Carol Stone, CBE

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Initial claims for unemployment insurance fell to 210,000 (-8.7% y/y) during the week ended October 13 from 215,000 in the prior week; the earlier figure was revised up 1,000. The latest report was in line with the Action Economics Forecast Survey at 210,000. The four-week moving average of initial claims was 211,750, up from the prior week's 209,750. The October 13 amount is the smallest since December 6, 1969, when there were 202,000 initial claims; the smallest on record was 162,000 the week ended November 30, 1968. These data begin January 7, 1967.

In the week ending October 6, 2018, continuing claims for unemployment insurance fell 13,000 to 1.640 million (-13.8% y/y) from 1.653 million a week earlier; that earlier number was revised down by 7,000. The 1.640 million is the smallest weekly amount since August 4, 1973. The four-week moving average of claimants declined to 1,653,000. This is again, as it was the previous week, the lowest four-week average since August 18, 1973, when it was 1,646,750.

The insured rate of unemployment remained at its record low of 1.2%, where it's been since early May.

Insured rates of unemployment vary widely by state. During the week ended September 29, the lowest rates were in South Dakota (0.19%), North Dakota (0.30%), Nebraska (0.31%), Indiana (0.42%), and Florida (0.45%). The highest rates were in Pennsylvania (1.43%), Connecticut (1.58%), California (1.64%), Alaska (1.84%), and New Jersey (1.87%). Among other of the largest states by population, the rate was 1.14% in New York and 0.87% in Texas. These state data are not seasonally adjusted.

Data on weekly unemployment insurance are contained in
Haver's WEEKLY database, and they are summarized monthly in USECON.
Data for individual states are in REGIONW. The expectations figure is from
the Action Economics Forecast Survey, carried in the AS1REPNA database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" >Unemployment Insurance (SA, 000s)</th>
 <th>10/13/18</th>
 <th>10/06/18</th>
 <th>09/29/18</th>
 <th>Y/Y %</th>
 <th>2017</th>
 <th>2016</th>
 <th>2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Initial Claims</td>
 <td >210</td>
 <td >215</td>
 <td >207</td>
 <td >-8.7</td>
 <td >245</td>
 <td >262</td>
 <td >278</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Continuing Claims</td>
 <td >--</td>
 <td >1,640</td>
 <td >1,653</td>
 <td >-13.8</td>
 <td >1,961</td>
 <td >2,135</td>
 <td >2,266</td>
 </tr>
 <tr>
 <td class="firstcol" >Insured Unemployment Rate (%)</td>
 <td >--</td>
 <td >1.2</td>
 <td >1.2</td>
 <td >
 1.4 
 (Oct 2017)
 </td>
 <td >1.4</td>
 <td >1.6</td>
 <td >1.7</td>
 </tr>
 </tbody>
 </table>
 
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Initial claims for unemployment insurance fell to 210,000 (-8.7% y/y) during the week ended October 13 from 215,000 in the prior week; the earlier figure was revised up 1,000. The latest report was in line with the Action Economics [...]

U.S. Initial Claims for Unemployment Insurance Ease

Tom Moeller

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The Philadelphia Federal Reserve reported that its General
Factory Sector Business Conditions Index dipped to 22.2 during October following
a rise to 22.9 in September. The latest reading compared to expectations for a
greater decrease to 20.0 in the Action Economics Forecast Survey. The figures
are diffusion indexes where readings above zero indicate expansion. The
percentage of firms reporting an improvement in business activity fell to 35.9%,
down from the high of 48.2% in May of last year. The number reporting a
worsening eased to 13.7%, half the percentages early in 2016.

Haver Analytics constructs an ISM-Adjusted General Business
Conditions Index. The figure fell slightly this month to 55.7 and remained down
versus its March peak of 61.9. During the last ten years, there has been a 66%
correlation between the quarterly ISM-adjusted Philadelphia Fed Index and
quarterly real GDP growth.

Movement amongst the components of the survey was mixed last
month. To the down side were the new and the unfilled orders series. A sharp
decline in the delivery times series indicated the quickest product delivery
speeds in two years. Moving higher were the shipments and inventory figures.

Also showing improvement were the labor market readings. The
employment figure rose to its highest level since June. During the last ten
years there has been an 80% correlation between the employment index and the m/m
change in factory sector payrolls. A higher 30% of respondents reported
increased hiring while eleven percent indicated less. The index of future
employment slipped m/m and remained well below its May high. The average
workweek reading rose to its longest since June.

Pricing power slackened as the prices paid gauge fell to its
lowest level in nine months. A sharply lessened 42% of firms reported higher
prices while four percent reported a decline. The index of prices received rose
slightly m/m, but remained well below its high in May.

The index measuring expectations of future business
conditions eased m/m and remained well below the high reached in March of last
year. Expected employment, delivery times and unfilled orders fell, but the new
orders and shipments readings increased. Expected capital expenditures weakened.

The survey panel consists of 150 manufacturing companies in
the third Federal Reserve District (which consists of southeastern PA, southern
NJ and Delaware). The diffusion indexes represent the percentage of respondents
indicating an increase minus the percentage indicating a decrease in activity.
The ISM-adjusted figure, calculated by Haver Analytics, is the average of five
diffusion indexes: new orders, shipments, employment, delivery times and
inventories with equal weights (20% each). Each ISM-adjusted index is the sum of
the percent responding &quot;higher&quot; and one-half of the percent responding
&quot;same.&quot;

The figures from the Philadelphia Federal Reserve dating back
to 1968 can be found in Haver's SURVEYS database. The expectation from
the Action Economics Forecast Survey is available in AS1REPNA.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" >Philadelphia Fed - Manufacturing
 Business Outlook Survey (%, SA)</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Oct'17</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >General Factory Sector Business
 Conditions</td>
 <td >22.2</td>
 <td >22.9</td>
 <td >11.9</td>
 <td >28.8</td>
 <td >27.4</td>
 <td >4.8</td>
 <td >3.7</td>
 </tr>
 <tr>
 <td class="firstcol" >ISM-Adjusted Business Conditions</td>
 <td >55.7</td>
 <td >56.3</td>
 <td >55.6</td>
 <td >60.1</td>
 <td >57.2</td>
 <td >48.2</td>
 <td >49.4</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;New Orders</td>
 <td >19.3</td>
 <td >21.4</td>
 <td >9.9</td>
 <td >23.3</td>
 <td >25.4</td>
 <td >4.9</td>
 <td >3.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Shipments</td>
 <td >24.5</td>
 <td >19.6</td>
 <td >16.6</td>
 <td >26.0</td>
 <td >26.8</td>
 <td >6.9</td>
 <td >3.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Unfilled Orders</td>
 <td >-2.3</td>
 <td >12.6</td>
 <td >5.6</td>
 <td >12.1</td>
 <td >11.9</td>
 <td >-5.6</td>
 <td >-5.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Delivery Time</td>
 <td >0.2</td>
 <td >11.1</td>
 <td >6.4</td>
 <td >19.9</td>
 <td >10.6</td>
 <td >-4.6</td>
 <td >-4.2</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Inventories</td>
 <td >-0.8</td>
 <td >-3.5</td>
 <td >15.4</td>
 <td >-0.8</td>
 <td >2.8</td>
 <td >-9.6</td>
 <td >-1.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Number of Employees</td>
 <td >19.5</td>
 <td >17.6</td>
 <td >14.3</td>
 <td >30.7</td>
 <td >16.2</td>
 <td >-5.6</td>
 <td >3.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Average Workweek</td>
 <td >20.8</td>
 <td >14.6</td>
 <td >10.7</td>
 <td >18.5</td>
 <td >14.9</td>
 <td >-5.4</td>
 <td >-1.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Prices Paid</td>
 <td >38.2</td>
 <td >39.6</td>
 <td >55.0</td>
 <td >37.6</td>
 <td >30.4</td>
 <td >13.5</td>
 <td >1.5</td>
 </tr>
 <tr>
 <td class="firstcol" >Expectations - General Business
 Conditions; Six Months Ahead</td>
 <td >33.8</td>
 <td >36.3</td>
 <td >38.8</td>
 <td >47.2</td>
 <td >47.1</td>
 <td >33.7</td>
 <td >37.6</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index dipped to 22.2 during October following a rise to 22.9 in September. The latest reading compared to expectations for a greater [...]

Philadelphia Fed Manufacturing Growth Continues; Pricing Pressure Eases

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The Philadelphia Federal Reserve reported that its General
Factory Sector Business Conditions Index dipped to 22.2 during October following
a rise to 22.9 in September. The latest reading compared to expectations for a
greater decrease to 20.0 in the Action Economics Forecast Survey. The figures
are diffusion indexes where readings above zero indicate expansion. The
percentage of firms reporting an improvement in business activity fell to 35.9%,
down from the high of 48.2% in May of last year. The number reporting a
worsening eased to 13.7%, half the percentages early in 2016.
Haver Analytics constructs an ISM-Adjusted General Business
Conditions Index. The figure fell slightly this month to 55.7 and remained down
versus its March peak of 61.9. During the last ten years, there has been a 66%
correlation between the quarterly ISM-adjusted Philadelphia Fed Index and
quarterly real GDP growth.
Movement amongst the components of the survey was mixed last
month. To the down side were the new and the unfilled orders series. A sharp
decline in the delivery times series indicated the quickest product delivery
speeds in two years. Moving higher were the shipments and inventory figures.
Also showing improvement were the labor market readings. The
employment figure rose to its highest level since June. During the last ten
years there has been an 80% correlation between the employment index and the m/m
change in factory sector payrolls. A higher 30% of respondents reported
increased hiring while eleven percent indicated less. The index of future
employment slipped m/m and remained well below its May high. The average
workweek reading rose to its longest since June.
Pricing power slackened as the prices paid gauge fell to its
lowest level in nine months. A sharply lessened 42% of firms reported higher
prices while four percent reported a decline. The index of prices received rose
slightly m/m, but remained well below its high in May.&nbsp;&nbsp; 
The index measuring expectations of future business
conditions eased m/m and remained well below the high reached in March of last
year. Expected employment, delivery times and unfilled orders fell, but the new
orders and shipments readings increased. Expected capital expenditures
weakened.&nbsp; 
The survey panel consists of 150 manufacturing companies in
the third Federal Reserve District (which consists of southeastern PA, southern
NJ and Delaware). The diffusion indexes represent the percentage of respondents
indicating an increase minus the percentage indicating a decrease in activity.
The ISM-adjusted figure, calculated by Haver Analytics, is the average of five
diffusion indexes: new orders, shipments, employment, delivery times and
inventories with equal weights (20% each). Each ISM-adjusted index is the sum of
the percent responding &quot;higher&quot; and one-half of the percent responding
&quot;same.&quot;
The figures from the Philadelphia Federal Reserve dating back
to 1968 can be found in Haver's SURVEYS database. The expectation from
the Action Economics Forecast Survey is available in AS1REPNA.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" width="1211">Philadelphia Fed - Manufacturing
 Business Outlook Survey (%, SA)</th>
 <th scope="col" width="93">Oct</th>
 <th scope="col" width="93">Sep</th>
 <th scope="col" width="94">Aug</th>
 <th scope="col" width="94">Oct'17</th>
 <th scope="col" width="94">2017</th>
 <th scope="col" width="94">2016</th>
 <th scope="col" width="94">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="1211">General Factory Sector Business
 Conditions</td>
 <td align="center" width="93">22.2</td>
 <td align="center" width="93">22.9</td>
 <td align="center" width="94">11.9</td>
 <td align="center" width="94">28.8</td>
 <td align="center" width="94">27.4</td>
 <td align="center" width="94">4.8</td>
 <td align="center" width="94">3.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="1211">ISM-Adjusted Business Conditions</td>
 <td align="center" width="93">55.7</td>
 <td align="center" width="93">56.3</td>
 <td align="center" width="94">55.6</td>
 <td align="center" width="94">60.1</td>
 <td align="center" width="94">57.2</td>
 <td align="center" width="94">48.2</td>
 <td align="center" width="94">49.4</td>
 </tr>
 <tr>
 <td class="firstcol" width="1211">&nbsp;&nbsp;New Orders</td>
 <td align="center" width="93">19.3</td>
 <td align="center" width="93">21.4</td>
 <td align="center" width="94">9.9</td>
 <td align="center" width="94">23.3</td>
 <td align="center" width="94">25.4</td>
 <td align="center" width="94">4.9</td>
 <td align="center" width="94">3.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1211">&nbsp;&nbsp;Shipments</td>
 <td align="center" width="93">24.5</td>
 <td align="center" width="93">19.6</td>
 <td align="center" width="94">16.6</td>
 <td align="center" width="94">26.0</td>
 <td align="center" width="94">26.8</td>
 <td align="center" width="94">6.9</td>
 <td align="center" width="94">3.0</td>
 </tr>
 <tr>
 <td class="firstcol" width="1211">&nbsp;&nbsp;Unfilled Orders</td>
 <td align="center" width="93">-2.3</td>
 <td align="center" width="93">12.6</td>
 <td align="center" width="94">5.6</td>
 <td align="center" width="94">12.1</td>
 <td align="center" width="94">11.9</td>
 <td align="center" width="94">-5.6</td>
 <td align="center" width="94">-5.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1211">&nbsp;&nbsp;Delivery Time</td>
 <td align="center" width="93">0.2</td>
 <td align="center" width="93">11.1</td>
 <td align="center" width="94">6.4</td>
 <td align="center" width="94">19.9</td>
 <td align="center" width="94">10.6</td>
 <td align="center" width="94">-4.6</td>
 <td align="center" width="94">-4.2</td>
 </tr>
 <tr>
 <td class="firstcol" width="1211">&nbsp;&nbsp;Inventories</td>
 <td align="center" width="93">-0.8</td>
 <td align="center" width="93">-3.5</td>
 <td align="center" width="94">15.4</td>
 <td align="center" width="94">-0.8</td>
 <td align="center" width="94">2.8</td>
 <td align="center" width="94">-9.6</td>
 <td align="center" width="94">-1.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="1211">&nbsp;&nbsp;Number of Employees</td>
 <td align="center" width="93">19.5</td>
 <td align="center" width="93">17.6</td>
 <td align="center" width="94">14.3</td>
 <td align="center" width="94">30.7</td>
 <td align="center" width="94">16.2</td>
 <td align="center" width="94">-5.6</td>
 <td align="center" width="94">3.9</td>
 </tr>
 <tr>
 <td class="firstcol" width="1211">&nbsp; Average Workweek</td>
 <td align="center" width="93">20.8</td>
 <td align="center" width="93">14.6</td>
 <td align="center" width="94">10.7</td>
 <td align="center" width="94">18.5</td>
 <td align="center" width="94">14.9</td>
 <td align="center" width="94">-5.4</td>
 <td align="center" width="94">-1.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="1211">&nbsp; Prices Paid</td>
 <td align="center" width="93">38.2</td>
 <td align="center" width="93">39.6</td>
 <td align="center" width="94">55.0</td>
 <td align="center" width="94">37.6</td>
 <td align="center" width="94">30.4</td>
 <td align="center" width="94">13.5</td>
 <td align="center" width="94">1.5</td>
 </tr>
 <tr>
 <td class="firstcol" width="1211">Expectations - General Business
 Conditions; Six Months Ahead</td>
 <td align="center" width="93">33.8</td>
 <td align="center" width="93">36.3</td>
 <td align="center" width="94">38.8</td>
 <td align="center" width="94">47.2</td>
 <td align="center" width="94">47.1</td>
 <td align="center" width="94">33.7</td>
 <td align="center" width="94">37.6</td>
 </tr>
 </tbody>
</table>

&nbsp;
<div id="content">
 <div id="rightside">
 <div class="col" id="entire">
 U.S. Leading Economic Indicators Strengthen 
 by <a href="http://haver.com/comment/Moeller.html">Tom
 Moeller</a>&nbsp;&nbsp;October 18, 2018
 The Conference Board's Composite Index of Leading
 Economic Indicators increased 0.5% (7.0% y/y) during September following
 an unrevised 0.4% June gain. A 0.5% rise had been expected in the Action
 Economics Forecast Survey. The index is comprised of 10 components which
 tend to precede changes in the overall economy.
 Movement amongst the components of the index remained
 mixed last month. Improvement was paced by a rise in consumer expectations
 for business/economic conditions, a higher ISM new orders index, the
 leading credit index and a steeper interest rate spread between 10-Year
 Treasuries &amp; Fed funds. Initial claims for unemployment insurance, stock
 prices, orders for nondefense capital goods excluding aircraft, as well as
 orders for consumer goods &amp; materials also improved. The length of the
 average workweek for production workers and building permits had negative
 effects. 
 Three-month growth in the leading index held steady at
 6.7% (AR), but remained below its 10.3% December 2017 peak.
 The Index of Coincident Economic Indicators increased a
 lessened 0.1% (2.4% y/y) in September. Each of the index components
 contributed positively, but minimally, to the index including changes in
 personal income less transfer payments, industrial production,
 nonagricultural payroll employment and manufacturing &amp; trade sales.
 Three-month growth in the coincident index of 1.9% (AR)
 remained improved from 1.6% growth early in the year, but below its 3.6%
 peak as of December.
 The Index of Lagging Economic Indicators eased 0.1%
 last month (+2.4% y/y) following an unrevised 0.2% August gain. The
 average prime rate charged by banks and the ratio consumer installment
 credit-to-income contributed positively to the index change. The average
 duration of unemployment, the change in unit labor costs, the change in
 commercial &amp; industrial loan outstanding and the change in the
 services CPI contributed negatively to the index change. The ratio of
 business inventories-to-sales had no effect on the index change.
 The three-month change in the lagging index fell to -0.4%,
 down from a high of 5.1% growth in February.
 The ratio of coincident-to-lagging indicators is often
 considered to be another leading indicator of economic activity. As
 economic slack diminishes relative to current performance, the ratio will
 rise. It improved slightly to 99.1 last month.
 The Conference Board figures are available in Haver's BCI
 database; the components are available there, and most are also in USECON.
 The expectations are in the AS1REPNA database. Visit the Conference
 Board's <a href="http://www.conference-board.org/">site</a> for coverage
 of leading indicator series from around the world.
 Modernizing Monetary Policy Rules from St. Louis
 Fed President &amp; CEO James Bullard is available here&nbsp; <a href="https://www.stlouisfed.org/~/media/files/pdfs/bullard/remarks/2018/bullard_memphis_economic_club_18_october_2018.pdf?la=en">https://www.stlouisfed.org/~/media/files/pdfs/bullard/remarks/2018/bullard_memphis_economic_club_18_october_2018.pdf?la=en</a>
 <table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="836">Business Cycle
 Indicators (%)</th>
 <th scope="col" width="147">Sep</th>
 <th scope="col" width="147">Aug</th>
 <th scope="col" width="147">Jul</th>
 <th scope="col" width="147">Sep Y/Y</th>
 <th scope="col" width="147">2017</th>
 <th scope="col" width="148">2016</th>
 <th scope="col" width="148">2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="836">Leading</td>
 <td align="center" width="147">0.5</td>
 <td align="center" width="147">0.4</td>
 <td align="center" width="147">0.7</td>
 <td align="center" width="147">7.0</td>
 <td align="center" width="147">4.1</td>
 <td align="center" width="148">1.2</td>
 <td align="center" width="148">4.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="836">Coincident</td>
 <td align="center" width="147">0.1</td>
 <td align="center" width="147">0.3</td>
 <td align="center" width="147">0.1</td>
 <td align="center" width="147">2.4</td>
 <td align="center" width="147">1.8</td>
 <td align="center" width="148">1.3</td>
 <td align="center" width="148">2.2</td>
 </tr>
 <tr>
 <td class="firstcol" width="836">Lagging</td>
 <td align="center" width="147">-0.1</td>
 <td align="center" width="147">0.2</td>
 <td align="center" width="147">-0.2</td>
 <td align="center" width="147">2.4</td>
 <td align="center" width="147">2.6</td>
 <td align="center" width="148">2.9</td>
 <td align="center" width="148">3.7</td>
 </tr>
 </tbody>
 </table>
 
 </div>
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The Mortgage Bankers Association reported that its total
Mortgage Applications Index fell 7.1% (-23.3% y/y) in the week ending October 12
following a 1.7% fall during the prior week. Purchase loan applications declined
5.9% (-7.8% y/y), while applications to refinance fell 9.0% (-40.1% y/y).

The effective interest rate on a 15-year fixed-rate mortgage
increased to 4.64%, up sharply from 3.01% averaged in July 2016. The effective
rate on a 30-year fixed-rate loan increased to 5.26%. The rate on a Jumbo
30-year loan was steady at 5.08%. For adjustable 5-year mortgages, the effective
interest rate was steady at 4.47%.

The average mortgage loan size eased to $288,400 (+1.9% y/y).
For purchases, the average loan size declined to $306,300 (-1.2% y/y); for
refinancings, it fell to $259,400 (+1.9% y/y).

Applications for fixed-rate loans fell 24.1% y/y while
applications for adjustable-rate loans declined 10.8% y/y.

The survey covers over 75% of all U.S. retail residential
mortgage applications and has been conducted weekly since 1990. Respondents
include mortgage bankers, commercial banks and thrifts. The base period and
value for all indexes is March 16, 1990=100. The figures for weekly mortgage
applications and interest rates are available in Haver's SURVEYW database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >MBA Mortgage Applications (%,
 SA)</th>
 <th scope="col" >10/12/18</th>
 <th scope="col" >10/05/18</th>
 <th scope="col" >09/28/18</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Total Market Index</td>
 <td >-7.1</td>
 <td >-1.7</td>
 <td >0.0</td>
 <td >-23.3</td>
 <td >-17.8</td>
 <td >15.6</td>
 <td >17.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Purchase</td>
 <td >-5.9</td>
 <td >-1.1</td>
 <td >0.1</td>
 <td >-7.8</td>
 <td >5.6</td>
 <td >13.3</td>
 <td >15.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Refinancing</td>
 <td >-9.0</td>
 <td >-2.6</td>
 <td >-0.1</td>
 <td >-40.1</td>
 <td >-34.0</td>
 <td >17.3</td>
 <td >19.7</td>
 </tr>
 <tr>
 <td class="firstcol" >15-Year Mortgage Effective Interest Rate
 (%)</td>
 <td >4.64</td>
 <td >4.58</td>
 <td >4.52</td>
 <td >3.57 (Oct'17)</td>
 <td >3.59</td>
 <td >3.22</td>
 <td >3.47</td>
 </tr>
 </tbody>
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The Mortgage Bankers Association reported that its total Mortgage Applications Index fell 7.1% (-23.3% y/y) in the week ending October 12 following a 1.7% fall during the prior week. Purchase loan applications declined 5.9% (-7.8% [...]

U.S. Mortgage Loan Applications Continue to Decline As Interest Rates Rise

Robert Brusca

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New inspection regulations push leads and lags behavior through new car sales trends 
New car sales in the European Union in September plunged after registrations had ramped up ahead of the introduction of new emissions inspection rules.

New car registrations fell 23% across the EU compared with a year earlier in September. New registrations had surged by 30% year-on-year in August. Month-to-month registrations plunged 44.3% after soaring by 24.8% in August. The introduction of the new WLTP (Worldwide Harmonized Light Vehicle Test Procedure) at the beginning of last month caused an exceptional surge in registrations in August. In September, that surge unwound.

European car makers had offered large discounts to offload noncompliant vehicles ahead of new emissions rules which came into effect in September, leading to increased competition and pricing pressure. Those discounts were responsible for the surge in August registrations.

The data show that these regulation effects dominate trends across markets as all EU members in the table show highly similar patterns of registrations surging in August then plunging in September.

The trends are present in the year-over-year data as well in the month-to-month behavior of buyers. By comparison, retail sale volume trends have been showing signs of topping, but looked at more broadly, retail sales are still on a trend rise. The trend for vehicle sales is a bit harder to pin down at the moment given its volatility.

While some data for Europe have been showing a slowing, for the most part growth is still in train. Fresh final inflation data released on the day show EMU inflation trends. The EMU HICP is at a 12-month gain of 2.1%, over the top of the EMU’s slightly less than 2% objective. But inflation, excluding food and energy (core inflation), has been dead flat at zero for two months in a row and the core is up by just 1.1% over 12 months. During the period, oil prices have been volatile and rising; the ECB has informally shifted its focus to core inflation from the headline. While the headline is just a bit more than a tick excessive, the core rate is undershooting by a wide margin. Still, there are disagreements within the ECB about how to proceed. Bundesbank purists will probably still be taken in by headline inflation excess. But the excessive headline for inflation in Germany itself has inflation up by 2.2% over 12 months; in France, it is up by 2.5%. But inflation excluding energy for both German and French inflation rates is well below the 2% mark.

Europe may be on the edge of a policy dilemma.


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New inspection regulations push leads and lags behavior through new car sales trends New car sales in the European Union in September plunged after registrations had ramped up ahead of the introduction of new emissions inspection [...]

European Vehicle Registrations Plunge After Soaring

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Total housing starts fell 5.3% during September to 1.201 million units (AR) from 1.268 million
in August, revised from 1.282 million. The decline compared to an estimate of
1.228 million starts in the Action Economics Forecast Survey.

Last month's shortfall reflected a 13.7% drop in the South to
567,000 units from 657,000, as Hurricane Florence made landfall. Nevertheless,
starts remained 4.4% higher than twelve months earlier. In the Midwest, housing
starts also were weak and posted a 14.0% decline to 160,000 units (-14.0% y/y)
from 186,000. In the Northeast, housing starts improved 29.0% (18.8% y/y) to
120,000 units, the highest level in six months. Housing starts in the West
increased 6.6% (7.9% y/y) to 354,000, also the highest level in six months.

Starts of single-family homes eased 0.9% (+4.8% y/y) last
month to 871,000 units following a 2.1% rise to 879,000. Starts of multi-family
units declined 15.2% (+0.9% y/y) to 330,000 and reversed most of their rise during August.

Building permits slipped 0.6% (-1.0% y/y) to 1.241 million,
the lowest level since May 2017, from 1.249 million, revised from 1.229 million.
Single-family permits increased 2.9% (2.4% y/y) to 851,000. Permits to build
multi-family homes declined 7.6% (-7.8% y/y) to 390,000, the lowest level since March 2016.

The housing starts and permits figures can be found in
Haver's USECON database. The expectations figure is contained in the AS1REPNA database.

The minutes to the latest FOMC meeting can be found
<a href="https://www.federalreserve.gov/monetarypolicy/fomcminutes20180926.htm">here</a>.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Housing Starts (000s, SAAR)</th>
 <th scope="col" >Sep</th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Sep Y/Y %</th>
 <th scope="col" >2017</th>
 <th scope="col" >2016</th>
 <th scope="col" >2015</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >1,201</td>
 <td >1,268</td>
 <td >1,184</td>
 <td >3.7</td>
 <td >1,208</td>
 <td >1,177</td>
 <td >1,107</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Single-Family</td>
 <td >871</td>
 <td >879</td>
 <td >861</td>
 <td >4.8</td>
 <td >852</td>
 <td >785</td>
 <td >713</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Multi-Family&nbsp;</td>
 <td >330</td>
 <td >389</td>
 <td >323</td>
 <td >0.9</td>
 <td >356</td>
 <td >393</td>
 <td >394</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="8" >Starts By Region</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Northeast</td>
 <td >120</td>
 <td >93</td>
 <td >103</td>
 <td >18.8</td>
 <td >111</td>
 <td >116</td>
 <td >135</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Midwest</td>
 <td >160</td>
 <td >186</td>
 <td >178</td>
 <td >-14.0</td>
 <td >180</td>
 <td >185</td>
 <td >150</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;South</td>
 <td >567</td>
 <td >657</td>
 <td >624</td>
 <td >4.4</td>
 <td >603</td>
 <td >585</td>
 <td >557</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;West</td>
 <td >354</td>
 <td >332</td>
 <td >279</td>
 <td >7.9</td>
 <td >314</td>
 <td >292</td>
 <td >265</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Building Permits</td>
 <td >1,241</td>
 <td >1,249</td>
 <td >1,303</td>
 <td >-1.0</td>
 <td >1,286</td>
 <td >1,206</td>
 <td >1,178</td>
 </tr>
 </tbody>
 </table>
 
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Total housing starts fell 5.3% during September to 1.201 million units (AR) from 1.268 million in August, revised from 1.282 million. The decline compared to an estimate of 1.228 million starts in the Action Economics Forecast Survey. [...]

U.S. Housing Starts Decline

Gerald D. Cohen

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The Bureau of Labor Statistics reported that the total job
openings rate during July held steady m/m at a record 4.4%........




The Job Openings &amp; Labor Turnover Survey (JOLTS) survey
dates to December 2000 and the figures are available in Haver's USECON database.

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 <table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS
 (Job Openings &amp; Labor Turnover Survey, SA)</a></th>
 <th scope="col" >Aug</th>
 <th scope="col" >Jul</th>
 <th scope="col" >Jun</th>
 <th scope="col" >Aug'17</th>
 <th scope="col" >Aug'16</th>
 <th scope="col" >Aug'15</th>
 </tr>
</thead>
<tbody>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" >Job Openings, Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td >4.4</td>
 <td >4.4</td>
 <td >4.3</td>
 <td >4.1</td>
 <td >3.8</td>
 <td >3.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td >6,659</td>
 <td >6,939</td>
 <td >6,822</td>
 <td >6,202</td>
 <td >5,982</td>
 <td >5,863</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" >Hires, Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)&nbsp;</td>
 <td >3.8</td>
 <td >3.8</td>
 <td >3.9</td>
 <td >3.7</td>
 <td >3.7</td>
 <td >3.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td >5,747</td>
 <td >5,679</td>
 <td >5,677</td>
 <td >5,498</td>
 <td >5,324</td>
 <td >5,111</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="7" >Layoffs &amp; Discharges,
 Total</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Rate (%)</td>
 <td >1.1</td>
 <td >1.1</td>
 <td >1.1</td>
 <td >1.2</td>
 <td >1.1</td>
 <td >1.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Total (000s)</td>
 <td >1,618</td>
 <td >1,602</td>
 <td >1,652</td>
 <td >1,816</td>
 <td >1,600</td>
 <td >1,662</td>
 </tr>
 </tbody>
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The Bureau of Labor Statistics reported that the total job openings rate during July held steady m/m at a record 4.4%........ The Job Openings & Labor Turnover Survey (JOLTS) survey dates to December 2000 and the figures are available [...]

U.S. JOLTS: Job Openings Rate Hits A Record Level

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The scene 
Financial experts responding in the ZEW economic survey found current conditions weaker just about across the board (the U.S. an exception) with macroeconomic expectations cut everywhere with no exceptions. At the same time, inflation expectations worsened everywhere except in the U.K. Long-term interest rate expectations rose in all regions and expectations for equity values fell across the board with Japan holding out as a minor exception. On balance, the ZEW survey participants are a pessimistic lot. Conditions are weaker, expectations are cut, inflation and interest rates will be higher and stocks will weaken as well. Are all those things really internally consistent?

This ZEW ‘scenario’ may in fact come to pass. But it has elements that I find curious especially amid the facts on the ground (true facts, not fake facts).

I do not reject ‘Keynesianism’ - nor do I think it is the only way to look at things. However, in an environment in which inflation has been stable and where economic conditions are expected to deteriorate, why is there so much pessimism about inflation? What is driving inflation even as ZEW members look for official interest rates (short-term rates rise imply official rate hikes) to rise in all survey regions except the U.K.? For the record, on the month, the ZEW crude oil price assessment slipped a bit so inflation is not being pushed by oil in the ZEW view. What is driving inflation?

Current activity is strong 
Even admitting that the ZEW forecasts are as they are characterized above, there is (as always) more to the story than ‘just that’ does abrader view reconcile the forecast elements? Well, there is this: for example, the current situation or economic situation, while broadly weakening, still has an 83rd percentile standing in the EMU, an 82nd percentile standing in Germany, and a 91st percentile standing in the U.S. There is a below median 42nd percentile standing in the U.K. and softer readings in France (77th percentile) and Italy (63rd percentile). But on the whole, while the economic situation is seen worsening, the slippage is small, and when viewed year-over-year, it only worsens in the EMU, Germany, and Italy. So despite some current slippage, there is some period in which strength is prevailing.

Expectations plunge 
However, macroeconomic expectations are falling month-to-month and usually falling significantly. The small drop in the ‘economic situation’ and its high percentile standing readings are in marked contrast with large monthly declines in macroeconomic expectations - severe declines are logged in expectations year-over-year and extraordinarily low percentile standings are the result with the U.S. having the best macroeconomic expectation at a standing in its lower 20th percentile followed by France in its 15th percentile and most countries and regions are around or below their respective 10th percentile - or lower. This part of the survey is really at odds with rising inflation, especially with the strongest economy (the U.S.) having a central bank that is hiking rates peremptorily.

When beliefs disconnect from the chain of causation 
Again my question to the ZEW experts is: how can economic conditions be so broadly deteriorating and the future so rough and still drive inflation higher? As noted above, inflation expectations are up month-to-month everywhere except in the U.K. Year-over-year they are up in the EMU, Germany, and France (barely). The U.S., with the strongest economic situation and the highest-ranking expectations, has a fall in inflation expectations year-over-year but also has the second highest ranking for the level of inflation expectations currently (second to the U.K.). Stock markets are seen higher than 12-months ago in the U.S. and Germany but weaker month-to-month in most places and with below median queue values everywhere. The U.K. stock market assessment is at its weakest ever and Italy is close to its weakest ever stock market assessment. In the case of the U.K., Brexit expectations dominate the analysis and in the case of Italy it is its ‘new’ government and its insistence on breaking EU budget parameters.

Of course, the ZEW survey is a stew of results where every ‘chef’ prepares his or her own menu and dumps it into the same pot. So it should not be surprising that in an amalgamation such as that some curious ‘tastes’ develop. We also have some curious circumstances.

The unexpected paves the way for the long-anticipated 
Economic growth has endured longer than many had expected and unemployment rates in the West have fallen to unexpectedly low levels especially in the U.S., Germany, and the U.K. While labor markets have seemed to ‘tighten up,’ wages remain restrained and so does inflation. The ZEW forecasters, certain EMU board members and U.S. officials all seem to have some sort of stopped clock forecasting method or are taking the ‘Godot’ forecasting approach. By that I mean that they all are waiting for an event that may never happen but they are unwilling to give up on it. So they are simply holding their inflation forecasts in place, all but certain that this environment MUST produce inflation. Even though they continue to see these forecasts befuddled by events, they wait.

We are stretching the credibility of the modern post-war world with this run of growth combined with with the low unemployment and with low stable inflation and ‘no one’ (apparently) is prepared to believe it will continue (but markets do; see the U.S. yield curve and note the University of Michigan inflation expectations readings). So that is the worry that underlies all the ZEW forecasts whatever ‘models’ they use to assess events. The U.K. and Italy have a few special problems in the works, but for the rest is matter of looking for ‘historic norms’ to set in and waiting...and waiting.

The weight of the wait 
What no one seems willing to deal with is what Donald Trump is dealing with and that is globalization. Globalization changes things. It changes the way things work. It’s as though a new expressway has been built but central bankers want to stick to the old roads and predict traffic jams. Globalization, supported by a number of technological innovations, has broken down national borders, lifted constraints and made national statistics less relevant for policy purposes. Labor services have become more malleable and the internet has shifted where work can be done. Factories have networks and supply chains so that work can actually be shifted abroad easily. On balance, labor does not call the tune on inflation as it once did. But traditionalists are in denial about that. It is not that Keynesianism does not work; it is that the paradigm in which a bottleneck is defined has to be redefined and broadened and perhaps broadened to such an extent that it will lose its empirical meaning. But neither macroeconomics nor policy-economics have come to grips with that. So we sit and wait for... Godot.


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The scene Financial experts responding in the ZEW economic survey found current conditions weaker just about across the board (the U.S. an exception) with macroeconomic expectations cut everywhere with no exceptions. At the same time, [...]

Macroeconomic Assessments by ZEW Experts Continue to Sink

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.

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**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.

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**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.

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**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.

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**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.

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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

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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.

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**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

Jump to:

U.S. Initial Claims for Unemployment Insurance Ease

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Philadelphia Fed Manufacturing Growth Continues; Pricing Pressure Eases

U.S. Mortgage Loan Applications Continue to Decline As Interest Rates Rise

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U.S. Housing Starts Decline

U.S. JOLTS: Job Openings Rate Hits A Record Level

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