Tom Moeller

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709c.jpg">
The current recession started over eighteen months ago and roughly eight billion dollars are being paid each month in unemployment benefits under state programs. For the jobless who have exhausted their unemployment benefits, recent discussion in Washington of extending the duration of benefits may come too late. For those receiving benefits, the news is welcome in this tough job environment. Data in Haver&#39;s USECON database focuses on the magnitude of the labor market difficulties, not only by dollars paid and the duration of unemployment but by which industries and states have been most affected.
The average duration of unemployment recently has been running 15.7 weeks. That is up by one full week from the beginning of the year and, given the severity of this recession, it likely will rise further. During the severe recessions of 1973-75 and 1981-82, the peaks in average duration were above 17 weeks. Notable this cycle has been the jump in the benefit exhaustion rate to a record 49.2%. (The exhaustion rate is the percent of claimants who collect all of their unemployment.) Past cycle highs were nearer to 40%. As this recession has now lasted so long, the higher rate is no surprise. The states with the higher benefit exhaustion rates include New Jersey (57.3%), California (55.5%), Massachusetts (48.8%) and New York (46.5%). (These figures are available in Haver&#39;s REGIONAL database.)<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709d.jpg">
Also under current discussion is raising the level of weekly dollars paid in insurance. The current average of $315.71 is up 6.2% from last year and up from an average $212.13 ten years ago. Adjusted for inflation using the CPI, benefits have risen 18% over those ten years helped by the recent decline in oil prices.
The industry breakout of continued unemployment claims indicates that roughly one-third of all continuing unemployment insurance benefits are being collected by workers in the manufacturing (20.3%) and construction (13.6%) industries. The factory sector&#39;s share of all claims being paid is up to 20% from 13% early last year. The administration &amp; support sectors follow with 10.0% of workers collecting, but that rate has been stable since 2005. The retail trade sector follows with a steady 8.0% collecting while 5.4% of workers in the professional/scientific and tech services area collect. Surprisingly, perhaps, workers in the health care &amp; social services industry account for 4.7% of those collecting, but that is down from an 8.0% 2007 peak. Finally, 3.0% of workers in the finance &amp; insurance industries collect but that is down from a 4.8% share late in 2007.
The elasticity of the unemployment rate with respect to benefits from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/publications/working-papers//2008/wp08-15.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance Benefits</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Average Duration (Weeks)</td>
<td>15.68</td>
<td>15.21</td>
<td>15.18</td>
<td>15.19</td>
<td>15.14</td>
<td>15.38</td>
</tr>
<tr>
<td class="firstcol">Exhaustion Rate (%)</td>
<td>49.23</td>
<td>47.06</td>
<td>36.80</td>
<td>37.84</td>
<td>35.22</td>
<td>35.42</td>
</tr>
</tbody>
</table>
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The current recession started over eighteen months ago and roughly eight billion dollars are being paid each month in unemployment benefits under state programs. For the jobless who have exhausted their unemployment benefits, recent [...]

U.S. Pays $8 Billion In Unemployment Benefits

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<img align="left" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709a.jpg" width="353">
The labor market may have given another sign of improvement in the U.S. economy. Initial claims for unemployment insurance fell a surprisingly sharp 52,000 last week to 565,000 after a slightly revised 13,000 decline during the prior week. The latest level was off from the March peak of 674,000 and it was the lowest level since mid-January. The four-week average of claims, which smoothes out some of the volatility in the weekly numbers, also fell to 606,000. The latest weekly level was quite a bit lower than Consensus expectations for 610,000.
The Labor Department indicated that the largest increases in initial claims for the week ending June 27 were in New Jersey (+7,876), Massachusetts (+4,730), Kansas (+4,469), Kentucky (+3,614), and New York (+3,019), while the largest decreases were in Florida (-12,493), Illinois (-5,321), Pennsylvania (-3,949), California (-2,919), and Tennessee (-2,743).
Continuing claims for unemployment insurance jumped 159,000 to a new record high, though these figures do lag the initial claims by one week. Continuing claims provide an indication of workers&#39; ability to find employment. At 6,883,000 claims were more than double the year ago level. The four-week average of continuing claims also touched a new record high. The series dates back to 1966.<img align="right" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709b.jpg" width="353">
The insured rate of unemployment inched up just slightly to 5.1%, essentially where it has been for the last eight weeks. It was, however, the highest rate since 1983. During the last ten years there has been a 93% correlation between the level of the insured unemployment rate and the overall rate of unemployment published by the Bureau of Labor Statistics.
The highest insured unemployment rates in the week ending June 20 were in Michigan (6.8 percent), Puerto Rico (6.8), Oregon (6.7), Pennsylvania (6.4), Nevada (6.2), Wisconsin (5.7), California (5.3), Illinois (5.3), North Carolina (5.3), and South Carolina (5.3).
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.
Federal Reserve&#39;s Initiatives to Support Minority-Owned Institutions is the title of today&#39;s speech by Fed Governor Elizabeth A. Duke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/duke20090709a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">07/04/09</th>
<th scope="col">06/27/09</th>
<th scope="col">06/20/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>565</td>
<td>617</td>
<td>630</td>
<td>54.0%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,883</td>
<td>6,724</td>
<td>113.9%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
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The labor market may have given another sign of improvement in the U.S. economy. Initial claims for unemployment insurance fell a surprisingly sharp 52,000 last week to 565,000 after a slightly revised 13,000 decline during the prior [...]

U.S. Initial Claims For Unemployment Insurance Fall Sharply But Continuing Claims Reach A New Record

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709c.jpg" align="left" border="0">
The current recession started over eighteen months ago and roughly
eight billion dollars are being paid each month in unemployment
benefits under state programs. For the jobless who have exhausted their
unemployment benefits, recent discussion in Washington of extending the
duration of benefits may come too late. For those receiving benefits,
the news is welcome in this tough job environment. Data in Haver's USECON
database focuses on the magnitude of the labor market difficulties, not
only by dollars paid and the duration of unemployment but by which
industries and states have been most affected.
The average duration of unemployment recently has been running 15.7
weeks. That is up by one full week from the beginning of the year and,
given the severity of this recession, it likely will rise further.
During the severe recessions of 1973-75 and 1981-82, the peaks in
average duration were above 17 weeks. Notable this cycle has been the
jump in the benefit exhaustion rate to a record 49.2%. (The exhaustion
rate is the percent of claimants who collect all of their
unemployment.) Past cycle highs were nearer to 40%. As this recession
has now lasted so long, the higher rate is no surprise. The states with
the higher benefit exhaustion rates include New Jersey (57.3%),
California (55.5%), Massachusetts (48.8%) and New York (46.5%). (These
figures are available in Haver's REGIONAL database.)<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709d.jpg" align="right" border="0">
Also under current discussion is raising the level of weekly dollars
paid in insurance. The current average of $315.71 is up 6.2% from last
year and up from an average $212.13 ten years ago. Adjusted for
inflation using the CPI, benefits have risen 18% over those ten years
helped by the recent decline in oil prices.
The industry breakout of continued unemployment claims indicates
that roughly one-third of all continuing unemployment insurance
benefits are being collected by workers in the manufacturing (20.3%)
and construction (13.6%) industries. The factory sector's share of all
claims being paid is up to 20% from 13% early last year. The
administration &amp; support sectors follow with 10.0% of workers
collecting, but that rate has been stable since 2005. The retail trade
sector follows with a steady 8.0% collecting while 5.4% of workers in
the professional/scientific and tech services area collect.
Surprisingly, perhaps, workers in the health care &amp; social services
industry account for 4.7% of those collecting, but that is down from an
8.0% 2007 peak. Finally, 3.0% of workers in the finance &amp; insurance
industries collect but that is down from a 4.8% share late in 2007.
The elasticity of the unemployment rate with respect to benefits from the Federal Reserve Bank of Philadelphia can be found <a href="http://www.philadelphiafed.org/research-and-data/publications/working-papers//2008/wp08-15.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance Benefits</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Average Duration (Weeks)</td>
<td>15.68</td>
<td>15.21</td>
<td>15.18</td>
<td>15.19</td>
<td>15.14</td>
<td>15.38</td>
</tr>
<tr>
<td class="firstcol">Exhaustion Rate (%)</td>
<td>49.23</td>
<td>47.06</td>
<td>36.80</td>
<td>37.84</td>
<td>35.22</td>
<td>35.42</td>
</tr>
</tbody>
</table>
 U.S. Initial Claims For Unemployment Insurance Fall Sharply But Continuing Claims Reach A New Record 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 9, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709a.jpg" align="left" height="265" width="353">
The labor market may have given another sign of improvement in the
U.S. economy. Initial claims for unemployment insurance fell a
surprisingly sharp 52,000 last week to 565,000 after a slightly revised
13,000 decline during the prior week. The latest level was off from the
March peak of 674,000 and it was the lowest level since mid-January.
The four-week average of claims, which smoothes out some of the
volatility in the weekly numbers, also fell to 606,000. The latest
weekly level was quite a bit lower than Consensus expectations for
610,000.
The Labor Department indicated that the largest increases in initial
claims for the week ending June 27 were in New Jersey (+7,876),
Massachusetts (+4,730), Kansas (+4,469), Kentucky (+3,614), and New
York (+3,019), while the largest decreases were in Florida (-12,493),
Illinois (-5,321), Pennsylvania (-3,949), California (-2,919), and
Tennessee (-2,743).
Continuing claims for unemployment insurance jumped 159,000 to a new
record high, though these figures do lag the initial claims by one
week. Continuing claims provide an indication of workers' ability to
find employment. At 6,883,000 claims were more than double the year ago level. The four-week average of continuing claims also touched a new record high. The series dates back to 1966.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709b.jpg" align="right" height="265" width="353">
The insured rate of unemployment inched up just slightly to 5.1%,
essentially where it has been for the last eight weeks. It was,
however, the highest rate since 1983. During the last ten years there
has been a 93% correlation between the level of the insured
unemployment rate and the overall rate of unemployment published by the
Bureau of Labor Statistics.
The highest insured unemployment rates in the week ending June 20
were in Michigan (6.8 percent), Puerto Rico (6.8), Oregon (6.7),
Pennsylvania (6.4), Nevada (6.2), Wisconsin (5.7), California (5.3),
Illinois (5.3), North Carolina (5.3), and South Carolina (5.3).
The unemployment insurance claims data is available in Haver's WEEKLY database and the state data is in the REGIONW database.
Federal Reserve's Initiatives to Support Minority-Owned Institutions is the title of today's speech by Fed Governor Elizabeth A. Duke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/duke20090709a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">07/04/09</th>
<th scope="col">06/27/09</th>
<th scope="col">06/20/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>565</td>
<td>617</td>
<td>630</td>
<td>54.0%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,883</td>
<td>6,724</td>
<td>113.9%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
 Consumer Credit Usage Falls For An Unprecedented Fourth Straight Month 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 9, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709e.jpg" align="left" border="0" height="265" width="353">
The consumer continued to deleverage this spring. The Federal
Reserve reported late yesterday that consumer credit outstanding during
May fell for the fourth straight month and for the eighth month since
last summer. The $3.3B decline was the shallowest of the unprecedented
streak, but it followed huge double-digit drops during the prior three
months. The decline in credit usage has been just one factor behind the
recent retrenchment in retail spending though the May drop was short of
expectations for a $7.1B decline.
Usage of revolving credit fell a sharp $2.9B during May following an
even sharper decline of $8.7B during April. The latest was the eighth
decline in as many months and it lowered usage by 3.6% versus one year
ago. Non-revolving credit (autos &amp; other consumer durables), which
accounts for nearly two-thirds of the total, ticked lower by $0.4B in
May but the decline was quite a bit shallower than during the prior two
months. Compared to the decline in revolving credit usage, the drop
here has been less dramatic. The 0.7% y/y shortfall compares to a 6.8%
drop after the 1990-91 recession but it is similar to the pullbacks
during 1975 and even the "credit crunch" recession of 1980.
These figures are the major input to the Fed's quarterly Flow of Funds accounts for the household sector.
Credit data are available in Haver's USECON database. The Flow of Funds data are in Haver's FFUNDS database.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709f.jpg" align="right" border="0" height="265" width="353">
Commercial real estate is the topic of today's testimony by
Jon D. Greenlee, Associate Director, Division of Banking Supervision
and Regulation at the Federal Reserve and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/greenlee20090709a.htm">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Consumer Credit (m/m Chg, SAAR)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$-3.3B</td>
<td>&nbsp;$-16.5B</td>
<td>-1.8%</td>
<td>1.7%</td>
<td>5.5%</td>
<td>4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$-2.9B</td>
<td>$-8.7B</td>
<td>-3.6%</td>
<td>2.3%</td>
<td>7.4%</td>
<td>6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-revolving</td>
<td>$-0.4B</td>
<td>$-7.8B</td>
<td>-0.7%</td>
<td>1.4%</td>
<td>4.4%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
 UK Trade Picture: Better In Month But In Flux 
by <a href="/comment/Brusca.html">Robert Brusca</a> July 9, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090709g.jpg" align="left" border="0">
The UK trade balance shrank to 6.26bln sterling in May from 7.14bln
in April. Exports edged lower, while imports fell by 4% in May. Export
and import trends do not show very dramatic signs of change. Exports
are declining by a bit less than imports and their rate of decline is
more persistently losing that negative edge, but that remains a very
gradual process. For imports the declines over various horizons are
still large. The pace of decline over three months is less than for six
months; the drop over six months shows acceleration in the drop
compared to 12 months. Import trends are still a chaotic. 
Exports and imports of road vehicles have picked up, perhaps in
response to various vehicle purchase plans in effect in the UK and
around Europe. Vehicle sales have picked up because of such incentives. 
Trends for capital goods shipments are worsening for exports and for imports over 12- 6- and 3-months. 
For other groups of exports and imports the patterns are still too varying to categorize. 
German trade reported a bounce in exports with imports still falling
in May. German orders (especially foreign orders) and industrial output
have been on the mend in other recent reports. Still, it is too soon to
throw the UK figures in with that lot and call them positive. The UK
trade accounts still have divergent trends and the improvement in trade
has given way to deterioration and then to more improvement. It is too
much in flux to be sure of. Both export and import trends are still
under clear downward pressure Yr/Yr. There is no solid sign of trade
flows returning to an expansion path any time soon for the UK. 

UK Trade trends for goods<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>

</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="2">m/m%</td>
<td colspan="3">% Saar</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp;</td>
<td>May-09</td>
<td>Apr-09</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="grey3">
<td class="firstcol">Balance*</td>
<td>-££ 6.26</td>
<td>-££ 7.14</td>
<td>-££ 6.62</td>
<td>-££ 6.89</td>
<td>-££ 7.34</td>
</tr>
<tr class="grey2">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">All Exp</td>
<td>-0.8%</td>
<td>-1.5%</td>
<td>-12.3%</td>
<td>-13.7%</td>
<td>-14.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital gds</td>
<td>-2.8%</td>
<td>-8.0%</td>
<td>-34.3%</td>
<td>-28.1%</td>
<td>-16.1%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Road Vehicles</td>
<td>14.5%</td>
<td>-8.3%</td>
<td>-10.6%</td>
<td>-39.8%</td>
<td>-35.0%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Basic Materials</td>
<td>-22.2%</td>
<td>11.6%</td>
<td>-33.3%</td>
<td>-3.6%</td>
<td>-44.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Food Feed Bev &amp; Tbco</td>
<td>-0.6%</td>
<td>4.2%</td>
<td>11.9%</td>
<td>17.5%</td>
<td>9.2%</td>
</tr>
<tr class="grey2">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">All IMP</td>
<td>-4.0%</td>
<td>1.5%</td>
<td>-16.1%</td>
<td>-20.1%</td>
<td>-15.3%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Capital gds</td>
<td>-7.5%</td>
<td>-0.7%</td>
<td>-42.6%</td>
<td>-37.1%</td>
<td>-19.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Road Vehicles</td>
<td>5.5%</td>
<td>-5.6%</td>
<td>-9.4%</td>
<td>-22.5%</td>
<td>-38.4%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Basic Materials</td>
<td>-2.0%</td>
<td>-2.0%</td>
<td>-16.5%</td>
<td>-39.8%</td>
<td>-36.2%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Food Feed Bev &amp; Tbco</td>
<td>-2.1%</td>
<td>5.5%</td>
<td>8.2%</td>
<td>5.7%</td>
<td>9.3%</td>
</tr>
<tr class="grey1">
<td colspan="6">*Stg Blns; mo or period average</td>
</tr>
</tbody>
</table>
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Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708c.jpg" align="left" border="0" height="265" width="353">
German industrial production rose by 3.7% in May from April.
It has risen in two of the last three-months. IP is accelerating,
rising at a 5.4% annual rate over three-months compared to a rate of
minus 22.2% over six-months and minus 18.1% over twelve-months. Still in the quarter to date IP is
contracting at a pace of 6.1%. Two months into the second quarter,
despite the stirring in the industrial sector, IP is still a
subtraction from growth. 
Construction is showing a steady acceleration and positive
growth rates over 3-months, 6-months and 12-months. Manufacturing is up
at a strong 10% annual rate over three-months but still falling at a
6.6% pace in the current quarter.
Industrial orders are rising on a much more explosive path
over this period. But orders are a precursor to increases in output.
Among large EMU countries Spain and the UK also have reported
industrial output measures for May. For each of them the May result for
MFG output was negative. But MFG output in Spain and in the UK had
risen in April. In the UK
output is falling at a 0.9% pace in Q2. In Spain output is dropping at
a 3% pace in Q2. 
These trends have the trappings of a bottoming in progress but
not here yet. The German chemicals industry reported that it had made a
recession bottom already. For Germany , as a whole, capital goods
orders are leading the way out. In May these orders surged by 8.3%
compared to April, but that was after a 6.9% plunge in April output
itself. Intermediate goods output was up by 4.3% in May. The consumer
is not a major factor in the rebound. Output from consumer goods
industries is up by 0.6% in May, the second monthly rise in a row, but
it is still falling at a pace of 5.4% in Q2. Capital goods output is
declining at an 11.5% pace in Q2 and intermediate goods output is
falling at a 2.1% pace. There
are signs of stirring but no evidence that the real positive thrust is
here yet.
Overall there is evidence of the drop in output and the
decline in GDP slowing or of a bottom forming and tentative signs of a
rise from the lows being put in place for industrial output. The UK reported consumer sentiment
rose in June as another sign of optimism in Europe . The G-8 is getting
ready to meet and tell us that we have not turned the corner yet. The
message from that is for countries not to reverse the stimulus that is
in place but a further subtle message is not to commence any new
stimulus either.




<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7">Total German IP </th>
<th>Quarter</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>to-Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>3.7%</td>
<td>-2.6%</td>
<td>0.3%</td>
<td>5.4%</td>
<td>-22.2%</td>
<td>-18.1%</td>
<td>-8.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.6%</td>
<td>0.5%</td>
<td>-1.0%</td>
<td>0.4%</td>
<td>-5.7%</td>
<td>-5.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>8.3%</td>
<td>-6.9%</td>
<td>3.7%</td>
<td>19.1%</td>
<td>-31.2%</td>
<td>-22.6%</td>
<td>-11.5%</td>
</tr>
<tr>
<td class="firstcol">Intermed</td>
<td>4.3%</td>
<td>-1.0%</td>
<td>-1.7%</td>
<td>6.4%</td>
<td>-23.5%</td>
<td>-21.8%</td>
<td>-2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-3.2%</td>
<td>0.0%</td>
<td>6.0%</td>
<td>11.2%</td>
<td>5.0%</td>
<td>1.3%</td>
<td>14.8%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>4.9%</td>
<td>-3.1%</td>
<td>0.8%</td>
<td>10.1%</td>
<td>-24.6%</td>
<td>-19.5%</td>
<td>-6.6%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>4.4%</td>
<td>0.1%</td>
<td>0.0</td>
<td>38.4%</td>
<td>-17.4%</td>
<td>-28.8%</td>
<td>19.4%</td>
</tr>
</tbody>
</table>
</body></html>

German industrial production rose by 3.7% in May from April. It has risen in two of the last three-months. IP is accelerating, rising at a 5.4% annual rate over three-months compared to a rate of minus 22.2% over six-months and minus [...]

German IP Follows Orders Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708a.jpg" width="353">
The Mortgage Bankers Association latest report on mortgage applications provided further evidence that home purchases are recovering but that the refinancing boom is most assuredly over. Overall, mortgage applications recovered 10.9% last week and recovered most of the prior week&#39;s decline. However, applications nevertheless remained near the lowest level since last November.
The interest in home buying has improved, in part due to distress sales. Purchase applications rose 6.7% last week to the highest level since they spiked in early April. Since the early-February low, purchase application have risen 21.1% as new and existing home sales have recovered.
The interest in refinancing an existing mortgage, conversely, has virtually dried up. Applications to refinance did rise 15.2% last week. However, that made up just half of the prior week&#39;s decline and left them at the lowest level since November. Since their peak in January, refinance applications have fallen by three quarters.
Since the beginning of this year, fixed-rate mortgage applications have fallen by slightly more than one half while adjustable-rate mortgages have doubled.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708b.jpg" width="353">
The end of the refinancing boom can be traced, in part, to the rise in interest rates. The effective interest rate on a conventional 15-year mortgage slipped last week to 5.09% but that remained up from the April low of 4.69%. For a 30-year mortgage, the rate also slipped last week to 5.57% but remained up from the 4.81% low. Interest rates on 15- and 30-year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. Up also were adjustable 1-Year mortgage rates which remained stable at 6.61% versus the low near 6.0% during January. Nevertheless, the rate remained down from the 7.07% peak reached last fall.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage. Moreover, during the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The figures for weekly mortgage applications are available in Haver&#39;s SURVEYW database.
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. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
IMF Moves to Boost Resources to Combat Global Crisis from the International Monetary can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW070609A.htm"> here</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/03/09</th>
<th scope="col">06/26/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>493.1</td>
<td>444.8</td>
<td>-4.0%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>285.6</td>
<td>267.7</td>
<td>-21.9%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,707.1</td>
<td>1,482.2</td>
<td>23.8%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The Mortgage Bankers Association latest report on mortgage applications provided further evidence that home purchases are recovering but that the refinancing boom is most assuredly over. Overall, mortgage applications recovered 10.9% [...]

U.S. Mortgage Applications For Purchase Rise But Applications To Refinance Remain Low

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708a.jpg" align="left" border="0" height="265" width="353">
The Mortgage Bankers Association latest report on mortgage
applications provided further evidence that home purchases are
recovering but that the refinancing boom is most assuredly over.
Overall, mortgage applications recovered 10.9% last week and recovered
most of the prior week's decline. However, applications nevertheless
remained near the lowest level since last November.
The interest in home buying has improved, in part due to
distress sales. Purchase applications rose 6.7% last week to the
highest level since they spiked in early April. Since the
early-February low, purchase application have risen 21.1% as new and
existing home sales have recovered.
The interest in refinancing an existing mortgage, conversely,
has virtually dried up. Applications to refinance did rise 15.2% last
week. However, that made up just half of the prior week's decline and
left them at the lowest level since November. Since their peak in
January, refinance applications have fallen by three quarters.
Since the beginning of this year, fixed-rate mortgage
applications have fallen by slightly more than one half while
adjustable-rate mortgages have doubled.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708b.jpg" align="right" border="0" height="265" width="353">
The end of the refinancing boom can be traced, in part, to the
rise in interest rates. The effective interest rate on a conventional
15-year mortgage slipped last week to 5.09% but that remained up from
the April low of 4.69%. For a 30-year mortgage, the rate also slipped
last week to 5.57% but remained up from the 4.81% low. Interest rates
on 15- and 30-year mortgages are closely correlated (&gt;90%) with
the rate on 10-year Treasury securities. Up also were adjustable 1-Year
mortgage rates which remained stable at 6.61% versus the low near 6.0%
during January. Nevertheless, the rate remained down from the 7.07%
peak reached last fall.
During the last ten years there has been a (negative) 79%
correlation between the level of applications for purchase and the
effective interest rate on a 30-year mortgage. Moreover, during the
last ten years there has been a 61% correlation between the y/y change
in purchase applications and the change in new plus existing single
family home sales.
The figures for weekly mortgage applications are available in
Haver's SURVEYW database.
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. Visit the Mortgage
Bankers Association site <a href="http://www.mbaa.org">here</a>.
IMF Moves to Boost Resources to Combat Global Crisis
from the International Monetary can be found <a href="http://www.imf.org/external/pubs/ft/survey/so/2009/NEW070609A.htm">
here</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA
Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/03/09</th>
<th scope="col">06/26/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>493.1</td>
<td>444.8</td>
<td>-4.0%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>285.6</td>
<td>267.7</td>
<td>-21.9%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,707.1</td>
<td>1,482.2</td>
<td>23.8%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
 German IP Follows Orders
Higher 
by <a href="/comment/Brusca.html">Robert
Brusca&nbsp;</a> July 8, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090708c.jpg" align="left" border="0" height="265" width="353">
German industrial production rose by 3.7% in May from April.
It has risen in two of the last three-months. IP is accelerating,
rising at a 5.4% annual rate over three-months compared to a rate of
minus 22.2% over six-months and minus 18.1% over twelve-months. Still in the quarter to date IP is
contracting at a pace of 6.1%. Two months into the second quarter,
despite the stirring in the industrial sector, IP is still a
subtraction from growth. 
Construction is showing a steady acceleration and positive
growth rates over 3-months, 6-months and 12-months. Manufacturing is up
at a strong 10% annual rate over three-months but still falling at a
6.6% pace in the current quarter.
Industrial orders are rising on a much more explosive path
over this period. But orders are a precursor to increases in output.
Among large EMU countries Spain and the UK also have reported
industrial output measures for May. For each of them the May result for
MFG output was negative. But MFG output in Spain and in the UK had
risen in April. In the UK
output is falling at a 0.9% pace in Q2. In Spain output is dropping at
a 3% pace in Q2. 
These trends have the trappings of a bottoming in progress but
not here yet. The German chemicals industry reported that it had made a
recession bottom already. For Germany , as a whole, capital goods
orders are leading the way out. In May these orders surged by 8.3%
compared to April, but that was after a 6.9% plunge in April output
itself. Intermediate goods output was up by 4.3% in May. The consumer
is not a major factor in the rebound. Output from consumer goods
industries is up by 0.6% in May, the second monthly rise in a row, but
it is still falling at a pace of 5.4% in Q2. Capital goods output is
declining at an 11.5% pace in Q2 and intermediate goods output is
falling at a 2.1% pace. There
are signs of stirring but no evidence that the real positive thrust is
here yet.
Overall there is evidence of the drop in output and the
decline in GDP slowing or of a bottom forming and tentative signs of a
rise from the lows being put in place for industrial output. The UK reported consumer sentiment
rose in June as another sign of optimism in Europe . The G-8 is getting
ready to meet and tell us that we have not turned the corner yet. The
message from that is for countries not to reverse the stimulus that is
in place but a further subtle message is not to commence any new
stimulus either.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7">Total German IP </th>
<th>Quarter</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Saar exept m/m</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>to-Date</td>
</tr>
<tr>
<td class="firstcol">IP total</td>
<td>3.7%</td>
<td>-2.6%</td>
<td>0.3%</td>
<td>5.4%</td>
<td>-22.2%</td>
<td>-18.1%</td>
<td>-8.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td>0.6%</td>
<td>0.5%</td>
<td>-1.0%</td>
<td>0.4%</td>
<td>-5.7%</td>
<td>-5.0%</td>
<td>-5.4%</td>
</tr>
<tr>
<td class="firstcol">Capital</td>
<td>8.3%</td>
<td>-6.9%</td>
<td>3.7%</td>
<td>19.1%</td>
<td>-31.2%</td>
<td>-22.6%</td>
<td>-11.5%</td>
</tr>
<tr>
<td class="firstcol">Intermed</td>
<td>4.3%</td>
<td>-1.0%</td>
<td>-1.7%</td>
<td>6.4%</td>
<td>-23.5%</td>
<td>-21.8%</td>
<td>-2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Memo</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>-3.2%</td>
<td>0.0%</td>
<td>6.0%</td>
<td>11.2%</td>
<td>5.0%</td>
<td>1.3%</td>
<td>14.8%</td>
</tr>
<tr>
<td class="firstcol">MFG IP</td>
<td>4.9%</td>
<td>-3.1%</td>
<td>0.8%</td>
<td>10.1%</td>
<td>-24.6%</td>
<td>-19.5%</td>
<td>-6.6%</td>
</tr>
<tr>
<td class="firstcol">MFG Orders</td>
<td>4.4%</td>
<td>0.1%</td>
<td>0.0</td>
<td>38.4%</td>
<td>-17.4%</td>
<td>-28.8%</td>
<td>19.4%</td>
</tr>
</tbody>
</table>
</body></html>

U.S. Mortgage Applications ForPurchase Rise But Applications To Refinance Remain Low

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707d.jpg" align="right" border="0" height="265" width="353">The volume
of new orders in German Manufacturing rose 4.4% in May after a small
rise of 0.1% in April and a 3.7% rise in March.&nbsp; The three
month rise has brought the level of new orders to 84.5
(2005=100).&nbsp; This is still 33% below the peak of 126.1
recorded in November, 2007.&nbsp; Sales of German Manufacturing and
Mining product rose 4.5% in May after a decline of 2.0% in April and a
1.6% rise in March. Sales are now at an index level of 91.8, 21% below
the peak of 115.7 reached in January, 2008.&nbsp; To put the recent
improvements in perspective, the volume of new orders and sales over
the 8 plus years are shown in the first chart. 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707e.jpg" align="right" border="0" height="265" width="353">Much of the
improvement in both orders and sales was due to a jump in foreign
sales.&nbsp; While domestic new orders rose 3.9% in May, new orders
from the Euro Area countries rose, 5.2% and from the non Euro Area
countries, 8.2%.&nbsp; The comparable figures for sales were 2.9%,
3.9% and 9.4%.&nbsp;&nbsp; The month to month percent changes
in domestic new orders, Euro Area countries new orders and Non Euro
Area countries new orders are shown in the second chart.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707f.jpg" align="right" border="0" height="265" width="353">Signs of
recovery in new orders and sales in the manufacturing sector are
particularly important for Germany as manufacturing plays such an
important role in the German economy.&nbsp; Manufacturing accounts
for about 25% of Germany's GDP in contrast to the United States where
manufacturing accounts for about 14% of the economy.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">GERMAN
MANUFACTURING ORDERS AND SALES (2005=100)</th>
<th scope="col">May 09</th>
<th scope="col">Apr&nbsp; 09</th>
<th scope="col">May 08</th>
<th scope="col">M/M% Chg&nbsp;</th>
<th scope="col">Y/Y % Chg</th>
<th scope="col">2008 </th>
<th scope="col">2007 </th>
<th scope="col"> 2006 </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">New Orders,&nbsp;</td>
<td>84.5</td>
<td>80.9</td>
<td>118.6</td>
<td>4.45</td>
<td>-28.75</td>
<td>111.3</td>
<td>119.7</td>
<td>108.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>86.2</td>
<td>83.0</td>
<td>113.8</td>
<td>3.86</td>
<td>-24.25</td>
<td>108.3</td>
<td>114.8</td>
<td>106.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Euro Area Countries</td>
<td>83.1</td>
<td>79.0</td>
<td>122.8</td>
<td>5.19</td>
<td>-32.33</td>
<td>113.9</td>
<td>124.0</td>
<td>110.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non Euro Area
Countries</td>
<td>88.5</td>
<td>81.8</td>
<td>124.8</td>
<td>8.19</td>
<td>-29.09</td>
<td>118.0</td>
<td>125.0</td>
<td>113.4</td>
</tr>
<tr class="even">
<td class="firstcol">Sales</td>
<td>91.8</td>
<td>87.8</td>
<td>113.1</td>
<td>4.56</td>
<td>-18.83</td>
<td>111.2</td>
<td>111.6</td>
<td>105.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Domestic</td>
<td>92.2</td>
<td>89.6</td>
<td>107.7</td>
<td>2.90</td>
<td>-14.39</td>
<td>106.7</td>
<td>106.4</td>
<td>102.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Euro Area Countries</td>
<td>88.5</td>
<td>85.2</td>
<td>116.8</td>
<td>3.87</td>
<td>-24.23</td>
<td>113.6</td>
<td>116.1</td>
<td>107.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non Euro Area
Countries</td>
<td>93.8</td>
<td>85.7</td>
<td>122.8</td>
<td>9.45</td>
<td>-23.62</td>
<td>121.1</td>
<td>119.9</td>
<td>110.9</td>
</tr>
</tbody>
</table>

</body></html>

The volume of new orders in German Manufacturing rose 4.4% in May after a small rise of 0.1% in April and a 3.7% rise in March. The three month rise has brought the level of new orders to 84.5 (2005=100). This is still 33% below the [...]

German Manufacturing Orders And Sales Recovering From Their Steep Declines

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707c.jpg" width="353">
The Fourth of July seems to have prompted consumer spending this year. During the latest week, chain store sales ticked up all of 0.1%. That, however, was enough to pull the y/y change up to +0.5% after a y/y gain of 0.6% last week. Maybe the consumer is finding his footing? These are the first positive comparisons since late last year. But the consumer definitely isn&#39;t spending with wild abandonee. The latest gains fall well short of the three-to-seven percent growth rates logged during the last several years.
During the last ten years there has been a 69% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. The weekly figures are available in Haver&#39;s SURVEYW database.
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.
In tandem with the idea that the consumer isn&#39;t yet spending freely, the leading indicator of sales ticked up all of 0.1% during the latest week. That uptick left the indicator down 2.5% y/y and it has been flat-to-lower all this year.
Exit Strategies for the Federal Reserve from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/econ/bullard/PhiladelphiaGIC28june2009FINAL653pm.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/04/09</th>
<th scope="col">06/27/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>493.8</td>
<td>493.4</td>
<td>0.5%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

The Fourth of July seems to have prompted consumer spending this year. During the latest week, chain store sales ticked up all of 0.1%. That, however, was enough to pull the y/y change up to +0.5% after a y/y gain of 0.6% last week. [...]

Weekly Chain Store Sales Recover Around The Holiday

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

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

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Winnie Tapasanun

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The ISM U.S. manufacturing PMI held at a lower-than-expected 52.7 in April and March following a 0.2-point easing to 52.4 in February, data from the Institute for Supply Management showed. The April reading, above the 50 expansion-contraction dividing line, indicated the U.S. manufacturing sector expanded for the fourth successive month. A reading of 53.0 for April had been expected in the Action Economics Forecast Survey. The April manufacturing PMI, while above a contraction-level 48.8 in April 2025 and a low of 47.0 in October 2024, remained below a peak of 63.8 in March 2021.

The production index slipped to 53.4 in April from 55.1 in March, indicating production expanded for the sixth consecutive month but at the slowest pace since December. The index was above its recent low of 44.8 in April 2025 but below a peak of 66.5 in March 2021. In April, 28.3% (NSA) of respondents reported higher production while 13.0% reported lower production. The new orders index rebounded to 54.1 in April from 53.5 in March, signaling new orders grew for the fourth straight month following four successive months of contraction. The index remained well above a low of 41.8 in January 2023. In April, an increased 31.6% (NSA) of respondents reported higher new orders while 15.2% reported declines. The inventories index increased to 49.0 in April from 47.1 in March, marking the 12th straight month of contraction. The index was below its recent high of 52.7 in March 2025 but above a low of 43.8 in October 2024. Meanwhile, the supplier deliveries index rose to 60.6 in April from 58.9 in March, indicating slower delivery performance for the fifth consecutive month after faster deliveries in November. In April, 22.6% (NSA) of respondents reported slower delivery speeds while only 1.5% reported faster speeds.

On the labor front, the employment index slid to 46.4 in April from 48.7 in March, showing employment contracted for the 31st straight month and at the lowest level since December following a brief expansion in September 2023. The index was above its recent low of 44.1 in November 2025 but below a high of 49.7 in January 2025 and a high of 56.5 in March 2022. In April, 17.5% (NSA) of respondents reported higher employment while 20.2% reported less hiring.

On the pricing front, the prices paid index jumped to 84.6 (NSA) in April from 78.3 in March, indicating raw materials prices rose for the 19th consecutive month and at the fastest pace since April 2022. The index remained well above a low of 39.4 in December 2022 but below a high of 87.1 in March 2022 and a peak of 92.1 in June 2021. In April, an increased 70.3% (NSA) of respondents reported higher prices while only 1.2% reported price declines.

In other ISM series not included in the composite index, the new export orders index fell to 47.9 in April from 49.9 in March, indicating new export orders contracted for the second successive month after expanding in February and January. The index was up from a low of 40.1 in May 2025 but down from its recent high of 52.4 in January 2025 and a high of 57.1 in February 2022. The imports index decreased to 50.3 in April from 52.6 in March, suggesting imports expanded at the weakest pace in three months. The index was below its recent high of 54.9 in February but above a low of 39.9 in May 2025. The order backlog index declined to 51.4 (NSA) in April from 54.4 in March, showing backlog levels grew at the slowest pace in four months. The index was well above a low of 37.5 in May 2023 but far below a peak of 70.6 in May 2021.

The ISM figures are based on responses from over 400 purchasing and supply executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These data are diffusion indexes where a reading above 50 indicates expansion; below 50 indicates contraction. The ISM Manufacturing PMI is a composite index based on the diffusion indexes of five of the indexes (seasonally adjusted) with equal weights: New Orders, Production, Employment, Supplier Deliveries, and Inventories. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

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- ISM Mfg. PMI at 52.7 in Apr. and Mar.; fourth consecutive month of expansion.
- Production (53.4) expands for the sixth straight mth.; new orders (54.1) for the fourth successive mth.
- Employment (46.4) contracts for the 31st straight mth.; at a four-month low.
- Prices Index (84.6) highest since Apr. ’22; prices rising for the 19th consecutive mth.
- Exports (47.9) contract; imports (50.3) still grow but at a three-month low.

U.S. ISM Manufacturing PMI Steady in April; New Orders and Production Growing; Employment Contracting

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GDP growth in Europe in the first quarter of 2026 continued to be weak. First-quarter annualized growth at 0.6% followed a fourth-quarter annualized growth rate at 0.8%. Year-over-year growth in the monetary union logged a 0.8% annual rate; that represents a slowdown from earlier quarters where the growth rates were generally above 1% and more on the order of 1.5% at an annual rate.

**Early GDP reporters in EMU**
Among the 8 early reporters of GDP in the first quarter, in the table, only three posted growth pickups compared to the previous quarter. Those were Belgium, with a growth rate in the first quarter annualized at 0.8%, up from 0.2% in Q4 2025; Germany, where the growth rate picked up to 1.3% in the first quarter from 1.0% in Q4; and Ireland, with a dubious acceleration of growth to a -7.8% annualized rate, improving from -14.5% annualized in Q4.

**Big country, small country**
The table also looks at growth divided into the four largest economies in the monetary union versus the rest of the monetary union. There we see a growth rate of 1% for the four largest economies, a slowdown from 1.3% in the fourth quarter. For the rest of the monetary union, the growth rate held at 0.5% in the first quarter, the same rate logged in the fourth quarter.

**Median growth**
The median growth rate among these reporters was 0.6%, the same as for the weighted growth rate in the EMU, while the median in the fourth quarter was 1.5% compared to a weighted growth rate for the monetary union at 0.8%.

**Ranking the growth rates vs. their own histories**
The ranking data on the far-right column rank growth in the first quarter on its year-over-year growth pace. On a historic profile, we see only three monetary union reporters with growth in the first quarter at a rate that exceeds median on data back to the 1990s. Those economies are Italy with a 52.2 percentile ranking, Spain with a 53.3 percentile ranking, and Portugal with a 65.2 percentile ranking. For the monetary union as a whole, the growth rate rank is 28.3%, placing it at a ranking between its lower 1/4 and lower 1/3. The median for the monetary union among these early reporting countries is a 32.6 percentile growth rate, and these compared to the United States where the growth rate has a 60.2 percentile standing.

Other data sources report that growth in the services sector has been extremely weak, while there actually has been some resilience in manufacturing. That is somewhat surprising given the Middle East War that affects the world trade and global supply chains. New disruptions because of war in the Middle East are a new fact of life. However, war itself sometimes is a stimulant to some forms of growth. These sector trends will be for us to watch, but for right now growth rates are not impressive and they're certainly not gaining momentum.

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Europe

GDP Remains Weak in EMU

Andrew Cates

**Front-End Yields Reflect Policy Reassessment**
Against a backdrop of key central bank meetings either having just taken place or imminent, short-dated government bond yields have moved decisively higher across most major economies since the escalation of the Middle East conflict, with the sharpest increase seen in the UK. The rise in 2-year yields reflects a repricing of near-term monetary policy expectations, as markets respond to the inflationary implications of higher energy prices and the growing likelihood that central banks will delay easing cycles. Moves have been most pronounced in economies where inflation is expected to be more persistent—most notably the UK—while increases have been more modest in the US and particularly Japan, where policy normalisation remains gradual. In effect, the front end of the curve is signalling a shift away from the “rate cuts soon” narrative that prevailed earlier in the year toward a more cautious, higher-for-longer policy outlook.

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**US Recession Risks Remain Contained—For Now**
Despite the recent deterioration in the macro backdrop, real-time recession risk indicators for the US remain relatively subdued. This is notable given the combination of softer growth momentum, higher bond yields and heightened geopolitical risk. The nowcast—derived from a blend of high-frequency activity data and financial stress measures—has historically tended to move sharply when conditions turn, rather than drift higher gradually. That asymmetry is important in the current environment. While recession risks are not yet flashing red, past cycles suggest they can reprice abruptly, and arguably at present if energy-driven inflation were to feed much more forcefully into financial conditions or begin to weigh more materially on demand.

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**Consumer Confidence Diverges: Europe and UK Slide, US Stabilises**
Consumer confidence has weakened across the major economies, but the deterioration has been more pronounced in the euro area and the UK than in the US. While sentiment in the US has recently edged up, it remains at relatively subdued levels. By contrast, confidence in Europe and the UK has fallen more sharply, reflecting greater exposure to higher energy costs and a more direct squeeze on real household incomes. This divergence is consistent with broader macro trends, suggesting that demand in Europe may prove more sensitive to the current shock, with weaker sentiment feeding more quickly into consumption.

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**Euro area Credit Conditions Turn More Restrictive**
The latest ECB lending survey points to a clear tightening in credit conditions across the euro area, with banks raising lending standards for both firms and households while loan demand weakens. This combination—more restrictive supply alongside softer demand—is typically associated with a cooling in activity, particularly in interest-sensitive sectors. Recent evidence suggests that higher perceived risks, rising funding costs and geopolitical uncertainty are all weighing on banks’ willingness to lend, while weaker confidence and reduced investment appetite are dampening borrowing needs. The result is a tightening in financial conditions that is likely to amplify the broader slowdown already evident in survey data, reinforcing the more fragile growth dynamics now emerging across the region.

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**An Intensifying AI Boom with Supply-Side Undercurrents**
Against the backdrop of surging AI-related investment, semiconductor prices are not just high—they are rising at an increasingly rapid pace. This chart shows a clear acceleration in both prices and export values, pointing to an intensifying boom in global chip demand. While this is in part a reflection of strong, structural demand, supply-side factors may also be playing a growing role. Although the Middle East is not a direct source of key chip-making minerals, it is central to the energy and petrochemical inputs that underpin semiconductor production. Ongoing geopolitical tensions are therefore likely feeding into higher costs and renewed frictions across supply chains. The combination of accelerating demand and tightening supply conditions suggests that semiconductor inflation could prove more persistent—and more globally consequential—than currently assumed.

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**Labour Markets Reflect the AI Acceleration**
Our final chart this week highlights the extent to which the current AI boom is now feeding through into labour markets. This high-frequency indicator—based on the share of job listings containing AI-related keywords—shows a sharp and sustained increase since the widespread adoption of generative AI tools in late 2022. What began as a more traditional build-out in machine learning roles has evolved into a broader and more intense wave of hiring tied to generative AI capabilities, with demand accelerating markedly across multiple economies. The scale and persistence of this trend point to a structural shift rather than a cyclical upswing, reinforcing the view that AI is becoming an increasingly important driver of investment, productivity expectations and, potentially, broader macroeconomic dynamics.

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Against a backdrop of persistent geopolitical tensions, firmer energy prices and a busy week of central bank meetings—including the Fed, ECB, BoE and BoJ—financial markets have remained notably resilient, even as the macro narrative has softened at the margin. The message from this week’s charts is one of growing tension beneath that surface calm. Front-end bond yields have moved higher, signalling a shift toward a more cautious, “higher-for-longer” policy outlook (chart 1). At the same time, real-time recession indicators for the United States suggest risks remain contained for now (chart 2). Consumer confidence data paint a more uneven picture, with sharper declines in the euro area and UK than in the US, highlighting regional vulnerabilities to the current energy shock (chart 3). The ECB’s latest bank lending survey reinforces this, pointing to tighter credit conditions and weaker demand—factors that are likely to weigh further on European growth (chart 4). By contrast, developments in the semiconductor sector underline a different dynamic: an intensifying global boom, with accelerating price pressures reflecting both strong AI-driven demand and emerging supply-side constraints linked indirectly to energy and logistics disruptions (chart 5). Finally, labour market data confirm that the AI surge is not merely a market narrative but a tangible structural shift, with hiring for AI-related roles accelerating across economies (chart 6). Taken together, these signals point to a more complex macro environment—one in which resilient markets coexist with softening growth, more persistent inflation risks and increasingly delicate policy trade-offs.

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Charts of the Week: Tension Beneath the Surface

Michael J. Moran

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Real GDP grew at an annual rate of 2.0% in the first quarter of 2026, almost identical to the expected advance of 2.1%. The latest change was comfortably within the range of recent observations and close to the economy’s potential rate of growth. The year-over-year change totaled 2.7%, but that shift reflected what might be viewed as a special factor (robust growth in the second and third quarters that offset a trade-tariff-induced drop in 2025-Q1 GDP).

Business fixed investment was the star of the show in the first quarter, registering growth of 10.4%. Outlays for information processing equipment and software were especially strong, while outlays for industrial equipment and Research & Development contributed positively as well. Outlays for structures remained decidedly soft, dropping for the ninth consecutive quarter. Building of data centers have been vigorous, but softness in offices and manufacturing facilities has dwarfed the strength in this new area.

Federal spending surged 9.4% in Q1, but the rise reflected the reopening of most federal agencies after their closure during much of the fourth quarter. Excluding this noise, support from the federal government has been softening. Nondefense outlays peaked in the fourth quarter of 2024, and they were 6.9% shy of that total in the first quarter. Defense spending also peaked in 2024-Q4 and has eased 2.4% since then. Defense spending most likely will grow in coming quarters because of the efforts in the Middle East. Orders for defense goods have already started to rise.

Consumer spending rose 1.5% in the first quarter, a bit shy of the 2.1% pace over the four quarters of last year and less than half the rates in 2023 and 2024. Consumer spending showed signs of softening in late 2025 and January of this year, but activity picked up in February and March. Firm tax refunds might have provided a boost to household spending in the latest months. Some of the tax cuts from the One Big Beautiful Bill were applied retroactively to 2025, but withholding schedules were not adjusted last year. Thus, many households are receiving larger-than-normal tax refunds.

International trade acted as a drag on economic growth in Q1, with net exports subtracting 1.3 percentage points from the GDP increase. Exports did well in the first quarter with growth of 12.9%, but imports were even stronger with a jump of 21.4%. The real trade deficit of $1.1 trillion was noticeably smaller than the shortfall of $1.4 trillion in 2025-Q1 when importers were rushing to get goods into the US before the imposition of tariffs. Still, the trade shortfall was sizeable and its effect on growth noticeable.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

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- Robust business investment led the advance; moderate support from consumers.
- Government spending jumped with the reopening of most federal agencies.
- The trade sector remained volatile, making a sizeable negative contribution in Q1.

Q1 GDP: Weathering the Challenges; Trend-Like Growth

Sandy Batten

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This monthly report contains a wealth of information concerning the state of the consumer. The anticipation ahead of today’s report centered on how much the surge in energy prices since the escalation of the US-Iran conflict in early March would push up overall PCE inflation. Prices of energy goods and services jumped 11.6% m/m not annualized in March. This was the largest monthly increase since September 2005. As a result, the headline PCE price index increased 0.7% m/m (3.5% y/y versus 2.8% y/y in February), the largest monthly gain since July 2022 but in line with expectations of the Action Economics Forecast Survey.

The core index (that is, excluding food and energy prices) rose by a more modest 0.3% m/m in March, down from a 0.4% monthly increase in February and in line with expectations. However, the yearly rate rose further to 3.2% y/y in March from 3.0% in February, well above and moving away from the Fed’s 2% target. The FOMC left its fed funds rate target unchanged at yesterday’s meeting, but some committee members dissented, opposing the implied easing bias contained in the statement. Chair Powell, in his press conference, noted that a number of members have become more concerned over the inflation outlook and the possible need for a Fed response.

Nominal personal income posted a solid 0.6% m/m (3.7% y/y) increase in March following an upwardly revised unchanged reading in February (previously -0.1% m/m). The March increase was twice the 0.3% monthly gain expected by the Action Economics Forecast Survey. However, after adjusting for inflation, real personal income slipped 0.1% m/m in March on top of a 0.4% m/m decline in February.

Employee compensation continued to be a major driver of personal income in March. It rose 0.4% m/m (4.1% y/y) in March after a 0.2% monthly increase in February. In March, proprietors’ income jumped 2.8%. This outsized increase reflected payments to farmers from the federal government’s Farmer Bridge Assistance Program. Rental income rose a solid 0.7% m/m, the same gain as in February. Income from financial assets increased 0.4% m/m following a 0.9% m/m decline in February. Personal current transfer payments edged up 0.1% m/m versus a 0.3% m/m decline in February.

Nominal consumption expenditures jumped 0.9% m/m (5.7% y/y) in March following an upwardly revised 0.6% monthly gain in February (previously +0.5% m/m). Spending on goods rose 2.0% m/m (4.5% y/y) while spending on services increased 0.4% m/m (6.3% y/y). As for overall inflation, the surge in energy prices also accounted for a large portion of the March gain in nominal spending. After adjusting for overall inflation, real PCE rose a more modest 0.2% m/m following an upwardly revised 0.3% m/m increase in February (previously +0.1% m/m). Still, the solid gains in February and March provide a strong starting point for Q2. The March level is 1.5% at an annual rate above the Q1 average. For all of Q1, real PCE rose 1.6% q/q saar.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- The PCE price index jumped 0.7%, reflecting an 11.6% m/m surge in energy prices.
- The core index was up 0.3%, in line with expectations but still well above the Fed’s target.
- Personal income increased 0.6% m/m, led by a 0.4% m/m rise in compensation.
- Personal consumption jumped 0.9% m/m with a slight upward revision to February.
- However, much of the March gain in nominal consumption also reflected the jump in energy prices.
- Real consumption rose by a more modest 0.2% m/m.

Economy in Brief

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German IP Follows Orders Higher

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U.S. Mortgage Applications ForPurchase Rise But Applications To Refinance Remain Low

German Manufacturing Orders And Sales Recovering From Their Steep Declines

Weekly Chain Store Sales Recover Around The Holiday