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/070216c.jpg" width="353">
The producer price index for finished goods fell 0.6% following its 0.9% rise in December. This result was close to consensus forecasts of a 0.5% decline. It was, as anticipated, led by a drop in energy prices; this ran 4.6%. Food prices continued rising, adding 1.1% after December&#39;s 1.5%.
The core finished goods PPI rose 0.2%, the same as in December and also equal to forecasts. Note that the BLS conducted its annual seasonal adjustment revisions on these data, so 2006 figures quoted here may differ from those reported last month.
Energy prices fell sharply in January: gasoline was down 13.0% in the month and 9.7% from January 2006. Fuel oil fell 8.3% from December and 2.3% from a year ago. Natural gas prices were off 1.9% in January, carrying the 12-month change to -15.1%. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070216d.jpg" width="353">
Finished consumer goods prices less food &amp; energy rose 0.2% (1.5% y/y); the seasonal factor revisions shaved 0.1% off the December increase, leaving it at 0.1%. Within that subset, passenger car prices edged down 0.1% (-0.5% y/y) after December&#39;s 0.2% decline.
Capital equipment prices increased 0.2% (2.3% y/y), with December&#39;s rise trimmed to 0.1%. January light truck prices were off 1.4%; these prices have settled down after their whipsaw in October and November, and now, notably, they are just 0.3% above year-earlier readings. 
Intermediate goods prices declined 0.7% in January and were a modest 1.2% above January 2006. The corresponding &quot;core&quot; index was unchanged for a second month in a row and it has slowed to a 3.8% y/y increase compared with 5-6% increases across much of the last three years. The recent slowdown is showing in building materials: lumber, plasterboard and the like, and in metal products. 
The crude materials PPI was down 6.3%, led by the drop in crude petroleum prices of 9.2%; this put the total crude index down 8.0% y/y. Judging by the behavior of spot prices, about half of that drop in oil has since reversed. The core crude materials PPI was up 1.6%, with increases in logs and timber and in iron and steel scrap. In contrast, nonferrous ores and copper scrap are slowing down after their dramatic rises through the middle of last year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.6</td>
<td>0.9%&nbsp;</td>
<td>1.8%</td>
<td>&nbsp; 0.2%&nbsp;</td>
<td>2.9%</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2</td>
<td>0.2%</td>
<td>1.1%</td>
<td>&nbsp;1.7%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.7</td>
<td>0.5%</td>
<td>0.6%</td>
<td>1.2%</td>
<td>6.5%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.0</td>
<td>0.0%</td>
<td>-0.4%</td>
<td>3.8%</td>
<td>6.1%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-6.3</td>
<td>&nbsp;2.8%&nbsp;</td>
<td>15.5%</td>
<td>&nbsp;-8.0%</td>
<td>1.7%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.6</td>
<td>0.5%</td>
<td>0.4%</td>
<td>&nbsp;17.8%</td>
<td>21.0%</td>
<td>4.9%</td>
<td>&nbsp;26.5%</td>
</tr>
</tbody>
</table>
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The producer price index for finished goods fell 0.6% following its 0.9% rise in December. This result was close to consensus forecasts of a 0.5% decline. It was, as anticipated, led by a drop in energy prices; this ran 4.6%. Food [...]

PPI Eases with Lower Energy; Core Rate Steady

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070216b.jpg" width="353">
Housing starts in January fell 14.3% from December to 1.408 million, the lowest volume since August 1997. They were 37.8% below January 2006. Consensus expectations called for a decrease, but only a modest one, 2.6%, to 1.600 million.
Single-family structures were off 11.2% to 1.108 million, also the lowest since August 1997. This continued the steep downtrend that began in March last year, which has carried construction of these houses down 38.9% from their year-ago value.
Multi-family housing units had jumped in December in what turned out to be one-month spike. For January, they gave up 95,000 units, very close to their December rise of 101,000. This produces a startling 24.1% drop, but the resulting 300,000 level is found in several months of 2006, so there doesn&#39;t seem to be new weakness there.
The pattern of starts was likely exacerbated by weather changes. Data on heating degree days and average temperatures show that December was very warm while January was &quot;only&quot; normal. So construction activity was perhaps accelerated into the mild December and then retreated anew in January.
Building permits are less affected by the vagaries of weather, and while they did decline from December to January, the fall was not nearly so steep. They totaled 1.568 million last month, down from 1.613 million in December. Permits for single-family homes took all the decline, down 4.0% to 1.121 million.Multi-family permits were virtually unchanged in the month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070216a.jpg" width="353">
So the contraction in home-building has resumed, and what we thought a month ago might have been a stabilizing tendency was only a pause in the broader decline. Mortgage interest rates are modestly higher in February than they were in December and January, and as Tom Moeller noted in these commentaries Wednesday, mortgage application volume has a clear negative relationship with interest rates; extrapolating that to building activity, current financial market conditions seem unlikely to support a turnaround in the housing sector.

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<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,408</td>
<td>1,643</td>
<td>1,565</td>
<td>-37.84%</td>
<td>1,818</td>
<td>2,073</td>
<td>1,950</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,108</td>
<td>1,248</td>
<td>1,271</td>
<td>-38.92%</td>
<td>1,478</td>
<td>1,719</td>
<td>1,604</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>300</td>
<td>395</td>
<td>294</td>
<td>-33.48%</td>
<td>340</td>
<td>354</td>
<td>345</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,568</td>
<td>1,613</td>
<td>1,513</td>
<td>-28.56%</td>
<td>1,835</td>
<td>2,159</td>
<td>2,058</td>
</tr>
</tbody>
</table>
</body>
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Housing starts in January fell 14.3% from December to 1.408 million, the lowest volume since August 1997. They were 37.8% below January 2006. Consensus expectations called for a decrease, but only a modest one, 2.6%, to 1.600 million. [...]

Housing Starts Drop Hard in January, Falling to Lowest in 9-1/2 Years

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070216c.jpg" width="353">
The producer price index for finished goods fell 0.6% following its 0.9% rise in December. This result was close to consensus forecasts of a 0.5% decline. It was, as anticipated, led by a drop in energy prices; this ran 4.6%. Food prices continued rising, adding 1.1% after December&#39;s 1.5%.
The core finished goods PPI rose 0.2%, the same as in December and also equal to forecasts. Note that the BLS conducted its annual seasonal adjustment revisions on these data, so 2006 figures quoted here may differ from those reported last month.
Energy prices fell sharply in January: gasoline was down 13.0% in the month and 9.7% from January 2006. Fuel oil fell 8.3% from December and 2.3% from a year ago. Natural gas prices were off 1.9% in January, carrying the 12-month change to -15.1%. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070216d.jpg" width="353">
Finished consumer goods prices less food &amp; energy rose 0.2% (1.5% y/y); the seasonal factor revisions shaved 0.1% off the December increase, leaving it at 0.1%. Within that subset, passenger car prices edged down 0.1% (-0.5% y/y) after December&#39;s 0.2% decline.
Capital equipment prices increased 0.2% (2.3% y/y), with December&#39;s rise trimmed to 0.1%. January light truck prices were off 1.4%; these prices have settled down after their whipsaw in October and November, and now, notably, they are just 0.3% above year-earlier readings. 
Intermediate goods prices declined 0.7% in January and were a modest 1.2% above January 2006. The corresponding &quot;core&quot; index was unchanged for a second month in a row and it has slowed to a 3.8% y/y increase compared with 5-6% increases across much of the last three years. The recent slowdown is showing in building materials: lumber, plasterboard and the like, and in metal products. 
The crude materials PPI was down 6.3%, led by the drop in crude petroleum prices of 9.2%; this put the total crude index down 8.0% y/y. Judging by the behavior of spot prices, about half of that drop in oil has since reversed. The core crude materials PPI was up 1.6%, with increases in logs and timber and in iron and steel scrap. In contrast, nonferrous ores and copper scrap are slowing down after their dramatic rises through the middle of last year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.6</td>
<td>0.9%&nbsp;</td>
<td>1.8%</td>
<td>&nbsp; 0.2%&nbsp;</td>
<td>2.9%</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2</td>
<td>0.2%</td>
<td>1.1%</td>
<td>&nbsp;1.7%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.7</td>
<td>0.5%</td>
<td>0.6%</td>
<td>1.2%</td>
<td>6.5%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.0</td>
<td>0.0%</td>
<td>-0.4%</td>
<td>3.8%</td>
<td>6.1%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-6.3</td>
<td>&nbsp;2.8%&nbsp;</td>
<td>15.5%</td>
<td>&nbsp;-8.0%</td>
<td>1.7%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.6</td>
<td>0.5%</td>
<td>0.4%</td>
<td>&nbsp;17.8%</td>
<td>21.0%</td>
<td>4.9%</td>
<td>&nbsp;26.5%</td>
</tr>
</tbody>
</table>
Housing Starts Drop Hard in January, Falling to Lowest in 9-1/2 Years 
by <a href="/comment/Stone.html">Carol Stone</a> February 16, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070216b.jpg" width="353">
Housing starts in January fell 14.3% from December to 1.408 million, the lowest volume since August 1997. They were 37.8% below January 2006. Consensus expectations called for a decrease, but only a modest one, 2.6%, to 1.600 million.
Single-family structures were off 11.2% to 1.108 million, also the lowest since August 1997. This continued the steep downtrend that began in March last year, which has carried construction of these houses down 38.9% from their year-ago value.
Multi-family housing units had jumped in December in what turned out to be one-month spike. For January, they gave up 95,000 units, very close to their December rise of 101,000. This produces a startling 24.1% drop, but the resulting 300,000 level is found in several months of 2006, so there doesn&#39;t seem to be new weakness there.
The pattern of starts was likely exacerbated by weather changes. Data on heating degree days and average temperatures show that December was very warm while January was &quot;only&quot; normal. So construction activity was perhaps accelerated into the mild December and then retreated anew in January.
Building permits are less affected by the vagaries of weather, and while they did decline from December to January, the fall was not nearly so steep. They totaled 1.568 million last month, down from 1.613 million in December. Permits for single-family homes took all the decline, down 4.0% to 1.121 million.Multi-family permits were virtually unchanged in the month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070216a.jpg" width="353">
So the contraction in home-building has resumed, and what we thought a month ago might have been a stabilizing tendency was only a pause in the broader decline. Mortgage interest rates are modestly higher in February than they were in December and January, and as Tom Moeller noted in these commentaries Wednesday, mortgage application volume has a clear negative relationship with interest rates; extrapolating that to building activity, current financial market conditions seem unlikely to support a turnaround in the housing sector.

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</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,408</td>
<td>1,643</td>
<td>1,565</td>
<td>-37.84%</td>
<td>1,818</td>
<td>2,073</td>
<td>1,950</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,108</td>
<td>1,248</td>
<td>1,271</td>
<td>-38.92%</td>
<td>1,478</td>
<td>1,719</td>
<td>1,604</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>300</td>
<td>395</td>
<td>294</td>
<td>-33.48%</td>
<td>340</td>
<td>354</td>
<td>345</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,568</td>
<td>1,613</td>
<td>1,513</td>
<td>-28.56%</td>
<td>1,835</td>
<td>2,159</td>
<td>2,058</td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070215a.jpg" width="353">
Japan&#39;s GDP surged upward 4.84% in Q4 at an annual rate, the Cabinet Office reported early today in Tokyo. Forecasters had looked for 3.8-3.9% growth, according to news service surveys. It was the largest quarterly gain since Q1 2004 at 5.11%.
Domestic final demand was responsible for the strong rise. Consumer spending, which had fallen 4.3% in Q3, rebounded nicely by 4.5% in Q4. Private investment expenditures in plant and equipment grew at a 9.2% rate, following a much more modest 3.4% in Q3. The year&#39;s total nonresidential investment grew 7.3%, the fourth consecutive good gain in real investment outlays and the largest since 2000&#39;s tech boom.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070215b.jpg" width="353">
Other major components slowed: the change in private inventories was &yen;1.15 trillion, less than Q3&#39;s &yen;1.85 trillion. Exports grew at a 4.3% annual rate, easing from the 10.0% pace in Q3. Imports fell by a marginal 0.1% after a 1.8% annualized decline in Q3. The resulting net export figure, &yen;21.84 trillion, was up just &yen;883 billion, well less than half Q3&#39;s &yen;2.20 trillion increase.
This broad-based gain in Q4 GDP growth in Japan has analysts talking in the press today about BoJ interest rate hikes, soon. Possibly, but we can&#39;t help notice interesting downward revisions in the Q3 data. Three months ago here, Louise Curley described the then surprisingly large 2.03% rate of increase in Q3 GDP. Interim revisions put that figure down at 0.84% (still carried in Haver&#39;s OECDNAQ database and several forecast databases) and today&#39;s report has shaved it further to just 0.26%. The same pattern is evident in the household consumption component: an original report of a 2.98% rate of decline in Q3 became -3.80% and now -4.29%. So, yes, the Q4 report looks good now, but we hope it has staying power! The &quot;Second Preliminary&quot; GDP report will be issued by Japan&#39;s Cabinet Office on March 12. Stay tuned. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Japan: SAAR % Chg</th>
<th scope="col">Q4 2006</th>
<th scope="col">Q3 2006</th>
<th scope="col">Q2 2006</th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP</td>
<td>4.84</td>
<td>0.26</td>
<td>1.35</td>
<td>2.81</td>
<td>1.65</td>
<td>2.16</td>
<td>1.87</td>
<td>2.72</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Feb 8 OECD*</td>
<td>--</td>
<td>0.84</td>
<td>1.14</td>
<td>2.71</td>
<td>2.06</td>
<td>--</td>
<td>1.88</td>
<td>2.72</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nov 14*</td>
<td>--</td>
<td>2.03</td>
<td>1.51</td>
<td>3.17</td>
<td>4.09</td>
<td>--</td>
<td>2.69</td>
<td>2.13</td>
</tr>
<tr>
<td class="firstcol">Consumption</td>
<td>4.50</td>
<td>-4.29</td>
<td>2.41</td>
<td>0.27</td>
<td>1.06</td>
<td>0.94</td>
<td>1.49</td>
<td>1.55</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Feb 8 OECD*</td>
<td>--</td>
<td>-3.80</td>
<td>2.11</td>
<td>-0.19</td>
<td>1.88</td>
<td>--</td>
<td>1.51</td>
<td>1.55</td>
</tr>
<tr>
<td class="firstcol">Private Nonresidential Investment</td>
<td>9.22</td>
<td>3.41</td>
<td>13.66</td>
<td>14.03</td>
<td>-2.11</td>
<td>7.32</td>
<td>6.61</td>
<td>5.43</td>
</tr>
<tr class="odd">
<td class="firstcol">Private Inven- tories (Bil.&yen;)</td>
<td>1155.5</td>
<td>1845.5</td>
<td>741.1</td>
<td>1639.1</td>
<td>660.4</td>
<td>1345.3</td>
<td>1033.4</td>
<td>1815.8</td>
</tr>
<tr>
<td class="firstcol">Exports</td>
<td>4.30</td>
<td>10.01</td>
<td>2.77</td>
<td>9.65</td>
<td>15.77</td>
<td>9.72</td>
<td>6.94</td>
<td>13.98</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>-0.13</td>
<td>-1.79</td>
<td>5.69</td>
<td>8.12</td>
<td>-1.23</td>
<td>4.63</td>
<td>5.85</td>
<td>8.11</td>
</tr>
</tbody>
</table>
</body>
</html>

Japan's GDP surged upward 4.84% in Q4 at an annual rate, the Cabinet Office reported early today in Tokyo. Forecasters had looked for 3.8-3.9% growth, according to news service surveys. It was the largest quarterly gain since Q1 2004 [...]

Japan GDP Gains at 4.8% AR in Q4, Fastest in Almost 3 Years

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070215d.jpg" width="353">
Total U.S. industrial production decreased by 0.5% last month. Revisions to December and November data were mixed, pushing the December total up to a 0.5% gain from 0.4% reported before and holding November at the -0.1% change previously published. Consensus expectations had called for a January production figure unchanged from December rise.
Factory sector output dropped 0.8% after December&#39;s upwardly revised 1.0% gain. November, however, was shaved further to -0.1% from an originally reported 0.3% increase.
Mining industry output declined 1.2% after a 1.5% increase in December. Utilities, by contrast, saw their output gain 2.3%; temperatures around the country returned to more normal levels after a mild December, so utility output became more seasonal following weakness in November and December. Remarkably, the utility sector has seen production unchanged on balance over the past six months (seasonally adjusted).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070215e.jpg" width="353">
Among manufactured products, consumer durables output dropped 2.4%, erasing much of the November and December gain. The automotive sector was largely responsible, losing 4.4%. Among other groups, only computers and video equipment managed an increase.
Consumer nondurable goods fell 0.6%; their December decrease was revised from 0.2% to 0.4%, but November&#39;s was ameliorated slightly from -0.4% to -0.2%. Food and chemical products both fell, while paper and clothing increased. After two monthly declines totaling 2.3%, energy production rebounded 3.9%. In our second graph here, we call your attention to two trends: the well-known continuing gains in computers and other home electronics and also a perhaps less-noticed stabilization of clothing output. This latter fell from about 185 (2002=100) at the beginning of 1995 to a range of 77 to 80 in late 2004 through 2006. The textile industry as a whole continues to contract, but clothing itself is maintaining its rate of production, albeit at a low level.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070215c.jpg" width="353">
Business equipment production, with a drop of 1.7%, gave up half of its November/December increase. Transportation and industrial shared in the decline, while information processing equipment rose 0.9%, a fifth consecutive monthly gain.
With the decline in total output, total industry capacity utilization fell back in January, reaching 81.2% after 81.8% in December, which was unrevised. It has been trending lower now an August peak, and has returned to its level of February 2006. In manufacturing, utilization went down from 80.2% in December to 79.4% in January, the lowest since a similar rate in November 2005.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/output.htm">Production &amp; Capacity</a></th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>-0.5%</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>2.6%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Manufacturing (NAICS)</td>
<td>-0.8%</td>
<td>1.0%</td>
<td>-0.1%</td>
<td>1.9%</td>
<td>5.0%</td>
<td>4.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>2.8%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Equipment</td>
<td>-1.7%</td>
<td>2.3%</td>
<td>0.7%</td>
<td>8.7%</td>
<td>11.7%</td>
<td>7.9%</td>
<td>4.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>81.2%</td>
<td>81.8%</td>
<td>81.5%</td>
<td>81.1% (01/06)</td>
<td>81.8%</td>
<td>80.2%</td>
<td>78.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Total U.S. industrial production decreased by 0.5% last month. Revisions to December and November data were mixed, pushing the December total up to a 0.5% gain from 0.4% reported before and holding November at the -0.1% change [...]

Industrial Production Falls Unexpectedly by 0.5% in January

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070215d.jpg" width="353">
Total U.S. industrial production decreased by 0.5% last month. Revisions to December and November data were mixed, pushing the December total up to a 0.5% gain from 0.4% reported before and holding November at the -0.1% change previously published. Consensus expectations had called for a January production figure unchanged from December rise.
Factory sector output dropped 0.8% after December&#39;s upwardly revised 1.0% gain. November, however, was shaved further to -0.1% from an originally reported 0.3% increase.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070215e.jpg" width="353">
Mining industry output declined 1.2% after a 1.5% increase in December. Utilities, by contrast, saw their output gain 2.3%; temperatures around the country returned to more normal levels after a mild December, so utility output became more seasonal following weakness in November and December. Remarkably, the utility sector has seen production unchanged on balance over the past six months (seasonally adjusted).
Among manufactured products, consumer durables output dropped 2.4%, erasing much of the November and December gain. The automotive sector was largely responsible, losing 4.4%. Among other groups, only computers and video equipment managed an increase.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070215c.jpg" width="353">
Consumer nondurable goods fell 0.6%; their December decrease was revised from 0.2% to 0.4%, but November&#39;s was ameliorated slightly from -0.4% to -0.2%. Food and chemical products both fell, while paper and clothing increased. After two monthly declines totaling 2.3%, energy production rebounded 3.9%. In our second graph here, we call your attention to two trends: the well-known continuing gains in computers and other home electronics and also a perhaps less-noticed stabilization of clothing output. This latter fell from about 185 (2002=100) at the beginning of 1995 to a range of 77 to 80 in late 2004 through 2006. The textile industry as a whole continues to contract, but clothing itself is maintaining its rate of production, albeit at a low level.
Business equipment production, with a drop of 1.7%, gave up half of its November/December increase. Transportation and industrial shared in the decline, while information processing equipment rose 0.9%, a fifth consecutive monthly gain.
With the decline in total output, total industry capacity utilization fell back in January, reaching 81.2% after 81.8% in December, which was unrevised. It has been trending lower now an August peak, and has returned to its level of February 2006. In manufacturing, utilization went down from 80.2% in December to 79.4% in January, the lowest since a similar rate in November 2005.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/output.htm">Production &amp; Capacity</a></th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>-0.5%</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>2.6%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Manufacturing (NAICS)</td>
<td>-0.8%</td>
<td>1.0%</td>
<td>-0.1%</td>
<td>1.9%</td>
<td>5.0%</td>
<td>4.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>2.8%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Equipment</td>
<td>-1.7%</td>
<td>2.3%</td>
<td>0.7%</td>
<td>8.7%</td>
<td>11.7%</td>
<td>7.9%</td>
<td>4.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>81.2%</td>
<td>81.8%</td>
<td>81.5%</td>
<td>81.1% (01/06)</td>
<td>81.8%</td>
<td>80.2%</td>
<td>78.1%</td>
</tr>
</tbody>
</table>
Japan GDP Gains at 4.8% AR in Q4, Fastest in Almost 3 Years 
by <a href="/comment/Stone.html">Carol Stone</a> February 15, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070215a.jpg" width="353">
Japan&#39;s GDP surged upward 4.84% in Q4 at an annual rate, the Cabinet Office reported early today in Tokyo. Forecasters had looked for 3.8-3.9% growth, according to news service surveys. It was the largest quarterly gain since Q1 2004 at 5.11%.
Domestic final demand was responsible for the strong rise. Consumer spending, which had fallen 4.3% in Q3, rebounded nicely by 4.5% in Q4. Private investment expenditures in plant and equipment grew at a 9.2% rate, following a much more modest 3.4% in Q3. The year&#39;s total nonresidential investment grew 7.3%, the fourth consecutive good gain in real investment outlays and the largest since 2000&#39;s tech boom.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070215b.jpg" width="353">
Other major components slowed: the change in private inventories was &yen;1.15 trillion, less than Q3&#39;s &yen;1.85 trillion. Exports grew at a 4.3% annual rate, easing from the 10.0% pace in Q3. Imports fell by a marginal 0.1% after a 1.8% annualized decline in Q3. The resulting net export figure, &yen;21.84 trillion, was up just &yen;883 billion, well less than half Q3&#39;s &yen;2.20 trillion increase.
This broad-based gain in Q4 GDP growth in Japan has analysts talking in the press today about BoJ interest rate hikes, soon. Possibly, but we can&#39;t help notice interesting downward revisions in the Q3 data. Three months ago here, Louise Curley described the then surprisingly large 2.03% rate of increase in Q3 GDP. Interim revisions put that figure down at 0.84% (still carried in Haver&#39;s OECDNAQ database and several forecast databases) and today&#39;s report has shaved it further to just 0.26%. The same pattern is evident in the household consumption component: an original report of a 2.98% rate of decline in Q3 became -3.80% and now -4.29%. So, yes, the Q4 report looks good now, but we hope it has staying power! The &quot;Second Preliminary&quot; GDP report will be issued by Japan&#39;s Cabinet Office on March 12. Stay tuned. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Japan: SAAR % Chg</th>
<th scope="col">Q4 2006</th>
<th scope="col">Q3 2006</th>
<th scope="col">Q2 2006</th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP</td>
<td>4.84</td>
<td>0.26</td>
<td>1.35</td>
<td>2.81</td>
<td>1.65</td>
<td>2.16</td>
<td>1.87</td>
<td>2.72</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Feb 8 OECD*</td>
<td>--</td>
<td>0.84</td>
<td>1.14</td>
<td>2.71</td>
<td>2.06</td>
<td>--</td>
<td>1.88</td>
<td>2.72</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nov 14*</td>
<td>--</td>
<td>2.03</td>
<td>1.51</td>
<td>3.17</td>
<td>4.09</td>
<td>--</td>
<td>2.69</td>
<td>2.13</td>
</tr>
<tr>
<td class="firstcol">Consumption</td>
<td>4.50</td>
<td>-4.29</td>
<td>2.41</td>
<td>0.27</td>
<td>1.06</td>
<td>0.94</td>
<td>1.49</td>
<td>1.55</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Feb 8 OECD*</td>
<td>--</td>
<td>-3.80</td>
<td>2.11</td>
<td>-0.19</td>
<td>1.88</td>
<td>--</td>
<td>1.51</td>
<td>1.55</td>
</tr>
<tr>
<td class="firstcol">Private Nonresidential Investment</td>
<td>9.22</td>
<td>3.41</td>
<td>13.66</td>
<td>14.03</td>
<td>-2.11</td>
<td>7.32</td>
<td>6.61</td>
<td>5.43</td>
</tr>
<tr class="odd">
<td class="firstcol">Private Inven- tories (Bil.&yen;)</td>
<td>1155.5</td>
<td>1845.5</td>
<td>741.1</td>
<td>1639.1</td>
<td>660.4</td>
<td>1345.3</td>
<td>1033.4</td>
<td>1815.8</td>
</tr>
<tr>
<td class="firstcol">Exports</td>
<td>4.30</td>
<td>10.01</td>
<td>2.77</td>
<td>9.65</td>
<td>15.77</td>
<td>9.72</td>
<td>6.94</td>
<td>13.98</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>-0.13</td>
<td>-1.79</td>
<td>5.69</td>
<td>8.12</td>
<td>-1.23</td>
<td>4.63</td>
<td>5.85</td>
<td>8.11</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070214d.jpg" width="353">
Employment in the UK rose 7,000 in the November period, a third successive monthly increase in this 3-month moving average. Over the last three months (the style of comparison that the UK&#39;s Office for National Statistics [ONS] generally emphasizes) employment went up by 50,000. The advances were more than accounted for among part-time workers, who increased 80,000 over three months ago, in contrast to a 30,000 decline in full-time workers.
The unemployment rate has held flat at 5.5% since September, and is 0.1% below its August reading. This resulted from an outright decrease in the number unemployed of 24,000 since August, helped by the increase in employment and also by a smaller gain in the number of people &quot;in economic activity&quot; (what the US calls the &quot;labor force&quot;), 26,000, than in the total population over age 16, 92,000. This cut the ratio of the labor force to the population from 63.7% in the August period to 63.6% in November.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070214e.jpg" width="353">
The UK&#39;s alternative unemployment measure, the &quot;claimant count&quot;, shows more unambiguous improvement, albeit modestly so; the number of claimants (similar to the US measure of the number of people receiving unemployment insurance) fell 9,300 in December and 13,500 in January. The resulting &quot;claimant rate&quot; was 2.9% in January, down from 3.0% for the previous 10 consecutive months. &quot;Inflows&quot; to this group have had a choppy, but trendless pattern in recent months, while the number of &quot;outflows&quot; has increased consistently over almost the past year, suggesting increased hiring of benefit recipients.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070214f.jpg" width="353">
An increase in job vacancies in January hints that the recent hesitant but favorable labor market trend might continue. For January alone, vacancies were 637,700, up almost 35,000 from December. This put them at their highest level since the spring of 2005. The 3-month moving average rose slightly to 607,900, about even with last August and still well below the early-2005 amounts. So signs of improvement remain tentative, but the marginal adjustments in the labor market, new hires and vacancies, show a potential for further advance. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK Labor Force Survey &amp; Related Labor Data</th>
<th scope="col">Jan 2007</th>
<th scope="col">Dec 2006</th>
<th scope="col">Nov 2006</th>
<th scope="col">Oct 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Employment* &nbsp; (3Mo Avg, SA, Thous)</td>
<td>--</td>
<td>--</td>
<td>29,036</td>
<td>29,029</td>
<td>28,758</td>
<td>28,960</td>
<td>28,730</td>
<td>28,465</td>
</tr>
<tr>
<td class="firstcol">Chg from 1 &amp; 3 Months Ago</td>
<td>--</td>
<td>--</td>
<td>+7/50</td>
<td>+24/14</td>
<td>+23&nbsp;(MoAvg)1% y/y</td>
<td>0.8%</td>
<td>0.9%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate* &nbsp; (3Mo Avg, SA, %)</td>
<td>--</td>
<td>--</td>
<td>5.5%</td>
<td>5.5%</td>
<td>5.1%</td>
<td>5.4%</td>
<td>4.8%</td>
<td>4.8%</td>
</tr>
<tr>
<td class="firstcol">Claimant Count &nbsp; (Monthly, Thous)</td>
<td>925.8</td>
<td>939.3</td>
<td>948.6</td>
<td>956.5</td>
<td>905.1</td>
<td>944.1</td>
<td>861.8</td>
<td>853.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Vacancies (Monthly, Thous)</td>
<td>637.7</td>
<td>602.8</td>
<td>590.7</td>
<td>619.1</td>
<td>598.8</td>
<td>599.4</td>
<td>618.6</td>
<td>631.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Employment in the UK rose 7,000 in the November period, a third successive monthly increase in this 3-month moving average. Over the last three months (the style of comparison that the UK's Office for National Statistics [ONS] [...]

UK Unemployment Steadies; Modest Employment Growth

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070214c.jpg" width="353">
The total number of mortgage applications increased 1.5% last week after a slight 0.2% decline to start the month, according to the Mortgage Bankers Association.
The gain was wholly due to a 4.5% rise in applications to refinance after the 0.2% uptick during the prior week.
Purchase applications fell 1.0% after a 0.8% decline during the prior week.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The effective interest rate on a conventional 30-year mortgage ticked up two basis points to 6.46%. Rates averaged 6.40% last month and 6.28% in December. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing dipped slightly to 6.22%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
Monetary Policy Inertia and Recent Fed Actions from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-03.pdf">here</a>.

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<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">02/09/07</th>
<th scope="col">02/02/07</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>639.8</td>
<td>630.1</td>
<td>11.4%</td>
<td>584.2</td>
<td>708.6</td>
<td>735.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>400.7</td>
<td>404.7</td>
<td>2.3%</td>
<td>406.9</td>
<td>470.9</td>
<td>454.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,031.7</td>
<td>1,943.4</td>
<td>24.1%</td>
<td>1,634.0</td>
<td>2,092.3</td>
<td>2,366.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications increased 1.5% last week after a slight 0.2% decline to start the month, according to the Mortgage Bankers Association. The gain was wholly due to a 4.5% rise in applications to refinance [...]

Mortgage Applications Up

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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Mortgage applications eased 0.5% (+21.6% y/y) in the week ending August 22 after falling 1.4% in the prior week, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for purchase loans rose 2.2% (24.3% y/y) last week, following a 0.1% gain in the prior week. Applications to refinance a home loan fell 3.5% (+18.6% y/y) last week, following a 3.1% decline in the week of August 15.

The effective interest rate on a 30-year fixed-rate loan was unchanged at 6.86% in the week ending August 22 for the third straight week. It remained down from a high of 7.28% in the second week of January. The rate on 15-year fixed-rate mortgages rose to 6.22% in the latest week from 6.13% in the week of August 15. Conversely, the rate on 30-year Jumbo loans eased to 6.80% last week from 6.82% one week earlier. The rate on a 5-year ARM fell to 6.19% in the week of August 22 after rising to 6.24% in the prior week.

The share of applications for refinancing an existing loan fell to 45.3% of total applications in the week ending August 22 after easing to 46.1% in the prior week. The share hit a low of 34.6% in the fourth week of May. The adjustable-rate mortgage (ARM) share of activity edged lower to 8.40% in the latest week after falling to 8.60% in the week of August 15.

The average size of a mortgage loan fell 1.2% (+2.9% y/y) to $383,000 in the week of August 22, following a 2.7% decline in the prior week. The average size of a purchase loan rose 1.0% (1.5% y/y) to $433,400 in the latest week after rising 0.5% in the week ending August 15. The average size of a loan to refinance a mortgage fell 5.2% (+4.2% y/y) to $322,200 last week, after falling 7.3% to $339,800 in the prior week. It was increased from a low of $277,900 in the last week of May.

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.

- Purchase applications increase while loan refinancing eases.
- Fixed-interest rate on 30-year loan holds at four-month low.
- Average loan size declines again.

U.S. Mortgage Applications Edge Lower in Latest Week as Interest Rates Steady

Robert Brusca

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The GfK consumer climate indicator for Germany slipped in September to -23.6 from -21.7 in August. The slippage brings the index to its weakest level since April 2025 and in fact it's the weakest reading since May 2024 with only two-monthly exceptions.

The components for the GfK index are up to date through August. The economic index in August fell to -7.4, its weakest reading since December 2022. The decline in August was both sharp and deep.  Income expectations backed-off; after a reading of 15.2 in July, the index fell to 4.1 in August and was last weaker in March 2025. The propensity to buy index weakened again for the second month in a row to -10.1 in August from -9.2 in July; it's the weakest reading since February 2025.

**Percentile standings**
The percentile standing for the climate index and its components show climate is still very weak at a 9.7 percentile standing among data back to mid-2002. Economic expectations have a 23.7 percentile standing, the propensity to buy has a 28.8 percentile standing, while income expectations have a 38.8 percentile standing. These count percentiles or queue percentiles however you like to think of them, are all quite weak. The median in terms of this sort of gauge occurs at the 50th percentile reading, so all of these readings are well below their historic medians and data back to mid-2002.

**Consumer confidence – selected other Europe**
Other European confidence measures are up to date through August in France where the INSEE confidence measure slipped to 87 from 88.3 while in the United Kingdom the confidence measure improved to -17 in August from -19 in July. Italy's confidence reading is up to date only through July, and on that timeline, it showed a one-month improvement to 97.2, up from June’s 96.1. Italian confidence has the strongest standing at a 76.8 percentile standing, the U.K. has a 40.3 percentile standing, while France has a 19.8 percentile standing. There's a good deal of variation in how consumers perceive current circumstances. Based on these standings, Germany has the lowest assessment in the its lower 10 percentile, while Italy sees a top 25 percentile standing, the U.K. sees an assessment that's about 10 percentile points below its median, while France is at its 20th percentile closer to the German metric in standing. It's a substantial variation especially since three of these countries are in the European Monetary Union.

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On balance, consumers are concerned about global economic conditions. The tariff situation is in flux and beginning to settle into a hardened pattern. The Russia-Ukraine war is undergoing attempts to stop it, but neither participant seems willing to accept the conditions that the other requires for either a ceasefire or cessation of hostilities. Russia is increasingly looking as if it is beleaguered and under pressure as the U.S. seems to be edging closer to providing more support to Ukraine. Conditions in the Middle East remained as entangled and hostile as ever. Globally inflation continues to hover slightly above central banks’ targets in most places although it does not show much sign of drifting higher or lower as economic conditions continue to be weak. The Federal Reserve appears to be flirting more with the prospects of rate cuts, as the president mounts efforts to try to exert his influence or even outright control over the central bank. This is something that is going to bear some close watching.

Germany

German Climate Stabilizes But Eco-expectations Plunge

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The Conference Board's Index of Consumer Confidence declined 1.3% (-7.8% y/y) to 97.4 in August after increasing 3.7%, revised from 2.1%, in July and falling an unrevised 3.3% in June. An August reading of 96.5 had been expected in the Action Economics Forecast Survey. The index remained 13.7% below its November peak.

The Expectations Index declined 1.6% (-13.3% y/y) this month after rising 8.7% in July, revised from 6.4%, and falling 5.0% in June. The Present Situation index fell 1.2% (-2.5% y/y) after easing 0.2% in July, revised from down 1.1% and falling 1.8% in June.

The percentage of respondents assessing business conditions as “good” rose to 22.0% in August after holding steady at 20.5% in July. The index reached its highest level since October. The percentage assessing conditions as “bad” edged higher to 14.2% after falling to 13.6% in July. The appraisal of labor market conditions eased as 29.7% described “jobs plentiful” versus 29.9% in July. Jobs were viewed as “hard to get” by 20.0% of respondents this month, up from 18.9% in July. This measure has risen from 11.0% in January 2024. The labor market differential calculated by Haver Analytics (the percentage of consumers who think jobs are plentiful minus the percentage who believe that jobs are currently hard to get) fell to 9.7% compared to 11.0% in July and 12.2% in June. This measure remained below a high of 47.1% in March 2022. This series has a 60% correlation with the unemployment rate over the last ten years.

Expectations for business conditions improved this month as an increased 19.5% of respondents expect conditions to improve over the next six months, after 19.0% did so in July, while 21.9% expect them to worsen, after falling to 22.7% in July. On employment, 17.9% expect the number of jobs to increase over the next six months versus 18.0% in July. The percentage expecting the number of jobs to decline in the next six months rose to 26.8% after falling to 25.1% in July. A lessened 18.3% of respondents expect income to increase in six months, down from 18.7% in July. That remained off a high of 20.7% in November and compares to 12.6% who expect income to decrease, up from 11.8% in July.

The expected rate of price inflation over the next twelve months rose to 6.2% in August after falling to 5.7% in July. These remain up from a low of 5.0% in November. Interest rates are expected to rise this year by an increased 54.0% of respondents, and this remained up from a 45.5% November 2024 low. The percentage of respondents expecting equity prices to increase over the next twelve months fell to 47.4%, but remained up from a low of 37.6% in April and the most since January, while the percentage expecting a decline in stock prices rose to 30.3% after declining to 28.1% in July.

The percentage of respondents planning to buy a home held steady at 5.7% this month after falling from 6.1% in June. Plans to purchase an automobile rose to 12.0% this month, up from a low of 10.6% in April.

The Consumer Confidence data are available in Haver’s **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

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- Monthly decline is slight, level remains up sharply from April low.
- Expectations and present situation readings decline.
- Inflation expectations rise after falling for two months.

U.S. Consumer Confidence Weakens in August; Inflation Expectations Rise

Sandy Batten

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Durable goods orders fell 2.8% m/m (+3.3% y/y) in July on top of a slightly downwardly revised 9.4% monthly decline in June (previous -9.3% m/m). A 4.0% m/m decline had been expected by the Action Economics Forecast Survey. Once again, plummeting nondefense aircraft orders were the key factor behind the overall decline in July. Excluding nondefense aircraft orders, the remaining orders rose 0.2% m/m in July after a 0.3% m/m decline in June.

Orders excluding transportation increased by a solid 1.1% m/m (+3.8% y/y) in July following a 0.3% monthly gain in June. The July monthly increase matched the September 2024 gain as the largest in more than two years. Orders for nondefense aircraft plunged 32.7% m/m in July, on top of a 52.7% monthly decline in June. Apart from the plunge in aircraft orders, orders in other major groups posted solid increases. Orders for motor vehicles increased 0.3%, their third consecutive monthly gain. Orders for primary metals jumped 1.5% m/m, the largest monthly gain since April 2024. Fabricated metals orders rose 0.7% m/m after a 0.1% monthly decline in June. Machinery orders soared 1.8% m/m, the largest monthly increase since January. Orders for computers and electronic equipment increased 0.6% m/m. Orders for electrical equipment and appliances jumped 2.0% m/m, the largest increase since last December.

The capital spending data in this report augured a solid beginning for Q3 business spending on equipment. 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 increased 0.7% m/m in July, the largest monthly gain since April 2023, and are up more than 4% annualized in July from the Q2 average. Moreover, core capital goods orders rebounded in July, jumping 1.1% m/m after a 0.6% monthly decline in June.

Total manufacturing shipments increased 0.8% m/m (+1.8% y/y) in July following a 0.6% monthly increase in June. Shipments of durable goods rose a solid 1.4% m/m (+3.6% y/y), the largest monthly gain since May 2023. Excluding shipments of transportation goods, remaining shipments increased 1.0% m/m in July, the largest monthly increase since January 2023. Gains were widespread across major sectors with each one reporting an increase in July. Transportation shipments rose 2.3% m/m, led by a 15.5% monthly jump in shipments of nondefense aircraft and parts. Shipments of computers rose 4.5% m/m, their first monthly gain in three months. Shipments of nondurable goods edged up 0.2% m/m (-0.1% y/y), their third consecutive monthly increase.

Unfilled durable goods orders were unchanged in July from June (+7.0% y/y). Inventories of all manufactured goods increased 0.3% m/m in July (+1.4% y/y), the largest monthly gain since last December. Inventories of durable goods rose 0.3% m/m (+1.8% y/y), their fifth consecutive monthly increase. Motor vehicle inventories jumped 0.8% m/m, their largest monthly increase since October 2023. Aircraft inventories slipped 0.2% m/m, their third consecutive monthly decline. Inventories of nondurable goods increased 0.2% m/m in July (+0.8% y/y), the same monthly gain as in June.

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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- Durable goods orders fell 2.8% m/m in July on top of a 9.4% monthly drop in June.
- Once again, weak nondefense aircraft orders were the key factor; nondefense aircraft orders plunged 33% m/m in July on top of a 53% m/m decline in June.
- In contrast, orders excluding transportation rose a solid 1.1% m/m in July, their largest monthly gain since September 2024.
- Core capital goods orders rebounded, and shipments posted a solid gain.

U.S. Advance Durable Goods Orders Dragged Down Again by Aircraft in July

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U.S. house prices weakened 0.2% (+2.6% y/y) during June after easing 0.1% in May, revised from down 0.2% and falling an unrevised 0.3% in April. The annual increase is well below its recent high of 7.2% in February 2024, according to the Federal Housing Finance Agency (FHFA) House Price Index.

House price changes were mixed across the nine Census divisions of the country. Prices fell 0.8% (+5.0% y/y) in New England and 0.1% (+4.6% y/y) in the East North Central region. Prices were down 1.1% (+0.1% y/y) in the South Atlantic region, 0.4% (+3.1% y/y) in the East South Central region and 0.3% (+1.5% y/y) in the Mountain regions. Prices also eased 0.1% (+0.7% y/y) in the Pacific region, off for the fifth straight month. House price increases were logged in the middle Atlantic region where they rose 1.1% (7.2% y/y). Prices also increased 0.3% (4.3% y/y) in the West North Central region and 0.2% (1.4% y/y) in the West South Central region.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included. The FHFA data are available in Haver’s USECON database.

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- Prices edge lower for third straight month.
- Annual increase is near two-year low.
- Price changes are uneven amongst regions.

Economy in Brief: February 2007

Jump to:

PPI Eases with Lower Energy; Core Rate Steady

Housing Starts Drop Hard in January, Falling to Lowest in 9-1/2 Years

PPI Eases with Lower Energy; Core Rate Steady

Japan GDP Gains at 4.8% AR in Q4, Fastest in Almost 3 Years

Industrial Production Falls Unexpectedly by 0.5% in January

Industrial Production Falls Unexpectedly by 0.5% in January

UK Unemployment Steadies; Modest Employment Growth

Mortgage Applications Up