Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060216c.jpg" width="353">
The import prices jumped 1.3% last month, the first m/m increase since October. Consensus expectations for a 1.0% increase.
Higher petroleum prices led the January strength in import prices with a 6.4% jump. Crude oil prices rose 8.0% (48.2% y/y) m/m but in February have reversed course. Yesterday&#39;s price for Brent Crude of $57.61 compared to a January average of $63.15 per bbl. and a December average of $57.03.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060216e.jpg" width="353">
Nonpetroleum import prices rose 0.2% following and upwardly revised 0.1% December gain. The increase reflected a 1.2% (6.9% y/y) jump in foods, feeds &amp; beverages. Prices for nonauto consumer goods also rose 0.2% (0.1% y/y) and capital goods prices fell 0.1% (-1.6% y/y). Excluding a 1.0% decline in computer prices (-6.6% y/y), capital goods prices rose 0.3% (0.8% y/y).
During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies and a lower 57% against the real value of the dollar.
Export prices jumped 0.7% led by a 1.7% (8.2% y/y) surge in industrial materials prices.
The Dollar U-Turn from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/iet/20060201/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>1.3%</td>
<td>-0.1%</td>
<td>8.8%</td>
<td>7.5%</td>
<td>5.6%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>6.4%</td>
<td>-0.4%</td>
<td>49.3%</td>
<td>37.6%</td>
<td>30.5%</td>
<td>21.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.4%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.7%</td>
<td>0.1%</td>
<td>2.7%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>1.6%</td>
</tr>
</tbody>
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The import prices jumped 1.3% last month, the first m/m increase since October. Consensus expectations for a 1.0% increase. Higher petroleum prices led the January strength in import prices with a 6.4% jump. Crude oil prices rose 8.0% [...]

Import Prices Back Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060216a.jpg" width="353">
In February, the National Association of Home Builders&#39; (NAHB) Composite Housing Market Index remained at the depressed level of 57 for the third straight month. The figure compares to a high of 72 posted last June.
During the last twenty years there has been an 82% correlation between the y/y change in the annual composite index and the change in single family housing starts and there has been a 75% correlation between the current sales index and new single family home sales.
The January index for current sales of single family homes was stable at 62, down 20% from the January &#39;05 level of 77. The index for sales in six months slipped to 65 from an upwardly revised 66 during January, but it averaged 75 last year.
Traffic of prospective home buyers remained quite depressed at an index level of 40, the lowest level since April 2003.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">&nbsp;Feb &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>57</td>
<td>57</td>
<td>69</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
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In February, the National Association of Home Builders' (NAHB) Composite Housing Market Index remained at the depressed level of 57 for the third straight month. The figure compares to a high of 72 posted last June. During the last [...]

NAHB Housing Market Index Unchanged at a Low Level

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060216b.jpg" width="353">
Housing starts jumped 14.5% m/m during January to 2.276M units, the highest since 1973, following a December decline which was revised shallower. New construction activity most certainly was aided by the record warm temperatures last month. Consensus expectations had been for a lesser rise to 2.02M starts.
A 12.8% spike in single-family starts to 1.819M, a new record, more than reversed a 10.5% decline during December. The benefit from mild weather was clear from the regional figures which indicated a 23.3% (21.4% y/y) surge in the Northeast and a 31.0% (19.6% y/y) gain in the Midwest. The continuing benefit from low mortgage interest rates also was evident as single family starts in the South rose 8.3% (-1.0% y/y) and in the West by 7.3% (-5.3% y/y).
Multi family starts also were helped by the warmth and jumped 21.9% m/m to a new record high. Building permits rounded out last month&#39;s strength with a 6.8% gain to the highest level since September.
Today&#39;s testimony of Chairman Ben S. Bernanke before the U.S. Senate Committee on Banking, Housing, and Urban Affairs was identical to yesterday&#39;s and is available <a href="http://www.federalreserve.gov/boarddocs/hh/2006/february/testimony.htm"> here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>2,276</td>
<td>1,988</td>
<td>4.0%</td>
<td>2,072</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,819</td>
<td>1,613</td>
<td>2.8%</td>
<td>1,716</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>457</td>
<td>375</td>
<td>9.1%</td>
<td>355</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,217</td>
<td>2,075</td>
<td>3.8%</td>
<td>2,122</td>
<td>2,058</td>
<td>1,8 88</td>
</tr>
</tbody>
</table>
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Housing starts jumped 14.5% m/m during January to 2.276M units, the highest since 1973, following a December decline which was revised shallower. New construction activity most certainly was aided by the record warm temperatures last [...]

Housing Starts Lifted By Mild Weather

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060216b.jpg" width="353">
Housing starts jumped 14.5% m/m during January to 2.276M units, the highest since 1973, following a December decline which was revised shallower. New construction activity most certainly was aided by the record warm temperatures last month. Consensus expectations had been for a lesser rise to 2.02M starts.
A 12.8% spike in single-family starts to 1.819M, a new record, more than reversed a 10.5% decline during December. The benefit from mild weather was clear from the regional figures which indicated a 23.3% (21.4% y/y) surge in the Northeast and a 31.0% (19.6% y/y) gain in the Midwest. The continuing benefit from low mortgage interest rates also was evident as single family starts in the South rose 8.3% (-1.0% y/y) and in the West by 7.3% (-5.3% y/y).
Multi family starts also were helped by the warmth and jumped 21.9% m/m to a new record high. Building permits rounded out last month&#39;s strength with a 6.8% gain to the highest level since September.
Today&#39;s testimony of Chairman Ben S. Bernanke before the U.S. Senate Committee on Banking, Housing, and Urban Affairs was identical to yesterday&#39;s and is available <a href="http://www.federalreserve.gov/boarddocs/hh/2006/february/testimony.htm"> here</a>.

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<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>2,276</td>
<td>1,988</td>
<td>4.0%</td>
<td>2,072</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,819</td>
<td>1,613</td>
<td>2.8%</td>
<td>1,716</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>457</td>
<td>375</td>
<td>9.1%</td>
<td>355</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,217</td>
<td>2,075</td>
<td>3.8%</td>
<td>2,122</td>
<td>2,058</td>
<td>1,8 88</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index Unchanged at a Low Level 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060216a.jpg" width="353">
In February, the National Association of Home Builders&#39; (NAHB) Composite Housing Market Index remained at the depressed level of 57 for the third straight month. The figure compares to a high of 72 posted last June.
During the last twenty years there has been an 82% correlation between the y/y change in the annual composite index and the change in single family housing starts and there has been a 75% correlation between the current sales index and new single family home sales.
The January index for current sales of single family homes was stable at 62, down 20% from the January &#39;05 level of 77. The index for sales in six months slipped to 65 from an upwardly revised 66 during January, but it averaged 75 last year.
Traffic of prospective home buyers remained quite depressed at an index level of 40, the lowest level since April 2003.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</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/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">&nbsp;Feb &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>57</td>
<td>57</td>
<td>69</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
Import Prices Back Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060216c.jpg" width="353">
The import prices jumped 1.3% last month, the first m/m increase since October. Consensus expectations for a 1.0% increase.
Higher petroleum prices led the January strength in import prices with a 6.4% jump. Crude oil prices rose 8.0% (48.2% y/y) m/m but in February have reversed course. Yesterday&#39;s price for Brent Crude of $57.61 compared to a January average of $63.15 per bbl. and a December average of $57.03.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060216e.jpg" width="353">
Nonpetroleum import prices rose 0.2% following and upwardly revised 0.1% December gain. The increase reflected a 1.2% (6.9% y/y) jump in foods, feeds &amp; beverages. Prices for nonauto consumer goods also rose 0.2% (0.1% y/y) and capital goods prices fell 0.1% (-1.6% y/y). Excluding a 1.0% decline in computer prices (-6.6% y/y), capital goods prices rose 0.3% (0.8% y/y).
During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies and a lower 57% against the real value of the dollar.
Export prices jumped 0.7% led by a 1.7% (8.2% y/y) surge in industrial materials prices.
The Dollar U-Turn from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/iet/20060201/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>1.3%</td>
<td>-0.1%</td>
<td>8.8%</td>
<td>7.5%</td>
<td>5.6%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>6.4%</td>
<td>-0.4%</td>
<td>49.3%</td>
<td>37.6%</td>
<td>30.5%</td>
<td>21.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.2%</td>
<td>0.1%</td>
<td>2.4%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.7%</td>
<td>0.1%</td>
<td>2.7%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
Initial Unemployment Insurance Claims Up Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060216d.jpg" width="353">
Initial claims for jobless insurance rose 19,000 last week to 297,000, the highest level since early January. The prior week&#39;s increase was little revised so initial claims have been below 300,000 during six of the last seven weeks. Consensus expectations had been for an increase to 285,000 claims.
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.
The four-week moving average of initial claims rose to 283,000 (-9.3% y/y).
Continuing unemployment insurance claims reversed most of the prior week&#39;s revised increase and fell 39,000.
The insured rate of unemployment remained at 2.0% for the second week.

<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">02/11/06</th>
<th scope="col">02/04/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>297</td>
<td>278</td>
<td>-3.6%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,511</td>
<td>-7.2%</td>
<td>2,663</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
German Employment Falls in Q4; Gain in Public Sector, but Private Sector Jobs Base Has Marked Erosion 
by <a href="/comment/Stone.html">Carol Stone</a> February 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060216f.jpg" width="353">
Germany&#39;s Federal Statistics Office reported Q4 employment data today, classified by industry. These data are an input to German GDP data, due for release next Wednesday, February 22.
Early last week (February 7), Louise Curley discussed here weakness in German industrial production for Q4 and sluggish wage performance for workers, already bringing a strike by one major union. Today&#39;s employment data give further evidence of weakening in the German economy. Total employment fell 5,000 in Q4 from Q3 and was off 0.3% from a year ago. Subtracting out government, education and other public service activities, we see that the private sector is even weaker. Jobs there decreased by 88,000 over the second half of 2005 and were off 1.0% from the year-ago period. They fell 0.8% for the year as a whole, while total employment was off 0.2% in 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060216g.jpg" width="353">
Jobs in industry declined 135,000 from Q4 2004 to Q4 2005 and the trade and transportation sector was down 102,000. Agriculture and construction employment also declined. Growth in finance and other business services, by contrast, showed a 76,000 increase across the year. Government and related jobs had a substantial 152,000 increase from Q4 2004. The sharp rise in public sector jobs clearly offset a good portion of the total 280,000 job loss in the private sector. At the same time, it increases the burden on private sector firms and workers to generate tax revenues with which to pay the public sector workers. So the support to the economy from added government workers comes with a cost to businesses, which are already weighed down with pressure from labor unions wanting greater compensation, as explained by Ms. Curley here last week.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/@D5/@D51/@D51.HTM">Germany ( SA*, Thousands</a>)</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q4 2004</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Domestic Employment**</td>
<td>38,779</td>
<td>38,784</td>
<td>38,907</td>
<td>38,779</td>
<td>38,869</td>
<td>38,719</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Change</td>
<td>-5</td>
<td>+29</td>
<td>-0.3%</td>
<td>-0.2%</td>
<td>+0.4%</td>
<td>-1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Industry</td>
<td>7,844</td>
<td>7,864</td>
<td>7,979</td>
<td>7,882</td>
<td>8,018</td>
<td>8,138</td>
</tr>
<tr>
<td class="firstcol">Trade***</td>
<td>9,709</td>
<td>9,735</td>
<td>9,811</td>
<td>9,737</td>
<td>9,791</td>
<td>9,716</td>
</tr>
<tr class="odd">
<td class="firstcol">Finance &amp; Business Services</td>
<td>6,443</td>
<td>6,423</td>
<td>6,369</td>
<td>6,411</td>
<td>6,309</td>
<td>6,128</td>
</tr>
<tr>
<td class="firstcol">Government/Education/Health/Etc</td>
<td>11,826</td>
<td>11,779</td>
<td>11,676</td>
<td>11,753</td>
<td>11,628</td>
<td>11,535</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Change</td>
<td>+47</td>
<td>+65</td>
<td>+1.3%</td>
<td>+1.1%</td>
<td>+0.8%</td>
<td>+0.3%</td>
</tr>
<tr>
<td class="firstcol">Total - Government/Etc</td>
<td>26,953</td>
<td>27,005</td>
<td>27,231</td>
<td>27,026</td>
<td>27,241</td>
<td>27,184</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Change</td>
<td>-52</td>
<td>-36</td>
<td>-1.0%</td>
<td>-0.8%</td>
<td>+0.2%</td>
<td>-1.5%</td>
</tr>
</tbody>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215e.jpg" width="353">
Foreign investors sharply reduced their net purchases of securities from US investors in December, according to the US Treasury&#39;s monthly Treasury International Capital (&quot;TIC&quot;) data reported this morning. Foreigners bought $74.16 billion in US securities from US resident investors, down from $105.70 billion in November. At the same time, they sold $17.56 billion in foreign securities to US investors, making their overall net transactions with US investors $56.60 billion, down from $91.6 billion in November and the smallest amount since May&#39;s $56.57 billion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215f.jpg" width="353">
The TIC data, carried in Haver&#39;s USINT database, constitute a sizable body of information about interest in US markets from investors in many countries around the world. In the past, Japan has been the prime region absorbing US bonds and stocks. In the second graph, we show this with the share of Japanese gross purchases of US securities. In the late 1980s and early 1990s, Japan&#39;s purchase took about 35 - 40% of total foreign purchases. In more recent years, Japanese investors have reduced their buying. Not surprisingly, China&#39;s purchases have picked up. Additional monthly data are available on foreign holdings of Treasury securities and these show that Japan&#39;s portfolio has flattened. China&#39;s has trended consistently higher, but its Treasury ownership is still a mere fraction of Japan&#39;s.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215g.jpg" width="353">
In interpreting these data, it&#39;s important to remember that they mark the first transaction between a US investor and a non-US investor. That foreign party may be an intermediary between the American and the final foreign owner. Thus, the UK and Caribbean centers are large purchasers of US securities. But they may not be large &quot;owners&quot;. For instance, UK gross purchases of US Treasuries were 9 times as much as those of Japanese investors in 2005, but their holdings of Treasuries at the end of the year were only 34% as much as Japan&#39;s. China&#39;s holdings are just a little bit larger than the UK&#39;s, but they are growing consistently. See the third graph. 

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</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USINT/@U3/@U3.HTM">Net Foreign Purchases of Securities from US Investors</a> <a href="http://www.haverselect.com/dlx/USINT/@U3/@U3.HTM"> (Billions US$) </a></th>
<th scope="col">Dec 2005</th>
<th scope="col">Nov 2005 </th>
<th scope="col">Oct 2005 </th>
Monthly Averages&nbsp; 
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004 </td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Total </td>
<td>56.6</td>
<td>91.6</td>
<td>105.6</td>
<td>75.9</td>
<td>63.6</td>
<td>55.3</td>
<td>47.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Domestic Securities</td>
<td>74.2</td>
<td>105.7</td>
<td>108.8</td>
<td>87.4</td>
<td>76.4</td>
<td>60.0</td>
<td>45.6</td>
</tr>
<tr>
<td class="firstcol">Treasuries </td>
<td>18.5</td>
<td>54.5</td>
<td>29.2</td>
<td>29.2</td>
<td>29.3</td>
<td>22.0</td>
<td>10.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Federal Agencies (mostly &quot;GSEs&quot;) </td>
<td>9.8</td>
<td>9.1</td>
<td>34.9</td>
<td>18.9</td>
<td>18.9</td>
<td>13.0</td>
<td>16.3</td>
</tr>
<tr>
<td class="firstcol">US Corporate Bonds </td>
<td>37.3</td>
<td>37.3</td>
<td>36.1</td>
<td>32.6</td>
<td>25.8</td>
<td>22.1</td>
<td>15.2</td>
</tr>
<tr class="odd">
<td class="firstcol">US Corporate Stocks </td>
<td>8.7</td>
<td>4.8</td>
<td>8.0</td>
<td>6.6</td>
<td>2.4</td>
<td>2.9</td>
<td>4.2</td>
</tr>
<tr>
<td class="firstcol">Foreign Bonds </td>
<td>-3.7</td>
<td>2.2</td>
<td>2.8</td>
<td>-1.4</td>
<td>-5.7</td>
<td>2.7</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign Stocks </td>
<td>-13.8</td>
<td>-16.4</td>
<td>-6.0</td>
<td>-10.1</td>
<td>-7.1</td>
<td>-7.4</td>
<td>-0.1</td>
</tr>
</tbody>
</table>
</body>
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Foreign investors sharply reduced their net purchases of securities from US investors in December, according to the US Treasury's monthly Treasury International Capital ("TIC") data reported this morning. Foreigners bought $74.16 [...]

Foreign Investors Slow Net Buying of Securities from US Investors in December

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215a.jpg" width="353">
The total number of mortgage applications fell 7.3% last week, the third consecutive weekly decline. The declines have been sufficient to reverse virtually all of the 5.2% increase in applications during the month of January.
Purchase applications dropped a sharp 7.9% w/w and added to declines during the prior four months. The average level of purchase applications in February is down 17.6% from the peak month of July last year.
During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance fell 6.5% w/w to the lowest level in one month.
The effective interest rate on a conventional 30-year mortgage rose for the third straight week and settled at 6.52% versus an average 6.34% in January. The effective rate on a 15-year mortgage also rose to 6.21% versus an average 5.98% last month. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<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">02/10/06</th>
<th scope="col">02/03/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>574.1</td>
<td>619.3</td>
<td>-21.6%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>391.7</td>
<td>425.1</td>
<td>-7.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,636.7</td>
<td>1,751.0</td>
<td>-35.3%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
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The total number of mortgage applications fell 7.3% last week, the third consecutive weekly decline. The declines have been sufficient to reverse virtually all of the 5.2% increase in applications during the month of January. Purchase [...]

Mortgage Applications Reversed January Uptick

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215b.jpg" width="353">
The February Empire State Index of General Business Conditions, published by the Federal Reserve Bank of New York, was roughly stable at 20.31 following the 6.16 point January decline to 20.12. Consensus expectations for the factory sector index had been for the index to fall further to 18.0.
Since the series&#39; inception in 2001 there has been a 76% correlation between the index level and the three month change in factory sector production.
Most of the index components showed the same stability in February. The shipments index dipped marginally after a 13 point rise during January but new orders fell for the second month. The inventory index recouped more than all of a sharp January decline.
An exception was the employment index which reversed about all of a sharp January increase.
Pricing pressure picked up during February as indicated by a 6.3 point jump to the highest level since November.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215c.jpg" width="353">
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The index of expectations for business conditions in six months fell a sharp 9.7 points to the lowest level since October. Expectations for future capital spending improved sharply.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>20.31</td>
<td>20.12</td>
<td>18.05</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
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The February Empire State Index of General Business Conditions, published by the Federal Reserve Bank of New York, was roughly stable at 20.31 following the 6.16 point January decline to 20.12. Consensus expectations for the factory [...]

Empire State Index Stable

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215d.jpg" width="353">
Overall industrial output fell last month by 0.7% following an upwardly revised 0.9% rise during December. The decline, however, wholly reflected the warm temperatures which reduced utility output by 10.2% (-4.7% y/y). Consensus expectations had been for a 0.3% increase in total output.
Factory sector production increased 0.7% (4.5% y/y) following a December increase of 0.4% that was double the initial estimated gain.
A rebound in output of motor vehicles &amp; parts accounted for only some of last month&#39;s factory output gain as a 2.3% m/m increase still left production 3.8% below last June&#39;s level. Excluding motor vehicles, factory output rose 0.5% (4.7% y/y). Output of appliances, furniture &amp; carpeting recovered 2.1% (3.2% y/y) following three months of decline and clothing output rose 0.3% (1.6% y/y), the third straight monthly increase.
Output of business equipment rose a strong 1.0% (10.7% y/y) led by a 1.6% (24.3% y/y) increase in high tech output. Excluding the high tech sector, factory output rose 0.6% (3.3% y/y) and excluding both autos &amp; high tech factory output rose 0.5% (3.3% y/y).
Total capacity utilization fell to 80.9% but factory sector utilization rose to 80.5%, the highest level since 2000.
Today&#39;s testimony by Federal Reserve Board Chairman Ben S. Bernanke is available <a href="http://www.federalreserve.gov/boarddocs/hh/2006/february/testimony.htm"> here</a>.
The complete Monetary Policy Report and the Economic Outlook can be found <a href="http://www.federalreserve.gov/boarddocs/hh/2006/february/ReportSection1.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>-0.2%</td>
<td>0.9%</td>
<td>3.2%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>-0.4%</td>
<td>0.3%</td>
<td>1.8%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business Equipment</td>
<td>1.0%</td>
<td>0.6%</td>
<td>10.7%</td>
<td>9.0%</td>
<td>9.3%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>80.9%</td>
<td>81.2%</td>
<td>79.8% (1/05)</td>
<td>80.1%</td>
<td>78.6%</td>
<td>75.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

Overall industrial output fell last month by 0.7% following an upwardly revised 0.9% rise during December. The decline, however, wholly reflected the warm temperatures which reduced utility output by 10.2% (-4.7% y/y). Consensus [...]

Industrial Production Off Due to Warm Weather

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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Andrew Cates

**The US labour market**
The latest data highlight a growing sense of fragility in the US labour market. The unemployment rate, while still relatively low by historical standards, has been edging higher through the course of this year. More telling, however, is the signal from this week’s consumer confidence survey from Conference Board and specifically the labour market differential — the gap between the share of consumers saying jobs are plentiful versus those saying jobs are hard to get. That balance has narrowed sharply, moving back toward levels historically associated with softer labour demand and rising unemployment.

250828Z1.jpg

**Goods and services inflation** 
Haver’s breakdown of goods and services CPI inflation in the advanced economies highlights where fresh risks are emerging. Goods inflation, which had been receding sharply after the pandemic supply shocks, has recently shown signs of firming again. Some of this probably reflects the impact of US tariff policies, which are raising import costs and putting renewed upward pressure on traded goods prices. While services inflation remains the more stubborn component in most advanced economies, the risk is that tariffs could reintroduce stickiness into goods prices, slowing the overall disinflation process.

250828Z2.jpg

**China, Europe and US trade policy**
A consequence of US tariff policies has been a sharp contraction in Chinese exports to the US market, with much of the surplus redirected elsewhere. Europe in particular has recorded near double-digit import growth in recent months, raising concerns that Beijing is deflecting its industrial overcapacity problem rather than resolving it, effectively transferring the pressure onto trading partners. China’s authorities, however, have begun to push back, introducing measures to curb excess supply and rein in so-called “involution,” including clampdowns on price wars across several industries.

250828Z3.jpg

**China’s excess capacity and Europe**
A closer look at Europe–China trade shows that electric vehicles remain a key flashpoint. Import volumes from China have continued to rise even as per-unit prices fall sharply from a year ago —evidence suggesting that industrial overcapacity persists, with low-cost Chinese EVs increasingly challenging European automakers. The surge has carried on despite EU tariffs of up to 45% on battery EVs, as Chinese producers have adapted by pushing plug-in hybrids and expanding onshore production in Europe to bypass duties and defend market share.

250828Z4.jpg

**Wage growth in the US and Europe** 
Turning back to inflation dynamics, the UK stands out for its persistent wage pressures. While posted wage growth has cooled across the US and euro area, the UK measure has remained elevated at around 6% year-on-year, well above pre-pandemic norms. This stickiness reflects a still-tight labour market in key service sectors, even as broader activity has slowed and unemployment has edged higher. For the Bank of England, it underscores the dilemma: headline inflation is easing, but underlying pay growth risks keeping services inflation uncomfortably high, complicating the timing and scale of policy easing.

250828Z5.jpg

**The UK economy**
The UK’s net international investment position has deteriorated noticeably in recent years, with both direct investment and portfolio flows showing persistent weakness. The latest data underline how net FDI has turned increasingly negative, while the portfolio investment balance has also eroded, leaving the UK more reliant on volatile short-term funding sources. This deterioration comes against a backdrop of heightened investor unease about the riskiness of UK debt markets, where elevated gilt yields and rising debt-servicing costs have amplified concerns over fiscal sustainability. Taken together, these trends underscore the vulnerability of the UK’s external position at a time when global capital is arguably proving more selective and risk sensitive.

250828Z6.jpg

Global markets have continued to rally into late summer, buoyed by AI optimism, dovish signals from central bankers at Jackson Hole, and expectations of easier policy ahead. Yet beneath the surface, risks to the world economy are accumulating. In the US, labour market indicators point to softening conditions (chart 1), while tariff-driven pressures are beginning to push goods prices higher (chart 2). Global trade flows are being reshaped by US policy, with China’s excess capacity increasingly diverted toward Europe, most visibly through surging exports of electric vehicles (EVs) (charts 3 and 4). At the same time, wage growth remains stubbornly elevated in the UK, complicating disinflation (chart 5), while concerns are mounting over the country’s external vulnerabilities as net FDI and portfolio positions weaken against the backdrop of jittery debt markets (chart 6). Together, these dynamics highlight the tension between buoyant market performance and a global economy still grappling with structural fragilities.

Charts of the Week: Riskbusters

250828N8.jpg

250828C8.jpg

Real GDP grew 3.3% (SAAR) during the second quarter of 2025, revised from a 3.0% gain reported initially. The increase followed an unrevised 0.5% decline in Q1. A 3.1% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.1% compared to 2.0% y/y in Q1, and remained below its most recent high of 3.2% in Q4 2023.
After-tax corporate profits without IVA & CCA adjustment increased 1.4% (7.0% y/y) last quarter after easing 0.8% in Q1. Before-tax earnings with IVA & CCA rose 1.7% (4.3% y/y) after falling 2.3% in Q1. Financial sector earnings rose 1.4% (15.3% y/y) after rising 2.3% in Q1. Nonfinancial corporate profits rose 2.2% (2.5% y/y) after falling 2.5% in Q1. Earnings from abroad eased 0.7% (-0.4% y/y) following a 7.3% Q1 decline.
Foreign trade balance improvement added 4.95 percentage points to growth last quarter after subtracting 4.61 percentage points in Q1. Imports fell 29.8% (+1.3% y/y) after surging 38.0% in Q1. Exports declined 1.3% (+2.0% y/y) after improving 0.4% in Q1. Inventories subtracted 3.29 percentage points from growth after adding 2.59 percentage point to Q1 growth.

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

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

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

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

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

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Government spending eased 0.2%, revised from up 0.5% in Q2 (+1.8% y/y) after a 0.6% decline. Federal government expenditures declined 4.7% (+0.7% y/y) after falling 4.6% in Q1. National defense expenditures increased 1.4% (3.0% y/y) after declining 7.1% in Q1. State & local government spending rose 2.6% (2.5% y/y) following a 2.0% rise.
The GDP chain price index rose an unrevised and expected 2.0% last quarter (2.5% y/y) after increasing 3.8% in Q1. The PCE chain price index increased 2.0% (2.4% y/y) following a 3.7% rise. The PCE price index excluding food and energy rose 2.5% (2.7% y/y) after increasing 3.5% in Q1. The business fixed investment price index edged 0.5% lower (+1.1% y/y) after a 0.4% rise. The residential price index rose 1.1% (2.6% y/y) after a 4.1% rise while the government price index increased 3.3% (3.1% y/y) following a 4.6% rise.

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

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- Business investment strengthens & consumer spending firms.
- U.S. business earnings reverse Q1 decline.
- Increase in price index is unrevised, remaining roughly half of Q1’s gain.

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

Sandy Batten

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

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

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

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

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

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

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

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

FRB Kansas City Manufacturing Index Unchanged in August

Kathleen Stephansen, CBE

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

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

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

The insured unemployment rate varied greatly across individual states and territories. In the week ended August 9, the highest unemployment rates were in New Jersey (2.75%), Rhode Island (2.58%), Massachusetts (2.18%), Minnesota (2.17%), California (2.11%), Washington (2.08%), District of Columbia (2.04%), and Puerto Rico (2.02%). The lowest were in South Dakota (0.28%), Florida (0.42%), and Alabama and North Carolina (both 0.47%). Rates in other notable states include Pennsylvania (1.92%), New York (1.73%), Illinois (1.72%), and Texas (1.24%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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

U.S. Initial Unemployment Insurance Claims Declined in Latest Week

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

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

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

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

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

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

Economy in Brief: February 2006

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Import Prices Back Up

NAHB Housing Market Index Unchanged at a Low Level

Housing Starts Lifted By Mild Weather

Housing Starts Lifted By Mild Weather

Foreign Investors Slow Net Buying of Securities from US Investors in December

Mortgage Applications Reversed January Uptick

Empire State Index Stable

Industrial Production Off Due to Warm Weather