Tom Moeller

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707a.jpg">
The energy markets continued to reflect the recent and developing worry that forward momentum in the U.S. economy has faded. Yesterday, the cash market price for a gallon of regular gasoline fell to $1.71 versus the daily high of $2.04 reached in the middle of June. For the full week, the average price fell to $1.84. Retail gas prices have followed these declines, but to a lesser extent. The pump price for regular gasoline fell last week to an average $2.61 per gallon, down eight cents from the high. Nevertheless prices remained up by one dollar from the December low and were at the highest level since late-October. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.
Lower crude oil prices have led the decline in refined product prices. Yesterday the one-month futures price for light sweet crude oil dropped to $64.05 from an average $69.36 last week. Prices had reached a daily high of $72.68.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707b.jpg">
The weakness in energy prices is against the backdrop of soft demand. The ongoing recession reduced the demand for motor gasoline by 1.8% y/y during the last four weeks. There is good news, however. The rate of decline has moderated from the 4.8% shortfall this past autumn. Demand for distillate also is off sharply though residual fuel oil demand has moved higher. Finally, oil remains plentiful as evidenced by a 13.5% y/y rise in inventories of crude oil &amp; petroleum products. Inventories of gasoline are flat y/y but crude oil inventories less the SPR are up by 16.8%. The figures on crude oil production and inventories are available in Haver&#39;s OILWKLY database.
Finally, natural gas prices did recover during the last two weeks, but the trend since April has definitely been sideways. Last week&#39;s average price of $3.69 per mmbtu (-72.1% y/y) was down from a recent high of $4.02. Current prices are down by two-thirds from the high reached in early-July of $13.19/mmbtu.
Time variation in the inflation passthrough of energy prices from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/RESWKPAP/PDF/RWP09-06.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/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">07/06/09</th>
<th scope="col">06 /29/09</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">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.61</td>
<td>2.64</td>
<td>-36.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>69.36</td>
<td>68.76</td>
<td>-51.3%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
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The energy markets continued to reflect the recent and developing worry that forward momentum in the U.S. economy has faded. Yesterday, the cash market price for a gallon of regular gasoline fell to $1.71 versus the daily high of [...]

Gasoline Prices Decline As Economic Momentum Fades Further

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707a.jpg" align="left" border="0">
The energy markets continued to reflect the recent and
developing worry that forward momentum in the U.S. economy has faded.
Yesterday, the cash market price for a gallon of regular gasoline fell
to $1.71 versus the daily high of $2.04 reached in the middle of June.
For the full week, the average price fell to $1.84. Retail gas prices
have followed these declines, but to a lesser extent. The pump
price for regular gasoline fell last week to an average
$2.61 per gallon, down eight cents from the high. Nevertheless prices
remained up by one dollar from the December low and were at the highest
level since late-October. The figures are reported by the U.S.
Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.
Lower crude oil prices have led the
decline in refined product prices. Yesterday the one-month futures
price for light sweet crude oil dropped to $64.05 from an average
$69.36 last week. Prices had reached a daily high of $72.68.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707b.jpg" align="right" border="0">
The weakness in energy prices is against the backdrop of soft
demand. The ongoing recession reduced the demand for motor gasoline by
1.8% y/y during the last four weeks. There is good news, however. The
rate of decline has moderated from the 4.8% shortfall this past autumn.
Demand for distillate also is off sharply though residual fuel oil
demand has moved higher. Finally, oil remains plentiful as evidenced by
a 13.5% y/y rise in inventories of crude oil &amp; petroleum
products. Inventories of gasoline are flat y/y but crude oil
inventories less the SPR are up by 16.8%. The figures on crude oil
production and inventories are available in Haver's OILWKLY database.
Finally, natural gas prices did recover during the last two
weeks, but the trend since April has definitely been sideways. Last
week's average price of $3.69 per mmbtu (-72.1% y/y) was down from a
recent high of $4.02. Current prices are down by two-thirds from the
high reached in early-July of $13.19/mmbtu.
Time variation in the inflation passthrough of energy
prices from the Federal Reserve Bank of Kansas City can be
found <a href="http://www.kansascityfed.org/PUBLICAT/RESWKPAP/PDF/RWP09-06.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/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">07/06/09</th>
<th scope="col">06 /29/09</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">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.61</td>
<td>2.64</td>
<td>-36.5%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>69.36</td>
<td>68.76</td>
<td>-51.3%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Recover
Around The Holiday 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 7, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090707c.jpg" align="left" border="0" height="265" 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'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'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'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>
German Manufacturing Orders And
Sales Recovering From Their Steep Declines 
by <a href="/comment/Curley.html">Louise
Curley</a> July 7, 2009

<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>

Gasoline Prices Decline AsEconomic Momentum Fades Further

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706f.jpg" align="left" border="0" height="265" width="353">
Special programs to incentivize new car purchases are having
success in spurring new passenger car registrations in Europe. European
Commission President Jose Manuel Barroso said Monday that the recession
in Europe will extend throughout 2009. Yet the auto sector is doing
much better now. 
 

These key large European economies show momentum building from
12-months to six months to three-months. Although most of retails sales
is languishing, the special incentives have prompted auto sales to
revive. In Germany the strongest growth is over six months as the three
month growth rate has backed off. France exhibits the same sort of
pattern but with much less strength over six months and three months. 
 

Sales in Spain over three-months are exploding despite the
ongoing crash in the housing market there. Sales in the UK have finally
showing some growth over three-months buts sales there are still lower
on six months and 12-months. 
 

Auto sales alone will not be enough to turn around the sagging
European economy. Much of Europe depends on export sales reviving; that
will require a more balanced rebound and for recovery to spread to the
surrounding area in Eastern Europe as well. For now, sales inventive
plans seem to be working for autos and that will help to spread some
optimism and growth and should combine with other programs to help to
get growth back on track in 2010. 


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col" class="firstcol" colspan="10">E
Area Car Registrations</th>
</tr>
</thead>
<tbody>
<tr>
<td style="padding-left: 0.25em; padding-right: 0.25em;"></td>
<td colspan="3" style="padding-left: 0.25em; padding-right: 0.25em;"></td>
<td colspan="2" style="padding-left: 0.25em; padding-right: 0.25em;">3-Mo
Trend 
From</td>
<td colspan="2" style="padding-left: 0.25em; padding-right: 0.25em;">6-Mo
Trend 
From</td>
<td colspan="2" style="padding-left: 0.25em; padding-right: 0.25em;">12-Mo
Trend 
From</td>
</tr>
<tr class="odd">
<td style="padding-left: 0.25em; padding-right: 0.25em;">All Seasons
 
Adjusted</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Apr-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">Germany:</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">6.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-6.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">15.8%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">79.1%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">2.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">128.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">125.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">40.7%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">39.4%</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">France
(&amp;WDA)</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-10.6%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">17.7%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-2.4%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">11.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">123.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">19.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">48.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">6.6%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">14.6%</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">Italy</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">20.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-12.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">9.7%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">79.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">34.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">12.8%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">20.8%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">11.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-9.4%</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">Spain</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">25.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-9.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">15.9%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">206.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-12.4%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">22.1%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-9.3%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-16.0%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-39.1%</td>
</tr>
<tr>
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">UK</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">9.6%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-6.6%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">10.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">62.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-20.2%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-9.8%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">17.5%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-16.7%</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">-25.5%</td>
</tr>
<tr class="odd">
<td class="firstcol" style="padding-left: 0.25em; padding-right: 0.25em;">Base
Month of
Calculation</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Apr-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Mar-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Mar-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Feb-09</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Dec-08</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Nov-08</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">Jun-08</td>
<td style="padding-left: 0.25em; padding-right: 0.25em;">May-08</td>
</tr>
</tbody>
</table>
</body></html>

Special programs to incentivize new car purchases are having success in spurring new passenger car registrations in Europe. European Commission President Jose Manuel Barroso said Monday that the recession in Europe will extend [...]

Auto Registrations Lead Recovery In Europe

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706e.jpg" align="left" border="0" height="265" width="353">
The accompanying chart makes the point that US rate of
unemployment has risen a lot and Europe&#8217;s has risen by a little. Still
the higher US rate of unemployment will fall sharply in recovery
whereas Europe&#8217;s history suggests that its rate will remain above the
rate of unemployment in America even when it falls. Europe&#8217;s labor
markets are more insulated and less flexible. That will be the next
challenge for Europe. 
 

In Europe a few statistics show us how disparate conditions
can be even within the EMU portion of Europe. German unemployment is up
by just 0.3% points over the last 12 months. French unemployment is up
by 1.7 percentage points. Spain&#8217;s unemployment is up by 8.2 percentage
points, accounting for the bulk of the rise of the rate of unemployment
in EMU over the past year. Over the same period the US rate is up by
3.9 percentage points, and Japan&#8217;s rate is up by 1.2 percentage points.
While there are regional disparities in most large countries,
especially in the US and in Japan. But because of its single monetary
structure and split fiscal structure, regional disparities of the sort
EMU is bearing put a great deal more pressure on the system than would
be the case in a true single independent nation. 
 

For the US, a period like this offer the economy the
opportunity to reinvent itself as old businesses are killed off and new
opportunities and needs reveal themselves. Of course, in this cycle
some old US industries were bailed out because the government thought
they were still worthwhile. Europe has had same the same experience. 
 

Both Europe and the US will be leaving this episode of
recession with much higher levels of debt. This will be a challenge for
the period ahead. The US has showed an ability to get strong growth and
rebuild tax revenues in recoveries. Europe has not showed that same
sort of dynamism. Certain European countries, EMU members (plus the UK)
have the added burden of Maastricht criterion that quantitatively
restricts their debt levels relative to GDP. As recovery sets in, most
EMU nations will be in violation of this rule and it is not clear how
much time the authorities will allow for the rule to be put back in
force. An early imposition of the rule will lead to fiscal contraction
and could hamper recovery. 
 

That will be an extra problems facing Europe once we turn the
corner into recovery. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th scope="col" colspan="7" class="firstcol">Unemployment
rate and changes</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Level</td>
<td colspan="3">Simple Changes</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</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>
</tr>
<tr>
<td class="firstcol">EU-Urate</td>
<td>8.9</td>
<td>8.7</td>
<td>8.5</td>
<td>0.6</td>
<td>1.4</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">EMU-Urate</td>
<td>9.5</td>
<td>9.3</td>
<td>9.0</td>
<td>0.7</td>
<td>1.5</td>
<td>2.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">m/m%</td>
<td colspan="3">% changes (ar)</td>
</tr>
<tr>
<td class="firstcol">EU-U 000s</td>
<td>1.8%</td>
<td>2.6%</td>
<td>3.2%</td>
<td>7.8%</td>
<td>19.8%</td>
<td>31.3%</td>
</tr>
<tr>
<td class="firstcol">EMU-U 000s</td>
<td>1.9%</td>
<td>2.8%</td>
<td>3.0%</td>
<td>7.9%</td>
<td>18.6%</td>
<td>29.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">U-Rates</td>
<td colspan="3">Level</td>
<td colspan="3">Simple Changes</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>7.7</td>
<td>7.7</td>
<td>7.5</td>
<td>0.3</td>
<td>0.6</td>
<td>0.3</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>9.3</td>
<td>9.1</td>
<td>9</td>
<td>0.5</td>
<td>1.1</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>18.7</td>
<td>18</td>
<td>17.3</td>
<td>2.2</td>
<td>4.7</td>
<td>8.2</td>
</tr>
<tr>
<td class="firstcol">USA</td>
<td>9.4</td>
<td>8.9</td>
<td>8.5</td>
<td>1.3</td>
<td>2.6</td>
<td>3.9</td>
</tr>
<tr>
<td class="firstcol">Japan</td>
<td>5.2</td>
<td>5</td>
<td>4.8</td>
<td>0.8</td>
<td>1.2</td>
<td>1.2</td>
</tr>
</tbody>
</table>
</body></html>

The accompanying chart makes the point that US rate of unemployment has risen a lot and Europe’s has risen by a little. Still the higher US rate of unemployment will fall sharply in recovery whereas Europe’s history suggests that its [...]

Worse Vs Much Worse...

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<img align="left" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706c.jpg" width="353">
Despite the week-to-week gyration, initial claims for unemployment insurance have moved sideways since April, trending slightly downward. Reported Thursday, claims edged down last week by 16,000 to 614,000 after an upwardly revised 18,000 increase during the week prior. The latest level was off from the March peak of 674,000. The four-week average of claims, which smoothes out some of the volatility in the weekly numbers, also fell slightly to 615,250 which was its lowest level since mid-February. The latest weekly level roughly matched Consensus expectations.
The Labor Department indicated that the largest increases in initial claims for the week ending June 20 were in California (+14,570), New Jersey (+3,170), Oregon (+3,062), Maryland (+2,342), and Michigan (+2,032), while the largest decreases were in Missouri (-5,753), Pennsylvania (-3,037), Texas (-2,759), Alabama (-1,926), and Florida (-1,894).<img align="right" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706d.jpg" width="353">
Also suggesting improvement in the job market was a 53,000 decline in continuing claims for unemployment insurance which reversed all of the prior week&#39;s gain. Weekly claims were down slightly from their May high. Continuing claims provide an indication of workers&#39; ability to find employment. At 6,702,000, however, claims remained more than twice the year ago level. The four-week average of continuing claims again fell just slightly from their record high. The series dates back to 1966.
These improvements in the weekly claims figures have led to a leveling out of the insured unemployment rate. It slipped to 5.0% where it has been for the last seven weeks. Nevertheless, job market distress is evidenced by the fact that the level remained more than double that of June 2008 and the highest 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 13 were in Michigan (7.5 percent), Oregon (6.7), Puerto Rico (6.6), Nevada (6.3), Pennsylvania (6.2), Wisconsin (5.7), California (5.4), South Carolina (5.3), Arkansas (5.2), Illinois (5.2), and North Carolina (5.2).
The unemployment insurance claims data is available in Haver&#39;s WEEKLY database and the state data is in the REGIONW database.
Reply to Generalizing the Taylor Principle: A Comment from the Federal Reserve Bank of Kansas City can be found <a href="http://www.kansascityfed.org/PUBLICAT/RESWKPAP/PDF/rwp09-09.pdf">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">06/27/09</th>
<th scope="col">06/20/09</th>
<th scope="col">06/13/09</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>614</td>
<td>630</td>
<td>612</td>
<td>51.6%</td>
<td>420</td>
<td>321</td>
<td>313</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>6,702</td>
<td>6,755</td>
<td>112.6%</td>
<td>3,342</td>
<td>2,552</td>
<td>2,459</td>
</tr>
</tbody>
</table>
</body>
</html>

Despite the week-to-week gyration, initial claims for unemployment insurance have moved sideways since April, trending slightly downward. Reported Thursday, claims edged down last week by 16,000 to 614,000 after an upwardly revised [...]

U.S. Initial Unemployment Insurance Claims Continue To Move Sideways

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706a.jpg" width="353">
The service sector continued to show signs of improvement during June. The Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose to 47.0 from an unrevised reading of 44.0 during May. Though still below the break-even level of 50, the latest was the highest level since September of last year and it beat Consensus expectations for a reading of 46.0. A level of the ISM index below 50 indicates declining activity. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the business activity index in the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.
That latest rise came as the employment index jumped to its highest level (43.4) since September. Since the series&#39; inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090706b.jpg" width="353">
The overall business activity index for the service sector rose to 49.8 which was its highest level since September. Also rising to a nine-month high was the new orders series. The gain to 48.6 pulled it well above from last November&#39;s low of 35.6. Continuing to suggest that some slack remains in the service sector was a decline in the supplier deliveries component which fell back to near the series&#39; lowest level.
With an upside breakout, the price index rose about as it did during May. The strong 6.8 point gain to 53.7 was also the highest level since last September. Since its inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing <cite>Report On Business</cite>&reg;, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indices of four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found <a href="http://www.ism.ws/ISMReport/NonMfgROB.cfm">here.</a>
ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.
Lessons Learned from the Financial Crisis from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/newsevents/speeches/2009/dud090702.html">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/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;08</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">Composite Index</td>
<td>47.0</td>
<td>43.7</td>
<td>48.8</td>
<td>47.4</td>
<td>53.5</td>
<td>55.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Business Activity</td>
<td>49.8</td>
<td>42.4</td>
<td>50.7</td>
<td>47.4</td>
<td>56.0</td>
<td>58.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Employment</td>
<td>43.4</td>
<td>39.0</td>
<td>45.2</td>
<td>43.8</td>
<td>52.0</td>
<td>53.8</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>53.7</td>
<td>46.9</td>
<td>82.1</td>
<td>66.0</td>
<td>63.8</td>
<td>65.3</td>
</tr>
</tbody>
</table>


</html>

The service sector continued to show signs of improvement during June. The Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose to 47.0 from an unrevised reading of 44.0 during May. [...]

U.S. ISM Nonmanufacturing Index Improves To The Highest Level Since Last September

U.S. ISM Nonmanufacturing IndexImproves To The Highest Level Since Last September

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702e.jpg" width="353">
The Bureau of Labor Statistics indicated that the rate of job loss continued to moderate last month, just not by as much as had been anticipated. Nonfarm payrolls fell 467,000 during June after a 322,000 worker decline, revised from -345,000, during May. The June drop was deeper than the market&#39;s expectations for a 350,000 shortfall. During this recession so far employment has fallen by a total of 6.5 million, the record for an 18-month period. In percentage terms jobs are down 4.7% since the 2007 peak, also an 18-month record. The moderation is apparent in the 436,000 average monthly decline during the last three versus a peak three-month rate of 701,000 this past Winter.
The latest data from the payroll survey give insight into real GDP growth last quarter. Combined with the lessened decline in employment is a shorter length of the average workweek. Together, this measure of aggregate hours worked fell at a 7.9% annual rate versus an 8.9% 1Q drop. That drop was associated with negative 5.5% real GDP growth. Therefore the 2Q GDP rate of decline likely eased, perhaps sharply depending on productivity growth. During the last twenty years, there has been a 68% correlation between growth in hours worked and in real GDP.
Another indication of moderation in the economy&#39;s rate of decline was that the unemployment rate only ticked up slightly. The rise to 9.5% from 9.4% in May was, however, to the highest level since August of 1983. The rate&#39;s cycle low of 4.4% occurred in October 2006. Last month employment fell hard again, though here again the rate of decline eased. The 374,000 drop (-3.8% y/y) compared to a peak 1.2 million monthly decline this past January. The labor force fell 155,000 (0.3% y/y). Though the rate of job loss slowed, it also is increasingly difficult for the unemployed to find work. The average duration of unemployment rose during June to a new record of 24.5 weeks from an average of 17.8 weeks during 2008.
Also from the household survey was the continued indication that 5.9 million discouraged workers want a job now but are not in the labor force. That figure is up 19.5% from last June and near the highest since 1995. Finally, the labor force participation rate, i.e., the number of eligible workers who are in the labor force stands at 65.7%, down from the 2000 high of 67.1%.
Back in the establishment survey, the easing in the rate of job loss last month continued evident in slower declines in construction and in services jobs. The construction sector lost 79,000 workers last month after a 48,000 May decline. Monthly drops in excess of 100,000 were common during the prior six. Private service sector job loss also moderated, but just slightly. They fell 192,000 last month after a 97,000 decline May drop. These compare to declines between 196,000 and 399,000 since last September. Losses eased sharply in the retail trade area, in the financial sector and in leisure &amp; hospitality industries. The rate of job loss in the factory sector also eased, but just barely. Factory sector jobs fell 136,000 last month and by an average 147,000 during the last three. That compares with a 205,000 rate of job loss this Winter.
In the government sector there were 52,000 jobs lost last month and they&#39;re up just 4,000 this year. That&#39;s after the 162,000 worker increase during 2008.Jobs with the Federal government fell by 49,000 (+1.5% y/y) for the second consecutive monthly decline. The number of state gov&#39;t jobs fell 4,000 (+0.3% y/y) but local gov&#39;t jobs inched up 1,000. Nevertheless, local gov&#39;t jobs are down by 0.2% y/y, the first material decline since 1983. Should the federal government bail out the states? Lessons from past recessions from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflaugust2009_265.pdf">here</a>.
Not only is the labor market weak in the major categories, but the full breadth of decline shows even greater distress. Overall, only 28.6% of industries posted job gains last month, up from the March low of 19.6%. However, over the last six months just 18.1% of firms posted job growth, up little from the record low since 1990. In the factory sector 13.9% of firms posted job gains and only 6.0% did over the last six months. Both these figures were up from the lows, but just slightly.
Workers&#39; earning power continued to suffer last month from all the hiring distress. Average hourly earnings were unchanged in June for the second month in the last three. That weakness pulled the three-month rate of growth to a record low of just 0.7% (AR). Earnings in the factory sector slipped for the second month and the three-month growth rate dropped to -0.2%. That&#39;s versus a late-2008 growth rate of 5.0%. Growth in the durable sector&#39;s earnings (NSA) has turned negative over the last three months as have earnings in the private service sector.
The figures referenced above are available in Haver&#39;s USECON database. Additional detail can be found in the LABOR and in the EMPL databases.

<table border="0" cellspacing="0" width="100%">
<tr>
<td><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702f.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702g.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090702h.jpg" width="353"></td>
</tr>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Employment: 000s</th>
<th scope="col">June</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</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>-467</td>
<td>-322</td>
<td>-519</td>
<td>-4.1%</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Previous</td>
<td>--</td>
<td>-345</td>
<td>-504</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-136</td>
<td>-156</td>
<td>-150</td>
<td>-12.2%</td>
<td>-3.3%</td>
<td>-2.0%</td>
<td>-0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>-79</td>
<td>-48</td>
<td>-103</td>
<td>-13.7%</td>
<td>-5.5%</td>
<td>-0.8%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Service Producing</td>
<td>-244</td>
<td>-107</td>
<td>-252</td>
<td>-2.6%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Average Weekly Hours</td>
<td>33.0</td>
<td>33.1</td>
<td>33.1</td>
<td>33.6 (June &#39;08)</td>
<td>33.6</td>
<td>33.8</td>
<td>33.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Hourly Earnings</td>
<td>0.0%</td>
<td>0.2%</td>
<td>0.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>4.0%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate</td>
<td>9.5%</td>
<td>9.4%</td>
<td>8.9%</td>
<td>5.6% (June &#39;08)</td>
<td>5.8%</td>
<td>4.6%</td>
<td>4.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Bureau of Labor Statistics indicated that the rate of job loss continued to moderate last month, just not by as much as had been anticipated. Nonfarm payrolls fell 467,000 during June after a 322,000 worker decline, revised from [...]

U.S. Payrolls Decline Another 467,000 As Jobless Rate Increases To 9.5%

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.