Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050825a.jpg" width="353">
Initial claims for unemployment insurance fell by 4,000 in the week ended August 20 to 315,000, partially reversing the prior week&#39;s revised 8,000 increase. This latest figure was right in line with Consensus expectations.
The four-week moving average of initial claims rose to 315,000 (-6.7% y/y).
Continuing claims for unemployment insurance fell 9,000 in the August 13 week; the previous week&#39;s number was revised to a 22,000 increase from 28,000 reported initially.
The insured unemployment rate remained at its four-year low of 2.0% for a sixth consecutive week.
Initial claims are highly sensitive to the forces generating economic growth. Indeed, quarterly average claims have an 82% negative correlation with 4-quarter GDP growth. So in our chart, we have plotted weekly claims with those 4-quarter growth rates. We have used the &quot;horizontal reference&quot; feature of DLXVG3 to draw a line at 3.5%; the bar feature then points the individual bars up or down relative to that reference line instead of zero. There we see that turning points in claims appear to be roughly associated with shifts in growth above and below 3.5%. Four-quarter growth has been 3.6% throughout the first half of 2005 -- and initial unemployment insurance claims have hovered in a tight range of 315,000 to 330,000. The lower end of this range has held now since mid-July; this suggests good growth for Q3 as well -- or at least a firm foundation from which to meet the increasing burden of high energy costs.

<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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">08/20/05</th>
<th scope="col">08/13/05</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>
<td class="firstcol">Initial Claims</td>
<td>315</td>
<td>319</td>
<td>-7.9%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,578</td>
<td>-10.3%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
</body>
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Initial claims for unemployment insurance fell by 4,000 in the week ended August 20 to 315,000, partially reversing the prior week's revised 8,000 increase. This latest figure was right in line with Consensus expectations. The four- [...]

Unemployment Insurance Claims Ease, Hover in Tight Range

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050825a.jpg" width="353">
Initial claims for unemployment insurance fell by 4,000 in the week ended August 20 to 315,000, partially reversing the prior week&#39;s revised 8,000 increase. This latest figure was right in line with Consensus expectations.
The four-week moving average of initial claims rose to 315,000 (-6.7% y/y).
Continuing claims for unemployment insurance fell 9,000 in the August 13 week; the previous week&#39;s number was revised to a 22,000 increase from 28,000 reported initially.
The insured unemployment rate remained at its four-year low of 2.0% for a sixth consecutive week.
Initial claims are highly sensitive to the forces generating economic growth. Indeed, quarterly average claims have an 82% negative correlation with 4-quarter GDP growth. So in our chart, we have plotted weekly claims with those 4-quarter growth rates. We have used the &quot;horizontal reference&quot; feature of DLXVG3 to draw a line at 3.5%; the bar feature then points the individual bars up or down relative to that reference line instead of zero. There we see that turning points in claims appear to be roughly associated with shifts in growth above and below 3.5%. Four-quarter growth has been 3.6% throughout the first half of 2005 -- and initial unemployment insurance claims have hovered in a tight range of 315,000 to 330,000. The lower end of this range has held now since mid-July; this suggests good growth for Q3 as well -- or at least a firm foundation from which to meet the increasing burden of high energy costs.

<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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">08/20/05</th>
<th scope="col">08/13/05</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>
<td class="firstcol">Initial Claims</td>
<td>315</td>
<td>319</td>
<td>-7.9%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,578</td>
<td>-10.3%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
German IFO Index Decreases in August, But Expectations Edge Higher 
by <a href="/comment/Stone.html">Carol Stone</a> August 25, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050825b.jpg" width="353">
The German IFO Business Climate survey deteriorated anew this month after a hopeful improvement in July. The Business Climate Index eased to 94.6 (2000=100) from July&#39;s 95.0; forecasts had called for it to edge upward instead, to 95.2. The August result corresponds to a diffusion index of -11.7, down from July&#39;s -10.9.
By sector, wholesale trade, retail trade and manufacturing all declined, while construction managed to firm more than 4 points to -35.6, its best reading since early 2001. Commentators in press reports were most disappointed by the retail trade decline, which was the second in row. June had appeared to be establishing a good positive trend, but this was clearly unsustainable, possibly in the face of rising energy costs. Manufacturing, similarly, looked in July to be recovering from its weakness in Q2, but this did not extend into August. Even so, the -0.7 August figure remains much better than any in Q2.
Overall, companies saw marginal decreases in current conditions, from an index reading of 94.9 in July to 93.8 in August. The expectations component actually had a marginal improvement, to 95.4 from 95.1 in July and 92.9 in June. Thus, while headlines bemoan the negative move in the total, it is small, and companies hardly seem deeply distressed about their future prospects.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">Germany</a></th>
<th scope="col">Aug 2005</th>
<th scope="col">July 2005</th>
<th scope="col">June 2005</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">Business Climate Index, 2000=100</td>
<td>94.6</td>
<td>95.0</td>
<td>93.3</td>
<td>95.7</td>
<td>91.7</td>
<td>89.4</td>
</tr>
<tr>
<td class="firstcol">Diffusion Index</td>
<td>-11.7</td>
<td>-10.9</td>
<td>-14.2</td>
<td>-9.6</td>
<td>-17.5</td>
<td>-22.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>-0.7</td>
<td>-0.1</td>
<td>-5.3</td>
<td>4.5</td>
<td>-7.9</td>
<td>-10.3</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-35.6</td>
<td>-39.9</td>
<td>-42.0</td>
<td>-42.7</td>
<td>-42.9</td>
<td>-44.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale Trade</td>
<td>-17.9</td>
<td>-13.6</td>
<td>-18.1</td>
<td>-17.2</td>
<td>-25.0</td>
<td>-29.8</td>
</tr>
<tr>
<td class="firstcol">Retail Trade</td>
<td>-27.3</td>
<td>-24.8</td>
<td>-21.0</td>
<td>-27.6</td>
<td>-25.5</td>
<td>-40.2</td>
</tr>
</tbody>
</table>
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New single-family home sales rose 6.5% in July to 1.41 million units, following a 2.0% gain in June. Data for April through June were revised downward modestly, but July&#39;s figure is still well into record territory. The July sales volume is a substantial 27.7% higher than July 2004.
This latest increase was concentrated in the West, where sales jumped to 495,000 from 364,000 in June. Sales also rose in the Northeast, from 89,000 in June to 98,000; they were up nearly 72% from the July 2004 volume.
The median price of a new single family home declined for a third consecutive month, this time by 7.1%, to &quot;just&quot; $203,800. Prior months were revised slightly higher. The July drop occurred as accompanying data on price brackets showed that there were fewer sales of homes priced above $250,000 and more sales of homes under $150,000. This spread suggests a shift in demand toward the lower end of the market, rather than lower prices for similar homes.
The figures from the Census Department reflect home sales counted at the time of sales contract or deposit. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050824c.jpg" width="353"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050824d.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E90401/@E90401.HTM">Homes Sales (000s, AR)</a></th>
<th scope="col">July</th>
<th scope="col">June</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>
<td class="firstcol">New Single-Family</td>
<td>1,410</td>
<td>1,324</td>
<td>27.7%</td>
<td>1,203</td>
<td>1,088</td>
<td>972</td>
</tr>
</tbody>
</table>
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New single-family home sales rose 6.5% in July to 1.41 million units, following a 2.0% gain in June. Data for April through June were revised downward modestly, but July's figure is still well into record territory. The July sales [...]

New Home Sales Gain with Spurt in the West

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050824a.jpg" width="353">
New orders for durable goods fell 4.9% last month, with decreases across several industries. Consensus expectations had been for a 1.4% decline.
The increase in June&#39;s total orders was revised higher, from 1.4% reported initially to 1.9% in today&#39;s data. The gain in May was also raised, from 6.4% to 7.3%. These revisions encompass the usual monthly refinements plus the annual benchmarking, which was published last Friday. In that revision, total durable goods orders for 2004 were reduced by 0.6%.
July&#39;s orders for fabricated metals products, machinery and electronics were all down after sizable increases in June. Transportation orders fell 8.6%; they also declined in June, but they were up 23.5% in May. This last sector also saw sizable upward revisions: the May level was raised $4.1 billion or 6.4% in the annual revisions. By contrast, computer sector orders were chopped $5.3 billion or 15.0% for May; for June, today&#39;s data resulted in an originally reported 8.7% rise being cut to just 0.8%, with an 8.3% fall coming in July. Thus, the modest 0.6% revision for 2004 as a whole reflects widely varying revisions to individual industries. Transportation looks stronger, but computers considerably lower than before.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050824b.jpg" width="353">
Orders for aircraft &amp; parts continued to decline in July, a second sharp drop after their spike in May. Nondefense capital goods fell 7.3% last month, including the drop in aircraft and a 3.7% fall in other capital goods orders.
Shipments of durable goods eased 0.1% in July, continuing a recent trend of minimal monthly changes. Inventories rose 0.6% after a 0.4% fall in June. Order backlogs rose 1.0%, a third consecutive sizable increase, despite the volatility in new orders. The ratio of backlogs to shipments rose to 2.81, the highest since early 2002. Excluding transportation, this ratio was 1.95, the highest since June 2004.

<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">July</th>
<th scope="col">June</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">Durable Goods Orders</td>
<td>-4.9%</td>
<td>1.9%</td>
<td>5.0%</td>
<td>9.5%</td>
<td>4.1%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-3.2%</td>
<td>3.6%</td>
<td>7.6%</td>
<td>11.7%</td>
<td>3.1%</td>
<td>-6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-7.3%</td>
<td>-2.2%</td>
<td>6.7%</td>
<td>11.0%</td>
<td>4.2%</td>
<td>-9.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-3.7%</td>
<td>4.8%</td>
<td>8.4%</td>
<td>9.5%</td>
<td>4.8%</td>
<td>-10.5%</td>
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</tbody>
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New orders for durable goods fell 4.9% last month, with decreases across several industries. Consensus expectations had been for a 1.4% decline. The increase in June's total orders was revised higher, from 1.4% reported initially to [...]

U.S. Durable Goods Orders Down in July, But May & June Revised Upward

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050824a.jpg" width="353">
New orders for durable goods fell 4.9% last month, with decreases across several industries. Consensus expectations had been for a 1.4% decline.
The increase in June&#39;s total orders was revised higher, from 1.4% reported initially to 1.9% in today&#39;s data. The gain in May was also raised, from 6.4% to 7.3%. These revisions encompass the usual monthly refinements plus the annual benchmarking, which was published last Friday. In that revision, total durable goods orders for 2004 were reduced by 0.6%.
July&#39;s orders for fabricated metals products, machinery and electronics were all down after sizable increases in June. Transportation orders fell 8.6%; they also declined in June, but they were up 23.5% in May. This last sector also saw sizable upward revisions: the May level was raised $4.1 billion or 6.4% in the annual revisions. By contrast, computer sector orders were chopped $5.3 billion or 15.0% for May; for June, today&#39;s data resulted in an originally reported 8.7% rise being cut to just 0.8%, with an 8.3% fall coming in July. Thus, the modest 0.6% revision for 2004 as a whole reflects widely varying revisions to individual industries. Transportation looks stronger, but computers considerably lower than before.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050824b.jpg" width="353">
Orders for aircraft &amp; parts continued to decline in July, a second sharp drop after their spike in May. Nondefense capital goods fell 7.3% last month, including the drop in aircraft and a 3.7% fall in other capital goods orders.
Shipments of durable goods eased 0.1% in July, continuing a recent trend of minimal monthly changes. Inventories rose 0.6% after a 0.4% fall in June. Order backlogs rose 1.0%, a third consecutive sizable increase, despite the volatility in new orders. The ratio of backlogs to shipments rose to 2.81, the highest since early 2002. Excluding transportation, this ratio was 1.95, the highest since June 2004.

<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">July</th>
<th scope="col">June</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">Durable Goods Orders</td>
<td>-4.9%</td>
<td>1.9%</td>
<td>5.0%</td>
<td>9.5%</td>
<td>4.1%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>-3.2%</td>
<td>3.6%</td>
<td>7.6%</td>
<td>11.7%</td>
<td>3.1%</td>
<td>-6.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-7.3%</td>
<td>-2.2%</td>
<td>6.7%</td>
<td>11.0%</td>
<td>4.2%</td>
<td>-9.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>-3.7%</td>
<td>4.8%</td>
<td>8.4%</td>
<td>9.5%</td>
<td>4.8%</td>
<td>-10.5%</td>
</tr>
</tbody>
</table>
New Home Sales Gain with Spurt in the West 
by <a href="/comment/Stone.html">Carol Stone</a> August 24, 2005


New single-family home sales rose 6.5% in July to 1.41 million units, following a 2.0% gain in June. Data for April through June were revised downward modestly, but July&#39;s figure is still well into record territory. The July sales volume is a substantial 27.7% higher than July 2004.
This latest increase was concentrated in the West, where sales jumped to 495,000 from 364,000 in June. Sales also rose in the Northeast, from 89,000 in June to 98,000; they were up nearly 72% from the July 2004 volume.
The median price of a new single family home declined for a third consecutive month, this time by 7.1%, to &quot;just&quot; $203,800. Prior months were revised slightly higher. The July drop occurred as accompanying data on price brackets showed that there were fewer sales of homes priced above $250,000 and more sales of homes under $150,000. This spread suggests a shift in demand toward the lower end of the market, rather than lower prices for similar homes.
The figures from the Census Department reflect home sales counted at the time of sales contract or deposit. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050824c.jpg" width="353"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050824d.jpg" width="353">

<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/@E9/@E904/@E90401/@E90401.HTM">Homes Sales (000s, AR)</a></th>
<th scope="col">July</th>
<th scope="col">June</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>
<td class="firstcol">New Single-Family</td>
<td>1,410</td>
<td>1,324</td>
<td>27.7%</td>
<td>1,203</td>
<td>1,088</td>
<td>972</td>
</tr>
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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/050823e.jpg" width="353">
The ZEW Center for European Research announced that the institutional investors and analysts who respond to their survey on current and future conditions in Germany turned surprisingly optimistic in August as shown in the first chart. The balance of those expecting improved conditions in the next six months over those expecting worsened conditions rose to 50% from 37% in July. This was well above consensus and was the highest balance of optimists since March 2004. The recent decline in the euro has been one factor in the increase in confidence but there is also some suggestion that domestic activity within the economy is stirring. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050823d.jpg" width="353">
Such evidence is found in the details of the second quarter German gross domestic product released today. Investment in real terms both in plant and equipment and inventories rose and managed to overcome a decline in net exports and continued sluggish consumption. Total GDP increased a mere 0.01% in the quarter. The strongest rise was in inventories. Inventory liquidation has long been a drag on the German economy and the recent accumulation is encouraging, suggesting as it does that businesses are beginning to be more optimistic about future prospects.
In the German national accounts, inventories are shown only in current dollars. We derived a series in chained 2000 euros, by subtracting fixed investment from total investment, both in chained 2000 euros. This is not a proper procedure when dealing with chained dollars, however, it may suffice to give a rough estimate of the actual trend in real terms. The result is shown in the second chart.

<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">Germany</a></th>
<th scope="col">Aug 05</th>
<th scope="col">Jul&nbsp; 05</th>
<th scope="col">Aug 04</th>
<th scope="col">M/M dif </th>
<th scope="col">Y/Y dif</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">ZEW % balance</td>
<td>50.0</td>
<td>37.0</td>
<td>45.3</td>
<td>13.0</td>
<td>4.7</td>
<td>44.6</td>
<td>38.4</td>
<td>45.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Billions Chained 2000 Euros</td>
<td>Q2 05</td>
<td>Q1 05</td>
<td>Q2 04</td>
<td>M/M % </td>
<td>Y/Y %</td>
<td>2004 &nbsp; Quarterly Avg</td>
<td>2003&nbsp; Quarterly Avg</td>
<td>2002 Quarterly Avg</td>
</tr>
<tr>
<td class="firstcol">Total Gross Domestic Product</td>
<td>531.56</td>
<td>531.51</td>
<td>528.41</td>
<td>0.01</td>
<td>0.60</td>
<td>527.87</td>
<td>522.15</td>
<td>523.14</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Consumption</td>
<td>406.36</td>
<td>406.64</td>
<td>406.60</td>
<td>-0.07</td>
<td>-0.06</td>
<td>407.28</td>
<td>408.22</td>
<td>407.72</td>
</tr>
<tr>
<td class="firstcol">Total Investment</td>
<td>100.16</td>
<td>98.15</td>
<td>98.20</td>
<td>2.05</td>
<td>2.00</td>
<td>98.19</td>
<td>96.81</td>
<td>94.36</td>
</tr>
<tr class="odd">
<td class="firstcol">Fixed Investment</td>
<td>97.40</td>
<td>97.23</td>
<td>97.90</td>
<td>0.17</td>
<td>-0.51</td>
<td>98.32</td>
<td>99.83</td>
<td>100.56</td>
</tr>
<tr>
<td class="firstcol">Inventory (derived)</td>
<td>2.76</td>
<td>0.92</td>
<td>0.30</td>
<td>1.84*</td>
<td>2.46*</td>
<td>-0.13</td>
<td>-3.02</td>
<td>-6.20</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>222.30</td>
<td>219.63</td>
<td>214.38</td>
<td>1.22</td>
<td>3.69</td>
<td>212.41</td>
<td>196.13</td>
<td>191.71</td>
</tr>
<tr>
<td class="firstcol">Imports</td>
<td>197.21</td>
<td>192.80</td>
<td>188.21</td>
<td>2.29</td>
<td>4.62</td>
<td>190.08</td>
<td>179.15</td>
<td>170.71</td>
</tr>
</tbody>
</table>
</body>
</html>

The ZEW Center for European Research announced that the institutional investors and analysts who respond to their survey on current and future conditions in Germany turned surprisingly optimistic in August as shown in the first chart. [...]

German Investor's Confidence Rises Sharply in August: GDP Release Shows Increased Domestic Activity

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050823b.jpg" width="353">
Existing home sales eased slightly in July, falling 2.6% to 7.16 million units from an upwardly revised 7.35 million in June. Single-family sales alone decreased by 2.3% to 6.24 million and condo and co-op sales by 4.2% to 920,000. (The condo and co-op sales we calculated ourselves by simple subtraction.) Total sales were a bit weaker than consensus expectations, which had called for 7.25 million. Even so, the July outturn was the third highest ever, behind only June&#39;s figure, which was the record, and April&#39;s 7.18 million, according to these compilations by the National Association of Realtors. The data cover sales closed in this and previous months, in contrast to new home sales data, which count sales at the signing of a contract. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050823c.jpg" width="353">
The median price of an existing single-family home increased 0.5% but June&#39;s price figure was revised downward, so the July result, at $217,900, is actually lower than the original June price median. Prices are not seasonally adjusted, and they tend to soften a bit as the summer winds down. Even so, the July number is still 14.1% ahead of a year ago, and the escalation should be plainly evident in our second graph. 
By region, total sales fell everywhere except in the South, where they were flat with June. The West saw a decrease of 7% in the month to a volume just 0.7% above July 2004. Sales in the Midwest eased 1.4%, making them 1.9% below last July, and those in the Northeast were off 2.3%, but still held a gain of 4.9% from the year earlier amount. 
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">July</th>
<th scope="col">June</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 Home Sales</td>
<td>7,160</td>
<td>7,350</td>
<td>1.3%</td>
<td>6,723</td>
<td>6,170</td>
<td>5,653</td>
</tr>
<tr>
<td class="firstcol">Single Family Home Sales</td>
<td>6,220</td>
<td>6,390</td>
<td>0.5%</td>
<td>5,913</td>
<td>5,441</td>
<td>4,995</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price ($,000) </td>
<td>$217.9 </td>
<td>$216.7 </td>
<td>14.6% </td>
<td>$182.8 </td>
<td>$169.1 </td>
<td>$157.6 </td>
</tr>
</tbody>
</table>


</html>

Existing home sales eased slightly in July, falling 2.6% to 7.16 million units from an upwardly revised 7.35 million in June. Single-family sales alone decreased by 2.3% to 6.24 million and condo and co-op sales by 4.2% to 920,000. [...]

U.S. Existing Home Sales & Prices Moderate Slightly in July

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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Tom Moeller

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

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

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

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

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

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

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

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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**.

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

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

Michael J. Moran

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

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

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

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

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

Personal Income, Consumption, and Prices in March

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

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

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

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

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

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

U.S. Pending Home Sales Surge in March

Sandy Batten

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

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

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

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

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

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

Employment Cost Growth Steady in Q1 2025

Kathleen Stephansen, CBE

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

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

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

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

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

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

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

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

Economy in Brief: August 2005

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Unemployment Insurance Claims Ease, Hover in Tight Range

Unemployment Insurance Claims Ease, Hover in Tight Range

Unemployment Insurance Claims Ease, Hover in Tight Range

New Home Sales Gain with Spurt in the West

U.S. Durable Goods Orders Down in July, But May & June Revised Upward

U.S. Durable Goods Orders Down in July, But May & June Revised Upward

German Investor's Confidence Rises Sharply in August: GDP Release Shows Increased Domestic Activity

U.S. Existing Home Sales & Prices Moderate Slightly in July