Tom Moeller

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New orders in the manufacturing sector fell 2.9% during December following a
0.7% easing in November, revised from -0.2%. The decline roughly matched expectations
for a 2.7% drop in the Action Economics Forecast Survey. The shortfall reflected
a 5.0% decline (-1.6% y/y) in durable goods orders which was little-revised from
the advance report. Leading orders lower was a 29.3% drop (+4.8% y/y) in
nondefense aircraft &amp; parts orders. Factory sector orders excluding the
transportation altogether eased 0.8% (-5.4% y/y), about the same as during the
prior month. Orders for nondurable goods (which equal shipments) fell 0.8% (-7.1%
y/y), off for the sixth straight month. A 3.3% decline (-27.6%y/y) in shipments
from petroleum refineries dropped for the sixth consecutive month as prices
fell. Also down by 0.8% (-3.3% y/y) were food product shipments. Basic chemical
shipments remained little-changed (-1.1% y/y). Apparel shipments improved
0.4% but they were down slightly versus last year. Durable goods shipments
declined 2.1% (-3.1% y/y), led by a 1.0% increase (-4.1% y/y) in machinery.

Unfilled orders in the manufacturing sector eased 0.5% (-2.0% y/y).
Transportation sector backlogs also fell 0.5% (-1.8% y/y) led by a 3.2% decline
(-2.0% y/y) in defense aircraft &amp; parts. Outside of the transportation
sector, backlogs declined 0.5% (-2.2% y/y). Machinery backlogs declined 2.0%
(-8.9% y/y) but computer &amp; electronic product backlogs increased 0.2% (5.7% y/y).

Factory sector inventories increased 0.2% (-1.7% y/y), the first increase in
six months. Outside of the transportation sector, inventories were off 0.1% (-2.8%
y/y), off for the sixth consecutive month. Primary metals inventories fell 0.6%
(-12.0% y/y) but machinery inventories gained 0.7% (-0.9% y/y). Electrical
equipment &amp; appliance inventories eased 0.4% (-1.7% y/y) while computer
&amp; electronic product inventories notched 0.1% higher (0.2% y/y).

The factory sector figures are available in Haver's USECON database.
The expectations figure 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" scope="col" >Factory Sector- NAICS
 Classification (%)</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Oct</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >New Orders</td>
 <td >-2.9</td>
 <td >-0.7</td>
 <td >1.3</td>
 <td >-4.3</td>
 <td >-6.6</td>
 <td >3.5</td>
 <td >2.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Shipments</td>
 <td >-1.4</td>
 <td >-0.1</td>
 <td >-0.7</td>
 <td >-5.1</td>
 <td >-4.3</td>
 <td >2.6</td>
 <td >1.9</td>
 </tr>
 <tr>
 <td class="firstcol" >Unfilled Orders</td>
 <td >-0.5</td>
 <td >0.1</td>
 <td >0.3</td>
 <td >-2.0</td>
 <td >-2.0</td>
 <td >11.5</td>
 <td >6.5</td>
 </tr>
 <tr>
 <td class="firstcol" >Inventories</td>
 <td >0.2</td>
 <td >-0.3</td>
 <td >-0.2</td>
 <td >-1.7</td>
 <td >-1.7</td>
 <td >2.4</td>
 <td >1.7</td>
 </tr>
 </tbody>
 </table>
 
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New orders in the manufacturing sector fell 2.9% during December following a 0.7% easing in November, revised from -0.2%. The decline roughly matched expectations for a 2.7% drop in the Action Economics Forecast Survey. The shortfall [...]

U.S. Factory Sector Orders Decline Led by Transportation

Robert Brusca

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New vehicle registrations in Japan fell by 2.5% in January as they continue to gyrate with offsetting up down movements for the third consecutive month. On balance, registrations are higher over three months but lower over six months and 12 months. The ongoing intermediate trend for registrations is lower.

All other vehicle sales or output data also show declines year-over-year and most show that the weakness is ongoing over shorter periods. Over three months, motor vehicle sales are lower and truck output is falling rapidly. Passenger car output is up at less than a 1% annual rate over three months.

Both overall industrial output and retail sales are showing three-month declines. For the most part, the trends reveal accelerating deterioration.

Japan's year-over-year vehicle registrations have their strongest correlation with motor vehicle sales with a correlation of 0.92. The next best correlation is with passenger car production with a correlation of 0.82. The correlation with truck IP is 0.78 and with retail sales overall it is only 0.56.

Car registrations data are available a month ahead of the other series. Its correlation with motor vehicle sales is especially valuable. The weakness in registrations in January suggests strongly that motor vehicle sales and vehicle output are going to continue on their down trends. During these difficult times, the U.S., the U.K. and Europe have been buoyed by strong or rising vehicle sales. Japan's vehicle sector has not been anyway near as kind in boosting retail sales and spending in Japan that vehicle sales have been in the rest of the developed world. And now motor vehicle sales appear to be ready to become a drag on the overall economy.

The Bank of Japan has some newly initiated policies for stimulus. It has instituted a program of negative interest rates. That program is brand new; it is way too soon to expect to see any impact from it just yet. But the auto sector gives us one clear reason why the BOJ may have wanted to pull the trigger on a program with more stimulus. The auto sector, as well as all of retailing, and the factory sector all are showing some very downbeat results. Japan's economy is headed for trouble. The BOJ's policy move looks like it is, classically, too little too late.


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New vehicle registrations in Japan fell by 2.5% in January as they continue to gyrate with offsetting up down movements for the third consecutive month. On balance, registrations are higher over three months but lower over six months [...]

Japan's Vehicle Registrations Signal Trouble Ahead

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Nonfarm output per hour declined 3.0% at an annual rate (+0.3% y/y) during
Q4'15 following a 2.1% Q3 increase. A 1.8% decline had been expected in the Action
Economics Forecast Survey. It was the third decline in the last five
quarters and left growth during all of last year at 0.6%, roughly the same as in
2014. The decline occurred as output nudged 0.1% higher (1.9% y/y) while hours
worked gained 3.3% (1.5% y/y). Compensation grew 1.3% and 3.0% for the full
year, up from 1.1% in 2013. Weakness in productivity and strength in
compensation combined to raise unit labor costs 4.5% (2.8% y/y), the quickest
growth in a year. During all of 2015, unit labor cost growth of 2.4% was the
strongest since 2007.

In the manufacturing sector, the story was much the same. Productivity eased
0.4% last quarter (+1.5% y/y). For the full year, productivity growth was steady
at 1.3%. Output edged 0.5% higher in Q4 (1.1% y/y) and hours worked grew 0.9%
(-0.4% y/y). Compensation growth weakened, however, to 3.2% versus much stronger
growth in the earlier two quarters. The combination of weaker productivity and
moderate compensation growth raised unit labor costs by 3.6%, the fastest rise
in a year. For the full year, growth in unit labor costs was steady at 1.3%.

The productivity &amp; cost figures are available in Haver's USECON
database. The expectations figures are from the Action Economics Forecast Survey
and are found in the AS1REPNA database.

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 <thead>
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 <th class="firstcol" scope="col" >Productivity &amp; Costs
 (SAAR, %)</th>
 <th>Q4'15</th>
 <th>Q3'15</th>
 <th>Q2'15</th>
 <th>Q4 Y/Y</th>
 <th>2015</th>
 <th>2014</th>
 <th>2013</th>
 </tr>
 </thead>
 <tbody>
 <tr class="grey3">
 <td class="firstcol" colspan="8" >Nonfarm Business Sector</td>
 </tr>
 <tr>
 <td class="firstcol" >Output per Hour (Productivity)</td>
 <td >-3.0</td>
 <td >2.1</td>
 <td >3.5</td>
 <td >0.3</td>
 <td >0.6</td>
 <td >0.7</td>
 <td >0.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Compensation per Hour</td>
 <td >1.3</td>
 <td >4.1</td>
 <td >5.6</td>
 <td >3.1</td>
 <td >3.0</td>
 <td >2.7</td>
 <td >1.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Unit Labor Costs</td>
 <td >4.5</td>
 <td >1.9</td>
 <td >2.0</td>
 <td >2.8</td>
 <td >2.4</td>
 <td >2.0</td>
 <td >1.1</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colspan="8" >Manufacturing Sector</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Output per Hour (Productivity)</td>
 <td >-0.4</td>
 <td >5.0</td>
 <td >2.2</td>
 <td >1.5</td>
 <td >1.3</td>
 <td >1.3</td>
 <td >0.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Compensation per Hour</td>
 <td >3.2</td>
 <td >7.4</td>
 <td >5.5</td>
 <td >3.4</td>
 <td >2.6</td>
 <td >2.7</td>
 <td >0.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Unit Labor Costs</td>
 <td >3.6</td>
 <td >2.3</td>
 <td >3.2</td>
 <td >1.9</td>
 <td >1.3</td>
 <td >1.4</td>
 <td >-0.5</td>
 </tr>
 </tbody>
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Nonfarm output per hour declined 3.0% at an annual rate (+0.3% y/y) during Q4'15 following a 2.1% Q3 increase. A 1.8% decline had been expected in the Action Economics Forecast Survey. It was the third decline in the last five [...]

U.S. Productivity Decline Lifts Unit Labor Costs

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Initial claims for jobless insurance increased to 285,000 during the week
ended January 30 from 277,000 in the prior week, revised from 278,000. The
four-week moving average increased to 284,750, up slightly versus late last
year. Claims nevertheless remained near the lowest level since 1973. Consensus
expectations were for 280,000 applications in the Action Economics Forecast
Survey. During the last ten years, there has been a 75% correlation between the
level of initial claims and the m/m change in payroll employment.

In the week ending January 23, continuing claims for unemployment insurance
eased to 2.255 million (-5.1% y/y). The four-week moving average increased to
2.253 million, the highest level since early-September.

The insured rate of unemployment remained at 1.7%, about where it's
been since last March.

Insured rates of unemployment across states continued to vary. Near the low
end of the range were Florida (0.67%), North Carolina (0.81%), South Dakota (0.90%),
Virginia (0.95%), Tennessee (1.06%) and Indiana (1.23%). At the high end of the
scale were Massachusetts (2.79%), Illinois (2.88%), Connecticut (2.96%), New
Jersey (3.19%), Pennsylvania (3.29%) and West Virginia (3.31%). The state data
are not seasonally adjusted and cover the week ended January 16.

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 survey, carried in the AS1REPNA database.

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 <thead>
 <tr>
 <th class="firstcol" 0801 >Unemployment Insurance (000s)</th>
 <th 0801 >01/30/16</th>
 <th 0801 >01/23/16</th>
 <th 0801 >01/16/16</th>
 <th 0801 >Y/Y %</th>
 <th 0801 >2015</th>
 <th 0801 >2014</th>
 <th 0801 >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" 0801 >Initial Claims</td>
 <td 0801 >285</td>
 <td 0801 >277</td>
 <td 0801 >294</td>
 <td 0801 >1.8</td>
 <td 0801 >277</td>
 <td 0801 >307</td>
 <td 0801 >342</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" 0801 >Continuing Claims</td>
 <td 0801 >--</td>
 <td 0801 >2,255</td>
 <td 0801 >2,273</td>
 <td 0801 >-5.1</td>
 <td 0801 >2,268</td>
 <td 0801 >2,607</td>
 <td 0801 >2,978</td>
 </tr>
 <tr>
 <td class="firstcol" 0801 >Insured Unemployment Rate (%)</td>
 <td 0801 >--</td>
 <td 0801 >1.7</td>
 <td 0801 >1.7</td>
 <td 0801 >
 1.8 
 (Jan. 2015)
 </td>
 <td 0801 >1.7</td>
 <td 0801 >2.0</td>
 <td 0801 >2.3</td>
 </tr>
 </tbody>
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Initial claims for jobless insurance increased to 285,000 during the week ended January 30 from 277,000 in the prior week, revised from 278,000. The four-week moving average increased to 284,750, up slightly versus late last year. [...]

U.S. Initial Unemployment Insurance Claims Move Higher

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The Composite Index of Nonmanufacturing Sector Business from the Institute
for Supply Management (ISM) declined to 53.5 during January from an upwardly revised 55.8
in December. It was the lowest level since February 2014. Consensus expectations
had been for 55.3 in the Action Economics Forecast Survey. The ISM data are
diffusion indexes where a reading above 50 indicates expansion. Data back to
2014 were revised.

Haver Analytics constructs a Composite Index using the nonmanufacturing ISM
index and the ISM factory sector measure released Monday. It fell to 52.9, also
the lowest level since February 2014. During the last ten years, there has been
a 72% correlation between the index and the q/q change in real GDP.

The decline in the nonmanufacturing index was broad-based. The business
activity series weakened to 53.9, the lowest level since August 2012. The
employment index declined to 52.1, indicating the weakest job growth in twelve
months. During the last ten years, there has been a 96% correlation between the
employment index and the m/m change in service plus construction payrolls. The
new orders index also fell to 56.5, a four month low. Moving to the upside was
the supplier delivery index to 51.5. That indicated slower delivery speeds and
reversed most of the prior December decline.

The prices paid series fell below break-even to 46.4 from 51.0, revised from
49.7. Twelve percent (NSA) of respondents paid higher prices while 19 percent
paid less.

The export order series (NSA) dropped sharply to 45.5. It represented the
greatest decline in export volumes since March 2009. The imports series also
collapsed showing the largest decline since July 2012. The order backlog measure
rose slightly.

The figures are available in Haver's USECON database. The expectations
figure from Action Economics is in the AS1REPNA database.

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	<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/@EF/@EF03/@EF03.HTM">ISM
 Nonmanufacturing Survey (SA)</a></th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Jan'15</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Composite Diffusion Index</td>
 <td >53.5</td>
 <td >55.8</td>
 <td >56.6</td>
 <td >56.9</td>
 <td >57.1</td>
 <td >56.2</td>
 <td >54.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Business Activity</td>
 <td >53.9</td>
 <td >59.5</td>
 <td >59.4</td>
 <td >61.3</td>
 <td >60.8</td>
 <td >59.7</td>
 <td >56.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; New Orders</td>
 <td >56.5</td>
 <td >58.9</td>
 <td >57.9</td>
 <td >60.0</td>
 <td >59.2</td>
 <td >58.6</td>
 <td >55.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Employment</td>
 <td >52.1</td>
 <td >56.3</td>
 <td >56.0</td>
 <td >52.1</td>
 <td >56.1</td>
 <td >54.9</td>
 <td >54.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; Supplier Deliveries (NSA)</td>
 <td >51.5</td>
 <td >48.5</td>
 <td >53.0</td>
 <td >54.0</td>
 <td >52.5</td>
 <td >51.8</td>
 <td >51.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Prices Index</td>
 <td >46.4</td>
 <td >51.0</td>
 <td >50.0</td>
 <td >46.5</td>
 <td >50.7</td>
 <td >56.8</td>
 <td >55.7</td>
 </tr>
 </tbody>
 </table>
 
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The Composite Index of Nonmanufacturing Sector Business from the Institute for Supply Management (ISM) declined to 53.5 during January from an upwardly revised 55.8 in December. It was the lowest level since February 2014. Consensus [...]

U.S. ISM Nonmanufacturing Index Declines Sharply, Nearing 2014 Low

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The EMU services sector turned weaker in January but stayed above 50 signaling continued, if slower, growth. The EMU-wide service sector reading was last lower in January 2015. Even so, the various averages show that the overall EMU gauge has been steady over all these horizons of three-month, six-month and 12-month at level of 54.0. The slip to 53.6 in January is a relatively sharp pullback but not severe.

Three of four of the largest EMU members showed service sector pullbacks in January. France was the exception with its services sector pulling up out of the contraction zone to edge up over 50, at 50.3. The overall euro area index fell by 0.6 points, the German index fell by one full point, Italy fell by an outsized 1.7 points, and Spain's index fell by 0.5 points.

France had fallen for two months in a row before rising in January. Spain now has fallen for two months running. And the overall EMU gauge is lower for two months running.

The EMU services gauge stands in the 70th percentile of its historic queue, implying that it has been higher 30% of the time. The German index with the highest raw reading among this group of EMU members has a 75th percentile standing. Italy, despite its lower raw score, has been higher less than 7% of the time. Spain stands in its 67th percentile. Except for Italy, this is a collection of very modest standings. The standings are at their medians when they are at their respective 50th percentiles. Standings around the 70th percentile are substantially up from their medians and should be regarded as relatively solid readings. But they are not strong readings either. The Italian case is interesting since it has a 93.8 percentile standing when its raw index is only at a reading of 53.6. Obviously, the message is that the Italian services sector does not post such high scores for services, but its relative performance is still quite good by historic standards.

The U.K., an EU member, is not in the common currency mechanism. Its services sector strengthened to 55.6 in January after falling in December. Its sequential moving averages have been without clear trend. But its three-month average advanced on its six-month average. Still, its January level is below its 12-month average. That is true also for the EMU, France, and Spain. The U.K. services metric stands only in the 52nd percentile of its historic queue of values, just a bit above its historic median. The U.K. services sector is decidedly moderate by comparison with the EMU average and the large four EMU members taken individually.

Today the National Institute of Economic and Social Research (NIESR) released an outlook for the U.K. economy that was largely unchanged with growth outlook for the year ahead held at 2.3%. The institute did push out its projection for a rate hike to the second half of the year.

In some sense, this view is consistent with the Federal Reserve's view in the U.S. which seems to see no financial sector damage from the recent stock market selloff. Today New York Fed President William Dudley suggested that he saw some tightening of credit conditions. For the moment, the Fed has left us unconvinced that its timing for a rate hike has been changed. But in truth, we cannot tell for sure from the Fed's policy statement or from recent comments by Vice Chair Stanley Fischer. The NIESR sees the U.K. rate hike at least being pushed into the future. In that, the view from the Fed and from the U.K.'s NIESR is the same: that the stock market selloff is largely a market event and will not loom large as a policy factor this year.

The day also saw a wealth to economic data and service sector reports released worldwide. These global Markit indicators seem to show relatively stronger services sectors in Europe, Japan, and India whereas they see monthly improvements in only seven of 16 service sector reporters in January. But places like Russia and Brazil have sector readings at or near their lower 10 percentile of their historic standings. China is midrange and India is firm. But the BRICS as a group are more marked by weakness. The U.S. nonmanufacturing ISM index was cut to weakest vale on this timeline (since August 2008) and now has a zero percentile standing, with its index falling by more than two points in one month. Will the Federal Reserve remain equivocal in its assessment of the U.S. economy?

Service sectors have been stable in general and have produced a buffer from what have been weak global manufacturing conditions. But this month's erratic behavior, highlighted by a sharp weakening in the U.S., shows that service sector strength is not impervious to weakness elsewhere. This tug of war remains one of the key questions in evaluating the global economy. The services sector is the jobs producing sector since manufacturing is performed with much more capital and has greater productivity. When manufacturing turns down, the knock-on effect is reduced (compared to services) because it does not hit the job market so hard. But there is a knock-on effect and that does get transmitted to services. At the moment, it is amplified by conditions in the oil market and in other extractive sector industries. These, of course, hit developing economies harder and, arguably, below the belt.

On top of that, fiscal policy globally is mostly handcuffed and monetary policy has been as stimulative as it can be most places. Central banks are all but tapped out. Central banks have tried pulling rabbits out of their hats by engaging in operations known as QE or by pushing interest rates into the negative space. These sorts of actions reek of desperation and create side effects that may actually dominate the primary impact of what the banks hope to achieve.

As a result, it is very hard to evaluate the global economy. But we can come to the simple conclusion that the Federal Reserve's take on policy is wrong. The Fed will not even establish a balance of risk statement for policy. Everyone is watching and waiting instead of doing. Since monetary policy acts with a lag whichever direction it chooses to move next in the wake of this pause, it will be behind the curve. It is not so serious being behind the curve if risks lessen since there is so much space in which central banks can act to hike rates. On the upside, bankers still have the potential for completely controlling events seamlessly. The risk of bad policy decisions still lies on the downside side (regardless of what the Fed may not say) because it is there that the flexibility to act is so limited. That is true in the U.S., the EMU, the U.K., Japan as well as in other places to a lesser extent, if conditions weaken materially (as the services sector may now be doing in the U.S.) not only do central banks and governments have less ammunition to use but they will be applying it late and tardiness is what magnifies the risk. This conclusion comes from a simple statement about how policy should be discharged called the mini-max rule. Policy should act in such a way under this rule so as to minimize the impact of the worst mistake a central bank can make should it make the wrong policy choice. Central banks are not doing this. Instead, they are doing nothing and crossing their fingers. That is not a variable in most macro-models of economic impact.


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The EMU services sector turned weaker in January but stayed above 50 signaling continued, if slower, growth. The EMU-wide service sector reading was last lower in January 2015. Even so, the various averages show that the overall EMU [...]

EMU Services Sector in January Slows; In Other Places, Boy Does It Ever...

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The ADP/Moody's National Employment Report indicated that nonfarm
private sector payrolls rose 205,000 during January following a 267,000 December
increase, revised from 257,000. The latest gain was firmer than expectations for
a 190,000 rise in the Action Economics Forecast Survey. Since November, payrolls
have risen at a 2.3% annual rate. During the last ten years, there has been a 97%
correlation between the change in the ADP figure and the change in nonfarm private
sector payrolls as measured by the Bureau of Labor Statistics.

The ADP Research Institute survey is based on ADP's business payroll
transaction system covering 411,000 companies and nearly 24 million employees.
The data are processed by Moody's Analytics Inc., then calibrated and aligned
with the BLS establishment survey data. The ADP data cover private sector
employment, not government.

Medium-sized businesses led last month's job growth with an 82,000 rise
(1.8% y/y), the largest increase in twelve months. Small business hiring
strengthened 79,000 (2.2% y/y) after a 101,000 improvement. Amongst large-sized
employers, payrolls rose 44,000 (2.0% y/y), the weakest gain since October.

Service industry hiring moderated. A 192,000 increase (2.3% y/y) was
the weakest rise in three months. Payrolls in professional &amp; business services
increased a lessened 44,000 (2.4% y/y) while employment in trade, transportation &amp;
utilities industries improved a steady 35,000 (1.7% y/y). The number of financial
activities jobs rose an improved 19,000 (2.0% y/y), the strongest rise since March 2006.

The pace of hiring in the goods-producing sector of the economy slackened to
13,000 (0.5% y/y) following a strong 30,000 rise. Construction sector employment
increased a firm 21,000 (4.0% y/y) while factory sector jobs remained unchanged
(-0.1% y/y) after two months of modest increase.

The ADP National Employment Report data are maintained in Haver's USECON
database; historical figures date back to April 2001 for the total and industry
breakdown and back to January 2005 for the business size breakout. The
expectation figure is available in Haver's 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" scope="col" >ADP/Moody's National
 Employment Report</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Jan Y/Y</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Nonfarm Private Payroll Employment (m/m
 chg, 000s)</td>
 <td >205</td>
 <td >267</td>
 <td >201</td>
 <td >2.0%</td>
 <td >2.3%</td>
 <td >2.3%</td>
 <td >1.9%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Small Payroll (1-49)</td>
 <td >79</td>
 <td >101</td>
 <td >70</td>
 <td >2.2</td>
 <td >2.5</td>
 <td >2.1</td>
 <td >1.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Medium Payroll (50-499)</td>
 <td >82</td>
 <td >77</td>
 <td >58</td>
 <td >1.8</td>
 <td >2.2</td>
 <td >2.8</td>
 <td >2.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Large Payroll (&gt;500)</td>
 <td >44</td>
 <td >88</td>
 <td >74</td>
 <td >2.0</td>
 <td >1.9</td>
 <td >1.8</td>
 <td >1.6</td>
 </tr>
 <tr>
 <td class="firstcol" >Goods-Producing</td>
 <td >13</td>
 <td >30</td>
 <td >-1</td>
 <td >0.5</td>
 <td >1.8</td>
 <td >2.3</td>
 <td >1.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Construction</td>
 <td >21</td>
 <td >31</td>
 <td >6</td>
 <td >4.0</td>
 <td >4.8</td>
 <td >4.6</td>
 <td >3.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Manufacturing</td>
 <td >0</td>
 <td >4</td>
 <td >3</td>
 <td >-0.1</td>
 <td >0.8</td>
 <td >1.2</td>
 <td >0.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Service-Producing</td>
 <td >192</td>
 <td >237</td>
 <td >202</td>
 <td >2.3</td>
 <td >2.4</td>
 <td >2.3</td>
 <td >2.0</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

The ADP/Moody's National Employment Report indicated that nonfarm private sector payrolls rose 205,000 during January following a 267,000 December increase, revised from 257,000. The latest gain was firmer than expectations for a [...]

U.S. ADP Reports Moderate Increase in Hiring

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Gasoline prices continued to decline last week and reached a nine year low.
The pump price for a gallon of regular gasoline fell to an average $1.82 (-11.9%
y/y), down from $1.86 in the prior week, according to the U.S. Department of
Energy. The price compares to a 2014 high of $3.71 per gallon. Haver Analytics
constructs factors adjusting for the seasonal variation in pump prices, and the
adjusted price fell to $2.07 per gallon. The spot market gasoline price fell to
$1.05 per gallon (-22.5% y/y) as of last week.
WTI crude oil costs rose slightly and averaged $31.80 per barrel last
week (-29.8% y/y). Yesterday's price of $31.62 was down from Friday's high of
$33.62, and remained below the peak of $113.93 in April 2011. Brent crude oil
prices also rose w/w to $33.22 per barrel versus the prior week's low of $29.37.
Yesterday's price of $34.12 was down from Friday's high of $35.83.
Natural gas prices held steady last week at $2.20 per mmbtu (-23.4%
y/y). Prices were $2.18 yesterday.
Gasoline demand declined 2.5% y/y last week and demand for all
petroleum products fell 1.7% y/y. Gasoline inventories improved 4.2% y/y,
while inventories of all petroleum products rose 9.1% y/y. Crude oil production
(input to refineries) increased 3.8% y/y during the last four weeks.
The energy price data are reported by the U.S. Department of Energy. The
petroleum demand and inventory figures are from the Oil &amp; Gas Journal
Weekly. These data can be found in Haver's WEEKLY database. The daily
figures are in DAILY and greater detail on prices, demand and production,
along with regional breakdowns, are in OILWKLY.
<table class="centered" border="0" cellspacing="0" width="1871">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="859">Weekly Energy Prices</th>
 <th scope="col" width="144">02/01/16</th>
 <th scope="col" width="144">01 /25/16</th>
 <th scope="col" width="144">01/18/16</th>
 <th scope="col" width="144">Y/Y%</th>
 <th scope="col" width="144">2015</th>
 <th scope="col" width="144">2014</th>
 <th scope="col" width="144">2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="859">Retail Gasoline ($ per Gallon, Regular)</td>
 <td align="center" width="144">1.82</td>
 <td align="center" width="144">1.86</td>
 <td align="center" width="144">1.91</td>
 <td align="center" width="144">-11.9</td>
 <td align="center" width="144">2.03</td>
 <td align="center" width="144">2.30</td>
 <td align="center" width="144">3.33</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="859">Light Sweet Crude Oil, WTI ($ per bbl.,
 WSJ)</td>
 <td align="center" width="144">31.80</td>
 <td align="center" width="144">29.16</td>
 <td align="center" width="144">30.59</td>
 <td align="center" width="144">-29.8</td>
 <td align="center" width="144">48.90</td>
 <td align="center" width="144">93.64</td>
 <td align="center" width="144">97.96</td>
 </tr>
 <tr>
 <td class="firstcol" width="859">Natural Gas ($/mmbtu, LA, WSJ)</td>
 <td align="center" width="144">2.20</td>
 <td align="center" width="144">2.20</td>
 <td align="center" width="144">2.32</td>
 <td align="center" width="144">-23.4</td>
 <td align="center" width="144">2.62</td>
 <td align="center" width="144">4.37</td>
 <td align="center" width="144">3.73</td>
 </tr>
 </tbody>
</table>
&nbsp;
U.S. Light Vehicle Sales Set New Record in 2015 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;February
2, 2016
Records were meant to be broken, and total sales of light vehicles in
2015 did just that. Rising to 17.42 million units, they just beat the old record
of 17.40 million reached in 2000, as gasoline prices and interest rates fell.
The feat occurred despite a 4.6% m/m decline in December sales to 17.34 million
(SAAR) from 18.19 million during November. It was the lowest level in six
months. Nevertheless, sales rose 2.5% versus December 2014, pulling the
full-year average up 5.4% against 2014. These gains were, however, the smallest
of the economic expansion.
Sales of light trucks set the pace in 2015 with a 12.7% full-year
increase to a record 9.69 million units. Their 55.7% share of total vehicle
purchases also was a new record. The gain was led by a 25.3% surge in imported
light truck sales to 1.37 million units, just off the 2007 record of 1.47
million. Not to be outdone, the 10.8% increase in sales of domestically produced
light trucks pulled them to a record 8.33 million. During December, sales of
imported light trucks fell 3.2% to 1.59 million. Nevertheless, they were 45.9%
higher than December 2014. Sales of domestically produced light trucks fell 4.4%
last month to 8.34 million (+8.1% y/y).
Passenger car sales during all of 2015 declined 2.5% to 7.72 million
units, leaving them well below the 1990 high of 9.30 million. Sales of U.S. made
cars eased 0.8% to 5.63 million while sales of imports fell 6.7% to 2.09
million. For December, passenger car sales declined 5.2% from November to 7.40
million (-8.7% y/y). Sales of domestically made cars fell 3.4% to 5.51 million
(-5.5% y/y) while sales of imported cars were off 10.1% to 1.89 million (-17.0%
y/y).
Imports share of the light vehicle market eased slightly y/y to 19.8%
last year. That was, however, well below the 27.6% peak reached in 2009. During
December, their share was 20.1%. Imports share of the car market came to 27.1%
last year and 25.5% in December. Imports share of the light truck market totaled
14.1% in 2005 and 16.0% during December.
U.S. vehicle sales figures are published by Autodata and can be found in
Haver's USECON database.
<table class="centered" border="0" cellspacing="0" width="1871">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="875">Light Vehicle Sales (SAAR, Mil. Units)</th>
 <th scope="col" width="141">Jan</th>
 <th scope="col" width="141">Dec</th>
 <th scope="col" width="142">Nov</th>
 <th scope="col" width="142">Jan Y/Y %</th>
 <th scope="col" width="142">2015</th>
 <th scope="col" width="142">2014</th>
 <th scope="col" width="142">2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="875">Total</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">17.34</td>
 <td align="center" width="142">18.19</td>
 <td align="center" width="142">2.5</td>
 <td align="center" width="142">17.42</td>
 <td align="center" width="142">16.52</td>
 <td align="center" width="142">15.59</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="875">&nbsp;Autos</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">7.40</td>
 <td align="center" width="142">7.81</td>
 <td align="center" width="142">-8.7</td>
 <td align="center" width="142">7.72</td>
 <td align="center" width="142">7.92</td>
 <td align="center" width="142">7.77</td>
 </tr>
 <tr>
 <td class="firstcol" width="875">&nbsp;&nbsp;Domestic</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">5.51</td>
 <td align="center" width="142">5.71</td>
 <td align="center" width="142">-5.5</td>
 <td align="center" width="142">5.63</td>
 <td align="center" width="142">5.68</td>
 <td align="center" width="142">5.48</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="875">&nbsp;&nbsp;Imported</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">1.89</td>
 <td align="center" width="142">2.10</td>
 <td align="center" width="142">-17.0</td>
 <td align="center" width="142">2.09</td>
 <td align="center" width="142">2.24</td>
 <td align="center" width="142">2.30</td>
 </tr>
 <tr>
 <td class="firstcol" width="875">&nbsp;Light Trucks</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">9.94</td>
 <td align="center" width="142">10.38</td>
 <td align="center" width="142">12.8</td>
 <td align="center" width="142">9.69</td>
 <td align="center" width="142">8.60</td>
 <td align="center" width="142">7.82</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="875">&nbsp;&nbsp;Domestic</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">8.34</td>
 <td align="center" width="142">8.73</td>
 <td align="center" width="142">8.1</td>
 <td align="center" width="142">8.33</td>
 <td align="center" width="142">7.51</td>
 <td align="center" width="142">6.74</td>
 </tr>
 <tr>
 <td class="firstcol" width="875">&nbsp;&nbsp;Imported</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">1.59</td>
 <td align="center" width="142">1.65</td>
 <td align="center" width="142">45.9</td>
 <td align="center" width="142">1.37</td>
 <td align="center" width="142">1.09</td>
 <td align="center" width="142">1.08</td>
 </tr>
 </tbody>
</table>





</html>

Gasoline prices continued to decline last week and reached a nine year low. The pump price for a gallon of regular gasoline fell to an average $1.82 (-11.9% y/y), down from $1.86 in the prior week, according to the U.S. Department of [...]

U.S. Gasoline Prices Weaken To 2009 Low

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

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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 2016

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