Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060608a.jpg" width="353">
Initial claims for unemployment insurance fell 35,000 w/w to the lowest level since early April. The decline last week to 302,000 followed a slightly revised 9,000 increase the prior period and may have been biased down by the Memorial Day holiday. Consensus expectations had been for 330,000 claims.
The four week moving average of initial claims fell to 327,750 (-1.9% y/y).
Continuing claims for unemployment insurance reversed the downwardly revised increase the prior week and fell 5,000.
The insured rate of unemployment was stable at 1.9% for the third consecutive week.
Adjusting to the Next Stage of the Housing Cycle is yesterday&#39;s speech given by Jack Guynn, President of the Federal Reserve Bank of Atlanta, and it is available <a href="http://www.frbatlanta.org/invoke.cfm?objectid=AF005747-5056-9F1A-E28D889DADF9B34D&amp;method=display"> here</a>. 

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">06/03/06</th>
<th scope="col">05/27/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>302</td>
<td>337</td>
<td>-9.6%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,415</td>
<td>-7.2%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
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Initial claims for unemployment insurance fell 35,000 w/w to the lowest level since early April. The decline last week to 302,000 followed a slightly revised 9,000 increase the prior period and may have been biased down by the [...]

Initial Jobless Insurance Claims Fell To Two Month Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060608a.jpg" width="353">
Initial claims for unemployment insurance fell 35,000 w/w to the lowest level since early April. The decline last week to 302,000 followed a slightly revised 9,000 increase the prior period and may have been biased down by the Memorial Day holiday. Consensus expectations had been for 330,000 claims.
The four week moving average of initial claims fell to 327,750 (-1.9% y/y).
Continuing claims for unemployment insurance reversed the downwardly revised increase the prior week and fell 5,000.
The insured rate of unemployment was stable at 1.9% for the third consecutive week.
Adjusting to the Next Stage of the Housing Cycle is yesterday&#39;s speech given by Jack Guynn, President of the Federal Reserve Bank of Atlanta, and it is available <a href="http://www.frbatlanta.org/invoke.cfm?objectid=AF005747-5056-9F1A-E28D889DADF9B34D&amp;method=display"> here</a>. 

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">06/03/06</th>
<th scope="col">05/27/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>302</td>
<td>337</td>
<td>-9.6%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,415</td>
<td>-7.2%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
Central Banks in Many Countries Raise Base Rates 
by <a href="/comment/Stone.html">Carol Stone</a> June 8, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060608b.jpg" width="353">
It was expected that the ECB would raise its refinancing rate at today&#39;s scheduled meeting, and indeed the Governing Council lifted it to 2.75% from 2.50%. However, what was not at all expected were similar kinds of moves by central banks around the world. South Koreans moved their overnight call rate target from 4.00% to 4.25%, the Reserve Bank of South Africa raised their repo rate by half-a-percent to 7.50%, and the Reserve Bank of India pushed its reverse repo rate to 5.75% from 5.50%. Some countries have been raising rates for some time, but for South Africa, this was the first increase since 2002. Turkey, which has made such decisive progress getting its rates down, was actually the first to move, on Wednesday, when it raised its rate from 13.25% to 15.00%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060608c.jpg" width="353">
Inflation, which had behaved in such an encouraging way for a long time, has now started to pick up, as we discussed here yesterday with Austria&#39;s wholesale prices. Tom Moeller also covered the phenomenon yesterday in showing the &quot;TIP spread&quot; and the University of Michigan&#39;s consumer sentiment survey. In the latter measure for May, consumers anticipate inflation over the next year of 4.7%, up from 3.8% in January. At the same time, economies that had been weak, have gained strength, especially across Europe and in Japan. Last week, India reported a 9.3% rate of growth for Q1.
So central banks are trying to keep &quot;ahead of the curve&quot; on these issues, and the simultaneous action by so many on a single day is impressive. Indeed, bond markets reacted positively; German 10-year government bond yields, for instance, dropped in yield from 3.98% to 3.90%, a substantial one-day move. Such an endorsement should be gratifying to inflation-fighting central bankers. 

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">June 8</th>
<th scope="col">May</th>
<th scope="col">Dec 2005</th>
<th scope="col">Dec 2004</th>
<th scope="col">Dec 2003</th>
<th scope="col">Dec 2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">ECB</td>
<td>2.75</td>
<td>2.50</td>
<td>2.25</td>
<td>2.00</td>
<td>2.00</td>
<td>2.75</td>
</tr>
<tr>
<td class="firstcol">South Korea</td>
<td>4.25</td>
<td>4.00</td>
<td>3.75</td>
<td>3.25</td>
<td>3.75</td>
<td>4.25</td>
</tr>
<tr class="odd">
<td class="firstcol">India</td>
<td>5.75</td>
<td>5.50</td>
<td>5.25</td>
<td>4.75</td>
<td>4.50</td>
<td>5.50</td>
</tr>
<tr>
<td class="firstcol">Turkey</td>
<td>15.00</td>
<td>13.25</td>
<td>13.5</td>
<td>18.00</td>
<td>26.00</td>
<td>44.00</td>
</tr>
<tr class="odd">
<td class="firstcol">South Africa</td>
<td>7.50</td>
<td>7.00</td>
<td>7.00</td>
<td>7.50</td>
<td>8.00</td>
<td>13.50</td>
</tr>
<tr>
<td class="firstcol">Thailand</td>
<td>6.50</td>
<td>6.25</td>
<td>5.50</td>
<td>3.50</td>
<td>2.75</td>
<td>3.25</td>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060607d.jpg" width="353">
Inflation is becoming a hot topic once again. For instance, Austria&#39;s wholesale prices for May, which were released today, jumped 3.4% year-on-year, their largest increase since March 2005. Fuel has the main upward thrust, but other items are seeing bigger price advances as well.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060607e.jpg" width="353">
In the table below, we see prices of food, consumer goods and &quot;intermediary&quot; goods rising more rapidly. Some individual items include pharmaceuticals, household appliances, nonferrous metals and iron and steel. This last had been falling steeply for just over a year, but suddenly in May, it has a year-to-year increase; at 0.9%, the rise is not large, but marks a turn from a declining trend. World commodities prices in addition to oil have been booming, and those advances look to be working their way into costs of products in even such a medium-size economy as Austria.
A couple of exceptions stand out, however. Clothing prices continue deep in negative territory. This appears to be something of an exception as well, compared with other countries. Clothing prices have been declining at retail in most countries, but their producer prices have been increasing. Austria&#39;s products, though, seem to be getting cheaper. Capital goods prices have also been weakening, sustaining a trend in Austria that appears to have ended in most other countries, apart from computers and telecommunications equipment. It will be interesting to see in coming months if the Austrians can keep their finished equipment prices down in the face of the price increases in metals and other components.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060607f.jpg" width="353">
Finally, petroleum products are becoming more expensive in Austria, just as everywhere else. At the same time, this force may be muted somewhat by the recent strengthening of the euro. In the third graph, we see that in 2000 the weakening euro was associated with very large increases in fuel prices in Austria. The subsequent strengthening of the currency accompanied relative weakening of energy prices. A rough negative relationship is evident, although the numerical correlation is low (around 18%). So we could then watch for relatively more moderate increases in energy costs, which of course, are priced in dollars in world markets.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/ALPMED/@A1/@A14/@A142/@A142.HTM">Austria</a><a href="http://www.haverselect.com/dlx/ALPMED/@A1/@A14/@A142/@A142.HTM">: Wholesale Price Indexes, Yr/Yr % Changes</a></th>
<th scope="col">May 2006</th>
<th scope="col">Apr 2005</th>
<th scope="col">Mar 2005</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Total WPI</td>
<td>3.4</td>
<td>1.9</td>
<td>0.8</td>
<td>1.4</td>
<td>5.2</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>1.5</td>
<td>1.7</td>
<td>0.2</td>
<td>3.9</td>
<td>0.2</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">Intermediary Goods</td>
<td>7.0</td>
<td>3.6</td>
<td>1.9</td>
<td>-0.4</td>
<td>12.6</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Goods</td>
<td>-1.1</td>
<td>-2.6</td>
<td>-1.3</td>
<td>-0.6</td>
<td>0.5</td>
<td>-0.4</td>
</tr>
<tr>
<td class="firstcol">&quot;Other&quot; Food*</td>
<td>1.1</td>
<td>0.8</td>
<td>0.3</td>
<td>0.3</td>
<td>1.1</td>
<td>0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing</td>
<td>-4.3</td>
<td>-6.2</td>
<td>-6.3</td>
<td>-3.4</td>
<td>-7.0</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">Motor Fuel</td>
<td>17.3</td>
<td>12.9</td>
<td>14.6</td>
<td>16.0</td>
<td>11.5</td>
<td>-1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Machine Tools</td>
<td>0.7</td>
<td>0.1</td>
<td>0.8</td>
<td>1.4</td>
<td>1.4</td>
<td>0.5</td>
</tr>
</tbody>
</table>
</body>
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Inflation is becoming a hot topic once again. For instance, Austria's wholesale prices for May, which were released today, jumped 3.4% year-on-year, their largest increase since March 2005. Fuel has the main upward thrust, but other [...]

Austria's Wholesale Prices: Some Evidence of Mounting Inflation Pressure, but Clothing and Capital Goods Are [...]

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060607b.jpg" width="353">
Inflation expectations were piqued this week by Fed Chairman Bernanke&#39;s <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060605/default.htm"> comments</a> that the three-month and six-month core PCE inflation figures at 3.0% and 2.3% were &quot;unwelcome developments.&quot;
As a result, the yield on the inflation-protected Treasury note rose to 2.44% from 2.40% on Monday but the yield on the nominal security fell to 5.01%. The so called TIPS spread narrowed to 2.57% from 2.62% on Monday.
Bernanke&#39;s comments implied that more inflation pressure existed than had been perceived but that the Fed would combat those pressures more forcefully than previously expected. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060607c.jpg" width="353">
The rise in the TIPS spread this year has followed a rise in 12 month inflation expectations to 4.7% in May from 3.8% in January, as surveyed by the University of Michigan.
Inflation Expectations: How the Market Speaks from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-25.pdf"> here</a>.
How much work the Fed still must do to contain inflation is the $64,000 question. Already it has lifted short term interest rates by 400 basis points to 5.0%. More action might be suggested, however, by a recent pickup in the y/y growth of the monetary base (liquidity) to 4.6%. It had slowed previously to 3.2% from 5.8% late in 2004. In addition, the &quot;real&quot; Fed funds rate fell as the three month growth in &quot;core&quot; PCE prices tripled to 3.0% in May versus last August.
The Shadow Open Market Committee can be visited <a href="http://www.somc.rochester.edu/"> here</a> and its Policy Statement from May, 2005 can be found <a href="http://www.somc.rochester.edu/May05/SOMCstatement505.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/DAILY/@D1/@D111/@D111.HTM">Treasury Inflation Indexed Securities</a></th>
<th scope="col">06/06/06</th>
<th scope="col">06/05/06</th>
<th scope="col">12/31/05</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">10 Yr. Treas. Note at Constant Maturity Due 1/15/16</td>
<td>2.44%</td>
<td>2.40%</td>
<td>2.06%</td>
</tr>
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Inflation expectations were piqued this week by Fed Chairman Bernanke's comments that the three-month and six-month core PCE inflation figures at 3.0% and 2.3% were "unwelcome developments." As a result, the yield on the inflation- [...]

Inflation Expectations Rise

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060607a.jpg" width="353">
The total number of mortgage applications fell 1.4% last week and lowered the level in early June 4.8% below the May average which fell 2.2% from April.
Purchase applications were stable w/w but because of earlier declines the opening level in June was 3.2% below the May average. It was down 0.8% versus April.
During the last ten years there has been a negative 80% correlation between the interest rate level on 30-year financing and purchase applications while during those years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance dropped 3.8% on top of the prior week&#39;s 4.8% skid. Refis opened June 7.5% below the May average which fell 4.1% from April.
The effective interest rate on a conventional 30-year mortgage dipped to 6.83% from 6.86% the prior week. Rates began June about even with the May average of 6.86% but were up sharply from the 5.81% low last June. The rate on 15-year financing was stable for the third week at 6.52%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
Challenges of Conducting Effective Risk Management in Community Banks, yesterday&#39;s speech by Fed Governor Susan Schmidt Bies, is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060606/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">06/02/06</th>
<th scope="col">05/26/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>534.4</td>
<td>541.9</td>
<td>-29.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>395.6</td>
<td>395.5</td>
<td>-17.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,356.0</td>
<td>1,409.0</td>
<td>-42.6%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications fell 1.4% last week and lowered the level in early June 4.8% below the May average which fell 2.2% from April. Purchase applications were stable w/w but because of earlier declines the opening [...]

Mortgage Applications Fell Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060607a.jpg" width="353">
The total number of mortgage applications fell 1.4% last week and lowered the level in early June 4.8% below the May average which fell 2.2% from April.
Purchase applications were stable w/w but because of earlier declines the opening level in June was 3.2% below the May average. It was down 0.8% versus April.
During the last ten years there has been a negative 80% correlation between the interest rate level on 30-year financing and purchase applications while during those years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance dropped 3.8% on top of the prior week&#39;s 4.8% skid. Refis opened June 7.5% below the May average which fell 4.1% from April.
The effective interest rate on a conventional 30-year mortgage dipped to 6.83% from 6.86% the prior week. Rates began June about even with the May average of 6.86% but were up sharply from the 5.81% low last June. The rate on 15-year financing was stable for the third week at 6.52%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
Challenges of Conducting Effective Risk Management in Community Banks, yesterday&#39;s speech by Fed Governor Susan Schmidt Bies, is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060606/default.htm"> here</a>.

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<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">06/02/06</th>
<th scope="col">05/26/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>534.4</td>
<td>541.9</td>
<td>-29.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>395.6</td>
<td>395.5</td>
<td>-17.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,356.0</td>
<td>1,409.0</td>
<td>-42.6%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Inflation Expectations Rise 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 7, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060607b.jpg" width="353">
Inflation expectations were piqued this week by Fed Chairman Bernanke&#39;s <a href="http://www.federalreserve.gov/boarddocs/speeches/2006/20060605/default.htm"> comments</a> that the three-month and six-month core PCE inflation figures at 3.0% and 2.3% were &quot;unwelcome developments.&quot;
As a result, the yield on the inflation-protected Treasury note rose to 2.44% from 2.40% on Monday but the yield on the nominal security fell to 5.01%. The so called TIPS spread narrowed to 2.57% from 2.62% on Monday.
Bernanke&#39;s comments implied that more inflation pressure existed than had been perceived but that the Fed would combat those pressures more forcefully than previously expected. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060607c.jpg" width="353">
The rise in the TIPS spread this year has followed a rise in 12 month inflation expectations to 4.7% in May from 3.8% in January, as surveyed by the University of Michigan.
Inflation Expectations: How the Market Speaks from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-25.pdf"> here</a>.
How much work the Fed still must do to contain inflation is the $64,000 question. Already it has lifted short term interest rates by 400 basis points to 5.0%. More action might be suggested, however, by a recent pickup in the y/y growth of the monetary base (liquidity) to 4.6%. It had slowed previously to 3.2% from 5.8% late in 2004. In addition, the &quot;real&quot; Fed funds rate fell as the three month growth in &quot;core&quot; PCE prices tripled to 3.0% in May versus last August.
The Shadow Open Market Committee can be visited <a href="http://www.somc.rochester.edu/"> here</a> and its Policy Statement from May, 2005 can be found <a href="http://www.somc.rochester.edu/May05/SOMCstatement505.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/DAILY/@D1/@D111/@D111.HTM">Treasury Inflation Indexed Securities</a></th>
<th scope="col">06/06/06</th>
<th scope="col">06/05/06</th>
<th scope="col">12/31/05</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">10 Yr. Treas. Note at Constant Maturity Due 1/15/16</td>
<td>2.44%</td>
<td>2.40%</td>
<td>2.06%</td>
</tr>
</tbody>
</table>
Austria's Wholesale Prices: Some Evidence of Mounting Inflation Pressure, but Clothing and Capital Goods Are Notable Exceptions 
by <a href="/comment/Stone.html">Carol Stone</a> June 7, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060607d.jpg" width="353">
Inflation is becoming a hot topic once again. For instance, Austria&#39;s wholesale prices for May, which were released today, jumped 3.4% year-on-year, their largest increase since March 2005. Fuel has the main upward thrust, but other items are seeing bigger price advances as well.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060607e.jpg" width="353">
In the table below, we see prices of food, consumer goods and &quot;intermediary&quot; goods rising more rapidly. Some individual items include pharmaceuticals, household appliances, nonferrous metals and iron and steel. This last had been falling steeply for just over a year, but suddenly in May, it has a year-to-year increase; at 0.9%, the rise is not large, but marks a turn from a declining trend. World commodities prices in addition to oil have been booming, and those advances look to be working their way into costs of products in even such a medium-size economy as Austria.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060607f.jpg" width="353">
A couple of exceptions stand out, however. Clothing prices continue deep in negative territory. This appears to be something of an exception as well, compared with other countries. Clothing prices have been declining at retail in most countries, but their producer prices have been increasing. Austria&#39;s products, though, seem to be getting cheaper. Capital goods prices have also been weakening, sustaining a trend in Austria that appears to have ended in most other countries, apart from computers and telecommunications equipment. It will be interesting to see in coming months if the Austrians can keep their finished equipment prices down in the face of the price increases in metals and other components.
Finally, petroleum products are becoming more expensive in Austria, just as everywhere else. At the same time, this force may be muted somewhat by the recent strengthening of the euro. In the third graph, we see that in 2000 the weakening euro was associated with very large increases in fuel prices in Austria. The subsequent strengthening of the currency accompanied relative weakening of energy prices. A rough negative relationship is evident, although the numerical correlation is low (around 18%). So we could then watch for relatively more moderate increases in energy costs, which of course, are priced in dollars in world markets.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/ALPMED/@A1/@A14/@A142/@A142.HTM">Austria</a><a href="http://www.haverselect.com/dlx/ALPMED/@A1/@A14/@A142/@A142.HTM">: Wholesale Price Indexes, Yr/Yr % Changes</a></th>
<th scope="col">May 2006</th>
<th scope="col">Apr 2005</th>
<th scope="col">Mar 2005</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Total WPI</td>
<td>3.4</td>
<td>1.9</td>
<td>0.8</td>
<td>1.4</td>
<td>5.2</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Goods</td>
<td>1.5</td>
<td>1.7</td>
<td>0.2</td>
<td>3.9</td>
<td>0.2</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">Intermediary Goods</td>
<td>7.0</td>
<td>3.6</td>
<td>1.9</td>
<td>-0.4</td>
<td>12.6</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Goods</td>
<td>-1.1</td>
<td>-2.6</td>
<td>-1.3</td>
<td>-0.6</td>
<td>0.5</td>
<td>-0.4</td>
</tr>
<tr>
<td class="firstcol">&quot;Other&quot; Food*</td>
<td>1.1</td>
<td>0.8</td>
<td>0.3</td>
<td>0.3</td>
<td>1.1</td>
<td>0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing</td>
<td>-4.3</td>
<td>-6.2</td>
<td>-6.3</td>
<td>-3.4</td>
<td>-7.0</td>
<td>1.4</td>
</tr>
<tr>
<td class="firstcol">Motor Fuel</td>
<td>17.3</td>
<td>12.9</td>
<td>14.6</td>
<td>16.0</td>
<td>11.5</td>
<td>-1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Machine Tools</td>
<td>0.7</td>
<td>0.1</td>
<td>0.8</td>
<td>1.4</td>
<td>1.4</td>
<td>0.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060606e.jpg" width="353">
Like the NTC Economics Ltd. surveys of the intentions of purchasing managers in the manufacturing industries, that Carol Stone commented on last week, theMay survey of purchasing managers in the service industries is another sign of more growth to come in the Euro Zone despite rising oil prices and a strong euro.Growth has been stronger in the service industries than in the manufacturing as can be seen in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060606g.jpg" width="353">
For the Euro Zone, as a whole, the index rose to 58.69 in May from 58.33 in April. This is the highest value since November, 2003. (A value over 50 indicates expansion, one under 50, contraction.) PMI&#39;s are not available for all the individual members of the Euro Zone. For the service industries, only data for France, Germany, Ireland, Italy and Spain are available. Although the over-all index for the Euro Zone increased in May, the indexes for Spain and Germany fell. Some of the variations in purchasing managers intentions over the past year can be seen in the second chart. The intentions of purchasing managers in Italy have increased steadily and sharply over the past year while those in Spain have increased at slower rate and have had a more erratic path.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060606f.jpg" width="353">
In addition to the purchasing managers intentions, NTC Economics also publishes monthly GDP Indicators for selected countries and areas. These indicators are based on the data collected in the surveys of the intentions of the purchasing managers in the manufacturing, service and construction industries. In the latest surveys, the indicators point to a 2.9% year-over-year growth for the Euro Zone. This indicator has been a fairly good predictor of GDP growth as can be seen in the third chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">PMI Survey of Service Industries &gt;50=Growth &lt;50=Contraction</th>
<th scope="col">May 06</th>
<th scope="col">Apr 06</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro Zone</td>
<td>58.69</td>
<td>58.33</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>60.58</td>
<td>59.39</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>56.67</td>
<td>57.25</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>66.16</td>
<td>65.58</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>61.82</td>
<td>59.63</td>
</tr>
<tr>
<td class="firstcol">Spain&nbsp;</td>
<td>54.69</td>
<td>56.49</td>
</tr>
</tbody>
</table>
</body>
</html>

Like the NTC Economics Ltd. surveys of the intentions of purchasing managers in the manufacturing industries, that Carol Stone commented on last week, theMay survey of purchasing managers in the service industries is another sign of [...]

Good News for the Service Industries in the Euro Zone from the May PMI Surveys

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060606d.jpg" width="353">
The April job openings rate as reported by the Bureau of Labor Statistics in the Job Openings &amp; Labor Turnover Survey (JOLTS) was unchanged at 2.9%, where it has been all year. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.
The actual number of job openings, however, ticked 0.1% higher to 4.095 million. That added to strong monthly gains earlier in the year and pulled the number of openings up 14.1% y/y.
Moving in the other direction the hires rate fell to 3.4%, the lowest level in a year, from 3.6% in March. The hires rate is the number of hires during the month divided by employment. The actual number of hires fell a sharp 7.0% (-0.7% y/y) after a 1.4% March decline.
The job separations rate fell to 3.3% from 3.5% in March and 3.4% in February. Separations include quits, layoffs, discharges, and other separations as well as retirements. The total separations, or turnover, rate is the total number of separations during the month divided by employment. The level of job separations dropped 5.6% (-4.2% y/y) to 4.419 million.
The survey dates only to December 2000 but has since followed the movement in nonfarm payrolls.
A description of the Jolts survey and the latest release from the U.S. Department of Labor is available <a href="http://www.bls.gov/news.release/jolts.nr0.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB14/@EB14.HTM">JOLTS</a> (Job Openings &amp; Labor Turnover Survey)</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Job Openings Rate: Total</td>
<td>2.9%</td>
<td>2.9%</td>
<td>2.6%</td>
<td>2.7%</td>
<td>2.4%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">Hires Rate: Total</td>
<td>3.4%</td>
<td>3.6%</td>
<td>3.4%</td>
<td>3.6%</td>
<td>3.5%</td>
<td>3.2%</td>
</tr>
</tbody>
</table>
</body>
</html>

The April job openings rate as reported by the Bureau of Labor Statistics in the Job Openings & Labor Turnover Survey (JOLTS) was unchanged at 2.9%, where it has been all year. The job openings rate is the number of job openings on [...]

JOLTS: Job Openings Steady, Hires Rate Down

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

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

Equity market exuberance outpacing macroeconomic data

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

US production rebounded in Q2, but demand continued to slow

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

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

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

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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Andrew Cates

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

250828Z1.jpg

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

250828Z2.jpg

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

250828Z3.jpg

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

250828Z4.jpg

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

250828Z5.jpg

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

250828Z6.jpg

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

Charts of the Week: Riskbusters

250828N8.jpg

250828C8.jpg

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

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

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

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

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

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

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

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

250828O8.jpg

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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: June 2006

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