Haver’s data services are provided through the DLX platform; delivering tools for data management, visualization, modeling and publishing. DLX is designed to increase productivity and integrates with Excel, PowerPoint, and major statistical software packages; MatLab, R, Python, SAS, E-views and Stata. DLX component application DLXVG3 offers precision graphics, publishing, analytic tools, and easy navigation for all Haver databases.

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Chart and compare multiple data series with accompanying data table of values

Advanced functions (growth rates, moving averages, aggregation, seasonal adjustment)

Analytical tools (cycle charts, scatterplots, trend lines, and recession shading)

Complete graph customization (axis scaling, sizing, formatting, styles)

Excel and PowerPoint direct export and complete integration (dynamic spreadsheets and presentations update on a click)

DLXVG3

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DLX Add-ins for all versions of Excel provide instant data updates of entire workbooks

Use DLXVG3 to locate data series codes from within any file, easily creating new spreadsheets for analysis

Edit date ranges, archive data, apply functions

Excel Spreadsheet Add-ins

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Haver offers timely, accurate, and professionally supported data via an update service, meeting the strictest demands of the institutional research community

AutoUpdate provides fast and reliable data updates within seconds of source releases

Timer service runs continuously on an hourly basis when DLX is running

Manual updates offer clients the independence to update data retrievals on any desired schedule

All database updates retrieve only the data series that have changed and send only the data points that have been updated; including revisions

Timely Updates

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Haver supports a DLX API permitting clients to leverage and build processes with DLX data

Database Compatibility

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Data Link Express

Platform Independent site delivering DLX Databases across any workstation or device.

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HaverView

[Matlab](http://matlab.com) by The MathWorks lets you access, visualize, and analyze historic time-series data to identify patterns or uncover complex relationships. From within a single environment you can:

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MATLAB

[Stata Data Analysis and Statistical Software](https://www.stata.com) by StataCorp LP is an integrated statistical package designed for researchers of all disciplines. It provides the ability to do data analysis, data management and graphics and has features such as multiple imputation, factor variables, GMM, competing-risks regression, state-space modeling, predictive margins, and more.

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Stata

[SAS](https://www.sas.com) provides an integrated environment for predictive and descriptive modeling, data mining, text analytics, forecasting, optimization, simulation, experimental design and more. From predictive analytics to model deployment and process optimization, SAS provides a range of techniques and processes for the collection, classification, analysis and interpretation of data to reveal patterns, anomalies, key variables and relationships, leading ultimately to new insights and better answers faster.

[SASEHAVR](http://support.sas.com/documentation/cdl/en/etsug/67525/HTML/default/viewer.htm#etsug_sasehavr_gettingstarted01.htm) is a seamless interface between Haver and SAS data processing that enables SAS users to read economic and financial time series data that reside in a Haver Analytics DLX (Data Link Express) database. [SASEHAVR](http://support.sas.com/documentation/cdl/en/etsug/67525/HTML/default/viewer.htm#etsug_sasehavr_gettingstarted01.htm) requires both SAS/ETS and Base SAS Software.

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[RATS (Regression Analysis of Time Series) Econometric Software](https://estima.com) by Estima is a leading econometrics and time-series analysis software package. It provides ability to do linear and non-linear least squares, forecasting, SUR and ARIMA models and in addition, supports advanced techniques such as GMM, ARCH and GARCH models, state space models, and more.

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RATS

Session 1: Bootcamp Part 1

Visualization with GGPlot2 and data analysis

Session 2: Bootcamp Part 2

Session 3: Univariate Models Part 1

Session 4: Univariate Models Part 2

Session 5: Vector Autoregressions

Session 6: Cointegration and error-correction models

Estimating, evaluating, and forecasting ARIMA models

Understanding the concept of non-stationarity and testing for unit roots

Estimating autoregressions, granger causality tests, and impulse response functions

Understanding the concept of cointegration and testing using the Enger-Granger test

Estimating and forecasting with vector error correction models

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Teaches econometrics and forecasting at the University of Colorado Denver. He has over 15 years of econometric experience in both the private and public sector.

Daniel L. Jerrett, Ph.D.

Abdel M. Zellou, Ph.D.

Bootcamp and Econometric Tools 1 & 2

Econometrics Training: Applied Time Series in R

Session 5: Multivariate Models Part 1

Session 6: Multivariate Models Part 2

Haver partners with Clear Future Consultants to offer a two week immersive online course introducing participants to the power of the Python programming language. This applied hands-on training develops statistical economics skills with a concentration on economics and finance.

Gain proficiency in building modern time-series models in Python through real-world applications. Designed for professionals in both the public and private sector, the course does not require prior experience, assuming only that participants have a basic understanding of regression and statistical concepts.

Proficiency working in Jupyter notebooks and the Python environment

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Remote Training: Applied Time Series in Python

Policy uncertainty has surged since the US national elections.

Tom Moeller

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The Current General Activity Diffusion Index declined to -16.4 during December after falling to -5.5 in November, according to the Manufacturing Business Outlook Survey (MBOS) from the Federal Reserve Bank of Philadelphia, indicating further deterioration in factory sector activity this month. A reading of 2.5 had been expected in the Action Economics Forecast Survey. Sixteen percent of the firms reported increases in general activity in December while 32.7% reported decreases. Responses to this month's survey were collected between December 9 and December 16.

Haver Analytics calculates an ISM-adjusted current activity diffusion index from five key components using the methodology along the lines of the national ISM index. The index declined to 48.6 in this month from 49.2. It was the lowest reading in six months, down from a high of 54.9 in July.

The new orders index fell to -4.3 this month after declining to 8.9 in November, while the shipments series declined to -1.9 after falling to 4.5. Surging higher, however, was the unfilled orders index to 18.9, its highest level since March 2022. The delivery times reading jumped to 11.6 after weakening to -2.1 and the inventories index declined to -2.3 after rising to 5.4 last month.

The current employment index declined to 6.6 in December after rising to 8.6 in November, suggesting an overall increase in employment. Seventeen percent of respondents reported increases in employment last month while an increased 10.6% reported declines. The average employee workweek index collapsed to -8.2 and reversed most of its rise to 17.4 in November.

Inflation indicators were mixed this month. The prices paid index rose to 31.2 after falling to 26.6 last month. The index is up from a low of 3.7 in March. A higher 34.0% of respondents reported increases in input prices in December while 2.8% reported decreases. To the downside, the prices received index declined to 7.3 after falling to 14.3 in November It was down from a September high of 24.6. A lessened 12.0% of respondents reported increases in prices while an increased 4.7% reported declines.

The future activity index declined to 30.7 in December after surging to 56.6 during November. The reading hit its low of -4.0 in January. Most of the components declined, including new orders, shipments, order backlogs and employment. The expected capital spending measure fell sharply. Inventories and the length of the workweek increased. The expected prices paid series fell from the highest level since April 2022, but prices received increased. 

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The series from the survey dating back to May 1968 can be found in Haver's **SURVEYS** database. The expectations forecast figures are from the Action Economics Forecast Survey in **AS1REPNA**.



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- Current General Activity Index is lowest since April 2023.
- New orders, shipments & employment weaken.
- Prices paid index improves but prices received falls sharply.


U.S. Philadelphia Fed Manufacturing Index Declines in December

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined by 22,000 to 220,000, seasonally adjusted, in the week ended December 14, from the previous week’s unrevised level of 242,000.  The Action Economic Forecast Survey had expected claims to be 231,000. The 4-week moving average was 225,500 in the December 14 week, an increase of 1,250 from 224,250 in the previous week. As mentioned last week, weekly claims figures can be distorted by the timing of Thanksgiving and the associated difficulty that presents to seasonally adjusting weekly data.

The total number of unemployment insurance beneficiaries was 1.874 million in the week ended December 7, a decrease of 5,000 from the previous week’s level of 1.879 million, revised from 1.886 million. This total number of beneficiaries is also known as “continuing claims.” The 4-week moving average was 1.880 million in the week ended December 7, down 6,000 from 1.886 million in the previous week. The insured unemployment rate, that is, the total number of beneficiaries as a percent of covered employment, was unchanged at 1.2% in the week ended December 7.

Unemployment rates vary markedly across states. The Labor Department reports that for the week ended November 30, the insured unemployment rate was highest in New Jersey (2.46%), followed by California (2.30%), Washington (2.20%), Minnesota (2.11%), and Alaska (2.05%). The lowest rates were in Florida (0.39%), followed by Virginia (0.40%), South Dakota (0.43%), Alabama (0.46%), and New Hampshire (0.48%). Unemployment rates in other major states include Illinois (1.74%), New York and Massachusetts (both at 1.73%), Pennsylvania (1.70%), Michigan (1.35%), Texas (1.17%), and Ohio (0.95%). These state rates are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor, 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 were lower than expected in the week ended December 14.
- Continuing claims remained steady.
- The insured unemployment rate remained unchanged at 1.2%.


U.S. Initial Unemployment Claims Declined in Most Recent Week

Andrew Cates

**Stock markets and economic data**
In recent weeks, financial markets have been glued to political developments, with a particular focus on the policy implications of a new US administration. This political backdrop has buoyed US equity markets, which have responded positively to expectations of pro-growth policy shifts. However, beneath the surface, the economic data have told a more nuanced story. While inflation readings have consistently surprised to the upside, incoming growth data have fallen short of expectations (chart 1). Against this backdrop, the recent souring of sentiment in the US equity market seems less surprising, as investors reassess the balance between political optimism and the underlying economic reality.

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**Services inflation and monetary policy**
An additional reason, however, for that souring of sentiment concerns monetary policy. Although the US Fed cut interest rates by 25 bps this week, the commentary and forecasts left investors much more concerned about the scope for looser policy in 2025. These concerns have been amplified as well by incoming inflation data suggesting that service sector inflation has remained elevated (chart 2).

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**Broad money growth versus house price inflation**
There are, in addition, some forward-looking indicators that suggest inflation could pick up in the coming months. The recent lowering of policy rates across most major economies has been mirrored by an uptick in growth of broader measures of the money supply. As shown in chart 3, M2 growth in several major economies has gained momentum. This, in turn, has begun to translate—albeit with a lag—into stronger house price inflation. Against a backdrop where consumer price inflation has been above target and sticky this will potentially concern many policymakers. 

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**Supply chain pressures and inflation surprises**
These inflation concerns could be further amplified in the coming months by a potential shift in US policy toward greater trade protectionism. As chart 4 illustrates, global supply chain pressures have played a pivotal role in shaping inflation dynamics—first by driving inflation higher during the pandemic and the war in Ukraine, and more recently by easing inflation as those pressures subsided. However, a resurgence of supply-side disruptions driven by renewed protectionist measures could trigger another inflationary spike. Such a scenario would likely force central banks to maintain a more restrictive monetary stance for longer, delaying anticipated interest rate cuts and adding to the challenges facing the global economy.

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**The Bank of Japan**
Standing in contrast to these broad global concerns was the Bank of Japan’s decision this week to signal patience regarding further interest rate hikes. Policymakers specifically opted to keep the policy rate unchanged. This decision appears justified, as inflation in Japan is currently holding just above the 2% target, with no significant upward pressure on prices to warrant additional tightening. Moreover, Japan's economic growth remains relatively weak, although nominal wage growth continues to be positive. Looking ahead, market-based inflation expectations have steadily risen in recent years, specifically with the 5-year breakeven inflation rate recently surpassing the 2% threshold (see chart below). If these expectations materialize, a more stable inflationary environment could provide the BoJ with a stronger case for further increases in its policy interest rate next year.

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**China**
Turning to the situation in China, the week’s economic data releases were underwhelming, as the economy’s regular monthly data failed to meet expectations. This is reflected in the Citigroup Economic Surprise Index, which reversed from a period of positive surprises and took a downturn. Specifically, retail sales growth slowed to 3% y/y in November, down from the 4.8% seen in October. Furthermore, China’s property sector remained in a dire state, with existing house prices falling by an additional 8.4% y/y (chart 6). These disappointing figures have reinforced expectations of further monetary easing by Chinese authorities and continued weakness in demand-driven consumer inflation. Additionally, producer prices have continued to decline, partly driven by excess capacity issues. This outlook has also solidified expectations of a prolonged period of low interest rates in China, contributing to a rally in the country’s bond markets and pushing yields to record lows.

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Investors have shifted their attention back to the economic data and monetary policy over the past few days, marking a shift from recent weeks when political developments took centre stage in shaping financial market sentiment (chart 1). While this week’s decision by the US Fed to cut policy rates by 25 bps was widely anticipated, the accompanying commentary and forecasts have heightened concerns that US monetary policy will remain tighter for longer in the months ahead. Similarly, the BoE’s likely decision to leave rates unchanged this week has stoked comparable concerns about the UK’s policy trajectory. The key driver behind these concerns is inflation. Persistent inflation in the services sector (chart 2) and ongoing wage pressures are leaving policymakers in the US and UK reluctant to ease monetary policy further. This hesitancy has been amplified by financial conditions that have arguably been looser in recent months than central banks would prefer (chart 3). Additionally, a potential shift toward a more protectionist global trade environment next year could exacerbate price pressures in traded goods sectors, further complicating efforts to bring inflation back toward target levels (chart 4). Meanwhile, in Japan, the BoJ’s decision to maintain its accommodative monetary policy highlights a contrasting challenge: low inflation and a fragile economy. These dynamics stand in stark contrast to the issues confronting the US Fed (chart 5). Further complicating the global picture is China (chart 6), where recent data point to an economy weighed down by weak consumer demand, excess industrial capacity, and tepid inflation. This also underlines the increasingly divergent challenges faced by policymakers across the world’s major economies as they navigate a highly complex and uncertain macroeconomic landscape.

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/6BhojEY0a8kXw0Oug6Su8Q?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: Inflated expectations

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At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was reduced by 25 basis points to 4.25% to 4.50%. It followed a 25 basis point reduction at the last meeting, and was the third consecutive meeting where rates were reduced from the high range of 5.25%-5.50% in place in mid-September. The decline matched expectations in the Action Economics Forecast Survey.

The statement following the meeting began as it did at the last meeting. “Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated.”

It went on to state, as it did at the last meeting, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”

The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities.

Today’s FOMC statement can be found [here](https://www.federalreserve.gov/newsevents/pressreleases/monetary20241218a.htm).

**At today’s meeting the Fed updated its economic projections.**
The real GDP and Unemployment Rate estimates were little changed at roughly 2.0% (Q4/Q4) and 4.3%, respectively, through 2027. The 2025 PCE Inflation estimate was raised, however, to 2.5% (Q4/Q4) from 2.1%, with it then falling to an unchanged 2.0% estimate in 2027. The Core PCE price estimate was raised to 2.8% (Q4/Q4) from 2.6% for this year, to 2.5% from 2.2% for 2025, to 2.2% from 2.0% in 2026, settling at unchanged projections of 2.0% in 2027.  
Interest rate projections also were updated. The Projected appropriate Fed funds rate was left unchanged at 4.4% for the end of 2024, then raised to 3.9% at the end of next year from 3.4%, to 3.4% at the end of 2026 from 2.9%, and to 3.1% at the end of 2027 from 2.9%. 


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FOMC Lowers Targeted Funds Rate Range by 25 Basis Points; Lifts Rate Projections

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Total housing starts weakened 1.8% in November (-14.6% y/y) to 1.289 million (SAAR) after falling a minimally revised 3.2% during October to 1.312 million and 1.7% in September to 1.355 million, which also was minimally revised. Starts were 29.5% below the most recent peak of 1.828 million in April 2022. The Action Economics Forecast Survey expected 1.344 million starts in November.

Single-family starts rose 6.4% (-10.2% y/y) to 1.011 million last month after falling 9.1% to 950,000 in October, revised from 970,000. They rose 3.9% in September to 1.045 million. Multi-family starts declined 23.2% last month (-27.6% y/y) to 278,000 after rising 16.8% to 362,000 in October. They reached a high of 624,000 units in November 2022.

Starts in the Northeast rose 10.6% (-10.9% y/y) last month to 115,000 following a 37.0% October decline. Starts in the South improved 10.2% (-11.1% y/y) to 727,000 after falling 9.2% in October. Moving lower, starts in the Midwest slumped 28.2% (-22.2% y/y) to 158,000 after rising 24.3% in October. Starts in the West weakened 11.9% (-19.7% y/y) to 289,000 units after rising 14.7% in October.

Building permits increased 6.1% (-0.2% y/y) in November to 1.505 million after slipping 0.4% in October to 1.419 million units, revised from 1.416 million. Single-family permits edged 0.1% higher (-2.7% y/y) to 972,000 last month after improving 0.8% in October. Countering this weakness, multi-family permits rose 19.0% (4.7% y/y) to 533,000 last month, after a 3.0% October decline.

The housing starts and permits figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.


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- Single-family starts recover after two hurricanes; multi-family starts continue downward.
- Regional movement is mixed.
- Building permits rise due to strength in multi-family sector.


U.S. Housing Starts Decline in November; Building Permits Rise

Sandy Batten

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The U.S. current account deficit widened markedly in the third quarter of 2024 to a record $310.9 billion from an upwardly revised $275.0 billion in Q2 (previously $266.8 billion). The series dates back to 1960. The Action Economics Forecast Survey had expected the deficit to widen to $284.0 billion in Q3. The Q3 deficit was 4.2% of GDP, up from 3.8% in Q2. 

While the burgeoning goods deficit continued to be the driving force behind the widening current account shortfall, the balance on primary income and the balance on secondary income played a larger role than usual in Q3. The primary income balance posted its second consecutive deficit, for only the fifth time in the series history. The deficit widened $11.7 billion to a record $15.5 billion in Q3. Primary income receipts plunged $15.5 billion while primary income payments declined $3.8 billion. Primary income includes investment income and compensation of employees. The secondary income deficit widened $15.9 billion (a record for the series) to $61.9 billion (also a record). Secondary income receipts edged up $0.2 billion while secondary income payments surged a record $16.1 billion, mostly reflecting an increase in general government transfers. 
Secondary income includes transfer payments by governments, tax withholdings and insurance payments, among other items.

The goods trade deficit widened $10.1 billion to $307.3 billion in Q3. Goods exports increased a solid 2.6% q/q, reflecting an increase in capital goods, mostly semiconductors; computer accessories, peripherals, and parts; and civilian aircraft. Goods imports rose 2.9% q/q, reflecting increases in capital goods, mostly computer accessories, peripherals, and parts; electric-generating machinery, electric apparatus, and parts; and computers, and in consumer goods, mainly medicinal, dental, and pharmaceutical products. 

The services surplus widened $1.8 billion to $73.7 billion in Q3. Exports of services increased 2.8% q/q, reflecting increases in government goods and services, mostly military units and agencies, and in telecommunications, computer, and information services, mostly computer services. Imports of services rose 3.0%, reflecting increases in charges for the use of intellectual property, mostly licenses to reproduce and/or distribute audiovisual products, and in insurance services, mostly reinsurance.

Among financial account transactions, the net acquisition of financial assets rebounded, rising $18.7 billion to $201.9 billion in Q3. The net incurrence of financial liabilities surged $385.7 billion to $716.7 billion in Q3, the highest reading since Q1 2020.

Balance of Payments data are in Haver’s **USINT** database, with summaries available in **USECON**. The expectations figure is in the **AS1REPNA** database.



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- Goods deficit widened by $10 billion. Services surplus widened by nearly $2 billion.
- Balance on primary income posted a deficit for only the fifth quarter in the history of the series.
- Secondary income deficit widened by nearly $16 billion, the largest quarterly increase in the series history.


U.S. Current Account Deficit Widened to a Record in Q3 2024

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Mortgage applications eased 0.7% (+16.9% y/y) in the week ended December 13, after rising 5.4% (15.9% y/y) in the week ended December 6. Applications for loans to purchase a house rose 1.4% (5.6% y/y) in the December 13 week after a drop of 4.1% (+3.5% y/y) in the December 6 week, while applications to refinance a loan declined 2.6% (+41.1% y/y) following a surge of 27.2% (42.2% y/y) in the prior week. These data are from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey and the amounts quoted here are seasonally adjusted.

The effective interest rate on a 30-year fixed rate loan was 6.95% in the week ended December 13, up 9bps from 6.86% in the week ended December 6. The effective rate on a 15-year fixed rate mortgage rose 3bps to 6.32% in the week ended December 13, from 6.29% in the December 6 week. The rate on a 30-year jumbo loan rose 9bps to 7.03% in the week ended December 13 from 6.94% in the week ended December 6. The rate on a 5-year ARM rose 25bps to 6.21% in the latest week after declining by 50bps to 5.96% in the week ended December 6.

The share of applications to refinance an existing mortgage was 46.7% in the December 13 week down from 46.8% in the December 6 week. The largest share in recent months was 55.7% the week of September 20. The share of applications for ARMs was 5.3% in the latest week, unchanged from the December 6 week. The last time the share was 5.3% was in the week ended February 25, 2022.

The average loan size in the December 13 week was $376,100, up 2.1% (4.4% y/y) from $368,200 in the week ended December 6. The average size of an application for a loan to purchase a house was up 2.2% (2.3% y/y) to $425,400 in the December 13 week from $416,200 in December 6 week, while the average size of an application to refinance an existing loan increased 2.0% (16.4% y/y) to $319,900 in the latest week from $313,600 in the December 6 week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.



- Applications to purchase a house rose, while applications to refinance declined.
- Slight increase in rates on 30-year fixed-rate loans.
- Average loan size rises modestly.


U.S. Mortgage Applications Eased in the December 13 Week

Robert Brusca

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**UK industry turns a corner for the worse…**
The report on the United Kingdom industrial sector survey in December from the CBI is a crushing blow to anyone looking for recovery to take hold in the United Kingdom led by the industrial sector. The report shows significant, substantial, and even enormous deterioration in December in metrics involving total orders export orders and expected volume over the next three months. There is no silver lining here and, in fact, to make matters worse in the face of all of this weakness and expected weakness… average prices expected over the next three months move up sharply in December compared to what had been expected in November.

**Total orders** declined to reach a reading of -40 in December from -19 in November. Export orders in December slipped to -37 after logging -27 in November. The only thing close to a silver lining here is that the stocks of finished goods have a reading of 20 slightly lower than 21 in November indicating that inventories are not piling up at the moment and adding to and more horrific inventory cycle. Nonetheless diffusion readings on stocks of ‘20’ and ‘21’ are quite high.

**Looking ahead**
In the looking ahead category, we have output volume for the next three-months fall to a reading of minus 31 from plus 9 in November. This is a really sharp slowdown that leaves the output volume series in the 2.3 percentile of its queue of data back to 1992, an extremely low reading. Average prices for the next three-months at the same time take on a diffusion value of 23, up from 11 in November after having got to zero in October.  The reading of plus 23 in December has an 87-percentile standing, an extremely high level indicating that not only is growth in trouble but that inflation, or at least expected inflation, is back. 

**A drop in expected output of historic proportions**
The drop in expected output three-months ahead is a 40-point shift month-to-month (to -31 from +9) on data back to 1990. This is the second worst shift in the monthly reading in this survey, surpassed only during Covid in April of 2020. That is especially shocking since, at that time, there was a specific event to account for the shock-shift in expectations, unlike now. Now, the UK faces a period of domestic political stability, a world with global political shifts in progress in other countries – a changing of the geopolitical guard - and economic struggling as well as ongoing war in Ukraine and a worsening of instability in the Middle East. But this CPI reading is a horrific decline to impact one month’s reading. Meanwhile, most of those background events are not new and have been in progress. It appears that some watershed has been passed that businesses can no longer ignore. 

**Dilemma at the BOE**
Of course, the Bank of England has flipped the switch and has been cutting interest rates. And at its last meeting while it cut rates there was an accompanying message that it might be a while before the bank cut rates again. And now the bank is being put in a real dilemma because the state of the economy seems to call for rate reductions while the inflation background seems to call for rate increases. Welcome to the wild whacky world of central banking!

**Weakness across the board**
The percentile standings of the various categories show total orders at a 6.5-percentile standing, extremely weak with export orders at a 14-percentile standing, stocks -while not changing much month-to-month - have an 89.6-percentile standing. As noted, the output volume for the next three-months has a 2.3-percentile standing with prices expected over the next three months at an 87-percentile standing. There's nothing here that's good news and nothing that is going to make policy making in the United Kingdom any easier. It's certainly going to make life for the new government much more difficult and policy at the Bank of England much more contentious. It's definitely not a good way to end the old year and to usher in a new one but reality is what it is and in the United Kingdom the reality has just turned quite sour.  


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United Kingdom

UK Industry Sees a Bleak Future 

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The Conference Board's Index of Consumer Confidence fell 7.2% (-3.1% y/y) to 104.7 during December following a 2.9% November rise, revised from 1.9%. The level of confidence remains up from a low of 97.5 in April. The Action Economics Forecast Survey expected a reading of 112.8 in December. Consumer confidence has been fluctuating between 97.5 and 114.0 over the past two years.

Both components of the index fell this month. The present situation index eased 0.8% (-4.8% y/y) to 140.2 after rising 3.9% in November to 141.4. The expectations index dropped 13.4% (-1.0% y/y) in December to 81, after rising 2.0% in November.

The percentage of respondents assessing business conditions as “good” fell to 19.1% this month after declining to 21.6% in November. It was the lowest percentage in three months. The percentage assessing conditions as “bad” rose to 16.7% from 15.3% in November. The appraisal of labor market conditions improved in December as 37.0% of respondents thought jobs were plentiful, up from 33.6% in November. Jobs were viewed as hard to get by 14.8% of respondents this month following 15.2% in November. This measure has risen steadily this year from 11.0% in January. The labor market differential calculated by Haver Analytics (the percentage of consumers who think jobs are plentiful minus the percentage who believe that jobs are currently hard to get) rose m/m to 22.2%, but remained below a high of 47.1% in March 2022. This series has a 60% correlation with the unemployment rate over the last ten years.

Expectations for business conditions worsened in December. A lessened 21.7% of respondents expect conditions to improve over the next six months, down from 24.7% in November, while a higher 18.3% expect them to deteriorate, up from 15.9% in November. On employment, 19.1% expect the number of jobs to increase over the next six months versus 22.8% in November. A higher 21.3% respondents expect the number of jobs to decline versus 17.9% in November. A lessened 17.2% expect income to increase in six months versus 20.7% in November. That remained increased from 16.3% in February and compares to 14.3% who expect income to decrease.

The expected rate of price inflation over the next twelve months held at 5.0% in December. It was the lowest since March 2020. Interest rates are expected to rise over the year by 48.5% of respondents, up from 45.5% in November. The percentage of respondents expecting equity prices to increase over the next twelve months fell to 52.9% from 57.2% in November, while the percentage expecting a decline increased to 25.0% from 21.7%.

The percentage of respondents planning to buy a home in December fell to 4.9%, its lowest in four months, from 6.2% in November. Plans to purchase an automobile edged down this month to 11.4% from 13.1% in November.

The Consumer Confidence data are available in Haver’s **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

**Trends in Work from Home in the U.S.: Insights from Six Datasets** from the Federal Reserve Bank of St. Louis is available [here](https://www.stlouisfed.org/on-the-economy/2024/dec/trends-work-from-home-us-insights-six-datasets).

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- Confidence weakens to lowest level in three months.
- Present situations measure dips, while expectations fall sharply.
- Inflation expectations are unchanged, but interest rate expectations rise.



Consumer Confidence Declines in December; Inflation Expectations Steady

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