Robert Brusca

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 Progress, yes...but not much 
 
 
 
 

 
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The indices of sentiment and confidence in the EU area, for the Monetary Union sub-set, as well as for their key individual members, showed surprising resilience and strength in May. The overall EU index rose as the sentiment index for 10 of 11 key EU members improved month-to-month. This improvement followed a month in which seven of the same members reported month-to-month declines. In the previous month of March, 5 of them had reported declines.

Is it always good to remind people that one month does not determine a trend, however, the rebound of these sentiment indices for 10 out of 11 key countries as well as for the EU as a whole and for the Monetary Union is a good start to something better.

Still, once we evaluate where things sit, the answer is that the readings for the economic union the monetary union and these key 11 countries are still unfailingly week - even after the rebound in May. 

We evaluate the standing of the respective EU diffusion metrics in May by placing the current reading for each region or country in an ordered queue of its historic data then expressing that standing is a percentile positioning in the queue. For example, the EU index is in the 12 percentile of its queue. That means it is weaker historically than its current level only 12% of the time. The EMU metric for sentiment is in the 11.4 percentile of its queue, its weaker only 11.4% of the time. Of course, the ranking for the union is a weighted average of its various economies but with the overall index being weighted separately. Right now, for example, it appears that the EMU index is weaker than most of the members that carry the largest weight in the euro-Zone itself. How could that happen? The answer is that it's not just the weakness of the components in the EMU index that gives it its ranking but also the coincidence of all of that weakness happening together and it's the coincident occurrence of weakness that is responsible for the lower standing of the region than for most of its members

The weakest queue standing among these key 10 EMU members is from France which is in the 9.3 percentile of its queue followed by Spain in the 10.2 percentile of its queue. After those two relatively large EMU members the percentile standings move up to 12.9 for Belgium, to 14.1 for the Netherlands, to 15.0 for Portugal, and to 16.8 for Austria and so on. Germany, of course, is that the top of the food chain with the 35.6 percentile standing but note this is still pretty close to the bottom third of its range and it's the best of the lot and Germany is the largest economy in EMU.
The Industrial sector 
The industrial sector improved in the monetary union to a reading of -13 from reading of -14 (note that the values in the table by industry sector are for all of the EU not for the EMU). The queue standings for industry find Germany at the strongest reading at 40.7 percentile, Italy at the 13.8 percentile, France at the 18.6 percentile all expressed as percentile standings of their their respective queues. We also look at them in terms of changes of the last three months the German reading has deteriorated by four points, the French reading has deteriorated by three points, the Italian reading is unchanged, and the Spanish reading is down by one point. The overall EMU reading is weaker by two points. So the improvement that were seeing in industrial sector is mostly from very weak levels in April as we are still for the most part below the levels we saw in February. This is a common them for most categories this month...a minor one month bounce.
Consumer Confidence 
Consumer confidence in EMU continues to be uniformly low. In the EMU region it's in the bottom 15 percentile of its queue standing. There was no improvement in consumer confidence month-to-month, although April had showed improvement from March which was even with its value in February. Unemployment expectations have been steadily dropping they are still quite high in the top 22nd percent of their historic queue (expectations are higher only 22% of the time). And by country Germany continues to be the strongest with a decent consumer rating in the 64th percentile of its historic queue, nearly a top one-third reading. The EU's UK has a 20%-of-queue rating, while France's standing is in the bottom 12% of its queue and Spain is in the bottom 11.6% of its queue. 
Retailing: retail therapy? 
Retailing improved in the month in EMU to a -17 net reading from -18 reading in April but it is still below its -16 reading for February. The queue standing for the May reading of -17 is in the 17 percentile of its historic queue, a very weak standing. Germany has the highest queue standing on this metric in the 66.8 percentile or top one-third reading. the UK moves up to a more respectable 42nd percentile standing with Greece (Greece!) at a 34th percentile standing. Spain is at a 29th percentile and Italy at about 30th percentile all of these are relatively better than what we see for other components although clearly (except for the UK and Germany) all of these are still bottom one third of their queue standings which we have to regard as very weak. We do however see strong improvements from their February levels: Greece is at a -15 compared with a -33 raw-reading in February, Portugal which is at a -15 reading compared with a -20 raw reading in February, and even Italy, at a -22 compared with a -28 raw- reading in February. We are seeing improvement in retailing in the countries that have been the most hard-hit by austerity.
Services sector 
The services metric for EMU improved to -9 in May from -11 in April that -9 reading stands at its February level as well. There were month-to-month improvements in Germany, in Italy, and in Portugal; a sharp improvement in the UK and Greece. But the ranking of the services index for EMU in May is in the lower 12 percentile of its historic queue. Generally the services readings by country are slightly better than for other components, except for retailing. Interestingly, the UK has the highest percentile standing in the 33.5th percentile compared to Germany which is second at the 32nd percentile Greece is in the 29th percentile, Spain in the 20th percentile, Italy in the 13th percentile, Portugal in the 10th percentile and France, which was unchanged on the month stands in the lower 5th percentile of its historic queue, an extremely weak reading. 
Construction 
The construction sector in EMU ranks in the 17 percentile of its historic queue unlike the other measures it fell in May to a -34 reading to a -32 reading and it's below its February reading. By country Germany is exceptionally strong in the top 1% of its historic queue for the construction sector! Italy's reading is basically tied with the UK in the 37th percentile of their respective queues. France's reading stands in the 28th percentile of its queue. And Spain that has had an absolute construction disaster has fallen below 1% of its historic queue for the construction sector.
Employment expectations...generally 
Employment expectations up-and-down the Zone's sectors whether measured in the current environment or for expectations - cut and presented many different ways - are generally ranking from the 30th to the 13th percentile of their respective historic queues. The exception is for industry where employment expectations are in the 43rd percentile which is still not a good reading but it's by far the best of the lot. From the consumer sentiment report unemployment expectations are, as mentioned earlier, in the top 22% of their historic queue.
Summing up 
The picture for EMU this month is of a region that is slightly better than it was in the last month or two but still generally worse than it was three months ago. While, there is a rather broad-based bounce recorded in May, we need to be careful about getting too carried away about what that signal really means. It certainly is too soon to say we turned the corner and to try to extrapolate trends. If you look at the chart at the top and try to block out particular calculations for particular months, most of the lines on the chart appear to have moved up from their lowest points of this cycle. For some, like France, it's a one month move. For most of the rest it's a multi month move but on a very shallow gradient. That shallow gradient means that the signal is not strong. It also indicates ongoing vulnerability. 

Away from the sheer numbers we continue to hear divisive language out of leaders from the various countries in the monetary union. France, Spain, Poland, Portugal, the Netherlands and Slovenia are all being given more time to complete their austerity plans by the EU. We can be hopeful that the worst of this might be behind us, but it would be foolish to expect to see improvement at anything other than a very slow pace at least based on the momentum that we see in this report. 

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The indices of sentiment and confidence in the EU area, for the Monetary Union sub-set, as well as for their key individual members, showed surprising resilience and strength in May. The overall EU index rose as the sentiment index [...]

EU Indices largely improve in May.

Tom Moeller

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 According to the National Association of Realtors (NAR), pending sales
 of single-family homes during April ticked up 0.3% (10.3% y/y) after a
 1.5% gain during March. The latest level was the highest since April 2010.
 The sales rebound since the removal in 2010 of the home buyers tax credit
 has raised home sales by more than one-third from the low.
 Last month's sales gain again reflected mixed performance around the
 country. Sales in the Northeast rose 11.5% (17.7% y/y) to a three-year high.
 Sales in the Midwest gained 3.2% (15.0% y/y) to the highest level of the
 economic expansion. To the downside, sales in the West plummeted 7.6% (-2.7%
 y/y) while sales in the South were down 1.1% (+12.2% y/y).
 Pending home sales figures are analogous to the new home sales
 data from the Commerce Department in that they measure existing home sales
 when the sales contract is signed, not at the time the sale is closed. The
 series dates back to 2001 and the data are available in Haver's PREALTOR database.&nbsp;
 

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 &nbsp;


<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" >Pending Home Sales
 (2001=100)</th>
 <th scope="col" >Apr</th>
 <th scope="col" >Mar</th>
 <th scope="col" >Feb</th>
 <th scope="col" >Y/Y %</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td >106.0</td>
 <td >105.7</td>
 <td >104.1</td>
 <td >10.3</td>
 <td >100.3</td>
 <td >90.2</td>
 <td >89.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Northeast</td>
 <td >92.3</td>
 <td >82.8</td>
 <td >82.8</td>
 <td >17.7</td>
 <td >79.1</td>
 <td >67.9</td>
 <td >70.9</td>
 </tr>
 <tr>
 <td class="firstcol" >Midwest</td>
 <td >107.1</td>
 <td >103.8</td>
 <td >103.5</td>
 <td >15.0</td>
 <td >95.9</td>
 <td >81.5</td>
 <td >79.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >South</td>
 <td >119.2</td>
 <td >120.5</td>
 <td >116.9</td>
 <td >12.2</td>
 <td >110.7</td>
 <td >98.3</td>
 <td >97.0</td>
 </tr>
 <tr>
 <td class="firstcol" >West</td>
 <td >94.6</td>
 <td >102.4</td>
 <td >101.4</td>
 <td >-2.7</td>
 <td >105.0</td>
 <td >104.1</td>
 <td >100.7</td>
 </tr>
 </tbody>
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According to the National Association of Realtors (NAR), pending sales of single-family homes during April ticked up 0.3% (10.3% y/y) after a 1.5% gain during March. The latest level was the highest since April 2010. The sales rebound [...]

U.S. Pending Home Sales Reach a New High

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 Initial unemployment insurance claims increased to 354,000 (-7.3%
 y/y) during the week ended May 25 from a revised 344,000, initially
 reported as 340,000. Consensus expectations were for 340,000 claims. The
 four week moving average of claims rose to 347,250 from 340,500. During
 the last ten years, there has been a 74% correlation between the level
 of claims and the m/m change in nonfarm payrolls.
 Continuing claims for unemployment insurance in the week ended May 18
 increased to 2.986M (-9.0% y/y) from the low of 2.923M. The four week
 moving average of continuing claims fell to a cycle-low of&nbsp; 2.987M.
 The insured rate of unemployment held at 2.3% where it's been for six
 weeks. This particular count covers only &quot;regular&quot; programs
 and does not include all extended benefit and other specialized jobless
 insurance programs. In the week of May 11, the latest figure available,
 the grand total of all benefit recipients ticked up w/w to 4.579M, (-25.4%
 y/y. That compares to a cycle peak of 12.060M in January 2010. The
 number of individuals who are collecting emergency and extended payments
 fell to a new low of 1.727 million (-34.1% y/y).
 By state, the insured unemployment rate continued to vary
 greatly with Nebraska (1.04%), Louisiana (1.13%), Virginia (1.22%),
 Texas (1.48%), Florida (1.53%), Tennessee (1.55%), South Carolina (1.67%)
 and Ohio (1.77%) at the low end of the range. At the high end were
 Michigan (2.10%), Maryland (2.29%), New York (2.52%), Illinois (2.67%),
 Wisconsin (2.62%), (Nevada 2.85%), California (2.89%) and New Jersey
 (3.15%).
 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 consensus estimates come
 from the Action Economics survey, carried in the AS1REPNA
 database.&nbsp;&nbsp;
 

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
 <thead>
 <tr>
 <th class="firstcol" scope="col" >Unemployment
 Insurance (000s)</th>
 <th scope="col" >05/25/13</th>
 <th scope="col" >05/18/13</th>
 <th scope="col" >05/11/13</th>
 <th scope="col" >Y/Y %</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Initial Claims</td>
 <td>354</td>
 <td>344</td>
 <td>363</td>
 <td>-7.3</td>
 <td>375</td>
 <td>409</td>
 <td>459</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Continuing Claims</td>
 <td>--</td>
 <td>2,986</td>
 <td>2,923</td>
 <td>-9.0</td>
 <td>3,318</td>
 <td>3,744</td>
 <td>4,544</td>
 </tr>
 <tr>
 <td class="firstcol" >Insured Unemployment Rate (%)</td>
 <td>--</td>
 <td>2.3</td>
 <td>2.3</td>
 <td>2.6 
 (5/12)</td>
 <td>2.6</td>
 <td>3.0</td>
 <td>3.6</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Total &quot;All Programs&quot;
 (NSA)</td>
 <td>--</td>
 <td>--</td>
 <td>4.579M</td>
 <td>-25.4</td>
 <td>6.047M</td>
 <td>7.750M</td>
 <td>9.850M</td>
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Initial unemployment insurance claims increased to 354,000 (-7.3% y/y) during the week ended May 25 from a revised 344,000, initially reported as 340,000. Consensus expectations were for 340,000 claims. The four week moving average of [...]

U.S. Initial Claims for Unemployment Insurance Unexpectedly Notch Higher

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 Real GDP growth for last quarter was marginally
 revised to 2.4% (1.8% y/y) from the advance estimate of a 2.5% rise.
 Nevertheless, growth still improved from 0.4% at the end of the year.
 Expectations were for a 2.5% gain. Fewer military outlays and a smaller
 deterioration in the foreign trade account&nbsp; restrained growth last
 quarter. Inventory rebuilding, consumer spending and residential
 investment were firm. The increase in the GDP chain price index also was
 little-revised at a modest 1.1% (1.6% y/y).
 Posted for the first time, after tax corporate
 profits fell 2.0% (+4.0% y/y) following a 1.8% Q4 rise. The decline
 reflected weakness across sectors. Rest of world profits fell 7.3% (+4.1%
 y/y), domestic nonfinancial earnings were off 0.8% (+2.8% y/y) while
 earnings in the financial sector slipped 0.4% (+5.3% y/y).&nbsp;&nbsp; 
 The effect on GDP growth from inventory
 rebuilding was lessened to 0.6 percentage points from 1.0 points. This
 still did not recoup the 1.5 point subtraction during Q4. Trade deficit
 deterioration, however, lowered growth by a reduced 0.2 percentage points.
 It occurred as imports rose at an easier 1.9% rate (-0.1% y/y) while
 exports rose at a 0.8% rate (1.1% y/y), also lessened from the initial
 tally.

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 Final sales to domestic purchasers grew at an unrevised 1.9% rate (1.7%
 y/y). The advance continued to be held back by a 4.9% decline (-2.3% y/y)
 in government purchases. This drop reflected a 12.1% shortfall (-6.3% y/y)
 in national defense spending. It was accompanied by a deepened 2.4%
 decline (-1.2% y/y) in state &amp; local government outlays.&nbsp; 
 Growth in final sales to private domestic purchasers was unrevised at a
 firm 3.3% (2.6% y/y). That followed Q4's 3.6% increase. Consumer spending
 rose at a firmed 3.4% rate (2.1% y/y) led by a lessened 9.1% advance (7.3%
 y/y) in motor vehicle purchases. Consumption of home furnishings growth,
 however, was raised to 5.2% (3.6% y/y) while apparel consumption increased
 a little-changed 1.7% rate (0.1% y/y). Residential investment growth
 continued strong at a slightly-lessened 12.0% rate (12.8% y/y). Business
 fixed investment growth remained easier at 2.2% (4.1% y/y) following a
 13.1% rise during Q4.&nbsp;&nbsp;
 The GDP chain price index grew at a modest and marginally-changed 1.1%
 rate (1.6% y/y). That followed a 1.0% Q4 rise. This modest gain was
 largely influenced by a 1.0% increase (1.2% y/y) in the PCE price index,
 held back by lower energy prices. A firmed 6.7% rise (3.5% y/y) in the
 residential price index was countered by an unchanged 0.6% uptick (1.0%
 y/y) in the business fixed investment price index.&nbsp;
 The latest GDP figures can be found in Haver's USECON and USNA
 databases; USNA contains basically all of the Bureau of Economic
 Analysis' detail on the national accounts, including the new integrated
 economics accounts and the recently added GDP data for U.S. Territories.
 The Consensus estimates can be found in AS1REPNA.&nbsp;
 
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	<colgroup><col><col><col><col><col><col><col><col></colgroup>
	
	
 <thead>
 <tr>
 <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM" ;>Chained
 2005 $, %, AR</a></th>
 <th scope="col" >Q1'13 (2nd Estimate)</th>
 <th scope="col" >Q1'13 (Advance)</th>
 <th scope="col" >Q4'12</th>
 <th scope="col" >Q3'12</th>
 <th scope="col" >Q1 Y/Y</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Gross Domestic Product</td>
 <td >2.4</td>
 <td >2.5</td>
 <td >0.4</td>
 <td >3.1</td>
 <td >1.8</td>
 <td >2.2</td>
 <td >1.8</td>
 <td >2.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Inventory Effect</td>
 <td >0.6</td>
 <td >1.0</td>
 <td >-1.5</td>
 <td >0.7</td>
 <td >-0.1</td>
 <td >0.2</td>
 <td >-0.2</td>
 <td >1.5</td>
 </tr>
 <tr>
 <td class="firstcol" >Final Sales</td>
 <td >1.8</td>
 <td >1.5</td>
 <td >1.9</td>
 <td >2.4</td>
 <td >1.9</td>
 <td >2.1</td>
 <td >2.0</td>
 <td >0.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Foreign Trade Effect</td>
 <td >-0.2</td>
 <td >-0.5</td>
 <td >0.3</td>
 <td >0.4</td>
 <td >0.2</td>
 <td >0.1</td>
 <td >0.2</td>
 <td >-0.4</td>
 </tr>
 <tr>
 <td class="firstcol" >Domestic Final Sales</td>
 <td >1.9</td>
 <td >1.9</td>
 <td >1.5</td>
 <td >1.9</td>
 <td >1.7</td>
 <td >1.9</td>
 <td >1.8</td>
 <td >1.3</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" >Demand Components</td>
 </tr>
 <tr>
 <td class="firstcol" >Personal Consumption</td>
 <td >3.4</td>
 <td >3.2</td>
 <td >1.8</td>
 <td >1.6</td>
 <td >2.1</td>
 <td >1.9</td>
 <td >2.5</td>
 <td >1.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Business Fixed Investment</td>
 <td >2.2</td>
 <td >2.1</td>
 <td >13.1</td>
 <td >-1.8</td>
 <td >4.1</td>
 <td >8.0</td>
 <td >8.6</td>
 <td >0.7</td>
 </tr>
 <tr>
 <td class="firstcol" >Residential Investment</td>
 <td >12.0</td>
 <td >12.6</td>
 <td >17.5</td>
 <td >13.6</td>
 <td >12.8</td>
 <td >12.1</td>
 <td >-1.4</td>
 <td >-3.1</td>
 </tr>
 <tr>
 <td class="firstcol" >Government Spending</td>
 <td >-4.9</td>
 <td >-4.1</td>
 <td >-7.0</td>
 <td >3.9</td>
 <td >-2.3</td>
 <td >-1.7</td>
 <td >-3.1</td>
 <td >0.6</td>
 </tr>
 <tr class="grey3">
 <td class="firstcol" colSpan="9" >Chain-Type Price
 Index</td>
 </tr>
 <tr>
 <td class="firstcol" >GDP</td>
 <td >1.1</td>
 <td >1.2</td>
 <td >1.0</td>
 <td >2.7</td>
 <td >1.6</td>
 <td >1.8</td>
 <td >2.1</td>
 <td >1.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Personal Consumption Expenditures</td>
 <td >1.0</td>
 <td >0.9</td>
 <td >1.6</td>
 <td >1.6</td>
 <td >1.2</td>
 <td >1.8</td>
 <td >2.4</td>
 <td >1.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; PCE less Food &amp;
 Energy</td>
 <td >1.2</td>
 <td >1.2</td>
 <td >1.0</td>
 <td >1.1</td>
 <td >1.3</td>
 <td >1.7</td>
 <td >1.4</td>
 <td >1.5</td>
 </tr>
 </tbody>
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Real GDP growth for last quarter was marginally revised to 2.4% (1.8% y/y) from the advance estimate of a 2.5% rise. Nevertheless, growth still improved from 0.4% at the end of the year. Expectations were for a 2.5% gain. Fewer [...]

U.S. GDP Growth Remains Moderate but Profits Decline

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 Forward momentum in consumer spending was lost in May. The
 International Council of Shopping Centers and Goldman Sachs reported that
 chain store sales slumped 0.9% last week (2.8% y/y). That was enough to
 pull sales so far this month 2.2% below the April average which was a
 record high. During the last ten years there has been a 61% correlation
 between the y/y change in chain store sales and the change in retail sales
 at general merchandise stores. That correlation recently has declined.
 General merchandise store sales account for 15% of total retail sales.
 The ICSC-Goldman Sachs retail chain-store sales index is constructed using
 the same-store sales (stores open for one year) reported by 78 stores of
 seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears
 and Wal-Mart.
 
 The chain store figures can be found in Haver's SURVEYW
 database.&nbsp;
 
 <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" >ICSC-Goldman Sachs (SA, 1977=100)</th>
 <th scope="col">05/25/13</th>
 <th scope="col">05/18/13</th>
 <th scope="col" >05/11/13</th>
 <th scope="col" >Y/Y</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Total Weekly Chain Store Sales</td>
 <td>543.1</td>
 <td>547.9</td>
 <td >546.9</td>
 <td >2.8%</td>
 <td >3.0%</td>
 <td >3.2%</td>
 <td >2.9%</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; W/W %</td>
 <td>-0.9</td>
 <td>0.2</td>
 <td >-2.0</td>
 <td >--</td>
 <td >--</td>
 <td >--</td>
 <td >--</td>
 </tr>
 </tbody>
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Forward momentum in consumer spending was lost in May. The International Council of Shopping Centers and Goldman Sachs reported that chain store sales slumped 0.9% last week (2.8% y/y). That was enough to pull sales so far this month [...]

U.S. Chain Store Sales Remain Down Versus Last Month

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 Following earlier improvement, gasoline prices lost upward momentum last week. The price of
 regular gasoline slipped two cents to $3.65 per gallon and
 remained down just slightly versus last year. Prices remain below
 the $3.78 per gallon peak reached late in February. Haver Analytics
 constructs seasonal factors to account for seasonal volatility and
 the adjusted price ticked one penny higher w/w to $3.44 per gallon.
 
 Also, recently moving sideways was the
 price for light sweet crude oil. It ticked up last week to $95.09
 per barrel (4.4% y/y), close to where it's been for most of this
 year. Nevertheless, the price remained up from the June 2012 low of
 $80.29. Yesterday prices held at $95.01. Brent crude oil prices were
 roughly constant last week at $102.49 per barrel (-5.1% y/y) and
 were $103.89 yesterday.
 
 Natural gas prices jumped last week to $4.14 per mmbtu (59.0%
 y/y). They rose slightly yesterday at $4.17.
 The demand for gasoline fell 3.3% y/y last week. Residual
 fuel oil needs, used for heating, fell 7.9% y/y but distillate
 demand improved 2.5% y/y. Gasoline inventories jumped 9.8% y/y.
 
 The energy price data are reported by the U.S. Department of
 Energy and can be found in Haver's WEEKLY database. The daily
 figures are in DAILY and the gasoline demand figures are in OILWKLY.&nbsp;
 
 
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 &nbsp;


<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" >05/27/13</th>
 <th scope="col" >05/20/13</th>
 <th scope="col" >05/13/13</th>
 <th scope="col" >Y/Y%</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Retail Regular Gasoline ($
 per Gallon, Regular)</td>
 <td >3.65</td>
 <td >3.67</td>
 <td >3.60</td>
 <td >-0.7</td>
 <td >3.62</td>
 <td >3.52</td>
 <td >2.78</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Light Sweet Crude Oil, WTI ($
 per bbl.)</td>
 <td >95.09</td>
 <td >94.97</td>
 <td >96.17</td>
 <td >4.4</td>
 <td >94.20</td>
 <td >95.14</td>
 <td >79.51</td>
 </tr>
 <tr>
 <td class="firstcol" >Natural Gas ($/mmbtu)</td>
 <td >4.14</td>
 <td >3.95</td>
 <td >3.89</td>
 <td >59.0</td>
 <td >2.75</td>
 <td >3.99</td>
 <td >4.00</td>
 </tr>
 </tbody>
 </table>
 
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Following earlier improvement, gasoline prices lost upward momentum last week. The price of regular gasoline slipped two cents to $3.65 per gallon and remained down just slightly versus last year. Prices remain below the $3.78 per [...]

U.S. Petroleum Prices Meander Sideways

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 Higher interest rates prompted an
 immediate reaction in the mortgage loan market. Last week's
 increase in the effective rate on a 15-year mortgage to 3.17%
 left it at it's highest level since the last week of August. In
 tandem, the index of total
 mortgage applications from the Mortgage Bankers Association
 slumped 8.8% (-9.2% y/y), its third consecutive weekly decline.
 The drop reflected a 12.3% shortfall (-15.2% y/y) in
 applications to refinance an existing loan. Conversely,
 home purchase mortgage applications gained 2.6% (13.5%
 y/y) as home purchases continued their improvement since 2010.
 
 Accompanying the rise in 15-year mortgage rates was the
 effective rate on a 30-year fixed rate loan. It increased to
 4.01% last week while the rate on a Jumbo 30-year loan jumped
 to 4.15%. The 84 basis point spread between 15- and 30-year
 loan rates was nearly its record. The effective interest rate
 on an adjustable 5-year mortgage was stable w/w at 2.69%, up
 just slightly versus its low of 2.59% at the beginning of this
 month.
 
 Applications for fixed interest rate loans fell 9.6% y/y
 while adjustable rate loan applications slipped 1.2% y/y. The
 average mortgage loan size was $222,500. The average size loan
 for home purchases was $267,100 last week while for
 refinancings it was $204,200.
 
 The Mortgage Bankers Association surveys between 20 to 35
 of the top lenders in the U.S. housing industry to derive its
 refinance, purchase and market indexes. The weekly survey
 covers roughly 50% of all U.S. residential mortgage
 applications processed each week by mortgage banks, commercial
 banks and thrifts. The figures for weekly mortgage
 applications are available in Haver's SURVEYW database.&nbsp;&nbsp;
 
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 &nbsp;


<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" >MBA
 Mortgage Applications (SA, 3/16/90=100)</th>
 <th scope="col" >05/24/13</th>
 <th scope="col" >05/17/13</th>
 <th scope="col" >05/10/13</th>
 <th scope="col" >Y/Y%</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Total Market Index</td>
 <td >721.4</td>
 <td >791.0</td>
 <td >876.6</td>
 <td >-9.2</td>
 <td >813.8</td>
 <td >572.3</td>
 <td >659.3</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;Purchase</td>
 <td >210.6</td>
 <td >205.3</td>
 <td >211.6</td>
 <td >13.5</td>
 <td >187.8</td>
 <td >182.6</td>
 <td >199.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;Refinancing</td>
 <td >3,723.3</td>
 <td >4,245.5</td>
 <td >4,805.8</td>
 <td >-15.2</td>
 <td >4,505.0</td>
 <td >2,858.4</td>
 <td >3,348.1</td>
 </tr>
 <tr>
 <td class="firstcol" >15-Year Mortgage
 Effective Interest Rate (%)</td>
 <td >3.17</td>
 <td >3.04</td>
 <td >2.96</td>
 <td >3.36 
 (5/12)</td>
 <td >3.25</td>
 <td >3.97</td>
 <td >4.39</td>
 </tr>
 </tbody>
 </table>
 




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Higher interest rates prompted an immediate reaction in the mortgage loan market. Last week's increase in the effective rate on a 15-year mortgage to 3.17% left it at it's highest level since the last week of August. In tandem, the [...]

U.S. Mortgage Refinancings Drop Sharply With Higher Rates

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 Consumer confidence has been building across the board. The Conference Board's
 Consumer Confidence Index rose to 76.2 this month and built on the
 upwardly revised April figure of 69.0. Consensus expectations had been for
 a roughly stable 70.8. During the last ten years, there has been a 47%
 correlation between the level of confidence and the three-month change in
 real PCE.
 Another sharp improvement in the consumer expectations reading to 82.4
 from 74.3 led the strength in the overall confidence index this month.
 Expectations for better business conditions improved the most, followed by
 expectations for more jobs. Expectations for the inflation rate in twelve
 months dropped sharply to 5.3%, the lowest level since December 2010. The
 percentage expecting higher stock prices surged to its highest since May
 2007.
 The present situations index improved sharply m/m to 66.7, a breakout
 to its highest level since May 2008. The 18.8% of respondents who thought
 that business conditions were good was the most since February 2008. Jobs
 were thought to be hard to get by 36.1% of respondents. That was down
 slightly m/m and down sharply versus the high of 49.4% in June 2011. Jobs
 were viewed as not so plentiful by 53.1% of individuals, down from the
 recent high but up sharply from the 2011 low of 45.0%.
 The consumer confidence index for those under 35 years rose to its
 highest level since October 2007. Confidence amongst middle-aged
 individuals also improved to the highest since January 2008 but
 individuals over 55 years remained the most skeptical age group. Their
 confidence this month is no higher than February of last year.
 The Consumer Confidence data is available in Haver's CBDB&nbsp;database.
 

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 &nbsp;


<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" >Conference Board (SA, 1985=100)</th>
 <th scope="col" >May</th>
 <th scope="col" >April</th>
 <th scope="col" >Mar</th>
 <th scope="col" >Y/Y %</th>
 <th scope="col" >2012</th>
 <th scope="col" >2011</th>
 <th scope="col" >2010</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Consumer Confidence Index</td>
 <td>76.2</td>
 <td>69.0</td>
 <td>61.9</td>
 <td>18.3</td>
 <td>67.1</td>
 <td>58.1</td>
 <td>54.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Present Situation</td>
 <td>66.7</td>
 <td>61.0</td>
 <td>59.2</td>
 <td>48.6</td>
 <td>49.8</td>
 <td>36.1</td>
 <td>25.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Expectations</td>
 <td>82.4</td>
 <td>74.3</td>
 <td>63.7</td>
 <td>6.6</td>
 <td>78.6</td>
 <td>72.8</td>
 <td>73.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Consumer Confidence By Age Group</td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Under 35 Years</td>
 <td>100.9</td>
 <td>96.1</td>
 <td>83.2</td>
 <td>23.7</td>
 <td>86.5</td>
 <td>77.3</td>
 <td>70.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Aged 35-54 Years</td>
 <td>79.3</td>
 <td>69.1</td>
 <td>62.3</td>
 <td>20.2</td>
 <td>68.5</td>
 <td>59.8</td>
 <td>55.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Over 55 Years</td>
 <td>62.0</td>
 <td>58.1</td>
 <td>52.1</td>
 <td>12.7</td>
 <td>56.6</td>
 <td>47.3</td>
 <td>47.4</td>
 </tr>
 </tbody>
 </table>


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Consumer confidence has been building across the board. The Conference Board's Consumer Confidence Index rose to 76.2 this month and built on the upwardly revised April figure of 69.0. Consensus expectations had been for a roughly [...]

U.S. Consumer Confidence Continues To Strengthen

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

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

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Andrew Cates

**Energy shock lifts inflation, trims growth**
The IMF’s latest WEO revisions for 2026 broadly reflect the classic stagflationary impact of the recent Middle East energy shock, with growth downgraded and inflation revised higher across most major economies. Higher energy prices act as a tax on real incomes while simultaneously pushing up costs. That said, the picture is not uniform: a number of economies—notably the US, China and India—have seen growth upgrades, reflecting stronger-than-expected momentum so far in 2026. By contrast, the UK stands out at the stagflationary extreme, combining one of the largest growth downgrades with a relatively strong inflation uplift—consistent with its weaker underlying momentum, greater energy sensitivity and more persistent domestic inflation dynamics. More broadly, while the global revisions remain modest—pointing to resilience in activity—the message is that disinflation is no longer a smooth glide back to target but increasingly contingent on energy prices and geopolitical developments.

260423Z1.jpg

**Markets largely shrug off rising economic pessimism**
Notwithstanding a more downbeat assessment from economists—including the IMF’s stagflationary tilt to the outlook—there has been remarkably little follow-through into financial markets. Measures of systemic stress in both the US and UK remain low by historical standards, suggesting that investors are, for now, largely looking through the Middle East conflict. There are several possible explanations: corporate profits remain resilient, the AI-driven investment narrative continues to dominate market thinking, and markets may be assuming that any energy shock will be temporary and contained. In effect, investors appear to be pricing a benign baseline in which geopolitical risks do not materially disrupt growth, inflation expectations or policy. The UK is a partial exception, with a somewhat more visible uptick in stress, which aligns more closely with the IMF’s more challenging growth-inflation trade-off and the economy’s greater sensitivity to energy prices.

260423Z2.jpg

**Volatility falls despite deteriorating growth surprises**
Market optimism is also increasingly at odds with the incoming data flow. Typically, equity volatility declines when growth surprises are positive and inflation surprises are benign. However, the recent pattern has broken that relationship. Growth surprises across the G10 have turned increasingly negative (our series is inverted in the chart below), yet volatility has continued to fall. In other words, markets are becoming less sensitive to weakening macro data, continuing to price a benign outlook even as the data deteriorate. This divergence reinforces the broader theme: investors are, for now, looking through both geopolitical risks and softer economic momentum, placing greater weight on resilience in earnings, the AI-driven narrative and the assumption that policy will remain supportive.

260423Z3.jpg

**Inflation Nowcasts Have Jumped**
Incoming data suggest that headline inflation has moved higher in recent weeks, broadly in line with expectations given the rise in energy prices following the Middle East shock. Nowcasts for CPI across the major economies show a clear rebound in March and April from the lows seen at the start of 2026, with the move occurring in a relatively synchronised fashion. This reinforces the view that the recent pickup in inflation is being driven primarily by a common external factor—energy.

260423Z4.jpg

**Energy shock not yet feeding into underlying inflation**
However, the detailed breakdown of March inflation outcomes suggests that this remains, for now, a largely headline-driven phenomenon. While headline CPI prints were firm across most economies, core inflation—stripping out energy and food—was more subdued and in some cases weaker. This indicates that there has been very limited pass-through from higher energy prices into broader goods and services inflation at this early stage. In other words, the shock is still being absorbed rather than propagated. That distinction is critical for policy and markets alike: as long as second-round effects remain contained, central banks may be able to look through the near-term rise in inflation, even as headline rates move higher.

260423Z5.jpg

**Inflation Expectations Rising as Growth Sentiment Falters**
It remains early days, and much will hinge on how inflation expectations evolve from here. The latest ZEW survey for Germany already conveys the hallmarks of a classic stagflationary shock, with macroeconomic expectations weakening even as inflation expectations have ratcheted sharply higher. This shift is important: while the recent rise in headline inflation has so far shown limited pass-through into core, a sustained increase in expectations would raise the risk of second-round effects and make the inflation process more persistent. In that sense, the ZEW data highlight the key fault line in the current environment—whether the energy-driven shock remains contained, or begins to embed itself more broadly through expectations and pricing behaviour.

260423Z6.jpg

Financial markets have remained notably calm in recent weeks despite rising geopolitical tensions in the Middle East, a more downbeat macroeconomic narrative and elevated uncertainty. Measures of financial stress and volatility remain low, and equity markets continue to look through both the conflict and softer data. That resilience sits alongside a more nuanced macro backdrop. The IMF’s latest WEO revisions point to a classic stagflationary energy shock—growth downgraded and inflation revised higher—although the global impact remains modest and uneven, with some economies still benefiting from stronger momentum (chart 1). At the same time, market pricing appears increasingly detached from the data flow, with volatility declining even as growth surprises have turned more negative relative to inflation (charts 2 and 3). Incoming inflation data reinforce the idea of a largely headline-driven shock, with nowcasts rising in line with higher energy prices but only limited pass-through into core inflation so far (charts 4 and 5). However, it remains early days. Survey evidence, such as the latest ZEW release, suggests that inflation expectations may already be responding in a more concerning way, with a marked rise alongside weakening growth sentiment (chart 6). Taken together, the key question for markets is whether this remains a contained, energy-driven shock that can be looked through—or whether it begins to embed more persistently via expectations, forcing a reassessment of the currently benign outlook.

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/44A12ktUaoJGHZG7pEVcul?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Risks Build, Markets Shrug

260424E.jpg

The onset of the war in Iran appears to have hit the German economy extremely hard as the Ifo survey shows very substantial and broad-based decline across its survey in April. The Ifo survey features readings for five sectors as well as an aggregate reading, and it surveys them for climate, current conditions, and expectations. The decline in the Ifo survey is present for all three concepts and across all five sectors, marking the weakening in April as a highly significant and extremely disturbing development. Only manufacturing in the current conditions survey escapes a month-to-month decline.

**The Ifo sequences**: The **climate** reading fell both overall and across each of the five sectors. **Current conditions** declined for the overall and for four of the five sectors, with manufacturing the sole exception. **Expectations** declined for the overall and for all sectors. Several of the sector declines were for a very substantial magnitude, especially when compared to historic changes in these indexes.

**Monthly changes in readings—severe broad deterioration**
The month-to-month change in the climate reading has weakened more month-to-month 19% of the time. That overall result, however, is boosted by manufacturing where the monthly change has been weaker 35% of the time (on data back to 2011). However, all other sectors have seen climate weaker m/m only 2.3% to 6.3% of the time! The current situation readings weakened, with the headline weakening more m/m 11% of the time. This was boosted by manufacturing, the only sector that improved on the month; its ranking on change was in its 85th percentile—quite good and truly stand-alone good news. The other current changes by sector ranged from construction being weaker 1.7% of the time, to retailing that has been weaker about 30% of the time in terms of m/m changes. Expectation changes were uniformly terrible, with the headline drop weaker only 6.3% of the time and sector change month-to-month weaker between 9% and 1.7% of the time. The monthly weakening was uniform and substantial. I document it with these calculations, but you can also see it on the chart above.

**Climate**: The bottom line is that the all-sector index for climate fell to -20.3 in April from -18 in March, placing it at a 10.5 percentile standing on data since 1993. The sector ranking is the highest for construction with a 42.2 percentile standing and the weakness for services at a 1.1 percentile standing—weaker than the table reading nearly 99% of the time. In terms of percentile standing levels or monthly changes, conditions are closing in on grim.

**Current conditions**: Current conditions saw the all-sector index slip to -5.3 in April from -2.4 in March. The headline ranking stands at a 9.8 percentile mark, making it—like the climate reading—weaker than its current reading only about 10% of the time. The strongest reading under current conditions is for construction which has a 60.6 percentile standing; it is the only ranking in the table above its historic median. Manufacturing, the only sector in the survey that improved month-to-month, has a 22.5 percentile standing, while services record the weakest percentile standing under current conditions, at an 8.4 percentile standing.

**Expectations:** The all-sector index for expectations fell to -25.3 in April from -19.9 in March, placing it at a 6.3 percentile standing. The percentile standings across sectors range from a high of 9.5% for manufacturing to a low of 1.5% for retailing. Up until earlier this year, the Ifo was showing signs of improvement; however, all of that has simply collapsed in the last month. Weakness is across economic concepts and sectors, as documented above. For reference, the table also gives a separate set of rankings on where the various indexes stand since the invasion of Ukraine, since that was another marked event that drove the index, that had been improving after Covid, down to lower levels.  Ranked even on this reduced scale looking at conditions only since the invasion of Ukraine, when conditions have generally been weaker, the current rankings across the Ifo survey remained extremely weak. This is a very disturbing survey for the German economy.

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Germany

German Ifo Plunges Everywhere

Sandy Batten

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The National Activity Index published by the Federal Reserve Bank of Chicago (CFNAI) slipped to -0.20 in March from an upwardly revised +0.03 in February (previously (-0.11). This is the lowest monthly reading since last November. Smoothing out the monthly volatility, the index's three-month moving average (CFNAI-MA3) declined to -0.03 in March from an upwardly revised +0.03 in February (previously -0.01).

This index is expressed in standard deviation units from zero (with a value of zero defined as trend real GDP growth). Research at the FRB Chicago indicates that readings on the 3-month average of -0.70 or below are consistent with the economy being in a recession. Therefore, even though the March reading on the 3-month average was negative, it indicates that the US economy is still growing, just slightly slower than trend, and is well away from recessionary conditions. The 3-month average would be much deeper in negative territory if the economy was at risk of contracting.

The National Activity Index is a composite of 85 economic indicators, grouped into four major categories: production and income; employment, unemployment, and hours worked; personal consumption and housing; sales, orders, and inventories. Three of the four broad categories of indicators used to construct the index decreased from February, and three categories made negative contributions in March. Production-related indicators contributed –0.20 to the CFNAI in March, down from +0.13 in February. The sales, orders, and inventories category's contribution to the CFNAI was –0.01 in March, down from +0.05 in February. Employment-related indicators contributed +0.02 to the CFNAI in March, up from –0.15 in February. The personal consumption and housing category's contribution to the CFNAI was –0.01 in March, down from a neutral value in February.

The CFNAI Diffusion Index, which measures the breadth of the change in the component series and is also a three-month moving average, increased to –0.04 in March from –0.08 in February. This is the highest reading since February 2025. A reading of zero indicates that all of the indicators are growing at their long-term average. If all of the underlying indicators in a given month are below their long-run averages, the diffusion index will equal -1. If all of the indicators are above their long-run averages, it will equal +1. Thirty-four of the 85 individual indicators made positive contributions to the CFNAI in March, while 51 made negative contributions. Forty-three indicators improved from February to March, while 40 indicators deteriorated and two were unchanged. Of the indicators that improved, 16 made negative contributions.

These figures are available in Haver's **SURVEYS** database.

- The monthly reading fell to -0.20 in March from an upwardly revised +0.03 in February.
- The three-month average slipped from +0.03 to -0.03.
- Despite the slip in March, the index points to near-trend economic growth and is well above recession territory.

Chicago Fed National Activity Index Slipped in March

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance rose by 6,000 to 214,000 in the week ending April 18, from 208,000 in the week ending April 11, revised from 207,000. The four-week average rose 750 to 210,750 in the week ending April 18, from 210,000 the April 11 week, revised from 209,750. The Action Economics/Haver Analytics Survey looked for 210,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 12,000 to 1.821 million in the week ending April 11, from 1.809 million in the week ending April 4. The four-week moving average rose to 1.812 million in the latest week from 1.811 million in the March 28 week. The insured unemployment rate remained at 1.2% in the week of April 11. It has remained at that level since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending April 4, the highest unemployment rates were in New Jersey (2.51%), Massachusetts (2.37%), Rhode Island (2.31%), Washington (2.25%), Minnesota (2.11%), and California (2.02%). The lowest rates were in Florida (0.30%), Louisiana (0.31%), Arkansas (0.35%), Alabama (0.36%), North Carolina (0.39%), Tennessee (0.46%), South Dakota (0.47%), Kansas and Virginia (both 0.49%). Rates in other notable states include New York (1.92%), Illinois (1.82%), Pennsylvania (1.52%), and Texas (1.04%). 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 rose by 6,000 to 214,000.
- Continuing claims rose by 12,000 to 1.821 million.
- The insured unemployment rate remained at 1.2%.


U.S. Initial Unemployment Claims Rose in the Week of April 18

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**Manufacturing looks strong while service sectors weaken**
S&P's April flash PMI readings show some very mixed results. For the United States, India, Australia, and the United Kingdom, there is a strengthening in the readings month-to-month for services, manufacturing, and the composite.

For Japan, France, and the European Monetary Union as a whole, there is improvement in the manufacturing sector on the month but a weaker services reading and a weaker composite overall.

Germany is the only responding area in the table showing weakness all around—in all three sectors—a weaker composite, a weaker manufacturing sector, and a weaker services sector in April. For Germany, this follows a weaker composite and service sector in March as well.

Most reporters—France, the United Kingdom, Japan, Australia, and India—had weaker readings for all three metrics in March: the composite, services, and manufacturing. The March exceptions were the United States, Germany, and the European Monetary Union; in each case, the exception was that the manufacturing sector improved month-to-month, while the composite and services both weakened.

This has been a period of weakening—in March and April—since the war in Iran began. The 48 separate sector readings produced 30 readings that were weaker month-to-month in March and April. Among the 16 composite readings, 12 reported weaker conditions month-to-month. In March, the immediate aftermath of the outbreak of war brought instantaneous step backs across the PMI readings, while April, responding to at least a military success in the area, has shown a significant bounce back that is now more common than further weakness.

The sequential data over three months, six months, and 12 months are based only on completed data; therefore, they're up to date through March. On that basis, we have triple sector weakness in the U.S., India, and Australia, with only Japan and the United Kingdom showing triple-sector improvement over three months. However, if we look at six months compared to 12 months, we have triple sector strength in the Monetary Union, Germany, France, the United Kingdom, Japan, and Australia. India and the U.S. each show only one stronger sector over that comparison—services in India’s case and manufacturing in the U.S. case.

**Ranking Peculiarity**
The ranking data take the current flash data and compare them to the history of observations back to January 2022. What is quite surprising is that, on that timeline, the manufacturing sectors of all the countries in the table—except for Australia and India—show manufacturing standings in their respective 80th to 90th percentiles. Meanwhile, services standings are typically in the 30th percentile or lower.

**Odd Impact of War**
If the war in Iran has an impact on something, we would expect that to fall on the goods trade sector. We would expect this to have an impact on manufacturing although it's the opposite thing that's happening. Manufacturing is showing a revival, while services sectors are showing weaker performance across these countries generally. India is an interesting case, with manufacturing only in its 32nd percentile; however, India’s raw diffusion reading for manufacturing is the strongest raw diffusion reading in the table. What India's ranking is telling us is that India had been extremely strong over the period since 2022, and now compared to that past standard, it's relatively weaker. However, it's still strong in absolute terms, showing a great deal of strength based on its pure diffusion value, just not in comparison to historic performance.

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**Next?**
At this point, it's not clear to me at least what these PMI data are telling us since the strength in manufacturing is a curiosity as is the weakness in the services sector. You see these two phenomena displayed in the chart above, in the case of the European Monetary Union’s flash readings as well.

**War breeds negative effects**
It's not a surprise that war would take some toll on consumer confidence or that it would be reflected in the services sector. However, seeing the kind of weakness being portrayed now in services against the strength in manufacturing is simply a bit hard to rationalize and understand. So, I think we're going to have to keep an eye on these readings as well as other readings in the months ahead to try to discern how global events, the war, conditions in the Strait of Hormuz, inflation currency shifts, and central bank policy are playing out across these various countries. None of what is happening is obvious to me. Japan clearly continues to benefit from a weak yen as its manufacturing sector is flying high, at its best reading since January 2022.