Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325e.jpg" width="353">
The International Council of Shopping Centers ICSC-UBS Chain Store survey indicated that chain store sales last week fell 0.4% and gave back all of the prior week&#39;s modest increase. The decline left sales so far in March up a negligible 0.1% after February&#39;s 0.4% rise.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS 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.
During the latest week the leading indicator of chain store sales from ICSC-UBS also retreated 0.5% after the prior week&#39;s 0.9% increase.

<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">03/21/08</th>
<th scope="col">03/14/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>488.3</td>
<td>490.1</td>
<td>1.0%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers ICSC-UBS Chain Store survey indicated that chain store sales last week fell 0.4% and gave back all of the prior week's modest increase. The decline left sales so far in March up a [...]

U.S. Chain Store Sales Backpedal

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325d.jpg" width="353">
Retail gasoline prices ticked down two cents last week after rising strongly during each of the prior five weeks. The retreat to $3.26 per gallon was so modest that prices so far in March are still up 6.6% from February. They were roughly stable for three months before that.
Yesterday, the wholesale price of unleaded gasoline continued strong. A five cent rise in Monday&#39;s price to $2.48 per gallon versus Friday pulled gas prices up nearly a dime versus last week&#39;s average.
Crude oil prices also retreated with last week&#39;s average price for WTI crude down three dollars w/w to $106.02 per bbl. Yesterday crude prices backed off even further to $101.07 per barrel.
Natural gas prices also topped last week and were down w/w to $9.12 /mmbtu. Nevertheless, natural gas prices were up sharply from February and were up by nearly one third versus last year.
These energy price series are available in Haver&#39;s Daily and Weekly databases.
Globalization and the Determinants of Domestic Inflation is a panel discussion held by Janet L. Yellen, President of the San Francisco Federal Reserve Bank and it is available <a href="http://www.frbsf.org/news/speeches/2008/0307.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">03/24/08</th>
<th scope="col">03/17/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Gasoline ($ per Gallon)</td>
<td>3.26</td>
<td>3.28</td>
<td>24.9%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>106.02</td>
<td>109.43</td>
<td>81.0%</td>
<td>94.00</td>
<td>61.11</td>
<td>58.16</td>
</tr>
<tr class="odd">
<td class="firstcol">Natural Gas Price, Henry Hub ($/mmbtu)</td>
<td>9.12</td>
<td>9.75</td>
<td>42.3%</td>
<td>6.96</td>
<td>6.74</td>
<td>8.68</td>
</tr>
</tbody>
</table>
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Retail gasoline prices ticked down two cents last week after rising strongly during each of the prior five weeks. The retreat to $3.26 per gallon was so modest that prices so far in March are still up 6.6% from February. They were [...]

U.S. Petroleum Prices Tick Lower

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325c.jpg" align="left" border="0" height="265" width="353">
The S&amp;P/Case-Shiller Composite 20
home price index fell 2.4% m/m in January. As a result this index of U.S.
home prices was down 10.7% from January of 2007, a record
decline for this series which dates back only to 2000. Home prices have
fallen in every month since July of 2006 and the decline over that
period totals 12.5%.
The index of 20 U.S. cities and their surrounding areas is not
adjusted for the quality or the size of the home. The home price index
from the Office of Federal Housing Enterprise Oversight (OFHEO) does
make these adjustments. This series indicates that during the fourth
quarter of 2007 house prices rose a negligible 0.8% y/y, the weakest
gain since 1990.
The Case-Shiller composite index of homes in a fewer 10 a
metropolitan areas fell 2.3% (-11.4% y/y) last month.
Home prices in San Francisco prices fell 13.2% and prices in
Miami Florida also fell sharply by 19.3% y/y. Home prices in Las Vegas
Nevada matched that decline and fell 19.3% y/y while in Los Angeles
prices fell 16.5% y/y.
Relatively moderate declines were registered in New York
(-5.8% y/y), Chicago (-6.6% y/y), Denver (-5.1% y/y) and San Diego
California (-5.8% y/y).
An overview of the S&amp;P/Case-Shiller home price series
can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
The S&amp;P/Case-Shiller home price series can be found in
Haver's REGIONAL database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (NSA, Jan 00 = 100)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">20 City Composite
Index</td>
<td>180.65</td>
<td>185.01</td>
<td>-10.7%</td>
<td>-3.8%</td>
<td>7.6%</td>
<td>15.8%</td>
</tr>
</tbody>
</table>
</body></html>

The S&P/Case-Shiller Composite 20 home price index fell 2.4% m/m in January. As a result this index of U.S. home prices was down 10.7% from January of 2007, a record decline for this series which dates back only to 2000. Home prices [...]

Case-Shiller Home Price Index Posts 10.7% y/y Decline

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325a.jpg" align="left" border="0" height="265" width="353"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325b.jpg" align="right" border="0" height="265" width="353">
The Conference Board reported today that consumer confidence
in March again fell sharply. The 15.6% m/m decline to a reading of 64.5
followed February's 12.4% drop. It was the sharpest two month decline
since late 1991. A consensus of economists foresaw less of a decline in
March to a level of 73.8.

The expectations component of the index fell 17.4% m/m and
dropped the level to its lowest since the 1970s. Expectations for
business conditions and for income dropped sharply while expectations
for the inflation rate surged to 6.1%, its highest since 2005.
Respondents planning to buy a household appliance dropped
sharply.
The present conditions index also fell a sharp 14.2% m/m to
the lowest level since mid 2004.
Just 15.4% of respondents saw business conditions as good, the
lowest since 2003. Jobs as plentiful were seen by 18.8% while 25.1% saw
them as hard to get, the highest since mid 2005.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board &nbsp;(SA, 1985=100)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y %</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer
Confidence Index</td>
<td>64.5</td>
<td>76.4</td>
<td>-40.4</td>
<td>103.4</td>
<td>105.9</td>
<td>100.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>89.2</td>
<td>104.0</td>
<td>-35.6</td>
<td>128.8</td>
<td>130.2</td>
<td>116.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>47.9</td>
<td>58.0</td>
<td>-45.5</td>
<td>86.4</td>
<td>89.7</td>
<td>89.7</td>
</tr>
</tbody>
</table>
</body></html>

The Conference Board reported today that consumer confidence in March again fell sharply. The 15.6% m/m decline to a reading of 64.5 followed February's 12.4% drop. It was the sharpest two month decline since late 1991. A consensus of [...]

Consumer Confidence Fell Sharply

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325a.jpg" align="left" border="0" height="265" width="353">
The Conference Board reported today that consumer confidence
in March again fell sharply. The 15.6% m/m decline to a reading of 64.5
followed February's 12.4% drop. It was the sharpest two month decline
since late 1991. A consensus of economists foresaw less of a decline in
March to a level of 73.8.
<div align="left"> 
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325b.jpg" align="right" border="0" height="265" width="353">

The expectations component of the index fell 17.4% m/m and
dropped the level to its lowest since the 1970s. Expectations for
business conditions and for income dropped sharply while expectations
for the inflation rate surged to 6.1%, its highest since 2005.
<div align="left"> </div>
<div align="left">

Respondents planning to buy a household appliance dropped
sharply.
<div align="left"> </div>
</div>
</div>
<div align="left">

The present conditions index also fell a sharp 14.2% m/m to
the lowest level since mid 2004.
<div align="left"> </div>
<div align="left">

Just 15.4% of respondents saw business conditions as good, the
lowest since 2003. Jobs as plentiful were seen by 18.8% while 25.1% saw
them as hard to get, the highest since mid 2005.
</div>
</div>


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board &nbsp;(SA, 1985=100)</th>
<th scope="col">March</th>
<th scope="col">February</th>
<th scope="col">Y/Y %</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer
Confidence Index</td>
<td>64.5</td>
<td>76.4</td>
<td>-40.4</td>
<td>103.4</td>
<td>105.9</td>
<td>100.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Situation</td>
<td>89.2</td>
<td>104.0</td>
<td>-35.6</td>
<td>128.8</td>
<td>130.2</td>
<td>116.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>47.9</td>
<td>58.0</td>
<td>-45.5</td>
<td>86.4</td>
<td>89.7</td>
<td>89.7</td>
</tr>
</tbody>
</table>
Case-Shiller Home Price Index
Posts 10.7% y/y Decline 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 25, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325c.jpg" align="left" border="0" height="265" width="353">
The S&amp;P/Case-Shiller Composite 20
home price index fell 2.4% m/m in January. As a result this index of U.S.
home prices was down 10.7% from January of 2007, a record
decline for this series which dates back only to 2000. Home prices have
fallen in every month since July of 2006 and the decline over that
period totals 12.5%.
The index of 20 U.S. cities and their surrounding areas is not
adjusted for the quality or the size of the home. The home price index
from the Office of Federal Housing Enterprise Oversight (OFHEO) does
make these adjustments. This series indicates that during the fourth
quarter of 2007 house prices rose a negligible 0.8% y/y, the weakest
gain since 1990.
The Case-Shiller composite index of homes in a fewer 10 a
metropolitan areas fell 2.3% (-11.4% y/y) last month.
Home prices in San Francisco prices fell 13.2% and prices in
Miami Florida also fell sharply by 19.3% y/y. Home prices in Las Vegas
Nevada matched that decline and fell 19.3% y/y while in Los Angeles
prices fell 16.5% y/y.
Relatively moderate declines were registered in New York
(-5.8% y/y), Chicago (-6.6% y/y), Denver (-5.1% y/y) and San Diego
California (-5.8% y/y).
<div align="left">

An overview of the S&amp;P/Case-Shiller home price series
can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
<div align="left">

The S&amp;P/Case-Shiller home price series can be found in
Haver's REGIONAL database.
</div>
<div align="left"></div>
</div>


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">S&amp;P/Case-Shiller
Home Price Index (NSA, Jan 00 = 100)</th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">20 City Composite
Index</td>
<td>180.65</td>
<td>185.01</td>
<td>-10.7%</td>
<td>-3.8%</td>
<td>7.6%</td>
<td>15.8%</td>
</tr>
</tbody>
</table>
U.S. Petroleum Prices Tick Lower 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 25, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325d.jpg" align="left" border="0" height="265" width="353">
Retail gasoline prices ticked down two
cents last week after rising strongly during each of the prior five
weeks. The retreat to $3.26 per gallon was so modest that prices so far
in March are still up 6.6% from February. They were roughly stable for
three months before that.
Yesterday, the wholesale price of unleaded gasoline continued
strong. A five cent rise in Monday's price to $2.48 per gallon versus
Friday pulled gas prices up nearly a dime versus last week's average.
Crude oil prices also retreated with last week's average price
for WTI crude down three dollars w/w to $106.02 per bbl. Yesterday
crude prices backed off even further to $101.07 per barrel.
Natural gas prices also topped last week and were down w/w to
$9.12 /mmbtu. Nevertheless, natural gas prices were up sharply from
February and were up by nearly one third versus last year.
These energy price series are available in Haver's Daily
and Weekly databases.
Globalization and the Determinants of Domestic Inflation is a
panel discussion held by Janet L. Yellen, President of the San
Francisco Federal Reserve Bank and it is available <a href="http://www.frbsf.org/news/speeches/2008/0307.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">03/24/08</th>
<th scope="col">03/17/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Gasoline ($ per Gallon)</td>
<td>3.26</td>
<td>3.28</td>
<td>24.9%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>106.02</td>
<td>109.43</td>
<td>81.0%</td>
<td>94.00</td>
<td>61.11</td>
<td>58.16</td>
</tr>
<tr class="odd">
<td class="firstcol">Natural Gas Price, Henry Hub
($/mmbtu)</td>
<td>9.12</td>
<td>9.75</td>
<td>42.3%</td>
<td>6.96</td>
<td>6.74</td>
<td>8.68</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Backpedal 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 25, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325e.jpg" align="left" border="0" height="265" width="353">
The International Council of Shopping Centers ICSC-UBS Chain
Store survey indicated that chain store sales last week fell 0.4% and
gave back all of the prior week's modest increase. The decline left
sales so far in March up a negligible 0.1% after February's 0.4% rise.

During the last ten years there has been a 45% correlation
between the y/y change in chain store sales and the change in nonauto
retail sales less gasoline.

The ICSC-UBS 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.


During the latest week the leading indicator of chain store
sales from ICSC-UBS also retreated 0.5% after the prior week's 0.9%
increase.
<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">03/21/08</th>
<th scope="col">03/14/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>488.3</td>
<td>490.1</td>
<td>1.0%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
Iceland Raises Its
Official Discount Rate to 15% 
by <a href="/comment/Curley.html">Louise
Curley</a> March 25, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325f.jpg" align="left" border="0" height="265" width="353">

Iceland unexpectedly raised its official discount rate
today to 15% from 13.75%. According to the Board of Governors of the
Bank of Iceland, inflation has been higher than forecast and its
currency, the kroner, has depreciated sharply. The kroner fell 14%
during the week ending March 19 as seen in the first chart. Demand is
down and it is becoming more difficult to finance its current account
deficit.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080325g.jpg" align="right" border="0" height="265" width="353">


Iceland's action is in stark contrast to that of the
majority of developed nations who are lowering rates to combat the
spreading effects of the sub prime crisis. Iceland's problems appear to
have little to do with the financial turmoil resulting from the sub
prime crisis, rather its problems appear to be more the result of its
role in the "Carry Trade." (Investors borrow money in low interest
countries, say in Japan, and invest the proceeds in high interest
countries, say in Iceland. Providing that exchange rates are relatively
stable, the trade is profitable. When exchange rates go against the
borrower, the trade becomes unprofitable.) Iceland with its relatively
high interest rates was a favorite recipient of funds in the "Carry
Trade". With relative stability in exchange rates in the period from
2002 to 2006, the Carry Trade was, for the most part, very profitable.
When exchange rates began rising in the low interest countries in 2007
and falling in the high interest countries, the Carry Trade lost much
of its appeal. Inflows were reduced and, in some cases, reversed. The
ups and downs in the carry trade in Iceland are shown in the second
chart which shows the dramatic rise in the inflow of foreign investment
in debt securities. These flows rose dramatically beginning in 2003,
holding at high levels through 2006, plummeting in most of 2007 and
recovering slightly in the last quarter.


The Carry Trade inflows are more like "hot money" flows
than more long term oriented inflows. As such they tend to cause
disruptions in an economy. Among other things, they result in bigger
current account deficits and, unless they are sterilized, they tend to
add to inflationary pressures.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">ICELAND&nbsp;</th>
<th scope="col">Q4 08</th>
<th scope="col">Q3 07&nbsp;</th>
<th scope="col">Q1&nbsp; 07&nbsp;</th>
<th scope="col">Q/Q Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Inflows of Foreign
Invest in Debt Securities
(Mil Korona)</td>
<td>11,212</td>
<td>-138,609</td>
<td>278,074</td>
<td>149,981</td>
<td>-266,862</td>
<td>37,891</td>
<td>925,191</td>
<td>1,057,402</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324d.jpg" align="left" border="0" height="265" width="353">Italy&#8217;s retail sales edged up in January, rising by 0.2% in
nominal terms, likely a decline in volume terms given the recent pace
of inflation. Over the past three months, sales values fell at a 0.4%
annual rate. And, overall value growth has been eroding ever so
slightly over this period. In the first quarter of 2008 value growth is
up at a 0.5% annual pace and at a stronger 0.7% pace for food,
beverages and tobacco &#8211; both likely representing volume declines.

The chart at the top shows the ISAE consumer sentiment index
plotted against retail sales Yr/Yr. Notice that the ISAE index plotted
in its raw levels format tends to lead the Yr/Yr decline in retail
sales: Sentiment peaks first and rebounds first. It gives reasonably
good signals about what retail sales are about to do. In the recent
period the weak consumer sentiment readings are pointed to further
weakness in Italy&#8217;s already weak retail sales.

Italy&#8217;s HICP is rising at a 2.9% pace in Q1 (also through
January) and its core is up at a 1.5% pace. But in terms of Italy&#8217;s own
domestic inflation indicator (NIC) inflation is at a 5% pace in the
first quarter or 4.6% excluding tobacco (NIC ex-tobacco). Food prices
alone in Italy are up at a 5.8% pace in Q1.

As in the table above these inflation statistics for the first
quarter growth rates take the January level over the Q4 average
(centered in November) and compound that pace. Italy&#8217;s Q1 inflation
calculated on that same basis produces some dismal implicit estimates
of &#8216;retail sales growth (-2.5% to -4.5% depending on the deflator
used). Inflation is clearly outstripping the nominal growth rates for
sales in these comparisons by a wide margin. Italy is the most severely
impacted economy of the EMU Big Three or EU Big Four (i.e. Germany,
France &amp; Italy for EMU, adding the UK for EU).

All of the EMU nations are having a hard time getting retail
sales to grow. (The EU&#8217;s UK retail sales are an exception to most of
the rest of Europe). Germany continues to look for the consumer to fill
in some gaps. But flagging confidence is an issue and the EMU
industrial sector is slowing. Fear seems to have gripped the EMU
nations as the euro has climbed in value despite policymakers extolling
European strength and flexibility, and growth has continued to be
registered. Someone is either worried about nothing or someone else is
whistling past the graveyard. Who is out of touch? Is it the consumer
whose pull back is reminiscent of the consumer in the fetal position,
or is it the policymaker who is trying to put a brave face on an ugly
situation? I report, you decide&#8230; For the moment we are in opinion-land
on this or deeply into shrink-o-nomics as we try and assess the state
of mind of the government official vs the consumer.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">Italy Retail Sales Growth </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">mo/mo %</td>
<td colspan="4">At annual rates</td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
<td>Qtr-to-Date</td>
</tr>
<tr>
<td class="firstcol">Retail Trade</td>
<td>0.2%</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>-0.4%</td>
<td>0.9%</td>
<td>0.8%</td>
<td>0.2%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">Food Bev &amp; Tobacco</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.3%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>-0.3%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">Clothing&amp;Furniture</td>
<td>0.7%</td>
<td>0.2%</td>
<td>-1.5%</td>
<td>-2.6%</td>
<td>0.4%</td>
<td>0.7%</td>
<td>0.5%</td>
<td>1.7%</td>
</tr>
</tbody>
</table>
</body></html>

Italy’s retail sales edged up in January, rising by 0.2% in nominal terms, likely a decline in volume terms given the recent pace of inflation. Over the past three months, sales values fell at a 0.4% annual rate. And, overall value [...]

Italy Retail Sales and Consumer Confidence Sag

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324g.jpg" align="left" border="0" height="265" width="353">The Japanese Economic and
Social Research Institute of the
Cabinet Office and the Policy Research Institute of the Ministry of
Finance (MOF) have surveyed industry leaders of some 15,000 firms and
analyzed their assessments and forecasts of a number of important
business trends in the current quarter, the next quarter and the
quarter after next. The results are given for large (capital of 1
billion yen and over), medium (capital of 100 million to 1 billion yen)
and small (capital of 10 to 100 million yen) businesses. For each size
group, results for all industry, manufacturing and non manufacturing
industry are given. Complete results of the survey can be found in the
Haver series BUSINESS OUTLOOK SURVEY (M0F) in the BUSINESS CYCLE
INDICATORS AND SURVEY section of the JAPAN data
base. The survey was begun in 2004, and over its short life has tended
to anticipate results of the Bank of Japan's Tankan, Japan's most
closely watched indicator of the business outlook. The next Tankan
results are due on April 1st.
The current Cabinet Office and MOF survey, which was conducted
on February 25, was released today. Among the many results of the
survey, those for the large firms are frequently high lighted. For all
industry in large firms, the pessimists exceeded optimists by 9.3 % in
their appraisal of conditions in the current quarter. In non
manufacturing industry the excess of pessimists was 7.2%, and for
manufacturing, 12.9%. These were the most pessimistic outlooks in the
short history of the measure, as can be seen in the first chart.
Similar results were shown for the assessment of large manufacturing
firms for the next quarter, as shown in the second chart. However, for
the quarter after the next, optimists prevailed. The excess of
optimists for all industry was 6.6%, for non manufacturing, 6.1% and
for manufacturing, 7.3%, as can be seen in the third chart. In general,
the appraisals for conditions in the quarter after next show an excess
of optimists over pessimists. "Hope spring eternal in the human breast,
/ Man never is, but always to be blest."
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324e.jpg" border="0" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324f.jpg" border="0" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">BUSINESS
OUTLOOK SURVEY,&nbsp; 
CABINET OFFICE &amp; MOF&nbsp;(% Balance)</th>
<th scope="col">Q1 08</th>
<th scope="col">Q4 07&nbsp;</th>
<th scope="col">Q1 07&nbsp;</th>
<th scope="col">Q/Q Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol" colspan="9">Large Firms
Current
Quarter</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>-9.3</td>
<td>0.5</td>
<td>6.2</td>
<td>-9.8</td>
<td>-15.5</td>
<td>3.0</td>
<td>6.2</td>
<td>5.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>-12.9</td>
<td>5.2</td>
<td>0.1</td>
<td>-18.1</td>
<td>-13.0</td>
<td>2.7</td>
<td>6.1</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non
Manufacturing</td>
<td>-7.2</td>
<td>-2.2</td>
<td>-9.8</td>
<td>-5.0</td>
<td>-17.0</td>
<td>3.2</td>
<td>6.3</td>
<td>7.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Large Firms Next
Quarter</td>
<td>Q2 08</td>
<td>Q1 08&nbsp;</td>
<td>Q2 07&nbsp;</td>
<td>Q/Q Chg&nbsp;</td>
<td>Y/Y Chg&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>-2.3</td>
<td>2.4</td>
<td>4.2</td>
<td>-4.70</td>
<td>-6.5</td>
<td>8.3</td>
<td>10.3</td>
<td>7.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>-1.6</td>
<td>1.1</td>
<td>4.1</td>
<td>-2.7</td>
<td>-5.7</td>
<td>6.4</td>
<td>10.0</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non
Manufacturing</td>
<td>-2.8</td>
<td>3.2</td>
<td>4.3</td>
<td>-6.0</td>
<td>-7.1</td>
<td>7.9</td>
<td>10.5</td>
<td>8.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Large Firms&nbsp;
Quarter after Next</td>
<td>Q3 08</td>
<td>Q2 08&nbsp;</td>
<td>Q3 07&nbsp;</td>
<td>Q/Q Chg&nbsp;</td>
<td>Y/Y Chg&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">All Industry</td>
<td>6.6</td>
<td>2.1</td>
<td>9.9</td>
<td>4.5</td>
<td>-3.3</td>
<td>8.4</td>
<td>10.1</td>
<td>8.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>7.3</td>
<td>1.3</td>
<td>11.8</td>
<td>6.0</td>
<td>-4.5</td>
<td>8.6</td>
<td>9.6</td>
<td>8.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non
Manufacturing</td>
<td>6.1</td>
<td>2.5</td>
<td>8.8</td>
<td>3.6</td>
<td>-2.7</td>
<td>8.4</td>
<td>10.5</td>
<td>8.6</td>
</tr>
</tbody>
</table>
</body></html>

The Japanese Economic and Social Research Institute of the Cabinet Office and the Policy Research Institute of the Ministry of Finance (MOF) have surveyed industry leaders of some 15,000 firms and analyzed their assessments and [...]

Large Japanese Business Firms Turn More Pessimistic

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080324c.jpg" width="353">
The February National Activity Index (CFNAI) published by the Chicago Federal Reserve fell to its lowest level since April of 2003. At a negative 1.04 following downwardly revised readings in January and December &#39;07 the latest figure lowered the three month moving average to -0.87, its lowest level since 1Q03. That low reading 2003 was then associated with real GDP growth of 0.20% in 4Q02 and of 1.20% in 1Q03.
The Chicago Fed&#39;s release indicated &quot;an increasing likelihood that a recession has begun.&quot; A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth of roughly 3%. During the last twenty years there has been a 68% correlation between the level of the CFNAI and q/q growth in real GDP.
The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_march2008.pdf">here</a> and the historical data are available in Haver&#39;s Surveys database.
During February, each of the four broad categories of indicators &#151; employment, production, consumption and housing &#151; continued to make negative contributions to the CFNAI.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production &amp; income, the labor market, personal consumption &amp; housing, manufacturing &amp; trade sales, and inventories &amp; orders.
Economic Outlook Symposium: Summary of 2007 results and forecasts for 2008 from the Federal Reserve Bank of Chicago can be found <a href="http://www.chicagofed.org/publications/fedletter/cflfebruary2008_247.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/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">February &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.04</td>
<td>-0.68</td>
<td>-0.28</td>
<td>-0.44</td>
<td>0.01</td>
<td>0.28</td>
</tr>
</tbody>
</table>
</body>
</html>

The February National Activity Index (CFNAI) published by the Chicago Federal Reserve fell to its lowest level since April of 2003. At a negative 1.04 following downwardly revised readings in January and December '07 the latest figure [...]

Chicago Fed Index So Low Perhaps Indicates Recession

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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

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

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China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

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

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Sandy Batten

260617V1.jpg

260617W1.jpg

Total retail sales rose a much larger-than-expected 0.9% m/m (6.9%y/y) in May following a slightly downwardly revised 0.4% monthly gain in April (previously 0.5% m/m), according to data released by the U.S. Census Bureau. The Action Economics Forecast Survey looked for a 0.5% m/m gain. Excluding autos, other sales increased 0.8% m/m (7.5% y/y) after an unrevised 0.7% m/m increase in April. Expectations were for a 0.5% monthly rise.

Elevated retail gasoline prices continued to boost the value of gasoline sales in May. Gasoline sales increased 3.4% m/m (26.5% y/y) in May on top of a 2.8% m/m increase in April. However, both monthly increases were slower than the 14.2% monthly jump reported in March. Gasoline sales accounted for 31% of total sales in May. However, sales were solid even without gasoline sales. Total sales excluding gasoline rose 0.7% m/m in April, up from 0.2% m/m in April. Sales excluding both autos and gasoline increased 0.5% m/m in May, the same monthly gain as in April.

The control group of sales (total sales excluding food services, autos, gasoline and building materials that the BEA uses to construct PCE in the national accounts) posted another solid increase in May, rising 0.7% m/m (6.3% y/y) following an unrevised 0.5% monthly increase in April. The strong performance at the end of Q1 followed by solid gains in April and May put the April-May level of control group sales up 8.6% at an annual rate from the Q1 average, pointing to another solid contribution by consumption to overall GDP growth in Q2. Consumer spending remains surprisingly resilient notwithstanding the recent hit to disposable income from the marked increase in energy prices.

Sales generally increased across major sectors in May. Auto sales rebounded, rising 1.2% m/m in May and more than reversing the 0.9% monthly decline in April. This was the third gain in auto sales in the past four months. Furniture sales rose 1.0% m/m but sales at electronics and appliance stores slipped 0.5% m/m. Building material sales gained 1.0% m/m on top of a 1.1% monthly increase in April. Clothing sales rose 0.3% m/m. Sales at general merchandise stores gained 0.4% m/m in May. Miscellaneous sales jumped 2.3% m/m in May, their first monthly gain in three months. Sales by nonstore retailers continued their strong performance, increasing 1.5% m/m in May on top of a 1.1% monthly rise in April. Over the first five months of this year, nonstore retail sales have risen 7.2%, not annualized. By contrast, food sales were unchanged in May from April while sales at restaurants edged down 0.1% m/m in May, their first monthly decline in four months.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

260617X1.jpg

260617Y1.jpg

- Total sales increased 0.9% m/m in May, nearly twice expectations.
- Auto sales rebounded, rising 1.2% m/m in May, more than reversing a 0.9% monthly decline in April. 
- Gasoline sales rose 3.4% m/m in May.
- Excluding auto and gasoline sales, remaining sales increased by a solid 0.5% m/m in May, the same monthly increase as in April.
- Sales of the retail control group that is used to construct PCE rose 0.7% m/m in May and are 8.6% annualized above the Q1 average.

U.S. Retail Sales Jumped More than Expected in May

Winnie Tapasanun

260617A49.jpg

260617B49.jpg

Mortgage applications fell 3.8% w/w (+8.6% y/y) in the week ending June 12 following a 10.8% rebound in the week ending June 5, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The latest reading was the fourth w/w fall in five weeks, lowering the index to 269.5. Applications for loans to purchase a house slid 3.4% (+3.0% y/y) in the June 12 week, down for the fourth time in five weeks, after a 7.3% rise in the previous week. Applications for loan refinancing dropped 4.5% (+17.0% y/y) in the June 12 week, the seventh w/w decline in eight weeks, following a 15.3% jump in the June 5 week.

The effective interest rate on a 30-year fixed-rate loan was unchanged at 6.78% in the week ending June 12; it was above a low of 6.24% in the February 27 week but below a peak of 8.12% in the week of October 20, 2023. The rate on 15-year fixed-rate mortgages edged up 2bps to 6.18% in the June 12 week, the highest in three weeks, from 6.16% in the previous week; it was up from a low of 5.60% in the week of September 20, 2024 but down from a high of 7.44% in the week of October 27, 2023. Meanwhile, the rate on 30-year jumbo loans declined 4bps to 6.78% in the June 12 week from 6.82% in the prior week; it was above a low of 6.25% in the February 27 week but below a high of 7.99% in the week of October 27, 2023. The rate on a 5-year ARM fell 7bps to 6.16% in the June 12 week, the first w/w decline in six weeks, from 6.23% in the previous week (the highest since the week of August 15, 2025); it was above a low of 5.38% in the February 20 week but below a high of 7.31% in the week of October 27, 2023.

The share of applications for refinancing an existing loan edged up to 40.3% of total applications in the week ending June 12—the fourth w/w increase in five weeks and the highest level since the May 15 week—after rising to 40.2% in the week ending June 5; it remained below a peak of 61.9% in the January 16 week but above a low of 34.6% in the week of May 23, 2025. The adjustable-rate mortgage (ARM) share of activity slipped to 8.5% in the June 12 week from 8.6% in the prior week; it was below a peak of 12.9% in the week of September 12, 2025 but above a low of 4.7% in the week of January 3, 2025.

The average size of a mortgage loan fell 1.5% w/w (+3.7% y/y) to $394,100 in the June 12 week, the lowest level since the April 3 week, after a 0.4% rebound to $399,900 in the June 5 week. The average size of a purchase loan dropped 1.9% (+4.0% y/y) to $456,600 in the June 12 week following a 2.8% recovery to $465,300 in the prior week. The average size of a loan to refinance a mortgage fell 0.4% (+7.0% y/y) to $301,400 in the June 12 week on top of a 2.3% decline to $302,500 in the previous week, marking the third consecutive w/w fall, the sixth decline in seven weeks, and the lowest level since the week of July 25, 2025.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Purchase applications -3.4% w/w, down for fourth time in five weeks; refinance applications -4.5% w/w, seventh fall in eight weeks.
- Effective interest rate on 30-year fixed loans unchanged at 6.78%, up from a late-February low of 6.24%.
- Average loan size down for the second time in three weeks, lowest since the April 3 week.

U.S. Mortgage Applications Down 3.8% in the June 12 Week, Fourth Drop in Five Weeks

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It's an interesting time for the Bank of England to be meeting; it has its next policy meeting on June 18. Top money center central banks have been meeting, and the European Central Bank delivered a rate hike, with what is believed to be a likelihood of another hike before the end of the year. The Bank of Japan as just met and executed a 25-basis-point rate hike that brought the overnight interest rate up to 1% for the first time in 31 years. The Federal Reserve meets today and although the Fed is not expected to make an interest rate change, it is widely expected to remove the language that implies the next rate change is likely to be a reduction. Against that background, there is a pending deal to be signed on Friday between the United States and Iran to end the hostilities, to open the Strait of Hormuz, and to allow a normalization—or at least a transition toward normalization—of traffic flow through the Strait of Hormuz and the restoration of the delivery of the world's oil supplies.

Against this background, the Bank of England will be making its rate decision. Part of this background shows other central banks having taken steps to become less accommodative or more vigilant against inflation risks and what have been ongoing overshoots of inflation targets by monetary policy globally. The Bank of England is part of this phenomenon as its rate of inflation, measured by the CPIH, is 3% year-over-year, a full percentage point above where it's supposed to be. However, both the CPIH and the HICP treatments for measuring U.K. inflation show inflation edging slightly lower—from 3% for the CPIH over 12 months to 2.7% over three months annualized. For the HICP, it moves from 2.9% over 12 months to a 2.7% annual rate over three months. Both of these are small moves but in the right direction. In addition, the CPIH core measure, excluding food, energy, alcohol, and tobacco, shows inflation declining from 2.9% over 12 months to 2.6% at an annual rate over six months, and to 1.7% at an annual rate over three months.

In short, inflation progress in the U.K. is very much in gear for the headline; inflation is quite moderately easing, however. For the core, the move lower is impressive and considerable. The question is whether the MPC at the Bank of England will find these movements sufficient in and of themselves to stay their hand and hold interest rate policy, or whether the Committee will join the ranks of central banks hiking interest rates to make sure that inflation makes that turn lower.

The situation in the Strait of Hormuz is hopeful, but not definitive, and there have been a number of ceasefires in the Middle East that have been called and then broken up relatively quickly. This time, markets are reacting to this particular announcement much more decisively and treating it as if this one is the ‘Real McCoy’ with oil prices having fallen down into the mid $70/barrel range and other indicators showing that markets are convinced that prices are moving lower too. Are the Bank of England's MPC members buying onto this as well? Or are they going to treat this as perhaps one last opportunity to get interest rates up and to make sure that the inflation rate goes down?

U.K. inflation on a monthly basis shows a slight tendency to accelerate in May, with inflation diffusion measuring inflation acceleration month-to-month at 58.3%, above the neutral reading of 50. However, diffusion had been at 50% in April and at 41.7% in March. Acceleration has been broadly blunted. In addition, the May increase in the CPIH was only 0.1%, the same as in April, with March having posted a much stronger increase of 0.4%.

Looking at trends sequentially over 12 months, six months and three months, diffusion is only 25% over 12 months; it is 50% over six months and 25% over three months. These metrics reinforce the view that inflation is not broadly accelerating but rather decelerating and moving back into line.

Taking the year-over-year inflation rate, it's a ranking of overall inflation rates back to January 2000. The headline CPIH is still high at a 74.4 percentile standing; that means it has been higher than 3% about 25% of the time and lower about 75% of the time. The average ranking across the various metrics in the table is 61%. That's above a ranking of 50% that delineates the median for the period. And despite the fast fall in the CPIH core rate, the year-over-year core is at 2.9% and has an 81.2 percentile ranking, meaning it has been higher since January 2000, less than 20% of the time. However, that 12-month rate of 2.9% is now down to 1.7% over three months. There are too many ways to look at inflation, at the environment, at what other central banks have done, and at trends to know with any certainty what the BOE will do.

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The Bank of England has had a long period of overshooting its inflation target. It certainly will want to make sure that it's on a clear path toward getting inflation back to 2%. There's a question here about how much the Bank of England will want to trust the trend that it sees, how much it wants to trust the fast drop in the core rate, and then how much it wants to believe that the deal struck with Iran to open the Strait of Hormuz is going to prove durable. There are no real answers to these questions; they're going to be based upon opinions and perceptions, and they're also going to be based upon the pressure that the Bank of England feels about needing to make sure that it gets inflation back to 2% after its long period of intransigence. We'll find this out tomorrow.

United Kingdom

U.K. Inflation Dips and Shows Progress

Michael J. Moran

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The headline index on import prices rose 1.9% in May, close to the blistering pace in April and the fourth consecutive high-side reading. This recent pressure has pulled the year-over-year change to 6.7%, a distinct shift from last year when import prices showed no change over the 12 months of 2025.

Prices of petroleum products have been the most important factor behind the recent surge, increasing 13.0% in May after an average of 17.8% in the prior two months. However, prices excluding petroleum products also have stirred this year, as they have increased more than 0.6% in each of the past five months. May posted the firmest increase in this string of brisk readings (1.3%). Prices of consumer goods had been increasing moderately in early 2026, but they jumped 0.5% in May. The changes in capital and consumer goods led to an increase of 0.8% in nonpetroleum prices in May and an average of 0.6% in the first five months of the year.

Some observers might seek to look for the effects of tariffs on import prices, but these figures would not be especially helpful in this regard, as prices are recorded before the imposition of tariffs. However, if foreign producers wished to absorb the tariff burden to remain competitive in the US market, they could reduce invoiced prices to keep post-tariff prices steady. Indeed, nonpetroleum prices softened after April of last year following the announcement of President Trump’s Liberation Day tariffs. The subsequent easing of some of the draconian tariffs and the nullification of tariffs imposed under the International Emergency Economic Powers Act might be factors leading importers to return to original prices this year. Given that the pressure on import prices ex-petroleum has been concentrated in the capital goods area, there does not seem to be a rush to return to pre-tariff pricing.

On the export side, prices rose 1.3% in May, continuing the firm pace seen in the preceding four months. Petroleum prices have played a role in this pressure, as shown by an increase of 2.4% in the industrial supply category (petroleum prices alone are not available on the export side). Food prices also have jumped this year, increasing 0.8% in May after an average of 1.2% in the prior three months. Prices of capital goods were tame in the early months of the year, but they have firmed in the past two months (0.5% in April and 0.7% in May).

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Petroleum products led import prices higher, but capital goods also had an influence.
- Petroleum was also a factor on the export side; some stirring in food and capital goods.

Import and Export Prices: Firm in May

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Weighed down by further rises in longer-term interest rates, housing construction continued to languish in May. Housing starts plunged 15.4% m/m (-8.7% y/y) in May on top of a downwardly revised 8.5% monthly decline in April (previously -2.8% m/m). The level of starts plummeted to 1.177 million, the lowest since May 2020 when the economy was locked down during the COVID pandemic. The Action Economics Forecast Survey expected a 2.4% m/m decline to a level of 1.432 million units. The April/May average for starts was 1.285 million, 9.4% below the Q1 average. Residential investment has been a persistent drag on real GDP growth recently, subtracting from overall growth in each of the previous five quarters. Today’s report points to another subtraction in Q2.

Single-family starts fell 1.9% m/m (-6.7% y/y) in May on top of a downwardly revised 11.6% monthly plunge in April (previously -9.0% m/m). Multi-family starts, which had generally been trending up over the past year or so, albeit with quite a bit of volatility, plummeted 40.2% m/m (-14.2% y/y) in May following a downwardly revised 2.4% m/m decline in April (previously +10.3% m/m).

Starts fell in three of the four major geographic regions. Starts rose 3.7% m/m in the Midwest with gains in both single-family and multi-family starts. By contrast, starts fell in each of the other three regions, plunging 26.8% m/m in the Northeast, the third monthly decline in the past four months, falling 17.0% m/m in the South, also the third monthly decline in the past four months, and declining 17.2% m/m in the West, the fourth monthly decline in the past five months.

The performance of building permits is typically less volatile than that of starts. Total permits edged down 0.7% m/m (-0.2% y/y) to 1.413 million units in May following a 4.4% monthly gain in April and an 11.5% m/m fall in March. Expectations were for a 0.3% monthly increase in May. Single-family permits edged up 0.6% m/m (-1.8% y/y) in May versus a 1.6% monthly decline in April and a 3.7% m/m drop in March. By contrast, multi-family permits fell 2.8% m/m (+2.5 y/y) in May but this was after a 15.8% monthly surge in April.

In contrast to the regional performance of starts, permits fell in the Midwest (-18.7% m/m) but rose in each of the other three major geographic regions. Permits increased 3.1% m/m in the Northeast in May on top of a 18.1% monthly jump in April. They edged up 1.6% m/m in the South and rose 5.5% m/m in the West, the first monthly gain in three months.

The housing starts and permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Housing starts plunged 15.4% m/m in May to the lowest level since May 2020 with a significant downward revision to the previously reported April decline.
- Single family starts fell 1.9% m/m while multi-family starts plummeted 40.2% m/m to their lowest level since November 2024.
- Less volatile permits slid 0.7% m/m in May with a slight rise (+0.6% m/m) in single-family permits and a 2.8% monthly drop in multi-family permits.

Economy in Brief

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