Tom Moeller

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091021b.jpg" align="left" border="0" height="265" width="353">
The Mortgage Bankers Association indicated that mortgage
applications fell 13.7% last week. The drop left the weekly total down
from the end of last month as earlier gains in applications slackened.
Nevertheless, the monthly average level of applications rose 11.5% from
September due to strong weekly gains during the month and a strong
start to begin October.
Applications to purchase a home fell hard during the last two
weeks and the declines suggest a topping of a previously firm uptrend.
The latest level was roughly equal to the early-August figure. During
the last ten years there has been a 51% correlation between the y/y
change in purchase applications and the change in new plus existing
single family home sales. The correlation has lessened recently.
Applications to refinance mortgages fell hard last week but for the
month so far remained up 17.5% from September and double the June low.
Earlier declines in interest rates from the 2006 high had prompted
refinancing at blistering 20% rate during most of 2007 and 2008.
The effective interest rate on a conventional 15-year mortgage
rose slightly last week to 4.75%. Though still down from the June
average of 5.21% and near their lowest in decades, rates have risen
slightly from the early-October low of 4.58%. For 30-year mortgages,
the rate also rose slightly last week to 5.29% after reaching a high of
5.79% in early-June. Interest rates on 15-year and 30-year mortgages
are closely correlated (&gt;90%) with the rate on 10-year Treasury
securities. Rates on adjustable one-year mortgages rose to 6.94% last
week which was the highest level since November of last year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091021c.jpg" align="right" border="0" height="265" width="353">
During the last twelve months, the number of fixed-rate
mortgage applications has risen 51.0% while the number of
adjustable-rate mortgage applications has nearly tripled.
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>.The figures for weekly mortgage
applications are available in Haver's SURVEYW
database.
Gauging Aggregate Credit Market Conditions
from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-32.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/16/09</th>
<th scope="col">10/09/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>641.0</td>
<td>742.9</td>
<td>57.1%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>268.8</td>
<td>290.9</td>
<td>-13.8</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,808.0</td>
<td>3,374.6</td>
<td>142.3</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
<tr>
<td class="firstcol">15-Year Effective Interest Rate
(%)</td>
<td>4.75%</td>
<td>4.70%</td>
<td>6.31% (10/08)</td>
<td>5.9%</td>
<td>6.2%</td>
<td>6.3%</td>
</tr>
</tbody>
</table>
</body></html>

The Mortgage Bankers Association indicated that mortgage applications fell 13.7% last week. The drop left the weekly total down from the end of last month as earlier gains in applications slackened. Nevertheless, the monthly average [...]

U.S. Weekly Mortgage Applications Fall As Up-Trend in Purchases Slackens

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091021a.jpg" align="left" border="0" height="265" width="353">
UK industrial orders according to the CBI up-minus-down net
balance indicators fell in October. At a reading of -51 the orders
index is above its cycle low of -59 but down from September&#8217;s -48.
Export orders at a still weak -46 were flat at September&#8217;s level and
that strings the improvement out from the reading of -52 which was the
cycle low back in June. The volume outlook index crossed over from
negative to positive posting a +4 reading compared to the -2 it
registered in September. This switch ends a fifteen month string of
negative values for expected output. 

The optimism on expected output is a good sign and one that
has been long in coming. Still, the orders series remain very weak and
lacks any real upward momentum. The orders series are holding their
levels but these are still deeply negative readings that indicate
orders are not stable but contracting. We have seen some recent
readings on foreign orders elsewhere that have been spotty. In Germany,
and more recently, Italy, their reports showed that &#8216;foreign&#8217; orders
have become irregular and progress has been set back at times. Of
course, &#8216;foreign order&#8217; has different meaning in different countries.
While Germany rebounded from a one-month back track in its foreign
orders reading, it is Italy&#8217;s newest reading that has gone negative. UK
orders are weaker and its foreign orders are flat. There is more than
one sign in the EU that the turn to growth may not be a smooth one.
Still, UK firms are optimistic about future output trends. And that
should count for something.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="10" scope="col">UK Industrial volume data CBI Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>OCT-09</td>
<td>SEP-09</td>
<td>AUG-09</td>
<td>JUL-09</td>
<td>JUN-09</td>
<td>12MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>-51</td>
<td>-48</td>
<td>-54</td>
<td>-59</td>
<td>-51</td>
<td>-50</td>
<td>12%</td>
<td>9</td>
<td>-59</td>
<td>68</td>
</tr>
<tr class="odd">
<td class="firstcol">Export Orders</td>
<td>-46</td>
<td>-46</td>
<td>-48</td>
<td>-45</td>
<td>-52</td>
<td>-42</td>
<td>11%</td>
<td>3</td>
<td>-52</td>
<td>55</td>
</tr>
<tr class="odd">
<td class="firstcol">Stocks:FinGds</td>
<td>10</td>
<td>13</td>
<td>13</td>
<td>20</td>
<td>22</td>
<td>24</td>
<td>36%</td>
<td>31</td>
<td>-2</td>
<td>33</td>
</tr>
<tr>
<td colspan="11">Looking ahead</td>
</tr>
<tr class="odd">
<td class="firstcol">Output Volume:Nxt 3M</td>
<td>4</td>
<td>-2</td>
<td>-5</td>
<td>-14</td>
<td>-17</td>
<td>-30</td>
<td>68%</td>
<td>28</td>
<td>-48</td>
<td>76</td>
</tr>
<tr class="odd">
<td class="firstcol">Avg Prices 4Nxt 3m&nbsp;</td>
<td>-4</td>
<td>-10</td>
<td>-17</td>
<td>-6</td>
<td>-13</td>
<td>-8</td>
<td>30%</td>
<td>34</td>
<td>-20</td>
<td>54</td>
</tr>
</tbody>
</table>
</body></html>

UK industrial orders according to the CBI up-minus-down net balance indicators fell in October. At a reading of -51 the orders index is above its cycle low of -59 but down from September’s -48. Export orders at a still weak -46 were [...]

UK Expected Output Turns The Corner As Total Orders Drop

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091021a.jpg" align="left" border="0" height="265" width="353">
UK industrial orders according to the CBI up-minus-down net
balance indicators fell in October. At a reading of -51 the orders
index is above its cycle low of -59 but down from September&#8217;s -48.
Export orders at a still weak -46 were flat at September&#8217;s level and
that strings the improvement out from the reading of -52 which was the
cycle low back in June. The volume outlook index crossed over from
negative to positive posting a +4 reading compared to the -2 it
registered in September. This switch ends a fifteen month string of
negative values for expected output. 

The optimism on expected output is a good sign and one that
has been long in coming. Still, the orders series remain very weak and
lacks any real upward momentum. The orders series are holding their
levels but these are still deeply negative readings that indicate
orders are not stable but contracting. We have seen some recent
readings on foreign orders elsewhere that have been spotty. In Germany,
and more recently, Italy, their reports showed that &#8216;foreign&#8217; orders
have become irregular and progress has been set back at times. Of
course, &#8216;foreign order&#8217; has different meaning in different countries.
While Germany rebounded from a one-month back track in its foreign
orders reading, it is Italy&#8217;s newest reading that has gone negative. UK
orders are weaker and its foreign orders are flat. There is more than
one sign in the EU that the turn to growth may not be a smooth one.
Still, UK firms are optimistic about future output trends. And that
should count for something.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col">UK
Industrial volume data CBI Survey</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>OCT-09</td>
<td>SEP-09</td>
<td>AUG-09</td>
<td>JUL-09</td>
<td>JUN-09</td>
<td>12MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>-51</td>
<td>-48</td>
<td>-54</td>
<td>-59</td>
<td>-51</td>
<td>-50</td>
<td>12%</td>
<td>9</td>
<td>-59</td>
<td>68</td>
</tr>
<tr class="odd">
<td class="firstcol">Export Orders</td>
<td>-46</td>
<td>-46</td>
<td>-48</td>
<td>-45</td>
<td>-52</td>
<td>-42</td>
<td>11%</td>
<td>3</td>
<td>-52</td>
<td>55</td>
</tr>
<tr class="odd">
<td class="firstcol">Stocks:FinGds</td>
<td>10</td>
<td>13</td>
<td>13</td>
<td>20</td>
<td>22</td>
<td>24</td>
<td>36%</td>
<td>31</td>
<td>-2</td>
<td>33</td>
</tr>
<tr>
<td colspan="11">Looking ahead</td>
</tr>
<tr class="odd">
<td class="firstcol">Output Volume:Nxt 3M</td>
<td>4</td>
<td>-2</td>
<td>-5</td>
<td>-14</td>
<td>-17</td>
<td>-30</td>
<td>68%</td>
<td>28</td>
<td>-48</td>
<td>76</td>
</tr>
<tr class="odd">
<td class="firstcol">Avg Prices 4Nxt 3m&nbsp;</td>
<td>-4</td>
<td>-10</td>
<td>-17</td>
<td>-6</td>
<td>-13</td>
<td>-8</td>
<td>30%</td>
<td>34</td>
<td>-20</td>
<td>54</td>
</tr>
</tbody>
</table>
 U.S. Weekly Mortgage Applications
Fall As Up-Trend in Purchases Slackens 
by <a href="/comment/Moeller.html">Tom
Moeller</a> October 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091021b.jpg" align="left" border="0" height="265" width="353">
The Mortgage Bankers Association indicated that mortgage
applications fell 13.7% last week. The drop left the weekly total down
from the end of last month as earlier gains in applications slackened.
Nevertheless, the monthly average level of applications rose 11.5% from
September due to strong weekly gains during the month and a strong
start to begin October.
Applications to purchase a home fell hard during the last two
weeks and the declines suggest a topping of a previously firm uptrend.
The latest level was roughly equal to the early-August figure. During
the last ten years there has been a 51% correlation between the y/y
change in purchase applications and the change in new plus existing
single family home sales. The correlation has lessened recently.
Applications to refinance mortgages fell hard last week but for the
month so far remained up 17.5% from September and double the June low.
Earlier declines in interest rates from the 2006 high had prompted
refinancing at blistering 20% rate during most of 2007 and 2008.
The effective interest rate on a conventional 15-year mortgage
rose slightly last week to 4.75%. Though still down from the June
average of 5.21% and near their lowest in decades, rates have risen
slightly from the early-October low of 4.58%. For 30-year mortgages,
the rate also rose slightly last week to 5.29% after reaching a high of
5.79% in early-June. Interest rates on 15-year and 30-year mortgages
are closely correlated (&gt;90%) with the rate on 10-year Treasury
securities. Rates on adjustable one-year mortgages rose to 6.94% last
week which was the highest level since November of last year.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091021c.jpg" align="right" border="0" height="265" width="353">
During the last twelve months, the number of fixed-rate
mortgage applications has risen 51.0% while the number of
adjustable-rate mortgage applications has nearly tripled.
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>.The figures for weekly mortgage
applications are available in Haver's SURVEYW
database.
Gauging Aggregate Credit Market Conditions
from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2009/el2009-32.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/16/09</th>
<th scope="col">10/09/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>641.0</td>
<td>742.9</td>
<td>57.1%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>268.8</td>
<td>290.9</td>
<td>-13.8</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,808.0</td>
<td>3,374.6</td>
<td>142.3</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
<tr>
<td class="firstcol">15-Year Effective Interest Rate
(%)</td>
<td>4.75%</td>
<td>4.70%</td>
<td>6.31% (10/08)</td>
<td>5.9%</td>
<td>6.2%</td>
<td>6.3%</td>
</tr>
</tbody>
</table>
</body></html>

UK Expected Output Turns TheCorner As Total Orders Drop

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020c.jpg" width="353">
Industrial orders for Italy and France show strong signs of having shaken off the worst of the recession as each of them has rebounded sharply into 2009. But in August their paths have diverged. France continues to show signs of progress in leaps and bounds as orders are up by 7.9% m/m and are falling at an annual pace of just 11.6% over 6-months. By comparison Italy&#146;s orders have plunged by 8.6% m/m in August and are declining at an annual rate of 18.8% over six months- and are worse over three months. 
France reports increases in foreign orders and a larger gain in orders overall as it domestic orders are surging. In Italy both foreign and domestic orders are dropping: at -12.8% pace of decline; Italy&#146;s foreign order drop is twice as large as its domestic drop in August. This decline is consistent with a drop-off in foreign orders first reported by Germany in July but German foreign orders snapped back in August. Maybe this foreign order weakness in Italy will prove to be temporary. But Italy still has two months in a row of dropping domestic orders it must deal with. This weakness, unfortunately, does not look like a fluke. 
The starkest contrast may be over three months where French orders are rising at a 43% annual rate compared to Italy where overall orders are off at a 19% annual rate led by a collapse in domestic orders that are dropping at a 25.6% annual rate. 
Divergences like this will create problems for policy in the e-zone. There is only one exchange rate and one monetary policy for all of the e-zone. The French and Italian economies, two of the larger EMU economies, are not on compatible paths. If this continues it could make for some real difficulties in policymaking. For sure the split- if it continues - will put a stop to the rise in the euro. Italy &#150;despite having some special problems - is too-big of an economy to be ignored by markets or by the ECB.
Italy has recently surprised us with a sharp rise in consumer sentiment but this was reported even as industrial sentiment was still eroding. The weak industrial order result gives the drop off in the assessment of Italian businesses more credence. Clearly Italy is an economy with challenges and those problems could spillover into the e-Zone.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
 Italy Orders
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="3">Saar exept m/mAug-</td>
<td> 09</td>
<td> Jul-09</td>
<td> Jun-09</td>
<td> 3-mo6-mo12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>-8.6%</td>
<td>2.1%</td>
<td>1.6%</td>
<td>-19.0%</td>
<td>-18.8%</td>
<td>-29.8%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-12.8%</td>
<td>12.8%</td>
<td>0.4%</td>
<td>-5.0%</td>
<td>-20.9%</td>
<td>-29.7%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-6.1%</td>
<td>-3.2%</td>
<td>2.2%</td>
<td>-25.6%</td>
<td>-17.6%</td>
<td>-29.9%</td>
</tr>
<tr>
<td class="firstcol"> Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Sales</td>
<td>-1.4%</td>
<td>0.7%</td>
<td>-1.7%</td>
<td>-9.5%</td>
<td>-7.8%</td>
<td>-21.7%</td>
</tr>
<tr class="odd">
<td colspan="7"> French Orders</td>
</tr>
<tr class="odd">
<td colspan="3">Saar exept m/mAug-</td>
<td> 09</td>
<td> Jul-09</td>
<td> Jun-09</td>
<td> 3-mo6-mo12-mo</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>7.9%</td>
<td>3.8%</td>
<td>-2.3%</td>
<td>43.7%</td>
<td>-11.6%</td>
<td>-21.3%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>0.8%</td>
<td>13.8%</td>
<td>-3.2%</td>
<td>52.0%</td>
<td>35.8%</td>
<td>-14.4%</td>
</tr>
<tr>
<td class="firstcol">IP xConstruct</td>
<td>1.9%</td>
<td>0.8%</td>
<td>0.5%</td>
<td>13.7%</td>
<td>8.6%</td>
<td>-11.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

Industrial orders for Italy and France show strong signs of having shaken off the worst of the recession as each of them has rebounded sharply into 2009. But in August their paths have diverged. France continues to show signs of [...]

e-Schism! Italy and France Orders Show Signs of Past Progress, then Italy Backtracks

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020g.jpg" width="353">
The pump price for regular gasoline increased last week to $2.57 per gallon and the gain reversed most of the decline since early last month. Moreover, prices remain up from the December low of $1.61. In addition, prices recently moved even higher and the wholesale gasoline price broached the $2.00 level for the first time since early-August. This level is nearly the highest in one year. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
The crude oil market certainly has firmed and light sweet crude prices (WTI) rose to $75.74 per barrel last week, up from the December low of $32.37. Yesterday, the spot market price for light sweet crude oil rose even further to $79.61 per barrel.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020h.jpg" width="353">
Behind the increase in energy prices is an increase in the demand for gasoline. Last week, it posted a 4.0% rise versus one year ago. The gain was the strongest since the fall of 2006. Demand for residual fuel oil also increased 12.6% y/y while distillate demand halved its recent decline to 11.3% y/y. Finally, oil remains plentiful as evidenced by a 13.0% y/y rise in inventories of crude oil &amp; petroleum products. The gain in inventories of gasoline has eased sharply, however, to 7.9% versus last year. The figures on crude oil production and inventories are available in Haver&#39;s OILWKLY database.
Natural gas prices increased again last week, ahead of the winter heating season, to an average of $3.63 per mmbtu (-45.8% y/y) but they remained down by three-quarters from the high reached in early-July of last year of $13.19/mmbtu. Yesterday prices increased further to $4.00/mmbtu.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">10/19/09</th>
<th scope="col">10/12/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.57</td>
<td>2.49</td>
<td>-11.7%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>75.74</td>
<td>70.86</td>
<td>0.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

The pump price for regular gasoline increased last week to $2.57 per gallon and the gain reversed most of the decline since early last month. Moreover, prices remain up from the December low of $1.61. In addition, prices recently [...]

Weekly Gasoline Prices Increase With Stronger Crude Oil Prices

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020e.jpg" align="right" border="0" height="265" width="353">Pricing
power virtually evaporated last month with across-the-board declines in
goods prices. The PPI for finished goods fell 0.6%. It was the second
decline in the last three months and left prices down 4.7% from the
year-ago level. The decline compared to the Consensus expectation for
no change. Moreover, it was broad-based and included lower food
&amp; energy prices as well as the third decline in core prices in
the last five months. The 0.1% decline in the PPI less food &amp;
energy contrasted with expectations for a 0.1% increase and it pulled
the y/y change to 1.8%, the weakest since May 2007.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020d.jpg" align="right" border="0" height="265" width="353">Lower
finished energy prices led the decline in last month's PPI with a 2.4%
drop (-22.2% y/y). Though the decline has been partially reversed here
in October, last month it reflected a 5.4% fall in gasoline prices
(-37.5% y/y). Natural gas prices also fell by 1.9% (-24.5% y/y) and
fuel oil prices fell 24.1% (-40.5% y/y).
The PPI for finished consumer
goods less food &amp; energy slipped 0.1% but gained 2.2% y/y. That
was the weakest annual increase since June 2007. Finished durables
prices slipped 0.2% (+2.0% y/y) and prices of core finished consumer
nondurable goods slipped for the fourth month in the last six. The 2.3%
y/y increase was down from 5.9% as of last November. Capital equipment
prices also reflected economic weakness and slipped 0.1%. That pulled
the y/y increase down to 1.4% after a 4.3% rise as of last December.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020f.jpg" align="right" border="0" height="265" width="353">Prices for intermediate goods inched 0.2%
higher, paced by a firm 0.9%
increase in core prices. They were led by a 1.3% (-11.3% y/y) increase
in prices for materials for manufacturing. Intermediate food prices
fell 0.5% (-12.9% y/y) and energy prices also slipped 2.1% (-24.2%
y/y).
 The crude materials PPI fell 2.1%
and was led lower by a 5.4% decline (-42.6% y/y) in&nbsp; crude
energy prices. In contrast, core prices showed strength and increased
for the sixth straight month.
The producer price data is available in
Haver's USECON database. More detailed data is in
the PPI and in the PPIR
databases.&nbsp;
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a> (%)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.6</td>
<td>1.7</td>
<td>-4.7</td>
<td>6.4</td>
<td>3.9</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.1</td>
<td>0.2</td>
<td>1.8</td>
<td>3.4</td>
<td>2.0</td>
<td>1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.2</td>
<td>1.8</td>
<td>-11.6</td>
<td>10.5</td>
<td>4.0</td>
<td>6.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.9</td>
<td>0.6</td>
<td>-7.5</td>
<td>7.4</td>
<td>2.8</td>
<td>6.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-2.1</td>
<td>3.8</td>
<td>-31.5</td>
<td>21.4</td>
<td>11.9</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>3.6</td>
<td>6.0</td>
<td>&nbsp;-19.6</td>
<td>14.8</td>
<td>15.6</td>
<td>20.8</td>
</tr>
</tbody>
</table>

</body></html>

Pricing power virtually evaporated last month with across-the-board declines in goods prices. The PPI for finished goods fell 0.6%. It was the second decline in the last three months and left prices down 4.7% from the year-ago level. [...]

U.S. PPI Declines With Lower Energy, Food And Core Prices

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020c.jpg" align="left" border="0" height="265" width="353">
The steep declines in new orders in France and Italy that the
recession exacted are beginning to show some signs of leveling out. New
orders in France and Italy on a three-month moving average basis that
smoothes out some of the month- to- month variation are shown in the
first chart. The turnaround in France appears stronger than that in
Italy. The index of French new orders in Manufacturing actually
increased 3.0% in August from 87.0 (2005=100) to 89.6 but it was still
13.8% below the year ago level. At the same time, the index of Italian
new orders actually declined 8.6% from 88.8 to 81.2 and was 29.8% below
the year ago level.
In general, the index of new orders in Italy has been higher
than that of France; and, in spite of France's better performance
relative to Italy's in August, the index of Italian new orders so far
this year has exceeded that of France. The average level of the index
of new orders over the period January through August was 87.3 for Italy
and 84.6 for France. It should be noted that comparisons of indexes
between countries say nothing about actual levels in the two countries;
they merely indicate that, currently, new orders in Italy compared to
their level in 2005 are higher than the corresponding measures in
France.
Foreign orders accounted for the big decline in the actual
index of Italian orders in August. Foreign orders dropped 12.8% from
96.8 in July to 84.4 in August. In France new foreign orders actually
increased 0.7% from 86.4 in July to 87.0 in August. However, on a three
month average basis, which is shown in the second chart, the July
increase in Italy's foreign orders has been followed by relative
stability in August. In France, the upward trend started in May and has
continued through August.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Year to Date Avg</th>
<th scope="col">Aug 09</th>
<th scope="col">Jul&nbsp; 09</th>
<th scope="col">Aug 08</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y&amp;&nbsp;</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol"> Total New Orders</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>87.1</td>
<td>81.2</td>
<td>88.8</td>
<td>115.7</td>
<td>-8.56</td>
<td>-29.82</td>
<td>115.8</td>
<td>121.4</td>
<td>114.1</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>84.6</td>
<td>89.6</td>
<td>87.0</td>
<td>103.9</td>
<td>2.99</td>
<td>-13.76</td>
<td>104.0</td>
<td>111.4</td>
<td>103.6</td>
</tr>
<tr>
<td class="firstcol" colspan="10">Foreign New Orders</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>71.4</td>
<td>84.4</td>
<td>96.8</td>
<td>120.1</td>
<td>-12.81</td>
<td>-29.73</td>
<td>121.8</td>
<td>131.3</td>
<td>117.8</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>64.0</td>
<td>87.0</td>
<td>86.4</td>
<td>101.7</td>
<td>-.69</td>
<td>-14.45</td>
<td>104.6</td>
<td>115.8</td>
<td>106.6</td>
</tr>
</tbody>
</table>
</body></html>

The steep declines in new orders in France and Italy that the recession exacted are beginning to show some signs of leveling out. New orders in France and Italy on a three-month moving average basis that smoothes out some of the [...]

Manufacturing New Orders in France and Italy

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020a.jpg" width="353">
Continuing to show a loss of forward momentum was the housing sector. Housing starts ticked up slightly last month to 590,000 (AR) units versus 587,000 during August which was revised down slightly. The latest level, however, showed no growth from June. In addition, September&#39;s figure fell short of Consensus expectations for 610,000 starts.
The loss of momentum owes to weakness in the multi-family sector where starts fell 15.2% m/m during September. That decline reversed roughly all of the August increase and left multi-family starts near the postwar low. Starts of apartments, condominiums &amp; town houses remained down by roughly two-thirds from the 2006 peak.
Starts of single-family homes have shown more life recently. Single-family starts rose 3.9% last month to 501,000 units (AR) and reversed most of an August decline. They are now 40% above the low of this past winter. During the last ten years, there has been an 84% correlation between the q/q change in single-family starts and their contribution to quarterly GDP growth.
By region, starts of single-family units last month were mixed. Single-family starts in the Northeast rose 13.0% to nearly their highest level since October (-8.8% y/y) while starts in the South also rose 14.3% (-5.9% y/y) to their highest level since last September. In the Midwest, starts posted a 5.7% (-4.6% y/y) decline after a dip during August and starts in the West fell 14.4% (-18.8% y/y) to their lowest level since May. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/091020b.jpg" width="353">
Building permits fell 1.2% and gave back much of their increase during August. Permits remained just above their record low and were down by roughly one-half from last May. As with starts, permits to build a single-family home have been relatively strong, despite a moderate 3.0% decline during September. A leading indicator of starts, permits are one-third higher than their winter low.
The housing starts figures can be found in Haver&#39;s USECON database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Housing Starts (000s, SAAR)</th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>590</td>
<td>587</td>
<td>-28.2%</td>
<td>900</td>
<td>1,342</td>
<td>1,812</td>
</tr>
<tr>
<td class="firstcol">Single-Family</td>
<td>501</td>
<td>482</td>
<td>-8.7</td>
<td>616</td>
<td>1,036</td>
<td>1,474</td>
</tr>
<tr>
<td class="firstcol">Multi-Family</td>
<td>89</td>
<td>105</td>
<td>-67.4</td>
<td>285</td>
<td>306</td>
<td>338</td>
</tr>
<tr class="odd">
<td class="firstcol">Building Permits</td>
<td>573</td>
<td>580</td>
<td>-28.9</td>
<td>895</td>
<td>1,392</td>
<td>1,844</td>
</tr>
</tbody>
</table>
</body>
</html>

Continuing to show a loss of forward momentum was the housing sector. Housing starts ticked up slightly last month to 590,000 (AR) units versus 587,000 during August which was revised down slightly. The latest level, however, showed [...]

U.S. Housing Starts Inch Higher During September But Are Flat Over Last Four Months

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

250501Z1.jpg

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

250501Z2.jpg

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

250501Z3.jpg

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

250501Z4.jpg

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

250501Z5.jpg

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

250501Z6.jpg

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

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Charts of the Week: Tariff Truce, Tenuous Trust

250501J5.jpg

250501K5.jpg

The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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The value of construction put in place unexpectedly fell 0.5% m/m in March after rises of 0.6% in February (+0.7% initially) and 0.1% in January (-0.5% previously), data from the U.S. Census Bureau showed. The March reading was the first m/m fall following five straight m/m gains. A 0.3% m/m March rise had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase decelerated to 2.8% in March, the lowest since May 2019, after registering at 3.4% in February and January. The latest y/y figure was lower than 8.7% in March 2024; thus, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction slid 0.6% (+2.3% y/y) in March, down for the first time since September, following increases of 0.7% in February (+0.9% initially) and 0.1% in January (-0.7% previously). Residential private construction fell 0.4% (+2.8% y/y) in March, the first m/m fall in six months, after an unrevised 1.3% gain in February. Home improvement building dropped 1.2% (+13.4% y/y), the first m/m decline since December, following a 2.3% February gain; it was 41.1% of the residential private construction. Single-family building edged up 0.1% (-0.8% y/y), the smallest of seven consecutive m/m increases, after a 0.8% February rise; it was 46.6% of the residential private construction. Meanwhile, multi-family building was essentially unchanged m/m (-12.1% y/y) in March following 15 straight m/m decreases; it was 12.3% of the residential private construction.

Nonresidential private construction fell 0.8% (+1.6% y/y) in March after a 0.1% increase in February (+0.4% initially) and a 0.1% easing in January (-0.2% previously). The March fall reflected m/m drops in the following nonresidential private constructions. These included religious (-2.9%; +16.4% y/y), health care (-2.2%; -5.2% y/y), office (-1.8%; +2.7% y/y), educational (-1.7%; -4.2% y/y), lodging (-1.6%; -1.0% y/y), commercial (-1.0%; -5.8% y/y), manufacturing (-0.4%; +3.6% y/y), communication (-0.3%; +2.2% y/y), and utilities (-0.1%; +7.0% y/y). In contrast, private constructions for amusement & recreation (1.5%; 7.0% y/y) and transportation (0.7%; 10.2% y/y) rose m/m in March.

The value of public construction declined 0.2% (+4.7% y/y) in March after holding steady in February (+0.2% initially), reflecting a 0.2% increase (-1.9% y/y) in residential public construction and a 0.2% easing (+4.8% y/y) in nonresidential public construction. The March decline reflected m/m drops in the following nonresidential public constructions. These included utilities (-4.8%; -12.8% y/y), commercial (-1.6%; +40.3% y/y), amusement & recreation (-1.0%; +19.1% y/y), educational (-0.6%; +7.6% y/y), sewage & waste disposal (-0.6%; +10.6% y/y), and health care (-0.4%; +13.0% y/y). Notably, spending on highways & streets, which made up 28.7% of public construction spending, fell 0.5% (-2.4% y/y) in March, the first m/m fall since October, following a 0.9% increase in February. To the upside, the following public constructions rose m/m in March: office (1.6%; 6.0% y/y), transportation (1.4%; 7.3% y/y), public safety (0.7%; 4.1% y/y), conservation & development (0.6%; 4.7% y/y), and water supply (0.6%; 12.2% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

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- March construction spending -0.5% m/m; +2.8% y/y, the lowest y/y rate since May ’19.
- Residential private construction -0.4% m/m, led by a 1.2% drop in home improvement building.
- Nonresidential private construction -0.8% m/m, down for the second month in three.
- Public sector construction -0.2% m/m, reflecting a 0.2% decline in nonresidential public building.

U.S. Construction Spending Unexpectedly Drops in March, the First M/M Fall Since September

Carol Stone, CBE

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Initial claims for unemployment insurance rose 18,000 in the week ended April 26 to 241,000, seasonally adjusted.  This is higher by 16,000 than the Action Economics Forecast Survey amount of 225,000 and is the largest amount since the week of February 22. The previous week’s actual count was revised up by 1,000 to 223,000, from 222,000 reported initially.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended April 19 was 1.916 million, up 83,000 from the prior week’s 1.833 million; that earlier amount was revised down by 8,000.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, was 1.3% in the April 19 week, following 1.2% continuously since the week of January 6, 2024.

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) and Texas (1.09%). 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 U**SECON**. 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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- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

U.S. Initial Jobless Claims Rise Notably in April 28 Week

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

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

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

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

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

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

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

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

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

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

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

Economy in Brief: October 2009

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