Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050629b.jpg" width="353">
US real GDP growth in 1Q &#39;05 was revised up further to 3.8% (AR), in line with Consensus expectations.
Corporate profit growth (w/IVA &amp; CCA) also was revised up to 6.0% (15.4% y/y) versus the preliminary estimate of a 4.5% increase. Profitability amongst US nonfinancial corporations rose 3.4% (22.6% y/y) instead of declining 0.8% as initially estimated.
The upward revision to profits stemmed from an increase in profit margins which were initially estimated to have declined.
Growth in domestic demand growth also was revised up to 3.5% Growth in business investment was raised slightly to 4.1% (10.9% y/y) and growth in residential building was raised sharply to 11.5% (8.1% y/y). Real PCE growth was left unchanged at 3.6% (3.6% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050629a.jpg" width="353">
The drag on US output growth from a larger foreign trade deficit was little changed as exports grew 8.9% and imports rose 9.6% while the contribution to GDP growth from faster inventory accumulation also was little revised at 0.7%.
The chain price index was revised down to 2.9% growth as the price index for domestic demand was lowered to 2.7% (2.7% y/y).

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">1Q &#39;05 (Final)</th>
<th scope="col">1Q &#39;05 (Prelim.)</th>
<th scope="col">4Q &#39;04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>3.8%</td>
<td>3.5%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>4.4%</td>
<td>3.0%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.7%</td>
<td>0.8%</td>
<td>0.5%</td>
<td>0.2%</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>3.0%</td>
<td>2.7%</td>
<td>3.4%</td>
<td>3.5%</td>
<td>4.0%</td>
<td>3.1%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>-0.6%</td>
<td>-0.7%</td>
<td>-1.4%</td>
<td>-0.6%</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>-0.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>3.5%</td>
<td>3.2%</td>
<td>4.5%</td>
<td>4.1%</td>
<td>4.4%</td>
<td>3.4%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.9%</td>
<td>3.2%</td>
<td>2.3%</td>
<td>2.4%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>
Mortgage Applications Fell A Bit Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 29, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050629c.jpg" width="353">
The Mortgage Bankers Association reported that total mortgage applications fell another 1.1% last week following the 11.3% decline during the week prior. As a result of increases earlier in the month, applications in June grew 9.9% versus the May average which rose 6.5% versus April.
Purchase applications slipped 0.4% adding to the 9.4% w/w drop during the prior week. In June purchase applications rose 1.3% from May which rose 3.1% from April. 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 1.8% w/w but in June were 21.2% versus May.
The effective interest rate on a conventional 30-year mortgage fell sharply to 5.71%, down from the 5.92% averaged during May. It was the lowest rate since March 2004. The effective rate on a 15-year mortgage also fell sharply to 5.33%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">06/24/05</th>
<th scope="col">06/17/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>778.4</td>
<td>786.8</td>
<td>35.4%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>477.4</td>
<td>479.4</td>
<td>9.6%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,529.2</td>
<td>2,575.0</td>
<td>82.4%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Japanese Industrial Output Sluggish; Korea's Grows Unevenly 
by <a href="/comment/Stone.html">Carol Stone</a> June 29, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050629d.jpg" width="353">
Industrial activity in Japan and Korea shows sharply varying patterns, both in recent months and over the past several years. In Japan, mining and manufacturing output in May stood at 100.1, that is, barely above the amount five years ago for this index based at 100 in 2000. Looking at these endpoints, though, masks the recession in 2001 and a recovery in 2003 and 2004. However, the evolution over the past few months has started to show renewed hesitation. An industry segment in which Japan and Korea compete actively is motor vehicles. For Japan, the corresponding production sector, transport equipment (excluding ships and rolling stock), has been relatively volatile of late, but at 116.3 in May, the sector shows growth since 2000 averaging just over 3%.
Total output in Korea has been considerably more vigorous, with the May 2005 index standing a 128.8, an average annualized gain of 5.1% since the base year in 2000. Despite this attractive average, the gains have been uneven over time and across industries. Chemicals and products have been strong fairly consistently, and radio, TV and communications equipment showed sizable increases in 2003 and 2004, but some recent hesitation. The motor vehicle sector, illustrated in the second graph along with that in Japan, has grown 9% - 10% yearly, but after a spike in December and January, has weakened markedly. These latest declines carried total vehicle production down to the lowest in seven months and to a level just equal to the average monthly output in the last two years. They are probably just an adjustment to that end-2004 surge, but may skittishness some skittishness as world energy prices stay high.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050629e.jpg" width="353">

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<th scope="col" class="firstcol">Indexes, 2000=100, Monthly, Seasonally adjusted</th>
<th scope="col">May 2005</th>
<th scope="col">Apr 2005</th>
<th scope="col">Mar 2005</th>
<th scope="col">Year Ago (Yr/Yr&nbsp;&nbsp; % Chg)</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Japan: Mining &amp; Manufacturing</td>
<td>100.1</td>
<td>102.5</td>
<td>100.6</td>
<td>100.5</td>
<td>100.2</td>
<td>95.0</td>
<td>92.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>-2.3</td>
<td>1.9</td>
<td>-0.2</td>
<td>0.9</td>
<td>5.5</td>
<td>3.2</td>
<td>-1.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Transport Equipment*</td>
<td>116.3</td>
<td>126.4</td>
<td>117.7</td>
<td>113.4</td>
<td>113.5</td>
<td>108.5</td>
<td>105.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>-8.0</td>
<td>7.4</td>
<td>0.3</td>
<td>5.0</td>
<td>4.6</td>
<td>3.1</td>
<td>5.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Korea: Mining &amp; Manufacturing</td>
<td>128.8</td>
<td>128.0</td>
<td>129.9</td>
<td>126.6</td>
<td>125.7</td>
<td>113.7</td>
<td>108.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>0.6</td>
<td>-1.5</td>
<td>4.3</td>
<td>4.0</td>
<td>10.8</td>
<td>4.9</td>
<td>8.1</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>139.8</td>
<td>146.7</td>
<td>157.4</td>
<td>127.8</td>
<td>139.1</td>
<td>127.5</td>
<td>116.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>-4.7</td>
<td>-6.8</td>
<td>1.9</td>
<td>9.3</td>
<td>9.1</td>
<td>9.2</td>
<td>9.9</td>
</tr>
</tbody>
</table>
</body>
</html>

US real GDP growth in 1Q '05 was revised up further to 3.8% (AR), in line with Consensus expectations. Corporate profit growth (w/IVA & CCA) also was revised up to 6.0% (15.4% y/y) versus the preliminary estimate of a 4.5% increase. [...]

US GDP & Corporate Profit Growth Revised Up

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050628c.jpg" width="353">
Business confidence in both France and Italy had remained unchanged or declined in the months since October, 2004 through May 2005. In June, however, business confidence in France rose, but confidence in Italy continued to weaken.The attached chart show the French and Italian measures of business confidence.
The composite business climate indicator for France rose 2.1% to 99 (100 being the long term average) in June. The rise has been attributed to the euro&#39;s recent decline against the dollar and to the 4.5 billion euro plan announced June 8 by Prime Minister Dominique de Villepin to increase employment.
The decline in the Euro failed to raise confidence in Italy but it may have been a factor in reducing the extent of the decline. The ISAE (Instituto de Studi e Analisis Economica) index of business confidence declined only 0.12% in June, in contrast to the 0.59% decline in May and 0.24% in April. The pessimism of Italian businessmen has no doubt been influenced by the fact that Italy has experienced two successive quarters of decline in real gross domestic product; -0.44% in the fourth quarter of 2004 and -0.51% in the first quarter of 2005. In France, on the other hand, GDP has increased of 0.67% and 0.21% in the corresponding periods.
As we have noted in previous commentaries on confidence, the recent rise in the price of oil has yet to be reflected in the confidence indicators.

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Jun 05</th>
<th scope="col">May 05</th>
<th scope="col">Jun 04</th>
<th scope="col">M/M%&nbsp;</th>
<th scope="col">Y/Y%&nbsp;</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
<tbody>
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<td class="firstcol"><a href="http://www.haverselect.com/dlx/FRANCE/FRANCE.HTM">France</a></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<tr>
<td class="firstcol">Composite Business Climate Indicator (Long Term Average = 100)</td>
<td>99</td>
<td>97</td>
<td>105</td>
<td>2.06</td>
<td>-5.71</td>
<td>105</td>
<td>95</td>
<td>97</td>
</tr>
<tr class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/ITALY/ITALY.HTM">Italy</a></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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<tr>
<td class="firstcol">ISAE Indicator of Business Confidence (2000 = 100)</td>
<td>84.2</td>
<td>84.3</td>
<td>90.4</td>
<td>-0.12</td>
<td>-6.86</td>
<td>89.5</td>
<td>88.0</td>
<td>90.1</td>
</tr>
</tbody>
</table>
</body>
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Business confidence in both France and Italy had remained unchanged or declined in the months since October, 2004 through May 2005. In June, however, business confidence in France rose, but confidence in Italy continued to weaken.The [...]

More Indicators of European Business Confidence: French Up, Italian Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050628b.jpg" width="353">
Chain store sales fell 0.6% last week following three consecutive weeks of gain according to the International Council of Shopping Centers (ICSC)-UBS survey. In June sales are 0.4% below the prior month&#39;s average.
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC fell 0.2% w/w (+2.8% y/y) following two weeks of increase.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">06/25/05</th>
<th scope="col">06/18/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>453.0</td>
<td>455.9</td>
<td>4.2%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
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Chain store sales fell 0.6% last week following three consecutive weeks of gain according to the International Council of Shopping Centers (ICSC)-UBS survey. In June sales are 0.4% below the prior month's average. During the last ten [...]

Chain Store Sales Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050628a.jpg" width="353">
The Index of Consumer Confidence from the Conference Board rose another 2.6% in June to 105.8 following an upwardly revised gain in May. Consensus expectations had been for a lesser increase to 104.1.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Consumer expectations rose again for the second month to the highest level since February (-5.0% y/y). Expectations for business conditions and income rose.
The present situation index rose for the fifth month this year (+14.0% y/y). Jobs were viewed as hard to get by a net 22.6% of survey participants, near the lowest level in three years.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>105.8</td>
<td>103.1</td>
<td>2.9%</td>
<td>96.1</td>
<td>79.8</td>
<td>96.6</td>
</tr>
</tbody>
</table>
</body>
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The Index of Consumer Confidence from the Conference Board rose another 2.6% in June to 105.8 following an upwardly revised gain in May. Consensus expectations had been for a lesser increase to 104.1. During the last twenty years [...]

Consumer Confidence Rose Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050628a.jpg" width="353">
The Index of Consumer Confidence from the Conference Board rose another 2.6% in June to 105.8 following an upwardly revised gain in May. Consensus expectations had been for a lesser increase to 104.1.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Consumer expectations rose again for the second month to the highest level since February (-5.0% y/y). Expectations for business conditions and income rose.
The present situation index rose for the fifth month this year (+14.0% y/y). Jobs were viewed as hard to get by a net 22.6% of survey participants, near the lowest level in three years.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>105.8</td>
<td>103.1</td>
<td>2.9%</td>
<td>96.1</td>
<td>79.8</td>
<td>96.6</td>
</tr>
</tbody>
</table>
Chain Store Sales Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 28, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050628b.jpg" width="353">
Chain store sales fell 0.6% last week following three consecutive weeks of gain according to the International Council of Shopping Centers (ICSC)-UBS survey. In June sales are 0.4% below the prior month&#39;s average.
During the last ten years there has been a 56% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC fell 0.2% w/w (+2.8% y/y) following two weeks of increase.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">06/25/05</th>
<th scope="col">06/18/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>453.0</td>
<td>455.9</td>
<td>4.2%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
More Indicators of European Business Confidence:  French Up, Italian Down 
by <a href="/comment/Curley.html">Louise Curley</a> June 28, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050628c.jpg" width="353">
Business confidence in both France and Italy had remained unchanged or declined in the months since October, 2004 through May 2005. In June, however, business confidence in France rose, but confidence in Italy continued to weaken.The attached chart show the French and Italian measures of business confidence.
The composite business climate indicator for France rose 2.1% to 99 (100 being the long term average) in June. The rise has been attributed to the euro&#39;s recent decline against the dollar and to the 4.5 billion euro plan announced June 8 by Prime Minister Dominique de Villepin to increase employment.
The decline in the Euro failed to raise confidence in Italy but it may have been a factor in reducing the extent of the decline. The ISAE (Instituto de Studi e Analisis Economica) index of business confidence declined only 0.12% in June, in contrast to the 0.59% decline in May and 0.24% in April. The pessimism of Italian businessmen has no doubt been influenced by the fact that Italy has experienced two successive quarters of decline in real gross domestic product; -0.44% in the fourth quarter of 2004 and -0.51% in the first quarter of 2005. In France, on the other hand, GDP has increased of 0.67% and 0.21% in the corresponding periods.
As we have noted in previous commentaries on confidence, the recent rise in the price of oil has yet to be reflected in the confidence indicators.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Jun 05</th>
<th scope="col">May 05</th>
<th scope="col">Jun 04</th>
<th scope="col">M/M%&nbsp;</th>
<th scope="col">Y/Y%&nbsp;</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/FRANCE/FRANCE.HTM">France</a></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Composite Business Climate Indicator (Long Term Average = 100)</td>
<td>99</td>
<td>97</td>
<td>105</td>
<td>2.06</td>
<td>-5.71</td>
<td>105</td>
<td>95</td>
<td>97</td>
</tr>
<tr class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/ITALY/ITALY.HTM">Italy</a></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">ISAE Indicator of Business Confidence (2000 = 100)</td>
<td>84.2</td>
<td>84.3</td>
<td>90.4</td>
<td>-0.12</td>
<td>-6.86</td>
<td>89.5</td>
<td>88.0</td>
<td>90.1</td>
</tr>
</tbody>
</table>
</body>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050627d.jpg" width="353">
German business confidence improved in June after having declined in the four previous months according to the IFO Institute&#39;s survey of some 7,700 entrepreneurs. The data confirm the slight improvement in confidence shown by the institutional investors and analysts in the Zew Index published last week. The decline in the Euro has been cited in both cases as a cause of improved confidence as has the prospect of a Fall election that could lead to more business friendly economic and social reforms. The impact of the recent rise in the price of oil, however, has yet to be reflected in the confidence measures.
The preliminary results of the IFO survey published today include the business climate, the current situation and the expectations for six months ahead indexes. In addition, the percentage balances of opinion on the climate for manufacturing, wholesale, retail trade, construction and total businesses are published. The complete data, of indexes and percentage balances for detailed industries, will be published later in the week. The data released so far show that balance of opinion in the manufacturing, wholesale and retail trade areas has become less negative in June, but has become more negative in the construction industry.
The Business Climate index reflects both current conditions and expectations. In June both current conditions and expectations rose slightly, but while current conditions were also above June, 2004, expectations were 1.5% below the year ago figure. The indexes of current conditions and expectations of conditions six months ahead are plotted in the attached chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">Germany</a></th>
<th scope="col">Jun 05</th>
<th scope="col">May 05</th>
<th scope="col">Jun 04</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Indexes 2000=100</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Business Climate</td>
<td>93.3</td>
<td>92.9</td>
<td>94.7</td>
<td>0.43</td>
<td>-1.48</td>
<td>-5.7</td>
<td>91.7</td>
<td>89.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Current Conditions</td>
<td>93.7</td>
<td>93.4</td>
<td>93.3</td>
<td>0.32</td>
<td>0.43</td>
<td>94.0</td>
<td>88.4</td>
<td>85.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Expectation 6 mo, ahead</td>
<td>92.9</td>
<td>92.3</td>
<td>96.1</td>
<td>0.43</td>
<td>-1.48</td>
<td>97.4</td>
<td>95.1</td>
<td>93.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Percent Balances</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>M/M dif</td>
<td>Y/Y dif</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>-14.2</td>
<td>-15.1</td>
<td>-11.5</td>
<td>0.9</td>
<td>-2.7</td>
<td>-9.5</td>
<td>-17.5</td>
<td>-21.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>-5.3</td>
<td>-5.6</td>
<td>3.0</td>
<td>0.3</td>
<td>-8.3</td>
<td>4.5</td>
<td>-7.9</td>
<td>-10.2</td>
</tr>
<tr>
<td class="firstcol">Retail Trade</td>
<td>-21.0</td>
<td>-25.8</td>
<td>-29.8</td>
<td>4.8</td>
<td>8.8</td>
<td>-27.6</td>
<td>-25.4</td>
<td>-40.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale Trade</td>
<td>-18.2</td>
<td>-22.0</td>
<td>-22.5</td>
<td>3.8</td>
<td>4.3</td>
<td>-17.2</td>
<td>-24.5</td>
<td>-29.8</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-42.1</td>
<td>-37.6</td>
<td>-42.8</td>
<td>-4.5</td>
<td>0.7</td>
<td>-42.6</td>
<td>-42.8</td>
<td>-44.5</td>
</tr>
</tbody>
</table>
</body>
</html>

German business confidence improved in June after having declined in the four previous months according to the IFO Institute's survey of some 7,700 entrepreneurs. The data confirm the slight improvement in confidence shown by the [...]

The German IFO Institute Confirms the Rise in Business Confidence Shown Earlier by the ZEW Measure

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Liquidity growth in the US has slowed markedly this year versus the charged growth rates during the prior three years. Growth during the last three months in the adjusted monetary base fell to 1.2% versus 5.3% growth last year and 8.6% growth during 2002.
Contributing to this slowdown, if not causing it, has been the increase in the targeted interest rate for Fed funds to 3.0% from 1.0%.
Growth in MZM also has slowed to 0.8% during the last three months versus 3.9% during 2004 and 13.0% growth during 2002. The pickup in the most recent MZM growth rate from below zero may indicate continued life for consumer spending.
A Neutral Federal Funds Rate? from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20041201/cover.pdf"> here</a>.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050627a.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050627c.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W3/@W301/@W301.HTM">Money Supply</a></th>
<th scope="col">6/22/05 (13 Week %, AR)</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Adjusted Monetary Base</td>
<td>1.2%</td>
<td>4.4%</td>
<td>5.3%</td>
<td>6.3%</td>
<td>8.6%</td>
</tr>
<tr>
<td class="firstcol">MZM</td>
<td>0.8%</td>
<td>0.5%</td>
<td>3.9%</td>
<td>7.4%</td>
<td>13.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

Liquidity growth in the US has slowed markedly this year versus the charged growth rates during the prior three years. Growth during the last three months in the adjusted monetary base fell to 1.2% versus 5.3% growth last year and [...]

U.S. Liquidity Growth Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050627b.jpg" width="353">
At 0.10 in May, the National Activity Index (CFNAI) compiled by the Federal Reserve Bank of Chicago continued to suggest that US economic growth has slowed.The slowdown, however, would be from the heady rates of growth during 2004 near 4%.
The May figure left the three-month moving average of the CFNAI at -0.01.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
During the last twenty years there has been a 74% correlation between the level of the CFNAI and q/q growth in real GDP.
The latest CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_June2005.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/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.10</td>
<td>0.05</td>
<td>0.57</td>
<td>0.39</td>
<td>-0.11</td>
<td>-0.40</td>
</tr>
</tbody>
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</body>
</html>

At 0.10 in May, the National Activity Index (CFNAI) compiled by the Federal Reserve Bank of Chicago continued to suggest that US economic growth has slowed.The slowdown, however, would be from the heady rates of growth during 2004 [...]

Chicago Fed Nat'l Activity Index Indicates Trend US GDP Growth

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

AI boosting US investment in data centers

US productivity growth has been significantly faster than in other major economies

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

US financial markets have gotten used to elevated policy uncertainty

FOMC now expects more rate cuts going forward than in June

China gaining ASEAN exports while US exports slump

Job openings less than the number unemployed in July for first time since 2021

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

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Initial claims for unemployment insurance dropped 10,000 to 214,000 in the week of December 20, from 224,000 during the week of December 13. The four-week moving average of initial claims was 216,750, a decrease of 750 from the prior week’s unrevised 217,500.

Federal government employees initially filed 805 (NSA) jobless insurance claims in the week ended December 13, after filing 1091 claims in the week ended December 6.

Continuing claims for unemployment insurance rose 38,000 to 1.923 million in the week ending December 13, after rising 55,000 to 1.885 million, revised from 1.897 million in the week ending December 6. The four-week moving average was 1.894 million in the week ending December 13, down 5,250 from 1.899 million, revised from 1,902,000 in the week ending December 6. The insured unemployment rate stood at 1.3% in the week of December 13, up from 1.2% in the week of December 6.

Federal government employees’ continuing benefits claims were 12,887 (NSA) in the week ending December 6, from 14,077 (NSA) in the week of November 29. 

The insured unemployment rate varied greatly across individual states and territories. In the week ending December 6, the highest unemployment rates were in New Jersey and Washington (both 2.40%), Massachusetts and Minnesota (both 2.10%), California and Rhode Island (both 2.00%). The lowest rates were in Florida (0.30%), and Alabama, Louisiana, North Carolina (all 0.40%). Rates in other notable states include New York (1.80%), Illinois and Pennsylvania (both 1.70%), and Texas (1.10%). 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.


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- Initial claims declined from the prior week.
- Continuing claims rose from the prior week.
- The insured unemployment rate edged up.


U.S. Initial Claims for Unemployment Insurance Dropped in Latest Week

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Mortgage applications dropped 5.0% w/w (+49.8% y/y) in the week of December 19, after a drop of 3.8% w/w (+40.9% y/y) in the week of December 12, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house fell 3.7% w/w (+15.9% y/y) in the latest week, the third consecutive weekly decline, following a drop of 2.8% w/w (+12.3% y/y) in the December 12 week. Applications for loan refinancing dropped 5.6% w/w (+110.1% y/y) in the December 19 week after a decline of 3.6% w/w (+86.0% y/y) in the week of December 12. 

The effective interest rate on a 30-year fixed-rate loan fell 8bps to 6.48% in the week ending December 19 from 6.56% in the week ending December 12. The rate on 15-year fixed-rate mortgages dropped 5bps to 5.86% in the latest week from 5.91% in the prior week. The 30-year Jumbo rate rose 8bps to 6.63% in the December 19 week from 6.55% in the December 12 week. The rate on a 5-year ARM jumped 20bps to 5.96% in the latest week from 5.76% in the December 12 week.

The share of applications for refinancing an existing loan edged up to 59.1% of total applications in the December19 week from 59.0% in the week ending December 12. The adjustable-rate mortgage (ARM) share of activity rose to 8.1% in the latest week from 7.2% in the December 12 week.

The average size of a mortgage loan edged down 0.1% w/w (+7.8% y/y) to $399,700 in the week ending December 19, following a rise of 1.5% w/w (6.4% y/y) to $400,000 in the December 12 week. The average size of a purchase loan rose 1.0% w/w (1.1% y/y) to $428,600 in the latest week, after rising 0.6% w/w (-0.3% y/y) to $424,200 in the prior week. The average size of a loan to refinance a mortgage declined 0.9% w/w (+24.9% y/y) to $379,700 in the December 19 week, following a rise of 2.3% w/w (19.8% y/y) to $383,300 in the week ending December 12.

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.


- Both purchase applications and refinancing loan applications fell in the latest week.
- Effective interest rate on 30-year fixed loans fell to 6.48%.
- Average loan size edged down.


U.S. Mortgage Applications Dropped in the Week of December 19

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Real GDP grew 4.3% (SAAR) during the third quarter following a 3.8% Q2 gain, revised from 3.3% reported initially. These increases followed a minimally revised 0.6% decline in Q1. A 3.0% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.3% compared to 2.1% y/y in Q2 and remained below its most recent high of 3.4% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment surged 7.0% (4.2% y/y) last quarter after edging 0.6% higher in Q2. Before-tax earnings with IVA & CCA rose 4.2% (9.1% y/y) after improving 0.2% in Q2. Financial sector earnings rose 6.2% (21.1% y/y) after rising 1.1% in Q2. Nonfinancial corporate profits rose 2.5% (3.3% y/y) after edging 0.5% higher in Q2. Earnings from abroad jumped 10.6% (26.3% y/y) following a 2.9% Q2  decline.

Foreign trade balance improvement added 1.59 percentage points to growth last quarter after adding 4.83 percentage points in Q2. Real exports increased 2.1% (1.5% y/y) after falling 0.5% in Q2. Real imports declined 1.2% (-1.8% y/y) after declining 8.3% in Q2. Inventories subtracted 0.22 percentage points from growth after subtracting 3.44 percentage point from Q2 growth.

Real final sales to private domestic purchasers grew 3.0% (2.6% y/y) last quartter after rising 2.9% in Q2, revised from 1.6%. Personal consumption expenditures rose 3.5% (2.6% y/y) after a 2.5% rise, revised from 1.6%. Durable goods spending rose 1.6% (3.2% y/y) after increasing 2.3% in Q2. Motor vehicle purchases declined 6.7% (+1.6% y/y) after strengthening 9.7% in Q2. Spending on home furnishings & appliances weakened 4.2% (+0.7% y/y) following a 2.0% fall. Recreational goods & vehicle buying surged 15.7% (7.0% y/y) last quarter after falling 2.5% in Q2.

Nondurable goods outlays in constant dollars rose 3.9% (3.0% y/y) last quarter following 2.2% growth in Q2. Apparel spending strengthened 6.7% (7.0% y/y) following a 5.8% rise. Food & beverage buying gained 2.0% (1.3% y/y) after edging 0.2% higher. Gasoline & fuel oil purchases improved 1.3% (-0.2% y/y) after falling 2.8% in Q2.



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Real spending on services increased 3.7% (2.4% y/y) in Q3 after a 2.6% Q2 gain. Outlays on housing & utilities edged 0.3% higher (1.0% y/y) after easing 0.2% in Q2. Health care expenditures surged 6.8% (4.5% y/y) after a 4.8% increase. Transportation outlays gained 3.1% both  q/q and y/y after a 7.0% rise, while recreation spending jumped 6.6% (2.4% y/y) following a 3.9% rise. Restaurant & hotel expenditures increased 1.2% (2.0% y/y) after strengthening 5.9% in Q2. Financial services expenditures rose 2.6% both q/q and y/y following a 4.8% Q2 increase.

Business fixed investment in constant dollars increased 2.8% (3.9% y/y) last  quarter following a 7.3% Q2 rise, revised from 5.7%. Expenditures on structures declined 6.3% both q/q and y/y, after falling for six consecutive quarters. Expenditures on producers’ durable equipment increased 5.4% (7.4% y/y), after strengthening 8.5% in Q2. Outlays on information processing equipment rose 8.4% (18.6% y/y), after strengthening 11.7% during Q2. Industrial equipment investment rose 2.0% (3.4% y/y) after a 6.5% rise. Transportation equipment investment fell  2.7% (+3.0% y/y) after strengthening 25.2%. Intellectual property product spending rose 5.4% last quarter (6.4% y/y), after surging 15.0% in Q2.

Residential structures investment in real terms declined 5.1% (-1.8% y/y), the same as in Q2. It was the third consecutive quartly decline.

Government spending rose 2.2% (1.1% y/y) during the third quarter after an unrevised 0.1% easing in Q2. Federal government expenditures rose 2.9% (-1.0% y/y) after falling 5.3% in Q2. National defense expenditures increased 5.8% (1.0% y/y) after rising 0.9% in Q2. State & local government spending rose 1.8% (2.4% y/y) following a 3.1% rise.

The GDP chain price index rose 3.8% (3.0% y/y) last quarter vs. 2.1% in Q2. The PCE chain price index increased 2.8% (2.7% y/y) following a 2.1% rise. The PCE price index excluding food and energy rose 2.9% (2.9% y/y) after increasing 2.6% in Q2. The business fixed investment price index rose 5.2% (1.5% y/y) in Q3 after a 0.4% decline. The residential price index rose 4.5% (3.3% y/y) last quarter after a 2.2% rise, while the government price index increased 4.4% (3.5% y/y) following a 3.3% 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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- Consumer spending strengthens; growth in business investment decelerates.
- Corporate profit growth led by earnings abroad.
- Rise in chain price index accelerates.


U.S. GDP Growth is Strong in Q3; Profits Jump

Sandy Batten

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Industrial production fell 0.1% m/m in October but rose 0.2% m/m (2.5% y/y) in November. The Action Economics Forecast Survey expected 0.1% monthly gains in both months. Manufacturing activity was tepid with manufacturing production falling 0.4% m/m in October and unchanged in November. Manufacturing output has not posted a monthly gain since July. Mining output fell 0.8% m/m in October but rebounded 1.7% m/m in November. Utilities output surged 2.6% m/m in October but fell 0.4% m/m in November. Compared to a year ago, manufacturing production is up 1.9%; mining output is up 3.9%; and utilities output is up 4.8%.

By market group, output of durable consumer goods plunged 2.6% m/m in October and fell another 0.2% in November. Production of durable consumer goods has declined in five of the previous six months. Production of nondurable consumer goods rose 0.5% m/m in both October and November. Compared to a year ago, durable consumer goods production has fallen 5.9% while nondurable consumer goods output has risen 2.7%. Business equipment production fell 0.3% m/m in October but rebounded 0.3% m/m in November and is up 11.2% y/y. Production of nonindustrial supplies fell 0.3% m/m in both October and November.

By industry group, output of durable goods fell 0.5% m/m in October and declined 0.1% m/m in November but were up 3.2% from a year ago. Motor vehicle and parts production slumped 5.1% m/m in October and declined 1.0% m/m in November to be down 5.6% from a year ago. Monthly motor vehicle output has declined in five of the previous six months. In contrast, production of computers and electronic products increased 1.5% m/m in October and rose 0.8% m/m in November. Aerospace production continued to rise, increasing 2.0% m/m in October and 1.1% m/m in November to be up 25.2% from a year ago. Output of nondurable goods fell 0.2% m/m in October and edged up 0.1% m/m in November. Their output is up 0.9% from a year ago. Apparel output fell 1.3% m/m in October but recovered in November, rising 2.3% m/m. Food and beverage output rose 0.3% m/m in October and another 1.2% in November.

Output of selected high-technology industries rebounded in October and November. After having declined 1.0% m/m in both August and September, production jumped 1.9% m/m in October and 1.1% m/m in November to stand 11.8% higher than a year ago. Manufacturing output excluding selected high-tech industries fell 0.4% m/m in October and was unchanged in November. It has risen only 1.6% over the past year. Manufacturing excluding motor vehicle production was unchanged in October and edged up 0.1% m/m in November; it is up 2.6% y/y.

Total industry capacity utilization edged down to 75.9% in October from 76.0% in September and then recovered the decline in November, edging up to 76.0%. In the manufacturing sector, the utilization rate slumped to 75.4% in October from 75.8% in September and remained at 75.4% in November. The October/November reading is the lowest since January.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.



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- Today’s release contained figures for both October and November that had been delayed by the federal government shutdown.
- IP fell in October but recovered in November.
- Manufacturing output was tepid, falling in October and unchanged in November.
- A surge in utilities output in October prevented a larger decline in total production.
- A jump in mining output in November accounted for all of the increase in total production.


U.S. Industrial Production Fell in October and Recovered in November

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New orders for durable goods fell a more-than-expected 2.2% (+4.8% y/y) in October following an upwardly revised 0.7% m/m rise in September (previously +0.5% m/m) and a 3.0% monthly jump in August. The Action Economics Forecast Survey expected a 1.5% m/m decline. A 23.7% m/m drop in aircraft orders more than accounted for the overall decline. Orders excluding aircraft increased 0.2% m/m (4.0% y/y) in October on top of a 0.5% monthly increase in September.

More generally, transportation orders fell 6.5% m/m (+7.3% y/y) in October following a 0.6% m/m increase in September and an 8.0% monthly jump in August. In addition to the drop in aircraft orders, orders for motor vehicles and parts edged up 0.1% m/m in October, their sixth consecutive monthly increase. Across other sectors, orders for primary metals fell 0.7% m/m, their first monthly decline in ten months. Orders for electrical equipment and appliances slumped 1.5% m/m, their first monthly decline in seven months. In contrast, orders for fabricated metal products rose 0.5% m/m, their fourth consecutive monthly gain. Machinery orders increased 0.8% m/m, their eighth consecutive monthly rise. Orders for computers and electronic products increased a solid 1.0% m/m on top of a 1.2% monthly increase in September.

Shipments of core capital goods (nondefense capital goods shipments excluding aircraft) are a reliable coincident indicator of business spending on equipment in the national accounts. They rose 0.7% m/m in October following an upwardly revised 1.2% monthly gain in September (previously +0.9%). The was the second consecutive monthly increase and the fifth in the past six months. The strong end to Q3 and the continued rise in the first month of Q4 provides a solid starting point for all of Q4. The October shipments figure was 5.9% at an annual rate above the Q3 average. Core capital goods orders rose 0.5% m/m in October on top of an upwardly revised 1.1% m/m increase in September (previously +0.9%). This was the fourth consecutive monthly rise.

Total manufacturing shipments edged up 0.1% m/m (+2.8% y/y) in October after having been essentially unchanged in September. Shipments of durable goods increased 0.6% m/m (5.9% y/y), led by 1.4% monthly jump in transportation shipments. However, apart from a 0.1% m/m decline in shipments of other durable goods, all of the other major sectors posted monthly gains in October. In contrast, shipments of nondurable goods fell 0.4% m/m (-0.3% y/y) in October for their third consecutive monthly decline. The monthly decline was led by a 2.4% m/m fall in shipments of petroleum and coal products although it was relatively widely spread across major sectors. The one exception was a 2.1% m/m increase in leather product shipments, but this came after four consecutive sizeable monthly declines.

Unfilled durable goods orders increased 0.2% m/m (7.9% y/y) in October for their third consecutive monthly gain following a 0.8% m/m rise in September and a 0.7% m/m increase in August. Total factory inventories were unchanged in October (+1.4% y/y) following 0.1% monthly declines in both August and September. Durable goods inventories edged up 0.1% m/m in October while inventories of nondurable goods fell 0.2% m/m, the third consecutive monthly decline.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.



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- New orders for durable goods slumped 2.2% m/m in October following increases in both August and September
- A 24% monthly drop in aircraft orders drove the overall decline
- Orders excluding aircraft rose 0.2% m/m in October
- Core capital goods shipments and orders continued to rise in October with small upward revisions to September


Economy in Brief: 2005

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US GDP & Corporate Profit Growth Revised Up

More Indicators of European Business Confidence: French Up, Italian Down

Chain Store Sales Fell

Consumer Confidence Rose Again

Consumer Confidence Rose Again

The German IFO Institute Confirms the Rise in Business Confidence Shown Earlier by the ZEW Measure

U.S. Liquidity Growth Down

Chicago Fed Nat'l Activity Index Indicates Trend US GDP Growth