COLORADO SPRINGS ECONOMIC HIGHLIGHTS



WEEK IN REVIEW
Economic Highlights for the Week Ending November 7, 2008
MONDAY, November 3rd
The ISM manufacturing index fell to 38.9% in October from 43.5% in September. This is the lowest index level since September 1982! Apparently, manufacturing activity has fallen even further from already weak levels. The index reading suggests recession in both the sector and the economy. Credit flows to business will need to be restored before a turnaround can take place in manufacturing conditions.
Construction spending fell 0.3% in September less than an expected decline of 0.8%. Residential construction spending resumed its downward trek, tumbling 1.3% in September after gaining 1.9% in August in its first increase since March 2007. Though not as weak as expected in the last two months, construction spending will likely falter going forward due to severely weak economic conditions.
TUESDAY, November 4th
Motor vehicle sales plunged 15.5% in October to an annual rate of 10.6 million, the lowest level since February 1983! Expectations were for a much smaller decline to an annual pace of 12.0 million vehicles. Total vehicle sales have dropped 34.2% over the past year as a result of frozen credit markets, deteriorating economic conditions and accumulating job losses. With financing hard to secure and incomes and jobs uncertain, vehicle sales will remain exceptionally weak for the foreseeable future.
WEDNESDAY, November 5th
The ISM non-manufacturing index plunged to 44.4% in October from 50.2% in September. The larger than expected decline in the index indicates activity in the services, construction and government sectors of the economy contracted sharply last month, reflecting the intensifying turmoil in credit and financial markets.
The MBA mortgage applications index dropped 20.3% to 379.9% for the week ending October 31. This is the lowest level of the index since December 2000. The sharp decline in applications activity last week was probably related to the jump in mortgage interest rates. The purchase index tumbled 13.9% last week as the refinance index sank 27.8%. Total application volume is now 43.3% below its year ago level.
THURSDAY, November 6th
Productivity grew at a 1.1% rate in the third quarter, better than an expected 0.8% gain. Productivity remains quite solid given the economic downturn. Apparently, businesses are trimming workforces in response to weaker demand which keeps output levels aloft. Unit labor cost jumped 3.6% last quarter amid rising price pressures elsewhere. Weak labor market conditions are expected to reduce any wage pressures going forward.
Jobless claims fell 4k to 481k for the week ending November 1. The level of claims remains elevated indicating more job cuts and less hiring. Labor market conditions are clearly in recession as is the broader economy. It could get worse before it gets better with tomorrow's employment report showing more severe payroll losses in October than the 200k expected.
Mortgage rates declined this week as weaker economic data weighed on yields in the bond market. 30-year fixed rate mortgages averaged 6.20% this week compared to 6.46% last week according to Freddie Mac's mortgage market survey. Increased Fed rate cut expectations are also placing downward pressure on yields, thus mortgage rates.
FRIDAY, November 7th
Payroll employment declined by 240k in October compared to expected job losses of 200k. The outsized decline, the largest since 2001 provides more evidence of deepening weakness in the broader economy. The economy has shed 1.2 million jobs since the beginning of the year. Job declines were broad based as the unemployment rate rose to 6.5% from 6.1% in the prior month.

Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 8943.89 9325.01 -381.12 or -4.09%
NASDAQ 1647.40 1720.95 -73.55 or -4.27%


WEEK IN ADVANCE
The holiday-shortened week presents all of the economic data in the last two days. Except for retail sales and import prices, most of the data is second tier and expected to show protracted weakness. The Treasury's $55 billion quarterly refunding will probably draw more attention, because these three auctions portend of many larger sized auctions to come as the government seeks to finance bailout and stimulus packages.
Key Interest Rates Latest 6 Mos Ago 1 Yr Ago
Prime Rate 4.00 5.00 7.50
Fed Discount 1.25 2.25 5.00
Fed Funds 1.00 1.94 4.33
11th District COF 2.769 3.280 4.383
10-Year Note 3.79 3.85 4.32
30-Year Treasury Bond 4.27 4.57 4.65
30-Yr Fixed (FHLMC) 6.20 6.05 6.24
15-Yr Fixed (FHLMC) 5.88 5.60 5.90
1-Yr Adj (FHLMC) 5.25 5.29 5.50
6-Mo Libor (FNMA) 3.12125 2.96500 4.80625

Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco



Upward pressure on interest rates
Downward pressure on interest rates
No pressure to change interest rates
News worthy

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