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/060208c.jpg" width="353">
Three Central and Eastern European countries reported January consumer prices today. Two of them, the Czech Republic and Latvia, show signs of upward creep in their CPI inflation, while Albania&#39;s is easing.
In the Czech Republic, the year-on-year CPI reached 2.9% in January, the highest since November 2004. As might be expected, energy-related categories, including housing costs, provide some of this upswing, but among other items, post and telecommunications fees have risen and home furnishing prices are falling more slowly.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060208d.jpg" width="353">
Over the last couple of years, Latvia has had a markedly higher inflation rate than these and most other nations. In January, the CPI was up 7.5% above January 2005, continuing a trend that began in the spring of 2004. Several items apart from energy costs are contributing on a sustained basis: food prices, home furnishings, health care, and hotels and restaurants. In addition, a large increase in seasonally adjusted (by Haver) prices for clothing occurred just in January, ending a period of moderation. With the diversity of line items increasing, this inflation tendency appears more embedded than that in the Czech Republic. In Latvia, that is, inflation may be feeding on itself.
Finally in Albania, prices remain quite temperate. The January year-on-year gain is only 1.4%, with outright declines still evident in food, clothing and furniture. Unfortunately, data on these various items begin only in October 2004, so no trend can yet be analyzed. The Bank of Albania signed a new &quot;Letter of Intent&quot; with the IMF just at end-January, pledging to maintain low inflation along with other commitments to facilitate raising the standard of living in the nation. Thus, while there are only limited data on other aspects of the Albanian economy, the central bank and the statistical agency &quot;INSTAT&quot; are monitoring price behavior quite closely.
All these data appear in Haver&#39;s EMERGECW database, along with such neighboring nations as Lithuania, Slovakia and Croatia, among others. 

<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/emerging.htm">CPI (Yr/Yr % Changes)</a></th>
<th scope="col">Jan 2006</th>
<th scope="col">Dec 2005</th>
<th scope="col">Nov 2005</th>
<th scope="col">Oct 2005</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Czech Republic</td>
<td>2.9</td>
<td>2.2</td>
<td>2.4</td>
<td>2.5</td>
<td>2.8</td>
<td>1.0</td>
<td>0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Albania</td>
<td>1.4</td>
<td>2.1</td>
<td>3.0</td>
<td>3.4</td>
<td>2.2</td>
<td>3.2</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Latvia</td>
<td>7.5</td>
<td>6.9</td>
<td>7.3</td>
<td>7.5</td>
<td>7.3</td>
<td>3.6</td>
<td>1.4</td>
</tr>
</tbody>
</table>
</body>
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Three Central and Eastern European countries reported January consumer prices today. Two of them, the Czech Republic and Latvia, show signs of upward creep in their CPI inflation, while Albania's is easing. In the Czech Republic, the [...]

January Inflation Creeps Up in Czech Republic, Latvia; Restrained in Albania

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060208a.jpg" width="353">
Record warm temperatures in the U.S. have helped lower the price of natural gas this year. Since a high of $14.51 per mmbtu during the middle of December prices fell 42% through last week to $8.40 and were down again yesterday at $7.76.
Through early February, the number of heating degree days in the U.S. was down 26% from one year earlier, more than double the y/y decline during the warm winter of 2004. The 662 heating degree days during this past January was well below the 750-1,250 range of the last 50 years.
The decline in gas prices has been accompanied by lower oil prices which yesterday fell to $63.10 per barrel for WTI crude. That was down from the January high of $68.36.
Spot gasoline prices also fell yesterday to $1.53 per gallon, off twenty cents from the January average of $1.73. In addition, fuel oil prices were lower at $1.61 per gallon versus a January average $1.75.
Two Hurricanes Too Many from the Federal Reserve Bank of Dallas is available <a href="http://www.dallasfed.org/eyi/usecon/0510hurricane.html">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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">02/03/06</th>
<th scope="col">12/30/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Natural Gas (per mmbtu)</td>
<td>$8.40</td>
<td>$9.89</td>
<td>34.0%</td>
<td>$8.68</td>
<td>$5.89</td>
<td>$5.47</td>
</tr>
</tbody>
</table>
</body>
</html>

Record warm temperatures in the U.S. have helped lower the price of natural gas this year. Since a high of $14.51 per mmbtu during the middle of December prices fell 42% through last week to $8.40 and were down again yesterday at [...]

Natural Gas Prices Down Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060208b.jpg" width="353">
The total number of mortgage applications fell again last week, by 1.2%, following the prior period&#39;s 5.1% drop. Mortgage applications during all of January rose 5.2% following three months of sharp decline but began February down 0.9% m/m.
Purchase applications fell by another 2.4% w/w. The average level in January dropped 0.6% from December and began February 6.1% below the prior month.
During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales
Applications to refinance ticked up 0.2% w/w and started the month 5.1% above January following a 17.7% rise versus December.
The effective interest rate on a conventional 30-year mortgage added 5 basis points to the prior week&#39;s 15 point increase and settled at 6.49% versus an average 6.34% in January. The effective rate on a 15-year mortgage also rose to 6.16%. The interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
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>.
Longer-Term Perspectives on the Yield Curve and Monetary Policy from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/4q05kozi.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">02/03/06</th>
<th scope="col">01/27/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>619.3</td>
<td>626.8</td>
<td>-15.8%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>425.1</td>
<td>435.7</td>
<td>-4.4%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,751.0</td>
<td>1,747.2</td>
<td>-28.0%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications fell again last week, by 1.2%, following the prior period's 5.1% drop. Mortgage applications during all of January rose 5.2% following three months of sharp decline but began February down [...]

Mortgage Applications Lower Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060208b.jpg" width="353">
The total number of mortgage applications fell again last week, by 1.2%, following the prior period&#39;s 5.1% drop. Mortgage applications during all of January rose 5.2% following three months of sharp decline but began February down 0.9% m/m.
Purchase applications fell by another 2.4% w/w. The average level in January dropped 0.6% from December and began February 6.1% below the prior month.
During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales
Applications to refinance ticked up 0.2% w/w and started the month 5.1% above January following a 17.7% rise versus December.
The effective interest rate on a conventional 30-year mortgage added 5 basis points to the prior week&#39;s 15 point increase and settled at 6.49% versus an average 6.34% in January. The effective rate on a 15-year mortgage also rose to 6.16%. The interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
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>.
Longer-Term Perspectives on the Yield Curve and Monetary Policy from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/4q05kozi.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">02/03/06</th>
<th scope="col">01/27/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>619.3</td>
<td>626.8</td>
<td>-15.8%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>425.1</td>
<td>435.7</td>
<td>-4.4%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,751.0</td>
<td>1,747.2</td>
<td>-28.0%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Natural Gas Prices Down Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 8, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060208a.jpg" width="353">
Record warm temperatures in the U.S. have helped lower the price of natural gas this year. Since a high of $14.51 per mmbtu during the middle of December prices fell 42% through last week to $8.40 and were down again yesterday at $7.76.
Through early February, the number of heating degree days in the U.S. was down 26% from one year earlier, more than double the y/y decline during the warm winter of 2004. The 662 heating degree days during this past January was well below the 750-1,250 range of the last 50 years.
The decline in gas prices has been accompanied by lower oil prices which yesterday fell to $63.10 per barrel for WTI crude. That was down from the January high of $68.36.
Spot gasoline prices also fell yesterday to $1.53 per gallon, off twenty cents from the January average of $1.73. In addition, fuel oil prices were lower at $1.61 per gallon versus a January average $1.75.
Two Hurricanes Too Many from the Federal Reserve Bank of Dallas is available <a href="http://www.dallasfed.org/eyi/usecon/0510hurricane.html">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/WEEKLY/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">02/03/06</th>
<th scope="col">12/30/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Natural Gas (per mmbtu)</td>
<td>$8.40</td>
<td>$9.89</td>
<td>34.0%</td>
<td>$8.68</td>
<td>$5.89</td>
<td>$5.47</td>
</tr>
</tbody>
</table>
January Inflation Creeps Up in Czech Republic, Latvia; Restrained in Albania 
by <a href="/comment/Stone.html">Carol Stone</a> February 8, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060208c.jpg" width="353">
Three Central and Eastern European countries reported January consumer prices today. Two of them, the Czech Republic and Latvia, show signs of upward creep in their CPI inflation, while Albania&#39;s is easing.
In the Czech Republic, the year-on-year CPI reached 2.9% in January, the highest since November 2004. As might be expected, energy-related categories, including housing costs, provide some of this upswing, but among other items, post and telecommunications fees have risen and home furnishing prices are falling more slowly.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060208d.jpg" width="353">
Over the last couple of years, Latvia has had a markedly higher inflation rate than these and most other nations. In January, the CPI was up 7.5% above January 2005, continuing a trend that began in the spring of 2004. Several items apart from energy costs are contributing on a sustained basis: food prices, home furnishings, health care, and hotels and restaurants. In addition, a large increase in seasonally adjusted (by Haver) prices for clothing occurred just in January, ending a period of moderation. With the diversity of line items increasing, this inflation tendency appears more embedded than that in the Czech Republic. In Latvia, that is, inflation may be feeding on itself.
Finally in Albania, prices remain quite temperate. The January year-on-year gain is only 1.4%, with outright declines still evident in food, clothing and furniture. Unfortunately, data on these various items begin only in October 2004, so no trend can yet be analyzed. The Bank of Albania signed a new &quot;Letter of Intent&quot; with the IMF just at end-January, pledging to maintain low inflation along with other commitments to facilitate raising the standard of living in the nation. Thus, while there are only limited data on other aspects of the Albanian economy, the central bank and the statistical agency &quot;INSTAT&quot; are monitoring price behavior quite closely.
All these data appear in Haver&#39;s EMERGECW database, along with such neighboring nations as Lithuania, Slovakia and Croatia, among others. 

<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/emerging.htm">CPI (Yr/Yr % Changes)</a></th>
<th scope="col">Jan 2006</th>
<th scope="col">Dec 2005</th>
<th scope="col">Nov 2005</th>
<th scope="col">Oct 2005</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Czech Republic</td>
<td>2.9</td>
<td>2.2</td>
<td>2.4</td>
<td>2.5</td>
<td>2.8</td>
<td>1.0</td>
<td>0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Albania</td>
<td>1.4</td>
<td>2.1</td>
<td>3.0</td>
<td>3.4</td>
<td>2.2</td>
<td>3.2</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Latvia</td>
<td>7.5</td>
<td>6.9</td>
<td>7.3</td>
<td>7.5</td>
<td>7.3</td>
<td>3.6</td>
<td>1.4</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060207d.jpg" width="353">
There was more news from Germany that economic activity slowed significantly in the fourth quarter. Declines in December retail sales, new orders and sales in manufacturing and mining have already been reported and today we learn that industrial production fell 0.5% in December from November after having fallen 0.4% in the previous month. Production of intermediate and energy goods increased but were outweighed by declines in the production of capital and consumer goods.The increase in the quarterly average of industrial production for the fourth quarter was 1.05%, a decline from the 1.56% increase of the third quarter. As shown in the first chart the quarter-to-quarter change in industrial production tends to suggest the change in real gross domestic product.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060207e.jpg" width="353">
Also in the news were reports of labor unrest in Germany. Ten thousand workers, members of the public service union, Verdi, began a strike in Baden-Wurttember on February 6th. Targeted services include waste disposal, road maintenance, hospitals and kindergartens. The issues are wages and hours. Wages have shown little increase in the past few years and the workers are now being asked to work longer hours at the same pay. The IG Metall engineering union is also stirring. It will start negotiations this week over its demand for a 5% rise for its 3.4 million industrial workers. The second chart shows the year-to-year changes in the compensation of workers in Total Industry ex Construction and in Public and Personal Services. The increases, particularly in the Public and Personal Services have been well below the roughly 2% inflation rate that has prevailed recently. These data, along with data for productivity and unit labor costs are found in Haver&#39;s Germany data base. The data are quarterly and were last updated in November 22. Data for the fourth quarter should be available later this month.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">Germany: Industrial Production</a> (2000=100)</th>
<th scope="col">Q3 05</th>
<th scope="col">Q2 05 </th>
<th scope="col">Q1 05</th>
<th scope="col">Q4 04</th>
<th scope="col">Q3 04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>105.1</td>
<td>105.6</td>
<td>101.6</td>
<td>-1047</td>
<td>3.44</td>
<td>103.6</td>
<td>100.8</td>
<td>98.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Intermediate products</td>
<td>110.2</td>
<td>109.8</td>
<td>104.9</td>
<td>0.36</td>
<td>5.05</td>
<td>106.8</td>
<td>103.4</td>
<td>99.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Capital goods</td>
<td>111.6</td>
<td>114.3</td>
<td>104.8</td>
<td>-2.36</td>
<td>6.49</td>
<td>110.9</td>
<td>105.7</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Consumer goods</td>
<td>97.6</td>
<td>97.8</td>
<td>96.9</td>
<td>-0.20</td>
<td>0.72</td>
<td>98.2</td>
<td>96.0</td>
<td>95.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>103.0</td>
<td>101.6</td>
<td>105.8</td>
<td>1.38</td>
<td>-2.65</td>
<td>102.6</td>
<td>102.6</td>
<td>99.9</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Labor Costs Per Employee (euros)</td>
<td>Q3 05 &nbsp;% chg</td>
<td>Q2 05 &nbsp;% chg </td>
<td>Q1 05 % chg</td>
<td>Q4 04 &nbsp;% chg</td>
<td>Q3 04 &nbsp;% chg</td>
<td>2004 &nbsp;% chg</td>
<td>2003 % chg</td>
<td>2002 % chg</td>
</tr>
<tr>
<td class="firstcol">Industry ex construction</td>
<td>1.60</td>
<td>-0.67</td>
<td>1.92</td>
<td>-1.04</td>
<td>0.70</td>
<td>0.56</td>
<td>2.34</td>
<td>2.11</td>
</tr>
<tr class="odd">
<td class="firstcol">Public and personal services</td>
<td>-1.34</td>
<td>-0.72</td>
<td>1.18</td>
<td>-1.45</td>
<td>-1.07</td>
<td>-.55</td>
<td>0.99</td>
<td>1.81</td>
</tr>
</tbody>
</table>
</body>
</html>

There was more news from Germany that economic activity slowed significantly in the fourth quarter. Declines in December retail sales, new orders and sales in manufacturing and mining have already been reported and today we learn that [...]

Germany: December Industrial Production Suggests a Slow Q4 in 2005, Labor Unrest Ahead?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060207c.jpg" width="353">
The Bureau of Labor Statistics reported that the job openings rate, from the Job Openings &amp; Labor Turnover Survey (JOLTS), rose again in December as the US job market firmed further. The rate rose to 2.9% from 2.8% in November and averaged 2.7% during the year, an improvement from 2.4% during 2004. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.
The actual number of job openings rose 123,000 (15.5% y/y) to 4.05 million.
Not showing the same improvement, the hires rate slipped in December to 3.4% and fell during much of the year from a 1Q high of 3.6%. The hires rate is the number of hires during the month divided by employment. The hires level during December fell 134,000 (-2.8% y/y) to 4.507 million.
The job separations rate dropped sharply to 3.1%, the lowest level in nearly two years. Separations include quits, layoffs, discharges, and other separations as well as retirements. The total separations, or turnover, rate is the total number of separations during the month divided by employment. The level of job separations fell 182,000 (-6.8% y/y) to 4.133 million.
The survey dates only to December 2000 but has since followed the movement in nonfarm payrolls.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/jolts.nr0.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Dec &#39;04</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.4%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>3.4%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
</body>
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The Bureau of Labor Statistics reported that the job openings rate, from the Job Openings & Labor Turnover Survey (JOLTS), rose again in December as the US job market firmed further. The rate rose to 2.9% from 2.8% in November and [...]

JOLTS: More U.S. Job Openings, Less Hiring?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060207b.jpg" width="353">
Chain store sales surged 2.0% during the opening week of February and recovered all of the prior week&#39;s sharp 1.1% decline, according to the International Council of Shopping Centers (ICSC)-UBS survey.
As a result of the jump, sales began the month 0.9% above the January average which rose 1.0% from December.
The rise in sales may have been aided by a two cent decline in gasoline prices at the pump to $2.34 per gallon of regular unleaded. The decline reversed most of the prior week&#39;s rise. Despite the decline, retail gasoline prices began February three cents higher than the January average with rose thirteen cents versus December. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060207a.jpg" width="353">
In spot market trading, gasoline prices recently have been quite soft. The decline from $1.74 last Monday extended to yesterday when prices hit $1.56, the lowest level since late December. Weak demand for gasoline may have caused the price weakness as gasoline demand fell 10% from December. Seasonal declines in demand of this order have been common during January in the past. The theory is complicated, however, by the abnormally warm temperatures last month.
The leading indicator of chain store sales reversed all of the prior week&#39;s rise and fell 0.6%.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">02/04/06</th>
<th scope="col">01/28/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>462.9</td>
<td>454.0</td>
<td>3.8%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

Chain store sales surged 2.0% during the opening week of February and recovered all of the prior week's sharp 1.1% decline, according to the International Council of Shopping Centers (ICSC)-UBS survey. As a result of the jump, sales [...]

Chain Store Sales Up, Gasoline Prices Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060207c.jpg" width="353">
The Bureau of Labor Statistics reported that the job openings rate, from the Job Openings &amp; Labor Turnover Survey (JOLTS), rose again in December as the US job market firmed further. The rate rose to 2.9% from 2.8% in November and averaged 2.7% during the year, an improvement from 2.4% during 2004. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.
The actual number of job openings rose 123,000 (15.5% y/y) to 4.05 million.
Not showing the same improvement, the hires rate slipped in December to 3.4% and fell during much of the year from a 1Q high of 3.6%. The hires rate is the number of hires during the month divided by employment. The hires level during December fell 134,000 (-2.8% y/y) to 4.507 million.
The job separations rate dropped sharply to 3.1%, the lowest level in nearly two years. Separations include quits, layoffs, discharges, and other separations as well as retirements. The total separations, or turnover, rate is the total number of separations during the month divided by employment. The level of job separations fell 182,000 (-6.8% y/y) to 4.133 million.
The survey dates only to December 2000 but has since followed the movement in nonfarm payrolls.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/jolts.nr0.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Dec &#39;04</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.4%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>3.5%</td>
<td>3.4%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
Chain Store Sales Up, Gasoline Prices Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 7, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060207b.jpg" width="353">
Chain store sales surged 2.0% during the opening week of February and recovered all of the prior week&#39;s sharp 1.1% decline, according to the International Council of Shopping Centers (ICSC)-UBS survey.
As a result of the jump, sales began the month 0.9% above the January average which rose 1.0% from December.
The rise in sales may have been aided by a two cent decline in gasoline prices at the pump to $2.34 per gallon of regular unleaded. The decline reversed most of the prior week&#39;s rise. Despite the decline, retail gasoline prices began February three cents higher than the January average with rose thirteen cents versus December. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060207a.jpg" width="353">
In spot market trading, gasoline prices recently have been quite soft. The decline from $1.74 last Monday extended to yesterday when prices hit $1.56, the lowest level since late December. Weak demand for gasoline may have caused the price weakness as gasoline demand fell 10% from December. Seasonal declines in demand of this order have been common during January in the past. The theory is complicated, however, by the abnormally warm temperatures last month.
The leading indicator of chain store sales reversed all of the prior week&#39;s rise and fell 0.6%.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">02/04/06</th>
<th scope="col">01/28/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>462.9</td>
<td>454.0</td>
<td>3.8%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
Germany: December Industrial Production Suggests a Slow Q4 in 2005, Labor Unrest Ahead?  
by <a href="/comment/Curley.html">Louise Curley</a> February 7, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060207d.jpg" width="353">
There was more news from Germany that economic activity slowed significantly in the fourth quarter. Declines in December retail sales, new orders and sales in manufacturing and mining have already been reported and today we learn that industrial production fell 0.5% in December from November after having fallen 0.4% in the previous month. Production of intermediate and energy goods increased but were outweighed by declines in the production of capital and consumer goods.The increase in the quarterly average of industrial production for the fourth quarter was 1.05%, a decline from the 1.56% increase of the third quarter. As shown in the first chart the quarter-to-quarter change in industrial production tends to suggest the change in real gross domestic product.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060207e.jpg" width="353">
Also in the news were reports of labor unrest in Germany. Ten thousand workers, members of the public service union, Verdi, began a strike in Baden-Wurttember on February 6th. Targeted services include waste disposal, road maintenance, hospitals and kindergartens. The issues are wages and hours. Wages have shown little increase in the past few years and the workers are now being asked to work longer hours at the same pay. The IG Metall engineering union is also stirring. It will start negotiations this week over its demand for a 5% rise for its 3.4 million industrial workers. The second chart shows the year-to-year changes in the compensation of workers in Total Industry ex Construction and in Public and Personal Services. The increases, particularly in the Public and Personal Services have been well below the roughly 2% inflation rate that has prevailed recently. These data, along with data for productivity and unit labor costs are found in Haver&#39;s Germany data base. The data are quarterly and were last updated in November 22. Data for the fourth quarter should be available later this month.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/GERMANY.HTM">Germany: Industrial Production</a> (2000=100)</th>
<th scope="col">Q3 05</th>
<th scope="col">Q2 05 </th>
<th scope="col">Q1 05</th>
<th scope="col">Q4 04</th>
<th scope="col">Q3 04</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>105.1</td>
<td>105.6</td>
<td>101.6</td>
<td>-1047</td>
<td>3.44</td>
<td>103.6</td>
<td>100.8</td>
<td>98.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Intermediate products</td>
<td>110.2</td>
<td>109.8</td>
<td>104.9</td>
<td>0.36</td>
<td>5.05</td>
<td>106.8</td>
<td>103.4</td>
<td>99.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Capital goods</td>
<td>111.6</td>
<td>114.3</td>
<td>104.8</td>
<td>-2.36</td>
<td>6.49</td>
<td>110.9</td>
<td>105.7</td>
<td>102.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Consumer goods</td>
<td>97.6</td>
<td>97.8</td>
<td>96.9</td>
<td>-0.20</td>
<td>0.72</td>
<td>98.2</td>
<td>96.0</td>
<td>95.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>103.0</td>
<td>101.6</td>
<td>105.8</td>
<td>1.38</td>
<td>-2.65</td>
<td>102.6</td>
<td>102.6</td>
<td>99.9</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Labor Costs Per Employee (euros)</td>
<td>Q3 05 &nbsp;% chg</td>
<td>Q2 05 &nbsp;% chg </td>
<td>Q1 05 % chg</td>
<td>Q4 04 &nbsp;% chg</td>
<td>Q3 04 &nbsp;% chg</td>
<td>2004 &nbsp;% chg</td>
<td>2003 % chg</td>
<td>2002 % chg</td>
</tr>
<tr>
<td class="firstcol">Industry ex construction</td>
<td>1.60</td>
<td>-0.67</td>
<td>1.92</td>
<td>-1.04</td>
<td>0.70</td>
<td>0.56</td>
<td>2.34</td>
<td>2.11</td>
</tr>
<tr class="odd">
<td class="firstcol">Public and personal services</td>
<td>-1.34</td>
<td>-0.72</td>
<td>1.18</td>
<td>-1.45</td>
<td>-1.07</td>
<td>-.55</td>
<td>0.99</td>
<td>1.81</td>
</tr>
</tbody>
</table>


</html>

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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Andrew Cates

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

250828Z1.jpg

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

250828Z2.jpg

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

250828Z3.jpg

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

250828Z4.jpg

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

250828Z5.jpg

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

250828Z6.jpg

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

Charts of the Week: Riskbusters

250828N8.jpg

250828C8.jpg

Real GDP grew 3.3% (SAAR) during the second quarter of 2025, revised from a 3.0% gain reported initially. The increase followed an unrevised 0.5% decline in Q1. A 3.1% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.1% compared to 2.0% y/y in Q1, and remained below its most recent high of 3.2% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment increased 1.4% (7.0% y/y) last quarter after easing 0.8% in Q1. Before-tax earnings with IVA & CCA rose 1.7% (4.3% y/y) after falling 2.3% in Q1. Financial sector earnings rose 1.4% (15.3% y/y) after rising 2.3% in Q1. Nonfinancial corporate profits rose 2.2% (2.5% y/y) after falling 2.5% in Q1. Earnings from abroad eased 0.7% (-0.4% y/y) following a 7.3% Q1 decline.

Foreign trade balance improvement added 4.95 percentage points to growth last quarter after subtracting 4.61 percentage points in Q1. Imports fell 29.8% (+1.3% y/y) after surging 38.0% in Q1. Exports declined 1.3% (+2.0% y/y) after improving 0.4% in Q1. Inventories subtracted 3.29 percentage points from growth after adding 2.59 percentage point to Q1 growth.

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

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

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

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

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

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Government spending eased 0.2%, revised from up 0.5% in Q2 (+1.8% y/y) after a 0.6% decline. Federal government expenditures declined 4.7% (+0.7% y/y) after falling 4.6% in Q1. National defense expenditures increased 1.4% (3.0% y/y) after declining 7.1% in Q1. State & local government spending rose 2.6% (2.5% y/y) following a 2.0% rise.

The GDP chain price index rose an unrevised and expected 2.0% last quarter (2.5% y/y) after increasing 3.8% in Q1. The PCE chain price index increased 2.0% (2.4% y/y) following a 3.7% rise. The PCE price index excluding food and energy rose 2.5% (2.7% y/y) after increasing 3.5% in Q1. The business fixed investment price index edged 0.5% lower (+1.1% y/y) after a 0.4% rise. The residential price index rose 1.1% (2.6% y/y) after a 4.1% rise while the government price index increased 3.3% (3.1% y/y) following a 4.6% rise.

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

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

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

Sandy Batten

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

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

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

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

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

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

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

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

FRB Kansas City Manufacturing Index Unchanged in August

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The Pending Home Sales Index weakened 0.4% in July (+0.7% y/y) to 71.7 after falling an unrevised 0.8% in June and rising an unrevised 1.8% in May, according to the National Association of Realtors (NAR). The Index remained 42.7% below its most recent peak of 125.1 in October 2021. The index is a forward-looking measure of home sales based on contract signings.

The fall in pending home sales occurred as the average rate on a 30-year mortgage rose to 6.72% in July after holding steady m/m at 6.82% in June. These rates remained well above a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales were mixed last month in the four major regions of the country. Sales in the Midwest declined 4.0% (+1.3% y/y) in July after easing 0.8% in June. Sales in the Northeast fell 0.6% both m/m and y/y, after holding steady in June. In the South, sales eased 0.1% (+1.8% y/y) following a 0.6% June decline, but sales in the West increased 3.7% (-1.9% y/y), reversing a 3.9% June drop.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Decline adds to June weakness.
- Regional changes are mixed.


U.S. Pending Home Sales Decline in July

Kathleen Stephansen, CBE

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

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

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

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

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

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

Economy in Brief: February 2006

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