Carol Stone, CBE

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071123b.jpg" align="left" border="0" height="265" width="353">
The British Bankers' Association (BBA) this morning reported
significant declines in mortgage lending activity for October. These
data cover the nine members of the "Major British Banking Groups",
which account for some two-thirds of all UK mortgage loans outstanding.
The net change in loans outstanding at these big banks was
£4.95 billion in October, markedly less than September's £5.88 billion
and the smallest monthly amount since December 2005, £4.90 billion. The
peak month was December 2006 at £6.04 billion.
The accompanying loan approval information is valuable, of
course, as a leading indicator of the actual loans made. This showed
distinct weakness in October, with the number of loans approved for
home purchase at just 44,100 (absolute figure, not rounded or
annualized), compared with almost 54,000 in September. The year-ago
number was 70,458 and the recent peak was 78,301 in November 2006. Loan
approvals for remortgaging and for "other" purposes -- this last
importantly including equity withdrawal -- also decreased
significantly. As seen in the second graph here, the last "other"
category has been drifting downward since a peak in late 2003. But
straight refinancing loans have more or less paralleled home purchase
loans since early 2003. Both of these loan groups retrenched somewhat
with the Bank of England tightening during 2004, but held up well
during more interest rate hikes from mid-2006. Finally, both purchase
and remortgaging loan approvals began to come down more decisively in
May this year and have continued to decrease since then despite the
BoE's steady rate policy beginning in August.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071123c.jpg" align="right" border="0" height="265" width="353">
These lending data for October reflect the first full month
following the international credit crunch of late August and September.
In the UK, this directly involved Northern Rock, one of the nine "Major
British Bank Groups" and a "Top 5" mortgage lender, which experienced
massive deposit runs in September. The October figures thus illustrate
clearly the impact of reversals in the global mortgage security market.
Additionally, press reports today also indicate that Northern Rock's
own delinquency experience has been worsening. Broader data on mortgage
possession actions from the UK's Council of Mortgage Lenders show a
sharp uptrend in such proceedings beginning in 2006. So while we may be
disturbed by loan performance in the US, it is certainly not the only
country where borrowers are faltering, contributing to an eventual
slowdown in the entire home financing system.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col">UK BBA</th>
<th scope="col">Oct 2007</th>
<th scope="col">Sept 2007</th>
<th scope="col">Aug 2007</th>
<th scope="col">Year Ago</th>
<th scope="col" colspan="3">Monthly
Averages</th>
</tr>
<tr>
<th scope="col" colspan="5"></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">Mortgage Loans,
Net Change, Bil.&#163;</td>
<td>4.95</td>
<td>5.88</td>
<td>5.75</td>
<td>5.84</td>
<td>5.50</td>
<td>4.59</td>
<td>5.05</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Number of Loan Approvals</td>
</tr>
<tr class="odd">
<td class="firstcol">Home Purchase</td>
<td>44,100</td>
<td>53,997</td>
<td>56,811</td>
<td>70,458</td>
<td>68,961</td>
<td>62,754</td>
<td>68,888</td>
</tr>
<tr class="odd">
<td class="firstcol">Remortgaging</td>
<td>54,881</td>
<td>66,519</td>
<td>62,559</td>
<td>66,238</td>
<td>64,149</td>
<td>65,014</td>
<td>67,989</td>
</tr>
<tr class="odd">
<td class="firstcol">Other (incl "Equity Withdrawal")</td>
<td>38,471</td>
<td>43,143</td>
<td>40,744</td>
<td>48,298</td>
<td>48,557</td>
<td>52,127</td>
<td>64,924</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Value, Loans
Approved for Home Purchase*, &#163;</td>
<td>153,500</td>
<td>152,300</td>
<td>153,800</td>
<td>144,600</td>
<td>139,167</td>
<td>128,250</td>
<td>112,100</td>
</tr>
</tbody>
</table>
</body></html>

The British Bankers' Association (BBA) this morning reported significant declines in mortgage lending activity for October. These data cover the nine members of the "Major British Banking Groups", which account for some two-thirds of [...]

UK Banks Sharply Restrain Mortgage Lending in October

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071123a.jpg" align="left" border="0" height="265" width="353">
The NTC-Reuter Flash PMIs for November show an unexpected
bounce for Manufacturing and slip for Services. Both readings are weak,
however. Placed in the past 23-month range (the whole of the life of
the services index) services are the weakest ever at a reading of
53.72. The MFG index is in the 18.5 percentile of its range for this
period. Although taking MFG back to 1997, we find it resides in the
55th percentile of its much longer range experience. That experience
includes episodes of recession whereas for services and MFG the shorter
comparison does not. 

The graph, however, underscores that the peaking and dropping
of the indices dates from super-peaking in 2006 then to a dropping from
a lower plateau in mid 2007. Currently the indices are chopping around
at a much lower level that barely indicates continuing growth (above a
level of 50). 

We know that the strong euro is part of the problem, but
interestingly the outlook and slowing has spread though the services
industries just as fast even though MFG is sure to be affected first by
foreign exchange issues. With exports plus imports accounting for 40%
of GDP in some EMU nations it is no wonder that the impact of a strong
currency spreads faster that in the US where the sum is so much smaller. 

In Germany the export association says firms can still export
at an exchanger rate to the dollar of 1.50 but Merkel is registering
worry already and orders of all sorts across the Euro Area members are
slowing if not weakening. The NTC indices memorialize and underscore
that Europe is slowing and is well off peak. They tell us more
topically what other indices will hold for us in the months ahead.
While certain groups of exports may be more resilient than others some
line seems to have been crossed that says that a the euro has risen
above a critical level that is taking business prospects down a notch
for some critical mass of companies. In part this means that US-based
firms should benefit form the exact factor that is hurting European
business (FX competitiveness), but due to the weakness in Europe that
the euro strength also engenders, that the amount of benefit will be
limited. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="3" scope="col">FLASH Readings </th>
</tr>
<tr>
<th colspan="3" scope="col">NTC PMIs for the Euro Area
13</th>
</tr>
</thead>
<tbody>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Manufacturing</td>
<td>Services</td>
</tr>
<tr class="grey2">
<td class="firstcol">Nov-07</td>
<td>52.60</td>
<td>53.72</td>
</tr>
<tr class="grey2">
<td class="firstcol">Oct-07</td>
<td>51.46</td>
<td>55.56</td>
</tr>
<tr class="grey2">
<td class="firstcol">Sep-07</td>
<td>53.21</td>
<td>54.04</td>
</tr>
<tr class="grey2">
<td class="firstcol">Aug-07</td>
<td>54.16</td>
<td>57.91</td>
</tr>
<tr class="grey1">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-Mo</td>
<td>52.42</td>
<td>54.44</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-Mo</td>
<td>53.61</td>
<td>56.28</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-Mo</td>
<td>54.56</td>
<td>56.74</td>
</tr>
<tr class="grey1">
<td colspan="3" class="firstcol">23-Mo Range</td>
</tr>
<tr class="grey2">
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr class="grey2">
<td class="firstcol">Low</td>
<td>51.46</td>
<td>53.72</td>
</tr>
<tr class="grey2">
<td class="firstcol">% Range</td>
<td>18.5%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

The NTC-Reuter Flash PMIs for November show an unexpected bounce for Manufacturing and slip for Services. Both readings are weak, however. Placed in the past 23-month range (the whole of the life of the services index) services are [...]

Services Slip: E-zone PMIs are Weak

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071123b.jpg" align="left" border="0" height="265" width="353">
The British Bankers' Association (BBA) this morning reported
significant declines in mortgage lending activity for October. These
data cover the nine members of the "Major British Banking Groups",
which account for some two-thirds of all UK mortgage loans outstanding.
The net change in loans outstanding at these big banks was
£4.95 billion in October, markedly less than September's £5.88 billion
and the smallest monthly amount since December 2005, £4.90 billion. The
peak month was December 2006 at £6.04 billion.
The accompanying loan approval information is valuable, of
course, as a leading indicator of the actual loans made. This showed
distinct weakness in October, with the number of loans approved for
home purchase at just 44,100 (absolute figure, not rounded or
annualized), compared with almost 54,000 in September. The year-ago
number was 70,458 and the recent peak was 78,301 in November 2006. Loan
approvals for remortgaging and for "other" purposes -- this last
importantly including equity withdrawal -- also decreased
significantly. As seen in the second graph here, the last "other"
category has been drifting downward since a peak in late 2003. But
straight refinancing loans have more or less paralleled home purchase
loans since early 2003. Both of these loan groups retrenched somewhat
with the Bank of England tightening during 2004, but held up well
during more interest rate hikes from mid-2006. Finally, both purchase
and remortgaging loan approvals began to come down more decisively in
May this year and have continued to decrease since then despite the
BoE's steady rate policy beginning in August.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071123c.jpg" align="right" border="0" height="265" width="353">
These lending data for October reflect the first full month
following the international credit crunch of late August and September.
In the UK, this directly involved Northern Rock, one of the nine "Major
British Bank Groups" and a "Top 5" mortgage lender, which experienced
massive deposit runs in September. The October figures thus illustrate
clearly the impact of reversals in the global mortgage security market.
Additionally, press reports today also indicate that Northern Rock's
own delinquency experience has been worsening. Broader data on mortgage
possession actions from the UK's Council of Mortgage Lenders show a
sharp uptrend in such proceedings beginning in 2006. So while we may be
disturbed by loan performance in the US, it is certainly not the only
country where borrowers are faltering, contributing to an eventual
slowdown in the entire home financing system.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col">UK BBA</th>
<th scope="col">Oct 2007</th>
<th scope="col">Sept 2007</th>
<th scope="col">Aug 2007</th>
<th scope="col">Year Ago</th>
<th scope="col" colspan="3">Monthly
Averages</th>
</tr>
<tr>
<th scope="col" colspan="5"></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">Mortgage Loans,
Net Change, Bil.&#163;</td>
<td>4.95</td>
<td>5.88</td>
<td>5.75</td>
<td>5.84</td>
<td>5.50</td>
<td>4.59</td>
<td>5.05</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Number
of Loan Approvals</td>
</tr>
<tr class="odd">
<td class="firstcol">Home Purchase</td>
<td>44,100</td>
<td>53,997</td>
<td>56,811</td>
<td>70,458</td>
<td>68,961</td>
<td>62,754</td>
<td>68,888</td>
</tr>
<tr class="odd">
<td class="firstcol">Remortgaging</td>
<td>54,881</td>
<td>66,519</td>
<td>62,559</td>
<td>66,238</td>
<td>64,149</td>
<td>65,014</td>
<td>67,989</td>
</tr>
<tr class="odd">
<td class="firstcol">Other (incl "Equity Withdrawal")</td>
<td>38,471</td>
<td>43,143</td>
<td>40,744</td>
<td>48,298</td>
<td>48,557</td>
<td>52,127</td>
<td>64,924</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Value, Loans
Approved for Home Purchase*, &#163;</td>
<td>153,500</td>
<td>152,300</td>
<td>153,800</td>
<td>144,600</td>
<td>139,167</td>
<td>128,250</td>
<td>112,100</td>
</tr>
</tbody>
</table>
Services Slip: E-zone PMIs are Weak 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 23, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071123a.jpg" align="left" border="0" height="265" width="353">
The NTC-Reuter Flash PMIs for November show an unexpected
bounce for Manufacturing and slip for Services. Both readings are weak,
however. Placed in the past 23-month range (the whole of the life of
the services index) services are the weakest ever at a reading of
53.72. The MFG index is in the 18.5 percentile of its range for this
period. Although taking MFG back to 1997, we find it resides in the
55th percentile of its much longer range experience. That experience
includes episodes of recession whereas for services and MFG the shorter
comparison does not. 

The graph, however, underscores that the peaking and dropping
of the indices dates from super-peaking in 2006 then to a dropping from
a lower plateau in mid 2007. Currently the indices are chopping around
at a much lower level that barely indicates continuing growth (above a
level of 50). 

We know that the strong euro is part of the problem, but
interestingly the outlook and slowing has spread though the services
industries just as fast even though MFG is sure to be affected first by
foreign exchange issues. With exports plus imports accounting for 40%
of GDP in some EMU nations it is no wonder that the impact of a strong
currency spreads faster that in the US where the sum is so much smaller. 

In Germany the export association says firms can still export
at an exchanger rate to the dollar of 1.50 but Merkel is registering
worry already and orders of all sorts across the Euro Area members are
slowing if not weakening. The NTC indices memorialize and underscore
that Europe is slowing and is well off peak. They tell us more
topically what other indices will hold for us in the months ahead.
While certain groups of exports may be more resilient than others some
line seems to have been crossed that says that a the euro has risen
above a critical level that is taking business prospects down a notch
for some critical mass of companies. In part this means that US-based
firms should benefit form the exact factor that is hurting European
business (FX competitiveness), but due to the weakness in Europe that
the euro strength also engenders, that the amount of benefit will be
limited. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col">FLASH
Readings </th>
</tr>
<tr>
<th colspan="3" scope="col">NTC PMIs
for the Euro Area
13</th>
</tr>
</thead>
<tbody>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>Manufacturing</td>
<td>Services</td>
</tr>
<tr class="grey2">
<td class="firstcol">Nov-07</td>
<td>52.60</td>
<td>53.72</td>
</tr>
<tr class="grey2">
<td class="firstcol">Oct-07</td>
<td>51.46</td>
<td>55.56</td>
</tr>
<tr class="grey2">
<td class="firstcol">Sep-07</td>
<td>53.21</td>
<td>54.04</td>
</tr>
<tr class="grey2">
<td class="firstcol">Aug-07</td>
<td>54.16</td>
<td>57.91</td>
</tr>
<tr class="grey1">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr class="grey2">
<td class="firstcol">3-Mo</td>
<td>52.42</td>
<td>54.44</td>
</tr>
<tr class="grey2">
<td class="firstcol">6-Mo</td>
<td>53.61</td>
<td>56.28</td>
</tr>
<tr class="grey2">
<td class="firstcol">12-Mo</td>
<td>54.56</td>
<td>56.74</td>
</tr>
<tr class="grey1">
<td colspan="3" class="firstcol">23-Mo
Range</td>
</tr>
<tr class="grey2">
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr class="grey2">
<td class="firstcol">Low</td>
<td>51.46</td>
<td>53.72</td>
</tr>
<tr class="grey2">
<td class="firstcol">% Range</td>
<td>18.5%</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
</body></html>

UK Banks Sharply Restrain MortgageLending in October

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071124a.jpg" width="353">
The Conference Board reported that the composite index of leading economic indicators for October fell by 0.5% after a 0.1% decline during September which was revised from the slight rise reported initially. The latest was the fourth decline in the last five months. 
During the last ten years there has been a 59% correlation between the y/y change in the leading indicators index and the lagged change in real GDP.
The breadth of one month gain amongst the 10 components of the leading index again collapsed to 30.0% from the revised 60% during September. Over a six month period, the breadth of gain amongst the leaders components was 50% for the second month in a row.
Last month, virtually all of the leader&#39;s components fell significantly except new orders for consumer goods, M2 and stock prices which made very modest positive contributions.
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071124b.jpg" width="353">
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators was unchanged for the first month since a slight decline in January. Over the last ten years there has been a 86% correlation between the y/y change in the coincident indicators and real GDP growth.
The lagging index rose firmly for the third consecutive month mostly due to higher C&amp;I loans. The ratio of coincident to lagging indicators (a measure of economic excess) fell for the fifth month in the last six to the lowest level since 1991. 
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">October</th>
<th scope="col">September</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">Leading</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>2.5%</td>
<td>7.1%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.0%</td>
<td>0.2%</td>
<td>1.7%</td>
<td>2.5%</td>
<td>2.1%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.3%</td>
<td>0.4%</td>
<td>3.3%</td>
<td>3.0%</td>
<td>3.5%</td>
<td>0.6%</td>
</tr>
</tbody>
</table>


</html>

The Conference Board reported that the composite index of leading economic indicators for October fell by 0.5% after a 0.1% decline during September which was revised from the slight rise reported initially. The latest was the fourth [...]

U.S. Leading Economic Indicators Fell Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121e.jpg" width="312">
Japan&#39;s trade balance widened in October, slightly from September and more noticeably from a year ago. The October surplus was &yen;1,073 billion, up from &yen;1,051 billion in September and &yen;933 in October 2006, all calculated from the Ministry of Finance&#39;s seasonally adjusted data. Before seasonal adjustment, the surplus was &yen;1,013 billion compared with just &yen;613 billion the year earlier.Exports strengthened anew, following some moderation in September; they increased &yen;124 billion from September to &yen;7,179 billion after falling &yen;192 billion then from August. They were up 13.9% from a year ago. Chemicals, manufactured goods, non-electrical machinery and &quot;other&quot; all grew more than the total, while the largest contribution came from motor vehicles. They were up 21.3% year/year or &yen;235 billion. Imports rose &yen;103 billion in October to &yen;6,106 billion, seasonally adjusted, yielding a third consecutive yearly increase less than 10%, this one 8.6% or &yen;513 billion. More than half of this increase was &quot;mineral fuels&quot;, &yen;278 billion. Thus, ironically this month, the rise in oil imports was almost completely covered by an increase in exports of motor vehicles.The trade pattern among various countries has been interesting. The trade surplus with the US is diminishing due to smaller exports. From yearly growth averaging &yen;177 billion per month in 2006, the 12 months through October saw just a &yen;26 billion average increase with September down from a year ago by &yen;146 billion and October down &yen;23 billion.This has reduced the surplus from &yen;783 billion in October 2006 to &yen;717 billion this October. In contrast, the deficit with China is decreasing as Japanese exports there are up 19.3% from a year ago, while imports have increased only 7.2%. There was a similar move in October with the EU, although the trend there is for a growing surplus. October exports to Europe surged 24% while imports rose only 9.8%. This yielded a nice increase in the surplus to &yen;476 billion from &yen;315 billion in October 2006. 
<img height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121f.jpg" width="312"><img height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121g.jpg" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN, Bil.&yen;</th>
<th scope="col">Oct 2007</th>
<th scope="col">Sept 2007</th>
<th scope="col">Aug 2007</th>
<th scope="col">Year Ago</th>
<th scope="col" colspan=3>Monthly Averages</th>
</tr>
<tr>
 <th colspan=5 scope="col"></th>
<th scope="col" >2006</th>
<th scope="col" >2005</th>
<th scope="col" >2004</th>
</tr>
</thead>
<tbody>

<tr>
<td class="firstcol">Trade Balance</td>
<td>1,073</td>
<td>1,051</td>
<td>1,133</td>
<td>933</td>
<td>658</td>
<td>726</td>
<td>996</td>
</tr>
<tr>
<td class="firstcol">Exports, SA*</td>
<td>7,179</td>
<td>7,054</td>
<td>7,247</td>
<td>6,448</td>
<td>6,271</td>
<td>5,471</td>
<td>5,097</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr %Chg</td>
<td>13.9%</td>
<td>6.5%</td>
<td>14.5%</td>
<td>--</td>
<td>14.6%</td>
<td>7.3%</td>
<td>12.1%</td>
</tr>
<tr>
<td class="firstcol">Imports, SA*</td>
<td>6,106</td>
<td>6,003</td>
<td>6,114</td>
<td>5,756</td>
<td>5,612</td>
<td>4,746</td>
<td>4,101</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr %Chg</td>
<td>8.6%</td>
<td>-3.2%</td>
<td>5.8%</td>
<td>--</td>
<td>18.3%</td>
<td>15.7%</td>
<td>10.9%</td>
</tr>
</tbody>
</table>
</body>
</html>

Japan's trade balance widened in October, slightly from September and more noticeably from a year ago. The October surplus was ¥1,073 billion, up from ¥1,051 billion in September and ¥933 in October 2006, all calculated from the [...]

Japanese Trade Surplus Widens in October with Strong Exports to China and Europe

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121c.jpg" width="353">
Initial claims for unemployment insurance fell back 11,000 last week to 330,000 after a 22,000 jump during the week prior. That was a slightly greater increase than originally indicated. A claims level of 330,000 had been expected for the latest week. There were no special factors indicated as having influenced the figures.
The latest figure is for the survey week for November nonfarm payrolls and claims fell 9,000 (2.7%) from the October period.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last six years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
The four week moving average of initial claims dipped slightly to 329,750 (3.2% y/y).
The largest increases in initial claims for the week ending Nov. 10 were in Michigan (+6,895), California (+5,696), Puerto Rico (+3,745), New Jersey (+2,726), and New York (+2,394), while the largest decreases were in Iowa (-2,397), Ohio (-1,558), North Carolina (-870), South Carolina (-809), and Georgia (-482).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121d.jpg" width="353">
Continuing claims for unemployment insurance rose 7,000 after a 16,000 worker decline that was slightly deeper than initially reported.
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment was again stable at 1.9%.
Labor Force Participation and the Prospects for U.S. Growth from the Federal Reserve Bank of Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-33.pdf"> 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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">11/17/07 </th>
<th scope="col">11/10/07 </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>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;330</td>
<td>341</td>
<td>2.5%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,566</td>
<td>5.7%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for unemployment insurance fell back 11,000 last week to 330,000 after a 22,000 jump during the week prior. That was a slightly greater increase than originally indicated. A claims level of 330,000 had been expected for [...]

U.S. Initial Claims for Jobless Insurance Fell Back

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121a.jpg" width="353">
The University of Michigan&#39;s consumer sentiment index for the full month of November held at the mid-month level of 75.0. That was down 7.3% from October and it pulled the average so far in 4Q 9.0% below the 3Q average. Consensus expectations for November were for stability with the mid-month reading of 75.0.
Both major sub-indexes were down sharply for the month. The current conditions index declined to 91.0 from October&#39;s 97.6, the weakest since March 2003. Expectations fell to 64.7 from 70.1 in October, the lowest reading since October 2005.
Current buying conditions compared to one year ago fell by half from where it was last year and the expected change in business conditions in the next 12 months also fell sharply. Current personal finances fell 9.0% and expectations for personal finances also fell. One-year expectations for business conditions fell but expectations for the next five years improved slightly from October&#39;s depressed level.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121b.jpg" width="353">
Expectations for inflation during the next twelve months jumped to 4.3% from 3.7% in October. The 2006 expectations were for 3.9% inflation this year. For the next five to ten years expectations were for a 3.4% rise in prices, equal to the expectation logged last year.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.
The minutes of the latest Federal Open Market Committee Meeting can be found <a href="http://www.federalreserve.gov/monetarypolicy/files/fomcminutes20071031.pdf"> here</a>.

<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/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Nov ( Final)</th>
<th scope="col">Nov (Prelim)</th>
<th scope="col">Oct</th>
<th scope="col">Nov&nbsp; 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">Consumer Sentiment</td>
<td>75.0</td>
<td>75.0</td>
<td>80.9</td>
<td>-18.6% </td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>91.0</td>
<td>91.0</td>
<td>97.6</td>
<td>-14.2%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>64.7</td>
<td>64.7</td>
<td>70.1</td>
<td>-22.2%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
</tr>
</tbody>
</table>
</body>
</html>

The University of Michigan's consumer sentiment index for the full month of November held at the mid-month level of 75.0. That was down 7.3% from October and it pulled the average so far in 4Q 9.0% below the 3Q average. Consensus [...]

Michigan Consumer Sentiment Remained Depressed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121a.jpg" width="353">
The University of Michigan&#39;s consumer sentiment index for the full month of November held at the mid-month level of 75.0. That was down 7.3% from October and it pulled the average so far in 4Q 9.0% below the 3Q average. Consensus expectations for November were for stability with the mid-month reading of 75.0.
Both major sub-indexes were down sharply for the month. The current conditions index declined to 91.0 from October&#39;s 97.6, the weakest since March 2003. Expectations fell to 64.7 from 70.1 in October, the lowest reading since October 2005.
Current buying conditions compared to one year ago fell by half from where it was last year and the expected change in business conditions in the next 12 months also fell sharply. Current personal finances fell 9.0% and expectations for personal finances also fell. One-year expectations for business conditions fell but expectations for the next five years improved slightly from October&#39;s depressed level.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121b.jpg" width="353">
Expectations for inflation during the next twelve months jumped to 4.3% from 3.7% in October. The 2006 expectations were for 3.9% inflation this year. For the next five to ten years expectations were for a 3.4% rise in prices, equal to the expectation logged last year.
The University of Michigan survey is not seasonally adjusted.The reading is based on telephone interviews with about 500 households at month-end; the mid-month results are based on about 300 interviews. The summary indexes are in Haver&#39;s USECON database, with details in the proprietary UMSCA database.
The minutes of the latest Federal Open Market Committee Meeting can be found <a href="http://www.federalreserve.gov/monetarypolicy/files/fomcminutes20071031.pdf"> here</a>.

<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/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Nov ( Final)</th>
<th scope="col">Nov (Prelim)</th>
<th scope="col">Oct</th>
<th scope="col">Nov&nbsp; 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">Consumer Sentiment</td>
<td>75.0</td>
<td>75.0</td>
<td>80.9</td>
<td>-18.6% </td>
<td>87.3</td>
<td>88.5</td>
<td>95.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>91.0</td>
<td>91.0</td>
<td>97.6</td>
<td>-14.2%</td>
<td>105.1</td>
<td>105.9</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>64.7</td>
<td>64.7</td>
<td>70.1</td>
<td>-22.2%</td>
<td>75.9</td>
<td>77.4</td>
<td>88.5</td>
</tr>
</tbody>
</table>
Japanese Trade Surplus Widens in October with Strong Exports to China and Europe 
by <a href="/comment/Stone.html">Carol Stone</a> November 21, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121e.jpg" width="312">
Japan&#39;s trade balance widened in October, slightly from September and more noticeably from a year ago. The October surplus was &yen;1,073 billion, up from &yen;1,051 billion in September and &yen;933 in October 2006, all calculated from the Ministry of Finance&#39;s seasonally adjusted data. Before seasonal adjustment, the surplus was &yen;1,013 billion compared with just &yen;613 billion the year earlier.Exports strengthened anew, following some moderation in September; they increased &yen;124 billion from September to &yen;7,179 billion after falling &yen;192 billion then from August. They were up 13.9% from a year ago. Chemicals, manufactured goods, non-electrical machinery and &quot;other&quot; all grew more than the total, while the largest contribution came from motor vehicles. They were up 21.3% year/year or &yen;235 billion. Imports rose &yen;103 billion in October to &yen;6,106 billion, seasonally adjusted, yielding a third consecutive yearly increase less than 10%, this one 8.6% or &yen;513 billion. More than half of this increase was &quot;mineral fuels&quot;, &yen;278 billion. Thus, ironically this month, the rise in oil imports was almost completely covered by an increase in exports of motor vehicles.The trade pattern among various countries has been interesting. The trade surplus with the US is diminishing due to smaller exports. From yearly growth averaging &yen;177 billion per month in 2006, the 12 months through October saw just a &yen;26 billion average increase with September down from a year ago by &yen;146 billion and October down &yen;23 billion.This has reduced the surplus from &yen;783 billion in October 2006 to &yen;717 billion this October. In contrast, the deficit with China is decreasing as Japanese exports there are up 19.3% from a year ago, while imports have increased only 7.2%. There was a similar move in October with the EU, although the trend there is for a growing surplus. October exports to Europe surged 24% while imports rose only 9.8%. This yielded a nice increase in the surplus to &yen;476 billion from &yen;315 billion in October 2006. 
<img height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121f.jpg" width="312"><img height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121g.jpg" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN, Bil.&yen;</th>
<th scope="col">Oct 2007</th>
<th scope="col">Sept 2007</th>
<th scope="col">Aug 2007</th>
<th scope="col">Year Ago</th>
<th scope="col" colspan=3>Monthly Averages</th>
</tr>
<tr>
 <th colspan=5 scope="col"></th>
<th scope="col" >2006</th>
<th scope="col" >2005</th>
<th scope="col" >2004</th>
</tr>
</thead>
<tbody>

<tr>
<td class="firstcol">Trade Balance</td>
<td>1,073</td>
<td>1,051</td>
<td>1,133</td>
<td>933</td>
<td>658</td>
<td>726</td>
<td>996</td>
</tr>
<tr>
<td class="firstcol">Exports, SA*</td>
<td>7,179</td>
<td>7,054</td>
<td>7,247</td>
<td>6,448</td>
<td>6,271</td>
<td>5,471</td>
<td>5,097</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr %Chg</td>
<td>13.9%</td>
<td>6.5%</td>
<td>14.5%</td>
<td>--</td>
<td>14.6%</td>
<td>7.3%</td>
<td>12.1%</td>
</tr>
<tr>
<td class="firstcol">Imports, SA*</td>
<td>6,106</td>
<td>6,003</td>
<td>6,114</td>
<td>5,756</td>
<td>5,612</td>
<td>4,746</td>
<td>4,101</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Yr/Yr %Chg</td>
<td>8.6%</td>
<td>-3.2%</td>
<td>5.8%</td>
<td>--</td>
<td>18.3%</td>
<td>15.7%</td>
<td>10.9%</td>
</tr>
</tbody>
</table>
U.S. Initial Claims for Jobless
Insurance Fell Back 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 21, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121c.jpg" align="left" border="0" height="265" width="353">
Initial claims for unemployment insurance fell back 11,000
last week to 330,000 after a 22,000 jump during the week prior. That
was a slightly greater increase than originally indicated. A claims
level of 330,000 had been expected for the latest week. There were no
special factors indicated as having influenced the figures.
The latest figure is for the survey week for November nonfarm
payrolls and claims fell 9,000 (2.7%) from the October period.
A claims level below 400,000 typically has been associated
with growth in nonfarm payrolls. During the last six years there has
been a (negative) 78% correlation between the level of initial claims
and the m/m change in nonfarm payroll employment.
The four week moving average of initial claims dipped slightly
to 329,750 (3.2% y/y).
The largest increases in initial claims for the week ending
Nov. 10 were in Michigan (+6,895), California (+5,696), Puerto Rico
(+3,745), New Jersey (+2,726), and New York (+2,394), while the largest
decreases were in Iowa (-2,397), Ohio (-1,558), North Carolina (-870),
South Carolina (-809), and Georgia (-482).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071121d.jpg" align="right" border="0" height="265" width="353">
Continuing claims for unemployment insurance rose 7,000 after
a 16,000 worker decline that was slightly deeper than initially
reported.
The continuing claims numbers lag the initial claims figures
by one week.
The insured rate of unemployment was again stable at 1.9%.
Labor Force
Participation and the Prospects for U.S. Growth from
the Federal Reserve Bank of Bank of San Francisco is available <a 
 href="http://www.frbsf.org/publications/economics/letter/2007/el2007-33.pdf">
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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a></th>
 <th scope="col">11/17/07 </th>
 <th scope="col">11/10/07 </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>
 <td class="firstcol">Initial Claims</td>
 <td>&nbsp;330</td>
 <td>341</td>
 <td>2.5%</td>
 <td>313</td>
 <td>331</td>
 <td>343</td>
 </tr>
 <tr>
 <td class="firstcol">Continuing
Claims</td>
 <td>--</td>
 <td>2,566</td>
 <td>5.7%</td>
 <td>2,459</td>
 <td>2,662</td>
 <td>2,924</td>
 </tr>
 </tbody>
</table>

</body>
</html>

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.

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**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.

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**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.

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**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.

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**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.

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**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.

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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

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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the I**NDUSTRY** database.

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- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

U.S. Light Vehicle Sales Fall in April

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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

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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%.

Economy in Brief: November 2007

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UK Banks Sharply Restrain Mortgage Lending in October

Services Slip: E-zone PMIs are Weak

UK Banks Sharply Restrain MortgageLending in October

U.S. Leading Economic Indicators Fell Again

Japanese Trade Surplus Widens in October with Strong Exports to China and Europe

U.S. Initial Claims for Jobless Insurance Fell Back

Michigan Consumer Sentiment Remained Depressed

Michigan Consumer Sentiment Remained Depressed