NSA, $)</td>
<td>203,500</td>
<td>215,600</td>
<td>219,100</td>
<td>&nbsp;-2.4</td>
<td>213,567</td>
<td>230,408</td>
<td>243,742</td>
</tr>
</tbody>
</table>
</span>
</body></html>

Whether record snowfall this season hurt housing activity is tough to say. This morning's report that new home sales fell 11.2% from December to 309,000 (AR) following that month's moderate decline suggests that it did, but January [...]

U.S. New Home Sales Plumb Record Low, Weather or Not?

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<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224a.jpg" style="width: 353px; height: 265px;" align="right">Whether
record snowfall this season hurt housing activity is tough to say. This
morning's report that new home sales fell 11.2% from December to
309,000 (AR) following that month's moderate decline suggests that it
did, but January single-family housing starts were reported last week
to have risen. Perhaps builders have thicker skin than buyers? It
remains to be seen. Nevertheless, January sales fell well short of
Consensus expectations for 355,000 and reached a record low for the
series which dates back to 1963.&nbsp;</p>
<p> The one-third m/m drop in
home sales in the Northeast certainly suggests a strong weather factor
after they rose sharply during December. Conversely, Mid-West sales
rose 2.1% following their sharp December decline. In the West, sales
drifted lower and neared their record low while sales in the South fell
for the fifth month in the last six.</p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224b.jpg" style="width: 353px; height: 265px;" align="right">Home
prices
also were quite weak last month posting a 5.6% decline from December to
$203,500. Prices fell 2.4% during the last twelve months to the lowest
level since late-2003. Since the 2007 peak prices have fallen
22.5%.</p>
<p>Price discounts had been lowering the inventory of
unsold homes, but weakness in sales and stable starts recently have
lifted the inventory to&nbsp;&nbsp; its highest level since
May. The months' supply of unsold homes also has increased to 11.1
months from its July low of 7.2 months though that remained down from
the high of 12.4 months in January '09. Despite the shrinkage of
inventory, it still took a record median 13.9 months to sell a new home
as of December.</p>
<p>Fed Chairman Ben S. Bernanke's <b>Semiannual
Monetary Policy Report to the Congress</b> can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20100224a.htm">here</a>.&nbsp;</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b>US
New Homes</b></th>
<th scope="col"><b>January</b></th>
<th scope="col"><b>December</b></th>
<th scope="col"><b>November</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>Total Sales</b>
(SAAR, 000s)</td>
<td>309</td>
<td>348</td>
<td>362</td>
<td>-6.1%</td>
<td>372</td>
<td>481</td>
<td>769</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>24</td>
<td>37</td>
<td>30</td>
<td>-20.0</td>
<td>31</td>
<td>35</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>49</td>
<td>48</td>
<td>68</td>
<td>-7.5</td>
<td>54</td>
<td>69</td>
<td>118</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>162</td>
<td>179</td>
<td>187</td>
<td>-10.5</td>
<td>201</td>
<td>264</td>
<td>409</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>74</td>
<td>84</td>
<td>77</td>
<td>13.8</td>
<td>87</td>
<td>113</td>
<td>178</td>
</tr>
<tr>
<td class="firstcol"><b>Median Price</b>
(NSA, $)</td>
<td>203,500</td>
<td>215,600</td>
<td>219,100</td>
<td>&nbsp;-2.4</td>
<td>213,567</td>
<td>230,408</td>
<td>243,742</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">U.S. Weekly Mortgage Applications
Slip Again</span><br>
<span id="byline">by <a href="/comment/Moeller.html">Tom
Moeller</a> February 24, 2010</span>
<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224c.jpg" style="width: 353px; height: 265px;" align="right">The
housing
market's upturn increasingly looks to have lost steam. The Mortgage
Bankers Association reported that mortgage applications slipped 8.5%
last week for the third week consecutive weekly decline. Nevertheless,
it's not all bad news since a late-January jump in applications was not
wholly unwound. The February average of applications still is up 8.8%
from January.&nbsp;&nbsp; &nbsp;</p>
<p>For last week,
applications to <i>refinance</i> mortgages fell 8.9% and
applications to <i>purchase</i> a home fell 7.3%, the
third down week. Overall, there has been a downtrend in purchase
applications despite an uplift provided by an up-to $8,000 Federal tax
credit for first-time homebuyers. During the last ten years there has
been a 51% correlation between the y/y change in purchase applications
and the change in new plus existing single family home sales. The
correlation has lessened recently.</p>
<p>The effective fixed interest rate
on conventional 15-year mortgages moved higher again to 4.68%. For the
month overall rates have been near the six year low. For 30-year
mortgages the rate also ticked up to 5.30% from a November average of
5.06%. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224d.jpg" style="width: 353px; height: 265px;" align="right">
Rates reached a high of 5.79% in early-June. Interest rates on
fixed 15-year and 30-year mortgages are closely correlated (near-90%)
with the rate on 10-year Treasury securities. Rates on adjustable
one-year mortgages fell to 6.64% last week from a November average of
6.81%.&nbsp;</p>
<p>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>.<span class="title">&nbsp;</span>The figures for weekly
mortgage applications are available in Haver's <b>SURVEYW</b>
database.</p>
<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/SURVEYW/@S5/@S5.HTM%22" style="color: black;"><b>MBA Mortgage Applications
(SA, 3/16/90=100)</b></a></th>
<th scope="col"><b>02/19/10</b></th>
<th scope="col"><b>02/12/10</b></th>
<th scope="col"><b>02/05/10</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>549.5</td>
<td>600.5</td>
<td>613.1</td>
<td>-26.1%</td>
<td>736.4</td>
<td>642.9</td>
<td>652.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>196.8</td>
<td>212.3</td>
<td>221.2</td>
<td>-21.4</td>
<td>263.5</td>
<td>345.4</td>
<td>424.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,605.3</td>
<td>2,860.1</td>
<td>2,893.9</td>
<td>-28.0</td>
<td>3,509.2</td>
<td>2,394.1</td>
<td>1,997.9</td>
</tr>
<tr>
<td class="firstcol">15-Year Mortgage Effective
Interest Rate (%)</td>
<td>4.68</td>
<td>4.59</td>
<td>4.57</td>
<td>5.07 (02/09)</td>
<td>4.85</td>
<td>5.9</td>
<td>6.2</td>
</tr>
</tbody>
</table>
</span>
<span id="articletitle">Orders Continue In Their Upswing</span><br>
<span id="byline">by <a href="/comment/Brusca.html">Robert
Brusca</a> February 24, 2010</span>
<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100224e.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Manufacturing orders are up by 0.8% in December but the
sequential growth rates do not show that the growth of orders continues
to accelerate. MFG sales are also slowing as capital goods and
intermediate goods sales rates over three-months are weaker than sales
rates for six months</p>
<p>In December domestic orders have been especially strong rising
by 6.1% while foreign orders advanced by 2.2%. But over three months
Domestic orders are up at just a 0.8% rate while foreign orders are up
at an 11.9% pace. The pattern of growth rates in the chart shows us
that domestic and foreign growth rates peaked about six months ago and
have since been slowing down even though they continue to grow. This is
one reason for concern about whether the recovery is building momentum
or not.</p>
<p>Among large EU/EMU countries Italy and the UK are
demonstrating still accelerating orders from 12-months to six months
and again from six months to the three-month horizon. In France orders
accelerated in six months compared to 12-months and have stayed near
that mark for 3-month growth rates. Germany shows a decided
deceleration with growth rates rising in six-months compared to
12-months then submerging and going negative for the recent three-month
period. Still the Yr/Yr growth rates moved sharply higher in December
compared to November everywhere but in the UK. But the sequential
growth rates do give more of an up-close view of growth and on that
basis momentum truly is fading.</p>
<p>Obviously the various EU/EMU countries have some differences.
But the overriding message is that orders growth is slowing. It is
still positive but it is slowing. Europe now will be burdened with the
growing and festering problems of Greece and possibly other debt
ladened e-Zone members. The European consumer does not seem to have
gotten in gear. The recent German IFO survey was weak but it may have
been impacted by weather. We are always on a bit of a weather watch at
this time of year. But apart from weather there are ample trends that
tell us to be cautious about depending on the European recovery being
too strong.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">Selected Euro-Area
and UK Industrial Orders </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar except m/m</td>
<td colspan="3">Mo/Mo</td>
<td>Dec<br>
09</td>
<td>Nov<br>
09</td>
<td>Dec<br>
09</td>
<td>Nov<br>
09</td>
<td>Dec<br>
09</td>
<td>Nov<br>
09</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro-Area Detail</td>
<td>Dec<br>
09</td>
<td>Nov<br>
09</td>
<td>Oct<br>
09</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
</tr>
<tr>
<td class="firstcol">MFG
Orders</td>
<td>0.8%</td>
<td>2.7%</td>
<td>-2.1%</td>
<td>5.6%</td>
<td>9.2%</td>
<td>16.9%</td>
<td>21.5%</td>
<td>9.5%</td>
<td>-3.2%</td>
</tr>
<tr>
<td class="firstcol">MFG Sales</td>
<td>-0.4%</td>
<td>1.4%</td>
<td>0.4%</td>
<td>6.1%</td>
<td>4.3%</td>
<td>8.8%</td>
<td>7.9%</td>
<td>-2.8%</td>
<td>-9.2%</td>
</tr>
<tr>
<td class="firstcol">
Consumer</td>
<td>0.7%</td>
<td>1.0%</td>
<td>-0.2%</td>
<td>6.1%</td>
<td>-3.4%</td>
<td>3.7%</td>
<td>-0.4%</td>
<td>-2.6%</td>
<td>-5.3%</td>
</tr>
<tr>
<td class="firstcol">
Capital</td>
<td>-1.9%</td>
<td>0.5%</td>
<td>-0.4%</td>
<td>-7.2%</td>
<td>6.4%</td>
<td>5.1%</td>
<td>5.8%</td>
<td>-5.7%</td>
<td>-10.3%</td>
</tr>
<tr>
<td class="firstcol">
Intermediate</td>
<td>6.1%</td>
<td>1.3%</td>
<td>-6.8%</td>
<td>0.8%</td>
<td>4.1%</td>
<td>18.6%</td>
<td>20.0%</td>
<td>7.7%</td>
<td>-1.1%</td>
</tr>
<tr class="odd">
<td colspan="10" class="firstcol">Memo:MFG</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>0.8%</td>
<td>2.7%</td>
<td>-2.1%</td>
<td>5.6%</td>
<td>9.2%</td>
<td>16.9%</td>
<td>21.5%</td>
<td>9.5%</td>
<td>-3.2%</td>
</tr>
<tr>
<td class="firstcol">E-13
Domestic MFG orders</td>
<td>6.1%</td>
<td>1.3%</td>
<td>-6.8%</td>
<td>0.8%</td>
<td>4.1%</td>
<td>18.6%</td>
<td>20.0%</td>
<td>7.7%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">E-13
Foreign MFG orders</td>
<td>2.2%</td>
<td>3.0%</td>
<td>-2.3%</td>
<td>11.9%</td>
<td>35.2%</td>
<td>20.8%</td>
<td>34.2%</td>
<td>10.0%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Countries:</td>
<td>Dec09</td>
<td>Nov09</td>
<td>Oct09</td>
<td>3Mo</td>
<td>3Mo</td>
<td>6mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
</tr>
<tr>
<td class="firstcol">Germany
(MFG):</td>
<td>-1.8%</td>
<td>3.2%</td>
<td>-2.1%</td>
<td>-3.4%</td>
<td>9.9%</td>
<td>10.3%</td>
<td>23.7%</td>
<td>4.2%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">France(Ind):</td>
<td>17.1%</td>
<td>0.5%</td>
<td>-8.2%</td>
<td>36.4%</td>
<td>-7.3%</td>
<td>40.5%</td>
<td>4.5%</td>
<td>15.5%</td>
<td>-4.2%</td>
</tr>
<tr>
<td class="firstcol">Italy
(Ind):</td>
<td>4.7%</td>
<td>2.9%</td>
<td>0.7%</td>
<td>38.5%</td>
<td>47.6%</td>
<td>18.5%</td>
<td>15.4%</td>
<td>5.3%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">UK
(Engineering Industy):</td>
<td>8.5%</td>
<td>-15.6%</td>
<td>14.1%</td>
<td>19.1%</td>
<td>-18.1%</td>
<td>7.1%</td>
<td>-9.9%</td>
<td>-16.2%</td>
<td>-3.8%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. New Home Sales Plumb RecordLow, Weather or Not?

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<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100223h.jpg" style="width: 353px; height: 265px;" align="right">
There was a
slowing of retail sales during December and January. More weakness may
be in the offing given the latest souring of consumers' mood. For
February, the Conference Board reported that consumer confidence fell
18.6% from January and that brought down the level of confidence to its
lowest since last April. Just a modest m/m decline had been the
Consensus expectation for February and during the last ten years there
has been an 83% correlation between the level of consumer confidence
and the y/y change in real consumer spending. The Conference Board data
can be found in Haver's <b>CBDB</b> database.</p><p>Consumers'
assessment of current economic conditions slumped by nearly one-quarter
m/m. That reversed all of a January increase and left the measure near
the historic low. Jobs were seen as hard to get by 47.7% of respondents
and jobs were seen as plentiful by only 3.6%. That was up just slightly
from the series' historic low. Also at a record low was the percentage
of respondents who saw business conditions as good. The percentage of
consumers who thought business conditions were bad rose to 46.3%, off
somewhat from its peak but nearly the highest since 1983.&nbsp;</p><p>The expectations component of confidence also fell sharply to its
lowest level since April. Lessened expectations for business
conditions, employment and income have led the latest downdraft.
Expectations for the inflation rate in twelve months held stable at
5.2%, the lowest level since 2007 and down from last year's high of
7.7%. Interest rates in twelve months were expected to be higher by
52.2% of respondents while 14.2% expected rates to fall. A greatly
lessened 28.6% of respondents expected stock prices to rise.
&nbsp;</p><p>An improved 2.7% of those surveyed plan to buy a home
during the next six months. An increased 27.1% plan to buy a major
appliance versus 30.9% back in 2007. Only 4.8% plan to buy an
automobile versus 6.0% in 2007 and just 1.8% plan to buy a new
one.&nbsp;&nbsp;</p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100223i.jpg" style="width: 312px; height: 265px;">
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100223j.jpg" style="width: 312px; height: 265px;">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><strong>Conference
Board&nbsp;(SA, 1985=100)</strong></th>
<th scope="col"><strong>February</strong></th>
<th scope="col"><strong>January</strong></th>
<th scope="col"><strong>December</strong></th>
<th scope="col"><strong>Y/Y %</strong></th>
<th scope="col"><strong>2009</strong></th>
<th scope="col"><strong>2008</strong></th>
<th scope="col"><strong>2007</strong></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><strong>Consumer
Confidence Index</strong></td>
<td>46.0</td>
<td>56.5</td>
<td>53.6</td>
<td>81.8</td>
<td>45.2</td>
<td>57.9</td>
<td>103.4</td>
</tr>
<tr>
<td class="firstcol"><strong>&nbsp;
Present Situation</strong></td>
<td>19.4</td>
<td>25.2</td>
<td>20.2</td>
<td>-13.0</td>
<td>24.0</td>
<td>69.9</td>
<td>128.8</td>
</tr>
<tr class="odd">
<td class="firstcol"><strong>&nbsp;
Expectations</strong></td>
<td>63.8</td>
<td>77.3</td>
<td>75.9</td>
<td>133.7</td>
<td>59.3</td>
<td>50.0</td>
<td>86.4</td>
</tr>
</tbody>
</table>
</span></body></html>

There was a slowing of retail sales during December and January. More weakness may be in the offing given the latest souring of consumers' mood. For February, the Conference Board reported that consumer confidence fell 18.6% from [...]

U.S. Consumer Confidence Falls Sharply

Louise Curley

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<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100223g.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>German business confidence, which had been improving since
March 2009, declined slightly in February. On a percent balance
measure, which subtracts the percentage of respondents who are negative
from those who are positive, confidence among German entrepreneurs fell
to -10.3% from -9.0%. The climate measure is a combination of the
business opinions regarding current conditions and expectations for the
next six months.. The percent balance of business opinion on current
conditions fell to -23.8% in February from -21.0% in January. Much of
the decline can probably be attributed to the weather. Heavy snow fall
and cold temperatures were particularly bad for construction and the
distributive trades, both wholesale and retail.</p>
<p>In spite of the fact
that the pessimists have exceeded the optimists regarding current
conditions by more than 20% over the past several months, the
proportion of German entrepreneurs who expect better condition six
months ahead has been increasing. In December there was a slight excess
of optimists over pessimists of 0.3%. In February the percent balance
on expectations increased to 4.2% from 3.8% in January.</p><p>The increase
in the proportion of business people who expect better conditions is in
sharp contrast to the declines in the proportion of financial people
who expect better conditions as revealed last Week in the ZEW survey.
Not only do the business and financial communities sometimes differ in
their appraisals of the future, but, they apparently differ in
temperament, as shown in the attached chart which compares the percent
balances on expectations of the two surveys. The financial community
appears to have a positive bias and to have wide mood swings while the
business community tends to have a negative bias and more restrained
mood swings. In statistical terms--over entire history of each of the
two series--the mean of the ZEW series is 27.1% and its standard
deviation, 40.6%; the mean of the IFO series is -5.2% and its standard
deviation, 10.6%</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMANY</th>
<th scope="col"><b>Feb 10&nbsp;</b></th>
<th scope="col"><b>Jan 10&nbsp;</b></th>
<th scope="col"><b>Dec 09</b></th>
<th scope="col"><b>Nov 09</b></th>
<th scope="col"><b>Oct 09</b></th>
<th scope="col"><b>Sep 09</b></th>
<th scope="col"><b>Low</b></th>
<th scope="col"><b>Date</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">IFO:&nbsp;&nbsp;
Climate (% Bal.)</td>
<td>-10.3</td>
<td>-9.0</td>
<td>-16.5</td>
<td>-12.9</td>
<td>-16.5</td>
<td>-17.8</td>
<td>-36.0</td>
<td>Mar 09</td>
</tr>
<tr>
<td class="firstcol">Current Conditions (% Bal.)</td>
<td>-23.8</td>
<td>-21.0</td>
<td>-22.5</td>
<td>-24.9</td>
<td>-28.4</td>
<td>-29.0</td>
<td>-38.1</td>
<td>Jun 09</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations
(% Bal.)</td>
<td>4.2</td>
<td>3.8</td>
<td>0.3</td>
<td>0.0</td>
<td>-3.9</td>
<td>-5.9</td>
<td>-44.8</td>
<td>Dec 08</td>
</tr>
<tr>
<td class="firstcol">ZEW: Expectations
(% Bal.)</td>
<td>45.1</td>
<td>47.2</td>
<td>50.4</td>
<td>51.1</td>
<td>56.0</td>
<td>57.7</td>
<td>-63.0</td>
<td>Oct 08</td>
</tr>
</tbody>
</table>
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German business confidence, which had been improving since March 2009, declined slightly in February. On a percent balance measure, which subtracts the percentage of respondents who are negative from those who are positive, confidence [...]

Confidence Among German Industrialists Slips A Bit In February

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<span id="articletext">
<p></p>
<p><img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100223f.jpg" style="border: 0px solid ; width: 353px; height: 265px; float: left;" align="left"></p>
<p>Consumer spending has yet to show real spark. Weekly chain
store sales improved by 2.3% last week but for the month so far sales
remained down slightly from the January average. Sales also remained
down 1.6% from last summer's high.<span></span></p>
<p><span style="color: black;">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.</span></p>
</span> During the last ten years there has been a 69%
correlation between the year-to-year growth in chain store sales and
the growth in general merchandise retail sales.<span> The weekly
figures are available in Haver's <b>SURVEYW </b>database.</span>
<p></p>
<p>Also treading water has been the leading indicator of chain
store sales. It's been roughly unchanged since early-January and flat
for the last year. This composite leading economic indicator is
compiled from four series: (1) the MBA's volume index of mortgage
applications for home purchase (2) the ABC News/Money magazine's survey
of consumer buying conditions (3) new filings for jobless benefits and
(4) the 30-year government bond yield.</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><b><a ;="" href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM" style="color: white;"><span>ICSC-UBS (SA, 1977=100)</span></a></b></th>
<th scope="col"><b>02/20/10</b></th>
<th scope="col"><b>02/13/10</b></th>
<th scope="col"><b>02/06/10</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>490.4</td>
<td>479.5</td>
<td>487.1</td>
<td>0.9%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</body></html>

Consumer spending has yet to show real spark. Weekly chain store sales improved by 2.3% last week but for the month so far sales remained down slightly from the January average. Sales also remained down 1.6% from last summer's high. [...]

U.S. Weekly Chain Store Sales Look Lifeless

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<span id="articletext">
<p></p>
<p>
<img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100223d.jpg" style="width: 353px; height: 265px;" align="right">Continuing
to move generally in a sideways pattern, the <b>pump price for
regular gasoline </b>rose last week to $2.66. Nevertheless,
prices remained up by more than one-third from last year. Yesterday,
the spot market price for a gallon of regular gasoline rose to its
highest level since January. The figures are reported by the U.S.
Department of Energy and can be found in Haver's <b>WEEKLY
&amp; DAILY </b>databases.</p>
<p> The price for a barrel of light
sweet crude (WTI) oil recovered prior weakness and rose last week to
$78.30. Nevertheless, it was down from the early-January high of
$82.59. Yesterday, the spot price was up further to $80.16. <img alt src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100223e.jpg" style="width: 353px; height: 265px;" align="right">
Prices have
risen from $71.53 early this past December and are more than double the
December 2008 low of $32.37.</p><p>Demand for gasoline fell 3.0% last week
versus one year ago. That decline compared to a 3.9% increase at the
beginning of October. Breaking away from earlier y/y strength, the
demand for residual fuel oil fell 3.7% y/y. Distillate demand fell
12.3% y/y, a decline more moderate than the 21.6% y/y shortfall at the
beginning of last July. Inventories of crude oil and petroleum products
slipped in February but were up 0.7% from one year ago.</p>
<p> U.S. natural
gas prices have been roughly flat this year as temperatures have been
volatile. They fell to an average $5.40 per mmbtu (+25.21% y/y) from
the high of $6.50 early in January. Nevertheless they remained double
the September low.</p><p>The energy price data can be found in Haver's <b>WEEKLY
</b>database while the daily figures are in <b>DAILY</b>.
The gasoline demand figures are in <b>OILWKLY</b>.&nbsp;</p>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a ;="" href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM" style="color: white;"><b>Weekly Prices</b></a></th>
<th scope="col"><b>02/22/10</b></th>
<th scope="col"><b>02/15/10</b></th>
<th scope="col"><b>02/08/10</b></th>
<th scope="col"><b>Y/Y</b></th>
<th scope="col"><b>2009</b></th>
<th scope="col"><b>2008</b></th>
<th scope="col"><b>2007</b></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.66</td>
<td>2.61</td>
<td>2.65</td>
<td>39.1%</td>
<td>2.35</td>
<td>3.25</td>
<td>2.80</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>78.30</td>
<td>73.91</td>
<td>74.59</td>
<td>111.7%</td>
<td>61.39</td>
<td>100.16</td>
<td>72.25</td>
</tr>
</tbody>
</table>
</span>
</body></html>

Continuing to move generally in a sideways pattern, the pump price for regular gasoline rose last week to $2.66. Nevertheless, prices remained up by more than one-third from last year. Yesterday, the spot market price for a gallon of [...]

U.S. Weekly Gasoline Prices Recover Somewhat

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

Resilient US economy is pushing up longer-term inflation expectations and interest rates

Positive US economic data surprises leading to upward adjustment of interest rate expectations

Recent aggressive policy easing in China has given a massive boost to equity prices

FOMC expects much more easing now than in June

US is clear world leader in business capital spending on artificial intelligence

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) eased 0.2% (-3.6% y/y) in January to 100.7 after rising 1.5% to 100.9 in December and falling 2.9% in November to 99.4. The level of home affordability has risen 12.0% from its low of 89.9 in October 2023. It remains 43.8% below the high of 179.2 in April 2020.

The slip in affordability in January reflected a 1.6% drop (+5.0% y/y) in the median price of an existing single-family home to $402,000 which was offset by a rise in mortgage rates to 7.04% from 6.80% in December. The price decline was the sixth in the last seven months from the record $432,900 in June. The rise in mortgage rates compared to a September low of 6.26% and a 7.14% high during May. It remained increased from a December 2020 low of 2.73%. These changes raised the principal & interest payment by 0.8% (8.4% y/y) to $2,148 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a steady 24.8% of income during January. They remained up from a low of 14.0% in April 2020.

The rise in housing costs in January was accompanied by improvement in median family income. It increased 0.7% (4.5% y/y) to a record $103,850 after rising 0.3% in December and 0.4% in November.

Housing affordability was mixed m/m across the country in January. The index rose 0.4% (-5.9% y/y) to 134.2 in the Midwest. It remains the most affordable region of the country. In the South, the index eased 0.6% (-2.5% y/y) to 103.3 and the affordability index in the Northeast fell 1.9% (-8.7% y/y) to 89.9. In the West, where homes are the least affordable, the index weakened 1.8% (-5.5% y/y) to 69.8 in January.

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 (98.8).

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 ease but mortgage rates rise.
- Median income strengthens.
- Affordability weakens in most of country.

U.S. Housing Affordability Is Little Changed in January

Carol Stone, CBE

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Yesterday, March 13, the Federal Reserve published the Financial Accounts for Q4 2024. They show, among numerous other things, that domestic nonfinancial participants in the U.S. economy had borrowings that represented 11.4% of GDP during Q4. This is down moderately from 12.3% in Q3 and produced an amount for the whole year of 2024 of 11.9% of GDP. The quarterly amounts cited here are at seasonally adjusted annual rates.

In Q4, the largest borrowing sector was the federal government, which used $2,602.9 billion, or 8.8% of GDP, up from $2,261 billion in Q3, or 7.7% of GDP.  Households borrowed $624.3 billion or 2.1% of GDP; this amount included $294.3 billion of home mortgages and $133.1 billion of consumer credit.

Nonfinancial business corporations actually paid down debt of $64.1 billion in Q4, or 0.2% of GDP. In Q1 of 2024, businesses had borrowed $698.2 billion and for the whole year, they borrowed $436.6 billion or 1.5% of GDP. State and local governments paid down $46.0 billion in Q4; for the whole year they did use $97.8 billion or 0.3% of GDP.

In addition to domestic borrowers, the foreign sector borrowed $341.3 billion in Q4, or 1.1% of GDP and up from $196.7 billion in Q3.  For all of 2024, foreign participants used $345.5 billion, or 1.2% of GDP.

The Financial Accounts data are in Haver's **FFUNDS** database. The Federal Reserve is the main source, while associated information is compiled in the Integrated Macroeconomic Accounts produced jointly with the Bureau of Economic Analysis (BEA); those nonfinancial data are carried in Haver's **USNA** database as well as in **FFUNDS**. Note that revisions are common throughout the accounts with every quarterly release.

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- Nonfinancial sectors together borrowed 11.4% of GDP in Q4.
- Not surprisingly, the largest borrowing sector was the federal government.
- Households had sizable amounts of home mortgage borrowing, though this was less than in Q3.
- Businesses paid down debt in Q4.

U.S. Economic Sectors Borrowed Moderately in Q4 and for All of 2024

Andrew Cates

**Falling US growth momentum**
The latest Blue Chip Economic Indicators survey reflects a shifting global economic landscape, with the US experiencing a notable loss of momentum. After climbing above 2.0% on the back of a strong economic performance in late 2024, consensus forecasts for US growth in 2025 have now been revised downward for the first time in nearly a year. This reversal reflects weaker-than-expected economic data and emerging challenges tied to the policy shifts of the new administration. The downgrade in US growth projections also coincides with a further downward revision to an already subdued outlook for the UK and the euro area, reinforcing concerns about a sluggish global growth outlook (chart 1).

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**Global inflation expectations**
In the meantime the same survey reveals growing concerns about the inflation outlook in the US and Europe this year, and possibly reflecting the impact of US tariff policies on global price pressures. Japan’s inflation forecast for 2025 has also surged, as rising import costs and shifting trade dynamics have additionally contributed to stronger price pressures. This all stands in contrast to China with inflation expectations for this year falling below 1%, reinforcing concerns about deflation and weak demand (chart 2).

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**Global bond markets**
Recent shifts in 10-year government bond yields reflect changing market expectations. While yields have risen sharply in Germany, China, and Japan, they have fallen in the US. Germany’s increase is tied to expanded defense spending and industrial subsidies, while China’s reflects a shift toward more aggressive fiscal easing, with its deficit target rising to 4% of GDP to counter deflation and weak demand. In contrast, falling US yields signal a reassessment of growth expectations under the new administration. This divergence suggests capital may be flowing toward economies with stronger fiscal stimulus, potentially weakening the dollar, increasing borrowing costs for US businesses, and complicating efforts to revive domestic manufacturing.

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**Overseas holdings of US Securities**
Latest data show that foreign-holdings of US long-term securities have risen steadily over the past decade, with a notable acceleration in the past two years. The most recent data additionally highlights a significant increase in foreign ownership of US corporate equities, reflecting, until recently, investor confidence in US companies.

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**Industrialisation versus de-industrialisation**
Recent US policy shifts—particularly higher tariffs on Chinese imports—aim to address the long-term decline in domestic manufacturing jobs. However, their effectiveness is uncertain, given the growing role of automation and AI in reshaping industrial production. While tariffs may offer short-term relief, they are unlikely to reverse decades of global manufacturing shifts. China’s rise from a low-value agrarian economy to an industrial powerhouse has reshaped trade patterns, while US industrial employment has steadily declined, mirroring trends in other advanced economies. Meanwhile, Vietnam and other emerging markets have absorbed manufacturing capacity, benefiting from shifting supply chains. The real challenge for US policymakers is not just bringing back jobs but ensuring domestic industries stay competitive amid changing cost structures and technological advancements.

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**Global competitiveness**
Historically, China's low unit labour costs provided it with a significant advantage, fuelling its manufacturing boom and accelerating the offshoring of US industrial jobs. However, as China's wages have risen due to economic development and increased productivity, and as US unit labour costs have remained relatively stable, the gap has narrowed considerably. Yet, still high labour costs in the US – coupled with rising trade barriers and rising input costs - still pose a challenge to the effectiveness of US policies, as firms may still find it difficult to maintain competitiveness without significant productivity gains. Indeed, as suggested above, there is a real risk that firms may instead accelerate their shift toward automation or relocate production to other low-cost regions (e.g. Vietnam), undermining the broader economic rationale for these interventions. The erosion of economic goodwill, combined with rising costs and financial market instability, additionally suggest that while the strategic objectives of US policy may be clear, the long-term implications remain highly uncertain.

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The recent financial market volatility, marked by sharp swings in bond yields and equity market repricing, reflects growing uncertainty about the trajectory of the US economy amid a rapidly shifting policy environment. The US administration’s latest tariff measures, and their conflicting objectives, have amplified uncertainty, stifled risk appetite and further ignited inflation concerns (charts 1 and 2). Markets are grappling with the inflationary impact of rising import costs, the potential supply chain disruptions caused by abrupt shifts in trade policy, and the broader implications of protectionism on corporate investment. Meanwhile, recent policy announcements from Germany and China, coupled with firming inflationary pressures in Japan, have pushed global (ex-US) bond yields sharply higher, potentially amplifying global financial instability (charts 3 and 4). These shifts could profoundly reshape global trade and investment, not just through economic fundamentals but also through a growing erosion of goodwill toward the United States. As policy unpredictability forces companies and governments to hedge against potential disruptions, trust in the stability of US economic leadership is weakening. At the same time, concerns are mounting over the effectiveness of US policy choices, particularly in relation to one of its core ambitions—reshoring manufacturing jobs (charts 5 and 6). The question remains whether these interventions will achieve their intended goals or simply accelerate automation and supply chain realignment elsewhere.

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Charts of the Week: From Blue to Red

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The Producer Price Index for final demand held steady (+3.2% y/y) during February after increasing 0.6% in January, revised from 0.4% and rising an unrevised 0.5% in December according to the Bureau of Labor Statistics (BLS). The February reading compared to a 0.2% rise expected in the Action Economics Forecast Survey. Producer prices excluding food, energy & trade services rose 0.2% (3.3% y/y) last month after an unrevised 0.3% January increase, and an unrevised 0.4% gain in December. The PPI excluding food & energy eased 0.1% (+3.4% y/y) after rising 0.5% in January, revised from 0.3%. A 0.3% increase had been expected.

Energy prices declined 1.2% (-3.7% y/y) during February, after rising 1.8% in January. Gasoline costs fell 4.7% (-8.2% y/y) after rising 0.3% while home heating oil prices declined 9.8% (-12.2% y/y) after a 6.5% strengthening. Electric power prices rose 0.5% (0.9% y/y) in February following a 0.4% January decline and natural gas costs strengthened 1.3% (6.7% y/y) following a 3.8% surge. Diesel fuel prices declined 3.9% (-18.5% y/y) after a 10.5% jump.

Final demand food prices rose 1.7% (5.9% y/y) in February, following a 1.0% January gain. Egg prices jumped 28.1% (136.6% y/y) following a 44.0% increase. Prices for fresh and dry vegetables rose 6.0% (-16.3% y/y) after falling 22.3% in January. Beef & veal prices declined 1.8% (+9.5% y/y) after a 5.7% rise while dairy product prices rose 0.1% (5.7% y/y) after a 0.4% increase.

Final demand goods prices excluding food & energy rose 0.4% (2.1% y/y) in February following a 0.2% rise. Core finished consumer goods prices rose 0.4% (2.1% y/y) after a decline of 0.2% in January. Core nondurable goods prices strengthened 0.6% (2.3% y/y) last month after falling 0.4% in January. Durable consumer goods prices improved 0.2% (1.6% y/y), after edging 0.1% higher in January. Capital equipment prices rose 0.2% (2.5% y/y) last month following a 0.3% gain. Core government-purchased goods prices rose 0.2% (2.4% y/y) in January, after a 0.6% January increase.

Final demand services prices declined 0.2% (+3.9% y/y) last month after rising 0.6% in January. Trade services prices fell 1.0% (+4.0% y/y) last month following a 1.2% gain. Trade of finished goods prices declined 1.1% (3.6% y/y) and reversed the January rise. Prices for final demand transportation and warehousing services held steady (+2.6% y/y) in February, after strengthening 0.9% in January. Services prices less these costs rose 0.2% (4.0% y/y) last month, after a rise of 0.3% in January.

Construction costs eased 0.1% (+1.7% y/y) in February, after increasing 0.4% during January.

Prices for intermediate demand of processed goods rose 0.5% (0.3% y/y) following a 1.0% jump. Processed energy goods prices rose 0.5% last month after increasing 3.6% in January, while food prices rose 2.0% following a 0.7% January gain.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver’s **USECON** database. Further detail is contained in **PPI** and **PPIR**. The expectations figures are available in the **AS1REPNA** database.

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- Energy prices weaken and food prices firm.
- Price gains in core goods pick up.
- Services prices decline.

U.S. PPI Is Unchanged in February; Rise in Core Index Moderates

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Initial claims for unemployment insurance were 220,000 seasonally adjusted in the week ended March 8, just slightly less than the 222,000 the week before; that earlier amount was revised marginally from 221,000 reported before. In the latest week, the Action Economics Forecast Survey had expected 230,000. In this March 8 week, the four-week moving average was 226,000.

The total number of unemployment insurance beneficiaries was 1.87 million in the week ended March 1, down from 1.897 million in the week ended February 22. The four-week moving average was 1.872 million through the March 1st week, up from 1.866 million the week before.

The insured unemployment rate, that is, the total number of beneficiaries as a percent of covered employment, remained at 1.2%, which has held since March 2023.

Economic conditions vary widely across states and territories. In the week ended February 22, the highest rates were in Rhode Island (3.37%), New Jersey (2.90%), Massachusetts (2.58%), Minnesota (2.57%) and California (2.42%). The lowest rates were in Florida (0.36%), Alabama (0.44%), Virginia (0.46%), Tennessee and North Carolina (both 0.56%) and Mississippi (0.58%). Rates in other notable states include New York (2.08%), Pennsylvania (2.03%) and Texas (1.12%). These state rates 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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- Initial claims were less than forecast.
- Total recipients of unemployment insurance also fell.
- Insured unemployment rate still 1.2%.

Economy in Brief: February 2010

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