Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040909a.jpg" width="353">
Import prices spiked 1.7% higher last month, the largest one month gain since February 2003 and more than triple the Consensus expectation. The prior month&#39;s gain was revised up due to raised petroleum prices.
Petroleum prices jumped 9.6% but a decline in the price of Brent crude oil so far in September versus August indicates the strength has not continued. Brent crude has traded near $41.00 versus $43.20 last month.
Non-petroleum import prices rose 0.4%, the strongest rise since February, following a downwardly revised no change in July. Capital goods prices were unchanged (-1.5% y/y) for the fifth month this year and were 0.8% below last December. Excluding computers capital goods prices rose 0.2% (+1.2% y/y). Non-auto consumer goods prices also were unchanged (+0.6% y/y).
During the last ten years there has been a (negative) 55% correlation between the level of the dollar and the y/y change in nonpetroleum import prices.
Export prices reversed all of the 0.5% rise the prior month as agricultural commodities prices fell 8.5%.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>1.7%</td>
<td>0.3%</td>
<td>7.2%</td>
<td>2.9%</td>
<td>-2.5%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>9.6%</td>
<td>2.0%</td>
<td>40.4%</td>
<td>21.0%</td>
<td>3.0%</td>
<td>-17.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.4%</td>
<td>0.0%</td>
<td>3.2%</td>
<td>1.1%</td>
<td>-2.4%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>-0.5%</td>
<td>0.5%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>-1.0%</td>
<td>-0.8%</td>
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Import prices spiked 1.7% higher last month, the largest one month gain since February 2003 and more than triple the Consensus expectation. The prior month's gain was revised up due to raised petroleum prices. Petroleum prices jumped [...]

Import Prices Spike Higher

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/040908g.jpg" width="353">
Yesterday, we described an improving trend in German industrial production through July, an encouraging sign for Europe as a whole. At the same time, not all countries are fully on board yet. Data reported yesterday for the UK show two months of hesitation and a report this morning from the Netherlands indicates that Dutch industry is still struggling to get on a sustained uptrend. 
UK output fell 0.3% in July following a similar decline in June. Trends are mixed among UK sectors, as production of capital goods and of consumer durable goods increased, while that of intermediate products and energy has had a listless performance and consumer nondurables continue to slide. Obviously, the improving pattern in investment and consumer durables, the most cyclical products, is quite favorable in the midst of an otherwise clouded picture. Indeed, capital goods output is the highest since the summer of 2001. 
In the Netherlands, manufacturing output has been uneven. It appeared to reach a bottom at the middle of last year and tilted up slightly in subsequent months. However, the declines in May and again in July erase most of those gains and leave factories just above their year-ago operating pace. Details will be published tomorrow. In the meantime, through June, food and textile production in the Netherlands were sources of weakness, as they have been in the UK. This suggests that consumer demand in those countries could still be sluggish and/or that import competition is pressuring domestic industry. 

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<th scope="col" class="firstcol">Industrial Production, % Changes</th>
<th scope="col">July 2004 </th>
<th scope="col">June 2004 </th>
<th scope="col">May 2004 </th>
<th scope="col">Year/ Year </th>
<th scope="col">2003 </th>
<th scope="col">2002 </th>
<th scope="col">2001 </th>
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<td class="firstcol">UK </td>
<td>-0.3</td>
<td>-0.3</td>
<td>0.4</td>
<td>-2.5</td>
<td>-0.1</td>
<td>-2.5</td>
<td>-1.6</td>
</tr>
<tr>
<td class="firstcol">Netherlands* </td>
<td>-0.6</td>
<td>0.1</td>
<td>-0.7</td>
<td>0.2</td>
<td>-2.8</td>
<td>-0.8</td>
<td>-0.1</td>
</tr>
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<td class="firstcol">Germany </td>
<td>1.6</td>
<td>-1.5</td>
<td>1.0</td>
<td>-1.1</td>
<td>0.1</td>
<td>-1.3</td>
<td>-0.8</td>
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Yesterday, we described an improving trend in German industrial production through July, an encouraging sign for Europe as a whole. At the same time, not all countries are fully on board yet. Data reported yesterday for the UK show [...]

Mixed Fortunes for European Industry

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908d.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage ticked up last week to 6.06% from 6.02% the prior week, but those rates were little changed from the 6.04% averaged in August. In May, 30-year financing averaged 6.53%. The effective rate on a 15-year mortgage was 5.49%.
The index of mortgage applications compiled by the Mortgage Bankers Association jumped 7.7% from the prior week as purchase applications surged 7.4% and began the month 6.1% above August which fell 2.8% from July.
During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance mortgages surged 8.0%following two weeks of decline. Refi&#39;s began September 7.5%% ahead of August.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">09/03/04</th>
<th scope="col">08/27/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
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<td class="firstcol">Total Market Index</td>
<td>692.0</td>
<td>642.7</td>
<td>-10.3%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>476.0</td>
<td>443.1</td>
<td>16.4%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,948.9</td>
<td>1,804.1</td>
<td>-32.4%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
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The effective interest rate on a conventional 30-year mortgage ticked up last week to 6.06% from 6.02% the prior week, but those rates were little changed from the 6.04% averaged in August. In May, 30-year financing averaged 6.53%. [...]

Low Mortgage Rates Stimulate Borrowing

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908c.jpg" width="353">
Chain store sales slipped ticked slightly higher last week but the level of sales was little changed from four weeks ago according to the International Council of Shopping Centers (ICSC)-UBS.
Sales began September 0.2% below the August average which was unchanged from July.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">09/04/04</th>
<th scope="col">08/28/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>438.6</td>
<td>438.4</td>
<td>2.1%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Chain store sales slipped ticked slightly higher last week but the level of sales was little changed from four weeks ago according to the International Council of Shopping Centers (ICSC)-UBS. Sales began September 0.2% below the [...]

U.S. Chain Store Sales Little Changed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908b.jpg" width="353">
Challenger, Gray &amp; Christmas reported that announced job cuts rose another 6.6% in August on top of an 8.1% rise the prior month. The increase to 74,150 was to the highest level since February.
The three month moving average of job cut announcements rose modestly to 69,355 (-7.4% y/y).
During the last ten years there has been an 86% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
A new series from Challenger indicated that announced hiring plans in August surged to a multiple of intentions for July. The series dates back only to May.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
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<td class="firstcol">Announced Job Cuts</td>
<td>74,150</td>
<td>69,572</td>
<td>-7.2%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
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Challenger, Gray & Christmas reported that announced job cuts rose another 6.6% in August on top of an 8.1% rise the prior month. The increase to 74,150 was to the highest level since February. The three month moving average of job [...]

Challenger Layoffs Up Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908a.jpg" width="353">
The Congressional Budget Office Updated its US budget outlook. The current deficit estimates of $422 for FY04 and $348B for FY05 are below the $477B and $363B estimated six months ago due to improved economic &amp; technical assumptions.
The ten year deficit outlook, however, deteriorated due to raised spending estimates (mostly military &amp; Medicare) which more than offset raised estimates of revenues.
&quot;The Budget and Economic Outlook: An Update&quot; from the Congressional Budget Office is available <a href="http://www.cbo.gov/ftpdocs/57xx/doc5773/08-24-BudgetUpdate.pdf">here</a>.
For the first ten months of FY04 the deficit of $395.8 was 22.2% larger than last year. Budget deficits raised the growth in outstanding liabilities of the Federal government through 1Q04 to 12.7% versus 8.0% growth in nonfederal liabilities.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908f.jpg" width="353">
Growth in net receipts for the first ten months of FY04 improved to 4.0% versus a 3.9% decline during the first ten months of FY03. Individual tax receipts were down 0.3% versus a 6.9% decline in the first ten months of FY03. Corporate tax receipts for the fiscal year-to-date were up 45.0% ($145.3B) versus last fiscal YTD.
Growth in Federal net expenditures was about stable at 7.2% versus the first ten months of last fiscal year. Defense expenditures grew 14.8% versus 15.9% last year. Growth in Medicare outlays was 8.6% versus 8.3%. Interest expense grew 3.7% versus a 10.0% decline during last year&#39;s first ten months.

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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">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;03</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
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</thead>
<tbody>
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<td class="firstcol">Budget Balance</td>
<td>$-69.2B</td>
<td>$19.1B</td>
<td>$-54.2B</td>
<td>$-374.2B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$134.4B</td>
<td>$214.4B</td>
<td>8.8%</td>
<td>-3.8%</td>
<td>-6.9%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$203.6B</td>
<td>$195.2B</td>
<td>14.5%</td>
<td>7.2%</td>
<td>7.9%</td>
<td>4.2%</td>
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</tbody>
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The Congressional Budget Office Updated its US budget outlook. The current deficit estimates of $422 for FY04 and $348B for FY05 are below the $477B and $363B estimated six months ago due to improved economic & technical assumptions. [...]

U.S. Budget Deficit Estimates Updated

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908e.jpg" width="353">
The Job Openings &amp; Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics for July continued to indicate improved hiring, but at a slower rate than in June. The hires rate fell to 3.2% from an upwardly revised 3.4% in June. These figures are versus the monthly low of 3.0% last Spring and 3.1% during all of last year.
The hires rate in manufacturing slipped to 2.4% from 2.6% in June but remained above the 2.2% averaged last year.
The survey dates only to December 2000 but has since followed closely the movement in nonfarm payrolls.
The job openings rate rose to 2.4%, the highest level since October 2002.
Chairman Greenspan&#39;s testimony on the economic outlook is available <a href="http://www.federalreserve.gov/BoardDocs/Testimony/2004/200409082/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
<tbody>
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<td class="firstcol">Job Openings Rate: Total</td>
<td>2.4%</td>
<td>2.3%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.2%</td>
<td>3.4%</td>
<td>3.1%</td>
<td>3.1%</td>
<td>3.2%</td>
<td>3.5%</td>
</tr>
</tbody>
</table>
</body>
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The Job Openings & Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics for July continued to indicate improved hiring, but at a slower rate than in June. The hires rate fell to 3.2% from an upwardly revised 3.4% in June. [...]

JOLTS July Update: US Hiring Improved But Slower

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908e.jpg" width="353">
The Job Openings &amp; Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics for July continued to indicate improved hiring, but at a slower rate than in June. The hires rate fell to 3.2% from an upwardly revised 3.4% in June. These figures are versus the monthly low of 3.0% last Spring and 3.1% during all of last year.
The hires rate in manufacturing slipped to 2.4% from 2.6% in June but remained above the 2.2% averaged last year.
The survey dates only to December 2000 but has since followed closely the movement in nonfarm payrolls.
The job openings rate rose to 2.4%, the highest level since October 2002.
Chairman Greenspan&#39;s testimony on the economic outlook is available <a href="http://www.federalreserve.gov/BoardDocs/Testimony/2004/200409082/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>2.4%</td>
<td>2.3%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.2%</td>
<td>3.4%</td>
<td>3.1%</td>
<td>3.1%</td>
<td>3.2%</td>
<td>3.5%</td>
</tr>
</tbody>
</table>
U.S. Budget Deficit Estimates Updated 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 8, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908a.jpg" width="353">
The Congressional Budget Office Updated its US budget outlook. The current deficit estimates of $422 for FY04 and $348B for FY05 are below the $477B and $363B estimated six months ago due to improved economic &amp; technical assumptions.
The ten year deficit outlook, however, deteriorated due to raised spending estimates (mostly military &amp; Medicare) which more than offset raised estimates of revenues.
&quot;The Budget and Economic Outlook: An Update&quot; from the Congressional Budget Office is available <a href="http://www.cbo.gov/ftpdocs/57xx/doc5773/08-24-BudgetUpdate.pdf">here</a>.
For the first ten months of FY04 the deficit of $395.8 was 22.2% larger than last year. Budget deficits raised the growth in outstanding liabilities of the Federal government through 1Q04 to 12.7% versus 8.0% growth in nonfederal liabilities.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908f.jpg" width="353">
Growth in net receipts for the first ten months of FY04 improved to 4.0% versus a 3.9% decline during the first ten months of FY03. Individual tax receipts were down 0.3% versus a 6.9% decline in the first ten months of FY03. Corporate tax receipts for the fiscal year-to-date were up 45.0% ($145.3B) versus last fiscal YTD.
Growth in Federal net expenditures was about stable at 7.2% versus the first ten months of last fiscal year. Defense expenditures grew 14.8% versus 15.9% last year. Growth in Medicare outlays was 8.6% versus 8.3%. Interest expense grew 3.7% versus a 10.0% decline during last year&#39;s first ten months.

<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/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;03</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$-69.2B</td>
<td>$19.1B</td>
<td>$-54.2B</td>
<td>$-374.2B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$134.4B</td>
<td>$214.4B</td>
<td>8.8%</td>
<td>-3.8%</td>
<td>-6.9%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$203.6B</td>
<td>$195.2B</td>
<td>14.5%</td>
<td>7.2%</td>
<td>7.9%</td>
<td>4.2%</td>
</tr>
</tbody>
</table>
Challenger Layoffs Up Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 8, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908b.jpg" width="353">
Challenger, Gray &amp; Christmas reported that announced job cuts rose another 6.6% in August on top of an 8.1% rise the prior month. The increase to 74,150 was to the highest level since February.
The three month moving average of job cut announcements rose modestly to 69,355 (-7.4% y/y).
During the last ten years there has been an 86% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
A new series from Challenger indicated that announced hiring plans in August surged to a multiple of intentions for July. The series dates back only to May.

<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/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>74,150</td>
<td>69,572</td>
<td>-7.2%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Little Changed 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 8, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908c.jpg" width="353">
Chain store sales slipped ticked slightly higher last week but the level of sales was little changed from four weeks ago according to the International Council of Shopping Centers (ICSC)-UBS.
Sales began September 0.2% below the August average which was unchanged from July.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">09/04/04</th>
<th scope="col">08/28/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>438.6</td>
<td>438.4</td>
<td>2.1%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Low Mortgage Rates Stimulate Borrowing 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 8, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908d.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage ticked up last week to 6.06% from 6.02% the prior week, but those rates were little changed from the 6.04% averaged in August. In May, 30-year financing averaged 6.53%. The effective rate on a 15-year mortgage was 5.49%.
The index of mortgage applications compiled by the Mortgage Bankers Association jumped 7.7% from the prior week as purchase applications surged 7.4% and began the month 6.1% above August which fell 2.8% from July.
During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance mortgages surged 8.0%following two weeks of decline. Refi&#39;s began September 7.5%% ahead of August.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">

</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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">09/03/04</th>
<th scope="col">08/27/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>692.0</td>
<td>642.7</td>
<td>-10.3%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>476.0</td>
<td>443.1</td>
<td>16.4%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,948.9</td>
<td>1,804.1</td>
<td>-32.4%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
Mixed Fortunes for European Industry 
by <a href="/comment/Stone.html">Carol Stone</a> September 8, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040908g.jpg" width="353">
Yesterday, we described an improving trend in German industrial production through July, an encouraging sign for Europe as a whole. At the same time, not all countries are fully on board yet. Data reported yesterday for the UK show two months of hesitation and a report this morning from the Netherlands indicates that Dutch industry is still struggling to get on a sustained uptrend. 
UK output fell 0.3% in July following a similar decline in June. Trends are mixed among UK sectors, as production of capital goods and of consumer durable goods increased, while that of intermediate products and energy has had a listless performance and consumer nondurables continue to slide. Obviously, the improving pattern in investment and consumer durables, the most cyclical products, is quite favorable in the midst of an otherwise clouded picture. Indeed, capital goods output is the highest since the summer of 2001. 
In the Netherlands, manufacturing output has been uneven. It appeared to reach a bottom at the middle of last year and tilted up slightly in subsequent months. However, the declines in May and again in July erase most of those gains and leave factories just above their year-ago operating pace. Details will be published tomorrow. In the meantime, through June, food and textile production in the Netherlands were sources of weakness, as they have been in the UK. This suggests that consumer demand in those countries could still be sluggish and/or that import competition is pressuring domestic industry. 

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Industrial Production, % Changes</th>
<th scope="col">July 2004 </th>
<th scope="col">June 2004 </th>
<th scope="col">May 2004 </th>
<th scope="col">Year/ Year </th>
<th scope="col">2003 </th>
<th scope="col">2002 </th>
<th scope="col">2001 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">UK </td>
<td>-0.3</td>
<td>-0.3</td>
<td>0.4</td>
<td>-2.5</td>
<td>-0.1</td>
<td>-2.5</td>
<td>-1.6</td>
</tr>
<tr>
<td class="firstcol">Netherlands* </td>
<td>-0.6</td>
<td>0.1</td>
<td>-0.7</td>
<td>0.2</td>
<td>-2.8</td>
<td>-0.8</td>
<td>-0.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany </td>
<td>1.6</td>
<td>-1.5</td>
<td>1.0</td>
<td>-1.1</td>
<td>0.1</td>
<td>-1.3</td>
<td>-0.8</td>
</tr>
</tbody>
</table>
</body>
</html>

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

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

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

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Winnie Tapasanun

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The advance estimate of the U.S. international trade deficit in goods widened to a larger-than-expected $103.57 billion in July after narrowing to $84.85 billion in June, data from the U.S. Census Bureau showed. The July reading, the second widening in the goods trade deficit in three months, was slightly smaller than a $103.92 billion shortfall in July 2024. A deficit of $90.2 billion for July had been expected by the Action Economics Forecast Survey. The deficit reached a record $161.95 billion in March. In Q2'25, the goods trade deficit narrowed to $266.96 billion, the smallest since Q4'23, after ballooning to a record $465.035 billion in Q1'25; the monthly deficit averaged $88.99 billion in Q2'25, down from a record $155.01 billion in Q1'25.

Total goods exports dipped 0.1% m/m (+3.0% y/y), the third consecutive monthly decline, to $177.97 billion in July, the lowest level since January, after a 0.7% decrease to $178.08 billion in June. April registered a record high of $190.08 billion. Exports were up 9.6% from a June 2023 low but down 2.1% from a July 2022 high. The m/m decline in exports in July reflected exports m/m drops of 2.4% (+16.3% y/y) in other goods, 0.9% (+5.1% y/y) in nonfood consumer goods excluding autos, and 0.8% (-1.2% y/y) in industrial supplies & materials. To the upside, exports for the following end-use categories rose m/m in July: automotive vehicles & parts (2.2%; -4.0% y/y), capital goods excluding autos (0.7%; 7.0% y/y), and foods, feeds & beverages (0.5%; 1.4% y/y).

Total goods imports rebounded 7.1% m/m (1.7% y/y), the first monthly increase since March, to a four-month-high $281.54 billion in July following a 4.6% drop to $262.94 billion in June. March registered a record high of $344.59 billion. Imports were up 11.9% from a June 2023 low but down 2.6% from a March 2022 high. The m/m rebound in imports in July reflected m/m rises in most imports end-use categories. These included a 25.4% surge (the first m/m increase and the largest since January; 4.9% y/y) in industrial supplies & materials as well as rises of 11.5% (23.5% y/y) in other goods, 4.8% (14.7% y/y) in capital goods excluding autos, 2.4% (4.9% y/y) in foods, feeds & beverages, and 2.1% (-12.2% y/y) in nonfood consumer goods excluding autos. In contrast, imports of automotive vehicles & parts, the only end-use category with a monthly decline in July, fell 3.2% (-14.1% y/y), the third m/m fall in four months, on top of a 3.6% June decrease.

The advance international trade data can be found in Haver's **USECON** database. The expectation figure is from the Action Economics Forecast Survey, which is in **AS1REPNA**.

- Deficit: $103.57 bil. in July, jumping 22.1% from June’s $84.85 bil.
- Exports -0.1%, down for the third straight month, led by a 2.4% decline in exports of other goods.
- Imports +7.1%, up for the first time since March, led by a 25.4% surge in imports of industrial supplies & materials.

U.S. Goods Trade Deficit Balloons in July; Largest Since March’s Record High

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Real GDP grew 3.3% (SAAR) during the second quarter of 2025, revised from a 3.0% gain reported initially. The increase followed an unrevised 0.5% decline in Q1. A 3.1% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.1% compared to 2.0% y/y in Q1, and remained below its most recent high of 3.2% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment increased 1.4% (7.0% y/y) last quarter after easing 0.8% in Q1. Before-tax earnings with IVA & CCA rose 1.7% (4.3% y/y) after falling 2.3% in Q1. Financial sector earnings rose 1.4% (15.3% y/y) after rising 2.3% in Q1. Nonfinancial corporate profits rose 2.2% (2.5% y/y) after falling 2.5% in Q1. Earnings from abroad eased 0.7% (-0.4% y/y) following a 7.3% Q1 decline.

Foreign trade balance improvement added 4.95 percentage points to growth last quarter after subtracting 4.61 percentage points in Q1. Imports fell 29.8% (+1.3% y/y) after surging 38.0% in Q1. Exports declined 1.3% (+2.0% y/y) after improving 0.4% in Q1. Inventories subtracted 3.29 percentage points from growth after adding 2.59 percentage point to Q1 growth.

Real final sales to domestic purchasers grew 1.6% (2.4% y/y), revised from 1.1%, in Q2 after rising 1.5% in Q1. Personal consumption expenditures rose 1.6% (2.4% y/y), revised from 1.4%, following a 0.5% gain. Durable goods spending rose 2.6% (4.6% y/y) after falling 3.7% in Q1. Motor vehicle purchases strengthened 11.7% (6.7% y/y) after declining 11.2% in Q1. Spending on home furnishings & appliances weakened 2.1% (+3.5% y/y) following a 1.5% rise. Recreational goods & vehicle outlays fell 3.5% (+4.3% y/y) last quarter after a 0.4% Q1 gain.

Nondurable goods outlays in constant dollars rose 2.3% (3.0% y/y) following 2.1% growth in Q1. Apparel spending increased 5.4% (4.8% y/y) following a 7.0% rise. Food & beverage buying gained 0.3% (1.5% y/y) after a 1.0% increase. Gasoline & fuel oil purchases weakened 1.4% (+0.9% y/y) after gaining 3.6% in Q1.

Real spending on services increased 1.2% (1.9% y/y) after a 0.6% gain. Outlays on housing & utilities eased 0.4% (+1.1% y/y) after rising 2.9% in Q1. Health care expenditures rose 4.2% (4.8% y/y) after a 3.1% increase. Transportation outlays declined 2.9% (-0.6% y/y) after a 1.4% rise, while recreation spending rose 3.6% (0.7% y/y) following a 5.1% decline. Restaurant & hotel expenditures increased 5.1% (1.9% y/y) after falling 1.8%. Financial services expenditures rose 1.9% (2.3% y/y) following a 0.1% Q1 increase.

Business fixed investment in constant dollars increased 5.7% last quarter (4.2% y/y), revised from 1.9%, following a 10.3% surge in Q1. Expenditures on structures declined 8.9% (-3.4% y/y), after falling 2.4% in Q1. Expenditures on producers’ durable equipment increased 7.4% (7.7% y/y), revised from 4.8%, after surging 23.7% in Q1. Outlays on information processing equipment rose 10.1% (20.1% y/y), revised from 5.5%, after soaring 72.8% during Q1. Industrial equipment investment rose 6.7% (4.0% y/y) after a 4.7% rise. Transportation equipment investment surged 20.4% (6.8% y/y) after a 6.9% gain. Intellectual property product spending rose 12.8% last quarter (5.2% y/y) following a 6.0% rise.

Residential structures investment in real terms declined a little-revised 4.7% (-1.3% y/y), the fourth decline in the last five quarters.

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Government spending eased 0.2%, revised from up 0.5% in Q2 (+1.8% y/y) after a 0.6% decline. Federal government expenditures declined 4.7% (+0.7% y/y) after falling 4.6% in Q1. National defense expenditures increased 1.4% (3.0% y/y) after declining 7.1% in Q1. State & local government spending rose 2.6% (2.5% y/y) following a 2.0% rise.

The GDP chain price index rose an unrevised and expected 2.0% last quarter (2.5% y/y) after increasing 3.8% in Q1. The PCE chain price index increased 2.0% (2.4% y/y) following a 3.7% rise. The PCE price index excluding food and energy rose 2.5% (2.7% y/y) after increasing 3.5% in Q1. The business fixed investment price index edged 0.5% lower (+1.1% y/y) after a 0.4% rise. The residential price index rose 1.1% (2.6% y/y) after a 4.1% rise while the government price index increased 3.3% (3.1% y/y) following a 4.6% 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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- Business investment strengthens & consumer spending firms.
- U.S. business earnings reverse Q1 decline.
- Increase in price index is unrevised, remaining roughly half of Q1’s gain.

U.S. GDP Q2’25 Growth Revised Up; Profits Improve

Sandy Batten

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The Kansas City Fed manufacturing composite index was unchanged at 1 in August from July. This was the second consecutive month that the index has been positive, indicating the manufacturing in the KC Fed district continue to inch up in August. Prior to the positive reading in July, the index had been negative for 22 consecutive months. The index’s most recent high was 31 reached in both April 2021 and October 2021. The durable manufacturing sector was mostly flat in August, while nondurable manufacturing activity declined slightly driven by printing activities and paper and chemical manufacturing. 

The August survey was open for a six-day period from August 20-25, 2025 and included 103 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

The ISM-adjusted index calculated by Haver Analytics rose to 51.1 (NSA) in August from 50.2 in July. This was the fifth reading above the critical 50 level that separates expansion from contraction in the past six months, a further indication of expanding manufacturing activity.

For the major component indexes, the production index was 0 in August, but this was up from -3 in July. The new orders index rose to 5 in August, its highest reading since May 2022, from 2 in July. The shipments index increased to 6 in August from 3 in July. The employment index was 0 in August, but this was up from -11 in July. Also, the average workweek index rebounded to 3 in August after having been in negative territory for the previous four months. Supplier delivery times were unchanged at 7 in August. The elevation of this index since April may indicate some incipient supply-chain disruptions from higher tariffs. In contrast, raw materials inventories fell to -7 in August from 8 in July.

On the inflation front, the prices paid for raw materials index remained elevated but fell to 43 in August from 47 in July and a local high of 51 in June. Forty-four percent of respondents reported an increase in raw materials prices in August, down from 48% in July and 53% in June, while only 4% reported a decrease, down from 5% in July and 6% in June. The prices received for finished products index increased to 21 in August from 18 in July. This index has fluctuated in a range between 17 and 21 for the past four months.

Expectations for future activity remained positive, with the composite index rising to 11 from 8, as firms anticipate an improvement in production and new orders. While expectations have been trending up over the past several months, they remain depressed relative to the recent high reading of 17 last December. Capital expenditures expectations remained in negative territory in August for the second consecutive month but edged up to -3 from -4 in July.

The series dates back to July 2001. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Data for the Kansas City Fed Survey can be found in Haver’s **SURVEYS** database.

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- Index remained (though barely) in positive territory for the second consecutive month, indicating that manufacturing activity was inching up.
- Prior to last month, the index had been negative for 22 consecutive months.
- Positive readings across most key components.

FRB Kansas City Manufacturing Index Unchanged in August

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The Pending Home Sales Index weakened 0.4% in July (+0.7% y/y) to 71.7 after falling an unrevised 0.8% in June and rising an unrevised 1.8% in May, according to the National Association of Realtors (NAR). The Index remained 42.7% below its most recent peak of 125.1 in October 2021. The index is a forward-looking measure of home sales based on contract signings.

The fall in pending home sales occurred as the average rate on a 30-year mortgage rose to 6.72% in July after holding steady m/m at 6.82% in June. These rates remained well above a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales were mixed last month in the four major regions of the country. Sales in the Midwest declined 4.0% (+1.3% y/y) in July after easing 0.8% in June. Sales in the Northeast fell 0.6% both m/m and y/y, after holding steady in June. In the South, sales eased 0.1% (+1.8% y/y) following a 0.6% June decline, but sales in the West increased 3.7% (-1.9% y/y), reversing a 3.9% June drop.

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.

- Decline adds to June weakness.
- Regional changes are mixed.


U.S. Pending Home Sales Decline in July

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined to 229,000 during the week of August 23, after rising to 234,000 in the week of August 16, revised from 235,000. The Action Economics Forecast Survey expected 230,000 initial claims for last week. The four-week moving average of initial claims increased to 228,500 from 226,000, revised from 226,250. It was the highest level since the second week of July.

In the week ended August 16, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – decreased by 7,000 to 1.954 million from 1.961 million in the prior week, revised down by 11,000 from 1.972 million. The four-week moving average rose to 1.956 million in the week ending August 16, the highest level in six weeks, and up from 1.952 million in the prior week, revised from 1.955 million.

In the week ending August 16, the insured rate of unemployment (the number of beneficiaries as a percent of covered employment) was 1.3% for the twelfth consecutive week.

The insured unemployment rate varied greatly across individual states and territories. In the week ended August 9, the highest unemployment rates were in New Jersey (2.75%), Rhode Island (2.58%), Massachusetts (2.18%), Minnesota (2.17%), California (2.11%), Washington (2.08%), District of Columbia (2.04%), and Puerto Rico (2.02%). The lowest were in South Dakota (0.28%), Florida (0.42%), and Alabama and North Carolina (both 0.47%). Rates in other notable states include Pennsylvania (1.92%), New York (1.73%), Illinois (1.72%), and Texas (1.24%). 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. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Initial claims declined in latest week after a surge in the prior week.
- Continuing claims declined.
- Insured unemployment rate holds steady.

Economy in Brief: 2004

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