Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081211g.jpg" width="353">
Initial claims for unemployment insurance jumped last week. The 58,000 surge to 573,000 brought them to the highest level since November, 1982 when initial filings hit 612,000. This month claims are 8.9% higher than the November average.
Expectations had been for claims last week of 523,000. The four-week moving average of initial claims rose to this cycle&#39;s high of 540,500 (59.1% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081211h.jpg" width="353">
The largest increases in initial claims for the week ending Nov. 29 were in Wisconsin (+16,331), Iowa (+6,240), Arkansas (+1,509), Mississippi (+1,398), and North Dakota (+1,391), while the largest decreases were in California (-20,304), Florida (-8,626), Missouri (-8,347), Michigan (-7,323), and Texas (-7,129).
Continuing claims for unemployment insurance during the week of November 29 surged by 338,000, also to the highest level since 1982. The four-week average of continuing claims rose to 4,133,500. Continuing claims provide some indication of workers&#39; ability to find employment and they lag the initial claims figures by one week.
The insured rate of unemployment rose to a new cycle high of 3.3%. The Commerce Department indicated the highest insured unemployment rates in the week ending November 22 were in Puerto Rico (5.0 percent), Oregon (4.5), Michigan (4.3), Nevada (4.1), Idaho (3.9), Alaska (3.8), Pennsylvania (3.7), South Carolina (3.7), New Jersey (3.6), and Wisconsin (3.5).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">12/06/08</th>
<th scope="col">11/29/08</th>
<th scope="col">11/22/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>573</td>
<td>515</td>
<td>531</td>
<td>70.0%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>4,429</td>
<td>4,091</td>
<td>67.6%</td>
<td>2,552</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
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Initial claims for unemployment insurance jumped last week. The 58,000 surge to 573,000 brought them to the highest level since November, 1982 when initial filings hit 612,000. This month claims are 8.9% higher than the November [...]

U.S. Weekly Claims For Jobless Insurance Highest Since 1982

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081211e.jpg" width="353">
Total U.S. import prices declined another 6.7% last month after the revised 5.4% drop during October. Consensus expectations had been for a 4.8% November decline.
Petroleum prices were off sharply again by 25.8% and this month imported crude petroleum prices are down another 20% m/m.
November import prices less petroleum doubled their decline of October and fell 1.8%. During the last three months prices fell at a 13.2% annual rate versus the 12%-to-13% rates of positive growth this past spring.
 Growth in import prices will slow further given the recent rise in the foreign exchange value of the dollar. During the last ten years there has been an 83% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081211f.jpg" width="353">
Capital goods import prices fell 0.4%. On a three-month basis prices fell at a 2.5% annual rate after a 5%-to-6% rate of increase earlier this year. Less the lower prices of computers, capital goods prices also fell 0.4% and the three-month growth went to a negative 1.4% after 9.0% growth earlier this year. Prices of computers, peripherals &amp; accessories were down at a 6.8% rate during the last three months.
Prices for nonauto consumer goods fell 0.3%. The rate of increase during the last three months went to a negative 1.1% versus the 5.9% peak earlier this year. Durable goods prices overall rose were unchanged during the last three months versus a 6.2% rate of increase earlier this year.
Total export prices fell 3.2% due to a 7.0% (-2.8% y/y) decline in agricultural prices. Nonagricultural export prices also fell by 2.9% and they were unchanged y/y. It was the fourth consecutive monthly decline.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA, %)</a></th>
<th scope="col">November</th>
<th scope="col">October</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>-6.7</td>
<td>-5.4</td>
<td>-4.4</td>
<td>4.2</td>
<td>4.9</td>
<td>7.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-25.8</td>
<td>-19.8</td>
<td>-29.0</td>
<td>11.6</td>
<td>20.6</td>
<td>37.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>-1.8</td>
<td>-0.9</td>
<td>2.4</td>
<td>2.7</td>
<td>1.7</td>
<td>2.7</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>-3.2</td>
<td>-2.0</td>
<td>-0.2</td>
<td>4.9</td>
<td>3.6</td>
<td>3.2</td>
</tr>
</tbody>
</table>


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Total U.S. import prices declined another 6.7% last month after the revised 5.4% drop during October. Consensus expectations had been for a 4.8% November decline. Petroleum prices were off sharply again by 25.8% and this month [...]

U.S. Import Prices Down Sharply

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081211d.jpg" align="left" border="0" height="265" width="353">
The chart above tells the story for UK manufacturing. The
bottom fell out in Sept, then in Oct and Nov., things got worse and now
negative conditions are remaining in force at levels near the bottom of
their recent range. Orders stand in the 4th
percentile of their range (since 2000); they remain very weak. The
volume index for the outlook is at a raw reading of -42, the lowest
since 2000. On a broader front going back to 1988 the volume outlook
index has been weaker than this only 3% of the time. Stocks are at the
top of their range since 2000 but the same stocks number is in the top
9% of the data going back to 1988 &#8211; inventories by any comparison are
top-heavy.
The orders and export order weakness also look low in broader
comparisons. Orders are weaker than this only 15% of the time and
foreign orders are weaker 26% of the time in data going back to 1988.
To combat weakness The UK has embarked on a stimulus plan.
That plan came under attack today from German Finance Minister
Steinbruck who characterized British stimulus as &#8216;breathtaking&#8217; calling
it &#8216;crass Keynesianism.&#8217; In
France , economy minister Lagarde was urging the EU to do more to
stimulate the region as she warned that the slowdown could get much
more severe. Lagarde says France is working and Germany is thinking,
pointing out that different countries have different approaches while
being much less confrontational than Steinbruck overall. In this
environment it is Germany that is doing so much less and it is Germany
that is the outlier much more than the UK .

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col">UK
Industrial volume data CBI Survey </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Reported:</td>
<td>Dec 
08</td>
<td>Nov 
08</td>
<td>Oct 
08</td>
<td>Sep 
08</td>
<td>Aug 
08</td>
<td>12MO Avg</td>
<td>Pcntle</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
</tr>
<tr>
<td class="firstcol">Total Orders</td>
<td>-35</td>
<td>-38</td>
<td>-39</td>
<td>-26</td>
<td>-13</td>
<td>-9</td>
<td>4%</td>
<td>9</td>
<td>-40</td>
<td>49</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>-33</td>
<td>-31</td>
<td>-32</td>
<td>-25</td>
<td>-9</td>
<td>-10</td>
<td>17%</td>
<td>3</td>
<td>-38</td>
<td>41</td>
</tr>
<tr>
<td class="firstcol">Stocks:FinGds</td>
<td>21</td>
<td>25</td>
<td>24</td>
<td>21</td>
<td>18</td>
<td>14</td>
<td>100%</td>
<td>25</td>
<td>-2</td>
<td>27</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">Looking
ahead</td>
</tr>
<tr>
<td class="firstcol">Output Volume:Nxt 3M</td>
<td>-42</td>
<td>-42</td>
<td>-31</td>
<td>-16</td>
<td>-13</td>
<td>-2</td>
<td>0%</td>
<td>28</td>
<td>-42</td>
<td>70</td>
</tr>
<tr>
<td class="firstcol">Avg Prices 4Nxt 3m</td>
<td>0</td>
<td>10</td>
<td>23</td>
<td>31</td>
<td>34</td>
<td>24</td>
<td>55%</td>
<td>34</td>
<td>-19</td>
<td>53</td>
</tr>
<tr class="odd">
<td colspan="11" class="firstcol">From
end 2000</td>
</tr>
</tbody>
</table>
</body></html>

The chart above tells the story for UK manufacturing. The bottom fell out in Sept, then in Oct and Nov., things got worse and now negative conditions are remaining in force at levels near the bottom of their recent range. Orders stand [...]

UK Industrial Sector Still Under Great Pressure

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081211a.jpg" width="353">
The October U.S. foreign trade deficit rose unexpectedly. The modest rise to $57.2B from a little revised $56.6B during September contrasted with Consensus expectations for a narrowing to $53.5B. So far this year the monthly trade deficit has averaged $59.1B, slightly deeper than the $58.3B averaged during the first ten months of 2007.
Adjusted for price inflation the trade deficit in goods deepened to $46.4B from a revised September level of $42.0B which was larger than originally reported. Nevertheless, year-to-date the real deficit narrowed more than $10.0B versus 2007 to an average $44.9B as real exports surged 9.0% and real imports fell 2.1%. A narrower trade deficit was estimated to have added 1.1 percentage points to real GDP growth last quarter following a 2.9 point addition during 2Q.
Developing recessions in economies abroad lowered U.S. exports for the third consecutive month. The 2.2% decline followed a 6.4% September drop that was slightly deeper than initially reported. The decline reflected a 2.8% drop in goods exports following the 8.5% September decline. Nevertheless, the increase in the competiveness of U.S.-made products due to past declines in the U.S. dollar lifted exports by 4.4% y/y. Adjusted for prices, chained-dollar goods exports slipped 0.9% (+0.7% y/y) after a slightly revised 8.2% September decline. Real exports of capital goods slipped 0.6% (-3.6% y/y) after a 9.6% plunge during the prior month. Exports of nonauto consumer goods fell 1.4% (+3.8% y/y) for the third consecutive monthly drop. Real exports of automobiles &amp; parts fell 2.7% (-5.2% y/y) and real exports of foods, feeds &amp; beverages slipped 0.4% (+1.5% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081211b.jpg" width="353">
Nominal exports of services slipped 0.7% (+7.3% y/y) as travel exports fell. Though they fell hard for the second month, travel exports remained up 7.2% y/y. Passenger fares fell another 1.8% but remained up 15.3% y/y. That y/y gain was, however, half that of several months ago. Exports of &quot;other&quot; private services slipped 0.4% as year-to-year growth fell to 5.4% after an 18.2% gain during all of last year.
Despite the developing U.S. recession, petroleum imports rose 3.0% and they surged a surprising 20.8% in constant dollar terms. The gain was driven by a 22.0% m/m surge in the quantity of petroleum products imported. The quantity of crude petroleum imports jumped 28.0% (2.9% y/y) and that nearly recovered declines during the prior two months. The average price per barrel of crude oil fell to $92.02 (+26.8% y/y) from a high of $124.7 in July. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081211c.jpg" width="353">
Recessionary forces were clearly evident in the 2.3% decline in the value of nonpetroleum imports. Measured in chained 2000 dollars, nonoil imports fell 1.6% (-4.9% y/y), though real imports of nonauto consumer goods rose 1.0% (-1.1% y/y) following a 7.7% decline during September. The chained-dollar value of imports of automotive vehicles &amp; parts fell another 5.2% (-22.8% y/y) and real imports of nonauto capital goods fell 3.7% (-2.4% y/y).
Services imports were unchanged (+6.0% y/y) after the 3.5% September drop. Travel imports ticked up 0.2% (0.4% y/y) after the 4.6% September drop. Passenger fares rose 2.3% (11.8% y/y). That annual gain is half what it was earlier this year.
The U.S. trade deficit in goods with China deepened slightly to another record $28.0B. Exports to China made up for the prior month&#39;s shortfall and rose 14.1% (6.8% y/y) after 18.2% growth during all of last year. Imports rose 2.8% (7.8% y/y). That y/y growth is down sharply, with the weakening U.S. economy, from 20% to 30% rates of growth during the prior ten years. The trade deficit with Japan deepened again m/m to $6.0B but during the first ten months of this year it is down to average of $6.2B from an average $6.9B during the first ten months of last year. The trade deficit with Japan ranged between $5 and $8 billion between 2003 and 2007.

<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/@EE/@EE01/@EE01.HTM">Foreign Trade&nbsp;</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">U.S. Trade Deficit</td>
<td>$57.2B</td>
<td>$56.6B</td>
<td>$56.3B (10/07)</td>
<td>$700.3</td>
<td>$753.3</td>
<td>$711.6B</td>
</tr>
<tr>
<td class="firstcol">Exports - Goods &amp; Services</td>
<td>-2.2%</td>
<td>-6.4%</td>
<td>5.3%</td>
<td>13.0%</td>
<td>13.5%</td>
<td>10.6%</td>
</tr>
<tr>
<td class="firstcol">Imports - Goods &amp; Services</td>
<td>-1.3%</td>
<td>-5.7%</td>
<td>4.2%</td>
<td>6.1%</td>
<td>10.8%</td>
<td>12.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>3.0%</td>
<td>-16.7%</td>
<td>25.7%</td>
<td>9.4%</td>
<td>20.1%</td>
<td>39.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonpetroleum Goods</td>
<td>-2.3%</td>
<td>-3.5%</td>
<td>-0.8%</td>
<td>4.8%</td>
<td>9.1%</td>
<td>10.3%</td>
</tr>
</tbody>
</table>
</body>
</html>

The October U.S. foreign trade deficit rose unexpectedly. The modest rise to $57.2B from a little revised $56.6B during September contrasted with Consensus expectations for a narrowing to $53.5B. So far this year the monthly trade [...]

U.S. Trade Deficit Rose As Exports Fell

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081210e.jpg" align="left" border="0" height="265" width="353">
Output plunges in Italy and in France 
 

In France a large part of the drop in IP is the weakened auto
sector. Output in the auto sector fell by 14.3%. Declines, as the table
shows, are widespread. The drops in output in France and in Italy are
worse than those in 2000 -2001. Output drops in France are gathering
momentum across sectors with the exception of capital goods. Italy
shows much the same situation with sequential growth rates indicating a
quickening pace of decline across sectors &#8211;the consumer sector being an
unpersuasive exception. In the quarter to date both countries show
sharp declines in output are underway in the -17% to -18% range
(annualized). Europe is in the throes of the severe output decline
phase of the recession. There are riots in Greece that mix some civil
unrest in with protests about how the economy is being managed. 
 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> French IP excluding Construction</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="odd">
<td class="firstcol">IP total</td>
<td>-2.7%</td>
<td>-0.8%</td>
<td>-0.5%</td>
<td>-14.7%</td>
<td>-12.3%</td>
<td>-7.2%</td>
<td>-18.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>-0.4%</td>
<td>-0.2%</td>
<td>-0.6%</td>
<td>-4.6%</td>
<td>-1.8%</td>
<td>-3.3%</td>
<td>-4.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Goods</td>
<td>-0.5%</td>
<td>0.8%</td>
<td>0.0%</td>
<td>1.0%</td>
<td>-4.9%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-3.5%</td>
<td>-1.7%</td>
<td>-0.9%</td>
<td>-22.0%</td>
<td>-16.3%</td>
<td>-10.1%</td>
<td>-26.0%</td>
</tr>
<tr class="even">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Auto</td>
<td>-14.3%</td>
<td>-5.9%</td>
<td>-0.2%</td>
<td>-58.2%</td>
<td>-44.4%</td>
<td>-29.2%</td>
<td>-69.3%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Italy IP excluding
Construction</td>
</tr>
<tr class="even">
<td class="firstcol">Saar except m/m</td>
<td>Oct-08</td>
<td>Sep-08</td>
<td>Aug-08</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-date</td>
</tr>
<tr class="odd">
<td class="firstcol">IP-MFG</td>
<td>-1.1%</td>
<td>-2.9%</td>
<td>0.1%</td>
<td>-14.6%</td>
<td>-12.9%</td>
<td>-6.8%</td>
<td>-16.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>0.8%</td>
<td>-3.3%</td>
<td>0.6%</td>
<td>-7.6%</td>
<td>-11.1%</td>
<td>-4.6%</td>
<td>-7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Goods</td>
<td>-1.5%</td>
<td>-2.7%</td>
<td>-1.1%</td>
<td>-19.1%</td>
<td>-18.2%</td>
<td>-8.7%</td>
<td>-19.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-2.1%</td>
<td>-3.5%</td>
<td>0.9%</td>
<td>-17.5%</td>
<td>-13.4%</td>
<td>-8.3%</td>
<td>-22.3%</td>
</tr>
<tr class="even">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Transportation</td>
<td>-5.8%</td>
<td>-5.6%</td>
<td>1.7%</td>
<td>-33.4%</td>
<td>-30.5%</td>
<td>-19.8%</td>
<td>-42.9%</td>
</tr>
</tbody>
</table>
</body></html>

Output plunges in Italy and in France In France a large part of the drop in IP is the weakened auto sector. Output in the auto sector fell by 14.3%. Declines, as the table shows, are widespread. The drops in output in France and in [...]

Industrial Production Drops Sharply in France and Italy

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081210a.jpg" width="353">
According to the Mortgage Bankers Association, the total number of mortgage applications fell a slight 7.1% last week. They had doubled during the prior week to take advantage of lower interest rates and the Fed&#39;s announcement that it would buy the debt of government sponsored enterprises (GSEs) and mortgage-backed securities (MBSs).
The Future of Mortgage Finance in the United States is Fed Chairman Bernanke&#39;s 10/31/08 speech and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20081031a.htm"> here</a>.
The index of applications to refinance a home mortgage slipped 0.9% last week after having tripled due to the government&#39;s guarantee.
Applications for a mortgage to purchase a home retraced most of the prior week&#39;s gain with a 17.4% w/w decline.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081210b.jpg" width="353">
The effective interest rate on a conventional 15-year mortgage dipped after having plummeted during the week prior. The decline to 5.40% left them down nearly a full percentage point from the October average. For a 30-year mortgage rates also fell slightly to 5.69%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. For an adjustable rate 1-Year mortgage the rate rose to 6.83% after having averaged 6.90% during November.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage. Moreover, during the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
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 covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
The figures for weekly mortgage applications are available in Haver&#39;s SURVEYW database.

<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">12/05/08</th>
<th scope="col">11/28/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>796.8</td>
<td>857.7</td>
<td>-1.8%</td>
<td>652.6</td>
<td>584.2</td>
<td>708.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>298.1</td>
<td>361.1</td>
<td>-36.8%</td>
<td>424.9</td>
<td>406.9</td>
<td>470.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,767.3</td>
<td>3,802.8</td>
<td>30.8%</td>
<td>1,997.9</td>
<td>1,634.0</td>
<td>2,092.3</td>
</tr>
</tbody>
</table>
</body>
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According to the Mortgage Bankers Association, the total number of mortgage applications fell a slight 7.1% last week. They had doubled during the prior week to take advantage of lower interest rates and the Fed's announcement that it [...]

U.S. Mortgage Applications Fell Slightly Last Week

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081210c.jpg" width="353">
The National Association of Realtors indicated that October pending sales of existing homes fell 0.7% m/m after September&#39;s 4.3% decline. Consensus expectations were for a greater 3.0% drop. Despite the two latest declines the level of sales on a three-month basis continued to rise, up 7.5% from the March low.
The home sales figures are analogous to the new home sales data from the Commerce Department in that they measure existing home sales when the sales contract is signed, not at the time the sale is closed. The series dates back to 2001.
Lower prices continued to bolster home sales. The median sales price of an existing home fell for the fourth straight month during October (-11.3% y/y). Prices were down 20.0% from their peak during June of last year. For single-family homes, prices fell 4.5% during October and prices were off 20.7% from their peak.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/081210d.jpg" width="353">
Weakness in the West led the October sales&#39; decline, but not by enough to stall the upward trend. On a three-month basis sales in the West rose to the highest level since the summer of 2006. Sales in the Midwest also were weak during October. The 4.3% decline followed a 0.7% downtick during September. October sales in the South were the strongest of the regions and they rose 7.8%. That pulled the 3-month average to its highest level since March. Home sales in the Northeast ticked up 0.6% but that followed a 15.2% m/m decline during September. The 3-month level of sales was near the lowest for this cycle,
Weak home sales are encouraging potential sellers to keep their homes off the market. The Realtors Association indicated in an earlier report that the number of homes on the market and available for sale fell for the third consecutive month (-4.5% y/y).
At the current sales rate there was a 10.2 months&#39; supply of homes on the market, higher than 8.9 months last year and 6.5 months during 2006. For single family homes the months&#39; supply ticked up to 9.6, near the lowest since March but still well above the 8.7 average of last year.
The pending home sales data are available in Haver&#39;s PREALTOR database and the number of homes on the market and prices are in the REALTOR database.
U.S. Economic Growth Will Be Weak in 2009, Chicago Fed Economic Outlook Symposium. Click <a href="http://www.chicagofed.org/economic_research_and_data/2008_eos_release.cfm"> here</a> for the summary.

<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/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">October</th>
<th scope="col">September</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>88.9</td>
<td>89.5</td>
<td>&nbsp;&nbsp; -1.0%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>68.1</td>
<td>67.7</td>
<td>-14.1</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>79.7</td>
<td>83.3</td>
<td>-6.8</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>95.9</td>
<td>89.0</td>
<td>-2.9</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>103.7</td>
<td>113.6</td>
<td>17.3</td>
<td>92.1</td>
<td>109.5</td>
<td>128.6</td>
</tr>
</tbody>
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The National Association of Realtors indicated that October pending sales of existing homes fell 0.7% m/m after September's 4.3% decline. Consensus expectations were for a greater 3.0% drop. Despite the two latest declines the level [...]

U.S. Pending Home Sales Fell

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

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

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

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

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Andrew Cates

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

250501Z1.jpg

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

250501Z2.jpg

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

250501Z3.jpg

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

250501Z4.jpg

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

250501Z5.jpg

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

250501Z6.jpg

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

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/3PzXXKrkHcwtOLipohEdnB?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Tariff Truce, Tenuous Trust

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

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

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

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

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

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

250501H20.jpg

250501I20.jpg

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

U.S. Light Vehicle Sales Fall in April

250501J5.jpg

250501K5.jpg

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

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

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

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

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

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

250501L5.jpg

250501M5.jpg

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

250501N.jpg

250501O.jpg

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

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

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

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

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

250501P.jpg

250501Q.jpg

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

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

Carol Stone, CBE

250501A8.jpg

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

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

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

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

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

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

Economy in Brief: 2008

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U.S. Weekly Claims For Jobless Insurance Highest Since 1982

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