Tom Moeller

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Initial claims for jobless insurance increased to 285,000 during the week
ended January 30 from 277,000 in the prior week, revised from 278,000. The
four-week moving average increased to 284,750, up slightly versus late last
year. Claims nevertheless remained near the lowest level since 1973. Consensus
expectations were for 280,000 applications in the Action Economics Forecast
Survey. During the last ten years, there has been a 75% correlation between the
level of initial claims and the m/m change in payroll employment.

In the week ending January 23, continuing claims for unemployment insurance
eased to 2.255 million (-5.1% y/y). The four-week moving average increased to
2.253 million, the highest level since early-September.

The insured rate of unemployment remained at 1.7%, about where it's
been since last March.

Insured rates of unemployment across states continued to vary. Near the low
end of the range were Florida (0.67%), North Carolina (0.81%), South Dakota (0.90%),
Virginia (0.95%), Tennessee (1.06%) and Indiana (1.23%). At the high end of the
scale were Massachusetts (2.79%), Illinois (2.88%), Connecticut (2.96%), New
Jersey (3.19%), Pennsylvania (3.29%) and West Virginia (3.31%). The state data
are not seasonally adjusted and cover the week ended January 16.

Data on weekly unemployment insurance are contained in Haver's WEEKLY
database and they are summarized monthly in USECON. Data for individual
states are in REGIONW. The expectations figure is from the Action
Economics survey, carried in the AS1REPNA database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" 0801 >Unemployment Insurance (000s)</th>
 <th 0801 >01/30/16</th>
 <th 0801 >01/23/16</th>
 <th 0801 >01/16/16</th>
 <th 0801 >Y/Y %</th>
 <th 0801 >2015</th>
 <th 0801 >2014</th>
 <th 0801 >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" 0801 >Initial Claims</td>
 <td 0801 >285</td>
 <td 0801 >277</td>
 <td 0801 >294</td>
 <td 0801 >1.8</td>
 <td 0801 >277</td>
 <td 0801 >307</td>
 <td 0801 >342</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" 0801 >Continuing Claims</td>
 <td 0801 >--</td>
 <td 0801 >2,255</td>
 <td 0801 >2,273</td>
 <td 0801 >-5.1</td>
 <td 0801 >2,268</td>
 <td 0801 >2,607</td>
 <td 0801 >2,978</td>
 </tr>
 <tr>
 <td class="firstcol" 0801 >Insured Unemployment Rate (%)</td>
 <td 0801 >--</td>
 <td 0801 >1.7</td>
 <td 0801 >1.7</td>
 <td 0801 >
 1.8 
 (Jan. 2015)
 </td>
 <td 0801 >1.7</td>
 <td 0801 >2.0</td>
 <td 0801 >2.3</td>
 </tr>
 </tbody>
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Initial claims for jobless insurance increased to 285,000 during the week ended January 30 from 277,000 in the prior week, revised from 278,000. The four-week moving average increased to 284,750, up slightly versus late last year. [...]

U.S. Initial Unemployment Insurance Claims Move Higher

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The Composite Index of Nonmanufacturing Sector Business from the Institute
for Supply Management (ISM) declined to 53.5 during January from an upwardly revised 55.8
in December. It was the lowest level since February 2014. Consensus expectations
had been for 55.3 in the Action Economics Forecast Survey. The ISM data are
diffusion indexes where a reading above 50 indicates expansion. Data back to
2014 were revised.

Haver Analytics constructs a Composite Index using the nonmanufacturing ISM
index and the ISM factory sector measure released Monday. It fell to 52.9, also
the lowest level since February 2014. During the last ten years, there has been
a 72% correlation between the index and the q/q change in real GDP.

The decline in the nonmanufacturing index was broad-based. The business
activity series weakened to 53.9, the lowest level since August 2012. The
employment index declined to 52.1, indicating the weakest job growth in twelve
months. During the last ten years, there has been a 96% correlation between the
employment index and the m/m change in service plus construction payrolls. The
new orders index also fell to 56.5, a four month low. Moving to the upside was
the supplier delivery index to 51.5. That indicated slower delivery speeds and
reversed most of the prior December decline.

The prices paid series fell below break-even to 46.4 from 51.0, revised from
49.7. Twelve percent (NSA) of respondents paid higher prices while 19 percent
paid less.

The export order series (NSA) dropped sharply to 45.5. It represented the
greatest decline in export volumes since March 2009. The imports series also
collapsed showing the largest decline since July 2012. The order backlog measure
rose slightly.

The figures are available in Haver's USECON database. The expectations
figure from Action Economics is in the AS1REPNA database.

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 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM
 Nonmanufacturing Survey (SA)</a></th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Jan'15</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Composite Diffusion Index</td>
 <td >53.5</td>
 <td >55.8</td>
 <td >56.6</td>
 <td >56.9</td>
 <td >57.1</td>
 <td >56.2</td>
 <td >54.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Business Activity</td>
 <td >53.9</td>
 <td >59.5</td>
 <td >59.4</td>
 <td >61.3</td>
 <td >60.8</td>
 <td >59.7</td>
 <td >56.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; New Orders</td>
 <td >56.5</td>
 <td >58.9</td>
 <td >57.9</td>
 <td >60.0</td>
 <td >59.2</td>
 <td >58.6</td>
 <td >55.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp; Employment</td>
 <td >52.1</td>
 <td >56.3</td>
 <td >56.0</td>
 <td >52.1</td>
 <td >56.1</td>
 <td >54.9</td>
 <td >54.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; Supplier Deliveries (NSA)</td>
 <td >51.5</td>
 <td >48.5</td>
 <td >53.0</td>
 <td >54.0</td>
 <td >52.5</td>
 <td >51.8</td>
 <td >51.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Prices Index</td>
 <td >46.4</td>
 <td >51.0</td>
 <td >50.0</td>
 <td >46.5</td>
 <td >50.7</td>
 <td >56.8</td>
 <td >55.7</td>
 </tr>
 </tbody>
 </table>
 
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The Composite Index of Nonmanufacturing Sector Business from the Institute for Supply Management (ISM) declined to 53.5 during January from an upwardly revised 55.8 in December. It was the lowest level since February 2014. Consensus [...]

U.S. ISM Nonmanufacturing Index Declines Sharply, Nearing 2014 Low

Robert Brusca

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The EMU services sector turned weaker in January but stayed above 50 signaling continued, if slower, growth. The EMU-wide service sector reading was last lower in January 2015. Even so, the various averages show that the overall EMU gauge has been steady over all these horizons of three-month, six-month and 12-month at level of 54.0. The slip to 53.6 in January is a relatively sharp pullback but not severe.

Three of four of the largest EMU members showed service sector pullbacks in January. France was the exception with its services sector pulling up out of the contraction zone to edge up over 50, at 50.3. The overall euro area index fell by 0.6 points, the German index fell by one full point, Italy fell by an outsized 1.7 points, and Spain's index fell by 0.5 points.

France had fallen for two months in a row before rising in January. Spain now has fallen for two months running. And the overall EMU gauge is lower for two months running.

The EMU services gauge stands in the 70th percentile of its historic queue, implying that it has been higher 30% of the time. The German index with the highest raw reading among this group of EMU members has a 75th percentile standing. Italy, despite its lower raw score, has been higher less than 7% of the time. Spain stands in its 67th percentile. Except for Italy, this is a collection of very modest standings. The standings are at their medians when they are at their respective 50th percentiles. Standings around the 70th percentile are substantially up from their medians and should be regarded as relatively solid readings. But they are not strong readings either. The Italian case is interesting since it has a 93.8 percentile standing when its raw index is only at a reading of 53.6. Obviously, the message is that the Italian services sector does not post such high scores for services, but its relative performance is still quite good by historic standards.

The U.K., an EU member, is not in the common currency mechanism. Its services sector strengthened to 55.6 in January after falling in December. Its sequential moving averages have been without clear trend. But its three-month average advanced on its six-month average. Still, its January level is below its 12-month average. That is true also for the EMU, France, and Spain. The U.K. services metric stands only in the 52nd percentile of its historic queue of values, just a bit above its historic median. The U.K. services sector is decidedly moderate by comparison with the EMU average and the large four EMU members taken individually.

Today the National Institute of Economic and Social Research (NIESR) released an outlook for the U.K. economy that was largely unchanged with growth outlook for the year ahead held at 2.3%. The institute did push out its projection for a rate hike to the second half of the year.

In some sense, this view is consistent with the Federal Reserve's view in the U.S. which seems to see no financial sector damage from the recent stock market selloff. Today New York Fed President William Dudley suggested that he saw some tightening of credit conditions. For the moment, the Fed has left us unconvinced that its timing for a rate hike has been changed. But in truth, we cannot tell for sure from the Fed's policy statement or from recent comments by Vice Chair Stanley Fischer. The NIESR sees the U.K. rate hike at least being pushed into the future. In that, the view from the Fed and from the U.K.'s NIESR is the same: that the stock market selloff is largely a market event and will not loom large as a policy factor this year.

The day also saw a wealth to economic data and service sector reports released worldwide. These global Markit indicators seem to show relatively stronger services sectors in Europe, Japan, and India whereas they see monthly improvements in only seven of 16 service sector reporters in January. But places like Russia and Brazil have sector readings at or near their lower 10 percentile of their historic standings. China is midrange and India is firm. But the BRICS as a group are more marked by weakness. The U.S. nonmanufacturing ISM index was cut to weakest vale on this timeline (since August 2008) and now has a zero percentile standing, with its index falling by more than two points in one month. Will the Federal Reserve remain equivocal in its assessment of the U.S. economy?

Service sectors have been stable in general and have produced a buffer from what have been weak global manufacturing conditions. But this month's erratic behavior, highlighted by a sharp weakening in the U.S., shows that service sector strength is not impervious to weakness elsewhere. This tug of war remains one of the key questions in evaluating the global economy. The services sector is the jobs producing sector since manufacturing is performed with much more capital and has greater productivity. When manufacturing turns down, the knock-on effect is reduced (compared to services) because it does not hit the job market so hard. But there is a knock-on effect and that does get transmitted to services. At the moment, it is amplified by conditions in the oil market and in other extractive sector industries. These, of course, hit developing economies harder and, arguably, below the belt.

On top of that, fiscal policy globally is mostly handcuffed and monetary policy has been as stimulative as it can be most places. Central banks are all but tapped out. Central banks have tried pulling rabbits out of their hats by engaging in operations known as QE or by pushing interest rates into the negative space. These sorts of actions reek of desperation and create side effects that may actually dominate the primary impact of what the banks hope to achieve.

As a result, it is very hard to evaluate the global economy. But we can come to the simple conclusion that the Federal Reserve's take on policy is wrong. The Fed will not even establish a balance of risk statement for policy. Everyone is watching and waiting instead of doing. Since monetary policy acts with a lag whichever direction it chooses to move next in the wake of this pause, it will be behind the curve. It is not so serious being behind the curve if risks lessen since there is so much space in which central banks can act to hike rates. On the upside, bankers still have the potential for completely controlling events seamlessly. The risk of bad policy decisions still lies on the downside side (regardless of what the Fed may not say) because it is there that the flexibility to act is so limited. That is true in the U.S., the EMU, the U.K., Japan as well as in other places to a lesser extent, if conditions weaken materially (as the services sector may now be doing in the U.S.) not only do central banks and governments have less ammunition to use but they will be applying it late and tardiness is what magnifies the risk. This conclusion comes from a simple statement about how policy should be discharged called the mini-max rule. Policy should act in such a way under this rule so as to minimize the impact of the worst mistake a central bank can make should it make the wrong policy choice. Central banks are not doing this. Instead, they are doing nothing and crossing their fingers. That is not a variable in most macro-models of economic impact.


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The EMU services sector turned weaker in January but stayed above 50 signaling continued, if slower, growth. The EMU-wide service sector reading was last lower in January 2015. Even so, the various averages show that the overall EMU [...]

EMU Services Sector in January Slows; In Other Places, Boy Does It Ever...

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The ADP/Moody's National Employment Report indicated that nonfarm
private sector payrolls rose 205,000 during January following a 267,000 December
increase, revised from 257,000. The latest gain was firmer than expectations for
a 190,000 rise in the Action Economics Forecast Survey. Since November, payrolls
have risen at a 2.3% annual rate. During the last ten years, there has been a 97%
correlation between the change in the ADP figure and the change in nonfarm private
sector payrolls as measured by the Bureau of Labor Statistics.

The ADP Research Institute survey is based on ADP's business payroll
transaction system covering 411,000 companies and nearly 24 million employees.
The data are processed by Moody's Analytics Inc., then calibrated and aligned
with the BLS establishment survey data. The ADP data cover private sector
employment, not government.

Medium-sized businesses led last month's job growth with an 82,000 rise
(1.8% y/y), the largest increase in twelve months. Small business hiring
strengthened 79,000 (2.2% y/y) after a 101,000 improvement. Amongst large-sized
employers, payrolls rose 44,000 (2.0% y/y), the weakest gain since October.

Service industry hiring moderated. A 192,000 increase (2.3% y/y) was
the weakest rise in three months. Payrolls in professional &amp; business services
increased a lessened 44,000 (2.4% y/y) while employment in trade, transportation &amp;
utilities industries improved a steady 35,000 (1.7% y/y). The number of financial
activities jobs rose an improved 19,000 (2.0% y/y), the strongest rise since March 2006.

The pace of hiring in the goods-producing sector of the economy slackened to
13,000 (0.5% y/y) following a strong 30,000 rise. Construction sector employment
increased a firm 21,000 (4.0% y/y) while factory sector jobs remained unchanged
(-0.1% y/y) after two months of modest increase.

The ADP National Employment Report data are maintained in Haver's USECON
database; historical figures date back to April 2001 for the total and industry
breakdown and back to January 2005 for the business size breakout. The
expectation figure is available in Haver's AS1REPNA database.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >ADP/Moody's National
 Employment Report</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Jan Y/Y</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Nonfarm Private Payroll Employment (m/m
 chg, 000s)</td>
 <td >205</td>
 <td >267</td>
 <td >201</td>
 <td >2.0%</td>
 <td >2.3%</td>
 <td >2.3%</td>
 <td >1.9%</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Small Payroll (1-49)</td>
 <td >79</td>
 <td >101</td>
 <td >70</td>
 <td >2.2</td>
 <td >2.5</td>
 <td >2.1</td>
 <td >1.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Medium Payroll (50-499)</td>
 <td >82</td>
 <td >77</td>
 <td >58</td>
 <td >1.8</td>
 <td >2.2</td>
 <td >2.8</td>
 <td >2.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Large Payroll (&gt;500)</td>
 <td >44</td>
 <td >88</td>
 <td >74</td>
 <td >2.0</td>
 <td >1.9</td>
 <td >1.8</td>
 <td >1.6</td>
 </tr>
 <tr>
 <td class="firstcol" >Goods-Producing</td>
 <td >13</td>
 <td >30</td>
 <td >-1</td>
 <td >0.5</td>
 <td >1.8</td>
 <td >2.3</td>
 <td >1.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Construction</td>
 <td >21</td>
 <td >31</td>
 <td >6</td>
 <td >4.0</td>
 <td >4.8</td>
 <td >4.6</td>
 <td >3.5</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Manufacturing</td>
 <td >0</td>
 <td >4</td>
 <td >3</td>
 <td >-0.1</td>
 <td >0.8</td>
 <td >1.2</td>
 <td >0.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Service-Producing</td>
 <td >192</td>
 <td >237</td>
 <td >202</td>
 <td >2.3</td>
 <td >2.4</td>
 <td >2.3</td>
 <td >2.0</td>
 </tr>
 </tbody>
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The ADP/Moody's National Employment Report indicated that nonfarm private sector payrolls rose 205,000 during January following a 267,000 December increase, revised from 257,000. The latest gain was firmer than expectations for a [...]

U.S. ADP Reports Moderate Increase in Hiring

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Gasoline prices continued to decline last week and reached a nine year low.
The pump price for a gallon of regular gasoline fell to an average $1.82 (-11.9%
y/y), down from $1.86 in the prior week, according to the U.S. Department of
Energy. The price compares to a 2014 high of $3.71 per gallon. Haver Analytics
constructs factors adjusting for the seasonal variation in pump prices, and the
adjusted price fell to $2.07 per gallon. The spot market gasoline price fell to
$1.05 per gallon (-22.5% y/y) as of last week.
WTI crude oil costs rose slightly and averaged $31.80 per barrel last
week (-29.8% y/y). Yesterday's price of $31.62 was down from Friday's high of
$33.62, and remained below the peak of $113.93 in April 2011. Brent crude oil
prices also rose w/w to $33.22 per barrel versus the prior week's low of $29.37.
Yesterday's price of $34.12 was down from Friday's high of $35.83.
Natural gas prices held steady last week at $2.20 per mmbtu (-23.4%
y/y). Prices were $2.18 yesterday.
Gasoline demand declined 2.5% y/y last week and demand for all
petroleum products fell 1.7% y/y. Gasoline inventories improved 4.2% y/y,
while inventories of all petroleum products rose 9.1% y/y. Crude oil production
(input to refineries) increased 3.8% y/y during the last four weeks.
The energy price data are reported by the U.S. Department of Energy. The
petroleum demand and inventory figures are from the Oil &amp; Gas Journal
Weekly. These data can be found in Haver's WEEKLY database. The daily
figures are in DAILY and greater detail on prices, demand and production,
along with regional breakdowns, are in OILWKLY.
<table class="centered" border="0" cellspacing="0" width="1871">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="859">Weekly Energy Prices</th>
 <th scope="col" width="144">02/01/16</th>
 <th scope="col" width="144">01 /25/16</th>
 <th scope="col" width="144">01/18/16</th>
 <th scope="col" width="144">Y/Y%</th>
 <th scope="col" width="144">2015</th>
 <th scope="col" width="144">2014</th>
 <th scope="col" width="144">2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="859">Retail Gasoline ($ per Gallon, Regular)</td>
 <td align="center" width="144">1.82</td>
 <td align="center" width="144">1.86</td>
 <td align="center" width="144">1.91</td>
 <td align="center" width="144">-11.9</td>
 <td align="center" width="144">2.03</td>
 <td align="center" width="144">2.30</td>
 <td align="center" width="144">3.33</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="859">Light Sweet Crude Oil, WTI ($ per bbl.,
 WSJ)</td>
 <td align="center" width="144">31.80</td>
 <td align="center" width="144">29.16</td>
 <td align="center" width="144">30.59</td>
 <td align="center" width="144">-29.8</td>
 <td align="center" width="144">48.90</td>
 <td align="center" width="144">93.64</td>
 <td align="center" width="144">97.96</td>
 </tr>
 <tr>
 <td class="firstcol" width="859">Natural Gas ($/mmbtu, LA, WSJ)</td>
 <td align="center" width="144">2.20</td>
 <td align="center" width="144">2.20</td>
 <td align="center" width="144">2.32</td>
 <td align="center" width="144">-23.4</td>
 <td align="center" width="144">2.62</td>
 <td align="center" width="144">4.37</td>
 <td align="center" width="144">3.73</td>
 </tr>
 </tbody>
</table>
&nbsp;
U.S. Light Vehicle Sales Set New Record in 2015 
by <a href="http://haver.com/comment/Moeller.html">Tom Moeller</a>&nbsp;&nbsp;February
2, 2016
Records were meant to be broken, and total sales of light vehicles in
2015 did just that. Rising to 17.42 million units, they just beat the old record
of 17.40 million reached in 2000, as gasoline prices and interest rates fell.
The feat occurred despite a 4.6% m/m decline in December sales to 17.34 million
(SAAR) from 18.19 million during November. It was the lowest level in six
months. Nevertheless, sales rose 2.5% versus December 2014, pulling the
full-year average up 5.4% against 2014. These gains were, however, the smallest
of the economic expansion.
Sales of light trucks set the pace in 2015 with a 12.7% full-year
increase to a record 9.69 million units. Their 55.7% share of total vehicle
purchases also was a new record. The gain was led by a 25.3% surge in imported
light truck sales to 1.37 million units, just off the 2007 record of 1.47
million. Not to be outdone, the 10.8% increase in sales of domestically produced
light trucks pulled them to a record 8.33 million. During December, sales of
imported light trucks fell 3.2% to 1.59 million. Nevertheless, they were 45.9%
higher than December 2014. Sales of domestically produced light trucks fell 4.4%
last month to 8.34 million (+8.1% y/y).
Passenger car sales during all of 2015 declined 2.5% to 7.72 million
units, leaving them well below the 1990 high of 9.30 million. Sales of U.S. made
cars eased 0.8% to 5.63 million while sales of imports fell 6.7% to 2.09
million. For December, passenger car sales declined 5.2% from November to 7.40
million (-8.7% y/y). Sales of domestically made cars fell 3.4% to 5.51 million
(-5.5% y/y) while sales of imported cars were off 10.1% to 1.89 million (-17.0%
y/y).
Imports share of the light vehicle market eased slightly y/y to 19.8%
last year. That was, however, well below the 27.6% peak reached in 2009. During
December, their share was 20.1%. Imports share of the car market came to 27.1%
last year and 25.5% in December. Imports share of the light truck market totaled
14.1% in 2005 and 16.0% during December.
U.S. vehicle sales figures are published by Autodata and can be found in
Haver's USECON database.
<table class="centered" border="0" cellspacing="0" width="1871">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="875">Light Vehicle Sales (SAAR, Mil. Units)</th>
 <th scope="col" width="141">Jan</th>
 <th scope="col" width="141">Dec</th>
 <th scope="col" width="142">Nov</th>
 <th scope="col" width="142">Jan Y/Y %</th>
 <th scope="col" width="142">2015</th>
 <th scope="col" width="142">2014</th>
 <th scope="col" width="142">2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="875">Total</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">17.34</td>
 <td align="center" width="142">18.19</td>
 <td align="center" width="142">2.5</td>
 <td align="center" width="142">17.42</td>
 <td align="center" width="142">16.52</td>
 <td align="center" width="142">15.59</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="875">&nbsp;Autos</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">7.40</td>
 <td align="center" width="142">7.81</td>
 <td align="center" width="142">-8.7</td>
 <td align="center" width="142">7.72</td>
 <td align="center" width="142">7.92</td>
 <td align="center" width="142">7.77</td>
 </tr>
 <tr>
 <td class="firstcol" width="875">&nbsp;&nbsp;Domestic</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">5.51</td>
 <td align="center" width="142">5.71</td>
 <td align="center" width="142">-5.5</td>
 <td align="center" width="142">5.63</td>
 <td align="center" width="142">5.68</td>
 <td align="center" width="142">5.48</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="875">&nbsp;&nbsp;Imported</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">1.89</td>
 <td align="center" width="142">2.10</td>
 <td align="center" width="142">-17.0</td>
 <td align="center" width="142">2.09</td>
 <td align="center" width="142">2.24</td>
 <td align="center" width="142">2.30</td>
 </tr>
 <tr>
 <td class="firstcol" width="875">&nbsp;Light Trucks</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">9.94</td>
 <td align="center" width="142">10.38</td>
 <td align="center" width="142">12.8</td>
 <td align="center" width="142">9.69</td>
 <td align="center" width="142">8.60</td>
 <td align="center" width="142">7.82</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="875">&nbsp;&nbsp;Domestic</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">8.34</td>
 <td align="center" width="142">8.73</td>
 <td align="center" width="142">8.1</td>
 <td align="center" width="142">8.33</td>
 <td align="center" width="142">7.51</td>
 <td align="center" width="142">6.74</td>
 </tr>
 <tr>
 <td class="firstcol" width="875">&nbsp;&nbsp;Imported</td>
 <td align="center" width="141"></td>
 <td align="center" width="141">1.59</td>
 <td align="center" width="142">1.65</td>
 <td align="center" width="142">45.9</td>
 <td align="center" width="142">1.37</td>
 <td align="center" width="142">1.09</td>
 <td align="center" width="142">1.08</td>
 </tr>
 </tbody>
</table>





</html>

Gasoline prices continued to decline last week and reached a nine year low. The pump price for a gallon of regular gasoline fell to an average $1.82 (-11.9% y/y), down from $1.86 in the prior week, according to the U.S. Department of [...]

U.S. Gasoline Prices Weaken To 2009 Low

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Total sales of light vehicles during January improved 1.4% m/m to
17.58 million units (SAAR) from 17.34 million in December. The 5.2% y/y increase
was prompted by the decline in gasoline prices, strong consumer confidence and
low unemployment. Nevertheless, sales remained below the cycle peak of 18.24
million reached in October.

Sales of light trucks continued to pace the market with a 2.1% advance
(12.2% y/y) to 10.15 million units. Domestic light truck sales improved 3.2%
(7.8% y/y) to 8.62 million. Sales of imported light trucks declined 3.7% (+45.3%
y/y) to 1.54 million. The gain lifted trucks sales to a record 57.7% of the
light vehicle market, up from 54.1% in January 2015.

Auto purchases edged 0.4% higher to 7.43 million, but were down 3.1%
y/y. Domestic auto sales gained 0.5% (-0.0% y/y) to 5.54 million. Sales of
imported autos improved a similarly lackluster 0.4% (-11.1% y/y) to 1.89 million.

Imports share of the light vehicle market declined to 19.5% from 20.4%
in Q4'15, and from 19.8% during all of last year. Imports share of the passenger
car market of 25.5% compared to 26.3% last quarter, and 27.1% during all of last
year. Imports share of the light truck market declined to 15.1% from 15.9% in
Q4, but that was up from 14.1% during all of last year.

U.S. vehicle sales figures are published by Autodata and can be found in
Haver's USECON database.

<a href="/comment/160202h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/160202h.png"></a>
 <a href="/comment/160202i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/160202i.png"></a>

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Light Vehicle Sales (SAAR, Mil. Units)</th>
 <th scope="col" >Jan</th>
 <th scope="col" >Dec</th>
 <th scope="col" >Nov</th>
 <th scope="col" >Jan Y/Y %</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >17.58</td>
 <td >17.34</td>
 <td >18.19</td>
 <td >5.2</td>
 <td >17.42</td>
 <td >16.52</td>
 <td >15.59</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Autos</td>
 <td >7.43</td>
 <td >7.40</td>
 <td >7.81</td>
 <td >-3.1</td>
 <td >7.72</td>
 <td >7.92</td>
 <td >7.77</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Domestic</td>
 <td >5.54</td>
 <td >5.51</td>
 <td >5.71</td>
 <td >-0.0</td>
 <td >5.63</td>
 <td >5.68</td>
 <td >5.48</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Imported</td>
 <td >1.89</td>
 <td >1.89</td>
 <td >2.10</td>
 <td >-11.1</td>
 <td >2.09</td>
 <td >2.24</td>
 <td >2.30</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Light Trucks</td>
 <td >10.15</td>
 <td >9.94</td>
 <td >10.38</td>
 <td >12.2</td>
 <td >9.69</td>
 <td >8.60</td>
 <td >7.82</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Domestic</td>
 <td >8.62</td>
 <td >8.34</td>
 <td >8.73</td>
 <td >7.8</td>
 <td >8.33</td>
 <td >7.51</td>
 <td >6.74</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;Imported</td>
 <td >1.54</td>
 <td >1.59</td>
 <td >1.65</td>
 <td >45.3</td>
 <td >1.37</td>
 <td >1.09</td>
 <td >1.08</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

Total sales of light vehicles during January improved 1.4% m/m to 17.58 million units (SAAR) from 17.34 million in December. The 5.2% y/y increase was prompted by the decline in gasoline prices, strong consumer confidence and low [...]

U.S. Light Vehicle Sales Edge Higher

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It is a global paradox of sorts that unemployment rates are behaving relatively well even as economies do not. Part of it is the global slump in manufacturing which is a productivity-centric sector rather than a jobs-centric center. So if manufacturing is weak, economic signals can be muted, but it may not cost a lot in terms of unemployment. It will cost growth and it will lower productivity gains, however.

In the United States, the ISM manufacturing index is lower for several months running and industrial production is declining while unemployment is so low that the Federal Reserve has started to hike interest rates despite an absence of any actual inflation pressure. In Europe, the European Central Bank is still pedal to the metal as unemployment has continued to fall, and has fallen slowly while marking historically uncomfortably high levels for most EMU members. As always Germany's performance is leaps and bounds out ahead of most EMU members and of the EMU as a whole.

Japan just tilted policy to embrace negative interest rates. Japan's unemployment rate is 3.3%. Money can't leave China fast enough, giving it a real policy conundrum.

For all of the EU and EMU, the number unemployed over three months, six months and 12 months is declining. There also are declines in the number unemployed in at least each of the last three months. The signs of progress are clear, but it is also true that the annualized percentage drop for the number unemployed has slowed over three months compared to both six-month and 12-month.

The core of the hard currency EMU members (Austria, Belgium, Germany and Finland) shows no unemployment rate declines over three months, but both Belgium and Germany show declines over six months and 12 months. These countries also have some of the lowest unemployment rates in the EMU.

Unemployment rates are declining over three months, six months and 12 months in France, Italy, Spain, Ireland, the Netherlands and Portugal. Finland and Austria show no unemployment rate decline on any of these horizons and Luxembourg shows a decline over 12 months alone.

The lowest unemployment rates are Germany (4.5%), Austria (5.8%), Luxembourg (6.1%), and the Netherlands (6.6%). The highest rates again for reporters with December rates posted are Spain (20.8%), Portugal (11.8%), Italy (11.4%), and France (10.2%). Of course, less-up-to-date is Greece with an unemployment rate of 24.5% as of October. On the low side, there is EU member the U.K. with an unemployment rate of 5.1% in October.

The gap between the EMU rate and Germany peaked at 6.8 percentage points in 2013 and early 2014; it stands at 5.9% in December 2015. The gap is still large and the German rate is still falling, but the rest of Europe is catching up albeit slowly.

Germany's unemployment rate has been this low or lower only 1% of the time. Compare that to the U.S., which is another unemployment rate success story, with its rate at 5%, a rate that historically has been this low or lower 28.8% of the time. Germany is at an extreme position in terms of the level of its unemployment rate compared to history. Compare it to the EMU average the rate (which includes Germany) and is lower 59.9% of the time. Ireland's rate has been lower 43% of the time. Belgium's rate is lower 44% of the time. After those two countries, the next best is Finland with an unemployment rate that is lower two thirds of the time; higher only one third of the time. The rest of EMU members have rates lower 70% of the time or more; one has rates lower 80% of the time or less; two have rates lower 90% of the time or less. Austria is an exceptional result with an unemployment rate that is the second lowest in the EMU; yet it has been higher less than 1% of the time historically. Finland, France, Italy and Portugal have rates near at or above the 10% mark; Spain's is over 20% and Greece continues with one quarter of its workforce out of a job- one quarter.

Yes, there is progress in Europe. Unemployment rates are coming down as many writers are pointing out. It is a numeric fact, but one of dubious merit. A few countries have made great progress in absolute or relative terms. But the bulk of Europe is represented by countries with unemployment rates that remain high and are stuck high, moving lower in some very frustrating slow-motion technical dance. Four of 11 of the original EMU members in the table show unemployment declines of 1% or more over 12 months. Two more show declines of more than one half of one percentage points over 12-months; that's still only six of 11. Finland and Austria show net higher rates over 12 months; Luxembourg's rate is net lower by 0.2% points; France's rate is lower by 0.3 percentage points. Should we characterize this as good progress? Is it acceptable?

This is why the ECB is contemplating more action. The real question is: why is it contemplating? Why isn't it acting? If it has something it can do, it should be doing it.

Today also the PPI finalized for the EMU; all 10 of the reporting original EMU members through December show PPI declines on all horizons: three-month, six-month and 12-month. The pace of decline is slowing over three months compared to six months for each of those members. But in late December and January, oil has fallen further. Price trends tell us that distress is still being circulated through the pricing mechanism at the PPI level. Some central banks see the commodity price drop and strong dollar as anomalies that will pass. But they are passing slowly and some are getting worse as they `pass.' It's enough to make you wonder if the tactic to wait for the distress to pass makes any sense at all.

Yesterday Fed Vice Chair Stanley Fischer basically championed that view. The Fed can't figure out if the global selloff means anything for policy. That is a curious view. The Fed apparently also has the view that a declining manufacturing sector (in addition) is not an impediment to its view of rising inflation and coming rate hikes. One wonders, what would change the Fed's view? Policy in the U.S. is increasingly being run on the basis of dogma, something that is believed and does not have to be reaffirmed. Incoming data do not deter a dogmatic Fed. Every other central bank seems to have its eyes wide open. At the Fed, they are wide shut.


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It is a global paradox of sorts that unemployment rates are behaving relatively well even as economies do not. Part of it is the global slump in manufacturing which is a productivity-centric sector rather than a jobs-centric center. [...]

European Unemployment Rates Continue to Fall and Remain High

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Gasoline prices continued to decline last week and reached a nine year low.
The pump price for a gallon of regular gasoline fell to an average $1.82
(-11.9% y/y), down from $1.86 in the prior week, according to the U.S. Department of
Energy. The price compares to a 2014 high of $3.71 per gallon. Haver Analytics
constructs factors adjusting for the seasonal variation in pump prices, and the
adjusted price fell to $2.07 per gallon. The spot market gasoline price fell to
$1.05 per gallon (-22.5% y/y) as of last week.

WTI crude oil costs rose slightly and averaged $31.80 per barrel last
week (-29.8% y/y). Yesterday's price of $31.62 was down from Friday's high of
$33.62, and remained below the peak of $113.93 in April 2011. Brent crude oil
prices also rose w/w to $33.22 per barrel versus the prior week's low of $29.37.
Yesterday's price of $34.12 was down from Friday's high of $35.83.

Natural gas prices held steady last week at $2.20 per mmbtu (-23.4%
y/y). Prices were $2.18 yesterday.

Gasoline demand declined 2.5% y/y last week and demand for all
petroleum products fell 1.7% y/y. Gasoline inventories improved 4.2% y/y,
while inventories of all petroleum products rose 9.1% y/y. Crude oil production
(input to refineries) increased 3.8% y/y during the last four weeks.

The energy price data are reported by the U.S. Department of Energy. The
petroleum demand and inventory figures are from the Oil &amp; Gas Journal
Weekly. These data can be found in Haver's WEEKLY database. The daily
figures are in DAILY and greater detail on prices, demand and production,
along with regional breakdowns, are in OILWKLY.

<a href="/comment/160202c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/160202c.png"></a>
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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Weekly Energy Prices</th>
 <th scope="col" >02/01/16</th>
 <th scope="col" >01 /25/16</th>
 <th scope="col" >01/18/16</th>
 <th scope="col" >Y/Y%</th>
 <th scope="col" >2015</th>
 <th scope="col" >2014</th>
 <th scope="col" >2013</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Retail Gasoline ($ per Gallon, Regular)</td>
 <td >1.82</td>
 <td >1.86</td>
 <td >1.91</td>
 <td >-11.9</td>
 <td >2.03</td>
 <td >2.30</td>
 <td >3.33</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Light Sweet Crude Oil, WTI ($ per bbl.,
 WSJ)</td>
 <td >31.80</td>
 <td >29.16</td>
 <td >30.59</td>
 <td >-29.8</td>
 <td >48.90</td>
 <td >93.64</td>
 <td >97.96</td>
 </tr>
 <tr>
 <td class="firstcol" >Natural Gas ($/mmbtu, LA, WSJ)</td>
 <td >2.20</td>
 <td >2.20</td>
 <td >2.32</td>
 <td >-23.4</td>
 <td >2.62</td>
 <td >4.37</td>
 <td >3.73</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

U.S. Gasoline Prices Weaken to 2009 Low

PMIs showing widespread revival of global economy

Crude oil price has returned to pre-conflict level but traffic through Hormuz still subpar

Surging orders for computers and electronics propelling durable goods orders

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

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Winnie Tapasanun

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Existing home sales unexpectedly fell 2.4% m/m (+2.8% y/y) to 4.09 million units (SAAR) in June, the first monthly decline since March, following an upwardly revised 3.7% increase to 4.19 million in May (previously +3.2%; 4.17 mil.), according to the National Association of Realtors (NAR). The Action Economics Forecast Survey had expected June sales of 4.20 million units. Sales remained 36.4% below a high of 6.43 million in January 2022 and 38.0% below a peak of 6.60 million in January 2021. The June decline coincided with a rise in the average 30-year fixed mortgage rate to 6.49% in June, the highest since August 2025, after increasing to 6.44% in May, according to Freddie Mac. The sales figures are based on closings of sales contracts signed over the past couple of months.

Existing single-family home sales fell 2.4% (+3.3% y/y) to 3.73 million units in June, the first m/m fall in three months, following a 4.1% gain to 3.82 million in May, remaining 34.6% below a high of 5.70 million in January 2022. Sales of condos and co-ops decreased 2.7% (-2.7% y/y) to 360,000 in June, the lowest level since May 2025, after being unchanged m/m for the third successive month at 370,000, remaining 50.7% below a high of 730,000 in January 2022.

Regionally, June existing home sales declined m/m in all regions except the Northeast. Sales in the South dropped 3.6% (+3.8% y/y) to 1.89 million in June, a three-month low, after a 3.2% rise in May, and sales in the Midwest slid 3.0% (+2.1% y/y) to 980,000 following a 7.4% May advance; both posted the first m/m decrease in three months. Sales in the West fell 1.3% (+2.8% y/y) to 740,000, the lowest level since January, after being flat m/m at 750,000 in May. In contrast, sales in the Northeast increased 2.1% (0.0% y/y) to 480,000 after a 4.4% May gain. Notably, the South remained the dominant region, accounting for 46.2% of total U.S. existing home sales.

The median price of all existing homes (NSA) rose 2.2% (1.8% y/y) to $440,600 in June, the fifth consecutive m/m rise, on top of an upwardly revised 3.3% increase to $431,200 in May ($429,300 previously). Prices were 22.1% above a low of $360,800 in January 2023. The median price of an existing single-family home climbed 2.3% (1.8% y/y) to $446,400 in June, the fifth straight m/m increase, after a 3.4% advance to $436,400 in May. The median price of condos and co-ops, up for the sixth time in seven months, grew 0.6% (1.6% y/y) to $380,000 following a 1.0% May gain to $377,800. Regionally, overall prices rose m/m and y/y in June in the Northeast (+5.6%; +3.9% y/y), Midwest (+2.1%; +2.7% y/y), South (+1.0%; +0.9% y/y), and West (+0.8%; +0.9% y/y). All these price series were at their record highs.

Inventories of homes for sale fell m/m in June for the first time since December. The number of existing homes for sale (NSA) declined 0.6% (+1.3% y/y) to 1.56 million units following an upwardly revised 4.7% May rise to 1.57 million (the highest level since November 2019). The supply of homes on the market at the current selling rate (NSA) increased to 4.6 months in June from 4.5 months in May and April, matching the highest level since August 2025. A record low in supply of 1.6 months was in January 2022.

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.

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- June sales -2.4% m/m to 4.09 mil., first drop in three mths.; +2.8% y/y, third straight y/y rise.
- Sales m/m down in the South (-3.6%), Midwest (-3.0%), and West (-1.3%); up in the Northeast (+2.1%).
- Sales y/y up in all regions except the Northeast w/ a flat reading.
- Median sales price +2.2% (+1.8% y/y) to $440,600, a record high.
- Unsold inventory -0.6% (+1.3% y/y) to 1.56 mil. units, first m/m decline since Dec.; 4.6 months' supply, highest since Aug. ’25.

U.S. Existing Home Sales Unexpectedly Fall in June from a Five-Month High

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined 2,000 to 215,000 in the week ending July 4, from 217,000 in the week ending June 27, revised from 215,000. The four-week average was 218,750 in the July 4 week, down from 222,500 in the week ending June 27. The Action Economics/Haver Analytics Survey looked for 218,000 claims to have been filed. 

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 8,000 to 1.814 million in the week ending June 27, from 1.806 million in the week ending June 20, revised from 1.814 million. The four-week moving average rose to 1.808 million in the June 27 week from 1.801 million in the June 20 week. The insured unemployment rate was unchanged at 1.2% in the week of June 27. Except for a one-week dip to 1.1% in the week of April 25, the insured unemployment rate has been at 1.2% since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending June 20, the highest unemployment rates were in Washington (2.03%), New Jersey (2.11%), Minnesota (2.15%), and Puerto Rico (2.45%). The lowest rates were in South Dakota (0.28%), Florida (0.35%), Alabama and North Carolina (both 0.41%), Louisiana (0.42%), and Arkansas (0.49%). Rates in other notable states include California (1.88%), Pennsylvania (1.63%), Illinois (1.58%), New York (1.52%), and Texas (1.12%). 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.

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- New claims declined by 2,000 to 215,000 in the week ending July 4.
- Continuing claims rose by 8,000 to 1.814 million in the week ending June 27.
- The insured unemployment rate was unchanged at 1.2% in the week of June 27.

U.S. Initial Unemployment Claims Declined in the Week of July 4

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The German trade surplus surged in May to €19.1 billion from €14.7 billion in April. Exports rose by 0.9% in May while imports fell by 2.5%, creating a jump in the surplus month-to-month. In April, exports increased by 0.8% while imports rose by 1.1%.

Details on exports and imports lag by one month. In April, exports for motor vehicles and consumer goods declined, while exports of capital goods and other exports rose. On the import side, there were increases in imports ranging from 2.8% to 4.3% month-to-month across capital goods, motor vehicles, and consumer goods, but for the catch-all category ‘other’ imports fell by 2.7% month-to-month.

Flows adjusted for inflation showed an increase in exports of 0.4% in May while real imports fell by 3.3%. In April, real exports were flat while real imports fell by 0.2%.

The sequential behavior of real exports and real imports show independent activity. Imports log a clear weakening, rising 0.1% over 12 months, falling at a 5% annual rate over six months, and then falling at a 10.3% annual rate over three months. On the export side, real exports rose by 2.6% over 12 months, accelerated to a 7.2% annual rate over six months, but over three months have pulled back and fallen at a 1.6% annual rate. However, export growth still exceeds import growth over each of these horizons: 12 months, six months, and three months.

Trade trends paint a darkening picture of the German economy, with imports weak in real terms and trending even weaker, while activity on the export side of the equation pops over 12 months and six months but takes a hit over three months.

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The situation in the Strait of Hormuz continues to muddy the waters for the future. Passage through the strait has been sharply stopped, stabilized, revived, and now is back to being destabilized. That makes the strait a major uncertainty zone; it's hard to tell how these effects are going to play out over the coming months for German trade results and everyone else's. The deterioration of conditions in the Strait of Hormuz is now unknowable because Iran has decided to start shooting at ships, further destabilizing the outlook.

Germany

German Trades Surplus Balloons

Andrew Cates

**Growth Surprises Continue to Underpin Equity Resilience**
Global equity markets have proved remarkably resilient in recent weeks, shrugging off intermittent bouts of geopolitical and policy uncertainty to grind higher. Chart 1 below helps explain why: it tracks the relationship between global growth-versus-inflation surprises and world equity markets, and on that measure the recent run of global growth data has continued to surprise on the upside relative to inflation outturns — a combination that has historically been supportive for risk assets. Whether that resilience persists will depend on whether the growth-surprise advantage evident in the chart below can be sustained in the face of the inflationary pressures explored below.

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**PMIs Confirm a Broadly Solid Global Expansion**
This week's final composite PMI readings for June reinforced the broader impression of resilient global growth. As chart 2 below shows, most major economies posted readings comfortably in expansionary territory, with India continuing to lead the pack and the US not far behind. Even the laggards in the sample are hovering close to the expansion threshold rather than falling decisively below it, suggesting stabilisation rather than outright contraction (and with the UK a notable exception).

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**Inflation Surprises Are Creeping Back, and Bond Yields Are Taking Notice**
The US growth picture painted by Haver's surprise indices broadly echoes the message from the global PMI data. Chart 3 below shows the combined growth-and-inflation surprise index drifting higher this week, and closer inspection suggests growth is doing most of that work, with activity data continuing to outperform expectations. That is, on the face of it, good news. But it has not stopped bond markets from taking notice: short-dated Treasury yields have remained elevated in recent weeks, as stronger growth keeps alive the possibility that the Federal Reserve holds rates higher for longer or even lifts them in coming weeks.

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**Supply Chains Are Tightening** 
Latest data show that global supply chain pressures tightened by less in June than they had the month before, likely reflecting the easing of Middle East tensions through much of the period. Chart 4 below shows that pressures troughed in the middle of last year and have been building gradually since, though June's slower pace of tightening suggests that easing had started to feed through. Still, today's flare-up threatens to undo that improvement, particularly if it affects shipping routes or energy flows through the region once again.

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**Extreme Weather: An Old Supply-Side Risk Returns**
Geopolitics is not the only source of supply-side risk currently in play. Large parts of Europe have been gripped this week by another intense and prolonged heatwave, with temperatures in several major cities running well above seasonal norms. Extreme heat of this kind carries real economic costs: it depresses labour productivity, particularly in outdoor and manufacturing-adjacent sectors, strains electricity grids as air-conditioning demand spikes, and can disrupt agricultural output and river-based transport when water levels fall. Episodes like this have become more frequent in recent years, and while any single heatwave rarely shifts the macro picture on its own, the cumulative effect of more frequent and more severe weather events could start showing up in productivity and inflation data across the advanced economies. It is a reminder that the supply side of the global economy faces structural as well as cyclical challenges, and that climate-related disruption deserves a permanent place alongside geopolitics and demographics in any assessment of medium-term inflation risk.

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**AI Investment: The Other Side of the Supply Equation**
Set against these supply-side headwinds is a genuinely positive structural development: the extraordinary scale of private investment now flowing into artificial intelligence. Chart 6 below shows just how sharply that investment has grown in recent years, reaching a fresh high last year. If even a fraction of that investment translates into genuine productivity gains, it could provide a meaningful long-run offset to the energy, climate and geopolitical constraints highlighted elsewhere in this week's charts. The scale of the bet now being placed on AI is large enough that it is beginning to show up in aggregate investment and capital expenditure data across the advanced economies, and it is likely to remain one of the defining structural themes shaping the global growth outlook over the remainder of this decade.

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Global markets head into this week’s closing stages digesting a mixed set of signals. Last week's US non-farm payrolls report undershot expectations, adding to questions about the durability of the US labour market even as broader activity data have continued to hold up well. Compounding that picture, news broke today of renewed instability in the Middle East, reintroducing a geopolitical risk premium into markets just as investors had begun to look past it. Global equity markets have nonetheless remained resilient, continuing to track the broadly encouraging tone of incoming activity data (chart 1). That resilience was reinforced by a solid set of global PMIs across most major economies over the past few days (chart 2). Haver's surprise indices tell a similar story of positive growth momentum in the US, but with an important caveat: incoming inflation data have also been surprising to the upside, driven largely by higher oil prices (chart 3). These inflation risks could persist moreover, as global supply chain pressures have picked up in recent months and today's flare-up in the Middle East threatens to add further strain (chart 4). The world economy remains vulnerable to other supply-side shocks too, such as the extreme heat gripping much of Europe this week (chart 5). Still, on the other side of the ledger the enormous scale of investment now flowing into artificial intelligence could be a genuine source of supply-side potential (chart 6).

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Charts of the Week: Growth Holds Firm

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Mortgage applications dropped 2.2% w/w (-5.4% y/y) in the week ending July 3, following no change in the week ending June 26, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house edged down 0.6% w/w (-6.3% y/y) in the latest week, after rising 0.5% w/w (3.2% y/y) in the June 26 week.  Applications for loan refinancing dropped 4.1% w/w (-4.2% y/y) in the week ending July 3, after declining 0.7% w/w (+9.1% y/y) in the June 26 week.

The effective interest rate on a 30-year fixed-rate loan rose 1bp to 6.77% in the week ending July 3 from 6.76% in the week ending June 26. The rate on 15-year fixed-rate mortgages edged down 2bps to 6.17% in the July 3 week from 6.19% in the June 26 week. The 30-year Jumbo rate edged down 1bp to 6.62% in the latest week from 6.63% in the June 26 week. The rate on a 5-year ARM rose 5bps to 6.19% in the July 3 week from 6.14% in the June 26 week.

The share of applications for refinancing an existing loan declined to 40.6% of total applications in the week of July 3 from 41.4% in the June 26 week. The adjustable-rate mortgage (ARM) share of activity edged up to 7.8% in the July 3 week from 7.6% in the June 26 week.

The average size of a mortgage declined 0.4% w/w (+1.3% y/y) to $391,500 in the week ending July 3, after rising 1.1% w/w (0.4% y/y) to $393,200 in the week ending June 26. The average size of a purchase loan declined 1.0% w/w (+4.3% y/y) to $451,000 in the latest week, after rising 1.2% w/w (2.7% y/y) to $455,600 in the June 26 week. The average size of a loan to refinance a mortgage edged down 0.1% w/w (-3.9% y/y) to $304,600 in the week ending July 3, after rising 0.5% w/w (-2.8% y/y) to $304,900 in the June 26 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 applications for loans to purchase and applications for loan refinancing declined in the latest week.
- Interest rate on 30-year fixed-rate loans rose 1bp to 6.77%. 
- Average loan size edged down.