Robert Brusca

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<p><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080320g.jpg" align="left" border="0" height="265" width="353">UK retail sales surged in February quite unexpectedly. Sales
popped by 1.2% in nominal terms and by 0.9% inflation adjusted ex-autos
Real sales ex autos are now up a strong 5.1% from one-year ago while
nominal sales overall are up 4.7%.
</p>
<p>In the quarter to date Real Retail Sales ex Autos are rising
at a 9.8% annual rate. Nominal overall retails ales are up at am 11.4%
pace. Sales are off to a terrific start in Q1.
</p>
<p>January and February sales are not quite strong a sharp
turnaround from the drop in Sales in December. Whereas once the UK
economy seemed to be floundering, now strength has emerged in several
areas, most recently in retailing. At the same time, the inflation
readings have become more nettlesome. All bets are off as far as what
the BOE does next and when.
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<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> <b>UK Real and Nominal Retail Sales</b></th>
</tr>
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<tbody>
<tr class="even">
<td class="firstcol"><b>Nominal</b></td>
<td><b>Feb-08</b></td>
<td><b>Jan-08</b></td>
<td><b>Dec-07</b></td>
<td><b>3-MO</b></td>
<td><b>6-MO</b></td>
<td><b>12-MO</b></td>
<td><b>YrAGo</b></td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Total</td>
<td>1.2%</td>
<td>1.2%</td>
<td>-0.7%</td>
<td>7.3%</td>
<td>5.5%</td>
<td>5.0%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food Beverage &amp; Tobacco</td>
<td>1.2%</td>
<td>1.1%</td>
<td>0.2%</td>
<td>10.7%</td>
<td>8.2%</td>
<td>6.4%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing footwear</td>
<td>2.6%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>13.9%</td>
<td>5.0%</td>
<td>3.6%</td>
<td>6.9%</td>
</tr>
<tr class="even">
<td class="firstcol"><b>Real</b></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Ex Auto</td>
<td>0.9%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>7.1%</td>
<td>5.3%</td>
<td>5.5%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
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UK retail sales surged in February quite unexpectedly. Sales popped by 1.2% in nominal terms and by 0.9% inflation adjusted ex-autos Real sales ex autos are now up a strong 5.1% from one-year ago while nominal sales overall are up [...]

UK Retail Sales Show Unexpected Zest

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Tom Moeller

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Total housing starts weakened 9.8% (-4.6% y/y) during May to 1.256 million units (SAAR) after rising 2.7% to 1.392 million in April, revised from 1.361 million and falling 9.1% to 1.355 million in March, revised from 1.339 million, according to the U.S. Census Bureau. Total starts in May were 31.0% below their peak of 1.820 million units reached in April 2022, and at their lowest level in five years. The Action Economics Forecast Survey expected 1.36 million starts in May.

Single-family starts edged 0.4% higher (-7.3% y/y) to 924,000 after falling 3.0% to 920,000 in April, revised from 927,000, and declining 13.7% to a minimally revised 948,000 in March. Multi-family starts dropped 29.7% (+4.1% y/y) to 332,000, after rising 16.0% to 472,000 in April, and increasing 3.8% to 407,000 in March. It was their lowest level since November.

Starts declined in May in three of the four major regions of the country. Starts fell 40.0% (+6.1% y/y) in the Northeast to 105,000, following an 18.2% April increase. In the South, starts weakened 10.5% (-7.2% y/y) to 693,000 after rising 11.2% in April. Starts in the Midwest declined 10.2% (+26.0% y/y) to 184,000 after declining 8.1% in April. Countering these declines, starts in the West increased 15.1% (-15.4% y/y) to 274,000 after falling 17.4% in April.

Building permits declined 2.0% (-1.0% y/y) last month to 1.393 million after falling 4.0% to 1.422 million in April, revised from 1.412 million. Single-family permits fell 2.7% (-6.4% y/y) in May to 898,000 after weakening 5.0% in April. Multi-family permits eased 0.8% (+10.5% y/y) after declining 2.0% in April. Building permits fell 8.8% (+3.3% y/y) in the Northeast and were off 5.2% (-3.1% y/y) in the West. In the South, building permits declined 2.5% (-4.9% y/y), but in the Midwest building permit increased 9.8% (16.4% y/y).

The housing starts and building 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 edge higher; multi-family drops to six-month low.
- Starts decline in most of the country.
- Building permits move down as well, led by single-family weakness.

U.S. Housing Starts Slump in May as Multi-Family Plummets

Andrew Cates

**Geopolitical risks and trade policy uncertainty** 
Geopolitical tensions have risen sharply following the recent escalation of instability in the Middle East. As shown in Chart 1, the Caldara-Iacoviello Global Geopolitical Risk Index has surged to its highest level in over a year, reflecting mounting fears of broader regional conflict and potential disruption to critical global energy supply routes. In contrast, the US Trade Policy Uncertainty Index has eased in recent weeks, reflecting a temporary de-escalation in tariff rhetoric and signs of diplomatic engagement with key trading partners. This divergence underscores the shifting risk landscape: while the trade policy narrative has stabilised somewhat, geopolitical volatility has returned as a dominant force, complicating the outlook for global coordination, capital flows, and supply chain resilience.

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**Oil process and global growth surprises** 
The most obvious and immediate channel for these shocks has been oil. As shown in Chart 2, the global oil price has risen sharply in recent days, with the rebound leading a broader repricing of growth and inflation risks. The oil price in chart 2 below with a seven-week lead and has lately been tightly correlated with the inverted Citigroup global growth surprise Index. Notably, the correlation remains strongly negative, indicating that rising energy costs could sap global economic momentum.

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**Global shipping costs** 
Freight rates have also surged in response to the Middle East conflict. Chart 3 shows the Baltic Dry Index and the Capesize Index, both of which have jumped materially in recent days. These indices, which capture the cost of transporting bulk goods such as metals, grains, and energy, are sensitive to perceived risk in major shipping lanes—including the Red Sea and Strait of Hormuz. As insurance premia rise and some routes are avoided altogether, freight costs are climbing.

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**Global oil reserves**
The strategic significance of the Middle East—particularly Iran—can be seen clearly in chart 4. Iran specifically accounts for over 9% of global proven oil reserves, and the broader Middle East (excluding Iran) holds nearly 40%. That means nearly half of the world’s known oil reserves sit in one of the most geopolitically volatile regions on the planet.

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**Energy costs and economic growth** 
The role of energy as a key driver of economic growth is arguably often underappreciated. However, its influence over economic performance is evident in the chart below. High real energy prices tend to discourage energy consumption, which in turn can suppress per capita GDP growth—unsurprising given energy’s central role in virtually all forms of economic activity, from manufacturing and transportation to household consumption. This dynamic has been particularly pronounced in the Euro area. Major economies such as Germany, France, and Italy have experienced sharp increases in real energy prices, accompanied by relatively subdued per capita GDP growth. In Germany’s case, this has been exacerbated by the rapid shift away from nuclear and Russian gas toward renewables—a transition that, while essential for long-term sustainability, has introduced near-term supply bottlenecks and cost volatility. More broadly, these energy price spikes are partly attributable to supply-side disruptions, many of which stem from geopolitical tensions and instability.

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**Natural capital** 
Beneath the surface of these immediate geopolitical shocks lies a deeper, slower-moving erosion: the decline of natural capital. As Chart 6 shows, renewable natural capital per capita has been falling steadily for over two decades, while non-renewable natural capital has stagnated. In contrast, produced capital has surged, and human capital has only modestly increased. This imbalance reflects a global economy that has continued to accumulate physical and financial assets while depleting its ecological foundation. The result is a structurally less resilient growth model, more exposed to shocks like climate volatility, resource scarcity, and geopolitical conflict over critical inputs like water, minerals, and land.

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Financial markets have been jolted over the past week by a sharp escalation in geopolitical risk. The sudden intensification of hostilities between Israel and Iran—marked by missile strikes and retaliatory air operations—has reignited fears of a broader regional conflict with global consequences. This flare-up has driven a visible spike in geopolitical risk indicators (Chart 1), unsettling investor sentiment at a moment when markets were still digesting the implications of US protectionist trade policies. As tensions mount, the economic shockwaves have been rippling outward: oil prices have rebounded sharply (Chart 2), global shipping costs have climbed sharply along key maritime routes (Chart 3), and capital markets are once again grappling with an unpredictable macro landscape. Iran’s strategic importance—both as a holder of nearly 10% of global oil reserves and as a key player in energy shipping lanes such as the Strait of Hormuz—underscores the vulnerability of global energy security (Chart 4). But the implications are not just immediate. Over the medium term, higher real energy prices have already been weighing on living standards and growth outcomes across many advanced economies (Chart 5), with the data pointing to a clear inverse relationship between real energy costs and gains in per capita GDP. Compounding this is the slow, structural erosion of natural capital—soils, forests, water systems—which continues to undermine long-run economic resilience and productive potential (Chart 6).

Charts of the Week: Conflict, Energy and Constraints

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance were 245,000 in the week ending June 14, a decrease of 5,000 from 250,000 in the week ending June 7, revised up from 248,000. The Action Economics Forecast Survey had expected 245,000. These data are seasonally adjusted by the Department of Labor. The 4-week moving average was 245,500, an increase of 4,750 from the previous week’s average of 240,750, revised up from 240,250. It also is the highest level for this average since August 19, 2023, when it was 246,000.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended June 7 was 1.945 million, down 6,000 from 1.951 million in the prior week, revised from 1.956 million. The 4-week moving average was 1.926 million, an increase of 13,000 from the previous week’s average of 1.913 million. This is the highest level for this average since November 20, 2021, when it was 2.004 million.

The insured unemployment rate for the week ending June 7, that is, the number of unemployment beneficiaries as a % of covered employment, was unchanged at 1.3% from the prior week.

Economic conditions vary widely across states and territories. In the week ended May 31, the highest unemployment rates were in New Jersey (2.30%), California (2.20%), Massachusetts and Washington (both 2.10%), and Rhode Island (2.00%). The lowest rates were in South Dakota (0.30%), Florida (0.40%), and Alabama, Iowa, North Carolina and Virginia (all at 0.50%). Rates in other notable states include Illinois and New York (both 1.60%), Pennsylvania (1.50%) and Texas (1.20%). These state data 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 claims for unemployment insurance eased in the week ended June 14.
- Total beneficiaries decreased by 6,000 in the June 7 week.
- The insured unemployment rate was unchanged at 1.3%.

U.S. Initial Jobless Claims Eased in Latest Week

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Mortgage applications declined 2.6% (+17.9% y/y) in the week ending June 13, after gaining 12.5% (22.1% y/y) in the week ending June 6, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house fell 3.0% (+13.6% y/y) in the June 13 week after the rebound of 10.3% (18.9% y/y) in the June 6 week. Applications for loan refinancing fell 2.1% (+25.3% y/y) in the latest week after surging 15.6% (27.5% y/y) in the June 6 week.

The effective interest rate on a 30-year fixed-rate loan fell 9bps to 7.03% in the week ending June 13 from 7.12% in the week ending June 6; The recent low was 6.29% in the September 20 week, while the peak of 8.12% was reached in the week of October 20, 2023. The rate on 15-year fixed-rate mortgages eased 2bps to 6.31% in the week ending June 13 from 6.33% in the June 6 week; a low of 5.60% was reached in the September 20 week, while the high of 7.44% was reached in the week of October 27, 2023. The rate on 30-year jumbo loans declined 12bps to 6.99% in the latest week from 7.11% in the June 6 week; the low of 6.57% was reached in the September 13 week and the high of 7.99% in the week of October 27, 2023. The rate on a 5-year ARM eased 3bps to 6.31% in the week ending June 13 from 6.34% in the June 6 week; the low of 5.84% was in the September 13 week and the high of 7.31% was in the week of October 27, 2023.

The share of applications for refinancing an existing loan rose to 37.3% of total applications in the week of June 13 from 36.7% in the week ending June 6. The adjustable-rate mortgage (ARM) share of activity dropped to 7.1% in the June 13 week from 7.2% in the June 6 week.

The average size of a mortgage loan eased 0.9% (+2.1% y/y) to $380,200 in the June 13 week, after a rise of 0.4% (2.8% y/y) to $383,700 in the June 6 week. The average size of a purchase loan declined by 0.7% (+2.0% y/y) to $439,000 in the June 13 week, after a rise of 0.8% (3.1% y/y) to $441,900 in the June 6 week. The average size of a loan to refinance a mortgage eased 0.6% (+6.1% y/y) to $281,600 in the June 13 week after a rise of 2.0% (4.5% y/y) to $283,400 in the June 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.

- Purchase and refinancing loan applications fell.
- Effective interest rate on 30-year fixed-rate loans fell to 7.03%.
- Average loan size eased.

UK Retail Sales Show Unexpected Zest

Summary

Robert Brusca

More Economy in Brief

U.S. Housing Starts Slump in May as Multi-Family Plummets

Charts of the Week: Conflict, Energy and Constraints

U.S. Initial Jobless Claims Eased in Latest Week

U.S. Mortgage Applications Decline in the June 13 Week

UK Real and Nominal Retail Sales
Nominal	Feb-08	Jan-08	Dec-07	3-MO	6-MO	12-MO	YrAGo
Retail Total	1.2%	1.2%	-0.7%	7.3%	5.5%	5.0%	4.7%
Food Beverage & Tobacco	1.2%	1.1%	0.2%	10.7%	8.2%	6.4%	3.9%
Clothing footwear	2.6%	0.4%	0.4%	13.9%	5.0%	3.6%	6.9%
Real
Retail Ex Auto	0.9%	1.1%	-0.3%	7.1%	5.3%	5.5%	5.1%