Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429g.jpg" width="353">
As evidence that the mortgage refinancing boom has lost steam, the Mortgage Bankers Association reported that mortgage applications fell sharply for the second week in the last three. The 18.1% decline last week lowered applications by nearly one-quarter from their early-April peak.
The index of applications to refinance a home mortgage fell by 21.9% just last week and the decline pulled them 25.0% below the peak in early April. Nevertheless, applications for all of this month are still more than double the year-ago level.
Whatever strength there may be in refinancings is hardly evident in mortgage applications to purchase a home. They had risen earlier this month but the forward momentum lost steam, falling in each of the last three weeks. Overall these applications are down by one-quarter from the year ago level, a decline which is greater than the y/y decline in new plus existing home sales of 9.3% through March.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429h.jpg" width="353">
Falling again, the effective interest rate on a conventional 15-year mortgage dropped last week to 4.69%. For a 30-year mortgage, rates also were near their recent lows at 4.85%. Interest rates on 15- and 30-year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. For an adjustable 1-Year mortgage the rate has been fairly stable this year near 6.25% but the rate still was down sharply from the 7.07% peak reached this past 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>.

<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">04/24/09</th>
<th scope="col">04/17/09</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>960.6</td>
<td>1,172.2</td>
<td>69.4%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>251.6</td>
<td>253.0</td>
<td>-26.0%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>5,108.2</td>
<td>6,540.7</td>
<td>168.1%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body>
</html>

As evidence that the mortgage refinancing boom has lost steam, the Mortgage Bankers Association reported that mortgage applications fell sharply for the second week in the last three. The 18.1% decline last week lowered applications [...]

U.S. Weekly Mortgage Applications Fall As Refinancings Lag

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429e.jpg" width="353">
In an anticipated move the Federal Open Market Committee today left the Federal funds rate in a &quot;range from 0 to 1/4 percent.&quot; The discount also was left unchanged at 0.50%. The Fed funds rate remained the lowest ever. The decision was unanimous amongst FOMC voters.
The Fed indicated that &quot;Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth and tight credit.&quot; Moreover, the Fed pointed out that while &quot;the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.&quot;
<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429f.jpg" width="353"> Regarding inflation the same statement was offered as at the last meeting. &quot;... that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.
In its effort to promote economic liquidity, the Fed used the same language as in March. &quot;As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.&quot;
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090429a.htm"> link</a>.
The Haver databases USECON, WEEKLY and DAILY contain the figures from the Federal Reserve Board.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">December</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.16</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>0.50</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>
</body>
</html>

In an anticipated move the Federal Open Market Committee today left the Federal funds rate in a "range from 0 to 1/4 percent." The discount also was left unchanged at 0.50%. The Fed funds rate remained the lowest ever. The decision [...]

FOMC Leaves Rates Unchanged

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429a.jpg" align="left" border="0" height="265" width="353">
Businesses worked with a vengeance last quarter to reduce
levels of unwanted inventory. The 6.1% (AR) drop in real GDP was about
the same as during 4Q '08, but together the back-to-back declines were
the worst since early-1958. Consensus expectations had been for a 1Q
decline of roughly 5.0%.
Cutbacks of unwanted levels of inventory, which built up as
demand cratered during last year's second half, subtracted 2.8
percentage points from GDP growth. That was the most since the first
quarter of 2000 and it rivals the biggest negative contribution from
inventories since the early-1980s.
The correction followed an unwanted inventory buildup late
during 2008 as demand fell sharply. Real U.S. final sales to domestic
purchasers contracted at a 5.1% annual rate that was little different
from the 4Q decline. Together, these declines also were the sharpest
since 1958. However, the latest decline in overall demand took on
somewhat of a different composition. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429b.jpg" align="right" border="0" height="265" width="353">
Personal consumption expenditures actually rose at a 2.2%
annual rate (-1.2% y/y) last quarter and that reversed a bit of the
decline during the prior two periods. Spending on motor vehicles rose
moderately during the quarter (-18.5% y/y) after five consecutive down
periods. Business fixed investment fell at a 21.7% rate (-5.2% y/y) and
residential investment dropped at a 22.8% rate (-19.4% y/y) from
Q4.Spending on furniture also rose (-0.1% y/y) and reversed a piece of
the declines during the prior two quarters.
Elsewhere the pattern of severe weakness in activity continued
or intensified. Residential investment fell at a 38.0% annual rate
(-23.2% y/y) last quarter. Housing investment has fallen steadily since
its peak in late 2005 but the 1Q drop was the sharpest during the
period. Business investment also has fallen sharply but here again the
rate of decline intensified. The 37.9% (AR) drop last quarter (-16.3%
y/y) set a new record for the postwar period.
The shortfall in overall GDP growth last quarter owed much to
a 3.9% drop (+1.7% y/y) in expenditures by the government sector. It
was the first decline since late 2005 and it was led by a surprising
4.0% drop (+5.6% y/y) drop in Federal spending. That was paced by a
6.4% decline (+5.2% y/y) in defense expenditures. State and local
spending also fell at a 3.9% annual rate -0.6% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429c.jpg" align="left" border="0" height="265" width="353">
If there was any solace in the GDP report it was in the
foreign trade sector where net exports contributed 2.0 percentage
points to 1Q GDP growth. But there was no real positive news here
either, just that imports fell somewhat more than exports. Imports fell
at a 34.% annual rate (-16.5% y/y) while U.S. exports fell at a 3.0%
rate (-11.3% y/y).
Even the inflation news was not great. The 2.9% increase in
the GDP chain price index was up from the 0.5%
annual rate of increase during 4Q. The reason for the rise was that
import prices fell at a faster rate than export prices. Domestic
prices, however, reflected the weak economy. The PCE price index fell
at a 1.0% annual rate while the residential investment chain price
index fell at a 4.8% rate (-5.3% y/y). The weakness in business caused
the nonresidential investment price index also to slip at a 0.9% rate
(+2.5% y/y), the first decline since 2007.
The U.S. National Income &amp; Product Account data is
available in Haver's USECON and the USNA
databases.

<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/@E7/@E701/@E701.HTM">Chained
2000$, % AR</a></th>
<th scope="col">1Q '09 (Advance)</th>
<th scope="col">4Q '08</th>
<th scope="col">1Q 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">GDP</td>
<td>-6.1</td>
<td>-6.3</td>
<td>-2.6</td>
<td>1.1</td>
<td>2.0</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>-2.8</td>
<td>-0.1</td>
<td>-0.9</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-3.4</td>
<td>-6.2</td>
<td>-1.7</td>
<td>1.4</td>
<td>2.4</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>2.0</td>
<td>-0.2</td>
<td>-1.3</td>
<td>1.4</td>
<td>0.6</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-5.1</td>
<td>-5.8</td>
<td>-3.0</td>
<td>-0.0</td>
<td>1.8</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.9</td>
<td>0.5</td>
<td>2.1</td>
<td>2.2</td>
<td>2.7</td>
<td>3.2</td>
</tr>
</tbody>
</table>
</body></html>

Businesses worked with a vengeance last quarter to reduce levels of unwanted inventory. The 6.1% (AR) drop in real GDP was about the same as during 4Q '08, but together the back-to-back declines were the worst since early-1958. [...]

U.S. GDP Declines 6.1% In 1Q As Inventory Cutbacks Weigh Heavily

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429a.jpg" align="left" border="0" height="265" width="353">
Businesses worked with a vengeance last quarter to reduce
levels of unwanted inventory. The 6.1% (AR) drop in real GDP was about
the same as during 4Q '08, but together the back-to-back declines were
the worst since early-1958. Consensus expectations had been for a 1Q
decline of roughly 5.0%.
Cutbacks of unwanted levels of inventory, which built up as
demand cratered during last year's second half, subtracted 2.8
percentage points from GDP growth. That was the most since the first
quarter of 2000 and it rivals the biggest negative contribution from
inventories since the early-1980s.
The correction followed an unwanted inventory buildup late
during 2008 as demand fell sharply. Real U.S. final sales to domestic
purchasers contracted at a 5.1% annual rate that was little different
from the 4Q decline. Together, these declines also were the sharpest
since 1958. However, the latest decline in overall demand took on
somewhat of a different composition. <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429b.jpg" align="right" border="0" height="265" width="353">
Personal consumption expenditures actually rose at a 2.2%
annual rate (-1.2% y/y) last quarter and that reversed a bit of the
decline during the prior two periods. Spending on motor vehicles rose
moderately during the quarter (-18.5% y/y) after five consecutive down
periods. Business fixed investment fell at a 21.7% rate (-5.2% y/y) and
residential investment dropped at a 22.8% rate (-19.4% y/y) from
Q4.Spending on furniture also rose (-0.1% y/y) and reversed a piece of
the declines during the prior two quarters.
Elsewhere the pattern of severe weakness in activity continued
or intensified. Residential investment fell at a 38.0% annual rate
(-23.2% y/y) last quarter. Housing investment has fallen steadily since
its peak in late 2005 but the 1Q drop was the sharpest during the
period. Business investment also has fallen sharply but here again the
rate of decline intensified. The 37.9% (AR) drop last quarter (-16.3%
y/y) set a new record for the postwar period.
The shortfall in overall GDP growth last quarter owed much to
a 3.9% drop (+1.7% y/y) in expenditures by the government sector. It
was the first decline since late 2005 and it was led by a surprising
4.0% drop (+5.6% y/y) drop in Federal spending. That was paced by a
6.4% decline (+5.2% y/y) in defense expenditures. State and local
spending also fell at a 3.9% annual rate -0.6% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429c.jpg" align="left" border="0" height="265" width="353">
If there was any solace in the GDP report it was in the
foreign trade sector where net exports contributed 2.0 percentage
points to 1Q GDP growth. But there was no real positive news here
either, just that imports fell somewhat more than exports. Imports fell
at a 34.% annual rate (-16.5% y/y) while U.S. exports fell at a 3.0%
rate (-11.3% y/y).
Even the inflation news was not great. The 2.9% increase in
the GDP chain price index was up from the 0.5%
annual rate of increase during 4Q. The reason for the rise was that
import prices fell at a faster rate than export prices. Domestic
prices, however, reflected the weak economy. The PCE price index fell
at a 1.0% annual rate while the residential investment chain price
index fell at a 4.8% rate (-5.3% y/y). The weakness in business caused
the nonresidential investment price index also to slip at a 0.9% rate
(+2.5% y/y), the first decline since 2007.
The U.S. National Income &amp; Product Account data is
available in Haver's USECON and the USNA
databases.

<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/@E7/@E701/@E701.HTM">Chained
2000$, % AR</a></th>
<th scope="col">1Q '09 (Advance)</th>
<th scope="col">4Q '08</th>
<th scope="col">1Q 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">GDP</td>
<td>-6.1</td>
<td>-6.3</td>
<td>-2.6</td>
<td>1.1</td>
<td>2.0</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory
Effect</td>
<td>-2.8</td>
<td>-0.1</td>
<td>-0.9</td>
<td>0.1</td>
<td>-0.4</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-3.4</td>
<td>-6.2</td>
<td>-1.7</td>
<td>1.4</td>
<td>2.4</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">Foreign Trade Effect</td>
<td>2.0</td>
<td>-0.2</td>
<td>-1.3</td>
<td>1.4</td>
<td>0.6</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>-5.1</td>
<td>-5.8</td>
<td>-3.0</td>
<td>-0.0</td>
<td>1.8</td>
<td>2.6</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.9</td>
<td>0.5</td>
<td>2.1</td>
<td>2.2</td>
<td>2.7</td>
<td>3.2</td>
</tr>
</tbody>
</table>
FOMC Leaves Rates Unchanged 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 29, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429e.jpg" align="left" border="0" height="265" width="353">
In an anticipated move the Federal Open Market Committee today
left the Federal funds rate in a "range from 0 to 1/4 percent." The
discount also was left unchanged at 0.50%. The Fed funds rate remained
the lowest ever. The decision was unanimous amongst FOMC voters.
The Fed indicated that "Household spending has shown signs of
stabilizing but remains constrained by ongoing job losses, lower
housing wealth and tight credit." Moreover, the Fed pointed out that
while "the economic outlook has improved modestly since the March
meeting, partly reflecting some easing of financial market conditions,
economic activity is likely to remain weak for a time. Nonetheless, the
Committee continues to anticipate that policy actions to stabilize
financial markets and institutions, fiscal and monetary stimulus, and
market forces will contribute to a gradual resumption of sustainable
economic growth in a context of price stability."
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429f.jpg" align="right" border="0" height="265" width="353"> Regarding
inflation the same statement was offered as at the last meeting. "...
that inflation will remain subdued. Moreover, the Committee sees some
risk that inflation could persist for a time below rates that best
foster economic growth and price stability in the longer term.
In its effort to promote economic liquidity, the Fed used the
same language as in March. "As previously announced, to provide support
to mortgage lending and housing markets and to improve overall
conditions in private credit markets, the Federal Reserve will purchase
a total of up to $1.25 trillion of agency mortgage-backed securities
and up to $200 billion of agency debt by the end of the year. In
addition, the Federal Reserve will buy up to $300 billion of Treasury
securities by autumn."
For the complete text of the Fed's latest press release please
follow this <a href="http://www.federalreserve.gov/newsevents/press/monetary/20090429a.htm">
link</a>.
The Haver databases USECON, WEEKLY and DAILY
contain the figures from the Federal Reserve Board.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Current</th>
<th scope="col">Last</th>
<th scope="col">December</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Federal Funds Rate, % (Target)</td>
<td>0.00 - 0.25</td>
<td>0.00 - 0.25</td>
<td>0.16</td>
<td>1.93</td>
<td>5.02</td>
<td>4.96</td>
</tr>
<tr>
<td class="firstcol">Discount Rate, %</td>
<td>0.50</td>
<td>0.50</td>
<td>0.50</td>
<td>2.39</td>
<td>5.86</td>
<td>5.96</td>
</tr>
</tbody>
</table>
U.S. Weekly Mortgage Applications
Fall As Refinancings Lag 
by <a href="/comment/Moeller.html">Tom
Moeller</a> April 29, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429g.jpg" align="left" border="0" height="265" width="353">
As evidence that the mortgage refinancing boom has lost steam,
the Mortgage Bankers Association reported that mortgage applications
fell sharply for the second week in the last three. The 18.1% decline
last week lowered applications by nearly one-quarter from their
early-April peak.
The index of applications to refinance a home mortgage fell by
21.9% just last week and the decline pulled them 25.0% below the peak
in early April. Nevertheless, applications for all of this month are
still more than double the year-ago level.
Whatever strength there may be in refinancings is hardly
evident in mortgage applications to purchase a home. They had risen
earlier this month but the forward momentum lost steam, falling in each
of the last three weeks. Overall these applications are down by
one-quarter from the year ago level, a decline which is greater than
the y/y decline in new plus existing home sales of 9.3% through March.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090429h.jpg" align="right" border="0" height="265" width="353">
Falling again, the effective interest rate on a conventional
15-year mortgage dropped last week to 4.69%. For a 30-year mortgage,
rates also were near their recent lows at 4.85%. Interest rates on 15-
and 30-year mortgages are closely correlated (&gt;90%) with the
rate on 10-year Treasury securities. For an adjustable 1-Year mortgage
the rate has been fairly stable this year near 6.25% but the rate still
was down sharply from the 7.07% peak reached this past 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>.

<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">04/24/09</th>
<th scope="col">04/17/09</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>960.6</td>
<td>1,172.2</td>
<td>69.4%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>251.6</td>
<td>253.0</td>
<td>-26.0%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>5,108.2</td>
<td>6,540.7</td>
<td>168.1%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090428c.jpg" align="left" border="0" height="265" width="353">
The Year-over-year the drop in Japan&#8217;s retail sales is
worsening. But overall seasonally adjusted sales while down by a sharp
1.1% m/m in March are not accelerating their drop over three months
compared to six months. The 5.6% annual rate of decline over three
months is less than the 7.6% pace of decline over six months but still
much greater than the 3.7% pace of decline over 12-months. There is not
much good news in those trends. In the just-completed quarter, sales
are still falling at a rapid 7% annual rate compared to Q4. With Japan
poised for its traditional Golden Week holiday, consumer spending is
again set to be tested. While the US and Europe have showed some
sporadic signs of improvement in data trends, there has been little in
the way of constructive data from Japan as of yet. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">Japan
Retail Sales Trends
</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Mar-09</td>
<td>Feb-09</td>
<td>Jan-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>Q-to-Date</td>
</tr>
<tr class="odd">
<td class="firstcol">Total SA</td>
<td>-1.1%</td>
<td>-0.2%</td>
<td>-0.1%</td>
<td>-5.6%</td>
<td>-7.6%</td>
<td>-3.7%</td>
<td>3.2%</td>
<td>-7.0%</td>
</tr>
<tr>
<td class="firstcol" colspan="9">Not
seasonally adjusted</td>
</tr>
<tr class="odd">
<td class="firstcol">Total: Nominal</td>
<td>-0.4%</td>
<td>-1.2%</td>
<td>0.9%</td>
<td>-3.1%</td>
<td>-6.6%</td>
<td>-3.9%</td>
<td>4.2%</td>
<td>-6.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Vehicles</td>
<td>-2.0%</td>
<td>-6.1%</td>
<td>3.7%</td>
<td>-17.0%</td>
<td>-10.9%</td>
<td>-6.3%</td>
<td>10.0%</td>
<td>-1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food&amp; Beverage</td>
<td>0.7%</td>
<td>-1.5%</td>
<td>-0.5%</td>
<td>-5.1%</td>
<td>-0.6%</td>
<td>0.4%</td>
<td>2.1%</td>
<td>-7.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Fabric apparel &amp; access</td>
<td>-0.9%</td>
<td>0.0%</td>
<td>1.7%</td>
<td>2.9%</td>
<td>-5.7%</td>
<td>-5.6%</td>
<td>-1.3%</td>
<td>-6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Rest of Retail</td>
<td>-0.7%</td>
<td>-0.1%</td>
<td>1.0%</td>
<td>0.7%</td>
<td>-9.3%</td>
<td>-5.6%</td>
<td>5.0%</td>
<td>-7.2%</td>
</tr>
</tbody>
</table>
</body></html>

The Year-over-year the drop in Japan’s retail sales is worsening. But overall seasonally adjusted sales while down by a sharp 1.1% m/m in March are not accelerating their drop over three months compared to six months. The 5.6% annual [...]

Japan Retail Sales Continue to Drop

Louise Curley

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090428j.jpg" align="left" border="0" height="265" width="353">
There was some good news for the U.K. in the latest
Confederation of Business Industries (CBI) Survey of the Distributive
Trades. More respondents reported increases in retail sales over a year
ago than those reporting decreases. Although the balance was
small--3%--it was the first positive result since the 1% balance in
March 2008 and represented a dramatic reversal from the large negative
balances of 25%-55% recorded in the last four months. It was, moreover,
unexpected. The same respondents had expected April to show a negative
balance of 47% and they still expect a negative balance of 15% for May.
The first chart shows the reported and expected percent balances for
retail trade.
While still reporting negative balances for wholesale
business, the balance for April was -18% well below the negatives
balances recorded earlier in the year and below the -56% expected for
April. Wholesalers, however, continue pessimistic and are expecting
decreases in sales relative to a year ago will exceed increases by 23%
in May. The second chart shows the reported and expected percent
balances for wholesale trade.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090428k.jpg" align="right" border="0" height="265" width="353">
Reported sales in the motor trades showed a negative balance
of 16%, compared with a negative balance of only 6% in March. The
reported figures have, in recent months, been much better than the
expected results. A negative balance of 48% was expected for April
versus the -16% that was reported. A negative balance of 62% is
expected for May. The third chart shows the reported and expected
percent balances for the motor trade.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Percent Balance</th>
<th scope="col">May 09</th>
<th scope="col">Apr 09</th>
<th scope="col">Mar 08</th>
<th scope="col">Feb 09&nbsp;</th>
<th scope="col">Jan 09</th>
<th scope="col">Dec 08&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Reported&nbsp;</td>
<td>--</td>
<td>3</td>
<td>-44</td>
<td>-25</td>
<td>-47</td>
<td>-55</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Expected&nbsp;</td>
<td>-15</td>
<td>-47</td>
<td>-33</td>
<td>-52</td>
<td>-49</td>
<td>-40</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale Reported</td>
<td>--</td>
<td>-18</td>
<td>-65</td>
<td>-47</td>
<td>-91</td>
<td>-25</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Expected</td>
<td>-23</td>
<td>-56</td>
<td>-46</td>
<td>-37</td>
<td>-30</td>
<td>-57</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Trades Reported</td>
<td>--</td>
<td>-16</td>
<td>-6</td>
<td>-50</td>
<td>-68</td>
<td>-100</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;Expected</td>
<td>-62</td>
<td>-48</td>
<td>-59</td>
<td>-57</td>
<td>-87</td>
<td>-98</td>
</tr>
</tbody>
</table>
</body></html>

There was some good news for the U.K. in the latest Confederation of Business Industries (CBI) Survey of the Distributive Trades. More respondents reported increases in retail sales over a year ago than those reporting decreases. [...]

More Retailers in the U.K. Report Increases in Sales versus a Year Ago than Those Reporting Decreases

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
.odd{
background-color:#edf5ff;
}
.even{
background-color:#dde5ef;
}
.grey1{
background-color:#f0f0f0;
}
.grey2{
background-color:#e2e2e2;
}
.grey3{
background-color:#d4d4d4;
}
.grey4{
background-color:#c6c6c6;
}
.grey5{
background-color:#b8b8b8;
}
</style>
</head>
<body>
 




<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090428d.jpg" align="left" border="0" height="265" width="353">
Although South Korea's real Gross Domestic Product improved
slightly in the first quarter of this year, the economy is still in
recession. GDP rose 0.21% at a seasonally adjusted annual rate (saar)
in the first quarter of 2009, but it is 18.6%%, saars, below the third
quarter of 2008. The fourth quarter of last year saw precipitous
declines in practically every sector of the economy--the exception
being an increase in Government Consumption expenditures.The table
below shows the saars for the major components of GDP and the attached
chart shows the saars for private consumption, gross capital formation
and exports of goods and services. Gross capital formation suffered the
biggest decline, 50.14% saar in the fourth quarter of 2008. Inventories
were cut by 914 billion chained 2005 Won while expenditures on
equipment declined at a saar of 45.80%. The decline in construction was
a saar of 11.42%. Exports of goods and services declined by 32.2% while
imports of goods and services declined at a saar of 45.8%
Government stimulus programs resulting in increased government
consumption expenditures and construction spending were largely
responsible for the increase in activity that took place in the first
quarter. Private consumption improved slightly but private business
spending on equipment continued to decline and there was a major
liquidation of inventories amounting to 8.5 trillion chained 2005 won.
The declines in exports and imports moderated in the first quarter but
were still significant.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">
Seasonally adjusted annual rates of return 
&nbsp;ex where noted</th>
<th scope="col">Q1 09</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 08</th>
<th scope="col">Q2 08&nbsp;</th>
<th scope="col">Q1 08</th>
<th scope="col">2008&nbsp;</th>
<th scope="col">2007&nbsp;</th>
<th scope="col">2006&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Gross Domestic Product&nbsp;</td>
<td>0.21</td>
<td>-18.78</td>
<td>0.97</td>
<td>1.72</td>
<td>4.38</td>
<td>2.22</td>
<td>5.11</td>
<td>5.16</td>
</tr>
<tr>
<td class="firstcol">Private Consumption</td>
<td>1.79</td>
<td>-17.29</td>
<td>-0.05</td>
<td>-0.65</td>
<td>4.29</td>
<td>0.92</td>
<td>4.06</td>
<td>4.73</td>
</tr>
<tr class="odd">
<td class="firstcol">Government Consumption</td>
<td>15.23</td>
<td>4.11</td>
<td>4.30</td>
<td>4.83</td>
<td>4.97</td>
<td>4.21</td>
<td>5.39</td>
<td>6.58</td>
</tr>
<tr>
<td class="firstcol">Gross Capital Formation</td>
<td>-40.34</td>
<td>-50.14</td>
<td>8.34</td>
<td>3.04</td>
<td>3.16</td>
<td>0.80</td>
<td>3.55</td>
<td>4.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Construction</td>
<td>23.06</td>
<td>-11.42</td>
<td>0.23</td>
<td>-1.23</td>
<td>-9.73</td>
<td>-2.10</td>
<td>1.44</td>
<td>0.53</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Equipment</td>
<td>-33.11</td>
<td>-45.80</td>
<td>0.68</td>
<td>1.55</td>
<td>-1.40</td>
<td>-1.99</td>
<td>9.29</td>
<td>8.19</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Inventory
Change&nbsp; (Bil. chained 2005 Won)</td>
<td>-8522</td>
<td>-914</td>
<td>6376</td>
<td>4979</td>
<td>4512</td>
<td>14958</td>
<td>7210</td>
<td>10017</td>
</tr>
<tr>
<td class="firstcol">Exports of
Goods&amp;Services</td>
<td>-15.64</td>
<td>-31.20</td>
<td>-1.62</td>
<td>-11.34</td>
<td>-0.11</td>
<td>5.73</td>
<td>12.61</td>
<td>11.37</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports of
Goods&amp;Services</td>
<td>-30.38</td>
<td>-45.83</td>
<td>4.29</td>
<td>12.31</td>
<td>-3.01</td>
<td>3.66</td>
<td>11.68</td>
<td>11.29</td>
</tr>
</tbody>
</table>
</body></html>

Although South Korea's real Gross Domestic Product improved slightly in the first quarter of this year, the economy is still in recession. GDP rose 0.21% at a seasonally adjusted annual rate (saar) in the first quarter of 2009, but it [...]

South Korea's GDP Increases in Q1 09, but is Still at Recession Levels

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090428i.jpg" width="353">
Consumer spending firmed this month. Though chain store sales slipped 0.7% last week, the International Council of Shopping Centers-Goldman Sachs Index indicated that on average April sales so far rose 1.4% from the March average following that month&#39;s tepid 0.3% uptick. The year-to-year change in the indicator remained, however, negative.
During the last ten years there has been a 64% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. These 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.
The outlook for sales continued cautiously optimistic. The leading indicator of sales has been moving sideways since early February.
Too big to fail from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/publications_papers/studies/tbtf/index.cfm"> 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">04/24/09</th>
<th scope="col">04/17/09</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>488.0</td>
<td>491.3</td>
<td>-1.7%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


</html>

Consumer spending firmed this month. Though chain store sales slipped 0.7% last week, the International Council of Shopping Centers-Goldman Sachs Index indicated that on average April sales so far rose 1.4% from the March average [...]

U.S. Chain Store Sales Firm During April

Surging orders for computers and electronics propelling durable goods orders

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

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

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

US is big leader in global surge in private AI investment

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

Sharply rising share of AI-related jobs

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

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

New York

London

Singapore

Tokyo

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

260629E.jpg

Headline indexes for the European Monetary Union improved in June to a reading of 95.0 from 93.7 in May. The index had been stronger at 96.4 in March; however, it fell to 93.3 in April, recovered slightly to 93.7 in May, and has now reached 95.0. While still below its March high, the index has made progress in the wake of the outbreak of war-like conditions and the closure of the Strait of Hormuz.

**Sector performance**
The industrial reading for the sector, at -8, has a 36.3 percentile standing, which better than the headline index for the Monetary Union with a 25.4 percentile standing. The EMU-wide sector index, consumer confidence, improved to a net diffusion reading of -17.7 in June from -19 in May, but that still leaves it with a very weak 8.1 percentile standing, the lowest among sector readings. Retailing improved to a net diffusion reading of -10 in June from -11 in May and posted a 38.1 percentile standing. The construction sector deteriorated, falling back to -5 from -4 in May; it has been undergoing steady degradation since at least March, but it still has a 68.4 percentile standing. It is the only sector with a percentile standing above 50, placing it above its historic median. The services sector had a net diffusion reading of +3, identical to its May reading and has a 24-percentile standing.

**Sector index ranking**
The sector readings clearly show that the monetary union is exhibiting a number of sectors with subpar growth; beyond ‘subpar,’ many are quite weak. The exception is—and has been for some time—the construction sector, which continues to perform above average and post an above-median metric. It is, perhaps surprising that we often think of consumer confidence as being relatively forward-looking, but in this schematic, consumer confidence is the weakest of the sectors; in fact, like statistics from the U.S., we find the same prevailing situation with consumer readings exceptionally weak. These weak consumer readings coexist with much stronger retailing readings and stronger industrial readings, although both of those are below their historic medians in Europe. This report is a sort of gut check for what consumer confidence means; it may not be as important as we used to think it was. Although the business cycle at this juncture seems to be concentrated more on the supply side and on recovery in the business community, that effect compounded by the influence of AI is much stronger in the U.S. than in Europe.

**Country detail – Large economies**
The country detail shows 16 of 20 early reporting countries with only one of the top four countries showing a decline month-to-month, and that's France. France recorded a 0.2% decline in June, while Germany posted a 1.9% increase, Italy gained 1.3%, and Spain rose 0.7%. Spain had the lone small decrease in May, while in April all of the large countries showed significant monthly declines in their overall indexes in the wake of the onset of the war with Iran.

**Smaller economies in EMU**
Apart from the Big Four economies, 12 other EMU members report in June; of those, 5 showed month-to-month declines in their country level indexes. This was up from three showing declines in May, although it was a vast improvement from April, when all of the country indexes turned negative and generated substantial month-to-month declines, except for Slovakia and Lithuania.

**Big Four economy rankings**
Among the Big Four economies, the strongest ranking reading in June is Spain at a 52.3 percentile standing, followed by Italy at a 41.6 percentile standing, France at a 22.7 percentile standing, and Germany at an 18.7 percentile standing.

**Other economy rankings**
Among the other 12 countries, the percentile standing readings range from a high of 76.1% for Greece to a low of 9.3% for Austria. Five of 12 of the smaller EMU members have percentile standings of 50% or greater, putting them above their historic medians, while the other 7 have rankings that range from a high of 44.6% in Portugal to a low of 9.3% in Austria.

**Summing up**
Conditions in the monetary union have improved over the last two months after a substantial stumble in the wake of the war in the Middle East with Iran and the closure of the Strait of Hormuz. However, the rebound in the European recovery is in gear; it is slow and measured. Conditions are still weak on balance.

260629.jpg

Europe

EU Indexes Show European Improvement in June

Tian Yong Woon

In this week's Letter, we explore the significant pullback in oil prices that followed the US-Iran memorandum of understanding and consider its broader economic implications. The agreement saw a fragile ceasefire ensue and a gradual resumption of shipping flows through the Strait of Hormuz (chart 1). We acknowledge that this major pullback will certainly be welcome to policymakers across the region and beyond. Previously elevated energy prices had added to the fiscal burdens of governments and sharpened the dilemma facing central banks (chart 2). That dilemma pits the need to rein in inflation against the risk of choking off economic growth. That said, while one source of inflationary pressure seems to be ebbing, another looks to be emerging on the horizon. It stems from a potential "Super El Niño" event, which meteorologists have been warning about for some time now. Asia sits at the centre of such risks, as past strong El Niño events have directly and adversely affected crop production (chart 3). The impact is not limited to potential surges in headline inflation via food supply shocks, especially in Asia. It extends directly to growth as well (chart 4), given the nontrivial share of GDP that agriculture still commands in many Asian economies (chart 5). Should price pressures simply rotate from energy to food, government subsidies may follow suit (chart 6). Central bankers, for their part, may find themselves unable to ease off the tightening pedal just yet. Some Asian economies, however, would still manage to offset such a growth shock through other engines. Electronics and semiconductors, buoyed by the current AI upcycle, offer one such cushion for the more fortunate. For others, lacking such offsets, the agricultural hit may simply have to be borne in full.

**The US-Iran conflict and oil prices**
The recent memorandum of understanding between the US and Iran, aimed at working towards a final deal, has already brought visible relief to crude oil markets (chart 1). This relief has held despite the renewed tensions that have followed the agreement, which markets seem to have largely looked past. The easing in prices should go a long way towards unwinding the inflation concerns that elevated oil prices had previously stoked. Much of the pullback reflects anticipation of the substantial supply now expected to return to global markets. Yet some shipping trackers, such as the IMF's, already point to a marked pickup in traffic through the Strait of Hormuz. Even so, those volumes still remain well below the levels seen before the conflict began in the region. 

260629T1.jpg

**Oil prices and inflation in Asia**
Should this normalisation of shipping flows through the Strait of Hormuz persist, it would support a corresponding easing in oil prices and energy inflation. That moderation in energy costs would, in turn, help bring down broader headline inflation across the economy. As chart 2 shows, energy has been a large contributor to headline inflation in recent years, though other important forces have been at play too. Such an outcome, in which restored oil supply cools energy inflation, would be a welcome development for central bankers. They face the delicate task of reining in price pressures without tightening policy so far that growth stalls or tips into contraction. That said, while one driver of price pressures now seems to be ebbing, albeit not without the risk of renewed tensions, another source of inflation is building on the horizon.

260629T2.jpg

**Risks of a “Super El Niño”**
As meteorological agencies have warned for some time, the world may be on the cusp of a Super El Niño. The probability of such an event has risen sharply in recent months. Were it to materialise, it would unleash a range of disruptions from the second half of this year, chief among them shifts in weather and climate patterns that can severely dent crop yields. Asian staples such as rice, wheat and palm oil are especially exposed, since strong El Niño events tend to bring drier conditions and reduced rainfall, in turn cutting output across affected economies in the region. Chart 3 illustrates just how tightly some crops are bound to these conditions: SOI readings correlate closely with certain economies' production, notably Thailand's rice harvest, underscoring how dependent such output remains on the weather. These supply shortfalls would then feed inflationary pressures through the food channel. So central bankers may not be able to rest entirely easy following the easing of tensions between the US and Iran, finding themselves wrestling with a fresh set of emerging inflation risks instead.

260629T3.jpg

Delving deeper, an examination of recent strong El Niño episodes against the growth of Asian economies' agricultural sectors shows that extreme weather weighs not just on food prices but on economic growth itself. As chart 4 shows, previous major El Niño episodes—notably in 2014–16 and 2023–24—were associated with weaker agricultural growth across parts of Asia, with India and Thailand appearing particularly vulnerable. This is understandable, since these episodes coincided with reduced crop production and, in turn, lower crop revenue. Should these past episodes serve as a gauge and given that the coming event is potentially the worst on record, these economies stand to suffer once more should it hit as hard as feared.

260629T4.jpg

Beyond the sensitivity of individual economies to extreme El Niño events, vulnerability also depends on the size of the agricultural sector itself. Economies where agriculture accounts for a larger share of output are naturally more exposed to weather-related disruptions. As chart 5 shows, economies such as India, Indonesia and, to a lesser extent, Vietnam carry a comparatively higher share of agriculture in their GDP, which presents a further source of risk. That said, this dimension should not be read in isolation, since the eventual impact would turn on a combination of factors: the degree of exposure, the intensity of El Niño's effect on each economy's agricultural output, and the actual weather conditions that come to pass.

260629T5.jpg

Bringing it all together, the recent de-escalation between the US and Iran and the early normalisation of flows through the Strait of Hormuz are certainly welcome news. Businesses, consumers and policymakers alike stand to benefit from the relief that lower energy prices would bring. Yet the formation of extreme El Niño conditions presents a looming inflation risk over the months ahead. It may displace energy as the dominant driver, shifting the pressure from the energy channel to the food channel. For Asia's central bankers, this could mean they are unable to ease off the tightening pedal just yet (chart 6). Food inflation may simply pick up where energy inflation leaves off, keeping price pressures elevated for longer. Regional governments, too, may have to redirect funds from energy subsidies to food subsidies should the supply shock play out. On growth, however, the picture may prove more uneven across the region than a single narrative suggests. Economies exposed to the current AI upcycle could keep leaning on those sectors for continued support. Those less exposed, by contrast, may simply have to absorb the hit to agriculture with little to offset it.

260629T6.jpg

Asia

Economic Letter from Asia: Oil Down, Emerging Risks

Winnie Tapasanun

260625H9.jpg

260625I9.jpg

The U.S. international trade deficit in goods ballooned to a larger-than-expected $105.75 billion in May after narrowing to $83.01 billion in April, according to the advance estimate from the U.S. Census Bureau. The May reading marked the third widening in the goods trade deficit in four months, exceeding a $91.55 billion shortfall in May 2025. A deficit of $84.0 billion for May had been expected by the Action Economics Forecast Survey. The deficit reached a low of $61.44 billion in October 2025 (the smallest since February 2020) and a record high of $158.73 billion in March 2025. On a quarterly basis, the deficit averaged $94.38 billion so far in Q2'26 versus $81.96 billion in Q1'26.

Total goods exports fell 5.4% m/m (+14.7% y/y) to $207.67 billion in May, the first monthly fall since December and a three-month low, following a 3.8% rise to a record-high $219.52 billion in April. Exports were up 27.7% from a June 2023 low. The m/m fall in exports in May reflected declines of 9.2% (-5.0% y/y) in nonfood consumer goods excluding autos, 7.0% (+23.2% y/y) in industrial supplies & materials, 6.8% (+19.5% y/y) in other goods, and 5.0% (+14.8% y/y) in capital goods excluding autos. To the upside, exports of foods, feeds & beverages (+3.9%; +19.1% y/y) and automotive vehicles & parts (+0.5%; -3.6% y/y) rebounded m/m in May.

Total goods imports, up for the fourth consecutive month, rose 3.6% m/m (15.0% y/y) to $313.43 billion in May, after a 2.0% increase to $302.53 billion in April, marking the highest level since the March 2025 record high of $340.11 billion. Imports were up 25.0% from a March 2023 low. The m/m rise in imports in May was broad-based across all end-use categories, led by an 11.5% gain (22.0% y/y) in other goods, followed by increases of 6.3% (1.4% y/y) in automotive vehicles & parts, 5.7% (-9.1% y/y) in nonfood consumer goods excluding autos, 4.8% (11.7% y/y) in industrial supplies & materials, 4.3% (-0.2% y/y) in foods, feeds & beverages, and 0.4% (41.9% y/y) in capital goods excluding autos. 

The advance international trade data can be found in Haver's **USECON** database. The expectation figure is from the Action Economics Forecast Survey, which is in **AS1REPNA**.

- Deficit: $105.75 bil. in May, up $22.75 bil. (+27.4%) from April’s $83.01 bil.
- Exports -5.4%, first m/m decline since Dec., led by a 9.2% drop in nonauto consumer goods exports.
- Imports +3.6%, fourth straight m/m rise to highest level since Mar. ’25, driven by an 11.5% gain in imports of other goods.

U.S. Goods Trade Deficit Balloons in May, Largest Since March ’25

260626E.jpg

In June, there's a slight divergence in the performance of industry climate and service sector climate, although broadly the two sectors have seen their composite indexes moving in more or less the same direction. Since 2024, the industry survey has moved up slightly after falling faster than the services gauge. The services survey has been locked in a slow trend of deterioration, largely since it reached a peak in 2021 in the wake of COVID.

The industry climate gauge has a 30.8 percentile standing, but the recent production trend, while declining, logs a more substantial 42.8 percentile standing. Contributing survey members find their own industry ‘likely trend’ much weaker, at a 21.2 percentile standing. Demand overall, however, has standings above the 50th percentile, putting overall and foreign orders & demand each above their respective medians for this period of ranking back to 2001. Inventories have a strong 81-percentile ranking. Prices are extremely strong, with 87-percentile and 86-percentile standings for respondents for their personal industry trend for prices as well as for the overarching manufacturing sector estimate of prices. Higher prices seem to be the one thing that everyone can agree on by a large margin.

260626.jpg

As for services, the service climate index improved slightly to 93.4 in June from 92.6 in May. The three-month moving average was weaker in June than in May as well; the 12-month moving average has been stuck at its current level for a number of months. The outlook in June improved slightly to a reading of -12 from -15 in May, but the outlook ranking is still a weak 26.8 percentile standing. The three-month expectations and observations of past sales trends haven't changed much in the last two months, but there has been a slight improvement for sales expectations. However, both sales metrics have low 20th percentile standings. Sales prices have deteriorated slightly in June compared to May for both the observed and the expected trends, but prices have standings above their 50th percentiles, logging above-median performance. Employment over the last three months has weakened noticeably, and expected employment is weaker by a small amount.

In terms of rankings, all of the sector rankings are below the 50th percentile on all of these observations, including the climate headline except for sales prices where both the past three-month observed trend and the expected trend have readings above their respective 50th percentiles, indicating past and expected price pressures in excess of normal.

260626 2.jpg

**Assessment**
On balance, the readings for the French industry, manufacturing sector and services are not encouraging. In addition, concerns about prices linger. The services sector, those concerns seem moderate compared to the concerns in manufacturing.

The hot war continues between Ukraine and Russia, while in the Middle East there was talk of some improvement and a potential peace deal between the United States and Iran, but every time there is some talk of a breakthrough, there appears to be a breakdown. In the most recent development, Iran has asserted its right to control traffic through the Strait of Hormuz, and it's not clear how that demand would ever be consistent with the U.S. allowing a ceasefire. It appears that Iran may have traded its irreconcilable demand for nuclear weapons for a more pragmatic and real-world argument—that it will control the traffic through the Strait of Hormuz simply because it can—and it still is doing exactly that, even after all the destruction it suffered.

Stopping Iran from controlling the Strait would take a commitment to restart the war. All this makes me personally more pessimistic. I think Iran sees the need for Trump to cut a deal and stop the war before the U.S. mid-term elections, and it is pressing that need to its advantage. Trading its nuclear ambitions for real world control of the Strait would elevate Iran’s power from being dangerous but ethereal to a real world event with constant consequences.

France

French Industry and Services Confidence Diverge in June

Andrew Cates

**Equity Momentum and Global Surprises — Still Moving Together**
One of the more telling features of global equity markets in 2026 has been the persistence of the correlation between non-US equity momentum and global growth and inflation surprise indices. Equity markets outside the United States have generally prospered when economic data have beaten consensus expectations and when inflation surprises have been negative  — a combination that has historically been associated with stronger corporate earnings and a more benign policy backdrop in economies other than the US. That correlation has held reasonably well through the turbulence of the past few months, even as the Middle East conflict introduced significant noise into both the economic data and the financial market signal. What the chart reveals this week is a picture of moderate but not alarming deterioration: global growth surprises have softened at the margin, consistent with the energy cost headwinds that have weighed on European and Asian activity, but the relationship between equity momentum and the broader data pulse remains intact. It is a signal that market participants continue to track economic fundamentals rather than purely geopolitical newsflow — a modestly reassuring sign that the underlying framework for assessing the global cycle has not broken down.

260625Z1.jpg

**The Fed Decouples: Why Oil and US Two-Year Yields Have Parted Ways**
For much of 2026, oil prices and US two-year Treasury yields moved in close alignment. The logic was straightforward: higher oil prices raised inflation expectations, which in turn pushed market participants to anticipate a more hawkish Federal Reserve, lifting short-dated yields in the process. That relationship held with notable consistency through the March escalation and the months that followed, as energy market shocks and monetary policy expectations fed off each other. What this week’s chart captures is a striking breakdown in that correlation. As oil prices have fallen on the back of the US-Iran memorandum of understanding and the associated unwinding of the geopolitical risk premium, US two-year yields have not followed them lower. The reason is last week’s Federal Reserve meeting. Under new chair Kevin Warsh, the Fed delivered a hawkish dot plot that shifted the median year-end projection to a hike, making clear that the easing cycle previously priced by some market participants is no longer the central scenario. The message is important: the deflationary impulse from lower oil prices is being offset — at least in the Fed’s framing — by persistent underlying inflation pressures and a commitment to keeping policy tight.

260625Z2.jpg

**Flash PMIs Signal Easing Supply Chain Stress and Softer Price Pressures**
June’s flash PMI surveys, released this week across the major advanced economies, provide a timely read on how the global manufacturing and services sectors are absorbing the shifting macro backdrop. Two findings stand out. First, supplier delivery times have improved (or not lengthened as much as they had in the prior two months). This finding coheres naturally with the broader narrative: lower oil prices reduce transport and energy input costs, while the resumption of Strait of Hormuz shipping flows — examined in more detail in chart 4 — is beginning to reduce the freight disruption and re-routing costs that had been building since the conflict escalated. Second, output price inflation in manufacturing has softened, suggesting that some of the pipeline pressure from earlier energy cost spikes is beginning to fade.

260625Z3.jpg

**Hormuz Traffic and Oil: A Coherent Story of Tentative Normalisation**
The recent US-Iran memorandum of understanding to work towards a final deal, though not without subsequent flare-ups, has already brought relief to markets, most visibly in crude oil prices. This should go a long way towards unwinding the inflation-related concerns that previously elevated oil prices had stoked. While the pullback has owed much to anticipation of the glut of pent-up supply expected to follow, certain trackers of shipping volume through the Strait of Hormuz, such as the IMF’s, already point to a marked pickup in traffic, even if it remains well below pre-conflict levels. Should this normalisation of shipping flows persist, it would lend continued justification to a corresponding easing in oil prices, energy-related inflation and, by extension, headline inflation — a welcome development for central banks grappling with the delicate balancing act of reining in price pressures without dampening growth too sharply.

260625Z4.jpg

**South Korea’s Trade Data Flag a Modest Softening in Global Demand**
South Korea’s trade data serve as one of the global economy’s most useful early warning systems. As one of the world’s most open economies, with exports spanning semiconductors, petrochemicals, steel, automobiles and consumer electronics, South Korea’s monthly trade figures provide a timely and broad-based read on the state of global demand. This week’s data show a slightly softer picture than the strong prints that characterised much of the first quarter. Headline export growth has moderated at the margin, and crucially, semiconductor exports — which had been the most dynamic component of the trade data, propelled by AI-related chip demand — have also come in a touch below the exceptional run rates seen earlier in the year. This is not, in itself, alarming: some moderation from peak rates was always to be expected, and the semiconductor cycle remains structurally supported by the scale of AI infrastructure investment globally.

260625Z5.jpg

**A Super El Niño on the Horizon — The Next Inflation Risk**
With that said, while one driver of price pressures seems to be ebbing for now — albeit not without the risk of future flare-ups — another potential inflationary risk looms on the horizon. The chart illustrates the transmission mechanism. It plots Thailand’s milled rice production (left axis) against Australia’s Southern Oscillation Index (right axis), a well-established barometer of El Niño and La Niña conditions. The convention is straightforward: SOI readings persistently above +8 indicate La Niña, associated with above-average rainfall across Southeast Asia and broadly supportive crop conditions; readings persistently below -8 signal El Niño, which brings drought stress and reduced water availability across the region. The historical relationship is striking. The sharp negative SOI troughs around 2002–03, 2009–10 and most dramatically around 2015 all coincide with visible falls in Thai milled rice output. The severe El Niño of 2014–16 produced both the deepest SOI trough in the series and the sharpest single drop in rice production, to below 24,000 thousand tonnes. As meteorological authorities have been warning for some time, the world appears to be facing an imminent Super El Niño event, with the SOI already drifting back towards negative territory in recent months. Were a significant El Niño to materialise in the second half of this year, the implications for Thai rice output — and by extension for Asian food price inflation — could be substantial. Central bankers, in other words, may find themselves having to wrestle with a new inflationary impulse just as they had begun to hope the worst was behind them.

260625Z6.jpg

The mood in global financial markets this week is more settled, though “settled” should not be confused with resolved. The US-Iran memorandum of understanding, signed last week, has continued to do its work: oil prices have fallen further, Strait of Hormuz shipping traffic has picked up measurably, and the risk premium that had been embedded in energy markets since the conflict escalated in March is now visibly unwinding. That is a material development for the inflation outlook, and central bankers will be watching carefully. Yet the picture is not without its complications. Technology stocks — the most conspicuous beneficiary of the prevailing low-rate, high-growth narrative — have been subject to renewed jitters this week, as investors grow more attentive to stretched valuations and the implications of a Federal Reserve that, under new chair Kevin Warsh, is no longer signalling the easing cycle previously priced into markets. Against this backdrop, this week’s charts draw on the latest data to assess where the global economic cycle stands. Equity momentum outside the United States has tracked closely with global growth and inflation surprises, a correlation that tells us something important about how activity is being perceived (chart 1). Meanwhile, the breakdown of the previously tight relationship between oil prices and US two-year yields is arguably one of the more telling market signals of recent weeks (chart 2). June’s flash PMI surveys point to easing supply chain stress and softer output price inflation in manufacturing — a finding that chimes naturally with lower crude prices and the resumption of Hormuz flows (chart 3). The Strait of Hormuz itself deserves a closer look: traffic data and the mechanics of the oil price pullback are telling a coherent story that supports the PMI picture (chart 4). South Korea’s trade data, including semiconductors, offer a slightly softer read on global demand momentum at the margin (chart 5). And looming on the horizon, one new risk is drawing the attention of meteorological authorities: a Super El Niño event whose probability has been rising, with potentially significant implications for food commodity prices and Asian agriculture (chart 6).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/7ru7psqeY4U7sp8qLdH3J7?utm_source=generator&si=328378479dd94509" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Economy in Brief

Jump to:

U.S. Weekly Mortgage Applications Fall As Refinancings Lag

FOMC Leaves Rates Unchanged

U.S. GDP Declines 6.1% In 1Q As Inventory Cutbacks Weigh Heavily

U.S. GDP Declines 6.1% In 1Q As Inventory Cutbacks Weigh Heavily

Japan Retail Sales Continue to Drop

More Retailers in the U.K. Report Increases in Sales versus a Year Ago than Those Reporting Decreases

South Korea's GDP Increases in Q1 09, but is Still at Recession Levels

U.S. Chain Store Sales Firm During April