Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816g.jpg" width="353">
The total number of mortgage applications rose 1.4% last week following a 4.9% rise the week prior.
The gains were led by rebounding applications to refinance which rose 4.6% on top of a 7.1% increase during the first week of August. Refis are up 17.1% from the lows in June.
Conversely, purchase applications last week fell for the fourth week in the last five and posted a 0.8% dip which pulled purchase apps in August 2.5% below the July average.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816h.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage increased to 6.73%. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also rose to 6.42% and the peak rate was 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
In July, 35.4% of all loan applications were to refinance, down from 44.2% last July.
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>.
Property Debt Burdens from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-18.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">08/11/06</th>
<th scope="col">08/04/06</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>561.2</td>
<td>553.3</td>
<td>-26.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>385.9</td>
<td>388.9</td>
<td>-22.7%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,587.5</td>
<td>1,518.1</td>
<td>-30.5%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
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The total number of mortgage applications rose 1.4% last week following a 4.9% rise the week prior. The gains were led by rebounding applications to refinance which rose 4.6% on top of a 7.1% increase during the first week of August. [...]

Mortgage Applications Up With More Refinancings

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816f.jpg" width="353">
Housing starts fell for the fourth straight month in July, by 2.5% to 1.795M units. The decline slightly outpaced Consensus expectations for drop to 1.81M starts.
Total housing starts in July were 20.8% below the peak this past January.
Single-family starts fell 2.3% last month to 1.453M, down 20.0% from the January peak. Multi family starts also fell another 3.4%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816e.jpg" width="353">
By region, single family housing starts dropped 9.5% (-25.8% y/y) in the West. In the Midwest starts also fell by 2.3% (-18.9% y/y) and single family starts in the South slipped 0.5% (-9.1% y/y). In the Northeast stats rose 12.2% (-26.3% y/y).
Building permits fell for the sixth consecutive month, dropping another 6.5%.
The July 2006 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/BoardDocs/snloansurvey/200608/default.htm"> here</a>.

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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">July</th>
<th scope="col">June</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>1,795</td>
<td>1,841</td>
<td>-13.3%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,452</td>
<td>1,486</td>
<td>-16.6%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>343</td>
<td>355</td>
<td>3.9%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,747</td>
<td>1,869</td>
<td>-20.8%</td>
<td>2,159</td>
<td>2,058</td>
<td>1,888</td>
</tr>
</tbody>
</table>
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Housing starts fell for the fourth straight month in July, by 2.5% to 1.795M units. The decline slightly outpaced Consensus expectations for drop to 1.81M starts. Total housing starts in July were 20.8% below the peak this past [...]

July Housing Starts Down Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816d.jpg" width="353">
Total U.S. industrial output increased 0.4% last month. The gain was a bit light versus Consensus expectations for a 0.5% rise though it followed an unrevised 0.8% jump during June.
Hot temperatures throughout the country fueled a 2.0% (0.5% y/y) surge in utility output. In fact, cooling degree days during July set a new record high.
Factory sector output rose a more moderate 0.2% following the unrevised 0.8% June jump. The rise lifted the starting point for 3Q 2.5% (AR) above the prior quarter&#39;s average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816c.jpg" width="353">
Production of durable consumer goods fell a whopping 3.2% (+1.1% y/y) as output of automotive products dropped 6.2% (-0.5%) and output of appliances &amp; furniture fell for the fourth straight month, down 0.7% (-2.0% y/y. Nondurable consumer goods output increased 0.8% (2.0% y/y) as clothing output jumped 1.7% (8.4% y/y).
Business equipment production surged 1.1% due to a 1.9% (7.7% y/y) spike in output of industrial &amp; other equipment. Production of information processing &amp; equipment also rose a firm 0.9% (19.5% y/y).Factory output overall less the hi-tech industries ticked up just 0.1% (4.6% y/y).
Overall capacity utilization rose to 82.4% in July, its highest level in six years. Factory sector utilization was stable m/m at 80.7%.

<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/output.htm">Production &amp; Capacity</a></th>
<th scope="col">July</th>
<th scope="col">June</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>0.4%</td>
<td>0.8%</td>
<td>4.8%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Manufacturing (NAICS)</td>
<td>0.2%</td>
<td>0.8%</td>
<td>5.8%</td>
<td>3.9%</td>
<td>4.8%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>-0.3%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Equipment</td>
<td>1.1%</td>
<td>0.8%</td>
<td>12.2%</td>
<td>9.1%</td>
<td>9.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>82.4%</td>
<td>82.3%</td>
<td>80.4% (7/05)</td>
<td>80.1%</td>
<td>78.6%</td>
<td>75.7%</td>
</tr>
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</table>
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Total U.S. industrial output increased 0.4% last month. The gain was a bit light versus Consensus expectations for a 0.5% rise though it followed an unrevised 0.8% jump during June. Hot temperatures throughout the country fueled a [...]

Industrial Production Up With Temperatures

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816a.jpg" width="353">
Consumer prices (CPI-U) during July rose an expected 0.4%, the average rate of monthly increase for the last five months. A somewhat more moderate increase, however, was posted by prices less food &amp; energy. The 0.2% increase compared to a 0.3% average of the last five months and was lower than expectations for a 0.3% gain.
The 2.9% m/m spike in energy prices reflected a 5.3% (29.6% y/y) surge in gasoline prices, although weekly gasoline prices have since stabilized in August somewhat at $3.00 per gallon. Natural gas &amp; electricity prices in July ticked up 0.1% (10.5% y/y) after five consecutive months of decline.
Core goods prices fell 0.1% after three months of 0.1% increase. Furniture &amp; bedding costs reversed the prior month&#39;s increase with a 0.3% decline (+1.4% y/y) while apparel prices dropped 1.2% (0.0% y/y). Appliance prices increased 0.3% (1.1% y/y) and new &amp; used motor vehicle prices rose 0.2% (0.5% y/y). Tobacco prices were unchanged in July (3.6% y/y) while medical care commodity prices rose 0.3% (3.9% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816b.jpg" width="353">
Core services prices rose 0.4%, the same as during the prior two months. Shelter prices increased another 0.4% (3.6% y/y) as the rental equivalence measure of owners&#39; primary residences rose 0.4% (3.7% y/y) and rents also rose 0.4% (3.6% y/y). Public transportation costs moderated somewhat from prior months&#39; strength and increased 0.4% (5.0% y/y).Education cost inflation ticked up to 0.6% (6.0% y/y) but medical care services price inflation dipped to 0.2% (4.0% y/y).
Food &amp; beverage prices rose 0.2% though meat, fish &amp; poultry prices fell 0.6% (+0.2% y/y). Fruit &amp; vegetable prices jumped for the second consecutive month and rose 0.9% (3.7% y/y) while dairy prices ticked up another 0.1% (-0.5% y/y).
The chained CPI, which adjusts for shifts in the mix of consumer purchases, rose 0.1% while less food &amp; energy prices were unchanged last month.
The Effects of Rounding on the Consumer Price Index from the U.S. Bureau of Labor Statistics can be found <a href="http://www.bls.gov/ore/pdf/ec060090.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/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </th>
<th scope="col">July</th>
<th scope="col">June</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&nbsp;</td>
<td>0.4%</td>
<td>0.2%</td>
<td>4.2%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.5%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.4%</td>
<td>0.4%</td>
<td>3.6%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>2.9%</td>
<td>-0.9%</td>
<td>20.5%</td>
<td>16.9%</td>
<td>10.8%</td>
<td>12.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>2.1%</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>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.5%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumer prices (CPI-U) during July rose an expected 0.4%, the average rate of monthly increase for the last five months. A somewhat more moderate increase, however, was posted by prices less food & energy. The 0.2% increase compared [...]

Core CPI Moderate As Energy Costs Jumped, Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816a.jpg" width="353">
Consumer prices (CPI-U) during July rose an expected 0.4%, the average rate of monthly increase for the last five months. A somewhat more moderate increase, however, was posted by prices less food &amp; energy. The 0.2% increase compared to a 0.3% average of the last five months and was lower than expectations for a 0.3% gain.
The 2.9% m/m spike in energy prices reflected a 5.3% (29.6% y/y) surge in gasoline prices, although weekly gasoline prices have since stabilized in August somewhat at $3.00 per gallon. Natural gas &amp; electricity prices in July ticked up 0.1% (10.5% y/y) after five consecutive months of decline.
Core goods prices fell 0.1% after three months of 0.1% increase. Furniture &amp; bedding costs reversed the prior month&#39;s increase with a 0.3% decline (+1.4% y/y) while apparel prices dropped 1.2% (0.0% y/y). Appliance prices increased 0.3% (1.1% y/y) and new &amp; used motor vehicle prices rose 0.2% (0.5% y/y). Tobacco prices were unchanged in July (3.6% y/y) while medical care commodity prices rose 0.3% (3.9% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816b.jpg" width="353">
Core services prices rose 0.4%, the same as during the prior two months. Shelter prices increased another 0.4% (3.6% y/y) as the rental equivalence measure of owners&#39; primary residences rose 0.4% (3.7% y/y) and rents also rose 0.4% (3.6% y/y). Public transportation costs moderated somewhat from prior months&#39; strength and increased 0.4% (5.0% y/y).Education cost inflation ticked up to 0.6% (6.0% y/y) but medical care services price inflation dipped to 0.2% (4.0% y/y).
Food &amp; beverage prices rose 0.2% though meat, fish &amp; poultry prices fell 0.6% (+0.2% y/y). Fruit &amp; vegetable prices jumped for the second consecutive month and rose 0.9% (3.7% y/y) while dairy prices ticked up another 0.1% (-0.5% y/y).
The chained CPI, which adjusts for shifts in the mix of consumer purchases, rose 0.1% while less food &amp; energy prices were unchanged last month.
The Effects of Rounding on the Consumer Price Index from the U.S. Bureau of Labor Statistics can be found <a href="http://www.bls.gov/ore/pdf/ec060090.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/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a> </th>
<th scope="col">July</th>
<th scope="col">June</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&nbsp;</td>
<td>0.4%</td>
<td>0.2%</td>
<td>4.2%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>0.5%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.4%</td>
<td>0.4%</td>
<td>3.6%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>2.9%</td>
<td>-0.9%</td>
<td>20.5%</td>
<td>16.9%</td>
<td>10.8%</td>
<td>12.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>2.1%</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>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.5%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.1%</td>
<td>2.5%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
Industrial Production Up With Temperatures 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816d.jpg" width="353">
Total U.S. industrial output increased 0.4% last month. The gain was a bit light versus Consensus expectations for a 0.5% rise though it followed an unrevised 0.8% jump during June.
Hot temperatures throughout the country fueled a 2.0% (0.5% y/y) surge in utility output. In fact, cooling degree days during July set a new record high.
Factory sector output rose a more moderate 0.2% following the unrevised 0.8% June jump. The rise lifted the starting point for 3Q 2.5% (AR) above the prior quarter&#39;s average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816c.jpg" width="353">
Production of durable consumer goods fell a whopping 3.2% (+1.1% y/y) as output of automotive products dropped 6.2% (-0.5%) and output of appliances &amp; furniture fell for the fourth straight month, down 0.7% (-2.0% y/y. Nondurable consumer goods output increased 0.8% (2.0% y/y) as clothing output jumped 1.7% (8.4% y/y).
Business equipment production surged 1.1% due to a 1.9% (7.7% y/y) spike in output of industrial &amp; other equipment. Production of information processing &amp; equipment also rose a firm 0.9% (19.5% y/y).Factory output overall less the hi-tech industries ticked up just 0.1% (4.6% y/y).
Overall capacity utilization rose to 82.4% in July, its highest level in six years. Factory sector utilization was stable m/m at 80.7%.

<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/output.htm">Production &amp; Capacity</a></th>
<th scope="col">July</th>
<th scope="col">June</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>0.4%</td>
<td>0.8%</td>
<td>4.8%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Manufacturing (NAICS)</td>
<td>0.2%</td>
<td>0.8%</td>
<td>5.8%</td>
<td>3.9%</td>
<td>4.8%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>-0.3%</td>
<td>1.1%</td>
<td>1.8%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Equipment</td>
<td>1.1%</td>
<td>0.8%</td>
<td>12.2%</td>
<td>9.1%</td>
<td>9.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>82.4%</td>
<td>82.3%</td>
<td>80.4% (7/05)</td>
<td>80.1%</td>
<td>78.6%</td>
<td>75.7%</td>
</tr>
</tbody>
</table>
July Housing Starts Down Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816f.jpg" width="353">
Housing starts fell for the fourth straight month in July, by 2.5% to 1.795M units. The decline slightly outpaced Consensus expectations for drop to 1.81M starts.
Total housing starts in July were 20.8% below the peak this past January.
Single-family starts fell 2.3% last month to 1.453M, down 20.0% from the January peak. Multi family starts also fell another 3.4%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816e.jpg" width="353">
By region, single family housing starts dropped 9.5% (-25.8% y/y) in the West. In the Midwest starts also fell by 2.3% (-18.9% y/y) and single family starts in the South slipped 0.5% (-9.1% y/y). In the Northeast stats rose 12.2% (-26.3% y/y).
Building permits fell for the sixth consecutive month, dropping another 6.5%.
The July 2006 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/BoardDocs/snloansurvey/200608/default.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/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">July</th>
<th scope="col">June</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>1,795</td>
<td>1,841</td>
<td>-13.3%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,452</td>
<td>1,486</td>
<td>-16.6%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>343</td>
<td>355</td>
<td>3.9%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,747</td>
<td>1,869</td>
<td>-20.8%</td>
<td>2,159</td>
<td>2,058</td>
<td>1,888</td>
</tr>
</tbody>
</table>
Mortgage Applications Up With More Refinancings 
by <a href="/comment/Moeller.html">Tom Moeller</a> August 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816g.jpg" width="353">
The total number of mortgage applications rose 1.4% last week following a 4.9% rise the week prior.
The gains were led by rebounding applications to refinance which rose 4.6% on top of a 7.1% increase during the first week of August. Refis are up 17.1% from the lows in June.
Conversely, purchase applications last week fell for the fourth week in the last five and posted a 0.8% dip which pulled purchase apps in August 2.5% below the July average.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816h.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage increased to 6.73%. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also rose to 6.42% and the peak rate was 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
In July, 35.4% of all loan applications were to refinance, down from 44.2% last July.
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>.
Property Debt Burdens from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-18.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">08/11/06</th>
<th scope="col">08/04/06</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>561.2</td>
<td>553.3</td>
<td>-26.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>385.9</td>
<td>388.9</td>
<td>-22.7%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,587.5</td>
<td>1,518.1</td>
<td>-30.5%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Q2 GDP Eases in Greece & Falls in the Palestinian Territories But Gains in Israel 
by <a href="/comment/Stone.html">Carol Stone</a> August 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816i.jpg" width="353">
Three Mediterranean regions reported Q2 GDP today. In Greece, total GDP eased 0.3% from Q1, Israel saw growth of 1.5% and the Palestinian Territories&#39; GDP fell 1.7%.
The Greek data featured a decline in domestic demand in Q2 after it rose sharply in Q1. The Q2 figures included a reduction in consumption and what might be termed a &quot;correction&quot; in fixed investment. This latter had been up strongly for three quarters running, so the latest period&#39;s decrease still left year-on-year growth of 14.0%, a nice recovery after a contraction in 2005. Consumption is somewhat steadier, maintaining four-quarter growth rates between 3% and 4%. Q2 total GDP was supported by an improvement in net exports. Country-source data for Greece are included in Haver&#39;s ALPMED database, with summary statistics in G10 and EUROSTAT. While the first two are updated by Haver soon after the data are released, the figures in EUROSTAT are available to us only after their staff have released them through their own channels and that database generally includes them some time later.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816j.jpg" width="353">
Israel&#39;s total GDP growth has been fairly steady at about a 6% annual pace for the last year, reflecting moderate gains in consumption and investment and strong exports. Obviously, these are Q2 data and do not cover any of the Israel/Hezbollah conflict, which began July 12. While economic impact is hardly a high priority in analyzing this war right now, the even-tempered performance of Israel&#39;s economy going into it will provide for interesting comparisons when Q3 data are produced.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060816k.jpg" width="353">
The Palestinian Territories have a tiny economy, with GDP for 2005 totaling only $4.46 billion in fixed 1997 prices. The first two quarters of this year were weak, with a steep drop of 7.2% in Q1 followed by 1.7% in Q2. Recent data are available only for industrial sectors (not for expenditure categories), and these sectors are experiencing varied patterns. The latest declines came in industry and construction, while transportation is erratic but maintaining a modest growth trend. As with many of the world&#39;s organized economic areas, the service sector is expanding with some vigor, and Q2 was up 16.5% from a year ago. One hopes that has been maintained this quarter despite the tumult around them.
Data on Israel and the Palestinian Territories are contained in Haver&#39;s EMERGEMA database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GDP: % Changes</th>
<th scope="col">Q2 2006</th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">Yr/Yr</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"><a href="http://www.haverselect.com/dlx/ALPMED/@A2/@A22/@A22.HTM">Greece*</a></td>
<td>-0.3</td>
<td>2.8</td>
<td>-0.2</td>
<td>4.1</td>
<td>3.7</td>
<td>4.7</td>
<td>4.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumption</td>
<td>-1.1</td>
<td>1.5</td>
<td>0.5</td>
<td>3.5</td>
<td>3.6</td>
<td>4.4</td>
<td>3.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Fixed Investment</td>
<td>-4.7</td>
<td>7.4</td>
<td>4.5</td>
<td>14.0</td>
<td>-1.2</td>
<td>5.7</td>
<td>13.7</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEMA/@M7/@M702/@M702.HTM">Israel*</a></td>
<td>1.5</td>
<td>1.4</td>
<td>1.4</td>
<td>6.2</td>
<td>5.2**</td>
<td>4.8**</td>
<td>1.5**</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumption</td>
<td>1.2</td>
<td>1.8</td>
<td>0.0</td>
<td>2.7</td>
<td>3.1**</td>
<td>2.8**</td>
<td>-0.3**</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Fixed Investment</td>
<td>-2.4</td>
<td>2.2</td>
<td>2.2</td>
<td>3.1</td>
<td>2.9**</td>
<td>0.3**</td>
<td>-5.5**</td>
</tr>
<tr class="odd">
<td class="firstcol">Palestinian Territories*</td>
<td>-1.7</td>
<td>-7.2</td>
<td>2.3</td>
<td>1.7</td>
<td>4.9</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815g.jpg" width="353">
The Composite Leading Indicator (MBONCUE-SUE) in Turkey is casting some doubt on the continuance of the period of good economic growth and relatively low inflation that the country has experience over the past few years. As can be seen in the first chart the year over year growth in industrial production has ranged between 5% and 9% while the year over year increase in consumer prices has declined from around 22% in 2003 to 8.6% in 2004 and 8.2% in 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815h.jpg" width="353">
Turkey&#39;s composite leading indicator is expressed in three differ forms: (1) Trend Restored (2) Cycle and (3) a six month moving average. All three forms have declined in June and July and, except for Trend Restored, they are below July, 2005 and the Trend Restored form is only 0.51% above July, 2005. The second chart shows the Trend Restored and Cycle. The six-month rate of change shows a similar trend.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815i.jpg" width="353">
The Business Tendency Survey increased in June but has declined in July from 104.4 to 102.4. This measure is so designed that values above 100 represent a preponderance of optimists, values below 100, a preponderance of pessimists and a value of 100, balance between optimists and pessimists. Although the current value is 2.4 points above 100, indicating a preponderance of optimists, it is well below the recent peak of 110.3 in February, 2004. 

<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/EMERGEMA/@M3/@M308/@M308.HTM">Turkey</a></th>
<th scope="col">Jul&nbsp; 06</th>
<th scope="col">Jun 06</th>
<th scope="col">Jul 05</th>
<th scope="col">M/M %</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">Composite Leading Indicator</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Trend Restored&nbsp;</td>
<td>146.25</td>
<td>148.02</td>
<td>145.51</td>
<td>-1.20</td>
<td>0.51</td>
<td>146.13</td>
<td>141.15</td>
<td>132.27</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Cycle</td>
<td>102.79</td>
<td>105.25</td>
<td>104.86</td>
<td>-1.40</td>
<td>-1.97</td>
<td>105.41</td>
<td>144.40</td>
<td>100.30</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Six-month Rate of Change</td>
<td>-2.43</td>
<td>0.09</td>
<td>2.49</td>
<td>-2.52*</td>
<td>-4.92*</td>
<td>3.52</td>
<td>5.14</td>
<td>6.81</td>
</tr>
<tr class="odd">
<td class="firstcol">Business Tendency Survey</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Confidence Index (100=Balance , &gt;100=Optimistic, &lt;100=Pessimistic</td>
<td>102.4</td>
<td>104.4</td>
<td>103.5</td>
<td>-2.20</td>
<td>2.10</td>
<td>122.8</td>
<td>106.8</td>
<td>104.1</td>
</tr>
</tbody>
</table>
</body>
</html>

The Composite Leading Indicator (MBONCUE-SUE) in Turkey is casting some doubt on the continuance of the period of good economic growth and relatively low inflation that the country has experience over the past few years. As can be [...]

Turkey's Leading Composite Indicators and Business Confidence: Harbingers of Lower Growth?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815e.jpg" width="353">
The National Association of Home Builders (NAHB) reported that the August Composite Housing Market Index at 32 fell another 18% from 39 in July to the lowest level since February, 1991. Consensus expectations were for only a small decline to 38. 
During the last twenty years there has been a 75% correlation between the y/y change in the Composite Index and the change in single family housing starts. 
The sub-indexes covering sales of single family homes (-50.7% y/y) and sales in the next six months (-48.1% y/y) were both down sharply again m/m. 
An index of the traffic of prospective home buyers fell further in August. At 21 (-58% y/y) it was the lowest since January, 1991 and the second lowest since the index began in 1985.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815f.jpg" width="353"> 
Housing markets in all regions of the U.S. weakened this month. The index in the Northeast was off 8.1% (-51.4% y/y). In the Midwest the index dropped 25% (-66.7% y/y). The West was down 19.2% (-50.6% y/y) and the South declined 18% (-44.6% y/y). 
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

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</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/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August &#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>32</td>
<td>39</td>
<td>67</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815c.jpg" width="353">
The producer price index for finished goods edged up 0.1% in July, in line with Consensus expectations. The index had increased by 0.5% in June. 
Prices for finished goods excluding food and energy unexpectedly fell 0.3% in July after rising 0.2% the previous month. Consensus estimates had been a 0.1% gain. Prices of light trucks dropped 3.1% compared with an increase of 0.4% in June. Prices in July were also lower for passenger cars (-0.8%) and civilian aircraft (-0.1%). 
The finished energy goods index rose 1.3% (+16.2% y/y) in July after a 0.7% rise in June. Residential electric power prices advanced 1.8% after a 2.8% drop in June. Residential natural gas also rose (+0.9%) compared with a 3.7% decline in June. Gasoline prices moderated somewhat in July (+0.7%) after huge increases in March through June. The gasoline price index in July was 33.7% higher than a year ago. 
The lack of inflationary pressure in finished goods was not shown in the intermediate and crude goods indexes. Intermediate goods prices rose 0.5% in July after a 0.7% increase in June. Excluding food and energy, the intermediate goods index was 0.7% higher compared with an 0.8% advance the prior month. Intermediate energy prices were down last month (-0.1%) led by diesel fuel which declined by 5.0% after rising 5.4% in June. The indexes for jet fuel, residential fuel and home heating oil were all lower in July as well. Industrial and commercial natural gas prices rose, as did liquefied petroleum gas prices. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815d.jpg" width="353">
Materials prices for nondurable manufacturing increased 0.2% last month after a 1.0% advance in June. The index for materials for durable goods manufacturing climbed 2.3% in July compared with a 1.1% gain the previous month. Prices for materials for construction moved up 0.7% after a 0.3% rise in June. 
The PPI for crude materials soared 3.1% in July after declining 1.7% in June. Crude energy materials prices rose 4.8% led by natural gas (+1.2%) and crude petroleum (+9.4%). Crude energy prices had dropped by 6.8% in June. Prices of crude materials less food and energy increased 1.3% following a rise of 1.7% in June. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a> </th>
<th scope="col">July</th>
<th scope="col">June</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">Finished Goods </td>
<td>0.1%&nbsp;</td>
<td>0.5%</td>
<td>4.1%&nbsp;</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Core </td>
<td>-0.3%</td>
<td>0.2%</td>
<td>&nbsp;1.3%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods </td>
<td>0.5%</td>
<td>0.7%</td>
<td>8.8%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Core </td>
<td>0.7%</td>
<td>0.8%</td>
<td>7.9%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods </td>
<td>3.1%&nbsp;</td>
<td>-1.7%</td>
<td>&nbsp;6.7%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol"> &nbsp; Core </td>
<td>1.3%</td>
<td>1.7%</td>
<td>&nbsp;34.6%</td>
<td>4.8%</td>
<td>&nbsp;26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815a.jpg" width="353">
Manufacturing activity in New York State grew in August but at the slowest pace in 2006. The Empire State Manufacturing Index of General Business Conditions, reported by the Federal Reserve Bank of New York, fell 6.24 points to 10.34 in August. Consensus expectations had been for a lesser decline to 14.25.
Since the series&#39; inception in 2001 there has been a 75% correlation between the index level and the three month change in U.S. factory sector industrial production.
The indexes for new orders &amp; shipments remained positive and higher than previous month&#39;s indexes but unfilled orders went into negative territory. The index of inventories was negative for the third consecutive month. The index of employment was positive but remained at a low level, indicating a modest increase in employment.
Pricing pressure continued to ease. Since 2001 there has been an 88% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815b.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.
New York manufacturers were less optimistic in August. The Empire State index of expectations for business conditions in six months dropped 10 points to 35.20 with 48% of respondents expecting an improvement in conditions versus 57% during the previous month.
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>.

<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/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">August</th>
<th scope="col">July</th>
<th scope="col">August &#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>10.34</td>
<td>16.58</td>
<td>22.61</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815g.jpg" width="353">
The Composite Leading Indicator (MBONCUE-SUE) in Turkey is casting some doubt on the continuance of the period of good economic growth and relatively low inflation that the country has experience over the past few years. As can be seen in the first chart the year over year growth in industrial production has ranged between 5% and 9% while the year over year increase in consumer prices has declined from around 22% in 2003 to 8.6% in 2004 and 8.2% in 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815h.jpg" width="353">
Turkey&#39;s composite leading indicator is expressed in three differ forms: (1) Trend Restored (2) Cycle and (3) a six month moving average. All three forms have declined in June and July and, except for Trend Restored, they are below July, 2005 and the Trend Restored form is only 0.51% above July, 2005. The second chart shows the Trend Restored and Cycle. The six-month rate of change shows a similar trend.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060815i.jpg" width="353">
The Business Tendency Survey increased in June but has declined in July from 104.4 to 102.4. This measure is so designed that values above 100 represent a preponderance of optimists, values below 100, a preponderance of pessimists and a value of 100, balance between optimists and pessimists. Although the current value is 2.4 points above 100, indicating a preponderance of optimists, it is well below the recent peak of 110.3 in February, 2004. 

<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/EMERGEMA/@M3/@M308/@M308.HTM">Turkey</a></th>
<th scope="col">Jul&nbsp; 06</th>
<th scope="col">Jun 06</th>
<th scope="col">Jul 05</th>
<th scope="col">M/M %</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">Composite Leading Indicator</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Trend Restored&nbsp;</td>
<td>146.25</td>
<td>148.02</td>
<td>145.51</td>
<td>-1.20</td>
<td>0.51</td>
<td>146.13</td>
<td>141.15</td>
<td>132.27</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Cycle</td>
<td>102.79</td>
<td>105.25</td>
<td>104.86</td>
<td>-1.40</td>
<td>-1.97</td>
<td>105.41</td>
<td>144.40</td>
<td>100.30</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Six-month Rate of Change</td>
<td>-2.43</td>
<td>0.09</td>
<td>2.49</td>
<td>-2.52*</td>
<td>-4.92*</td>
<td>3.52</td>
<td>5.14</td>
<td>6.81</td>
</tr>
<tr class="odd">
<td class="firstcol">Business Tendency Survey</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Confidence Index (100=Balance , &gt;100=Optimistic, &lt;100=Pessimistic</td>
<td>102.4</td>
<td>104.4</td>
<td>103.5</td>
<td>-2.20</td>
<td>2.10</td>
<td>122.8</td>
<td>106.8</td>
<td>104.1</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Home Builders (NAHB) reported that the August Composite Housing Market Index at 32 fell another 18% from 39 in July to the lowest level since February, 1991. Consensus expectations were for only a small [...]

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060814a.jpg" width="353">
As noted by Randy Gernaat last Friday, reports of growth in several European nations confirm analyst&#39;s expectations of good growth in Europe in the second quarter. Today&#39;s reports for Spain and Germany reinforced this view. Both Spain and Germany reported growth of 0.9% for the second quarter.
By now Eurostat has enough data from the various countries to issue Flash Estimates for the Euro Zone, as a whole, and for the 25 members of the European Union. Flash Estimates of GDP growth have been available from the second quarter of 2002 to date for the Euro Zone and from the second quarter of 2003 for the Euro 25. The Flash Estimates of Growth for the two areas are shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060814b.jpg" width="353">
Growth for the entire Euro Zone is now estimated at 0.9% up from 0.6% in the first quarter. At an annual rate of increase, the measure used in the United States%, Euro Zone growth was 3.6% in the second quarter, compared with the seasonally adjusted annual rate of 2.5% for the U. S. Growth of GDP in the Euro Zone and in the U. S. are compared in the second chart.
The Euro 25 are also estimated to have grown 0.9% in the second quarter compared with 0.7% in the first quarter.. (In addition to the 12 countries of the Euro Zone, the Euro 25 includes, the U. K., Sweden, Denmark, Estonia, Latvia, Lithuania, Hungary, Poland, Czech Republic, Slovakia, Slovenia, Cyprus and Malta.)
Also published today were The European Commission&#39;s forecasts of the Euro Zone&#39;s rate of growth for the next three quarters. On the basis of their dynamic factor model for quarterly GDP growth the Commission forecasts a range of GDP growth in the third quarter of 0.5% to 0.9%, in the fourth quarter, 0.4% to 0.9% and in the first quarter of 2007, 0.2% to 0.8%.

<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/EUROSTAT/@U2/@U218/@U218.HTM">Quarter-to-Quarter Change in GDP</a></th>
<th scope="col">Q1&nbsp; 06</th>
<th scope="col">Q2 06</th>
<th scope="col">--</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">Germany&nbsp;</td>
<td>0.7</td>
<td>0.9</td>
<td>--</td>
<td>1.16</td>
<td>1.10</td>
<td>-0.19</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.8</td>
<td>0.9</td>
<td>--</td>
<td>3.43</td>
<td>3.09</td>
<td>3.00</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Zone</td>
<td>0.6</td>
<td>0.9</td>
<td>--</td>
<td>1.40</td>
<td>1.33</td>
<td>0.79</td>
</tr>
<tr>
<td class="firstcol">EU 25</td>
<td>0.7</td>
<td>0.9</td>
<td>--</td>
<td>1.69</td>
<td>2.26</td>
<td>1.27</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Zone Forecast</td>
<td>Q3 06</td>
<td>Q4 06</td>
<td>Q1 07</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>0.9</td>
<td>0.9</td>
<td>0.8</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Low</td>
<td>0.5</td>
<td>0.4</td>
<td>0.2</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Average</td>
<td>0.7</td>
<td>0.65</td>
<td>0.5</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
</html>

As noted by Randy Gernaat last Friday, reports of growth in several European nations confirm analyst's expectations of good growth in Europe in the second quarter. Today's reports for Spain and Germany reinforced this view. Both Spain [...]

European Commission Predicts Strong GDP Growth in the Euro Zone to Continue

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

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

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

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Andrew Cates

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

250501Z1.jpg

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

250501Z2.jpg

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

250501Z3.jpg

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

250501Z4.jpg

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

250501Z5.jpg

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

250501Z6.jpg

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

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Charts of the Week: Tariff Truce, Tenuous Trust

250501F20.jpg

250501G20.jpg

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

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

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

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

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

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

250501H20.jpg

250501I20.jpg

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

U.S. Light Vehicle Sales Fall in April

250501J5.jpg

250501K5.jpg

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

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

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

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

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

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

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

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

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

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

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

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

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

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

Carol Stone, CBE

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

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

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

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) and Texas (1.09%). These state data are not seasonally adjusted.

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

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- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

Economy in Brief: August 2006

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