Author Archives: WARREN MOSLER

payrolls, rail traffic

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Most notable is the market reaction- rates up, stocks down, as markets discount higher odds of a Fed rate hike into what markets think is a relatively weak economy, and I tend to agree.

Employment Situation
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Highlights
The hawks definitely have some ammunition for the June 16-17 FOMC meeting as the May employment report proved very strong led by payroll growth and, very importantly, an uptick in wage pressures. Non-farm payrolls rose 280,000, well above the Econoday consensus for 220,000 and near the top-end forecast of 289,000. Revisions added a net 32,000 to the two prior months.

Average hourly earnings came in at the high end of expectations, up 1 tenth to plus 0.3 percent. Year-on-year earnings are up 2.3 percent, a rate only matched twice during the recovery, the last time back in August 2013. Pressure here will be the focus of the hawks’ arguments.

Another sign of strength includes the labor participation rate, up 1 tenth to 62.9 percent. The unemployment rate did tick 1 tenth higher to 5.5 percent which is unexpected but the gain reflects a solid gain in the labor force for both those who found a job and especially those who are now looking for a job.

Private payrolls are up 262,000 vs expectations for 215,000 and also near the high-end forecast. By industry, professional business services once again leads the list, up 63,000 following a 66,000 gain in April. Within this industry, the closely watched temporary help services sub-component is up 20,000 after two prior gains of 16,000. The rise in temporary hiring points to permanent hiring in the months ahead. Trade & transportation is up 50,000 followed by retail trade at a solid 31,000. Construction is up 17,000 but follows a 35,000 surge in April. Manufacturing, where exports are hurting, continues to lag, up only 7,000. And mining, which is being clobbered by contraction in the energy sector, is down 17,000 to extend a long run of declines.

Today’s results probably aren’t enough to raise expectations for a rate hike at this month’s FOMC but will be enough to raise talk for a hike at the September meeting. The approach of a rate hike is a wildcard for the financial markets, likely raising volatility including for the Treasury market where turbulence has been very heavy the last month.

Can be said to be a minor rebound from the March dip when you average the last three months, and certainly not a sign of ‘acceleration’:
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Not a lot of change, but the 6 month average is still bending down some:
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These are still telling me there is still a very large amount of slack in the ‘labor market’ and the gains all along have been relatively small:
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If you think of the recessions of ‘digging a hole’ that was subsequently ‘filled in’ you can see the magnitude of the hole dug in the last recession and how it remains ‘unfilled in’, as per the participation rates:
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When you look at this age group in isolation, the decline is all about aggregate demand, and not about aging:
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This doesn’t look so good when you take it back a few years, and considering this is not adjusted for inflation and there’s been a 0 rate policy for 7 years and $3.5 trillion of QE ;)
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Rail Week Ending 30 May 2015: Contraction Further Worsens On Rolling Averages. May 2015 Month Totals Show Contraction Year-over-Year.

(Econintersect) — Week 21 of 2015 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic improved year-over-year, which accounts for half of movements – but weekly railcar counts continues deep into contraction. A quote from the AAR data release:

The degree to which coal carloads have fallen has been a surprise, and the relative weakness in other carload categories is a sign that the economy is probably not yet in bounce-back mode after a dismal first quarter.

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productivity, job cuts, claims

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Seems this has to come from ‘overhiring’ or very odd seasonal adjustments?

And many of the 1.2 million people who lost benefits Jan 14 and took menial jobs that didn’t add to output? Same happening as benefits expire? Should normalize through either more output or fewer jobs?

Productivity and Costs
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Highlights
The grinding halt that the economy came to the first quarter pulled nonfarm productivity down by 3.1 percent and inflated unit labor costs by 6.7 percent. These are more severe than the initial data released a month ago where productivity was pegged at minus 1.9 percent and unit labor costs at plus 5.0 percent. Output as measured in this report fell 1.6 percent in the quarter at the same time that hours worked rose 1.6 percent. Adding to labor costs was a sharp 3.3 percent rise in compensation.

Looking year-on-year, productivity is on the plus side, though just barely, at 0.3 percent with labor costs more tame, at plus 1.8 percent. Should the second-quarter see the bounce as many suspect, productivity, compared to the first quarter, should improve and labor costs cool.

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Job cuts down but trending higher:
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Hard to say how much expiring benefits keeps down the number of people collecting:

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Fed’s Beige Book

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The sharp reduction in oil capex that was driving the economy has predictably shown up first in the oil states like Texas, Oklahoma, North Dakota, etc. Just as these states led on the way up, they are leading on the way down as well, with that weakness working its way to the other regions as the US continues to suffer from a general lack of aggregate demand. Though to a lesser degree, this is similar to the sub prime episode, where that housing expansion led the recovery, driving down the Federal deficit via the automatic fiscal stabilizers (tax revenues and transfer payments) as private sector deficit spending increased and did the heaving lifting. Then when that private sector deficit spending came to an end, sales and jobs collapsed, as the recession unfolded. Same for the .com era expansion and the S and L driven expansion prior to that, etc. Once the deficit spending falls short of the demand leakages the cycle ends.

Yes, debt levels are low enough for a consumer debt led rebound, but the private sector tends to be pro cyclical, and we see this happen only on the way up, pro cyclically, and not counter cyclically to rescue a slowdown already in progress.

Also, seems much like they did a few years ago, the Fed has engineered a spike in mortgage rates just as housing was beginning to show some signs of life, though admittedly not much. Traditionally housing has been the source of private sector deficit spending- borrowing to buy houses- but seems this time it isn’t going to happen. Nor are a few car loans going to move the needle, and in any case overall consumer spending growth seems to be fading.

Beige Book

Highlights
The second to last risk for a June rate hike has passed as the Beige Book, prepared by the Fed for its June 16-17 policy meeting, downgrades the strength of the economy slightly. Four of the Fed’s 12 districts are reporting slowing growth from the prior Beige Book, especially Dallas which is being hit hard by the energy sector.

Nevertheless, total employment is up slightly as are wages, but only slightly. Retail sales are also up as are residential and commercial construction. Manufacturing is described as steady with the exception, again, of Dallas and also Kansas City. The service sector is described as growing.

The pace of the nation’s economy is somewhere between moderate and modest with no signs of over heating. The only chance left now for a rate hike at the June meeting is Friday’s employment report which would not only have to show huge gains for May but also major upward revisions for April. The economy is not getting the big second-quarter boost that the hawks expected.

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mtg purch apps, ADP, Trade, ISM, Atlanta Fed

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Another setback, still up some year over year but all cash purchases are down quite a bit as well:

MBA Mortgage Applications
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Highlights
Application activity is sputtering with MBA’s composite index down a very steep 7.6 percent in the May 29 week for a 6th straight decline and the steepest decline since February. Purchase applications fell 3 percent in the week but are still up a respectable 14 percent year-on-year. Refinancing applications fell 12.0 percent in the week to their lowest level since May last year. Refinancing demand has been especially hurt by this year’s rise in interest rates though rates were down in the latest week, with the average 30-year mortgage for conforming loans ($417,000 or less) down 5 basis points to 4.02 percent.

Note the chart below, which doesn’t show much of a recovery from Q1:

ADP Employment Report
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Highlights
ADP estimates that private payrolls rose a moderate 201,000 in May which is right at the Econoday consensus for 200,000. For comparison, the consensus for private payroll growth in Friday’s employment report is a bit higher, at 215,000 with the low estimate at 185,000. ADP sometimes does and sometimes does not correctly anticipate the employment report having last month signaled weakness in what turned out to be a respectable report for April.
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The chart shows how non petroleum imports continued to rise sharply, and the May auto sales report which includes imports looks to continue to support that up trend. Petroleum imports show a lot of month to month volatility so they could very well be up substantially for the rest of the quarter, as prices were higher and US production is being forecast to decline due to the sharp drop off in drilling. So look for the US trade gap to widen, partly because of the dollar strength and partly because of fading exports and rising oil imports due to domestic production declines. The trade flows are now working against the dollar and in favor of the euro, which is being supported by a large and growing trade surplus.

International Trade
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Highlights
Second-quarter GDP looks to be getting a lift by a decline in imports, at least it will in April when the trade gap eased to $40.9 billion. The gap is on the low side of Econoday expectations and compares with March’s outsized revised gap of $50.6 billion which was distorted by a spike in imports tied to the resolution of the first-quarter port strike. Imports fell 3.3 percent in April to $230.8 billion at the same time that exports, in another positive for GDP, showed some life, up 1.0 percent to $189.9 billion.

Consumer goods show the strongest improvement on the import side, down $4.9 billion in the month and reflecting a $1.3 billion decline in cell phones as well as declines for apparel and furniture. Imports of capital goods, industrial supplies, and autos also fell. Imports of petroleum products rose $0.2 million to $15.4 billion, more than offset by a $0.9 billion rise in petroleum exports to $8.6 billion.

Strength in exports also includes capital goods, up $2.1 billion with civilian aircraft representing nearly half the total. Exports of industrial supplies and autos were also higher.

Another plus in the report is another gain for the nation’s services where the trade surplus rose to $19.8 billion from $19.4 billion in March.

Country data show a sharp easing in the gap with China, to $26.5 billion vs March’s $31.2 billion, and improvement with Mexico, to a gap of $4.4 billion vs $5.5 billion in March. The gap with Europe widened slightly to $13.3 from $12.7 billion while the gap with Japan was unchanged at $7.1 billion.

The decline in imports was of course expected given the special circumstances in March, but the gain for exports is very positive suggesting an easing in dollar-related troubles and perhaps pointing to some life in foreign demand. Today’s report includes annual revisions which increased deficits for 2013 and 2014.
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Again, the chart shows it’s not as strong as it was in q1, which means it’s contributing less growth in q2 than it did in q1, and it’s also no where near the strength of q2 2014:

ISM Non-Mfg Index
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Highlights
The ISM non-manufacturing index for May, at 55.7, came in solid but at the low end of Econoday expectations to indicate the slowest rate of monthly growth since April last year. Key readings all slowed slightly but are still very constructive with new orders at 57.9 and business activity at 59.5. Employment also slowed, down 1.4 points to 55.3 which is still a respectable rate.

Other details include a jump in exports, up 6.5 points to 55.0 in a reading that underscores this morning’s big service-sector surplus in the April trade report. Supplier delivery times, which had been slowing all year, were unchanged in May suggesting, also like this morning’s trade report, that supply-chain distortions tied to the first-quarter port strike have unwound. Input prices, likely tied to higher fuel costs, show some pressure, up 5.8 points to a 55.9 reading that’s the highest since August last year.

A look at individual industries shows special strength for arts/entertainment/recreation and management & support services, the latter one of the strongest export industries for the nation. And in the latest hint of strength in the housing sector, both real estate and construction show strength. The only one of 18 industries to contract in the month was, once again, mining which is being hurt by low commodity prices.

The dip in employment won’t be boosting expectations for Friday’s employment report and the hawks at the Fed are certain to take note of the rise in prices. But in sum, this report is mostly positive and in line with the PMI services index released earlier this morning, both pointing to modest deceleration in what is otherwise the economy’s central strength – the service sector.
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The Atlanta Fed GDP forecast for Q2 is up to 1.1% annualized, which would be a shockingly low follow up to Q1’s -.7. And, as above, there’s a good chance May’s trade number goes the other way, sending the GDP forecast back down:
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Car sales, Redbook retail sales, Factory orders

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Strong number, bouncing from winter slowdown. Looking at the chart seems spikes are followed by dips, and imports are a large factor as well. Hopefully it continues:

United States : Motor Vehicle Sales
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Highlights
Consumers weren’t holding back in May when it came to buying cars and trucks which sold at a 17.8 million annual rate for a whopping 7.9 percent gain from April. The rate is above the top-end of the Econoday forecast and the strongest since July 2005. The monthly percentage change is the strongest since March 2010. Incentives and low rates no doubt boosted sales but May’s surge hints at pent-up demand, demand that has built up over the last six months when sales declined four times.

Among details, sales of North American-made vehicles rose 7.6 percent to a 14.2 million rate in a jump that points to a rise in future auto production and a rising auto contribution in the factory sector. Foreign-made vehicles sold at a 3.6 million rate for 9.1 percent gain which is among the largest monthly gains on record for this reading.

The April retail sales report proved to be a flop, but May’s vehicle sales data point to a big surge for the motor vehicle component which makes up nearly 1/4 of total retail sales.
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This retail sales measure should have picked up by now:
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Nor is this any good:

Factory Orders
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Highlights
Factory orders fell 0.4 percent in April for the 8th decline in 9 months, a depressing streak interrupted only by March’s revised gain of 2.2 percent, a gain inflated by a monthly swing higher for civilian aircraft. There are significant downward revisions to the durable goods side of the report that was first published last week, with durables orders now down 1.0 percent vs an initial decline of 0.5 percent. Capital goods in that report looked strong, but not with today’s revision with orders for non-defense capital goods excluding aircraft sinking 0.3 percent vs an initial and very strong gain of 1.0 percent.

Ex-transportation, orders are unchanged, well down from the 0.5 percent gain in the durable goods report. Nondurable goods are a positive offset in today’s report, up 0.2 percent and reflecting strength for chemical products.

Outside of new orders, data show no change for shipments and a 0.1 percent dip for unfilled orders, both very weak. The lack of punch is putting pressure on inventory levels where the inventory-to-shipments ratio rose to 1.35 from 1.34 in March.

The downward revision to core capital goods orders is a setback, pointing to much less business optimism than first reported. The factory sector did not get any lift at all coming out of the first quarter, reflecting weak exports and trouble in the energy sector. Manufacturing employment has understandably been very soft with the next update part of Friday’s employment report.
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Saudi output, Greek statement, EU pmi

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Saudi output up a bit. As they post prices and let their refiners buy all they want at those prices, this shows demand is up a bit, likely because of a supply disruption elsewhere, like Libya, for example:
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As suggested all along:

In an interview with Realnews newspaper published on Saturday, Economy Minister George Stathakis said Athens had no alternative plan.

“The idea of a Plan B doesn’t exist. Our country needs to stay in the eurozone but on a better organized aid program,” he said.

Stathakis was confident a deal will be reached. “Otherwise, mainly Greece but the European Union as well will step into unchartered waters and no-one wants that.

Note the improvement in exports, with the current account surplus already strong. This is the opposite of the US, and caused by the liquidation of euro reserves by foreign central banks, whose selling drove the euro down to the point the current account surplus expanded to absorb it. As the selling subsides the CA surplus will continue until the euro goes high enough to eliminate it:

European Union : PMI Manufacturing Index
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Highlights
The final manufacturing PMI for May showed a minimal 0.1 point downward revision to its flash estimate to 52.2. This matched the 10-month high registered in March and was 0.2 points firmer than the final April print.

Manufacturing production expanded again, albeit at a slightly slower rate than last time, and both overall new orders and new export business improved suggesting that growth should be sustained over coming months. Increased demand was reflected in a rise in backlogs and also contributed to a ninth consecutive gain in the sector’s headcount.

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Personal Income and outlays, ISM manufacturing, Construction spending, Atlanta Fed

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Personal Income and Outlays
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Highlights
The consumer started off the second quarter slowly, putting income into savings and not spending. Consumer spending was unchanged in April with deep declines in spending on both durable and nondurable goods, down 0.7 percent and down 0.5 percent respectively, offset by another incremental increase in spending on services of plus 0.2 percent. Personal income, boosted by rents and dividends, rose a solid 0.4 percent though the gain for wages & salaries was less strong at 0.2 percent. The savings rate rose 4 tenths in the month to 5.6 percent.

Inflation readings are very tame with the price index unchanged in the month and the core up only 0.1 percent. The core rate, unlike April’s 1.8 percent core reading for the CPI where weightings on housing and medical costs are greater, is showing less pressure, down slightly to 1.2 percent. Overall prices are barely up at all year-on-year, at plus 0.1 percent.

The April retail sales report first signaled trouble for second-quarter spending that today’s report confirms. The consumer, the economy’s bread-and-butter right now given weakness in manufacturing, is sitting on their hands. This report pushes back the outlook for the Fed’s first rate hike.
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Construction Spending +2.2% in April

Seasonally adjusted annual rate of $1,006.1 billion, 2.2% above the revised March estimate of $984.0 billion. The April figure is 4.8% above the April 2014 estimate of $960.3 billion. During the first 4 months of this year, construction spending amounted to $288.7 billion, 4.1% above the $277.3 billion for the same period in 2014.

These surveys are ‘one company one vote’ and the drop in oil capex hurts a small number of the total initially even as GDP growth fades before it spreads to the rest, which could take a while as slowing employment gains reduce demand in general, etc. And note the continued reference to export softness, which is partly dollar related, but also a function of the drop in gobal oil capex.

ISM Mfg Index
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Highlights
May was a modestly positive month for ISM’s manufacturing sample with the headline index rising 1.0 point to a better-than-expected 52.8 which is near Econoday’s high-end forecast. New orders are the highlight of the report, up 2.3 points to 55.8 which is the best reading of the year. Contraction in export orders has been pulling down total orders in many reports but exports were unchanged at 50.0 in this report.

Employment moved back over 50 to 51.7 for a 3.4 point gain while production looks solid at 54.5. Backlog orders, at 53.5, are back over 50 for the first time since February. Supplier deliveries show very little change, at 50.7 vs 50.1 in the prior report to suggest that snags tied to the first-quarter port slowdown have unwound. Price data show slightly lower costs for raw materials.

The 52.8 headline for this report may be better-than-expected but it’s still very soft. The manufacturing sector appears to be stumbling through the second quarter.
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Up nicely, though mainly due to state and local govt increases. And more importantly, year over year growth a bit better but still very low.

Construction Spending
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Highlights
Construction spending is showing life, up 2.2 percent in April which is well above Econoday’s consensus for plus 0.7 percent and Econoday’s high-end forecast of 1.6 percent. Spending on residential construction rose 0.6 percent with strong gains posted for both single-family and multi-family homes. The gain here is no surprise and follows April’s big surge in housing starts & permits.

Private non-residential spending looks very strong in this report, up 3.1 percent and led by gains out of the power and office sectors. Pubic spending is also strong led by an outsized gain for highways & streets and including a large gain for educational building. The gain in public spending came entirely from the state and local governments as federal construction spending declined for a second straight month.

Adding to the positive news are big upward revisions, to plus 0.5 percent from an initial reading of minus 0.6 percent for March and no change from minus 0.6 percent in February. This will help boost the next revision to first-quarter GDP. And construction should give a badly needed lift to second-quarter growth which isn’t getting much help from the consumer, evidenced by this morning’s personal income & outlays report, nor from manufacturing, underscored by mostly soft readings in both this morning’s PMI index and ISM index.
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After factoring in today’s numbers the Atlanta Fed GDP forecast remains at .8% annualized for Q2:
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macro update

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At the beginning of 2013 the US let the FICA tax reduction and some of the Bush tax cuts expire and then in April the sequesters kicked totally some $250 billion of proactive deficit reduction. This cut 2013 growth from what might have been 4% to just over half that, peaking in Q3 and then declining to negative growth in Q1, due to the extremely cold winter. Forecasts were for higher growth in 2014 as the ‘fiscal headwinds’ subsided. GDP did resume after the weather improved, though not enough for 2014 to look much different from 2013. And with the fall in the price of oil in Q4 2014, forecasts for Q1 2015 were raised to about 4% based on the ‘boost to consumers’ from the lower oil prices. Instead, Q1 GDP was -.7%. The winter was on the cold side and the consumer had been saving instead of spending the savings from lower gas prices. And the forecasts for Q2 were for about 4% growth based on a bounce back and consumers now spending their gas savings. Most recently Q2 forecasts have been reduced with the release of Q2 data.

My narrative is that we learned the extent of capex chasing $90 in Q4 after the price fell in half. It seemed to me then that it had been that capex that kept 2013 growth as high as it was and was responsible for the bounce from Q1 2014 as well as the continued positive growth during 2014 up to the time the price of oil dropped and the high priced oil related capex came to a sudden end.

By identity if any agent spend less than his income another must have spent more than his income or the output would not have been sold. So for 2012 the output was sold with govt deficit spending where it had been, and when it was cut by some $250 billion in 2013 some other agent had to increase it’s ‘deficit spending’ (which can be via new debt or via depleting savings) or the output would have been reduced by that amount. Turns out the increase in oil capex was maybe $150 billion for 2013 and again in 2014, best I can tell, and this was sufficient to keep the modest growth going while it lasted. And when it ended in Q4 that spending (plus multipliers) ended as well, as evidenced by the sudden decline in GDP growth. And so far the Q2 numbers don’t look like they’ve increased much, if any, since Q1. And to do so will take an increase in ‘borrowing to spend’ that I can’t detect. Of course, I missed the surge in oil capex last year, so there could be something this year I’m missing as well.

When oil prices dropped I pointed out three things-

1. Income saved by buyers of oil equaled income lost by sellers, so the benefit to total spending was likely to be small and could be negative, depending on propensities to save and to spend on imports. And yes, some of the sellers of oil were ‘non residents’, but that was likely to reduce US exports, and cuts in global capex could reduce US exports as well.

2. Lost capex was a direct loss of GDP, plus multipliers, both domestically and globally.

3. Deflation in general is highly problematic for lenders, and tends to reduce private sector credit expansion in general.

To me this meant the drop in oil prices was an unambiguous negative. And in the face of universal expectations (including the Fed) that it was a positive, which can be further problematic.

Euro Zone

Forecasts are for modestly improving growth largely due to the weak euro driving exports. However, the euro is down from massive foreign CB selling, probably due to fears of ECB policy and the Greek saga. This technical selling drove the euro down and the euro area 19 member current account surplus up, absorbing the euro the portfolios were selling. Once the portfolio selling subsides- which it will as euro reserves are depleted and short positions reach maximums- the trade flows continue, which then drives the euro up until those trade flows reverse. In other words, the euro appreciates until net exports decline and the anticipated GDP growth fades. And there is nothing the ECB can do to stop it, as rate cuts and QE works only to the extent it frightens portfolio managers into selling, etc.

Also, ironically, a Greek default would fundamentally strengthen the euro as Greek bonds are nothing more than euro balances in the ECB system, and a default is a de facto ‘tax’ that reduces the holdings of euro net financial assets in the economy, making euro that much ‘harder to get’ etc.

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Stephanie Kelton, Rail cars, Econintersect forecast, Italy comment, corp profits

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Professor Kelton hit the ground running in January and has been making serious inroads!

This article has the usual misrepresentations, of course, but now Stephanie’s position gives her the opportunity to respond publicly and decisively.

U.S. Senate economist explains why deficits aren’t always evil: Walkom

By Thomas Walkom

Stephanie Kelton is part of a new generation of economists trying to figure out how things work in our grim, new world.

Rail Week Ending 23 May 2015: Contraction Worsens On Rolling Averages

(Econintersect) — Week 20 of 2015 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic improved year-over-year, which accounts for half of movements – but weekly railcar counts continues deep into contraction.


June 2015 Economic Forecast: Significant Decline In Our Economic Index

By Steven Hansen

(Econintersect) — Econintersect’s Economic Index continues to weaken. Most tracked sectors of the economy are relatively soft with most expanding well below rates seen since the end of the Great Recession. When data is this weak, it is not inconceivable that a different methodology could say the data is recessionary. The significant softening of our forecast this month was triggered by marginal declines in many data sets which are dancing closer and closer to zero growth.

The currency depreciation a while back took away real spending power as did the tax increase, shifting income from people to businesses, and helping exports as well:

Japan : Household Spending
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Highlights
April household spending was down 1.3 percent from a year ago. This was the thirteenth consecutive month of decline. The retreat in spending began when the sales tax was increased from 5 percent to 8 percent in April 2014. Consumers went on a spending frenzy prior to the enactment of the increase and shut off the spending spigot when it was introduced. The weak consumption figures could threaten to keep inflation subdued in the months ahead, though recent commentary from the BoJ suggests the bank is optimistic about the economy’s resilience.

First they credit reforms and THEN oil and the euro:

Italy:

Early efforts with labor and bank reform show progress and Italy’s economy is showing signs of life, expanding 0.3 percent in the first quar ter – the first uptick since the third quarter of 2013 — as a weaker euro and lower oil prices help push the country out of its longest recession on record.

The economic figures tie with recent business confidence data and yet unemployment is still ticking higher – hitting 13 percent in March. As one Italian worker told me in Milan: “If recovery is happening, it isn’t happening fast enough.”
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Revised lower as expected. The question is q2 which so far isn’t looking so good.

GDP
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Atlanta Fed, Redbook retail sales, mtg purchase apps

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Still not showing much of a rebound from Q1, with their Q2 GDP forecast now at only .8% annualized:
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Continues to disappoint and still looking worse than it was in Q1:

Redbook Retail Sales
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Up 1% after being down 4% last week:

United States : MBA Mortgage Applications
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Highlights
Mortgage rates are moving higher and squeezing out what had been gains in purchase applications. Purchase applications did rise in the May 22 week but only 1.0 percent. Year-on-year, applications are still up a healthy 14.0 percent. Demand for refinancing continues to shrink, down 4.0 percent in the latest week. The average 30-year fixed mortgage for conforming loan balances ($417,000 or less) rose 3 basis points to 4.07 percent.

Purchase Mortgage level:

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