Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080306f.jpg" align="left" border="0" height="265" width="353">
The Teikoku indices show a weakening Japan economy. Just today
Japan policymakers, commenting on the state of the economy, were saying
that it is weak and did not know if the word &#8216;recession&#8217; should be used
in connection with it. The
Teikoku index hit a five year low in January and has recovered slightly
in February. The NTC MFG index is also weak but not quite as weak as
the Teikoku MFG reading; it is not in the bottom 5 percent of its range
but in the bottom 30% of it.
The Teikoku outlook indices show that progressively greater
weakness is expected looking ahead. While each of these indexes, the
current, the 6-mo ahead and 12-mo ahead index, has fallen, each has
also made a small rebound in February. Up until now, Japan has taken a
mostly upbeat view of the economy. It took Japanese officials a long
time to downgrade the economy and its prospects. But the slide in the
economy is now undeniable. Still, like the US, we do not yet know how
far the economy will skid.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Key
Japanese Surveys</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Yr range*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
</tr>
<tr>
<td class="firstcol">NTC MFG</td>
<td>50.8</td>
<td>52.4</td>
<td>52.3</td>
<td>50.8</td>
<td>30.5%</td>
<td>47.4%</td>
<td>47.3%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Econ
Trends (Teikoku'/50
neutral/weighted diffusion)</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>38.5</td>
<td>37.9</td>
<td>40.8</td>
<td>41.7</td>
<td>4.4%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>32.6</td>
<td>31.3</td>
<td>34.2</td>
<td>34.4</td>
<td>9.4%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>35.3</td>
<td>34.5</td>
<td>37.0</td>
<td>38.3</td>
<td>6.3%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>41.0</td>
<td>40.4</td>
<td>43.5</td>
<td>45.0</td>
<td>5.4%</td>
<td>0.0%</td>
<td>20.1%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>29.7</td>
<td>28.9</td>
<td>32.0</td>
<td>32.6</td>
<td>7.5%</td>
<td>0.0%</td>
<td>16.4%</td>
</tr>
</tbody>
</table>
</body></html>

The Teikoku indices show a weakening Japan economy. Just today Japan policymakers, commenting on the state of the economy, were saying that it is weak and did not know if the word ‘recession’ should be used in connection with it. The [...]

Japan Economy Shows Weakening Sectors and a Weakening Outlook

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080306e.jpg" align="left" border="0">
Manufacturing orders were a little weaker at the start of the
year than in the fourth quarter said the German ministry in a classic
understatement of the facts. It noted, however, mitigating factors,
such as a change in the tax depreciation system at the start of 2008
that caused many domestic companies to pull their orders backward into
2007. Even with that pull back December orders fell. And the 2008
growth rate as of January 2008 compared to the Q4 base sees a 7.6%
annual rate of decline in Q1 2008. Domestic orders are shrinking at a
2.4% pace. But foreign orders, an area unaffected by the depreciation
rule in Germany, sees Q1 orders are off at a 12.3% annual pace.
German orders are being compressed. German domestic orders
peaked in September 2006 and have been declining irregularly ever
since. There was an order rebound in November and December of 2007 but
the down shift is again in train.
In Germany sales trends show declines for consumer durables
and nondurables. Sales of intermediate goods have seen resurgence while
capital goods sales continue to be quite firm and have recently
re-accelerated. This is a
continuation of the same story that sees the consumer sector weak and
capital goods remaining strong. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> German Orders and Sales By Sector and Origin</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</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>YrAgo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>-1.5%</td>
<td>-1.1%</td>
<td>3.0%</td>
<td>1.2%</td>
<td style="color: red;">0.6%</td>
<td>9.6%</td>
<td>6.9%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-1.3%</td>
<td>-2.5%</td>
<td>2.3%</td>
<td style="color: red;">-5.9%</td>
<td style="color: red;">-3.0%</td>
<td>13.3%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-1.9%</td>
<td>0.4%</td>
<td>3.7%</td>
<td>9.1%</td>
<td style="color: red;">4.5%</td>
<td style="color: red;">5.8%</td>
<td>8.1%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">Sector Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>1.4%</td>
<td>1.1%</td>
<td>-0.7%</td>
<td>7.3%</td>
<td style="color: red;">3.6%</td>
<td style="color: red;">5.9%</td>
<td>9.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td style="color: red;">-0.5%</td>
<td>0.5%</td>
<td>-0.6%</td>
<td style="color: red;">-2.3%</td>
<td style="color: red;">-1.1%</td>
<td style="color: red;">1.1%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Cons Durables</td>
<td style="color: red;">-2.6%</td>
<td>2.8%</td>
<td>-0.2%</td>
<td style="color: red;">-0.4%</td>
<td>-0.2%</td>
<td style="color: red;">-1.5%</td>
<td>7.0%</td>
</tr>
<tr>
<td class="firstcol">Cons Nondurable</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-0.6%</td>
<td style="color: red;">-2.6%</td>
<td style="color: red;">-1.3%</td>
<td style="color: red;">1.5%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>2.7%</td>
<td>0.9%</td>
<td>-2.1%</td>
<td>6.0%</td>
<td style="color: red;">3.0%</td>
<td style="color: red;">7.9%</td>
<td>11.3%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td style="color: red;">0.6%</td>
<td>1.9%</td>
<td>0.8%</td>
<td>14.1%</td>
<td>6.8%</td>
<td style="color: red;">6.2%</td>
<td>9.2%</td>
</tr>
<tr>
<td class="firstcol">All MFG Sales</td>
<td>1.3%</td>
<td>1.2%</td>
<td>-0.9%</td>
<td>6.7%</td>
<td style="color: red;">3.3%</td>
<td style="color: red;">5.6%</td>
<td>8.8%</td>
</tr>
</tbody>
</table>
</body></html>

Manufacturing orders were a little weaker at the start of the year than in the fourth quarter said the German ministry in a classic understatement of the facts. It noted, however, mitigating factors, such as a change in the tax [...]

German Orders Take Another Swing Lower

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080306c.jpg" width="353">
Factory inventories surged 1.3% in January and posted the strongest m/m increase since early 2005. It followed an upwardly revised 0.9% December increase. Together the gains lifted the three month annualized rate of increase to 12.0%, up sharply from last year&#39;s lows which were at or below 1.0% through the Summer.
Excluding the volatile transportation sector where the aircraft industry can have an outsized effect on the total figures, the story of accelerated inventory accumulation isn&#39;t much different. Inventories rose the same 1.3% in January, the December rise was revised up, and the three month rate of accumulation was 9.6%, up from slight decumulation early last year. Inventories in the civilian aircraft industry rose 3.7% during January and the three month rate of gain was 51.3%.
Total factory orders fell 2.5% during January, pulled lower by a 30.4% m/m decline in orders for civilian aircraft (+86.7% y/y). Less that decline and less the transportation sector altogether, orders fell a slight 0.4% after a 0.6% December gain. The three month rate of increase at 6.9% was down from the double digit rates of increase seen last year. January orders for durable goods fell 5.1%, about the same as the advance report of a 5.3% decline.
Factory shipments surged 1.1%, again influenced by a strong aircraft industry where shipments rose 11.7% (19.1% y/y). Excluding the transportation sector shipments rose 0.8% and the three month rate of growth of 9.2% was down by half from last year&#39;s peak rates of gain.
Overall unfilled orders rose 0.7% in January and the three month rate of increase was a hefty 18.6%. Shipments of civilian aircraft &amp; parts still can&#39;t keep pace with orders, therefore backlogs rose 1.4% after a 4.0% surge in December (45.0% y/y). Excluding the transportation sector altogether unfilled orders rose a lesser 0.4% during January and the three month average growth rate was a still firm 9.2% (AR).
Macroeconomic Interdependence and the International Role of the Dollar from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr316.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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS, %)</th>
<th scope="col">January</th>
<th scope="col">December</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">Inventories</td>
<td>1.3</td>
<td>0.9</td>
<td>5.0</td>
<td>3.7</td>
<td>6.4</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>1.3</td>
<td>0.5</td>
<td>4.0</td>
<td>2.5</td>
<td>7.1</td>
<td>8.0</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>-2.5</td>
<td>2.0</td>
<td>7.7</td>
<td>1.4</td>
<td>5.1</td>
<td>11.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>-0.4</td>
<td>0.6</td>
<td>8.0</td>
<td>1.2</td>
<td>5.4</td>
<td>11.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.1</td>
<td>-0.4</td>
<td>7.1</td>
<td>1.1</td>
<td>4.3</td>
<td>10.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding Transportation</td>
<td>0.8</td>
<td>-0.2</td>
<td>8.1</td>
<td>1.3</td>
<td>5.0</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>0.7</td>
<td>2.5</td>
<td>18.3</td>
<td>18.1</td>
<td>20.0</td>
<td>15.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Transportation</td>
<td>0.4</td>
<td>1.3</td>
<td>8.6</td>
<td>9.1</td>
<td>14.1</td>
<td>8.4</td>
</tr>
</tbody>
</table>
</body>
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Factory inventories surged 1.3% in January and posted the strongest m/m increase since early 2005. It followed an upwardly revised 0.9% December increase. Together the gains lifted the three month annualized rate of increase to 12.0%, [...]

U.S. Factory Inventory Gain Strong, Orders Reverse December Rise

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080306d.jpg" width="353">
The National Association of Realtors reported that the January level of pending sales of existing homes was unchanged from December. The reading contrasted slightly with Consensus expectations for a modest decline. The latest level also was unchanged from last year&#39;s low reached in August.
These figures are analogous to the new home sales data from the Commerce Dept. They measure existing home sales when the sales contract is signed, not at the time the sale is closed.
In contrast to the stability in overall sales, pending home sales in the Northeast continued to fall. The 4.1% m/m January decline was the sixth in the last seven months and sales were down 40.1% from the monthly peak early in 2005. Sales in the South also were quite weak in January and fell 6.1% m/m, the fourth down month in a row. Sales were off 35.5% from the 2005 peak.
Sales in the Midwest recently have shown some stability. They rose 0.6% in January and were up 7.4% from the low last August. Nevertheless, sales were one third lower than the 2004 peak. Out West sales recovered in January. The 13.0% rise was first m/m gain on record but sales were still 44.6% below the late 2005 peak.
The Realtors also indicated in an earlier report that the number of homes on the market and available for sale rose 5.5% (18.4% y/y) in January.
The pending home sales data are available in Haver&#39;s PREALTOR database and the number of homes on the market are in the REALTOR database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>85.9</td>
<td>&nbsp;85.9</td>
<td>&nbsp;&nbsp; -19.6%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>69.6</td>
<td>72.6</td>
<td>-28.0</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>85.2</td>
<td>84.7</td>
<td>-13.3</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>89.5</td>
<td>95.3</td>
<td>-23.8</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>93.8</td>
<td>83.0</td>
<td>-12.7</td>
<td>92.3</td>
<td>109.5</td>
<td>128.6</td>
</tr>
</tbody>
</table>
</body>
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The National Association of Realtors reported that the January level of pending sales of existing homes was unchanged from December. The reading contrasted slightly with Consensus expectations for a modest decline. The latest level [...]

U.S. Pending Home Sales Unchanged in January

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080306a.jpg" width="353">
Initial claims for unemployment insurance fell 24,900 to 351,000 last week. The decline reversed all of the 21,000 increase during the prior week which was revised to show a slightly stronger rise. During February claims averaged 359,000 (+6.3% y/y) per week, up 9.8% from the January average.
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. During the last ten years there has been a (negative) 76% correlation between the level of initial claims and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance continued their recent rise. A 29,000 increase during the latest week followed a 16,000 gain during the prior period which was revised down slightly. Insured unemployment stood at its highest level since Summer 2005. The figure provides some indication of workers&#39; ability to find employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080306b.jpg" width="353">
The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment remained at 2.1% for the fifth consecutive week.
The latest Beige Book from the Federal Reserve covering regional economic conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2008/20080305/fullreport20080305.pdf">here</a>.
An Expanded Look at Employment from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20080301/cover.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a>&nbsp;</th>
<th scope="col">03/01/08</th>
<th scope="col">02/23/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;351</td>
<td>375</td>
<td>7.3%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,831</td>
<td>12.3%</td>
<td>2,551</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
</body>
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Initial claims for unemployment insurance fell 24,900 to 351,000 last week. The decline reversed all of the 21,000 increase during the prior week which was revised to show a slightly stronger rise. During February claims averaged [...]

U.S. Weekly Jobless Insurance Claims Fell

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080306c.jpg" align="left" border="0" height="265" width="353">
Factory inventories surged 1.3% in January and posted the
strongest m/m increase since early 2005. It followed an upwardly
revised 0.9% December increase. Together the gains lifted the three
month annualized rate of increase to 12.0%, up sharply from last year's
lows which were at or below 1.0% through the Summer.
Excluding the volatile transportation sector where the
aircraft industry can have an outsized effect on the total figures, the
story of accelerated inventory accumulation isn't much different.
Inventories rose the same 1.3% in January, the December rise was
revised up, and the three month rate of accumulation was 9.6%, up from
slight decumulation early last year. Inventories in the civilian
aircraft industry rose 3.7% during January and the three month rate of
gain was 51.3%.
Total factory orders fell 2.5% during January, pulled lower by
a 30.4% m/m decline in orders for civilian aircraft (+86.7% y/y). Less
that decline and less the transportation sector altogether, orders fell
a slight 0.4% after a 0.6% December gain. The three month rate of
increase at 6.9% was down from the double digit rates of increase seen
last year. January orders for durable goods fell 5.1%, about the same
as the advance report of a 5.3% decline.
Factory shipments surged 1.1%, again influenced by a strong
aircraft industry where shipments rose 11.7% (19.1% y/y). Excluding the
transportation sector shipments rose 0.8% and the three month rate of
growth of 9.2% was down by half from last year's peak rates of gain.
Overall unfilled orders rose 0.7% in January and the three
month rate of increase was a hefty 18.6%. Shipments of civilian
aircraft &amp; parts still can't keep pace with orders, therefore
backlogs rose 1.4% after a 4.0% surge in December (45.0% y/y).
Excluding the transportation sector altogether unfilled orders rose a
lesser 0.4% during January and the three month average growth rate was
a still firm 9.2% (AR).
Macroeconomic Interdependence and the International
Role of the Dollar from the Federal Reserve Bank of New York
is available <a href="http://www.newyorkfed.org/research/staff_reports/sr316.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/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory
Survey</a> (NAICS, %)</th>
<th scope="col">January</th>
<th scope="col">December</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">Inventories</td>
<td>1.3</td>
<td>0.9</td>
<td>5.0</td>
<td>3.7</td>
<td>6.4</td>
<td>8.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>1.3</td>
<td>0.5</td>
<td>4.0</td>
<td>2.5</td>
<td>7.1</td>
<td>8.0</td>
</tr>
<tr class="odd">
<td class="firstcol">New Orders</td>
<td>-2.5</td>
<td>2.0</td>
<td>7.7</td>
<td>1.4</td>
<td>5.1</td>
<td>11.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>-0.4</td>
<td>0.6</td>
<td>8.0</td>
<td>1.2</td>
<td>5.4</td>
<td>11.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>1.1</td>
<td>-0.4</td>
<td>7.1</td>
<td>1.1</td>
<td>4.3</td>
<td>10.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Excluding
Transportation</td>
<td>0.8</td>
<td>-0.2</td>
<td>8.1</td>
<td>1.3</td>
<td>5.0</td>
<td>11.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unfilled Orders</td>
<td>0.7</td>
<td>2.5</td>
<td>18.3</td>
<td>18.1</td>
<td>20.0</td>
<td>15.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Transportation</td>
<td>0.4</td>
<td>1.3</td>
<td>8.6</td>
<td>9.1</td>
<td>14.1</td>
<td>8.4</td>
</tr>
</tbody>
</table>
U.S. Pending Home Sales Unchanged
in January 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 6, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080306d.jpg" align="left" border="0" height="265" width="353">
The National Association of Realtors reported that the January
level of pending sales of existing homes was unchanged from December.
The reading contrasted slightly with Consensus expectations for a
modest decline. The latest level also was unchanged from last year's
low reached in August.
These figures are analogous to the new home sales data from
the Commerce Dept. They measure existing home sales when the sales
contract is signed, not at the time the sale is closed.
In contrast to the stability in overall sales, pending home
sales in the Northeast continued to fall. The 4.1% m/m January decline
was the sixth in the last seven months and sales were down 40.1% from
the monthly peak early in 2005. Sales in the South also were quite weak
in January and fell 6.1% m/m, the fourth down month in a row. Sales
were off 35.5% from the 2005 peak.
Sales in the Midwest recently have shown some stability. They
rose 0.6% in January and were up 7.4% from the low last August.
Nevertheless, sales were one third lower than the 2004 peak. Out West
sales recovered in January. The 13.0% rise was first m/m gain on record
but sales were still 44.6% below the late 2005 peak.
The Realtors also indicated in an earlier report that the
number of homes on the market and available for sale rose 5.5% (18.4%
y/y) in January.
The pending home sales data are available in Haver's PREALTOR
database and the number of homes on the market are in the REALTOR
database.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Pending
Home Sales (2001=100)&nbsp;</a></th>
<th scope="col">January</th>
<th scope="col">December</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>85.9</td>
<td>&nbsp;85.9</td>
<td>&nbsp;&nbsp; -19.6%</td>
<td>95.7</td>
<td>112.1&nbsp;</td>
<td>124.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Northeast</td>
<td>69.6</td>
<td>72.6</td>
<td>-28.0</td>
<td>85.6</td>
<td>98.5</td>
<td>108.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Midwest</td>
<td>85.2</td>
<td>84.7</td>
<td>-13.3</td>
<td>89.6</td>
<td>102.0</td>
<td>116.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; South</td>
<td>89.5</td>
<td>95.3</td>
<td>-23.8</td>
<td>107.3</td>
<td>127.3</td>
<td>134.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; West</td>
<td>93.8</td>
<td>83.0</td>
<td>-12.7</td>
<td>92.3</td>
<td>109.5</td>
<td>128.6</td>
</tr>
</tbody>
</table>
U.S. Weekly Jobless Insurance
Claims Fell 
by <a href="/comment/Moeller.html">Tom
Moeller</a> March 6, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080306a.jpg" align="left" border="0" height="265" width="353">
Initial claims for unemployment insurance fell 24,900 to
351,000 last week. The decline reversed all of the 21,000 increase
during the prior week which was revised to show a slightly stronger
rise. During February claims averaged 359,000 (+6.3% y/y) per week, up
9.8% from the January average.
A claims level below 400,000 typically has been associated
with growth in nonfarm payrolls. During the last ten years there has
been a (negative) 76% correlation between the level of initial claims
and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance continued their
recent rise. A 29,000 increase during the latest week followed a 16,000
gain during the prior period which was revised down slightly. Insured
unemployment stood at its highest level since Summer 2005. The figure
provides some indication of workers' ability to find employment.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080306b.jpg" align="right" border="0" height="265" width="353">
The continuing claims numbers lag the initial claims figures
by one week.
The insured rate of unemployment remained at 2.1% for the
fifth consecutive week.
The latest Beige Book from the Federal
Reserve covering regional economic conditions can be found <a href="http://www.federalreserve.gov/fomc/beigebook/2008/20080305/fullreport20080305.pdf">here</a>.
An Expanded Look at Employment from the
Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/net/20080301/cover.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a>&nbsp;</th>
<th scope="col">03/01/08</th>
<th scope="col">02/23/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006&nbsp;</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;351</td>
<td>375</td>
<td>7.3%</td>
<td>322</td>
<td>313</td>
<td>331</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,831</td>
<td>12.3%</td>
<td>2,551</td>
<td>2,459</td>
<td>2,662</td>
</tr>
</tbody>
</table>
German Orders Take Another
SwingLower 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 6, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080306e.jpg" align="left" border="0">
Manufacturing orders were a little weaker at the start of the
year than in the fourth quarter said the German ministry in a classic
understatement of the facts. It noted, however, mitigating factors,
such as a change in the tax depreciation system at the start of 2008
that caused many domestic companies to pull their orders backward into
2007. Even with that pull back December orders fell. And the 2008
growth rate as of January 2008 compared to the Q4 base sees a 7.6%
annual rate of decline in Q1 2008. Domestic orders are shrinking at a
2.4% pace. But foreign orders, an area unaffected by the depreciation
rule in Germany, sees Q1 orders are off at a 12.3% annual pace.
German orders are being compressed. German domestic orders
peaked in September 2006 and have been declining irregularly ever
since. There was an order rebound in November and December of 2007 but
the down shift is again in train.
In Germany sales trends show declines for consumer durables
and nondurables. Sales of intermediate goods have seen resurgence while
capital goods sales continue to be quite firm and have recently
re-accelerated. This is a
continuation of the same story that sees the consumer sector weak and
capital goods remaining strong. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> German
Orders and Sales By Sector and Origin</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Real and SA</td>
<td colspan="3">% M/M</td>
<td colspan="4">% Saar</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</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>YrAgo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Orders</td>
<td>-1.5%</td>
<td>-1.1%</td>
<td>3.0%</td>
<td>1.2%</td>
<td style="color: red;">0.6%</td>
<td>9.6%</td>
<td>6.9%</td>
</tr>
<tr>
<td class="firstcol">Foreign</td>
<td>-1.3%</td>
<td>-2.5%</td>
<td>2.3%</td>
<td style="color: red;">-5.9%</td>
<td style="color: red;">-3.0%</td>
<td>13.3%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">Domestic</td>
<td>-1.9%</td>
<td>0.4%</td>
<td>3.7%</td>
<td>9.1%</td>
<td style="color: red;">4.5%</td>
<td style="color: red;">5.8%</td>
<td>8.1%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">Sector
Sales</td>
</tr>
<tr>
<td class="firstcol">MFG/Mining</td>
<td>1.4%</td>
<td>1.1%</td>
<td>-0.7%</td>
<td>7.3%</td>
<td style="color: red;">3.6%</td>
<td style="color: red;">5.9%</td>
<td>9.1%</td>
</tr>
<tr>
<td class="firstcol">Consumer</td>
<td style="color: red;">-0.5%</td>
<td>0.5%</td>
<td>-0.6%</td>
<td style="color: red;">-2.3%</td>
<td style="color: red;">-1.1%</td>
<td style="color: red;">1.1%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Cons Durables</td>
<td style="color: red;">-2.6%</td>
<td>2.8%</td>
<td>-0.2%</td>
<td style="color: red;">-0.4%</td>
<td>-0.2%</td>
<td style="color: red;">-1.5%</td>
<td>7.0%</td>
</tr>
<tr>
<td class="firstcol">Cons Nondurable</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-0.6%</td>
<td style="color: red;">-2.6%</td>
<td style="color: red;">-1.3%</td>
<td style="color: red;">1.5%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>2.7%</td>
<td>0.9%</td>
<td>-2.1%</td>
<td>6.0%</td>
<td style="color: red;">3.0%</td>
<td style="color: red;">7.9%</td>
<td>11.3%</td>
</tr>
<tr>
<td class="firstcol">Intermediate Goods</td>
<td style="color: red;">0.6%</td>
<td>1.9%</td>
<td>0.8%</td>
<td>14.1%</td>
<td>6.8%</td>
<td style="color: red;">6.2%</td>
<td>9.2%</td>
</tr>
<tr>
<td class="firstcol">All MFG Sales</td>
<td>1.3%</td>
<td>1.2%</td>
<td>-0.9%</td>
<td>6.7%</td>
<td style="color: red;">3.3%</td>
<td style="color: red;">5.6%</td>
<td>8.8%</td>
</tr>
</tbody>
</table>
Japan Economy Shows Weakening
Sectors and a Weakening Outlook 
by <a href="/comment/Brusca.html">Robert
Brusca</a> March 6, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080306f.jpg" align="left" border="0" height="265" width="353">
The Teikoku indices show a weakening Japan economy. Just today
Japan policymakers, commenting on the state of the economy, were saying
that it is weak and did not know if the word &#8216;recession&#8217; should be used
in connection with it. The
Teikoku index hit a five year low in January and has recovered slightly
in February. The NTC MFG index is also weak but not quite as weak as
the Teikoku MFG reading; it is not in the bottom 5 percent of its range
but in the bottom 30% of it.
The Teikoku outlook indices show that progressively greater
weakness is expected looking ahead. While each of these indexes, the
current, the 6-mo ahead and 12-mo ahead index, has fallen, each has
also made a small rebound in February. Up until now, Japan has taken a
mostly upbeat view of the economy. It took Japanese officials a long
time to downgrade the economy and its prospects. But the slide in the
economy is now undeniable. Still, like the US, we do not yet know how
far the economy will skid.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Key
Japanese Surveys</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Yr range*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
</tr>
<tr>
<td class="firstcol">NTC MFG</td>
<td>50.8</td>
<td>52.4</td>
<td>52.3</td>
<td>50.8</td>
<td>30.5%</td>
<td>47.4%</td>
<td>47.3%</td>
</tr>
<tr class="grey3">
<td colspan="8" class="firstcol">Econ
Trends (Teikoku'/50
neutral/weighted diffusion)</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>38.5</td>
<td>37.9</td>
<td>40.8</td>
<td>41.7</td>
<td>4.4%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>32.6</td>
<td>31.3</td>
<td>34.2</td>
<td>34.4</td>
<td>9.4%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>35.3</td>
<td>34.5</td>
<td>37.0</td>
<td>38.3</td>
<td>6.3%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>41.0</td>
<td>40.4</td>
<td>43.5</td>
<td>45.0</td>
<td>5.4%</td>
<td>0.0%</td>
<td>20.1%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>29.7</td>
<td>28.9</td>
<td>32.0</td>
<td>32.6</td>
<td>7.5%</td>
<td>0.0%</td>
<td>16.4%</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080305h.jpg" align="left" border="0" height="265" width="353">
Services in the Euro Area bounced back in February but the
index still resides in the lower portion of the range it has occupied
since May of 2000. The overall index stands in its 39th
percentile, about 10 percentage points below range mid-point. Germany
and France have two of the &#8216;stronger&#8217; service sector readings with
indexes that are near or above their range midpoints at 50% and 56%
respectively. Italy finds its service sector with the worst reading
since this survey was taken. Similarly Spain and Ireland are weak in
their range in the bottom 15 percentile or worse. The UK, an EU member
country, finds its service sector in the 54th
percentile. Its reading rose in February as well.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> NTC
Services Indexes for EU/EMU</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>3Mo</td>
<td>6Mo</td>
<td>12Mo</td>
<td>Percentile</td>
</tr>
<tr>
<td class="firstcol">Euro-13</td>
<td>52.25</td>
<td>50.56</td>
<td>51.98</td>
<td>53.35</td>
<td>55.54</td>
<td>39.9%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>52.17</td>
<td>49.17</td>
<td>50.86</td>
<td>52.31</td>
<td>55.32</td>
<td>50.2%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>58.15</td>
<td>56.60</td>
<td>57.88</td>
<td>58.01</td>
<td>58.35</td>
<td>56.0%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>47.15</td>
<td>47.86</td>
<td>48.24</td>
<td>50.77</td>
<td>53.47</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>46.13</td>
<td>44.24</td>
<td>47.12</td>
<td>49.48</td>
<td>52.42</td>
<td>11.7%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>48.27</td>
<td>51.90</td>
<td>51.23</td>
<td>52.96</td>
<td>55.19</td>
<td>14.6%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="7">EU
only</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>54.05</td>
<td>52.46</td>
<td>52.96</td>
<td>53.43</td>
<td>55.41</td>
<td>54.4%</td>
</tr>
<tr class="grey2">
<td colspan="7" class="firstcol">percentile
is over range since May
2000</td>
</tr>
</tbody>
</table>
</body></html>

Services in the Euro Area bounced back in February but the index still resides in the lower portion of the range it has occupied since May of 2000. The overall index stands in its 39th percentile, about 10 percentage points below [...]

EMU Services PMI Makes a Small Rebound in February

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080305g.jpg" align="left" border="0" height="265" width="353">
January Euro Area retail sales fell 1% in volume terms. Over
three months growth has slowed marginally and is clinging in real terms
to a 1% rate of growth. The volume of spending on food has picked up in
the recent three months after negative growth rates of six and 12
months despite climbing prices. The volume of spending on nonfood items
has steadily deteriorated: 12-month to 6-month to 3-month. This is matter of concern. Three of
four EU countries depicted in the table details show sales decelerating
in the recent three-month period. I say three since I include Italy
that only offers nominal figures. Once inflation is subtracted surely
Italy with nominal sales already so weak will add to the story of
retail weakness in EMU. France shows some resilience. The UK, while
showing some slowing, also shows some growth consumer is not about to
hold growth aloft in the Euro Area. The purchase plans plotted in the
chart underscore that fact of life.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="7" scope="col"> Euro
Area 15 Retail Sales Volume</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</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>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>0.4%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-1.1%</td>
<td>-1.4%</td>
<td>0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Food</td>
<td>0.6%</td>
<td>-0.5%</td>
<td>-0.7%</td>
<td>-2.8%</td>
<td>-1.4%</td>
<td>-0.9%</td>
</tr>
<tr>
<td class="firstcol">Nonfood</td>
<td>0.4%</td>
<td>0.0%</td>
<td>-0.4%</td>
<td>0.0%</td>
<td>-1.6%</td>
<td>0.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Textiles</td>
<td>#N/A</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-13.0%</td>
<td>-2.0%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">HH Goods</td>
<td>#N/A</td>
<td>0.6%</td>
<td>-0.8%</td>
<td>-2.7%</td>
<td>-2.6%</td>
<td>-2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Books news, etc</td>
<td>#N/A</td>
<td>-0.6%</td>
<td>0.1%</td>
<td>-1.2%</td>
<td>-1.7%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">Pharma</td>
<td>#N/A</td>
<td>0.1%</td>
<td>0.0%</td>
<td>2.2%</td>
<td>3.4%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Other Nonspecialized stores</td>
<td>#N/A</td>
<td>-0.2%</td>
<td>-0.6%</td>
<td>-3.0%</td>
<td>-2.1%</td>
<td>-2.1%</td>
</tr>
<tr>
<td class="firstcol">Mail Order</td>
<td>#N/A</td>
<td>2.8%</td>
<td>-1.3%</td>
<td>4.1%</td>
<td>1.0%</td>
<td>-1.2%</td>
</tr>
<tr class="grey4">
<td colspan="7" class="firstcol">Nonfood Country detail
(volume)</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.9%</td>
<td>-0.2%</td>
<td>-0.4%</td>
<td>1.3%</td>
<td>-4.0%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>-0.4%</td>
<td>1.1%</td>
<td>-0.3%</td>
<td>1.7%</td>
<td>2.0%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">Italy (Total; Value)</td>
<td>#N/A</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>0.4%</td>
<td>0.6%</td>
<td>0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">UK (EU)</td>
<td>1.2%</td>
<td>0.0%</td>
<td>0.5%</td>
<td>6.8%</td>
<td>5.6%</td>
<td>7.6%</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">Shaded areas
calculated on a
one-month lag due to lagging data.</td>
</tr>
<tr class="grey3">
<td colspan="7" class="firstcol">The EA 15
countries are Austria,
Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Malta, the Netherlands, Portugal, Slovenia and Spain.</td>
</tr>
</tbody>
</table>
</body></html>

January Euro Area retail sales fell 1% in volume terms. Over three months growth has slowed marginally and is clinging in real terms to a 1% rate of growth. The volume of spending on food has picked up in the recent three months after [...]

Retail Sales and Spending Plans in EMU: Deceleration

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

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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**.

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- 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

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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

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.

U.S. Housing Starts Plunged in May

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The ZEW diffusion survey (an up-minus-down survey) showed mixed improvements in the economic situation and improvements for macroeconomic expectations in June. The report shows the economic situation improving in the United States and China, with the euro area taking a small step back (to -43.4 in June from -41.4 in May), while Germany also saw a step back in the economic situation (to -81.0 from -77.8). The ranking metrics show the German reading as lower only 13.8% of the time—the weakest showing among the four. The EMU ranking is at a 36.7 percentile, with the U.S. ranking close to that at a 42.5 percentile. China has a 76.2 percentile ranking over a shorter timeline.

Macro expectations show solid improvements reported in Germany, the U.S., and China. Macroeconomic rankings all are muted, with the U.S. at a 39.9 percentile standing as the strongest, followed by Germany at a 35.2 percentile standing and China at a 22.2 percentile standing.

Inflation expectations are still high across the board, ranging from a low percentile standing for the EMU, Germany, and China—from a euro area low of 78.6 to a high standing for this group at 85.7 for China. In contrast, the U.S. ranking is still high, but only at its 61.8 percentile. And all the inflation expectations readings fell in June as optimism on opening the Strait of Hormuz has been growing. 

Nonetheless, expectations for short-term rates have been rising. They rose solidly in the EMU and China, and strongly in the U.S., from 10.5 in May to 38.5 in June.

In contrast, long-term rate expectations rose across the board as well but by modest amounts. The rankings for short-term expectations are stronger for all three countries compared to the ranking on long-term rate expectations. I suppose we can understand that as expectations of anti-inflation medicine.

Stock markets are assessed as higher month-to-month in the EMU and in all three countries. China has a strong ranking for its stock market assessment at its 81st percentile. The U.S. standing is above its median at its 51.5 percentile; the euro area expectation is at its 34.2 percentile, with German stock market expectations still weak at its 23.6 percentile.

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The pending conflict-ending deal in the Middle East should be a catalyst for further improvement. While the U.S.-Iran deal is not yet announced in detail—or even signed—market reactions are clear-cut across the board; there is no sign that this deal is expected to wither so soon. But it still has issues and contentious elements, such as Iran’s nuclear ambitions and the fact that the Israel is not on board with what it regards as a too-early exit from hostilities. Israel wants regime change and warns of a more difficult future without one.

Economy in Brief

Jump to:

Japan Economy Shows Weakening Sectors and a Weakening Outlook

German Orders Take Another Swing Lower

U.S. Factory Inventory Gain Strong, Orders Reverse December Rise

U.S. Pending Home Sales Unchanged in January

U.S. Weekly Jobless Insurance Claims Fell

U.S. Factory Inventory Gain Strong, Orders Reverse December Rise

EMU Services PMI Makes a Small Rebound in February

Retail Sales and Spending Plans in EMU: Deceleration