Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040329a.jpg" width="353">
Home prices as tallied by the Office of Federal Housing Enterprise Oversight (OFHEO) surged in 4Q 2003 by the most for any one period since 1Q 1979. The 3.7% jump last quarter pulled home price appreciation for the year to 6.9%.
The acceleration in home prices was notable versus the prior two years when prices rose an average of 1.6% each quarter. It was attributed to the economy&#39;s emergence from recession combined with the continued low level of interest rates. 
Home price appreciation accelerated across the country&#39;s regions. The greatest accelerations occurred in Vermont, New York and the District of Columbia.
The OFHEO house price index is a geometric weighted average based on more than 26.5 million repeat transactions over 29 years and 12,000 transactions annually.
View the latest OFHEO release <a href="http://www.ofheo.gov/media/pdf/4q03hpi.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E911/@E91101/@E91101.HTM"> OFHEO</a></th>
<th scope="col">4Q03</th>
<th scope="col">3Q03</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">House Price Index</td>
<td>3.7%</td>
<td>1.6%</td>
<td>8.0%</td>
<td>6.9%</td>
<td>7.1%</td>
<td>8.0%</td>
</tr>
</tbody>
</table>
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Home prices as tallied by the Office of Federal Housing Enterprise Oversight (OFHEO) surged in 4Q 2003 by the most for any one period since 1Q 1979. The 3.7% jump last quarter pulled home price appreciation for the year to 6.9%. The [...]

Home Prices Surged in 4Q03

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040326a.jpg" width="353">
Consumer spending rose just 0.2% in February following an upwardly revised 0.5% January increase. A 0.5% gain in total PCE had been the Consensus expectation.
Despite a modest increase in light vehicle sales last month, durable goods spending fell 0.2%. Spending on non-durables rose a slight 0.1% (6.5% y/y). After accounting for a 0.4% rise in the price deflator for non-durables, real non-durables spending fell 0.4% (+5.0% y/y). Services spending rose 0.4% (5.3% y/y).
Personal income rose 0.4% (+4.6% y/y) in February versus Consensus expectations for a 0.3% gain.
Wages &amp; salaries were strong with a 0.5% (+3.6% y/y) rise after an upwardly revised 0.7% January pop. Strength in wages was again spread evenly across industries.
Personal disposable income rose 0.4% (5.6% y/y) following an upwardly revised 0.9% January jump. Tax payments rose slightly (-3.6% y/y) after the 4.8% January skid. 
The PCE chain price index rose 0.2%. Less food &amp; energy prices rose 0.1% (1.1% y/y) last month after a like gain in January, but earlier figures were revised up slightly. 
The savings rate ticked up to 1.9%. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM"> Disposition of Personal Income</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Personal Income</td>
<td>0.4%</td>
<td>0.3%</td>
<td>4.6%</td>
<td>3.3%</td>
<td>2.3%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.2%</td>
<td>0.5%</td>
<td>5.8%</td>
<td>5.0%</td>
<td>4.8%</td>
<td>4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>1.9%</td>
<td>1.8%</td>
<td>2.0%</td>
<td>2.1%</td>
<td>2.3%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.2%</td>
<td>0.3%</td>
<td>1.5%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
Surprise Gain in U.S. Consumer Sentiment 
by <a href="/comment/Stone.html">Carol Stone</a> March 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040326d.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index rebounded unexpectedly in the latter part of March to give a 95.8 reading for the month as a whole. The mid- month index was 94.1, and Consensus expectations had called for further erosion to 93.2. Instead, the late March results put the month at the best level since mid-2002, apart from the unusual and unsustainable spurt in January.
The gain in sentiment may be related to the reduced number of claims for unemployment insurance. That recently favorable trend is probably the most positive sign about the labor market in many months. A comparison of the Michigan Index with monthly claims data shows 71%-83% correlation over various parts of the last 25 years. So if there are fewer layoffs, people &quot;feel better&quot; enough to push up the Michigan results. In turn, over the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real PCE. That correlation has risen to 84% during the last five years. While it might go without saying that better labor market conditions should lead to more spending, what we have in the latest jobless claims data and the Michigan Survey is a very early indication that labor markets are getting better and that people may be noticing that. Moreover, the higher sentiment readings are somewhat surprising in light of the sharp nationwide surge in gasoline prices, the recent lackluster stock market, and the renewed terrorist concerns.
Perceptions of both current economic conditions and expectations shared in the more positive economic picture. The assessment of current conditions improved by more than a point from the mid-month result, and expectations reversed their earlier decline to show a net gain for the month, albeit a small one.
The University of Michigan survey is not seasonally adjusted.It is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">March</th>
<th scope="col">Mid- March</th>
<th scope="col">Feb</th>
<th scope="col">March 2003</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
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<td class="firstcol">Consumer Sentiment</td>
<td>95.8</td>
<td>94.1</td>
<td>94.4</td>
<td>77.6</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>106.8</td>
<td>105.7</td>
<td>103.6</td>
<td>90.0</td>
<td>97.2</td>
<td>97.5</td>
<td>100.1</td>
</tr>
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<td class="firstcol">Consumer Expectations</td>
<td>88.8</td>
<td>86.6</td>
<td>88.5</td>
<td>69.6</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
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Consumer spending rose just 0.2% in February following an upwardly revised 0.5% January increase. A 0.5% gain in total PCE had been the Consensus expectation. Despite a modest increase in light vehicle sales last month, durable goods [...]

U.S. Personal Spending Growth Slowed

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040325a.jpg" width="353">
The &quot;final&quot; release of U.S. GDP for Q4-2003 showed virtually no revision from the &quot;preliminary&quot; 4.1% growth. Upward revisions to PCE-services and nonresidential structures were offset by downward shifts in inventories and state and local government outlays.
This report brought the first reading on Q4 corporate profits; these had their third strong quarterly gain in a row, when measured to include inventory valuation and capital consumption adjustments. The resulting &quot;operating profits&quot; were up at quarterly rates of 10.3%, 9.9% and 7.2% in Q2, Q3 and Q4, respectively. Without the accounting adjustments, profits were also strong in Q3 and Q4, but had been soft in Q2, when a tax law change sharply increased depreciation charges calculated for tax purposes.
Whichever way profits are measured, they benefited from both volume gains and cost constraints in the second half of last year. As seen in the table below, value added by domestic non-financial corporations was even stronger than GDP in both Q3 and Q4. Prices increased modestly. But labor costs fell in both periods, and non-labor costs, especially &quot;interest and miscellaneous payments&quot;, were down in Q3 and flat in Q4. Unit profits, that is, profit &quot;margins&quot;, thus widened significantly. Indeed, at $0.122 per unit value added, operating profit margins were the largest since Q4 of 1997.

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<th scope="col" class="firstcol">SAAR, % Changes&nbsp;&nbsp;(except as noted)</th>
<th scope="col">Q4-2003</th>
<th scope="col">Q3-2003</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Real GDP</td>
<td>4.1</td>
<td>8.2</td>
<td>3.1</td>
<td>2.2</td>
<td>0.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Real Value Added:&nbsp; Domestic Non-financial Corporations</td>
<td>5.0</td>
<td>9.3</td>
<td>5.4</td>
<td>3.5</td>
<td>-1.4</td>
</tr>
<tr>
<td class="firstcol">Price per Unit:&nbsp;&nbsp; Dollars</td>
<td>$1.019</td>
<td>$1.016</td>
<td>$1.015</td>
<td>$1.013</td>
<td>$1.012</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; % Change</td>
<td>1.2</td>
<td>0.8</td>
<td>0.5</td>
<td>-0.2</td>
<td>1.2</td>
</tr>
<tr>
<td class="firstcol">Compensation/Unit</td>
<td>-0.6</td>
<td>-4.2</td>
<td>-1.8</td>
<td>-2.8</td>
<td>0.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Non-labor Cost/Unit</td>
<td>0.0</td>
<td>-3.2</td>
<td>-3.6</td>
<td>0.0</td>
<td>4.1</td>
</tr>
<tr>
<td class="firstcol">Profits*/Unit (Qtrly % Chg)</td>
<td>2.5</td>
<td>10.2</td>
<td>27.1</td>
<td>20.0</td>
<td>-1.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Profits After Tax** (Qtrly % Chg)</td>
<td>12.4</td>
<td>9.4</td>
<td>20.7</td>
<td>24.1</td>
<td>-5.3</td>
</tr>
</tbody>
</table>
Jobless Claims Edge Upward, But Remain in 3-Year Low Ranges 
by <a href="/comment/Stone.html">Carol Stone</a> March 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040325b.jpg" width="353">
Initial claims for jobless insurance edged upward last week, interrupting a 3-week- long decline. Even so, the rise was only 1,000 and despite a 2,000 upward revision to the prior week, still allowed the 4-week moving average to decrease to 341,500, its lowest since the end of January 2001.
Continuing claims for unemployment insurance fell 46,000 in the March 13 week from a downwardly revised level in the the prior week, which now shows a 36,000 increase. The latest figure of 3.004 million continuing claims is the lowest since July 27, 2001, i.e., as the economy was experiencing that year&#39;s recessionary contraction.
The insured rate of unemployment was unchanged at 2.4% for a fifth consecutive week.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">3/20/04</th>
<th scope="col">3/13/04</th>
<th scope="col">3/06/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 339</td>
<td>338</td>
<td>342</td>
<td>-15.9%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>3,004</td>
<td>3,050</td>
<td>-13.5%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
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The "final" release of U.S. GDP for Q4-2003 showed virtually no revision from the "preliminary" 4.1% growth. Upward revisions to PCE-services and nonresidential structures were offset by downward shifts in inventories and state and [...]

Volume Gains & Cost Cutting Lift Q4 Corporate Profits

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040324e.jpg" width="353">
The South Korean economy ended 2003 on a firm note as GDP grew 2.7% (seasonally adjusted) in the fourth quarter, that is, 11.3% annualized. It stood 3.9% above the fourth quarter of 2002 and for the year as a whole, GDP was 3.1% above 2002.
The Q4 performance is an encouraging sign after outright contraction early in 2003 and a modest increase in Q3. Private consumption remained weak throughout, but investment and net exports made important positive contributions. In particular, investment in machinery and equipment turned upward distinctly after three negative quarters, yielding its best outturn since early in 2000.
The upturn in growth toward year-end is reassuring for Korea, as 2003 otherwise had a lackluster performance by recent historical standards. Only 1998, in the aftermath of the Asian-wide currency crises, saw more weakness. In the absence of such cataclysmic events, 2003 was indeed sluggish, so the fourth quarter improvement is beneficial. It gives a firmer base now that the nation is beset with political uncertainty in the face of the impeachment of its president. [N.B. The Bank of Korea is revising these national accounts data, including rebasing them to 2000 prices from 1995. Not all the detail is available to us from this source yet, and the data in real terms presently begin only in 1995.]

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<th scope="col" class="firstcol">GDP &amp; Selected Components</th>
Seasonally&nbsp; Adjusted &nbsp;Quarterly % Chg
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Q4-2003</td>
<td>Q3-2003 </td>
<td>Q2-2003</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">GDP&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>2.7</td>
<td>1.6</td>
<td>-0.1</td>
<td>3.9</td>
<td>7.5</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Year/Year</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>3.1</td>
<td>7.0</td>
<td>3.8</td>
</tr>
<tr>
<td class="firstcol">Private Consumption</td>
<td>-0.5</td>
<td>0.3</td>
<td>-0.8</td>
<td>-2.2</td>
<td>5.5</td>
<td>7.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Fixed Investment</td>
<td>3.2</td>
<td>-0.7</td>
<td>0.0</td>
<td>3.6</td>
<td>9.1</td>
<td>6.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>2.6</td>
<td>1.7</td>
<td>0.7</td>
<td>7.4</td>
<td>8.4</td>
<td>10.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Machinery &amp; Equipment</td>
<td>4.3</td>
<td>-4.9</td>
<td>-1.0</td>
<td>-2.4</td>
<td>9.6</td>
<td>-1.3</td>
</tr>
<tr>
<td class="firstcol">Net Exports (Bil.won)</td>
<td>SKW14.1</td>
<td>SKW9.3</td>
<td>SKW7.3</td>
<td>SKW37.3</td>
<td>SKW19.4</td>
<td>SKW21.1</td>
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The South Korean economy ended 2003 on a firm note as GDP grew 2.7% (seasonally adjusted) in the fourth quarter, that is, 11.3% annualized. It stood 3.9% above the fourth quarter of 2002 and for the year as a whole, GDP was 3.1% above [...]

Q4 Pick-Up in Investment Helps South Korean Economy

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040324a.jpg" width="353">
Durable goods orders rose 2.5% last month and recovered from a downwardly revised 2.7% decline in January. Consensus expectations had been for a 1.5% rise in February orders.
Non-defense capital goods orders rose 2.9% but the advance report of a 1.5% gain in January was reversed to show a 2.7% decline. Excluding aircraft and parts, orders rose 1.1% but January was revised down to a 0.3% decline versus the advance report of a 3.6% jump.
Orders for computers &amp; electronic products rose 1.2% (15.6% y/y) but that followed a 4.2% gain in January that was about half the rise in the advance report.
Machinery orders rose 1.3% (+14.2% y/y) but January was taken down to a 4.6% drop from a 1.9% decline reported initially. Orders for electrical equipment, appliances &amp; components fell 0.4% following a little-revised 3.6% January gain.
Excluding the transportation sector durable goods orders fell 0.3% (+10.4% y/y) after a 0.6% January gain, revised from 2.0%. Transportation equipment orders rose 9.9% following a little-revised 10.5% January drop. Aircraft orders rose 43.8% as both defense (27.6% y/y) and non-defense (29.8% y/y) orders soared m/m.
Shipments of durable goods recovered 0.8% (7.8% y/y) after the 1.0% January decline. Excluding transportation shipments fell 1.4% (8.2% y/y) but January was revised to slight decline.
Durable inventories rose for the fourth month in five, up 0.4% (-2.4% y/y).
&quot;Global Gain, Local Pain&quot; from the Federal Reserve Bank of Richmond examines the local costs of the Globalization of Manufacturing on this <a href="http://www.rich.frb.org/pubs/regionfocus/winter04/cover.htm">website</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM"> NAICS Classification</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Durable Goods Orders</td>
<td>2.5%</td>
<td>-2.7%</td>
<td>8.7%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-defense Capital Goods</td>
<td>2.9%</td>
<td>-2.7%</td>
<td>13.0%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
</tbody>
</table>
New Home Sales Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 24, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040324d.jpg" width="353">
Sales of new single family homes jumped 5.8% m/m to 1.163M in February and were up 24.4% versus year ago sales that were socked by severe winter weather. Consensus estimates were for a smaller gain in sales to 1.100M. January sales were revised down slightly.
Sales were mixed m/m in the country&#39;s regions. Northeast sales jumped 12.0% and doubled the weather depressed &#39;03 level. In the West sales surged 28.5% (39.3% y/y). Lower sales were logged in the Midwest, down 10.6% m/m (+2.2% y/y), and in the South, down 1.2% (+15.4% y/y).
The median price of a new home jumped 4.8% m/m to $205,500 (9.9% y/y).
These new home sales data from the US Census Department reflect current sales versus the existing home sale figures which reflect closings on past sales.

<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/@E904/@E90401/@E90401.HTM"> Homes Sales (000s, AR)</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">New Single-Family</td>
<td>1,163</td>
<td>1,099</td>
<td>24.4%</td>
<td>1,091</td>
<td>977</td>
<td>907</td>
</tr>
</tbody>
</table>
Mortgage Applications Dipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 24, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040324b.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association dipped 0.2% last week following the 25.6% jump the prior period. It was the first weekly decline since early February.
Purchase applications fell 0.8% w/w (+17.0% y/y) and in March are 6.7% ahead of the February average.
During the last ten years there has been a 56% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance nudged 0.1% higher (-38.7% y/y) following five weeks of strong gain.
The effective interest rate on a conventional 30-Year mortgage was unchanged at 5.62%. The effective rate on a 15-year mortgage dipped slightly to 4.99%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<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/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/19/04</th>
<th scope="col">03/12/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>1,114.9</td>
<td>1,117.1</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>448.9</td>
<td>452.4</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>4,988.7</td>
<td>4,983.7</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
Chicago Fed National Activity Index Again Positive 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 24, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040324c.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) was 0.39 in February, positive for the seventh month in the last eight.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
During the last twenty years there has been a 76% correlation between the level of the CFNAI and quarterly growth in real GDP.
The three-month moving average of the CFNAI dipped slightly to 0.29 but was still near the high of the last four years.
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.
For a complete discussion of the latest Chicago Fed&#39;s National Activity Index click <a href="http://www.chicagofed.org/economicresearchanddata/national/pdffiles/CFNAI_november2003.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">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.39</td>
<td>0.40</td>
<td>-0.93</td>
<td>-0.13</td>
<td>-0.39</td>
<td>-1.17</td>
</tr>
</tbody>
</table>
</body>
</html>

Durable goods orders rose 2.5% last month and recovered from a downwardly revised 2.7% decline in January. Consensus expectations had been for a 1.5% rise in February orders. Non-defense capital goods orders rose 2.9% but the advance [...]

U.S. Durable Goods Orders Up, Revisions Negative

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040323b.jpg" width="353">
The economic news announced today, relating to consumer spending and confidence in France, Italy and the Netherlands, adds fuel to the growing doubts about this year&#39;s growth prospects for the Euro Zone.
Consumer spending has yet to show any signs of accelerating. February data on household expenditures on manufactured goods, a good indicator of French consumer spending were practically unchanged from January. Growth in retail sales in Italy in December and January improved, but a decline in confidence suggests this trend may not hold up.
The seasonally adjusted consumer confidence index in Italy increased in March, but the ISAE reported that confidence weakened toward the end of the survey period after the Madrid bombings. On average, the Italian consumer confidence index in the first quarter of 2004 was 5% below that of the fourth quarter of last year.
In the Netherlands, where confidence had been generally improving since July, 2003, it declined in March by 4 points.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Consumption Indicators</th>
<th scope="col">Feb 04</th>
<th scope="col">Jan 04</th>
<th scope="col">Dec 03</th>
<th scope="col">Feb 03</th>
<th scope="col">Jan 03</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col">Y/Y&nbsp; %</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">French Household&nbsp; Expenditures on Mfg Goods (Bil 95 Euros)</td>
<td>17.9</td>
<td>17.8</td>
<td>&nbsp;</td>
<td>17.3</td>
<td></td>
<td>0.04</td>
<td>3.62</td>
<td>208.0</td>
<td>204.3</td>
<td>201.9</td>
</tr>
<tr>
<td class="firstcol">Italy Retail Sales (2000=100)</td>
<td></td>
<td>108.9</td>
<td>108.3</td>
<td></td>
<td>106.4</td>
<td>0.55</td>
<td>2.35</td>
<td>107.4</td>
<td>105.3</td>
<td>102.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Confidence Indicators</td>
<td>Mar 04</td>
<td>Feb 04</td>
<td>Mar 03&nbsp;</td>
<td></td>
<td></td>
<td>M/M&nbsp; %</td>
<td>Y/Y&nbsp; %</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy (1980=100)</td>
<td>101.9</td>
<td>98.9</td>
<td>99.0</td>
<td></td>
<td></td>
<td>3.03</td>
<td>-4.59</td>
<td>106.2</td>
<td>115.8</td>
<td>122.6</td>
</tr>
<tr>
<td class="firstcol">Netherlands (% balance)</td>
<td>-26</td>
<td>-22</td>
<td>-30</td>
<td></td>
<td></td>
<td>-4</td>
<td>+12</td>
<td>-36</td>
<td>-20</td>
<td>-1</td>
</tr>
</tbody>
</table>
</body>
</html>

The economic news announced today, relating to consumer spending and confidence in France, Italy and the Netherlands, adds fuel to the growing doubts about this year's growth prospects for the Euro Zone. Consumer spending has yet to [...]

Economic News from France, Italy and the Netherlands Suggests Lower Growth Prospects in the Euro Zone

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040323a.jpg" width="353">
Chain store sales added 0.2% last week to the 0.5% gain the prior period, according to the ICSC-UBS survey.
Sales so far in March are 0.3% ahead of the February average.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
During the last ten years there has been a 51% correlation between the year-to-year percent change in the ICSC-UBS measure of chain store sales and consumer sentiment.
&quot;Why Does Consumer Sentiment Predict Household Spending?&quot; from the Federal Reserve Bank of Richmond can be found <a href="http://www.rich.frb.org/pubs/eq/pdfs/fall2003/mehra.pdf"> here</a>.

<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/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">03/20/04</th>
<th scope="col">03/13/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>439.5</td>
<td>438.6</td>
<td>7.1%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

Chain store sales added 0.2% last week to the 0.5% gain the prior period, according to the ICSC-UBS survey. Sales so far in March are 0.3% ahead of the February average. The ICSC-UBS retail chain-store sales index is constructed using [...]

Chain Store Sales Rose Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040322b.jpg" width="353">
The rental and property markets in Hong Kong are beginning to show signs of revival. Prices in these markets had reached peaks in October, 1997 and had declined steeply until the past few months.
The index of rental prices, which had declined by 49% from its high, held steady in January after having rising for the previous three months. The improvement in property prices has been more marked as the index of property prices has risen in each of the past six months. However, that index had fallen by some 70% from its October, 1997 high.
Prices in both the rental and property markets are still well below even the pre peak levels.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Rental and Property Prices in&nbsp; Hong Kong (1999=100)</th>
<th scope="col">Jan 04</th>
<th scope="col">Dec 03</th>
<th scope="col">Jan 03</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col">Y/Y&nbsp; %</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Rental</td>
<td>72.4</td>
<td>71.4</td>
<td>77.4</td>
<td>0.0</td>
<td>-6.46</td>
<td>73.5</td>
<td>83.4</td>
<td>95.3</td>
</tr>
<tr>
<td class="firstcol">Property</td>
<td>67.8</td>
<td>65.0</td>
<td>63.7</td>
<td>4.31</td>
<td>6.44</td>
<td>61.4</td>
<td>69.9</td>
<td>78.7</td>
</tr>
</tbody>
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</body>
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The rental and property markets in Hong Kong are beginning to show signs of revival. Prices in these markets had reached peaks in October, 1997 and had declined steeply until the past few months. The index of rental prices, which had [...]

Hong Kong Property Markets Show Signs of Revival

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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Andrew Cates

**The Global Monetary Policy Consensus**
The latest Blue Chip Financial Forecasts survey points to a notably more balanced global monetary policy outlook over the coming year. In contrast to the pronounced easing bias that dominated much of the past two years, expectations are now more symmetric, with a similar number of central banks projected to raise rates as to ease policy. Japan is seen delivering further tightening, while Canada is expected to initiate an interest rate hike in coming months. In Australia’s case, this tightening guidance was reinforced this week, with the Reserve Bank lifting its policy rate by 25 basis points. Elsewhere, and in contrast, the euro area, UK and US are expected to move in the opposite direction.

260205Z1.jpg

**US manufacturing activity**
The second chart underscores the recent improvement in US economic momentum, highlighted by an unexpected surge in the January ISM manufacturing PMI. After spending much of the past year hovering below the 50 threshold consistent with stagnation, the index jumped sharply back into expansionary territory, signalling a renewed pickup in industrial activity. This rebound has coincided with a broader run of stronger-than-anticipated US economic data, as reflected in the upswing in the Citigroup Economic Surprise Index. Together, these developments point to a US economy that continues to display notable resilience, complicating expectations of monetary easing in the near term.

260205Z2.jpg

**US Bank Lending Standards and Financial Stress** 
The next chart turns to US financial conditions, highlighting the latest readings from the Senior Loan Officer Opinion Survey. The net proportion of banks tightening lending standards on corporate loans and mortgages is now more modest by historical standards, and well below the extremes seen during past episodes of financial stress. Some easing in credit headwinds has occurred alongside relatively subdued readings on the OFR Financial Stress Index, which continues to hover below its long-run average. Together, these indicators suggest that the US financial system has continued to avoid the kind of acute stress typically associated with sharp slowdowns in credit availability—helping to underpin the recent resilience in economic activity.

260205Z3.jpg

**Semiconductor Sales**
The fourth chart highlights the renewed surge in global semiconductor sales, with momentum strengthening sharply over recent months across the Americas, China and the broader Asia-Pacific region. After the cyclical downturn in 2022–23, sales have rebounded to fresh highs, reflecting a powerful revival in demand for advanced chips and related technologies. This upswing has taken place amid intense investor preoccupation with artificial intelligence, with expectations that AI adoption will drive a sustained wave of capital spending on data centres, cloud infrastructure and high-performance computing. In contrast, semiconductor sales in Europe remain comparatively subdued, reflecting the region’s smaller footprint in high-end chip manufacturing, weaker industrial demand, and the ongoing impact of slower economic growth. While semiconductors are inherently cyclical, markets have increasingly interpreted the current rebound elsewhere as structural rather than purely cyclical—underpinned by the belief that AI represents a transformative and durable source of demand growth.

260205Z4.jpg

**Large-Scale AI Models**
The next chart illustrates the rapid proliferation of large-scale AI models globally, with newly updated data for 2025 pointing to a further sharp acceleration in development activity. The United States continues to lead by a wide margin, while China has also seen a steep rise in model deployment in recent years, underscoring the intensifying technological competition between the two economies. Growth in the UK and other regions has been more modest by comparison, highlighting the increasingly concentrated nature of AI innovation. Taken together with the surge in semiconductor sales, these trends help explain the market’s strong preoccupation with AI as a potential driver of future productivity and investment cycles—although the geographic concentration of activity also raises questions about the uneven distribution of any resulting economic gains.

260205Z5.jpg

**An AI Bubble?** 
The final chart draws on the latest Blue Chip Financial Forecasts special questions, highlighting market participants’ perceptions of the economic gains likely to be delivered by artificial intelligence. While a sizeable share of respondents still believe that financial markets may be overestimating AI’s potential benefits, an increasing proportion now judge current expectations to be broadly accurate, with only a small minority viewing the gains as underestimated. Notably, this represents a softening in scepticism compared with the survey results from last month, when concerns about excessive market optimism were more pronounced. The shift suggests a growing acceptance that AI-related investment and innovation could translate into meaningful economic impacts—though uncertainty remains high around the scale, timing and distribution of these gains.

260205Z6.jpg

Financial markets have experienced renewed gyrations in recent weeks, as shifting geopolitical risks, questions around Federal Reserve independence, renewed talk of US dollar “debasement,” and ongoing enthusiasm surrounding artificial intelligence have combined to drive volatility across asset classes. These cross-currents have also contributed to a degree of rotation away from high-flying technology stocks, as investors reassess valuations and the timing of anticipated AI-driven gains. Against this backdrop, the charts in this week’s COTW highlight several important themes. Policy rate expectations now appear more balanced globally, marking a clear shift away from the one-sided easing bias of the past two years (chart 1), even as resilient US data—underscored by the unexpected jump in the January ISM index and a run of positive economic surprises—continues to complicate the outlook for monetary easing (chart 2). At the same time, US financial conditions remain relatively benign, with limited evidence of widespread credit stress or aggressive tightening in lending standards (chart 3). Meanwhile, the sharp rebound in semiconductor sales and the accelerating rollout of large-scale AI models underscore why investors remain so focused on the AI narrative, even as Europe lags behind due to weaker industrial momentum and a smaller footprint in advanced chip production (charts 4 and 5). Finally, while some scepticism about AI’s ultimate economic impact persists, the latest survey results suggest a moderation in concerns that markets are materially overestimating its gains (chart 6). Taken together, these developments paint a picture of a US economy that remains more resilient than many had anticipated, set against a financial landscape increasingly shaped by powerful—if sometimes competing—narratives around geopolitics, policy, and technological transformation.

Charts of the Week: Balanced Policy, Resilient Data and AI Narratives

Robert Brusca

260206E.jpg

With the December report, Germany’s production and some of the early European industrial production data reveal a good deal of chaos in terms of the embedded trends. On the month, German industrial production fell by 1.9%, with consumer goods output up by 0.5%, capital goods output falling by 5.3%, and intermediate goods output falling by 1.2%. Among the early reporters in the monetary union—France, Spain, and Portugal—only Spain showed an increase in manufacturing IP in December; however, Spanish industrial production is notoriously volatile.

**Broader IP trends in Germany and elsewhere in Europe**
As for other early industrial production reporters, both Sweden and Norway showed strong-to-solid gains in December and each of them showed two-months of gains in a row. Beyond that, sequential growth rates from 12-months to six-months to three-months show accelerating growth in German consumer goods output against decelerating growth for intermediate goods. Real manufacturing output and real sales show mixed results- no clear trends; however, real manufacturing orders in Germany are off the map strong. 

**German manufacturing/industrial Surveys**
German industrial surveys from the IFO for manufacturing shows persistent weakening as well as for IFO manufacturing expectations, and in the EU Commission industrial index in the last three months. More broadly, Germany shows some modest but ongoing step up all of these based on average levels from 12-months to six-months to three-months for IFO expectations and the EU Commission industrial readings with mixed results for other survey readings.

**IP trends in Europe**
For the early reporting EMU members France, Spain, and Portugal, who report industrial production trends, each show mixed monthly trends against ongoing decelerations for manufacturing output over the broader sequential periods (12-month, to 6-month, to 3-month). However, for other Europe, Sweden and Norway, manufacturing trends are steadily accelerating on this broader timeline.

**A feeling of ‘Deja- What?’**
These combinations of opposed trends mixed with a lack of trends leave us with this sense of confusion about what's going on in manufacturing. For Germany, the extreme strength in orders is reassuring since orders should be forward-looking rather than backward-looking or even contemporaneous. But orders can also be a fickle series and so we'll have to watch it to see if the trends for German orders hold up.

**Current quarter-What’s been happening now**
In addition, current quarter growth for Germany actually looks quite good with industrial production up 3.7% at an annual rate in the current quarter, led by output increases in manufacturing against a decline in the intermediate goods output. Real orders in the quarter are surging at a 44% growth rate, while real sales in manufacturing only had a 0.1% uptick at an annual rate. The industrial indicators for Germany in the quarter show weakness or flatness with the only exception being IFO manufacturing expectations that advanced by a small amount. The three EMU members who report industrial production data show positive growth in the just-completed quarter except for Portugal where industrial production is falling at a 2.9% rate in the fourth quarter. Sweden and Norway, European countries but not monetary union members, show a strong 22% annual rate gain in Sweden against the 3% annual rate decline in Norway.

260206.jpg

**Rankings**
**How growth rates stack up…**
Moving away from short-term trends, the rankings of growth rates of these various metrics using 12-month growth rates on data back to 2006, show below-median growth rates for German industrial production and all three of its major sectors. All of them have rankings below the 50% mark where the median resides. Germany’s manufacturing output growth rate is below its median as is the growth of real sales; and once again real manufacturing orders break out and show a stunning 90th percentile standing, extremely strong compared to other growth rates on this period.

**Indicator rankings are poor**
However, the survey based industrial indicators for Germany, ranked based on their index levels, are all extremely weak and much weaker than German sector or other German metrics. The strongest indicator reading is the 29th percentile standing for IFO manufacturing expectations while the current ZEW index, IFO manufacturing index, and the EU Commission industrial readings, all reside below their 15th percentile. The survey rankings suggest that industrial sentiment is in much worse shape than activity and growth.

**IP elsewhere in Europe**
However, the growth ranking of manufacturing industrial production for the reporting EMU members and other European members are all quite solid, with percentile standings ranging from the 66th up to the 93rd percentile.

**Summing up**
From these data, Germany emerges as the weak economy compared with historic norms based on industrial production growth and indicator readings. However, there's a glimpse of positivity from the growth of real orders, and at the same time, some concern about ongoing sentiment for manufacturing in Germany as distinct from actual performance.

Germany

German IP Reveals Chaotic Trends

Winnie Tapasanun

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**Total job openings** fell 5.6% m/m (-12.9% y/y) to 6.542 million in December after a downwardly revised 7.0% decline to 6.928 million in November (previously -4.1% m/m; 7.146 million), according to the Job Openings and Labor Turnover Survey. December marked the third consecutive m/m fall and the lowest level since September 2020. The job openings rate declined to 3.9% in December, the lowest since April 2020, from 4.2% in November, remaining below a record-high 7.4% in March 2022. This rate is calculated as the ratio of job openings to total nonfarm employment plus openings. Significantly, the drop in job openings also lowered the **ratio of job openings to unemployed individuals** to 0.872 in December—the lowest since March 2021—from 0.890 in November, down from 1.085 in December 2024 and a pre-pandemic 1.211 in February 2020. A reading of 0.872 implies there were about 0.87 open jobs per unemployed person—indicating fewer openings than unemployed workers. December was the fifth time in six months that this ratio remained below 1.0.

**Private sector job openings** fell 6.8% (-12.5% y/y) to 5.804 million in December after a 6.6% fall to 6.227 million in November, registering the third successive m/m decline and the lowest level since September 2020. The private sector job openings rate fell to 4.1% in December, the lowest since April 2020, from 4.4% in November. The December m/m decline in private sector openings reflected drops of 27.7% (-36.9% y/y) in financial activities, 20.2% (-25.5% y/y) in professional & business services, 14.4% (-5.1% y/y) in trade, transportation & utilities, and 5.2% (-12.4% y/y) in private educational & health services. To the upside, private sector openings in the following categories rose m/m in December: other services (21.1%; 11.0% y/y), mining & lodging (17.6%; 0.0% y/y), information (13.5%; -4.7% y/y), manufacturing (8.5%; 0.5% y/y), leisure & hospitality (7.5%; -17.2% y/y), and construction (2.8%; 42.4% y/y). Meanwhile, government job openings rose 5.3% (-15.6% y/y) in December, the first m/m rise in three months, after a 10.6% drop in November.

**Total hiring** rebounded 3.4% (-1.5% y/y) to 5.293 million in December, the first m/m increase since September, following a 4.6% decrease to 5.121 million in November. The hiring rate edged up to 3.3% in December from 3.2% in November, though it remained below pre-pandemic levels. **Private sector hiring** rose 3.1% (-0.4% y/y) to 4.978 million in December, the third m/m rise in four months, after a 4.0% decline to 4.826 million in November. The private sector hiring rate rose to 3.7% in December from 3.5% in November, the same as in October and September. The December m/m increase in private sector hiring was led by a 32.1% jump (42.3% y/y) in information, followed by gains of 24.0% (-4.6% y/y) in financial activities, 23.5% (0.0% y/y) in mining & lodging, 6.5% (-4.8% y/y) in private educational & health services, 4.2% (-4.9% y/y) in trade, transportation & utilities, 3.6% (6.1% y/y) in construction, 3.4% (7.9% y/y) in leisure & hospitality, and 1.8% (-4.3% y/y) in manufacturing. To the downside, private sector hiring in professional & business services (-5.2%; +0.5% y/y) and other services (-4.3%; -16.5% y/y) declined m/m in December. Meanwhile, government hiring rebounded 6.4% (-16.3% y/y) in December, the first m/m rise since September, following a 13.5% drop in November.

**Total separations** rose 2.1% (3.3% y/y) to 5.251 million in December after a 1.5% rise to 5.144 million in November, marking the third m/m increase in four months and the highest level since September. The total separations rate edged up to 3.3% after holding at 3.2% in November and October. Private sector separations rose 1.6% (4.2% y/y) to 4.932 million in December, the highest level since June, while government sector separations jumped 10.4% (-9.1% y/y) to 319,000 following two consecutive m/m declines. **Total quits** (voluntary separations initiated by the employee) increased 0.3% (3.5% y/y) to 3.204 million in December, the third m/m rise in four months and the highest level since June, after a 7.4% rebound in November. The quits rate (a measure of workers’ willingness or ability to leave jobs) held at 2.0% in December and November, slightly below 2.3% in February 2020. Private sector quits eased 0.2% (+4.5% y/y) following an 8.4% November rebound. **Layoffs and discharges** (involuntary separations initiated by the employer) increased 3.6% (5.6% y/y) to 1.762 million in December, up for the third time in four months, after an 8.1% drop in November. The layoffs & discharges rate remained at 1.1% in December and November, marginally below 1.3% in February 2020. Private sector layoffs grew 4.3% (7.8% y/y) following a 7.3% November decrease.

The Job Openings and Labor Turnover Survey (JOLTS) data are available in Haver’s **USECON** database.

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- Job openings down 5.6% (-12.9% y/y) to 6.542 mil., third straight m/m decline.
- Hiring up 3.4% (-1.5% y/y) to 5.293 mil., first m/m increase since September.
- Separations rise to a three-month high; quits reach a six-month high; layoffs rebound.

U.S. JOLTS: Openings Drop to Lowest Level Since Sept. ’20; Hiring Rebounds in December

Sandy Batten

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Initial claims for unemployment insurance jumped 22,000 to 231,000 in the week ended January 31 following an unrevised 209,000 in the prior week. The four-week average rose to 212,250 from 206,250. The Action Economics Forecast Survey looked for 213,000 claims to have been filed. Winter Storm Fern and the accompanying very cold temperatures could have provided a temporary boost. Historically speaking, claims remain at low levels.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—increased by 25,000 to 1.844 million in the week ending January 24, from a downwardly revised 1.819 million in the prior week (previously 1.827 million). The insured unemployment rate remained at 1.2% in the week of January 24, unchanged from the previous eight weeks.

The insured unemployment rate varied greatly across individual states and territories. In the week ending January 17, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.77%), Massachusetts (2.67%), Washington (2.54%), and Minnesota (2.45%). The lowest rates were in Florida (0.30%), North Carolina (0.42%), Louisiana (0.43%), Alabama (0.46%), and Arkansas (0.47). Rates in other notable states include Illinois (2.15%), California, (2.08%), New York (2.02%), Pennsylvania (1.91%), 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 **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- New claims jumped 22,000 to 231,000, the highest level since December 6.
- Continuing claims rose to 1.844 million from 1.819 million.

U.S. Initial Unemployment Claims Surged in Latest Week

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German real orders in December adjusted for inflation rose strongly again, gaining 7.8% month-to-month after rising 5.7% month-to-month in November. Foreign orders were up by 5.6% in December compared to 5.2% in November. Domestic orders surged by 10.7% in December after rising 6.4% in November and 10% in October.

**Real sales**
Real sales were mixed in December with overall sales falling 1.4% month-to-month mostly on weakness in capital goods sales.

**Broad categorical acceleration**
Many flows are accelerating this month. Sequential growth rates show acceleration. Total real orders accelerate from a year ago, to the current year, to six-months, and to three-months. Sales growth rates for consumer goods, consumer nondurables, and intermediate goods all show accelerations in gear. The exceptions are foreign orders that are not as strong over six months compared to their 12-month growth. And on the sales side, consumer durables sales and capital goods sales are weak.

**Quarter-to-quarter**
Quarterly annualized growth is complete for Q4 with this report. Foreign orders are the ‘weak flow’ expanding at a 13.6% annual rate – certainly not a weak growth rate. But domestic real orders are up at an astounding 101.9% annual rate. The net impact on the total real orders growth is to lift it to a pace of 44.1%. 

**Order ranking is very strong**
The table provides two rankings: one based on the level of variables and the other based on its year-on-year growth. The rankings this month for real orders overall, foreign, and domestic orders all reside in their top 80th to 90th percentiles- extremely strong based on level or growth. Sales do not follow suit. This gives us some reason to suspect that there is some lumpiness involved in the manufacturing data as distinct from strength. That will be something to watch. Overall mining and manufacturing sales growth is essentially at its historic median at a rank of 49.8. However, capital goods, intermediate goods and manufacturing sales all have rankings at or above their medians - as high as a 61-percentile standing for capital goods.

**Industrial confidence**
Industrial confidence for Germany, France, Italy and Spain (the EU’s big-four economies) show rankings based on these survey levels that are much lower at the 11th percentile for Germany, the 42nd and 36th percentiles, for France and Italy, respectively. Spain scores better with a 61.8 percentile standing on its industrial confidence measure. 

On balance, there is now an accelerating profile that is broad in sales trends and especially strong order trends. Perhaps Europe, under the pressure to stimulate its miliary capabilities, has a core of demand to help drive output ahead more consistently. This is something to watch in the coming months.

Economy in Brief: 2004

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