Louise Curley

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<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050215f.jpg" width="353"></p>
<p>Preliminary estimates of the growth of Gross Domestic Product in the Euro-Zone reveal a disappointing rise of 0.2% in the fourth quarter of 2004, about one-half of what the consensus was looking for. Not all of the twelve countries comprising the Euro Zone have reported. Among those that have, Germany, Italy and the Netherlands showed unexpected declines from the third to the fourth quarter of 0.23%, 0.31% and. 0.08%, respectively. Spain and France, on the contrary, reported increases of 0.8% and 0.7%, respectively.</p>
<p>For the year as a whole, growth in the Euro-Zone is estimated at about 1.6% compared with a growth of 4.4% for the U.S. Among the individual countries that have reported, Spain and France are estimated to have led the group with growth rates of 2.65% and 2.40%.The Netherlands, Italy and Germany are estimated to have risen 1.35%, 1.14% and 1.03%. The better performance of France over Germany over the past few years is shown in the first chart showing the quarterly changes in GDP in Germany and France.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050215e.jpg" width="353"></p>
<p>Part of the cause of the relatively slow growth of the Euro-Zone over the last few years can be attributed to the rise in the euro and the high price of oil.These trends are shown in the second chart.</p>
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<th scope="col" class="firstcol"><b>Gross Domestic Product % change&nbsp; Period to Period</b></th>
<th scope="col"><b>&nbsp;Q1 04&nbsp;</b></th>
<th scope="col"><b>&nbsp;Q2 04</b></th>
<th scope="col"><b>&nbsp; Q3 04&nbsp; &nbsp;</b></th>
<th scope="col"><b>&nbsp;Q4 04</b></th>
<th scope="col"><b>&nbsp; 2004&nbsp; &nbsp;</b></th>
<th scope="col"><b>&nbsp;2003 &nbsp;</b></th>
<th scope="col"><b>&nbsp;2002</b></th>
<th scope="col"><b>&nbsp; 2001&nbsp; &nbsp;</b></th>
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<td class="firstcol">Germany</td>
<td>0.49</td>
<td>0.35</td>
<td>0.02</td>
<td>-0.23</td>
<td>1.03</td>
<td>-0.14</td>
<td>0.12</td>
<td>0.99</td>
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<td class="firstcol">France</td>
<td>0.64</td>
<td>0.64</td>
<td>-0.02</td>
<td>0.70</td>
<td>2.40</td>
<td>0.56</td>
<td>1.10</td>
<td>2.10</td>
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<td class="firstcol">Italy</td>
<td>0.54</td>
<td>0.35</td>
<td>0.43</td>
<td>-0.31</td>
<td>1.14</td>
<td>0.36</td>
<td>0.37</td>
<td>1.67</td>
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<td class="firstcol">The Netherlands</td>
<td>0.88</td>
<td>-0.14</td>
<td>0.34</td>
<td>-0.08</td>
<td>1.35</td>
<td>-0.88</td>
<td>0.57</td>
<td>1.43</td>
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<td class="firstcol">Spain</td>
<td>0.73</td>
<td>0.47</td>
<td>0.54</td>
<td>0.80</td>
<td>2.65</td>
<td>2.50</td>
<td>2.23</td>
<td>2.80</td>
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<td class="firstcol">Euro-Zone</td>
<td>0.64</td>
<td>0.47</td>
<td>0.27</td>
<td>0.20</td>
<td>1.55</td>
<td>0.52</td>
<td>0.86</td>
<td>1.60</td>
</tr>
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<td class="firstcol">United States</td>
<td>1.10</td>
<td>0.88</td>
<td>0.94</td>
<td>0.78</td>
<td>4.39</td>
<td>3.04</td>
<td>1.86</td>
<td>0.75</td>
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Preliminary estimates of the growth of Gross Domestic Product in the Euro-Zone reveal a disappointing rise of 0.2% in the fourth quarter of 2004, about one-half of what the consensus was looking for. Not all of the twelve countries [...]

Preliminary Estimates of Euro-Zone's 2004 GDP Growth are below Consensus Estimates

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Tom Moeller

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Sales of existing homes increased 2.2% (9.3% y/y) to 4.24 million (SAAR) during December after rising an unrevised 4.8% to 4.15 million in November. Sales increased 3.4% during October but fell 1.3% in September. The December sales increase accompanied an easing last month in the effective 30-year mortgage interest rate to an average 6.72% from 6.81% in November. The Action Economics Forecast Survey expected December sales of 4.17 million units. The sales figures are based on closings of sales signed over the past couple of months.

The median price of all existing homes (NSA) held steady (+6.1% y/y) in December at $404,400, with November, revised from $406,100. Prices remained below the $426,900 high this past June. The median price of an existing single-family home also was unchanged (+6.1% y/y) at $409,300 in December. The median price of condos and co-ops edged 0.2% higher (4.5% y/y) to $359,000 in December from $358,200 in November.

By region, sales of existing homes in the Northeast rose 3.9% (10.4% y/y) to 530,000 after an 8.5% November gain. Sales in the South increased 3.2% (9.0% y/y) to 1.93 million after a 5.6% November rise. Sales in the West improved 2.6% (12.9% y/y) to 790,000 after holding steady in November. To the downside, sales in the Midwest eased 1.0% (+6.5% y/y) to 990,000 after a 5.3% November increase.

The number of existing homes for sale (NSA) fell 13.5% (+16.2% y/y) to 1.15 million after falling 2.9% in November. The supply of homes on the market at the current selling rate (NSA) fell to 3.3 months from 3.8 months in November. This figure rose to a high of 4.3 months in September. The record low in supply of 1.6 months was reached in January 2022. These figures date back to January 1999.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. Mortgage interest rates can be found in the **WEEKLY** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.

**How Did U.S. Teenagers Benefit from Holiday Employment?** from the Federal Reserve Bank of St. Louis is available [here](https://www.stlouisfed.org/on-the-economy/2025/jan/how-us-teenagers-benefit-holiday-employment).

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- Sales increase to highest level since February.
- Existing home sales rise in three of four regions of the country.
- Median price holds steady.

U.S. Existing Homes Sales Continue to Rise in December

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Initial claims for unemployment insurance rose to 223,000 in the third week of January from an unrevised 217,000 during the prior week. A 215,000 increase in initial claims had been expected in the Action Economics Forecast Survey. Initial claims have risen from a 203,000 low in the first week of January. During the last four weeks, initial claims averaged 213,500, down from 226,750 four weeks earlier.

Continuing claims for jobless insurance increased 46,000 (7.8% y/y) to 1.899 million in the week ended January 11 from 1.853 million in the prior week. Ongoing claims have risen from a low of 1.834 million in the third week of December. The four week moving average of continuing jobless insurance claims eased to 1.866 million, down from a 1.888 million high in the third week of November.

The insured rate of unemployment was 1.2% for the fourth straight week. This level was increased from a 2022 low of 0.9% and compares to the rise in the overall unemployment rate to 4.1% from 3.4% over the same period.

Unemployment rates vary widely across states. The Labor Department reports that for the week ended January 4, the insured unemployment rate was highest in Rhode Island (3.22%), New Jersey (3.07%), Minnesota (2.73%), Washington (2.52%) and Massachusetts (2.41%). The insured unemployment rates were lowest in Florida (0.33%), Virginia (0.43%), Tennessee (0.58%) and Alabama (0.52%) and the Virgin Islands (0.67%). Rates in other notable states include California (2.32%), Pennsylvania (2.24%), New York (2.08%) and Texas (1.13%). These state rates 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 jobless claims increase to highest level in six weeks. 
- Continuing claims approach four-week high.
- The insured unemployment rate remains low.

U.S. Unemployment Insurance Claims Rise in Latest Week

Robert Brusca

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EU order trends ‘improved’ slightly in January as the net diffusion reading rose from -40 to -34. Still, that improvement leaves orders below their 3-month, 6-month, or 12-month averages. The queue standard of January orders is in the lower 14th percentile of its historic queue of data. Obviously, it remains a historically weak reading. The order series is volatile as the chart shows. But it is still in a clear downtrend even with the uptick this month.

Export orders have approximately the same profile as for orders overall. But export orders weaken slightly in January compared to December. Export orders overall have a slightly weaker queue standing than total orders at a 13.4 percentile level.

The diffusion readings for stocks of finished goods weakened in January but even with its weaker January assessment, stocks have a firm-to-strong 72.5 percentile standing.

Looking ahead, the outlook for output volume over the next three months improved sharply from its stunning weak reading of -31 in December. However, the rise to -19 in January represents only a 4.8 percentile standing.

Unfortunately, average output prices for three months ahead has reading of +27 in January, up from +23 in December and +11 in November; the backtracking in prices expected, has brought the expectation level for the current reading to a high, 90-percentile standing. These rising inflation expectations are going to be a real problem for the Bank of England.

IP data lag the CBI survey responses. The manufacturing IP growth rate, year-on-year, has a 17.4 percentile standing as of its most recent observation in November 2024. That is also very weak. The CBI results are not giving a different message from the industrial production data, but they are timelier.

The ramp up in inflation expectation is not good new with CPI-H inflation at 3.5% year-over-year and with the core pace at 4.2%. Core inflation, sequentially, is looking stable around the 4.2% pace; for the headline, the pace has accelerated from 3.5% over 12 months to a pace of 5.4% over three months. These results, coupled with the rise in CBI expectations, are not good news for the U.K. or for the BOE.

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United Kingdom

U.K. Order Trends Are Still Eroding

Andrew Cates

**Energy and labour markets**
Chart 1 below highlights two key trends: the real consumer price of energy in the OECD economies (indexed to 1970) has shown significant volatility, with sharp spikes during periods of energy crises (e.g., 1970s oil shocks, 2008, and post-pandemic supply constraints) and declines following market adjustments or advances in energy production. Meanwhile, the US labour share of business output has experienced a steady decline since the 1980s, reflecting structural changes in the economy such as globalization, technological advances, a shift in bargaining power away from labour toward capital as well as higher real energy prices. These trends and the interplay between them will arguably form the basis of several policy choices that will be made (or already are being made) by a new US administration.

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**Electricity prices**
Energy prices, their level and their volatility, arguably play a much bigger role in broader macroeconomic fluctuations than they are given credit for. Chart 2 below shows electricity prices (a 2-year average) across six major developed economies. It shows that the US has faced the cheapest electricity at around $44/MWh. The UK and Germany, in contrast, have faced the most expensive electricity at respectively $106/MWh and $94/MWh. This disparity reflects a mix of factors: European countries, particularly the UK and Germany, face elevated prices due to heavy reliance on natural gas imports, exacerbated by geopolitical tensions (e.g., reduced Russian supply), higher renewable energy integration costs, and carbon pricing mechanisms. The US, in contrast, enjoys lower electricity costs due to more abundant domestic energy resources, particularly natural gas, and less exposure to international energy markets. Against this backdrop it is hardly a surprise that the US economy has flourished (relative to other advanced economies) while the UK and Germany have floundered.

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**The UK labour market**
This week’s labour market data additionally suggest that the UK will probably struggle to keep pace with the US economy in the period immediately ahead. The data specifically revealed that employment growth is slowing on all measures, and the PAYE measure of payrolls in particular (see chart 3 below). And while private sector pay growth has also slowed, the 6-month annualised rates of growth still stood at a relatively lofty 5.8% in December. Weaker employment growth will encourage the BoE to cut rates again before too long (probably in February) but weaker wage growth could also be necessary for a much looser policy stance to be enacted over the next few months.

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**Household savings and labour market activity**
At a broader global level, a key risk to the economic outlook at present concerns restrictive monetary policy and its impact on labour market activity and household spending. Chart 4 below shows that household saving rates in the world’s major economies have – on the whole – been rebounding over the past two years. Simultaneously, the unemployment rate in advanced economies has begun to climb. These trends align with the tightening of monetary policy that’s been enacted in recent years and economic uncertainty. But if that combination persists, it could place a bigger brake on the world economy this year than many analysts are anticipating.

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**China’s credit impulse**
Another big source of uncertainty, at present, concerns China. Chart 5 below compares the Citigroup Economic Surprise Index for emerging markets (EM) and Haver’s calculations for China’s credit impulse (the change in new credit as a percentage of GDP). The chart suggests that China's credit growth influences broader EM economic fluctuations. During periods of robust credit growth (e.g., 2020-2021), driven by stimulus measures, EM economies benefited from improved liquidity and demand from China. Conversely, periods of credit tightening (e.g., 2017 and 2023-2024) weighed on economic surprises, reflecting weaker support for growth. These dynamics underline China’s outsized role in shaping sentiment and economic conditions in emerging markets. That its credit impulse, moreover, remained negative in Q4 (of 2024) underscores how China might continue to exert downward pressure on the world economy in the period immediately ahead.

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**South Korean trade**
Another source of uncertainty for the world economy, at present, is the optimism surrounding AI. While proponents highlight its transformative potential to boost productivity, efficiency, and innovation across industries, sceptics question the timeline for a meaningful economic impact. With that in mind it would be inappropriate to draw strong conclusions from chart 6 below but it is certainly of note that South Korea – which has been heavily reliant on AI-fuelled trade – saw a big slowdown in export growth in the first 20 days of January. Much of that slowdown, moreover, could be traced to a big drop in semiconductor trade.

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Financial markets have enjoyed a notable lift in sentiment over recent days, driven by renewed optimism about the domestic economic policies of a new US administration. Investors have certainly been cheered by early signals of a pro-growth strategy, with the energy sector taking centre stage following a ceasefire between Israel and Gaza and the announcement of measures aimed at reducing US energy costs (see charts 1 and 2). Meanwhile, China’s stronger-than-expected growth figures last week and softer-than-expected inflation readings from both the US and the UK have fuelled gains across equity and bond markets, bolstering risk appetite in other markets. However, despite the prevailing optimism, several factors warrant caution. Chief among them is the global uncertainty that surrounds the policy choices of a new US administration. The policy choices of central banks will also be critical, particularly as labour market strength could keep inflation risks alive (charts 3 and 4). Questions also linger about China’s ability to sustain its growth momentum, especially as its property sector and consumer demand face ongoing challenges (chart 5). Finally, while artificial intelligence is increasingly seen as a driver of future growth and productivity, doubts persist over its near-term potential to meaningfully transform the world economy (chart 6). For now, investors appear content to ride the wave of positive sentiment, but vigilance over these risks will be critical as the economic landscape continues to evolve.

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Preliminary Estimates of Euro-Zone's 2004 GDP Growth are below Consensus Estimates

Summary

Louise Curley

More Economy in Brief

U.S. Existing Homes Sales Continue to Rise in December

U.S. Unemployment Insurance Claims Rise in Latest Week

U.K. Order Trends Are Still Eroding

Charts of the Week: Trump Cards

Gross Domestic Product % change Period to Period	Q1 04	Q2 04	Q3 04	Q4 04	2004	2003	2002	2001
Germany	0.49	0.35	0.02	-0.23	1.03	-0.14	0.12	0.99
France	0.64	0.64	-0.02	0.70	2.40	0.56	1.10	2.10
Italy	0.54	0.35	0.43	-0.31	1.14	0.36	0.37	1.67
The Netherlands	0.88	-0.14	0.34	-0.08	1.35	-0.88	0.57	1.43
Spain	0.73	0.47	0.54	0.80	2.65	2.50	2.23	2.80
Euro-Zone	0.64	0.47	0.27	0.20	1.55	0.52	0.86	1.60
United States	1.10	0.88	0.94	0.78	4.39	3.04	1.86	0.75