Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050915c.jpg" width="353">
Consumer prices (CPI-U) rose an expected 0.5% last month, the same as the unrevised increase in July. The gain in prices less food &amp; energy prices also has been stable, the same 0.1% for four months. Consensus expectations had been for a 0.2% increase.
Energy prices added to the prior month&#39;s strength and jumped 5.0% led by an 8.3% (31.4% y/y) rise in gasoline prices to an average $2.49 per gallon. In August gasoline prices have risen further to over $3.00 per gallon. Fuel oil prices also rose a strong 2.9% (33.2% y/y increase and natural gas prices rose 1.3% (7.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050915b.jpg" width="353">
Core goods prices rose 0.1%. This second increase in seven months was led by a 1.0% (-1.6% y/y) rise in apparel prices and a 1.3% (0.2% y/y) gain in audio &amp; equipment. Tobacco prices also rose 0.6% (5.2% y/y). New vehicle prices, down 0.5% (+0.1% y/y), fell hard for the second consecutive month and furniture &amp; bedding prices fell 0.5%(-1.2% y/y).
Core services prices rose a modest 0.1% as shelter prices were unchanged (+2.5% y/y) and as medical care services prices fell slightly (4.5% y/y). Public transportation prices rose just 0.1% (6.5% y/y) and school tuition costs rose 0.2% (6.3% y/y).
The chained CPI which adjusts for shifts in the mix of consumer purchases rose 0.4% and less food &amp; energy chain prices rose 0.2%.
Trimmed Mean PCE Inflation from the Federal Reserve Bank of Dallas can be found <a href="http://www.dallasfed.org/research/papers/2005/wp0506.pdf"> here</a>.
Reading Inflation Expectations from CPI Futures from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20050201/cover.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total&nbsp;</td>
<td>0.5%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>0.7%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>5.0%</td>
<td>3.8%</td>
<td>20.3%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>0.4%</td>
<td>0.4%</td>
<td>3.0%</td>
<td>2.3%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.0%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>1.1%</td>
<td>1.9%</td>
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</tbody>
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Home Prices Surge 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 15, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050915a.jpg" width="353">
Home prices as tallied by the Office of Federal Housing Enterprise Oversight (OFHEO) surged 3.2% last quarter. The gain represented a some strengthening of the pattern of double digit annualized gains in home prices which began in late 2003.
The OFHEO house price index is a geometric weighted average based on more than 26.5 million repeat transactions (purchase or refinance) over 29 years and 12,000 transactions annually.
Year to year, the 28.1% rise in house prices in Nevada ranked highest followed by 27.8% appreciation in Arizona and 25.9% in Hawaii.
The slowest rates of house price appreciation were logged in Ohio (4.8%, Indiana (4.7%) and Texas (4.7%).
View the latest OFHEO release <a href="http://www.ofheo.gov/media/pdf/2q05hpi.pdf">here</a>.
Are Home Prices the Next &quot;Bubble&quot;? from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/epr/04v10n3/0412mcca.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E911/@E91101/@E91101.HTM">OFHEO</a></th>
<th scope="col">2Q05</th>
<th scope="col">1Q05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
<tbody>
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<td class="firstcol">House Price Index</td>
<td>3.2%</td>
<td>2.6%</td>
<td>13.4%</td>
<td>11.0%</td>
<td>6.9%</td>
<td>7.0%</td>
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Empire State Index Dipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 15, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050915d.jpg" width="353">
The September Empire State Index of General Business Conditions in New York&#39;s manufacturing industries dipped to 16.97 from 23.04 in August.
The new orders component fell sharply following its earlier improvement to 13.10 but the shipments index rose to the highest level since February. The employment index also rose to its highest since January while the prices paid index surged.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050915e.jpg" width="353">
The index of expectations for business conditions in six months fell sharply although expectations for future capital spending rose.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Sept &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>16.97</td>
<td>23.04</td>
<td>26.72</td>
<td>28.76</td>
<td>16.17</td>
<td>7.19</td>
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Hurricane Katrina Caused Jobless Insurance Claims To Surge 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 15, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050915f.jpg" width="353">
Initial claims for unemployment insurance surged 71,000 to 398,000 from the prior week. Consensus expectations had been for a rise to 345,000.
The Labor Department indicated that at least 68,000 of the new claims were directly related to Hurricane Katrina and that number will most likely be revised upward next week as state workers make their way to distant relief shelters.
The four-week moving average of initial claims rose to 340,750 (0.6% y/y).
Continuing claims for unemployment insurance rose 20,000 following a deepened 28,000 decline the week prior.
The insured unemployment rate remained at its four-year low of 2.0% for the ninth consecutive week.
The Recession of 2001 and Unemployment Insurance Financing from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/epr/05v11n1/0508vrom.pdf"> here</a>.

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<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">09/10/05</th>
<th scope="col">09/03/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Initial Claims</td>
<td>398</td>
<td>327</td>
<td>19.5%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,590</td>
<td>-9.3%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
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</tbody>
</table>
Energy in China 
by <a href="/comment/Stone.html">Carol Stone</a> September 15, 2005


<img align="left" border="0" height="282" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/0509151.gif" width="374">
China&#39;s National Bureau of Statistics published energy production data today for August. Their statisticians convert various forms of energy to a coal-equivalent volume. In August, total energy output amounted to 154.28 million tonnes of &quot;standard coal&quot;, up 14.1% from a year ago. Several factors are notable about the role of energy in China.
China uses much more coal than oil. Data for the year 2004 show coal accounting for 67.7% of energy consumption, compared with crude oil at just 22.7%. In the US, by contrast, where comparative energy statistics are expressed in quadrillion BTUs, coal accounted for 22.3% last year and oil, 40.5%. Natural gas, used just marginally in China, with 2.6% of consumption, is a major source in the US, providing 23.1% of energy.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050915i.jpg">
Another notable difference with the US is in energy efficiency. In the US, the number of BTU needed to produce a dollar of GDP (in real terms) has fallen steadily since the early 1970s (see second graph), while in China, the opposite trend applies. GDP growth in 2003 and 2004 was 9.5%, but energy production increased by 13.3% in 2003 and 15.9% last year. Some moderation is seen in the latest couple of months, but August&#39;s 14.1% expansion is surely still much stronger than GDP growth. A fast glance at various other measures of Chinese economic activity suggests that process of development is possibly the origin of this movement, not that Chinese people and businesses are becoming more profligate energy users. Automobile sales are rising rapidly as is business investment. Construction of infrastructure and heavy manufacturing activity take considerable power.
So it is not just China&#39;s rapid growth that is adding to world demand for energy, but the more intense use of energy in the modern Chinese economy.

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<th scope="col" class="firstcol">&nbsp;</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>
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</thead>
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<tr class="odd">
<td class="firstcol">Energy Production &nbsp; (Mil Ton SCE*)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="3">Annual Total</td>
</tr>
<tr>
<td class="firstcol">1556.0</td>
<td>1342.0</td>
<td>1184.2</td>
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<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>154.28</td>
<td>152.91</td>
<td>156.58</td>
<td colspan="3">Monthly Average</td>
</tr>
<tr>
<td class="firstcol">129.66</td>
<td>111.83</td>
<td>98.68</td>
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<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>14.1%</td>
<td>14.8%</td>
<td>15.9%</td>
<td>15.9%</td>
<td>13.3%</td>
<td>11.9%</td>
</tr>
<tr>
<td class="firstcol">Coal Production (Mil Ton)</td>
<td>153.96</td>
<td>151.76</td>
<td>158.60</td>
<td>130.43</td>
<td>109.60</td>
<td>92.34</td>
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<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>16.2%</td>
<td>15.4%</td>
<td>17.1%</td>
<td>19.0%</td>
<td>18.7%</td>
<td>15.4%</td>
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<tr>
<td class="firstcol">Refined Crude Oil</td>
<td>24.23</td>
<td>24.62</td>
<td>23.80</td>
<td>22.88</td>
<td>20.15</td>
<td>18.28</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>3.2%</td>
<td>7.4%</td>
<td>5.8%</td>
<td>13.5%</td>
<td>10.2%</td>
<td>4.2%</td>
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Consumer prices (CPI-U) rose an expected 0.5% last month, the same as the unrevised increase in July. The gain in prices less food & energy prices also has been stable, the same 0.1% for four months. Consensus expectations had been [...]

CPI Lifted By Strong Energy Prices

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/050914d.jpg" width="353">
As we monitor large economies around the world, it&#39;s easy to lose track of their smaller neighbors. Ireland&#39;s Central Statistics Office reported employment and unemployment data this morning for Q2. The labor market there is strong and undergoing an interesting structural shift.
Employment shot up in Q2 by 20,900 from Q1, producing a 93,000 increase from Q2 a year ago, a substantial 5.1% growth rate. In comparison, employment in the UK, which was reported today for the three months centered on June, grew by 1.11% year-on-year, and that was the fastest rate since last November (the three months centered on November), when it was just marginally higher, 1.14%. Further for Ireland, whose data are not seasonally adjusted, the increase was also the biggest for Q2 over Q1 in five years, since 2000. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050914e.jpg" width="353">
The Irish unemployment rate rose very modestly from 4.1% in Q1 to 4.2% in Q2. Even so, these two quarters have the lowest six-month average rate since 2001. The rate peaked at 5.1% in Q3 2003. Impressively, the low unemployment is being maintained at high levels of labor force participation. The participation rate reached 61.5% in Q2, a record for Q2, and 1.5 percentage points above Q2 2004.
One might think of Ireland as a manufacturing-centered country, but it, as others, has seen that sector diminish. Factory jobs fell to 294,200 in Q2, the first Q2 figure below 300,000 in the eight-year history of the series and down from a peak of 330,700 in Q3 2001. Notably, though, &quot;industry&quot; as a whole has held steady as construction jobs have taken up the slack. Services are responsible for the firm overall growth in jobs, with several individual sectors advancing steadily -- finance, education and health care, most notably.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/IRELAND/IRELAND.HTM">Ireland</a> Not Seasonally Adjusted</th>
<th scope="col">Q2 2005</th>
<th scope="col">Q1 2005</th>
<th scope="col">Q2 2004</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
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<td class="firstcol">Employment (thousands)</td>
<td>1929.2</td>
<td>1908.3</td>
<td>1836.2</td>
<td>1865.0</td>
<td>1810.6</td>
<td>1777.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr %Chg</td>
<td>5.1</td>
<td>3.9</td>
<td>2.4</td>
<td>3.0</td>
<td>1.9</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>4.2</td>
<td>4.1</td>
<td>4.4</td>
<td>4.5</td>
<td>4.7</td>
<td>4.4</td>
</tr>
<tr>
<td class="firstcol">Participation Rate (%)</td>
<td>61.5</td>
<td>61.0</td>
<td>60.0</td>
<td>60.7</td>
<td>50.1</td>
<td>60.0</td>
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As we monitor large economies around the world, it's easy to lose track of their smaller neighbors. Ireland's Central Statistics Office reported employment and unemployment data this morning for Q2. The labor market there is strong [...]

Good Growth in Irish Employment; Unemployment Rate Low in Q2

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050914f.jpg" width="353">
In August, the U.S. federal government ran a budget deficit of $50.0B. That was slightly deeper than Consensus estimates but it was quite a bit deeper than a $41.1BB deficit last August. Nevertheless, the deficit of $352.6B during the first eleven months of FY 2005 was 19% lower than the prior fiscal year&#39;s first eleven months. 
Overall, U.S. net outlays grew 6.8% during the first eleven months of FY05. A 20.3% y/y gain in federal outlays on defense (19% of total outlays) counted for much of the deterioration in the deficit picture versus last August. That rise lifted defense spending by 7.3% in fiscal year 2005 versus 2004. Medicare spending (12% of total outlays) also popped 29.6% versus August of 2004 and FYTD growth accelerated to 9.4%. Growth in spending on social security (21% of total outlays) was about stable at 5.6% though spending on health programs (10% of the total) picked up a bit to 4.4%. Spending on education &amp; training (4% of the total) surged 51% versus last August and grew 15.3% FYTD while interest expense (8% of the total) grew 11.7% with higher interest rates versus declines last year. 
Net receipt growth at 13.7% during the first eleven months of FY05 continued to reflect the improved economy. Individual income taxes (44% of total receipts) rose 15.3% and corporate income taxes (10% of total receipts) rose 41.3%. The improved job market raised employment taxes (36% of total receipts) by 8.1%. 
 Do Productivity Growth, Budget Deficits, and Monetary Policy Actions Affect Real Interest Rates? Evidence From Macroeconomic Announcement Data from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/wp/2004/2004-019.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">FY &#39;05 - YTD</th>
<th scope="col">FY2004</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
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</thead>
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<td class="firstcol">Budget Balance</td>
<td>$-50.0B</td>
<td>$52.8B</td>
<td>$-352.6B</td>
<td>$-412.1B</td>
<td>$-377.6B</td>
<td>$-157.8B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Revenues</td>
<td>$155.4B</td>
<td>$142.1B</td>
<td>13.7%</td>
<td>5.5%</td>
<td>-3.8%</td>
<td>-6.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Outlays</td>
<td>$205.4B</td>
<td>$194.9B</td>
<td>6.8%</td>
<td>6.1%</td>
<td>7.4%</td>
<td>7.9%</td>
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In August, the U.S. federal government ran a budget deficit of $50.0B. That was slightly deeper than Consensus estimates but it was quite a bit deeper than a $41.1BB deficit last August. Nevertheless, the deficit of $352.6B during the [...]

U.S. Budget Deficit Deepened Due To Widespread Spending

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050914b.jpg" width="353">
Industrial output in August rose 0.1% for the second consecutive month and fell short of Consensus expectations for a 0.3% increase. The disappointment centered on declines in utility output (-0.5%) and mining output (-0.7%). Factory sector production rose 0.3% (2.9% y/y) but the July increase was revised down to just 0.1%.
Hurricane Katrina lowered the gain in output by 0.3 percentage points.
A 3.8% (5.5% y/y) rise in motor vehicle &amp; parts production accounted for all of last month&#39;s output gain. Less motor vehicles, factory output was unchanged (2.6% y/y) following an unrevised 0.3% July increase.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050914c.jpg" width="353">
Output of computers &amp; peripheral equipment jumped another 1.5% (19.4% y/y) after the huge 2.3% spike in July. Excluding the high tech sector as well as autos, factory output fell 0.1% (+1.6% y/y).
Output of appliances, furniture &amp; carpeting rose 0.7% (1.0% y/y) and recovered a 0.8% drop in July although output of nondurable goods doubled the prior month&#39;s decline and fell 0.6% (+2.4% y/y). U.S. clothing output has fallen nearly two thirds from what is was ten years ago (-6.7% y/y) and, during the last three months, paper products&#39; output is down as well (+3.4% y/y).
Total capacity utilization was stable at 79.8% and capacity grew 1.1% y/y. Factory sector utilization rose to 78.4%, up from 77.2% last August while capacity rose 1.4% y/y.
Pricing, Production and Persistence from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/wps/2005/wp05-4.pdf"> here</a>.

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<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/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>0.1%</td>
<td>0.1%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>2.4%</td>
<td>2.7%</td>
<td>0.3%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business Equipment</td>
<td>-0.2%</td>
<td>1.6%</td>
<td>8.0%</td>
<td>9.5%</td>
<td>1.2%</td>
<td>-7.9%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>79.8%</td>
<td>79.8%</td>
<td>78.3% (8/04)</td>
<td>78.1%</td>
<td>75.5%</td>
<td>75.3%</td>
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Industrial output in August rose 0.1% for the second consecutive month and fell short of Consensus expectations for a 0.3% increase. The disappointment centered on declines in utility output (-0.5%) and mining output (-0.7%). Factory [...]

Industrial Production Increase Again Light

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050914a.jpg" width="353">
US retail sales fell 2.1% in August due to a 12.0% drop in motor vehicle dealers&#39; sales. Consensus expectations had been for a 1.3% decline. Less autos, however, retail sales doubled expectations and rose 1.0%.
Some of this m/m strength was due to a 4.4% surge in gasoline service station sales, although it was just half the 8.6% m/m increase in the retail price of gasoline to an average $2.49 per gallon.
Less gasoline, nonauto retail sales rebounded 0.5% (7.0 y/y) following no change in July.
Sales at furniture &amp; electronics stores rose 0.6% (5.9% y/y) following an upwardly revised 0.2% July increase. Sales of nonstore retailers (internet &amp; catalogue) jumped 1.8% (11.0% y/y) and sales of building materials rose 0.5% (8.4% y/y).
On the disappointing side, general merchandise store sales rose a modest 0.3% (6.7% y/y) after downwardly revised gains in both July and June while apparel store sales were unchanged after a deepened 0.9% drop in July.
Oil Prices and Consumer Spending from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/summer2005/mehrapetersen.pdf"> here</a>.

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<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>-2.1%</td>
<td>1.9%</td>
<td>7.9%</td>
<td>7.3%</td>
<td>4.3%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>1.0%</td>
<td>0.5%</td>
<td>9.4%</td>
<td>8.3%</td>
<td>4.7%</td>
<td>3.3%</td>
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US retail sales fell 2.1% in August due to a 12.0% drop in motor vehicle dealers' sales. Consensus expectations had been for a 1.3% decline. Less autos, however, retail sales doubled expectations and rose 1.0%. Some of this m/m [...]

U.S. Retail Sales Down With Autos, Elsewhere OK

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050914a.jpg" width="353">
US retail sales fell 2.1% in August due to a 12.0% drop in motor vehicle dealers&#39; sales. Consensus expectations had been for a 1.3% decline. Less autos, however, retail sales doubled expectations and rose 1.0%.
Some of this m/m strength was due to a 4.4% surge in gasoline service station sales, although it was just half the 8.6% m/m increase in the retail price of gasoline to an average $2.49 per gallon.
Less gasoline, nonauto retail sales rebounded 0.5% (7.0 y/y) following no change in July.
Sales at furniture &amp; electronics stores rose 0.6% (5.9% y/y) following an upwardly revised 0.2% July increase. Sales of nonstore retailers (internet &amp; catalogue) jumped 1.8% (11.0% y/y) and sales of building materials rose 0.5% (8.4% y/y).
On the disappointing side, general merchandise store sales rose a modest 0.3% (6.7% y/y) after downwardly revised gains in both July and June while apparel store sales were unchanged after a deepened 0.9% drop in July.
Oil Prices and Consumer Spending from the Federal Reserve Bank of Richmond is available <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/summer2005/mehrapetersen.pdf"> here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>-2.1%</td>
<td>1.9%</td>
<td>7.9%</td>
<td>7.3%</td>
<td>4.3%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>1.0%</td>
<td>0.5%</td>
<td>9.4%</td>
<td>8.3%</td>
<td>4.7%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
Industrial Production Increase Again Light 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 14, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050914b.jpg" width="353">
Industrial output in August rose 0.1% for the second consecutive month and fell short of Consensus expectations for a 0.3% increase. The disappointment centered on declines in utility output (-0.5%) and mining output (-0.7%). Factory sector production rose 0.3% (2.9% y/y) but the July increase was revised down to just 0.1%. 
Hurricane Katrina lowered the gain in output by 0.3 percentage points. 
A 3.8% (5.5% y/y) rise in motor vehicle &amp; parts production accounted for all of last month&#39;s output gain. Less motor vehicles, factory output was unchanged (2.6% y/y) following an unrevised 0.3% July increase. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050914c.jpg" width="353">
Output of computers &amp; peripheral equipment jumped another 1.5% (19.4% y/y) after the huge 2.3% spike in July. Excluding the high tech sector as well as autos, factory output fell 0.1% (+1.6% y/y). 
Output of appliances, furniture &amp; carpeting rose 0.7% (1.0% y/y) and recovered a 0.8% drop in July although output of nondurable goods doubled the prior month&#39;s decline and fell 0.6% (+2.4% y/y). U.S. clothing output has fallen nearly two thirds from what is was ten years ago (-6.7% y/y) and, during the last three months, paper products&#39; output is down as well (+3.4% y/y). 
Total capacity utilization was stable at 79.8% and capacity grew 1.1% y/y. Factory sector utilization rose to 78.4%, up from 77.2% last August while capacity rose 1.4% y/y.
Pricing, Production and Persistence from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/files/wps/2005/wp05-4.pdf"> here</a>.

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</table>
<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/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>0.1%</td>
<td>0.1%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>-0.0%</td>
<td>-0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>2.4%</td>
<td>2.7%</td>
<td>0.3%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business Equipment</td>
<td>-0.2%</td>
<td>1.6%</td>
<td>8.0%</td>
<td>9.5%</td>
<td>1.2%</td>
<td>-7.9%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>79.8%</td>
<td>79.8%</td>
<td>78.3% (8/04)</td>
<td>78.1%</td>
<td>75.5%</td>
<td>75.3%</td>
</tr>
</tbody>
</table>
U.S. Budget Deficit Deepened Due To Widespread Spending 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 14, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050914f.jpg" width="353">
In August, the U.S. federal government ran a budget deficit of $50.0B. That was slightly deeper than Consensus estimates but it was quite a bit deeper than a $41.1BB deficit last August. Nevertheless, the deficit of $352.6B during the first eleven months of FY 2005 was 19% lower than the prior fiscal year&#39;s first eleven months. 
Overall, U.S. net outlays grew 6.8% during the first eleven months of FY05. A 20.3% y/y gain in federal outlays on defense (19% of total outlays) counted for much of the deterioration in the deficit picture versus last August. That rise lifted defense spending by 7.3% in fiscal year 2005 versus 2004. Medicare spending (12% of total outlays) also popped 29.6% versus August of 2004 and FYTD growth accelerated to 9.4%. Growth in spending on social security (21% of total outlays) was about stable at 5.6% though spending on health programs (10% of the total) picked up a bit to 4.4%. Spending on education &amp; training (4% of the total) surged 51% versus last August and grew 15.3% FYTD while interest expense (8% of the total) grew 11.7% with higher interest rates versus declines last year. 
Net receipt growth at 13.7% during the first eleven months of FY05 continued to reflect the improved economy. Individual income taxes (44% of total receipts) rose 15.3% and corporate income taxes (10% of total receipts) rose 41.3%. The improved job market raised employment taxes (36% of total receipts) by 8.1%. 
Do Productivity Growth, Budget Deficits, and Monetary Policy Actions Affect Real Interest Rates? Evidence From Macroeconomic Announcement Data from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/wp/2004/2004-019.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">FY &#39;05 - YTD</th>
<th scope="col">FY2004</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-50.0B</td>
<td>$52.8B</td>
<td>$-352.6B</td>
<td>$-412.1B</td>
<td>$-377.6B</td>
<td>$-157.8B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Revenues</td>
<td>$155.4B</td>
<td>$142.1B</td>
<td>13.7%</td>
<td>5.5%</td>
<td>-3.8%</td>
<td>-6.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Outlays</td>
<td>$205.4B</td>
<td>$194.9B</td>
<td>6.8%</td>
<td>6.1%</td>
<td>7.4%</td>
<td>7.9%</td>
</tr>
</tbody>
</table>
Good Growth in Irish Employment; Unemployment Rate Low in Q2 
by <a href="/comment/Stone.html">Carol Stone</a> September 14, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050914d.jpg" width="353">
As we monitor large economies around the world, it&#39;s easy to lose track of their smaller neighbors. Ireland&#39;s Central Statistics Office reported employment and unemployment data this morning for Q2. The labor market there is strong and undergoing an interesting structural shift.
Employment shot up in Q2 by 20,900 from Q1, producing a 93,000 increase from Q2 a year ago, a substantial 5.1% growth rate. In comparison, employment in the UK, which was reported today for the three months centered on June, grew by 1.11% year-on-year, and that was the fastest rate since last November (the three months centered on November), when it was just marginally higher, 1.14%. Further for Ireland, whose data are not seasonally adjusted, the increase was also the biggest for Q2 over Q1 in five years, since 2000. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050914e.jpg" width="353">
The Irish unemployment rate rose very modestly from 4.1% in Q1 to 4.2% in Q2. Even so, these two quarters have the lowest six-month average rate since 2001. The rate peaked at 5.1% in Q3 2003. Impressively, the low unemployment is being maintained at high levels of labor force participation. The participation rate reached 61.5% in Q2, a record for Q2, and 1.5 percentage points above Q2 2004.
One might think of Ireland as a manufacturing-centered country, but it, as others, has seen that sector diminish. Factory jobs fell to 294,200 in Q2, the first Q2 figure below 300,000 in the eight-year history of the series and down from a peak of 330,700 in Q3 2001. Notably, though, &quot;industry&quot; as a whole has held steady as construction jobs have taken up the slack. Services are responsible for the firm overall growth in jobs, with several individual sectors advancing steadily -- finance, education and health care, most notably.

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/IRELAND/IRELAND.HTM">Ireland</a> Not Seasonally Adjusted</th>
<th scope="col">Q2 2005</th>
<th scope="col">Q1 2005</th>
<th scope="col">Q2 2004</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">Employment (thousands)</td>
<td>1929.2</td>
<td>1908.3</td>
<td>1836.2</td>
<td>1865.0</td>
<td>1810.6</td>
<td>1777.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr %Chg</td>
<td>5.1</td>
<td>3.9</td>
<td>2.4</td>
<td>3.0</td>
<td>1.9</td>
<td>1.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>4.2</td>
<td>4.1</td>
<td>4.4</td>
<td>4.5</td>
<td>4.7</td>
<td>4.4</td>
</tr>
<tr>
<td class="firstcol">Participation Rate (%)</td>
<td>61.5</td>
<td>61.0</td>
<td>60.0</td>
<td>60.7</td>
<td>50.1</td>
<td>60.0</td>
</tr>
</tbody>
</table>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050913j.jpg" width="353">
Inflation in Europe has remained surprisingly subdued in the face of sharply rising oil prices. However the data released today for three Euro Zone countries--France, Germany and Spain--and the United Kingdom suggest that this situation may be about to change. Although the August year-over-year percentage increases in consumer price indexes (the generally accepted definition of inflation) for Germany and Spain were lower than the July increases, those for the U. K. and France were significantly higher. Data for Germany and Spain are shown in the first chart and those for the U.K. and France in the second chart.
Of the four countries, the sharpest change has occurred in the U.K. Over that past five years, inflation in the UK showed little trend as it varied between 0.65% and 1.98% -- for the most part, well below the Bank of England&#39;s 2% inflation target rate. In late 2004, however, inflation began to rise sharply, and, for the last two months has been above the target rate, 2.3% in July and 2.4% in August. In spite of the July rise in inflation above its target rate, the Bank of England voted 5 to 4 to lower the base rate from 4.75% to 4.50% on August 4 to counteract slow growth. Should inflation continue above the target rate, further reductions in the base rate, even if growth remains sluggish, may now be less likely.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050913i.jpg" width="353">
Among the countries in the Euro Zone, France is the other country, reporting today, to show some recent increase in the rate of inflation. Inflation in France had seemed to trending downward in the last part of 2004 but now shows some signs of reversing that trend. In contrast to France, inflation in Spain and Germany rose sharply in early 2004 and has since remained trend less at the higher level. In the face of sluggish growth in the Euro Zone, the European Central Bank has maintained its base rate at 2% since June, 2003. With the increased risk of higher inflation, slow growth would be unlikely to trigger a further decline in the base rate, while any indication of improved growth is very like to trigger an increase in the base rate.
Both France and Germany have had relatively low rates of inflation, while Spain has been among the high inflation group within the Euro Zone. As an indication of the relative position of the Euro Zone countries on the inflation scale, one can compare the level of the Harmonized Consumer Price Indexes which are comparable across countries and have the same base year,1996. For example, in 2004, the Harmonized Consumer Price Index for France averaged 113.3, that for Germany, 110.7, and for Spain, 124.1. 

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</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Year-over-Year Percent Change in CPI Index</th>
<th scope="col">Aug 05&nbsp;</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&nbsp;</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">U. K.&nbsp;&nbsp;</td>
<td>2.43</td>
<td>2.34</td>
<td>1.27</td>
<td>0.09</td>
<td>1.16</td>
<td>1.34</td>
<td>1.36</td>
<td>1.27</td>
</tr>
<tr>
<td class="firstcol">France&nbsp;</td>
<td>1.81</td>
<td>1.72</td>
<td>2.31</td>
<td>0.09</td>
<td>-0.60</td>
<td>2.13</td>
<td>2.11</td>
<td>1.92</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany&nbsp;</td>
<td>1.87</td>
<td>1.89</td>
<td>2.01</td>
<td>-0.02</td>
<td>-0.14</td>
<td>1.67</td>
<td>1.05</td>
<td>1.37</td>
</tr>
<tr>
<td class="firstcol">Spain&nbsp;</td>
<td>3.27</td>
<td>3.28</td>
<td>3.38</td>
<td>-0.01</td>
<td>-0.11</td>
<td>3.05</td>
<td>3.03</td>
<td>3.53</td>
</tr>
</tbody>
</table>
</body>
</html>

Inflation in Europe has remained surprisingly subdued in the face of sharply rising oil prices. However the data released today for three Euro Zone countries--France, Germany and Spain--and the United Kingdom suggest that this [...]

European Inflation Becoming a Rising Concern to Central Banks

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050913f.jpg" width="353">
The National Federation of Independent Business (NFIB) reported that their index of optimism amongst small businesses fell 0.2% in August and reversed a small up tick the month prior.
During the last ten years there has been a 64% correlation between the level of the NFIB index and the two quarter change in real GDP.
A greater percentage of firms expected higher real sales in six months but a lower percentage expected the economy to improve.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050913g.jpg" width="353">
The percentage of firms with one or more job openings jumped back to the five year high of 24%. During the last ten years there has been a 67% correlation between hiring plans and the three month growth in nonfarm payrolls.
The percentage of firms planning to raise capital spending fell as did the percentage of firms raising average selling prices rose.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<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/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>100.9</td>
<td>101.1</td>
<td>-1.9%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
</tr>
</tbody>
</table>
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The National Federation of Independent Business (NFIB) reported that their index of optimism amongst small businesses fell 0.2% in August and reversed a small up tick the month prior. During the last ten years there has been a 64% [...]

Small Business Optimism Slipped

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

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

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

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

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

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

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Kathleen Stephansen, CBE

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Initial claims for unemployment insurance dropped 10,000 to 214,000 in the week of December 20, from 224,000 during the week of December 13. The four-week moving average of initial claims was 216,750, a decrease of 750 from the prior week’s unrevised 217,500.

Federal government employees initially filed 805 (NSA) jobless insurance claims in the week ended December 13, after filing 1091 claims in the week ended December 6.

Continuing claims for unemployment insurance rose 38,000 to 1.923 million in the week ending December 13, after rising 55,000 to 1.885 million, revised from 1.897 million in the week ending December 6. The four-week moving average was 1.894 million in the week ending December 13, down 5,250 from 1.899 million, revised from 1,902,000 in the week ending December 6. The insured unemployment rate stood at 1.3% in the week of December 13, up from 1.2% in the week of December 6.

Federal government employees’ continuing benefits claims were 12,887 (NSA) in the week ending December 6, from 14,077 (NSA) in the week of November 29. 

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 6, the highest unemployment rates were in New Jersey and Washington (both 2.40%), Massachusetts and Minnesota (both 2.10%), California and Rhode Island (both 2.00%). The lowest rates were in Florida (0.30%), and Alabama, Louisiana, North Carolina (all 0.40%). Rates in other notable states include New York (1.80%), Illinois and Pennsylvania (both 1.70%), and Texas (1.10%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.


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- Initial claims declined from the prior week.
- Continuing claims rose from the prior week.
- The insured unemployment rate edged up.


U.S. Initial Claims for Unemployment Insurance Dropped in Latest Week

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Mortgage applications dropped 5.0% w/w (+49.8% y/y) in the week of December 19, after a drop of 3.8% w/w (+40.9% y/y) in the week of December 12, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house fell 3.7% w/w (+15.9% y/y) in the latest week, the third consecutive weekly decline, following a drop of 2.8% w/w (+12.3% y/y) in the December 12 week. Applications for loan refinancing dropped 5.6% w/w (+110.1% y/y) in the December 19 week after a decline of 3.6% w/w (+86.0% y/y) in the week of December 12. 

The effective interest rate on a 30-year fixed-rate loan fell 8bps to 6.48% in the week ending December 19 from 6.56% in the week ending December 12. The rate on 15-year fixed-rate mortgages dropped 5bps to 5.86% in the latest week from 5.91% in the prior week. The 30-year Jumbo rate rose 8bps to 6.63% in the December 19 week from 6.55% in the December 12 week. The rate on a 5-year ARM jumped 20bps to 5.96% in the latest week from 5.76% in the December 12 week.

The share of applications for refinancing an existing loan edged up to 59.1% of total applications in the December19 week from 59.0% in the week ending December 12. The adjustable-rate mortgage (ARM) share of activity rose to 8.1% in the latest week from 7.2% in the December 12 week.

The average size of a mortgage loan edged down 0.1% w/w (+7.8% y/y) to $399,700 in the week ending December 19, following a rise of 1.5% w/w (6.4% y/y) to $400,000 in the December 12 week. The average size of a purchase loan rose 1.0% w/w (1.1% y/y) to $428,600 in the latest week, after rising 0.6% w/w (-0.3% y/y) to $424,200 in the prior week. The average size of a loan to refinance a mortgage declined 0.9% w/w (+24.9% y/y) to $379,700 in the December 19 week, following a rise of 2.3% w/w (19.8% y/y) to $383,300 in the week ending December 12.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.


- Both purchase applications and refinancing loan applications fell in the latest week.
- Effective interest rate on 30-year fixed loans fell to 6.48%.
- Average loan size edged down.


U.S. Mortgage Applications Dropped in the Week of December 19

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

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

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

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

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



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

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

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

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

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

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



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


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

Sandy Batten

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

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

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

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

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

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



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


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

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

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

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

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

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

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



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


Economy in Brief: 2005

Jump to:

CPI Lifted By Strong Energy Prices

Good Growth in Irish Employment; Unemployment Rate Low in Q2

U.S. Budget Deficit Deepened Due To Widespread Spending

Industrial Production Increase Again Light

U.S. Retail Sales Down With Autos, Elsewhere OK

U.S. Retail Sales Down With Autos, Elsewhere OK

European Inflation Becoming a Rising Concern to Central Banks

Small Business Optimism Slipped