Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318a.jpg" width="353">
Housing starts during February were firmer than expected and fell just 0.6% to 1.065M units. A m/m decline to 0.96M had been the Consensus expectation. In addition, starts in January were revised higher to 1.065M from 1.012M reported last month.
As occurred last month, however, all of the strength relative to expectations (and most of the revision) was due to the multi-family sector. Starts of condos &amp; coops during February rose 14.4% and January starts were revised higher by nearly one half million units.
Single family starts last month fell 6.7% m/m to .707M after a 3.1% January decline. That decline was revised to show less of a decline. Single family starts in February were at their lowest level since January 1991 and since the peak in early 2006, starts of single family homes were down 61.5%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080318b.jpg" width="353">
By region, single family starts in the Northeast gave back all of the January increase with a 42.3% decline (-28.9% y/y). In the Midwest single family starts fell to the lowest level since (this is not a typo) early 1985 and were down 25.0% y/y. In the South, single family starts fell 7.0% (-42.5% y/y) and out West single family starts rose by nearly one-third m/m but still were down by nearly one-half from February 2007.
Building permits continued the slide from a 2005 peak with a 7.8% m/m drop. Single-family permits fell 6.2% (-41.9% y/y).
Understanding the Securitization of Subprime Mortgage Credit from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr318.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">February</th>
<th scope="col">January</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">Total</td>
<td>1,065</td>
<td>1,071</td>
<td>-28.4%</td>
<td>1,344</td>
<td>1,812</td>
<td>2,073</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-Family</td>
<td>707</td>
<td>758</td>
<td>-40.5%</td>
<td>1,039</td>
<td>1,474</td>
<td>1,719</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-Family</td>
<td>358</td>
<td>313</td>
<td>19.7%</td>
<td>304</td>
<td>338</td>
<td>354</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>978</td>
<td>1,061</td>
<td>-36.5%</td>
<td>1,371</td>
<td>1,842</td>
<td>2,159</td>
</tr>
</tbody>
</table>
</body>
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Housing starts during February were firmer than expected and fell just 0.6% to 1.065M units. A m/m decline to 0.96M had been the Consensus expectation. In addition, starts in January were revised higher to 1.065M from 1.012M reported [...]

U.S. Housing Starts Buoyed Again By Multi-Family

Finished producer prices in the U.S. rose 0.3% during February following a 1.0% surge in January. The latest increase fell just short of Consensus expectations for a 0.4% rise but the 6.8% increase versus last February was near this [...]

U.S. PPI Total & Total Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317g.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) reported that the March Composite Housing Market Index remained at the same low level as in February. The readings are more than two-thirds lower than the highs of 2004.
During the last twenty years there has been a 76% correlation between the y/y change in the Composite Index and the change in single family housing starts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317h.jpg" width="353">
The index for single family detached homes also remained near the cycle&#39;s low which was down about three quarters from the 2004 high. Builders saw little improvement in single family home sales during the next six months and their index remained down by two-thirds from 2004.
The Home Builders&#39; index improved slightly in the Southern region of the country but remained at or near the recent lows elsewhere.
Traffic of prospective home buyers was stable m/m following improvement during February.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor.
Fostering Sustainable Homeownership is Friday&#39;s speech by Federal Reserve Board Chairman Ben S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/speech/bernanke20080314a.htm"> here</a>. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">March</th>
<th scope="col">February &nbsp;</th>
<th scope="col">March &#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">Composite Housing Market Index</td>
<td>20</td>
<td>20</td>
<td>36</td>
<td>27</td>
<td>42</td>
<td>67</td>
</tr>
</tbody>
</table>
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The National Association of Home Builders' (NAHB) reported that the March Composite Housing Market Index remained at the same low level as in February. The readings are more than two-thirds lower than the highs of 2004. During the [...]

U.S. NAHB Housing Market Index Low & Stable

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317f.jpg" width="353">
The US current account deficit fell last quarter to $172.9 billion from $177.4 billion in Q3. The Q4 deficit was shallower than Consensus expectations for a deficit of $184 billion.
The latest deficit totaled 4.9% of GDP and it peaked as a percentage of GDP nearly two years ago at 6.8% in Q4 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317e.jpg" width="353">
That shrinkage occurred even though the deficit on merchandise trade deepened. Higher oil prices lifted imports and the goods deficit grew to $208.1B from Q3&#39;s revised deficit of $200.5B. It was the deepest deficit in just over a year. During the last year only, however, exports grew 14.2% and outpaced import growth of 9.8%.
The effects of the lower U.S. dollar and the strength of foreign economies versus the U.S. is apparent greatest in the surplus in services trade which grew to a record surplus of $30.2B from $28.0B in 3Q. Exports of services during the last year grew 15.2%. Travel exports grew 21.4% y/y and passenger fares were up 19.2%. Imports grew a slower 11.5% due to moderate 7.3% growth in travel and 9.3% growth in passenger fares.
The trade surplus on earned income grew to $33.0B as the unilateral transfers deficit deepened to 28.1B.
 Friedman and Taylor on Monetary Policy Rules: A Comparison from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/08/03/Nelson.pdf"> here</a>. 

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Balance of Payments</a>,&nbsp;Bil.$, SA</th>
<th scope="col">4Q &#39;07</th>
<th scope="col">Q3 &#39;07</th>
<th scope="col">Year Ago</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account Balance ($ Bil.)</td>
<td>-172.9</td>
<td>-177.4</td>
<td>-187.9</td>
<td>-738.6</td>
<td>-811.5</td>
<td>-754.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Deficit % of GDP</td>
<td>-4.9</td>
<td>-5.1</td>
<td>-5.6</td>
<td>-5.3</td>
<td>-6.2</td>
<td>-6.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Goods ($ Bil.)</td>
<td>-208.1</td>
<td>-200.5</td>
<td>-200.3</td>
<td>-815.4</td>
<td>-838.3</td>
<td>-787.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports&nbsp;</td>
<td>2.4%</td>
<td>6.7%</td>
<td>14.2%</td>
<td>12.3%</td>
<td>14.4%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports&nbsp;</td>
<td>2.9%</td>
<td>2.9%</td>
<td>9.8%</td>
<td>5.5%</td>
<td>10.7%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Balance on Private Services ($ Bil.)</td>
<td>30.2</td>
<td>28.0</td>
<td>23.4</td>
<td>106.9</td>
<td>79.8</td>
<td>72.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>4.4%</td>
<td>4.9%</td>
<td>15.2%</td>
<td>13.4%</td>
<td>8.8%</td>
<td>11.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>3.4%</td>
<td>3.7%</td>
<td>11.5%</td>
<td>8.6%</td>
<td>9.3%</td>
<td>8.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on Income ($ Bil.)</td>
<td>33.0</td>
<td>21.3</td>
<td>9.7</td>
<td>74.3</td>
<td>36.6</td>
<td>48.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral Transfers ($ Bil.)</td>
<td>-28.1</td>
<td>-26.2</td>
<td>-20.7</td>
<td>-104.4</td>
<td>-89.6</td>
<td>-88.5</td>
</tr>
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The US current account deficit fell last quarter to $172.9 billion from $177.4 billion in Q3. The Q4 deficit was shallower than Consensus expectations for a deficit of $184 billion. The latest deficit totaled 4.9% of GDP and it peaked [...]

U.S. Current Account Deficit Shrank in 2007

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317d.jpg" align="left" border="0" height="265" width="353">
Stock markets around the world have taken another plunge as a
result of the latest turmoil in the financial markets. Peaks and
troughs in the stock markets have been successively lower ever since
the sub prime crisis erupted last August. The attached chart plots
daily stock price indexes for the United States (the Dow Jones), the
United Kingdom (the Financial Times All Share) and Japan (the Nikkei
225). As of last Friday, the Dow Jones was down 15% from its July 19,
2007 peak of 14,000. The Financial Times All Share was down 17% and the
Nikkei 225, 33% from their peaks of respectively 3,468 and 18,239 on
July 13, 2007. Early indicators suggests further falls today.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317c.jpg" align="right" border="0" height="265" width="353">
While stock markets been falling, commodity prices have been
soaring. In attempts to seek safety, investors have turned to
commodities, gold and oil in particular. The second chart shows the run
ups in the prices of these commodities. Over the same period that the
Dow Jones fell 15%, gold rose 47% and oil 43%.
These daily prices can be found in the Haver Data Base, INTDAILY.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">STOCK
PRICE INDEXES&nbsp;</th>
<th scope="col">Mar 14,08&nbsp;</th>
<th scope="col">Peak, Jul 07</th>
<th scope="col">% Chg&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">U. S. Dow Jones</td>
<td>11951.09</td>
<td>14000.41</td>
<td>-14.64</td>
</tr>
<tr class="odd">
<td class="firstcol">U.K. Financial Times All Shares</td>
<td>2886.17</td>
<td>3467.92</td>
<td>-16.78</td>
</tr>
<tr class="odd">
<td class="firstcol">Japan Nikkei
225&nbsp;Foreign</td>
<td>12240.60</td>
<td>18238.95</td>
<td>-32.88</td>
</tr>
<tr class="grey2">
<td class="firstcol"> &nbsp;COMMODITY
PRICES</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Gold
(Engelhard Indus Bullion $ per troy oz.)</td>
<td>997.34</td>
<td>676.26</td>
<td>47.78</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Oil (Brent Crude $
per bbl.)</td>
<td>110.75</td>
<td>78.33</td>
<td>41.39</td>
</tr>
</tbody>
</table>
</body></html>

Stock markets around the world have taken another plunge as a result of the latest turmoil in the financial markets. Peaks and troughs in the stock markets have been successively lower ever since the sub prime crisis erupted last [...]

Stock Markets Plunge: Commodity Prices Soar

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317a.jpg" width="353">
Industrial production fell 0.5% last month after an unrevised 0.1% rise during January. The decline was greater than the 0.1% slip that was generally expected. The cause of the surprise, however, primarily was due to a 3.7% drop in utility output, caused by warm Winter temperatures during February.
Factory output fell 0.3% during February. A reading of no change in January production was revised down from a 0.1% uptick reported initially. The m/m decline was the first since October and three month growth in output fell to -0.7% (AR). Production in the high tech sector rose 1.1% last month after a 0.3% January increase. Outside the high tech sector, factory output fell 0.4% during February after having been unchanged during January. Three month output growth fell to -1.1% (AR).
Production of computers &amp; electronics again surged last month by 1.2% and three month growth totaled a strong 12.3%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317b.jpg" width="353">
Severe weakness has taken over output elsewhere in the durable goods area. Output of furniture &amp; appliances fell 3.1% last month after a 2.5% January decline. Three month output growth here fell to -25.4% at an annual rate. Output of automotive products dropped 1.2% and on a three month basis fell 6.2%. In the nondurables sector apparel product output fell 0.4%, the second consecutive decline, though that followed a strong 2.4% December jump. On a three month basis output growth was a still firm 3.2%.
Output of business equipment ticked up 0.1% for the second month and three month growth totaled 4.2%. Output of industrial equipment less high tech slipped 0.1% with three month growth still positive at 3.9%.
Output of construction supplies fell 0.7% during February for the second consecutive month and three month growth remained negative at -3.7%.
Capacity utilization fell to 80.9%, its lowest level since late 2005. Utilization in the factory sector slipped to 79.3%, its lowest also since late 2005. Annual growth in capacity is estimated at 1.7% y/y for 2.1% in the factory sector.
Yesterday the Federal Reserve announced two initiatives to promote financial market liquidity and orderly market functioning. The text of the announcement can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080316a.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION (SA)</th>
<th scope="col">February</th>
<th scope="col">January</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">Total</td>
<td>-0.5</td>
<td>0.1</td>
<td>1.1</td>
<td>1.9</td>
<td>4.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.3</td>
<td>0.0</td>
<td>1.7</td>
<td>1.9</td>
<td>4.7</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Utilities</td>
<td>-3.7</td>
<td>2.2</td>
<td>-5.4</td>
<td>3.1</td>
<td>0.2</td>
<td>2.0</td>
</tr>
</tbody>
</table>


</html>

Industrial production fell 0.5% last month after an unrevised 0.1% rise during January. The decline was greater than the 0.1% slip that was generally expected. The cause of the surprise, however, primarily was due to a 3.7% drop in [...]

U.S. Industrial Output Down

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317a.jpg" align="left" border="0" height="265" width="353">
Industrial production fell 0.5% last month after an unrevised
0.1% rise during January. The decline was greater than the 0.1% slip
that was generally expected. The cause of the surprise, however,
primarily was due to a 3.7% drop in utility output, caused by warm
Winter temperatures during February.
Factory output fell 0.3% during February. A reading of no
change in January production was revised down from a 0.1% uptick
reported initially. The m/m decline was the first since October and
three month growth in output fell to -0.7% (AR). Production in the high
tech sector rose 1.1% last month after a 0.3% January increase. Outside
the high tech sector, factory output fell 0.4% during February after
having been unchanged during January. Three month output growth fell to
-1.1% (AR).
Production of computers &amp; electronics again surged
last month by 1.2% and three month growth totaled a strong 12.3%.
<blockquote><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317b.jpg" align="right" border="0" height="265" width="353">

Severe weakness has taken over output elsewhere in the
durable goods area. Output of furniture &amp; appliances fell 3.1%
last month after a 2.5% January decline. Three month output growth here
fell to -25.4% at an annual rate. Output of automotive products dropped
1.2% and on a three month basis fell 6.2%. In the nondurables sector
apparel product output fell 0.4%, the second consecutive decline,
though that followed a strong 2.4% December jump. On a three month
basis output growth was a still firm 3.2%.
</blockquote>

Output of business equipment ticked up 0.1% for the second
month and three month growth totaled 4.2%. Output of industrial
equipment less high tech slipped 0.1% with three month growth still
positive at 3.9%.
Output of construction supplies fell 0.7% during February for
the second consecutive month and three month growth remained negative
at -3.7%.
Capacity utilization fell to 80.9%, its lowest level since
late 2005. Utilization in the factory sector slipped to 79.3%, its
lowest also since late 2005. Annual growth in capacity is estimated at
1.7% y/y for 2.1% in the factory sector.
Yesterday the Federal Reserve announced two initiatives to
promote financial market liquidity and orderly market functioning. The
text of the announcement can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20080316a.htm">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">INDUSTRIAL
PRODUCTION (SA)</th>
<th scope="col">February</th>
<th scope="col">January</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">Total</td>
<td>-0.5</td>
<td>0.1</td>
<td>1.1</td>
<td>1.9</td>
<td>4.0</td>
<td>3.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Manufacturing</td>
<td>-0.3</td>
<td>0.0</td>
<td>1.7</td>
<td>1.9</td>
<td>4.7</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Utilities</td>
<td>-3.7</td>
<td>2.2</td>
<td>-5.4</td>
<td>3.1</td>
<td>0.2</td>
<td>2.0</td>
</tr>
</tbody>
</table>
Stock Markets Plunge:
Commodity Prices Soar 
by <a href="/comment/Curley.html">Louise
Curley</a> March 17, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317d.jpg" align="left" border="0" height="265" width="353">
Stock markets around the world have taken another plunge as a
result of the latest turmoil in the financial markets. Peaks and
troughs in the stock markets have been successively lower ever since
the sub prime crisis erupted last August. The attached chart plots
daily stock price indexes for the United States (the Dow Jones), the
United Kingdom (the Financial Times All Share) and Japan (the Nikkei
225).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317c.jpg" align="right" border="0" height="265" width="353"> As of last Friday, the Dow
Jones was down 15% from its July 19, 2007 peak of 14,000. The Financial
Times All Share was down 17% and the Nikkei 225, 33% from their peaks
of respectively 3,468 and 18,239 on July 13, 2007. Early indicators
suggests further falls today.
While stock markets been falling, commodity prices have been
soaring. In attempts to seek safety, investors have turned to
commodities, gold and oil in particular. The second chart shows the run
ups in the prices of these commodities. Over the same period that the
Dow Jones fell 15%, gold rose 47% and oil 43%.
These daily prices can be found in the Haver Data Base, INTDAILY.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">STOCK
PRICE INDEXES&nbsp;</th>
<th scope="col">Mar 14,08&nbsp;</th>
<th scope="col">Peak, Jul 07</th>
<th scope="col">% Chg&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">U. S. Dow Jones</td>
<td>11951.09</td>
<td>14000.41</td>
<td>-14.64</td>
</tr>
<tr class="odd">
<td class="firstcol">U.K. Financial Times
All Shares</td>
<td>2886.17</td>
<td>3467.92</td>
<td>-16.78</td>
</tr>
<tr class="odd">
<td class="firstcol">Japan Nikkei
225&nbsp;Foreign</td>
<td>12240.60</td>
<td>18238.95</td>
<td>-32.88</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;COMMODITY
PRICES</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;Gold
(Engelhard Indus Bullion $ per troy oz.)</td>
<td>997.34</td>
<td>676.26</td>
<td>47.78</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Oil (Brent
Crude $ per bbl.)</td>
<td>110.75</td>
<td>78.33</td>
<td>41.39</td>
</tr>
</tbody>
</table>
U.S. Current Account Deficit
Shrank in 2007 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 17, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317f.jpg" align="left" border="0" height="265" width="353">
The US current account deficit fell last quarter to $172.9
billion from $177.4 billion in Q3. The Q4 deficit was shallower than
Consensus expectations for a deficit of $184 billion.
The latest deficit totaled 4.9% of GDP and it peaked as a
percentage of GDP nearly two years ago at 6.8% in Q4 2005.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080317e.jpg" align="right" border="0" height="265" width="353">
That shrinkage occurred even though the deficit on merchandise
trade deepened. Higher oil prices lifted imports and the goods deficit
grew to $208.1B from Q3's revised deficit of $200.5B. It was the
deepest deficit in just over a year. During the last year only,
however, exports grew 14.2% and outpaced import growth of 9.8%.
The effects of the lower U.S. dollar and the strength of
foreign economies versus the U.S. is apparent greatest in the surplus
in services trade which grew to a record surplus of $30.2B from $28.0B
in 3Q. Exports of services during the last year grew 15.2%. Travel
exports grew 21.4% y/y and passenger fares were up 19.2%. Imports grew
a slower 11.5% due to moderate 7.3% growth in travel and 9.3% growth in
passenger fares.
The trade surplus on earned income grew to $33.0B as the
unilateral transfers deficit deepened to 28.1B.
 Friedman and Taylor on Monetary Policy Rules: A
Comparison from the Federal Reserve Bank of St. Louis is
available <a href="http://research.stlouisfed.org/publications/review/08/03/Nelson.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/USECON/@EE/@EE01/@EE01.HTM">US
Balance of Payments</a>,&nbsp;Bil.$, SA</th>
<th scope="col">4Q '07</th>
<th scope="col">Q3 '07</th>
<th scope="col">Year Ago</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current Account
Balance ($ Bil.)</td>
<td>-172.9</td>
<td>-177.4</td>
<td>-187.9</td>
<td>-738.6</td>
<td>-811.5</td>
<td>-754.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Deficit % of GDP</td>
<td>-4.9</td>
<td>-5.1</td>
<td>-5.6</td>
<td>-5.3</td>
<td>-6.2</td>
<td>-6.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on
Goods ($ Bil.)</td>
<td>-208.1</td>
<td>-200.5</td>
<td>-200.3</td>
<td>-815.4</td>
<td>-838.3</td>
<td>-787.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Exports&nbsp;</td>
<td>2.4%</td>
<td>6.7%</td>
<td>14.2%</td>
<td>12.3%</td>
<td>14.4%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imports&nbsp;</td>
<td>2.9%</td>
<td>2.9%</td>
<td>9.8%</td>
<td>5.5%</td>
<td>10.7%</td>
<td>12.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Balance on
Private Services ($ Bil.)</td>
<td>30.2</td>
<td>28.0</td>
<td>23.4</td>
<td>106.9</td>
<td>79.8</td>
<td>72.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Exports</td>
<td>4.4%</td>
<td>4.9%</td>
<td>15.2%</td>
<td>13.4%</td>
<td>8.8%</td>
<td>11.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Imports</td>
<td>3.4%</td>
<td>3.7%</td>
<td>11.5%</td>
<td>8.6%</td>
<td>9.3%</td>
<td>8.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Balance on
Income ($ Bil.)</td>
<td>33.0</td>
<td>21.3</td>
<td>9.7</td>
<td>74.3</td>
<td>36.6</td>
<td>48.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Unilateral
Transfers ($ Bil.)</td>
<td>-28.1</td>
<td>-26.2</td>
<td>-20.7</td>
<td>-104.4</td>
<td>-89.6</td>
<td>-88.5</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN">
<html><head>
<style>
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<body>
 



<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080314h.jpg" align="left" border="0" height="265" width="353">
The upward-revised headline EMU inflation rate leaves the ECB
even more perturbed over events. While a tenth of a percentage point
upward revision is no big deal, it makes the highest inflation on
record since the Euro Area was formed even higher. Some members have
said that the revision is a further risk to second round effects. To
the extent that the public sees it and makes that their wage target
based on that higher rate, it is so.
The chart on the lest shows the &#8216;core&#8217; inflation rate, without
food and energy and &#8216;sin&#8217; (alcohol and tobacco).
The core rate is in better shape and it shows a muted
pass-through of inflation. At 2.4% year/year it is about what US core
inflation is (2.3% for ex food and energy inflation). The ECB is making
a big deal of inflation over its ceiling of 2% while the Fed
&#8216;references&#8217; the core PCE which is lower than the Core CPI. The Core
CPI is now below its Core-PCE-equivalent &#8216;reference ceiling&#8217; of 2.4%.
But since the ECB thinks in terms of headline inflation only, its
shortfall is not 2.4% (core) Vs 2% but 3.3% Vs 2% and that is a much
bigger distance. For the record US headline inflation is even higher.
Who is doing this the right way?
Central banks are what they make themselves into and what
their mandate demands. The US has seen enough weakness to react to the
economy and financial strife by cutting rates. And that works for a
central bank with a dual growth and inflation mandate. The ECB has no
such mandate. It is strictly to fight inflation and so it is doing
that, for better or worse. Meanwhile,
however, the euro continues to climb and that has its own deflationary
consequences for the Euro Area. It seems everyone in the Euro Area is
worried about it. Perhaps that is the way out for the ECB to see what
the strong euro is doing to help fight inflation as well as undermine
growth. Holding policy steady until inflation breaks noticeably could
be a problem since commodity prices are high enough that even with euro
strength they are and will be an inflation contributor for a while
longer. Central banks have entered the very foggy &#8216;judgment zone.&#8217;
One thing we can conclude is that with the weaker economy in
the US and the brunt of the financial problems there, it is a good
thing that the Fed is the central bank with the dual mandate and not
vice versa. In the meantime look for central banks to muddle though
under their own existing rules. Inflation may be near peaking since
it&#8217;s hard to imagine another move up in commodity prices to any
significant degree from these levels.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col">Trends in HICP </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% mo/mo</td>
<td colspan="4">% saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Yr Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">EMU-13</td>
<td>0.3%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>2.8%</td>
<td>4.5%</td>
<td>3.3%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Core</td>
<td>0.3%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>2.6%</td>
<td>2.9%</td>
<td>2.4%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods</td>
<td>0.3%</td>
<td>-0.5%</td>
<td>0.1%</td>
<td>-0.8%</td>
<td>5.3%</td>
<td>3.8%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>0.5%</td>
<td>-0.2%</td>
<td>0.9%</td>
<td>4.9%</td>
<td>1.1%</td>
<td>2.5%</td>
<td>2.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">HICP</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>1.1%</td>
<td>3.9%</td>
<td>2.9%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>0.0%</td>
<td>0.3%</td>
<td>0.4%</td>
<td>3.0%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.6%</td>
<td>0.1%</td>
<td>0.4%</td>
<td>4.2%</td>
<td>4.7%</td>
<td>3.1%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>0.4%</td>
<td>0.2%</td>
<td>0.5%</td>
<td>4.6%</td>
<td>6.1%</td>
<td>4.4%</td>
<td>2.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">Core:xFE&amp;A</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>0.3%</td>
<td>-0.2%</td>
<td>0.3%</td>
<td>1.5%</td>
<td>2.1%</td>
<td>2.2%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>0.1%</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.4%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>3.1%</td>
<td>2.5%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>0.3%</td>
<td>0.2%</td>
<td>0.3%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>3.3%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</body></html>

The upward-revised headline EMU inflation rate leaves the ECB even more perturbed over events. While a tenth of a percentage point upward revision is no big deal, it makes the highest inflation on record since the Euro Area was formed [...]

Inflation Flares Further in the Euro Area

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

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

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Sandy Batten

260617V1.jpg

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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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