Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050921f.jpg" width="353">
In 2Q, the net worth of the US household sector improved 1.9% (9.4% y/y) to a record $49.8 trillion. The gain lifted net worth not to a historical high versus income, but the highest in four years (5.5 times).
Household sector asset values rose 9.7% y/y due to a 13.8% rise in the value of real estate holdings. Financial asset values rose 7.1%, still half the gain in 2003 and held back by higher interest rates which reduced the growth in Treasury security holdings to a negative 2.2% y/y. Money market share values also fell by 4.8%. Higher prices in the stock market helped lift the value of mutual fund shares by 14.0% but the value of corporate equities held directly fell 1.9%.
Growth in total credit market debt outstanding moved slightly higher to 8.5% y/y. Growth in the federal government debt slowed a bit to 7.3% y/y but US household debt growth continued strong at 10.6% y/y while non-financial corporations debt grew a faster 6.9% y/y.

<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/FFUNDS/@F2/@F201/@F201.HTM">Flow of Funds</a>&nbsp;</th>
<th scope="col">% of Total</th>
<th scope="col">2Q 05&nbsp; (AR) </th>
<th scope="col">1Q 05 &nbsp; (AR)</th>
<th scope="col">2004 &nbsp; </th>
<th scope="col">2003 &nbsp; </th>
<th scope="col">2002 &nbsp; </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Credit Market Debt Outstanding</td>
<td></td>
<td>7.9%</td>
<td>7.3%</td>
<td>8.2%</td>
<td>8.9%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Federal Government</td>
<td>12%</td>
<td>-3.7%</td>
<td>15.9%</td>
<td>9.0%</td>
<td>10.9%</td>
<td>7.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Households</td>
<td>28%</td>
<td>10.6%</td>
<td>9.7%</td>
<td>11.1%</td>
<td>10.4%</td>
<td>9.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Nonfinancial Corporate Business</td>
<td>14%</td>
<td>7.3%</td>
<td>6.4%</td>
<td>4.8%</td>
<td>3.3%</td>
<td>0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Financial Sectors</td>
<td>32%</td>
<td>9.0%</td>
<td>4.7%</td>
<td>7.3%</td>
<td>10.3%</td>
<td>9.2%</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Net Worth: Households &amp; Nonprofit Organizations (Trillions)</td>
<td></td>
<td>$49.8</td>
<td>$48.9</td>
<td>$48.3</td>
<td>$44.1</td>
<td>$39.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tangible Assets</td>
<td></td>
<td>$23.9</td>
<td>$23.2</td>
<td>$22.5</td>
<td>$20.0</td>
<td>$18.4</td>
</tr>
</tbody>
</table>
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In 2Q, the net worth of the US household sector improved 1.9% (9.4% y/y) to a record $49.8 trillion. The gain lifted net worth not to a historical high versus income, but the highest in four years (5.5 times). Household sector asset [...]

Households' Net Worth Improved Further in 2Q

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050921b.jpg" width="353">
The total number of mortgage applications last week recouped all of the prior period&#39;s decline with a 1.5% increase, according to the Mortgage Bankers Association. Combined with a sharp gain earlier in the month, the rise lifted applications so far in September 2.9% above August.
Mortgage applications to refinance surged 7.0% w/w. The gain raised the September average 2.8% above August which fell 10.6% from July.
Purchase applications fell 2.6%, the first decline in three weeks. The average level in September so far is 3.1% above August. During the last ten years there has been a 49% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050921a.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage rose to 6.05% after three weeks slightly below 6.0%. The effective rate on a 15-year mortgage also fell to 5.69%, the highest level in a month. The interest rate on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
Housing Markets and Demographics from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-21.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">09/16/05</th>
<th scope="col">09/09/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>772.2</td>
<td>760.6</td>
<td>11.8%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>500.3</td>
<td>513.4</td>
<td>9.6%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,353.7</td>
<td>2,198.7</td>
<td>14.7%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
</body>
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The total number of mortgage applications last week recouped all of the prior period's decline with a 1.5% increase, according to the Mortgage Bankers Association. Combined with a sharp gain earlier in the month, the rise lifted [...]

Mortgage Applications Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050921b.jpg" width="353">
The total number of mortgage applications last week recouped all of the prior period&#39;s decline with a 1.5% increase, according to the Mortgage Bankers Association. Combined with a sharp gain earlier in the month, the rise lifted applications so far in September 2.9% above August.
Mortgage applications to refinance surged 7.0% w/w. The gain raised the September average 2.8% above August which fell 10.6% from July.
Purchase applications fell 2.6%, the first decline in three weeks. The average level in September so far is 3.1% above August. During the last ten years there has been a 49% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050921a.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage rose to 6.05% after three weeks slightly below 6.0%. The effective rate on a 15-year mortgage also fell to 5.69%, the highest level in a month. The interest rate on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
Housing Markets and Demographics from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-21.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"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">09/16/05</th>
<th scope="col">09/09/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>772.2</td>
<td>760.6</td>
<td>11.8%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>500.3</td>
<td>513.4</td>
<td>9.6%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,353.7</td>
<td>2,198.7</td>
<td>14.7%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Households' Net Worth Improved Further in 2Q  
by <a href="/comment/Moeller.html">Tom Moeller</a> September 21, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050921f.jpg" width="353">
In 2Q, the net worth of the US household sector improved 1.9% (9.4% y/y) to a record $49.8 trillion. The gain lifted net worth not to a historical high versus income, but the highest in four years (5.5 times).
Household sector asset values rose 9.7% y/y due to a 13.8% rise in the value of real estate holdings. Financial asset values rose 7.1%, still half the gain in 2003 and held back by higher interest rates which reduced the growth in Treasury security holdings to a negative 2.2% y/y. Money market share values also fell by 4.8%. Higher prices in the stock market helped lift the value of mutual fund shares by 14.0% but the value of corporate equities held directly fell 1.9%.
Growth in total credit market debt outstanding moved slightly higher to 8.5% y/y. Growth in the federal government debt slowed a bit to 7.3% y/y but US household debt growth continued strong at 10.6% y/y while non-financial corporations debt grew a faster 6.9% y/y.

<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/FFUNDS/@F2/@F201/@F201.HTM">Flow of Funds</a>&nbsp;</th>
<th scope="col">% of Total</th>
<th scope="col">2Q 05&nbsp; (AR) </th>
<th scope="col">1Q 05 &nbsp; (AR)</th>
<th scope="col">2004 &nbsp; </th>
<th scope="col">2003 &nbsp; </th>
<th scope="col">2002 &nbsp; </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Credit Market Debt Outstanding</td>
<td></td>
<td>7.9%</td>
<td>7.3%</td>
<td>8.2%</td>
<td>8.9%</td>
<td>7.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Federal Government</td>
<td>12%</td>
<td>-3.7%</td>
<td>15.9%</td>
<td>9.0%</td>
<td>10.9%</td>
<td>7.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Households</td>
<td>28%</td>
<td>10.6%</td>
<td>9.7%</td>
<td>11.1%</td>
<td>10.4%</td>
<td>9.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Nonfinancial Corporate Business</td>
<td>14%</td>
<td>7.3%</td>
<td>6.4%</td>
<td>4.8%</td>
<td>3.3%</td>
<td>0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Financial Sectors</td>
<td>32%</td>
<td>9.0%</td>
<td>4.7%</td>
<td>7.3%</td>
<td>10.3%</td>
<td>9.2%</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Net Worth: Households &amp; Nonprofit Organizations (Trillions)</td>
<td></td>
<td>$49.8</td>
<td>$48.9</td>
<td>$48.3</td>
<td>$44.1</td>
<td>$39.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tangible Assets</td>
<td></td>
<td>$23.9</td>
<td>$23.2</td>
<td>$22.5</td>
<td>$20.0</td>
<td>$18.4</td>
</tr>
</tbody>
</table>
Labor Costs Weak in Europe, Following Slow GDP Growth 
by <a href="/comment/Stone.html">Carol Stone</a> September 21, 2005


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050921c.jpg">
It is widely observed that there are major dislocations in European labor markets. Debate over reforms of present labor regulations in Germany, for instance, has basically paralyzed the government as last Sunday&#39;s elections gave no party or policy anything close to a majority vote.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050921d.jpg">
Thus, it is interesting that data reported today by Eurostat show that hourly labor costs in Europe have been rising rather modestly, and they compare favorably with similar information for the US. In the overall Euro-Zone, this gauge rose a mere 0.5% in Q2 (2.1% annualized) and was just 2.3% above a year ago. In Germany, where there is much distress in the labor market, the hourly labor cost index edged up just 0.1% in the quarter, and as seen in the table below, just 0.8% from a year ago. Somehow, public discussion of these labor developments gives the impression that the associated costs are quite high. But these costs increasing very slowly, and in the second graph, it is seen that they are retreating rapidly as a share of national income.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050921e.jpg" width="353">
In the face of high unemployment in Germany, what we seem to have is an excellent example of a Phillips Curve phenomenon: high unemployment combined with low inflation of labor costs. Generally this is seen as a demand-driven condition, but here it is likely exacerbated by the rigidities in the applicable regulations.
In Europe as a whole, demand appears to be a leading force on labor costs. The correlation of GDP growth (in nominal terms) with labor cost increases is 48% in the same quarter, but with a two-quarter lead for GDP, the correlation jumps to 76%. In the last two quarters the pace of GDP has slowed further, suggesting that it is difficult to look for much improvement in labor compensation over the remainder of this year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Hourly Labor Cost Index</th>
<th scope="col">Q2 2005</th>
<th scope="col">Q1 2005</th>
<th scope="col">Q4 2004</th>
Q4/Q4
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Euro-Zone (SA, 2000=100)</td>
<td>116.0</td>
<td>115.4</td>
<td>114.6</td>
<td>111.8</td>
<td>108.8</td>
<td>105.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Year/Year % Change*</td>
<td>2.3</td>
<td>3.0</td>
<td>2.2</td>
<td>2.6</td>
<td>3.5</td>
<td>3.6</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.8</td>
<td>1.2</td>
<td>0.5</td>
<td>1.5</td>
<td>2.2</td>
<td>2.2</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>2.7</td>
<td>3.3</td>
<td>2.9</td>
<td>2.3</td>
<td>3.8</td>
<td>4.1</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>4.4</td>
<td>4.4</td>
<td>4.4</td>
<td>4.0</td>
<td>5.3</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">US</td>
<td>--</td>
<td>3.4</td>
<td>3.8</td>
<td>4.0</td>
<td>3.2</td>
<td>4.2</td>
</tr>
</tbody>
</table>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050920c.jpg" width="353">
Political considerations apparently weighed heavily on the economic expectations of German institutional investors and analysts in September. The Frankfurt based, Center for European Research (ZEW) reported that the number of those expecting better conditions six months from now over those expecting worse conditions fell from 50% in August to 38.6% in September. Although most of the 309 respondents to the survey reported before the election took place, the 44 replies that were received after the September 18 election showed a significantly lower reading than the overall September results.
Preliminary results of the September 18 election indicate that the CDU/CSU, (The Christian Democratic Union and The Christian Social Union) won 225 seats; the SPD (Social Democratic Party), 222; the FDP (The Free Democratic Party), 61; the Left Party, 54 and the Greens, 51. The Left Party, formerly known as Party for Democratic Socialism consists largely of former communists and former SPD members who disagreed with the party&#39;s plans for reform. The inconclusive results of the election will have to be resolved by some sort of a coalition or, if that fails before October 18 when Parliament is set to open, by another election. Political uncertainty is likely to continue to cast a cloud over the economic outlook.
Important as the effects of political uncertainty on confidence may be, the rise in energy prices resulting from hurricane Katrina has also had a depressing effect. In spite of the deterioration in expectations, investors reported a slight improvement in what they judged to be, according to the negative figures, depressing current conditions. In September, there was a three percentage point improvement in the appraisal of current conditions as the excess of pessimists over optimists (noted by a negative) went to -58.1% from -61.1% in August.
The attached chart shows the month-to-month changes in the German investors&#39; appraisal of current conditions and their expectation of conditions six months from now.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">Zew Indicators</a></th>
<th scope="col">Sep 05&nbsp;</th>
<th scope="col">Aug&nbsp; 05</th>
<th scope="col">Sep 04</th>
<th scope="col">M/M DIF</th>
<th scope="col">Y/Y DIF</th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Current conditions</td>
<td>-58.1</td>
<td>-61.1</td>
<td>-61.5</td>
<td>3.0</td>
<td>3.4</td>
<td>-67.7</td>
<td>-92.6</td>
<td>-83.3</td>
</tr>
<tr>
<td class="firstcol">Expectations 6 mo. ahead</td>
<td>38.6</td>
<td>50.0</td>
<td>38.4</td>
<td>-11.4</td>
<td>0.2</td>
<td>44.6</td>
<td>38.4</td>
<td>45.3</td>
</tr>
</tbody>
</table>
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Political considerations apparently weighed heavily on the economic expectations of German institutional investors and analysts in September. The Frankfurt based, Center for European Research (ZEW) reported that the number of those [...]

Politics and Energy Prices Depress German Investor Confidence

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050920i.jpg" width="353">
The Federal Open Market Committee increased the target rate for federal funds 25 basis points to 3.75%. The discount rate also was raised 25 basis points to 4.75%. This latest increase is the eleventh since June of 2004.
The action was generally expected, though some analysts suggested the Fed would opt for no change in rates given the economic uncertainties generated by Hurricane Katrina.
Voting against the otherwise unanimous decision was Mark W. Olson, who preferred no change in rates at this meeting.
Today&#39;s press release from the Fed indicated that &quot;While these unfortunate developments have increased uncertainty about near-term economic performance, it is the Committee&#39;s view that they do not pose a more persistent threat.&quot;
Indicating its concern about price inflation, the FOMC statement indicated &quot;Higher energy and other costs have the potential to add to inflation pressures. However, core inflation has been relatively low in recent months and longer-term inflation expectations remain contained.&quot;<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050920h.jpg" width="353">
For the complete text of the Fed&#39;s latest press release please click <a href="http://www.federalreserve.gov/BoardDocs/Press/monetary/2005/20050920/default.htm">here</a>.
Has Monetary Policy Been More Accommodative Than Previously Believed? from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20051001/cover.pdf">here</a>.
Targeting versus Instrument Rules for Monetary Policy from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/05/09/McCallum.pdf">here</a>.

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The Federal Open Market Committee increased the target rate for federal funds 25 basis points to 3.75%. The discount rate also was raised 25 basis points to 4.75%. This latest increase is the eleventh since June of 2004. The action [...]

Fed Funds Rate Increased to 3.75%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050920e.jpg" width="353">
Supply uncertainties have wreaked havoc on prices for crude oil and petroleum products. As of last week, the US average retail gasoline price fell to $2.79 per gallon, down from the weekly high of $3.07 set two weeks earlier and the NY harbor spot price for regular unleaded last Friday was down to $1.82 from a high of $3.13 just before Labor Day.
Demand strength, however, has left even these lower gasoline prices both up 40-50% versus the year ago levels.
Hurricane Katrina caused the initial anxiety over supply. Figures from the Oil &amp; Gas Journal Weekly indicate that in the first two weeks of September, US refining production of gasoline was off 5% versus August. Some of that decline is seasonal, but the threat from Hurricane Rita yesterday caused the spot gasoline price to jump 10% d/d to $2.00 per gallon.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050920g.jpg" width="353">
Alternatively, US gasoline demand has been consistent and strong. Through August demand was running 3-4% ahead of last year helped by a 1.5% y/y gain in the number of miles being driven. In September, demand is estimated to have fallen sharply, perhaps 10% m/m, in the wake of Hurricane Katrina, although the decline probably is temporary. Strong gasoline demand is a trademark of the United States. From 1994 to 2004, growth in US gasoline demand averaged 1.8% per year versus a 0.7% annual rate of decline in Europe during that ten year period. Some of that reflects differing economic fortunes, but ...<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050920f.jpg" width="353">
Wholesale natural gas prices at $11.17/mmbtu last week were more than double the prior year&#39;s level and very much reflect the recent supply dislocations. Regulation, however, has limited the price increase for residential gas as measured by the Consumer Price Index. For the first eight months of 2005 versus 2004, gas prices rose 11.5% while the gain in household electricity costs also was limited to 4.6%. Further gains are in store if yesterday&#39;s gas price rise over $12/mmbtu holds. (Many plants which generate electricity are fired by natural gas.)<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050920d.jpg" width="353">
Movement in crude oil prices has been similarly volatile with an upward bent. Yesterday&#39;s spot market price for West Texas Intermediate jumped 7% d/d to $67.40 though prices have eased a bit today. Under laying the strength has been a steady decline in US crude oil production, off 2.2% y/y through the first eight months of 2005 and off 38% versus twenty years ago.
For the latest Short Term Energy Outlook from the US Department of Energy click <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.
Oil Prices and Consumer Spending from the Federal Reserve Bank of Richmond can be viewed <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/summer2005/mehrapetersen.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"><a href="http://www.haverselect.com/dlx/daily/@D3/@D306/@D306.HTM">Energy Prices</a></th>
<th scope="col">09/19/05</th>
<th scope="col">12/31/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">US Retail Gasoline, Regular ($/Gal.)</td>
<td>$2.79</td>
<td>$1.79</td>
<td>49.3%</td>
<td>$1.85</td>
<td>$1.56</td>
<td>$1.35</td>
</tr>
<tr>
<td class="firstcol">Natural Gas, Henry Hub, LA ($/mmbtu)</td>
<td>$11.17</td>
<td>$6.35</td>
<td>123.4%</td>
<td>$5.89</td>
<td>$5.47</td>
<td>$3.35</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Spot Market Price: West Texas Intermediate ($/Barrel)</td>
<td>$63.12</td>
<td>$41.78</td>
<td>42.2%</td>
<td>$41.78</td>
<td>$32.78</td>
<td>$31.23</td>
</tr>
</tbody>
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Supply uncertainties have wreaked havoc on prices for crude oil and petroleum products. As of last week, the US average retail gasoline price fell to $2.79 per gallon, down from the weekly high of $3.07 set two weeks earlier and the [...]

Petroleum Prices: Supply Uncertainty & US Demand Strength

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The full effect of Hurricane Katrina pushed chain store sales down 2.1% last week, according to the International Council of Shopping Centers (ICSC)-UBS survey, after a slight 0.2% decline the prior week. So far this month sales are 1.2% below the August average which fell 0.1% from July. 
The ICSC suggested that in addition to the Hurricane, higher gasoline prices and a drop in consumer confidence were responsible for the decline. 
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC cratered 2.0% in the latest week (-2.0% y/y) after a slight gain during the previous week.
The ICSC-UBS 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.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">09/17/05</th>
<th scope="col">09/10/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>445.0</td>
<td>454.6</td>
<td>2.4%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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The full effect of Hurricane Katrina pushed chain store sales down 2.1% last week, according to the International Council of Shopping Centers (ICSC)-UBS survey, after a slight 0.2% decline the prior week. So far this month sales are [...]

Weekly Chain Store Sales Down Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050920a.jpg" width="353">
Housing starts slipped 1.3% last month to 2.009M units versus a downwardly revised 2.035M units in July.The drop outpaced Consensus expectations for a decline to 2.025M starts.
Single-family starts inched 0.1% higher in this last report taken before Hurricane Katrina hit the US Gulf Coast. The rise was due to higher single family starts in the Northeast (1.5% y/y) and in the West (6.1% y/y). Single family starts in the South fell m/m (+1.4% y/y) and in the Midwest (-6.5% y/y).
Yesterday&#39;s report from the Nat&#39;l Association of Home Builders (NAHB) indicated slippage in their composite September index (-3.0% y/y) due to weaker current sales, weaker sales prospects and sharply lower buyer traffic. During the last twenty years there has been a 76% correlation between the y/y change in the NAHB index and the change in single family housing starts.
Multi family starts fell a sharp 8.5% m/m while building permits fell as well.
Assessing High House Prices: Bubbles, Fundamentals, and Misconceptions from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr218.pdf"> here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>2,009</td>
<td>2,035</td>
<td>-0.8%</td>
<td>1,950</td>
<td>1,854</td>
<td>1,7 10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,709</td>
<td>1,707</td>
<td>1.2%</td>
<td>1,604</td>
<td>1,505</td>
<td>1,363</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>300</td>
<td>328</td>
<td>-10.7%</td>
<td>345</td>
<td>349</td>
<td>347</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,124</td>
<td>2,171</td>
<td>3.2%</td>
<td>2,058</td>
<td>1,8 88</td>
<td>1,749</td>
</tr>
</tbody>
</table>
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Housing starts slipped 1.3% last month to 2.009M units versus a downwardly revised 2.035M units in July.The drop outpaced Consensus expectations for a decline to 2.025M starts. Single-family starts inched 0.1% higher in this last [...]

Housing Starts Slipped in August

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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Real GDP grew 4.3% (SAAR) during the third quarter following a 3.8% Q2 gain, revised from 3.3% reported initially. These increases followed a minimally revised 0.6% decline in Q1. A 3.0% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.3% compared to 2.1% y/y in Q2 and remained below its most recent high of 3.4% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment surged 7.0% (4.2% y/y) last quarter after edging 0.6% higher in Q2. Before-tax earnings with IVA & CCA rose 4.2% (9.1% y/y) after improving 0.2% in Q2. Financial sector earnings rose 6.2% (21.1% y/y) after rising 1.1% in Q2. Nonfinancial corporate profits rose 2.5% (3.3% y/y) after edging 0.5% higher in Q2. Earnings from abroad jumped 10.6% (26.3% y/y) following a 2.9% Q2  decline.

Foreign trade balance improvement added 1.59 percentage points to growth last quarter after adding 4.83 percentage points in Q2. Real exports increased 2.1% (1.5% y/y) after falling 0.5% in Q2. Real imports declined 1.2% (-1.8% y/y) after declining 8.3% in Q2. Inventories subtracted 0.22 percentage points from growth after subtracting 3.44 percentage point from Q2 growth.

Real final sales to private domestic purchasers grew 3.0% (2.6% y/y) last quartter after rising 2.9% in Q2, revised from 1.6%. Personal consumption expenditures rose 3.5% (2.6% y/y) after a 2.5% rise, revised from 1.6%. Durable goods spending rose 1.6% (3.2% y/y) after increasing 2.3% in Q2. Motor vehicle purchases declined 6.7% (+1.6% y/y) after strengthening 9.7% in Q2. Spending on home furnishings & appliances weakened 4.2% (+0.7% y/y) following a 2.0% fall. Recreational goods & vehicle buying surged 15.7% (7.0% y/y) last quarter after falling 2.5% in Q2.

Nondurable goods outlays in constant dollars rose 3.9% (3.0% y/y) last quarter following 2.2% growth in Q2. Apparel spending strengthened 6.7% (7.0% y/y) following a 5.8% rise. Food & beverage buying gained 2.0% (1.3% y/y) after edging 0.2% higher. Gasoline & fuel oil purchases improved 1.3% (-0.2% y/y) after falling 2.8% in Q2.



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Real spending on services increased 3.7% (2.4% y/y) in Q3 after a 2.6% Q2 gain. Outlays on housing & utilities edged 0.3% higher (1.0% y/y) after easing 0.2% in Q2. Health care expenditures surged 6.8% (4.5% y/y) after a 4.8% increase. Transportation outlays gained 3.1% both  q/q and y/y after a 7.0% rise, while recreation spending jumped 6.6% (2.4% y/y) following a 3.9% rise. Restaurant & hotel expenditures increased 1.2% (2.0% y/y) after strengthening 5.9% in Q2. Financial services expenditures rose 2.6% both q/q and y/y following a 4.8% Q2 increase.

Business fixed investment in constant dollars increased 2.8% (3.9% y/y) last  quarter following a 7.3% Q2 rise, revised from 5.7%. Expenditures on structures declined 6.3% both q/q and y/y, after falling for six consecutive quarters. Expenditures on producers’ durable equipment increased 5.4% (7.4% y/y), after strengthening 8.5% in Q2. Outlays on information processing equipment rose 8.4% (18.6% y/y), after strengthening 11.7% during Q2. Industrial equipment investment rose 2.0% (3.4% y/y) after a 6.5% rise. Transportation equipment investment fell  2.7% (+3.0% y/y) after strengthening 25.2%. Intellectual property product spending rose 5.4% last quarter (6.4% y/y), after surging 15.0% in Q2.

Residential structures investment in real terms declined 5.1% (-1.8% y/y), the same as in Q2. It was the third consecutive quartly decline.

Government spending rose 2.2% (1.1% y/y) during the third quarter after an unrevised 0.1% easing in Q2. Federal government expenditures rose 2.9% (-1.0% y/y) after falling 5.3% in Q2. National defense expenditures increased 5.8% (1.0% y/y) after rising 0.9% in Q2. State & local government spending rose 1.8% (2.4% y/y) following a 3.1% rise.

The GDP chain price index rose 3.8% (3.0% y/y) last quarter vs. 2.1% in Q2. The PCE chain price index increased 2.8% (2.7% y/y) following a 2.1% rise. The PCE price index excluding food and energy rose 2.9% (2.9% y/y) after increasing 2.6% in Q2. The business fixed investment price index rose 5.2% (1.5% y/y) in Q3 after a 0.4% decline. The residential price index rose 4.5% (3.3% y/y) last quarter after a 2.2% rise, while the government price index increased 4.4% (3.5% y/y) following a 3.3% 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**.



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- Consumer spending strengthens; growth in business investment decelerates.
- Corporate profit growth led by earnings abroad.
- Rise in chain price index accelerates.


U.S. GDP Growth is Strong in Q3; Profits Jump

Sandy Batten

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Industrial production fell 0.1% m/m in October but rose 0.2% m/m (2.5% y/y) in November. The Action Economics Forecast Survey expected 0.1% monthly gains in both months. Manufacturing activity was tepid with manufacturing production falling 0.4% m/m in October and unchanged in November. Manufacturing output has not posted a monthly gain since July. Mining output fell 0.8% m/m in October but rebounded 1.7% m/m in November. Utilities output surged 2.6% m/m in October but fell 0.4% m/m in November. Compared to a year ago, manufacturing production is up 1.9%; mining output is up 3.9%; and utilities output is up 4.8%.

By market group, output of durable consumer goods plunged 2.6% m/m in October and fell another 0.2% in November. Production of durable consumer goods has declined in five of the previous six months. Production of nondurable consumer goods rose 0.5% m/m in both October and November. Compared to a year ago, durable consumer goods production has fallen 5.9% while nondurable consumer goods output has risen 2.7%. Business equipment production fell 0.3% m/m in October but rebounded 0.3% m/m in November and is up 11.2% y/y. Production of nonindustrial supplies fell 0.3% m/m in both October and November.

By industry group, output of durable goods fell 0.5% m/m in October and declined 0.1% m/m in November but were up 3.2% from a year ago. Motor vehicle and parts production slumped 5.1% m/m in October and declined 1.0% m/m in November to be down 5.6% from a year ago. Monthly motor vehicle output has declined in five of the previous six months. In contrast, production of computers and electronic products increased 1.5% m/m in October and rose 0.8% m/m in November. Aerospace production continued to rise, increasing 2.0% m/m in October and 1.1% m/m in November to be up 25.2% from a year ago. Output of nondurable goods fell 0.2% m/m in October and edged up 0.1% m/m in November. Their output is up 0.9% from a year ago. Apparel output fell 1.3% m/m in October but recovered in November, rising 2.3% m/m. Food and beverage output rose 0.3% m/m in October and another 1.2% in November.

Output of selected high-technology industries rebounded in October and November. After having declined 1.0% m/m in both August and September, production jumped 1.9% m/m in October and 1.1% m/m in November to stand 11.8% higher than a year ago. Manufacturing output excluding selected high-tech industries fell 0.4% m/m in October and was unchanged in November. It has risen only 1.6% over the past year. Manufacturing excluding motor vehicle production was unchanged in October and edged up 0.1% m/m in November; it is up 2.6% y/y.

Total industry capacity utilization edged down to 75.9% in October from 76.0% in September and then recovered the decline in November, edging up to 76.0%. In the manufacturing sector, the utilization rate slumped to 75.4% in October from 75.8% in September and remained at 75.4% in November. The October/November reading is the lowest since January.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.



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- Today’s release contained figures for both October and November that had been delayed by the federal government shutdown.
- IP fell in October but recovered in November.
- Manufacturing output was tepid, falling in October and unchanged in November.
- A surge in utilities output in October prevented a larger decline in total production.
- A jump in mining output in November accounted for all of the increase in total production.


U.S. Industrial Production Fell in October and Recovered in November

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New orders for durable goods fell a more-than-expected 2.2% (+4.8% y/y) in October following an upwardly revised 0.7% m/m rise in September (previously +0.5% m/m) and a 3.0% monthly jump in August. The Action Economics Forecast Survey expected a 1.5% m/m decline. A 23.7% m/m drop in aircraft orders more than accounted for the overall decline. Orders excluding aircraft increased 0.2% m/m (4.0% y/y) in October on top of a 0.5% monthly increase in September.

More generally, transportation orders fell 6.5% m/m (+7.3% y/y) in October following a 0.6% m/m increase in September and an 8.0% monthly jump in August. In addition to the drop in aircraft orders, orders for motor vehicles and parts edged up 0.1% m/m in October, their sixth consecutive monthly increase. Across other sectors, orders for primary metals fell 0.7% m/m, their first monthly decline in ten months. Orders for electrical equipment and appliances slumped 1.5% m/m, their first monthly decline in seven months. In contrast, orders for fabricated metal products rose 0.5% m/m, their fourth consecutive monthly gain. Machinery orders increased 0.8% m/m, their eighth consecutive monthly rise. Orders for computers and electronic products increased a solid 1.0% m/m on top of a 1.2% monthly increase in September.

Shipments of core capital goods (nondefense capital goods shipments excluding aircraft) are a reliable coincident indicator of business spending on equipment in the national accounts. They rose 0.7% m/m in October following an upwardly revised 1.2% monthly gain in September (previously +0.9%). The was the second consecutive monthly increase and the fifth in the past six months. The strong end to Q3 and the continued rise in the first month of Q4 provides a solid starting point for all of Q4. The October shipments figure was 5.9% at an annual rate above the Q3 average. Core capital goods orders rose 0.5% m/m in October on top of an upwardly revised 1.1% m/m increase in September (previously +0.9%). This was the fourth consecutive monthly rise.

Total manufacturing shipments edged up 0.1% m/m (+2.8% y/y) in October after having been essentially unchanged in September. Shipments of durable goods increased 0.6% m/m (5.9% y/y), led by 1.4% monthly jump in transportation shipments. However, apart from a 0.1% m/m decline in shipments of other durable goods, all of the other major sectors posted monthly gains in October. In contrast, shipments of nondurable goods fell 0.4% m/m (-0.3% y/y) in October for their third consecutive monthly decline. The monthly decline was led by a 2.4% m/m fall in shipments of petroleum and coal products although it was relatively widely spread across major sectors. The one exception was a 2.1% m/m increase in leather product shipments, but this came after four consecutive sizeable monthly declines.

Unfilled durable goods orders increased 0.2% m/m (7.9% y/y) in October for their third consecutive monthly gain following a 0.8% m/m rise in September and a 0.7% m/m increase in August. Total factory inventories were unchanged in October (+1.4% y/y) following 0.1% monthly declines in both August and September. Durable goods inventories edged up 0.1% m/m in October while inventories of nondurable goods fell 0.2% m/m, the third consecutive monthly decline.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.



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- New orders for durable goods slumped 2.2% m/m in October following increases in both August and September
- A 24% monthly drop in aircraft orders drove the overall decline
- Orders excluding aircraft rose 0.2% m/m in October
- Core capital goods shipments and orders continued to rise in October with small upward revisions to September


Weak Aircraft Orders Pushed Down U.S. Durable Goods Orders in October

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The Chicago Fed National Activity Index (CFNAI) increased to -0.21 during September from a four-month low of -0.31 in August. It remained below a high of 0.42 during February. 

The employment, unemployment & hours measure led the improvement and rose to 0.01 during September from -0.11 in August. The employment readings had been negative in each month since February. The weakest occurred in July which equaled August. The production & income reading edged up to -0.10 in September from -0.13 in August. It remained below February’s high of 0.36. 

Moving lower, the personal consumption & housing measure fell to -0.06 in September from -0.03 in August. It was the weakest reading in four months. The sales, orders & inventories reading declined to -0.07 during September from -0.05 in August. It was the lowest figure since April, and down from a 0.16 high during March.  

The index's three-month moving average, which smooths out the m/m volatility in the index, fell to -0.21 in September after increasing to -0.18 in August. It was the fifth consecutive negative reading, but above its -0.24 June low. It remained below its recent high of 0.11 in February.

The CFNAI Diffusion Index, which measures the breadth of change in the component series and is also a three-month moving average, fell to -0.32 in September from -0.20 in both July and August. It was the weakest reading in three months. Negative for seven straight months, it was below the February high of 0.10. A reading of zero indicates that all of the indicators are growing at their long-term average. 

The CFNAI is a weighted average of 85 indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

These figures are available in Haver's **SURVEYS** database.


- The CFNAI is negative for sixth straight month.
- Three of four index components remain negative
- Improvement in labor market reading leads m/m gain.

The Federal Reserve Bank of Chicago indicated that the December 22, 2025, release of the CFNAI was originally scheduled to cover data through November 2025. However, because of the delay in data releases from government statistical agencies due to the federal government shutdown, this CFNAI release will instead only cover data through September 2025.

Chicago Fed National Activity Index Improves Slightly in September

Robert Brusca

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Canadian retail sales and other growth metrics appear to be weakening as the year draws to a close. Inflation has firmed up as well. Retail sales in October saw a month-to-month drop of 0.2% as supermarket sales fell 0.7%, month-to-month, clothing store sales fell 1.2%, and retail excluding motor vehicle sales fell by 0.6%. Overall real retail sales fell by 0.6% in October from September. This is the second consecutive month in which total nominal retail sales and retail sales in real terms both dropped month-to-month. Total retail sales and real retail sales both are declining over three months. Total retail sales at a -0.6% annual rate real retail sales-3.2% annual rate. Real retail sales are decelerating from a 2% growth rate over 12 months to a -1.7% annual rate over six months to a - 0.6% annual rate over three months. Real retail sales show more severe deceleration, growing by merely 0.1% over 12-months shrinking at a 3.8% annual rate over six-months and declining at a 3.2% annual rate over three-months.

**Other indicators weaken**
Over three months housing starts show a sharp contraction, falling at a 60.6% annual rate, a clear ongoing deceleration from a -5.2% drop over 12-months. However other metrics show slightly more upbeat results: employment, for example, yields job growth still at 1.2% at an annual rate over three-months although it slowed from a 1.4% year-over-year gain. The all-encompassing leading economic index shows an actual step up to a pace of 2.9% over 3 months from 2.6% over 6-months and 1.9% over 12-months. Manufacturing and mining output also show gains and a sharp acceleration from their year ago pace; for manufacturing output fell 1.4% year-over-year then rose at a 12.1% annual rate over the three-months ended in September; mining and oil production speeded up from a 4.7 percent 12-month gain to an 8.1% annual rate over three-months.  The manufacturing and mining statistics lag by one-month. Another positive sign for the economy is unemployment as the number of unemployed declines at a 0.7% annual rate over three months even though it rises by 5.5% over 12 months.

**Ranking metrics**
We can also vet these various sector results by looking at the growth rates year over year and comparing that pace to what has happened historically back to 2014. These individual category ranking statistics provide better relative comparisons across components. On that basis, the weak sector is retailing with real retail sales having 11.3 percentile standing and overall nominal retail sales having a 22.5 percentile standing. The next lowest year-over-year ranking is from manufacturing at a 22.7 percentile standing, that compares to a 26.1 percentile standing for housing starts. The performance of employment fares relatively better at a 38.7 percentile standing, but that's still below the 50% mark, putting job growth below its median for the period. The number unemployed, however, has a 67.6 percentile standing which is above its median and, of course, not a good result because here we would prefer to see leaner numbers on unemployment changes. The year-over-year growth rate for unemployment is solid, in the top one-third of all of the growth rates of the employed that we've seen since January of 2014. For unemployment, at least the sequential growth rates show that the process of unemployment creation is not accelerating. On the positive side the leading economic index has a 78.9 percentile standing which is quite strong and the mining and oil production have a 61.7 percentile standing which is above their median for the period. 

**Further context?**
And, when we consider the ranking of these growth rates, we can also look at the progression of growth in the table, such as the mention I made above for unemployment. For example, housing starts have a weak year-over-year standing but they have a much weaker growth rate over three months Compared to 12-months…on the other hand, manufacturing has a weak year-over-year standing but over three months manufacturing output has stepped up growth considerably. No one statistic can create a profile of these industries which live in the real world and have multiple dimensions and where the trends may be dynamic, in flux, and hard to singularly characterize.

**Got inflation?** 
As of October, Canadian inflation had picked up to some extent, inflation in Canada had dipped below the 2% mark from April through August of 2025. In September and October, the year-over-year growth of headline inflation was in the 2.3 to 2.2% region. The CPIx which didn't get quite that low, that recently got down to 1.5% and 1.6% in late 2024 and was as low as 2.2% and 2.5% from March to May of 2025 has moved up. September and October price growth rate is up to the 2.8 to 2.9% pace with the core rate running in the neighborhood of 2.6% toward the end of the year after reaching a low just below 2% in November of last year.

**Nothing dramatic but a tilt to more of what Canada wants less of**
Oh no there's nothing dramatic going on in Canada, the economy appears to be weakening to some extent, the retail sales numbers show the largest deceleration. Of course, Canada and the US continue to have a spat over tariffs, and their two leaders still appear to be somewhat antagonistic about how that process is unfolding. Some Canadian stores have even taken the action of removing form the shelves some goods from the US, particularly US alcoholic products. The step up of inflation is something to watch and does not pair well with the weakening in economic activity. 
  




Economy in Brief: 2005

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Households' Net Worth Improved Further in 2Q

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Petroleum Prices: Supply Uncertainty & US Demand Strength

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Housing Starts Slipped in August