Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/020211.jpg" width="353">
Prices for industrial commodities have risen nearly 5% since the lows last November according to the FIBER index of industrial materials price index (formerly the Journal of Commerce index). 
The FIBER index is heavily weighted (nearly 50%) toward crude oil and benzene prices which are up 6% during the period.
Prices in most other categories also have risen since the fall, including metals, textiles and miscellaneous commodities.
During the last twenty years there has been a 46% correlation between the three-month percent change in the FIBER index and the three-month change in factory sector industrial production.

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<th scope="col" class="firstcol">FIBER Industrial Materials Price Index (1990=100)</th>
<th scope="col">02/08/02</th>
<th scope="col">02/01/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
<th scope="col">1999</th>
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<td class="firstcol">All Items</td>
<td>80.90</td>
<td>80.18</td>
<td>-9.4%</td>
<td>85.28</td>
<td>94.18</td>
<td>92.50</td>
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Prices for industrial commodities have risen nearly 5% since the lows last November according to the FIBER index of industrial materials price index (formerly the Journal of Commerce index). The FIBER index is heavily weighted (nearly [...]

Higher Commodity Prices Signal Recovery in Manufacturing

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Kathleen Stephansen, CBE

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Mortgage applications dropped 2.0% (+8.6% y/y) in the week ending January 24 after edging up 0.1% w/w (2.9% y/y) in the week ending January 17, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The latest reading follows a six-week high in the index level. Applications for loans to purchase a house fell 0.4% (+5.1% y/y) in the January 24 week, after a rise of 0.6% (-6.5% y/y) in the January 17 week. Applications for loan refinancing fell 6.8% (+16.9% y/y) in the latest week, following a drop of 2.9% (+27.5% y/y) in the January 17 week.

The effective interest rate on a 30-year fixed-rate loan held steady at 7.20% in the week ending January 24 from the prior week when it posted the first w/w fall since the December 6 week. The rate on 15-year fixed-rate mortgages fell 5bps to 6.56% in the January 24 week, from 6.61% in the January 17 week. The rate on 30-year jumbo loans edged up 5bps to 7.18% in the latest week, from 7.13% in the January 17 week, while the rate on a 5-year ARM also rose 5bps to 6.67% in the week ended January 24 from 6.62% in the January 17 week.

The share of applications for refinancing an existing loan fell to 37.1% of total applications in the week ending January 24 from 40.4% in the week ending January 17, registering the lowest share since the July 5, 2024, week. Meanwhile, the adjustable-rate mortgage (ARM) share of activity rose to 5.8% in the latest week from 5.5% in the January 17 week, the highest since late November.

The average size of a mortgage loan increased 2.3% w/w (-0.6% y/y) to $382,300 in the week ended January 24 up from $373,800 in the January 17 week, reaching the highest level since the November 1 week. The average size of a purchase loan rose 1.1% (-1.7% y/y) to $436,500 in the January 24 week from $431,600 in the January 17 week, the highest since the November 22 week. The average size of a loan to refinance a mortgage rose 0.8% (7.3% y/y) to $290,500 in the latest week from $288,300 in the January 17 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.

- Both purchase and refinancing loan applications fell in the latest week.
- Effective interest rates on 30-year fixed-rate loans held steady at 7.20%.
- Average loan size rose to the highest since the November 1 week.


U.S. Mortgage Applications Retrenched in the January 24 Week

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The Conference Board's Index of Consumer Confidence fell 4.9% (-6.1% y/y) during January to 104.1 after declining 2.9%, revised from -7.2%, during December. The level of confidence remains up from a low of 97.5 in April. The Action Economics Forecast Survey expected a reading of 106.0 for January. 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 fell 6.7% in January (-13.3% y/y) to 134.3 after a 1.8% December rise, revised from a 0.8% fall. The Present Situation series improved 3.9% in November. The Expectations Index dropped 3.0% in January (+2.9% y/y) to 83.9 after falling 7.7% in December, revised from a 13.4% decline. The Expectations component rose 2.0% in November.

The percentage of respondents assessing business conditions as “good” fell to 18.4% this month after declining to 21.0% in December. It was the lowest percentage in four months. The percentage assessing conditions as “bad” held steady at 15.4%. The appraisal of labor market conditions deteriorated in January as 33.0% of respondents thought jobs were plentiful, down from 37.1% in December. Jobs were viewed as hard to get by 16.8% of respondents this month following 14.9% in December. This measure has risen steadily this year from 11.0% in January 2024. 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) fell m/m to 16.2% and 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 January. A lessened 20.9% of respondents expect conditions to improve over the next six months, down from 22.7% in December, while a higher 18.7% expect them to deteriorate, up from 17.3% in December. On employment, a lessened 19.4% expect the number of jobs to increase over the next six months. A steady 20.3% of respondents expect the number of jobs to decline. A lessened 18.3% expect income to increase in six months versus 19.0% in December. That remained down from 20.7% in November and compares to 11.9% who expect income to decrease.

The expected rate of price inflation over the next twelve months rose to 5.3% in January from 5.1% in December, still nearly the lowest since March 2020. Interest rates are expected to rise over the year by 51.4% of respondents, up from 49.1% in December. The percentage of respondents expecting equity prices to increase over the next twelve months fell to 52.9% from 54.8% in December, while the percentage expecting a decline in stock prices increased to 23.7% from 23.3%.

The percentage of respondents planning to buy a home in January fell to 52.2%, its lowest in five months. Plans to purchase an automobile dropped to 11.8% this month from 13.1% in December.

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**.

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- Confidence weakens to lowest level in four months.
- Present situations reading and expectations fall sharply.
- Inflation and interest rate expectations rise.

Consumer Confidence Declines Further in January; Inflation Expectations Edge Higher

Sandy Batten

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New orders for durable goods unexpectedly declined 2.2% m/m (-3.9% y/y) in December following a downwardly revised 2.0% m/m decline in November (previously -1.1% m/m) according to the U.S. Census Bureau. This was the fourth monthly decline in orders in the past five months. The Action Economics Forecast Survey had expected a 1.0% m/m increase. Orders for transportation equipment dropped 7.4% m/m, led by a 33.1% monthly plunge in aircraft orders. Excluding transportation orders, the remaining orders rose 0.3% m/m in December, more than offsetting a 0.2% monthly decline in November. For all of the fourth quarter, orders fell 1.8% q/q after having risen 4.0% q/q in the third quarter. Again, transportation orders played a big role. Excluding them, the remaining orders rose 0.7% q/q in Q4, up from 0.4% q/q in Q3. Orders for defense goods were essentially unchanged in December following a 10.9% monthly drop in November.

The decline in transportation orders reflected a 0.2% m/m decrease in motor vehicle orders and a 33.1% monthly plunge in aircraft orders with nondefense aircraft orders plummeting 45.7% m/m. Orders for primary metals fell 0.6% m/m but orders for all other major sectors increased, led by a 1.2% m/m rise in orders for fabricated metal products. Orders for electrical equipment increased 0.3% m/m in December while orders for “other” durable goods rose 0.4% m/m.

Core capital goods orders and shipments (that is, nondefense orders and shipments excluding aircraft) posted solid gains in December with upward revisions to November. Core capital orders were up 0.5% m/m following a 0.9% monthly gain in November. For all of Q4, they rose 0.9% q/q after having been unchanged in Q3. Core capital goods shipments, a reliable coincident indicator of business spending on equipment, increased 0.6% m/m in December, the third consecutive monthly gain. For all of Q4, care capital goods shipments were up 0.7% q/q, auguring a solid rise in business equipment spending in the Q4 GDP report to be released on Thursday, after having declined 0.6% q/q in Q3.

Shipments of all manufactured goods increased 0.7% m/m (+2.0% y/y) in December after a 0.1% monthly gain in December. Transportation shipments increased 2.8% m/m, their first monthly gain in five months. Excluding transportation shipments, the remaining shipments edged up 0.1% m/m, their fifth consecutive monthly increase. Shipments of durable goods increased 0.9% m/m (+2.3% y/y), their first monthly increase in five months. Shipments of nondurable goods rose 0.5% m/m (+1.6% y/y), their third consecutive monthly increase.

Unfilled orders fell 0.5% m/m, their first monthly decline in six months. This mostly reflected a 0.8% m/m fall in unfilled transportation orders. Unfilled orders excluding transportation edged up 0.1% m/m in December.

Inventories of all manufacturing industries rose 0.4% (0.9% y/y) in December, the same monthly gain as in November. Durable goods inventories increased 0.4% m/m while nondurable goods inventories rose 0.3% m/m.

Manufacturers’ orders and shipments of durable and nondurable goods, along with unfilled orders and inventories, are compiled by the U.S. Census Bureau. They are available in Haver’s **USECON** database. The Action Economics forecast data are in the **AS1REPNA** database.

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- New orders for durable goods unexpectedly fell 2.2% m/m in December.
- The total was dragged down by a 33.1% m/m drop in aircraft orders.
- Excluding aircraft, remaining orders edged up 0.1% m/m.
- Core capital goods orders and shipments posted solid increases in December with upward revisions to November.

Drop in Aircraft Orders Sink U.S. Durable Goods Orders in December

Winnie Tapasanun

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U.S. house prices rose 0.3% m/m in November after rises of 0.5% in October (+0.4% initially) and 0.7% in September (unrevised), according to the Federal Housing Finance Agency (FHFA) House Price Index. The November reading was the sixth consecutive m/m gain and the seventh in eight months. The November HPI at 433.42 was 12.0% above a low of 386.83 in August 2022 and 54.0% above a low of 281.37 in May 2020. The year-on-year rate of increase decelerated to 4.2% in November, the lowest since June 2023, after registering at 4.5% for three successive months; thus. having remained lower than 6.9% in November 2023 and well below a high of 18.7% in February 2022.

House prices rose m/m in November (vs. October) in six of the nine census divisions. These included New England (0.9% vs. 0.3%), West North Central (0.9% vs. -0.1%), Mountain (0.7% vs. -0.7%), South Atlantic (0.5% vs. 0.8%), Pacific (0.4% vs. -0.3%), and Middle Atlantic (0.2% vs. 0.6%). To the downside, house prices fell m/m in two census divisions in November (vs. October): East South Central (-0.6% vs. 0.2%) and West South Central (-0.4% vs. 1.2%). Meanwhile, house prices in the East North Central region were essentially unchanged (5.9% y/y) in November following nine straight m/m increases.

Year-on-year house prices continued to gain in November, with the pace of advance accelerating (vs. October) in three of the nine census divisions. These were New England (7.7% vs. 6.3%), West North Central (5.1% vs. 4.6%), and South Atlantic (4.2% vs. 4.0%). Meanwhile, house price growth decelerated y/y in November (vs. October) in the following six census divisions: West South Central (1.8% vs. 2.5%), Pacific (2.4% vs. 2.6%), Mountain (3.3% vs. 3.4%), East South Central (3.7% vs. 5.4%), East North Central (5.9% vs. 6.7%), and Middle Atlantic (6.4% vs. 6.9%).

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The FHFA data are available in Haver’s **USECON** database.

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- FHFA HPI +0.3% (+4.2% y/y, lowest since June ’23) in Nov., easing from +0.5% (+4.5% y/y) in Oct.
- House prices up m/m in six of nine census divisions but down for the first time since July in East South Central (-0.6%) and West South Central (-0.4%).
- House prices up y/y in all of the nine regions, w/ the highest rate in New England (7.7%).

U.S. FHFA House Prices Rise for the Sixth Straight Month in November