Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429e.jpg" align="left" border="0" height="265" width="353">
In an anticipated move, the Federal Open Market Committee
today left the Federal funds rate in a "range from 0 to 1/4 percent."
The discount also was left unchanged at 0.50%. The Fed funds rate
remained the lowest ever. The decision was unanimous amongst FOMC
voters.
The Fed indicated that "Information received since the Federal
Open Market Committee met in April suggests that the pace of economic
contraction is slowing. Conditions in financial markets have generally
improved in recent months.
Much of the commentary on the economy was similar to the last
meeting and concluded that "Although economic activity is likely to
remain weak for a time, the Committee continues to anticipate that
policy actions to stabilize financial markets and institutions, fiscal
and monetary stimulus, and market forces will contribute to a gradual
resumption of sustainable economic growth in a context of price
stability."
Regarding inflation, the wording of the statement was slightly
altered. The statement that "the Committee expects that inflation will
remain subdued for some time" replaced the earlier statement that "the
Committee sees some risk that inflation could persist for a time below
rates that best foster economic growth and price stability in the
longer term."
In its effort to promote economic liquidity, the Fed used the
same language as in April, "... to provide support to mortgage lending
and housing markets and to improve overall conditions in private credit
markets, the Federal Reserve will purchase a total of up to $1.25
trillion of agency mortgage-backed securities and up to $200 billion of
agency debt by the end of the year. In addition, the Federal Reserve
will buy up to $300 billion of Treasury securities by autumn."<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624i.jpg" align="right" border="0" height="265" width="353">
For the complete text of the Fed's latest press release please
follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090624a.htm">link</a>.The
Haver databases USECON, WEEKLY and DAILY
contain the figures from the Federal Reserve Board.
Uncertainty About When the Fed Will Raise Interest
Rates from the Federal Reserve Bank of St. Louis is available
<a href="http://research.stlouisfed.org/publications/es/09/ES0929.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">December</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.16</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>0.50</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>
</body></html>

In an anticipated move, the Federal Open Market Committee today left the Federal funds rate in a "range from 0 to 1/4 percent." The discount also was left unchanged at 0.50%. The Fed funds rate remained the lowest ever. The decision [...]

FOMC Leaves Rates Unchanged; Cites Slower Economic Contraction & Subsiding Threat From Low Pricing Power

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624e.jpg" align="right" border="0" height="265" width="353">Sales
of new single-family homes during May continued the sideways movement
of 2009. Sales were stable with April at 342,000 units (AR) and have
shown little month-to-month change this year. That stability, however,
follows a one-third sales decline over the last year and a
three-quarters decline since the 2005 peak. May sales fell short of
Consensus expectations for sales of 360,000 units. The new home sales
figures are available in Haver's USECON database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624f.jpg" align="right" border="0" height="265" width="353">
Around the country sales patterns continued to vary. Sales in the
Northeast and in the Midwest rose last month but sales barely inched
higher out West. Sales in the South reversed their April gain and fell
back to near the record low.The modest firming of home sales
continued to strengthen prices. The median price for a new
single-family home rose 4.2% last month to $221,600 after a like gain
during April. Nevertheless, prices have fallen 3.5% over the last
twelve months as well as since yearend 2008. Since their peak early in
2007, new home prices have fallen by roughly
one-quarter.Price weakness has helped move the
inventory of unsold homes which has fallen by nearly one-half since the
peak during 2006. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624g.jpg" align="right" border="0" height="265" width="353">
In each of the country's regions, inventories are
down by roughly one-third just during the last year.&nbsp;The
month's supply of new homes for sale also has started to drop. In May
the months supply in inventory fell to its lowest level since last
July. But there's more inventory to move with lower prices if sales
remain low.A related development indicated that mortgage
applications for purchase of a home rose last week to the highest level
since early April (-15.9% y/y). These figures from the Mortgage Bankers
Association are available in Haver's SURVEYW
database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">US
New Homes</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales
(SAAR, 000s)</td>
<td>342</td>
<td>344</td>
<td>-32.8%</td>
<td>479</td>
<td>768</td>
<td>1,049</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>27</td>
<td>21</td>
<td>&nbsp;-12.9</td>
<td>35</td>
<td>64</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>51</td>
<td>43</td>
<td>-32.0</td>
<td>69</td>
<td>118</td>
<td>161</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>184</td>
<td>201</td>
<td>-35.9</td>
<td>264</td>
<td>408</td>
<td>559</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>80</td>
<td>79</td>
<td>-31.0</td>
<td>111</td>
<td>178</td>
<td>266</td>
</tr>
<tr>
<td class="firstcol">Median Price
(NSA, $)</td>
<td>221,600</td>
<td>212,600</td>
<td>-3.4</td>
<td>230,408</td>
<td>243,742</td>
<td>243,067</td>
</tr>
</tbody>
</table>
</body></html>

Sales of new single-family homes during May continued the sideways movement of 2009. Sales were stable with April at 342,000 units (AR) and have shown little month-to-month change this year. That stability, however, follows a one- [...]

U.S. New Home Sales Stay Low As Prices Firm

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624d.jpg" align="left" border="0" height="265" width="353">
Consumer confidence in Italy has risen firmly in June.
Confidence now has risen in five of the past seven months having fallen
in only one of those months. The trend to improvement is clear. The
overall confidence measure from ISAE is not in the 35th percentile of
its range- still quiet weak but not so disastrous. 
 

The overall situation in the past 12 months is given a rating
of -68 which sounds terrible. Actually that reading is in the 55th
percentile of its range of historic outcomes and stands above the
average response of -71. For the next 12-months the rating is in the
40th percentile of range and is only slightly below the average
response for that category. It&#8217;s a return to sub-normalcy. 
 

The ability to make major purchase right now is at the index
average, but the mid point of its range at the 43.9th range percentile.
For the future the response rate is a super strong 95th percentile
reading. 
 

Despite this improved news, fears of unemployment still rate
high in 66th percentile of their range but even higher when we look at
the ranking percentile. The latter measure tells how many responses are
below the current response: that percentage is 96.2%. In other words,
unemployment fears are worse than this only about FOUR percent of the
time. Still the range reading tells us that there have been times when
the fears were much, much, greater. The ranking percentile says yes,
that maybe so, but there have not been many of those times. We can
compare the ranking and the range percentiles for each response to get
a better fix on what the raw responses man. Cleary the raw responses
taken alone can be very misleading across categories. 
 

As you can tell by surveying these responses and looking at
the percentile ranges or rankings each category has its individual
distribution of responses. Over the past 200-some months the overall
situation reading averages a -71 reading while the &#8216;overall situation
for the next 12-months&#8217; averages a -9. Go figure. Are 12-monht periods
usually that different? I don&#8217;t think so. We use the percentile and
range readings to try to shift though these responses to get a more
accurate assessment of the consumer&#8217;s mood. 
 

For now it is apparent that there is an improvement in the
Italian consumer&#8217;s mood, and also some paradox. There is still a high
fear of unemployment but apparently the social safety network is good
enough that is not raising a lot of anxiety about the future or even
about the ability to spend on consumer items. That may seem unusual but
after all this is Europe and it&#8217;s Italy. Those are simply the facts. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Italy
ISAE Consumer Confidence</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol" colspan="5">&nbsp;</td>
<td colspan="3">Since Jan 1992 Rank</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Percentile</td>
<td>Rank</td>
<td>percentile</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer Confidence</td>
<td>105.4</td>
<td>104.9</td>
<td>104.9</td>
<td>99.9</td>
<td>35.0</td>
<td>148</td>
<td>28.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">Last
12 months</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; OVERALL SITUATION</td>
<td>-68</td>
<td>-73</td>
<td>-74</td>
<td>-84</td>
<td>63.2</td>
<td>93</td>
<td>55.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; PRICE TRENDS</td>
<td>-40.5</td>
<td>-45</td>
<td>-43</td>
<td>-45</td>
<td>9.3</td>
<td>205</td>
<td>1.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">Next
12months</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; OVERALL SITUATION</td>
<td>-8</td>
<td>-17</td>
<td>-26</td>
<td>-35</td>
<td>49.2</td>
<td>123</td>
<td>40.9%&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; PRICE TRENDS</td>
<td>8.5</td>
<td>10</td>
<td>9.5</td>
<td>7</td>
<td>17.3</td>
<td>101</td>
<td>51.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; UNEMPLOYMENT</td>
<td>15</td>
<td>17</td>
<td>21</td>
<td>38</td>
<td>66.2</td>
<td>8</td>
<td>96.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; HOUSEHOLD BUDGET</td>
<td>0</td>
<td>5</td>
<td>1</td>
<td>5</td>
<td>15.6</td>
<td>200</td>
<td>3.8%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">HOUSEHOLD FIN SITUATION</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Last 12 months</td>
<td>-37</td>
<td>-34</td>
<td>-37</td>
<td>-39</td>
<td>38.8</td>
<td>126</td>
<td>39.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Next12 months</td>
<td>-4</td>
<td>-5</td>
<td>-11</td>
<td>-10</td>
<td>63.3</td>
<td>117</td>
<td>43.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">HOUSEHOLD
SAVINGS</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Current</td>
<td>60</td>
<td>59</td>
<td>60</td>
<td>69</td>
<td>72.7</td>
<td>13</td>
<td>93.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Future</td>
<td>-25</td>
<td>-29</td>
<td>-29</td>
<td>-33</td>
<td>51.1</td>
<td>145</td>
<td>30.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">MAJOR
Purchases</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Current</td>
<td>-39</td>
<td>-43</td>
<td>-41</td>
<td>-43</td>
<td>43.9</td>
<td>90</td>
<td>56.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Future</td>
<td>3</td>
<td>1</td>
<td>3</td>
<td>3</td>
<td>95.7</td>
<td>3</td>
<td>98.6%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Total number
of months: 208</td>
</tr>
</tbody>
</table>
</body></html>

Consumer confidence in Italy has risen firmly in June. Confidence now has risen in five of the past seven months having fallen in only one of those months. The trend to improvement is clear. The overall confidence measure from ISAE is [...]

Consumer Confidence Recovers In Italy

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624a.jpg" align="right" border="0" height="265" width="353">The factory
sector is showing some life recently and may be emerging from the
moribund state of the last year. The May report of durable goods orders
indicated a 1.8% jump following a little-revised 1.8% April gain. The
latest increase easily outpaced&nbsp; Consensus expectations for a
0.8% decline and during the last three months orders have risen at a
5.3% annual rate.&nbsp;That follows a 5.8% decline during all of
last year. A 3.6% rise (-25.8% y/y) in transportation equipment orders
led last month's increase in total durables bookings. That followed a
6.2% rise during April. Higher orders for commercial aircraft led the
gain with a 68.1% (-47.7% y/y) surge. Conversely, orders for motor
vehicles &amp; parts fell 8.1% (-29.3% y/y) as the auto companies
continued to suffer the effects of weak sales. Machinery orders also
posted a notable 7.7% increase (-26.9% y/y) after slight uptick in
April but electrical equipment orders fell 1.1% (-27.0% y/y) after
little change during April. Orders for primary metals rose slightly for
the second month but were off by nearly one-half from the year-ago
level. Orders for computers &amp; electronic products reversed most
of their April decline as computer orders rose 9.4% (-20.2% y/y) but
orders for communications equipment slipped m/m and have moved sideways
this year. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624b.jpg" align="right" border="0" height="265" width="353">
The capital goods sector may have begun to show life.
Orders for nondefense capital goods recovered an April decline with a
4.8% gain due to the jump in aircraft orders noted above. Nondefense
orders excluding aircraft also firmed but by just enough to return to
the level of last February. During the last ten years there has been an
80% correlation between the y/y change in nondefense capital goods
orders and the change in equipment &amp; software spending in the
GDP accounts. The correlation of the GDP figure with capital goods
shipments is, as one would expect, a larger 92%. As might be
expected, the improvement in orders has yet to show up in higher
shipments. Shipments of durable goods fell 2.1% last month (-19.5% y/y)
and have fallen in each month since February of last year. That y/y
decline in shipments has been accompanied by a 21.1% y/y drop in
industrial production of durable goods. During the last ten years,
there has been an 80% correlation between the change in shipments of
durable goods and the change in durables industrial
production.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624c.jpg" align="right" border="0" height="265" width="353">
Inventories of durable goods fell for the fifth
consecutive month. The 0.8% decline followed a 1.1% April decline that
was deeper than reported initially. On a three-month basis decumulation
of durable goods inventories has been at a near-record 13.5% rate.
Quick decumulation of inventories has been notably across industries.
Backlogs in order books have fallen in each of the last eight months
and during the last year by 7.7%, a rate of decline which is the
sharpest since 2003. The durable goods figures are available in
Haver's USECON database. Taming the Credit Cycle by
Limiting High-Risk Lending from the Federal Reserve Bank of
Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0904.html">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS
Classification</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>1.8</td>
<td>1.8</td>
<td>-23.3</td>
<td>-5.8</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>1.1</td>
<td>0.4</td>
<td>-22.4</td>
<td>-1.2</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>10.0</td>
<td>-2.9</td>
<td>-26.9</td>
<td>-6.8</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>4.8</td>
<td>-2.9</td>
<td>-21.8</td>
<td>-0.3</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>
</body></html>

The factory sector is showing some life recently and may be emerging from the moribund state of the last year. The May report of durable goods orders indicated a 1.8% jump following a little-revised 1.8% April gain. The latest [...]

U.S. Durable Goods Orders Surprisingly Strong For A Second Month

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624a.jpg" align="right" border="0" height="265" width="353">The factory
sector is showing some life recently and may be emerging from the
moribund state of the last year. The May report of durable goods orders
indicated a 1.8% jump following a little-revised 1.8% April gain. The
latest increase easily outpaced&nbsp; Consensus expectations for a
0.8% decline and during the last three months orders have risen at a
5.3% annual rate.&nbsp;That follows a 5.8% decline during all of
last year.
 A 3.6% rise (-25.8% y/y) in transportation equipment orders
led last month's increase in total durables bookings. That followed a
6.2% rise during April. Higher orders for commercial aircraft led the
gain with a 68.1% (-47.7% y/y) surge. Conversely, orders for motor
vehicles &amp; parts fell 8.1% (-29.3% y/y) as the auto companies
continued to suffer the effects of weak sales. Machinery orders also
posted a notable 7.7% increase (-26.9% y/y) after slight uptick in
April but electrical equipment orders fell 1.1% (-27.0% y/y) after
little change during April. Orders for primary metals rose slightly for
the second month but were off by nearly one-half from the year-ago
level. Orders for computers &amp; electronic products reversed most
of their April decline as computer orders rose 9.4% (-20.2% y/y) but
orders for communications equipment slipped m/m and have moved sideways
this year.
 <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624b.jpg" align="right" border="0" height="265" width="353">The
capital goods sector may have begun to show life.
Orders for nondefense capital goods recovered an April decline with a
4.8% gain due to the jump in aircraft orders noted above. Nondefense
orders excluding aircraft also firmed but by just enough to return to
the level of last February. During the last ten years there has been an
80% correlation between the y/y change in nondefense capital goods
orders and the change in equipment &amp; software spending in the
GDP accounts. The correlation of the GDP figure with capital goods
shipments is, as one would expect, a larger 92%.
 As might be
expected, the improvement in orders has yet to show up in higher
shipments. Shipments of durable goods fell 2.1% last month (-19.5% y/y)
and have fallen in each month since February of last year. That y/y
decline in shipments has been accompanied by a 21.1% y/y drop in
industrial production of durable goods. During the last ten years,
there has been an 80% correlation between the change in shipments of
durable goods and the change in durables industrial
production.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624c.jpg" align="right" border="0" height="265" width="353">Inventories
of durable goods fell for the fifth
consecutive month. The 0.8% decline followed a 1.1% April decline that
was deeper than reported initially. On a three-month basis decumulation
of durable goods inventories has been at a near-record 13.5% rate.
Quick decumulation of inventories has been notably across industries.
Backlogs in order books have fallen in each of the last eight months
and during the last year by 7.7%, a rate of decline which is the
sharpest since 2003.
 The durable goods figures are available in
Haver's USECON database.
 Taming the
Credit Cycle by
Limiting High-Risk Lending from the Federal Reserve Bank of
Dallas is available <a href="http://dallasfed.org/research/eclett/2009/el0904.html">here</a>.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS
Classification</a> (%)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>1.8</td>
<td>1.8</td>
<td>-23.3</td>
<td>-5.8</td>
<td>1.4</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Excluding Transportation</td>
<td>1.1</td>
<td>0.4</td>
<td>-22.4</td>
<td>-1.2</td>
<td>-0.3</td>
<td>9.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>10.0</td>
<td>-2.9</td>
<td>-26.9</td>
<td>-6.8</td>
<td>3.5</td>
<td>9.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>4.8</td>
<td>-2.9</td>
<td>-21.8</td>
<td>-0.3</td>
<td>-2.7</td>
<td>10.7</td>
</tr>
</tbody>
</table>

Consumer Confidence Recovers In
Italy 
by <a href="/comment/Brusca.html">Robert
Brusca&nbsp;</a> June 24, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624d.jpg" align="left" border="0" height="265" width="353">
Consumer confidence in Italy has risen firmly in June.
Confidence now has risen in five of the past seven months having fallen
in only one of those months. The trend to improvement is clear. The
overall confidence measure from ISAE is not in the 35th percentile of
its range- still quiet weak but not so disastrous. 
 

The overall situation in the past 12 months is given a rating
of -68 which sounds terrible. Actually that reading is in the 55th
percentile of its range of historic outcomes and stands above the
average response of -71. For the next 12-months the rating is in the
40th percentile of range and is only slightly below the average
response for that category. It&#8217;s a return to sub-normalcy. 
 

The ability to make major purchase right now is at the index
average, but the mid point of its range at the 43.9th range percentile.
For the future the response rate is a super strong 95th percentile
reading. 
 

Despite this improved news, fears of unemployment still rate
high in 66th percentile of their range but even higher when we look at
the ranking percentile. The latter measure tells how many responses are
below the current response: that percentage is 96.2%. In other words,
unemployment fears are worse than this only about FOUR percent of the
time. Still the range reading tells us that there have been times when
the fears were much, much, greater. The ranking percentile says yes,
that maybe so, but there have not been many of those times. We can
compare the ranking and the range percentiles for each response to get
a better fix on what the raw responses man. Cleary the raw responses
taken alone can be very misleading across categories. 
 

As you can tell by surveying these responses and looking at
the percentile ranges or rankings each category has its individual
distribution of responses. Over the past 200-some months the overall
situation reading averages a -71 reading while the &#8216;overall situation
for the next 12-months&#8217; averages a -9. Go figure. Are 12-monht periods
usually that different? I don&#8217;t think so. We use the percentile and
range readings to try to shift though these responses to get a more
accurate assessment of the consumer&#8217;s mood. 
 

For now it is apparent that there is an improvement in the
Italian consumer&#8217;s mood, and also some paradox. There is still a high
fear of unemployment but apparently the social safety network is good
enough that is not raising a lot of anxiety about the future or even
about the ability to spend on consumer items. That may seem unusual but
after all this is Europe and it&#8217;s Italy. Those are simply the facts. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Italy
ISAE Consumer Confidence</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol" colspan="5">&nbsp;</td>
<td colspan="3">Since Jan 1992 Rank</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Jun-09</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>Percentile</td>
<td>Rank</td>
<td>percentile</td>
</tr>
<tr class="grey2">
<td class="firstcol">Consumer Confidence</td>
<td>105.4</td>
<td>104.9</td>
<td>104.9</td>
<td>99.9</td>
<td>35.0</td>
<td>148</td>
<td>28.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">Last
12 months</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; OVERALL SITUATION</td>
<td>-68</td>
<td>-73</td>
<td>-74</td>
<td>-84</td>
<td>63.2</td>
<td>93</td>
<td>55.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; PRICE TRENDS</td>
<td>-40.5</td>
<td>-45</td>
<td>-43</td>
<td>-45</td>
<td>9.3</td>
<td>205</td>
<td>1.4%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">Next
12months</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; OVERALL SITUATION</td>
<td>-8</td>
<td>-17</td>
<td>-26</td>
<td>-35</td>
<td>49.2</td>
<td>123</td>
<td>40.9%&nbsp;</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; PRICE TRENDS</td>
<td>8.5</td>
<td>10</td>
<td>9.5</td>
<td>7</td>
<td>17.3</td>
<td>101</td>
<td>51.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; UNEMPLOYMENT</td>
<td>15</td>
<td>17</td>
<td>21</td>
<td>38</td>
<td>66.2</td>
<td>8</td>
<td>96.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; HOUSEHOLD BUDGET</td>
<td>0</td>
<td>5</td>
<td>1</td>
<td>5</td>
<td>15.6</td>
<td>200</td>
<td>3.8%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">HOUSEHOLD
FIN SITUATION</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Last 12 months</td>
<td>-37</td>
<td>-34</td>
<td>-37</td>
<td>-39</td>
<td>38.8</td>
<td>126</td>
<td>39.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Next12 months</td>
<td>-4</td>
<td>-5</td>
<td>-11</td>
<td>-10</td>
<td>63.3</td>
<td>117</td>
<td>43.8%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">HOUSEHOLD
SAVINGS</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Current</td>
<td>60</td>
<td>59</td>
<td>60</td>
<td>69</td>
<td>72.7</td>
<td>13</td>
<td>93.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Future</td>
<td>-25</td>
<td>-29</td>
<td>-29</td>
<td>-33</td>
<td>51.1</td>
<td>145</td>
<td>30.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan="8">MAJOR
Purchases</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Current</td>
<td>-39</td>
<td>-43</td>
<td>-41</td>
<td>-43</td>
<td>43.9</td>
<td>90</td>
<td>56.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Future</td>
<td>3</td>
<td>1</td>
<td>3</td>
<td>3</td>
<td>95.7</td>
<td>3</td>
<td>98.6%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Total number
of months: 208</td>
</tr>
</tbody>
</table>
U.S. New Home Sales Stay Low As
Prices Firm 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 24, 2009



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624e.jpg" align="right" border="0" height="265" width="353">Sales
of new single-family homes during May continued the sideways movement
of 2009. Sales were stable with April at 342,000 units (AR) and have
shown little month-to-month change this year. That stability, however,
follows a one-third sales decline over the last year and a
three-quarters decline since the 2005 peak. May sales fell short of
Consensus expectations for sales of 360,000 units. The new home sales
figures are available in Haver's USECON database.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624f.jpg" align="right" border="0" height="265" width="353">Around the
country sales patterns continued to vary. Sales in the
Northeast and in the Midwest rose last month but sales barely inched
higher out West. Sales in the South reversed their April gain and fell
back to near the record low.
The modest firming of home sales
continued to strengthen prices. The median price for a new
single-family home rose 4.2% last month to $221,600 after a like gain
during April. Nevertheless, prices have fallen 3.5% over the last
twelve months as well as since yearend 2008. Since their peak early in
2007, new home prices have fallen by roughly
one-quarter.
Price weakness has helped move the
inventory of unsold homes which has fallen by nearly one-half since the
peak during 2006. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624g.jpg" align="right" border="0" height="265" width="353">
In each of the country's regions, inventories are
down by roughly one-third just during the last year.&nbsp;The
month's supply of new homes for sale also has started to drop. In May
the months supply in inventory fell to its lowest level since last
July. But there's more inventory to move with lower prices if sales
remain low.
A related development indicated that mortgage
applications for purchase of a home rose last week to the highest level
since early April (-15.9% y/y). These figures from the Mortgage Bankers
Association are available in Haver's SURVEYW
database.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">US
New Homes</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Sales
(SAAR, 000s)</td>
<td>342</td>
<td>344</td>
<td>-32.8%</td>
<td>479</td>
<td>768</td>
<td>1,049</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>27</td>
<td>21</td>
<td>&nbsp;-12.9</td>
<td>35</td>
<td>64</td>
<td>64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>51</td>
<td>43</td>
<td>-32.0</td>
<td>69</td>
<td>118</td>
<td>161</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>184</td>
<td>201</td>
<td>-35.9</td>
<td>264</td>
<td>408</td>
<td>559</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>80</td>
<td>79</td>
<td>-31.0</td>
<td>111</td>
<td>178</td>
<td>266</td>
</tr>
<tr>
<td class="firstcol">Median Price
(NSA, $)</td>
<td>221,600</td>
<td>212,600</td>
<td>-3.4</td>
<td>230,408</td>
<td>243,742</td>
<td>243,067</td>
</tr>
</tbody>
</table>

FOMC Leaves Rates Unchanged; Cites
Slower Economic Contraction &amp; Subsiding Threat From Low Pricing
Power 
by <a href="/comment/Moeller.html">Tom
Moeller</a> June 24, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429e.jpg" align="left" border="0" height="265" width="353">
In an anticipated move, the Federal Open Market Committee
today left the Federal funds rate in a "range from 0 to 1/4 percent."
The discount also was left unchanged at 0.50%. The Fed funds rate
remained the lowest ever. The decision was unanimous amongst FOMC
voters.
The Fed indicated that "Information received since the Federal
Open Market Committee met in April suggests that the pace of economic
contraction is slowing. Conditions in financial markets have generally
improved in recent months.
Much of the commentary on the economy was similar to the last
meeting and concluded that "Although economic activity is likely to
remain weak for a time, the Committee continues to anticipate that
policy actions to stabilize financial markets and institutions, fiscal
and monetary stimulus, and market forces will contribute to a gradual
resumption of sustainable economic growth in a context of price
stability."
Regarding inflation, the wording of the statement was slightly
altered. The statement that "the Committee expects that inflation will
remain subdued for some time" replaced the earlier statement that "the
Committee sees some risk that inflation could persist for a time below
rates that best foster economic growth and price stability in the
longer term."
In its effort to promote economic liquidity, the Fed used the
same language as in April, "... to provide support to mortgage lending
and housing markets and to improve overall conditions in private credit
markets, the Federal Reserve will purchase a total of up to $1.25
trillion of agency mortgage-backed securities and up to $200 billion of
agency debt by the end of the year. In addition, the Federal Reserve
will buy up to $300 billion of Treasury securities by autumn."<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090624i.jpg" align="right" border="0" height="265" width="353">
For the complete text of the Fed's latest press release please
follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090624a.htm">link</a>.The
Haver databases USECON, WEEKLY and DAILY
contain the figures from the Federal Reserve Board.
Uncertainty About When the Fed Will Raise Interest
Rates from the Federal Reserve Bank of St. Louis is available
<a href="http://research.stlouisfed.org/publications/es/09/ES0929.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">December</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.16</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>0.50</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Durable Goods OrdersSurprisingly Strong For A Second Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090723c.jpg" width="353">
The National Association of Realtors reported that sales of existing homes rose 3.6% from May to the highest level since last October. Recent sales have been helped by a tax credit for first-time home buyers. The latest increase to 4.89M (AR) units beat Consensus expectations for sales of 4.85M homes. Total sales include sales of condos and co-ops. Sales of existing single-family homes alone increased 2.4% last month and they were up 6.7% from the January low. Despite the recent gains, however, sales remained near the lowest level since July 1997. (These data have a longer history than the total sales series).
The recently enacted tax credit is for first-time home buyers of either a new or a pre-owned home. The credit of up to $8,000 extends through the rest of this year. The full details of the home-buyer tax credit can be found <a href="http://www.federalhousingtaxcredit.com/2009/faq.php">here</a>
Home affordability fell somewhat from its record high to the lowest level this year. The decline was the result of the second consecutive, 4%+ m/m increase in home prices to a median $181,800. Nevertheless, affordability remained up by one-third from the year ago level as home prices remained down 20% from the 2007 peak. The series dates back to 1971.
The number of unsold homes (condos &amp; single-family) on the market fell again, posting a 0.7% decline during June. Year-to-year inventories are down 14.9%. At the current sales rate there was a 9.4 months&#39; supply on the market which was near the lowest since late-2007. For single-family homes the inventory was unchanged m/m (-17.9% y/y). At the current sales rate there was an 8.9 month&#39;s supply of homes on the market, near the lowest since 2007.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090723d.jpg" width="353">
The data on existing home sales, prices and affordability can be found in Haver&#39;s USECON database. The regional price, affordability and inventory data is available in the REALTOR database.
What Do We Know (And Not Know) About Potential Output from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/09/07/Basu.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">Existing Home Sales (Thous)</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>4,890</td>
<td>4,720</td>
<td>-0.2%</td>
<td>4,893</td>
<td>5,674</td>
<td>6,516</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Northeast</td>
<td>820</td>
<td>800</td>
<td>-4.7</td>
<td>845</td>
<td>1,010</td>
<td>1,093</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>1,100</td>
<td>1,090</td>
<td>-1.8</td>
<td>1,130</td>
<td>1,331</td>
<td>1,494</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; South</td>
<td>1,810</td>
<td>1,740</td>
<td>-3.7</td>
<td>1,860</td>
<td>2,243</td>
<td>2,577</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>1,160</td>
<td>1,090</td>
<td>11.5</td>
<td>1,064</td>
<td>1,095</td>
<td>1,357</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>4,320</td>
<td>4,220</td>
<td>0.2</td>
<td>4,341</td>
<td>4,960</td>
<td>5,712</td>
</tr>
<tr>
<td class="firstcol">Median Price, Total, $</td>
<td>181,800</td>
<td>174,700</td>
<td>-15.4</td>
<td>197,250</td>
<td>216,633</td>
<td>222,042</td>
</tr>
</tbody>
</table>


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The National Association of Realtors reported that sales of existing homes rose 3.6% from May to the highest level since last October. Recent sales have been helped by a tax credit for first-time home buyers. The latest increase to [...]

U.S. Existing Home Sales And Prices Rise

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623h.jpg" align="left" border="0" height="265" width="353">
Markit PMIs composite index rises - The
Euro Area FLASH PMI for MFG rose in June but that happy event was
partly offset by a decline in the region&#8217;s services survey. The
composite index comprised of both MFG and Services rose to 44.4, its
highest reading since September of 2008. The composite index stood at
44 in May. 
 
In Manufacturing 

In Germany the country level index for MFG rose to 40.5 from
39.58 in May, its highest level since October of last year. 
 

In France the MFG index moved up to 45.5 from 43.32 in May,
reaching its highest point since August of 2008. 
 

The moving averages for MFG show levels are still below those
of 12 months ago but the EMU trend has been improving and the current
level of the MFG index is above the 12-mo 6-mo and 3-mo moving
averages. That is very good for momentum. 
 
The Service Sector 

The services gauge for all of EMU fell in June but remains
above the level for April having only seen backsliding for one month&#8217;s
worth of gains. The same is true of the services slippage in France and
in Germany; each lost only one month&#8217;s worth of gains. Still, in
Germany the service index stands at 44.3 in the just the 15th
percentile of its historic range. For France the index is at 47.5 and
stands in the 32nd percentile of its range. In contrast Germany&#8217;s MFG
index stands in the 31st percentile of its range, not nearly as low as
for services; France&#8217;s MFG index stands in the 47th percentile of its
range also superior to its relative reading for services. For all of
EMU the services index stands near the 25th percentile of its range
compared to a standing at the 34th percentile for MFG. The
manufacturing sector is now beginning to be more of an engine of growth
after the services sector had provided the role of support when the
economic scene was unraveling in Europe. 
 
A note on MFG/Services comparison 

Note that absolute reading for services is superior to that
for MFG but that for MFG the current reading is at a higher percentile
in its range. The percentile reading is a better gauge to use to
compare one index to another since MFG indices span a broader range of
values and since the Services index has higher reading on average. The
services reading average nearly FOUR points higher than the MFG
readings. So on several bases the MFG index now is relatively stronger
than services despite the higher absolute monthly reading for services.
Over comparable periods the standard deviation of the MFG index is 5.41
compared to 4.72 for services making the MFG sector some 14% more
variable than services and 20% more volatile relative to its mean. The
service index is relatively sluggish compared to the MFG index, as we
well know. Not surprising then that MFG is the best DIRECTIONAL index.
Fortunately it is moving UP now. 
 
Perspective 

Manufacturing is now on the strongest rising gradients for
EMU. The service sector index has paused and lost some momentum. Still
the overall picture and trend remains positive. 
 

Another sign of progress this morning came from the Belgian
National Bank index which trimmed its negative reading to -23.6 in June
from -27.6 in May. For that index it is the best reading since November
2008. 
 

In terms of these index readings, we see in the Markit PMIs
the best MFG and Services (for services based on the May reading)
readings since August &#8211; October of last year and in the Belgian series
the best reading since November. On balance it is looking like a
reasonably well balanced rebound is taking place across the Zone in
these countries and across their various sectors, at least as judged by
the measures presented here. Of course, all the respective measures
still point to continuing losses. But these indices speak to the fact
that the speed of the loss has been cut sharply from the lows showing
that the pace of decline is back to the pace last seen in early Q4 or
late Q3 of 2008. 
 

The MFG ands Services PMIs each were last above 50 in May of
2008. The Belgian bank index was last positive in May of 2008 as well.
How soon we get back there depends on quickly this incipient recovery
traces its own steps. For now it is on the right path and the pace of
recovery is a good one, service sector (perhaps) excepted. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
<tr class="even">
<th colspan="3" scope="col">Markit
PMIs for the Euro
Area</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Jun-09</td>
<td>42.37</td>
<td>44.49</td>
</tr>
<tr>
<td class="firstcol">May-09</td>
<td>40.68</td>
<td>44.82</td>
</tr>
<tr>
<td class="firstcol">Apr-09</td>
<td>36.83</td>
<td>43.76</td>
</tr>
<tr>
<td class="firstcol">Mar-09</td>
<td>33.93</td>
<td>40.95</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>37.15</td>
<td>44.10</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>35.55</td>
<td>42.29</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>39.92</td>
<td>44.22</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">127-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>60.47</td>
<td>62.36</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>33.55</td>
<td>39.24</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>32.8%</td>
<td>22.7%</td>
</tr>
</tbody>
</table>
</body></html>

Markit PMIs composite index rises - The Euro Area FLASH PMI for MFG rose in June but that happy event was partly offset by a decline in the region’s services survey. The composite index comprised of both MFG and Services rose to 44.4, [...]

Europe Continues to Make a Turn Higher: Sector Results Turn Mixed in June

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623d.jpg" width="353">
The latest data from the Mortgage Bankers Association strongly suggest that the refinancing boom has reached an end. Overall, mortgage applications dropped sharply last week to the lowest level since last November. The moderate increase in interest rates is behind the lessened attractiveness of refinancing. The 15.8% w/w drop in overall mortgage applications was led by a collapse in refis. Last week, they dropped by one-quarter from the prior week and they are off by 80% during just the last two months.
While still low by historical standards, rates indeed have moved off the lows. And it&#39;s at the margin that activity is affected most. The effective interest rate on a conventional 15-year mortgage jumped last week to 5.24% and the rate is up by more than 50 basis points from the April low. For a 30-year mortgage, rates also rose to 5.68% versus the 4.81% low. Interest rates on 15- and 30-year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. Up also were adjustable 1-Year mortgage rates at 6.56% versus the low close to 6.0% during January. The rate still was down, however, sharply from the 7.07% peak reached this past fall.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090623e.jpg" width="353">
Despite the drop in re-fis, the interest in home buying appears intact. Purchase applications slipped last week but for June so far applications are 1.6% higher than during May. That follows the trend in new plus existing home sales.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage. Moreover, during the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The figures for weekly mortgage applications are available in Haver&#39;s SURVEYW database.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<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">06/12/09</th>
<th scope="col">06/05/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>514.4</td>
<td>611.0</td>
<td>1.2%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>261.2</td>
<td>270.7</td>
<td>-27.5%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,998.1</td>
<td>2,605.7</td>
<td>44.9%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The latest data from the Mortgage Bankers Association strongly suggest that the refinancing boom has reached an end. Overall, mortgage applications dropped sharply last week to the lowest level since last November. The moderate [...]

U.S. Mortgage Applications Collapse As Higher Rates Stymie Refinancing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

Charts of the Week: Tariff Truce, Tenuous Trust

250430N1.jpg

250430O1.jpg

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

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

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

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

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

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

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

250430P1.jpg

250430Q1.jpg

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

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

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

250430R1.jpg

250430S1.jpg

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

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

Michael J. Moran

250430A.jpg

250430B.jpg

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

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

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

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

250430C.jpg

250430D.jpg

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

Personal Income, Consumption, and Prices in March

250430F20.jpg

250430G20.jpg

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

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

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

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

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

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

U.S. Pending Home Sales Surge in March

Sandy Batten

250430F5.jpg

250430G5.jpg

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

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

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

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

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

250430H5.jpg

250430I5.jpg

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

Economy in Brief: June 2009

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