Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080227b.jpg" width="353">
During January new single family home sales fell 2.8% m/m to 588,000. The decline dropped sales to the lowest level since 1995 and they were down 57.7% since the peak in July of 2005. A sales rate of 600,000 was the Consensus expectation for last month and January sales were nearly one quarter below the 2007 average.
Reflecting the weakness in the auto industry, sales in the Midwest fell 7.6% m/m to a level 71.5% below the 2003 peak. In the West sales actually ticked up slightly m/m in January but remained down 67.4% from the 2005 peak.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080227a.jpg" width="353">
December sales in the South fell by 2.4% and were 53.9% below the 2005 peak. Sales in the Northeast fell 10.3% m/m and were 50% below the 2004 monthly peak.
The median price for a new single family home fell again last month by 1.5%. That left prices down 17.7% from early 2007 peak.
The inventory of new homes for sale declined 2.2% last month and the supply of homes is off 15.9% from the 2005 peak.
The decline in the number of homes for sale continued to not keep pace with the drop in home sales. At the current low sales rate, the 9.9 months&#39; supply of homes on the market was more than double the rate for all of 2005 and it was the highest since 1981.<div align="left"><div align="left">
Today&#39;s testimony by Federal Reserve Board Chairman Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20080227a.htm"> here</a>.</div><div align="left"></div></div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">US New Homes</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>
<td class="firstcol">Total Sales (SAAR, 000s)</td>
<td>588</td>
<td>605</td>
<td>-33.9%</td>
<td>773</td>
<td>1,049</td>
<td>1,279</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA, $)</td>
<td>216,000</td>
<td>219,200</td>
<td>-15.1%</td>
<td>242,383</td>
<td>243,067</td>
<td>234,208</td>
</tr>
</tbody>
</table>
</body>
</html>

During January new single family home sales fell 2.8% m/m to 588,000. The decline dropped sales to the lowest level since 1995 and they were down 57.7% since the peak in July of 2005. A sales rate of 600,000 was the Consensus [...]

US New Home Sales Off 57.7%, Midwest Sales Down 71.5%

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080226i.jpg" width="353">
Germany&#39;s business confidence rose, if only slightly, for the second month in a row. The IFO Business Climate Index for industry and trade rose 0.7% in February to 104.1 (2000=100) after having risen 0.4% in January. The increase in confidence among members of the business community follows an unexpected increase in confidence in the financial community earlier this month as reported by the Centre for European Economic Research (ZEW).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080226j.jpg" width="353">
In both cases the increase in confidence was due more to a more positive appraisal of current economic conditions that offset a slight deterioration in expectations. The first chart shows the IFO Business Climate Index and its two major components: the appraisal of current conditions and expectations of condition six months ahead.
Among the data released today* are diffusion indexes for the Business Climate for the Manufacturing, Construction, Wholesale and Retail Trade businesses, which are shown in the second chart. The most striking feature of this chart is the positive 18.8 percentage point change in confidence in the retail trade sector. Although the February survey shows only a 1.3% excess of optimists over pessimists in retail trade, this is the first excess of optimists since the early nineties. How much of the change was due to the appraisal of current conditions and/or to expectations will be answered later this week.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GERMAN BUSINESS CONFIDENCE (IFO)&nbsp;</th>
<th scope="col">Feb 08</th>
<th scope="col">Jan 08&nbsp;</th>
<th scope="col">Feb 07&nbsp;</th>
<th scope="col">M/M&nbsp; Chg&nbsp;</th>
<th scope="col">Y/Y Chg&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Business Climate (2000=100)</td>
<td>104.1</td>
<td>103.4</td>
<td>107.0</td>
<td>0.68</td>
<td>-2.71</td>
<td>103.2</td>
<td>106.5</td>
<td>95.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions&nbsp;</td>
<td>110.3</td>
<td>107.9</td>
<td>111.5</td>
<td>2.22</td>
<td>-1.08</td>
<td>111.2</td>
<td>108.4</td>
<td>94.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Expectations</td>
<td>98.2</td>
<td>99.0</td>
<td>102.7</td>
<td>-0.81</td>
<td>-4.38</td>
<td>101.4</td>
<td>102.7</td>
<td>96.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Business Climate (Percent Balance)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>16.3</td>
<td>17.4</td>
<td>23.0</td>
<td>-1.1</td>
<td>-6.8</td>
<td>22.3</td>
<td>19.7</td>
<td>1.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td>-24.9</td>
<td>-16.9</td>
<td>-11.8</td>
<td>-8.0</td>
<td>-13.1</td>
<td>-16.2</td>
<td>-15.8</td>
<td>-37.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale Trade</td>
<td>5.8</td>
<td>3.2</td>
<td>16.0</td>
<td>2.6</td>
<td>-10.2</td>
<td>11.0</td>
<td>11.6</td>
<td>-9.8</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;&nbsp; Retail Trade</td>
<td>1.3</td>
<td>-17.5</td>
<td>-7.8</td>
<td>18.8</td>
<td>9.1</td>
<td>-6.6</td>
<td>-6.1</td>
<td>-28.0</td>
</tr>
</tbody>
</table>
</body>
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Germany's business confidence rose, if only slightly, for the second month in a row. The IFO Business Climate Index for industry and trade rose 0.7% in February to 104.1 (2000=100) after having risen 0.4% in January. The increase in [...]

German Business Confidence Improves--A Big Increase In Confidence In Retail Trade

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080226k.jpg" align="left" border="0" height="265" width="353">
Italy&#8217;s Business Confidence Indicator by ISAE is still
dropping but not at the sort of speed that we saw in 1998 or in 2000.
The downward gradient is steep enough to worry about but not as
uncontrolled as in some recent past episodes. Indeed, we plot the index
on a two-scale chart that suggests that period of weakening may be
coming to an end. On this chart we see that rate of change lags behind
the index (of necessity) and that when it stops worsening, that is a
sign that the index itself may be near its bottom. In 1998, both the
rate of change and the index itself bottomed at the same time. In 2001
the rate of change and the index were separated but both paused before
falling and consolidating late in the year. What we see now is that the
raw index is still falling but the speed of the drop is not
accelerating and that is a constructive development.
Beyond the overall index and its behavior, there are its
merits; its details: The survey across total industries and its
components show that every component across the main industry sectors
is now barely at or below its own midpoint (since January 1999) except
for the reading on inventories. Inventories remain high. Overall orders
are in the 38th percentile of their range, roughly the same for both
domestic and foreign components.
The consumer goods sector is the weakest. Total orders are in
their 13th percentile only. Domestic orders are
the relative weakest, in their 11th percentile.
Foreign orders are just above the bottom third of their range.
Inventories are in the top third of their range. And production is in
the 13th percentile of its range - in some sense
balanced with orders.
Italy is seeing weakness across industry. Business morale is
poor. For now, the good news is that the deterioration is not
accelerating.
<div align="left"> </div>



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="7" scope="col"> Italy ISAE Business Sentiment</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td colspan="2">Since January 1999</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Feb-08</td>
<td>Jan-08</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Percentile</td>
<td>Rank</td>
</tr>
<tr class="odd">
<td class="firstcol">Biz Confidence</td>
<td>89.8</td>
<td>91.3</td>
<td>91.7</td>
<td>92.2</td>
<td>43.7</td>
<td>68</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="7">TOTAL INDUSTRY</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="7">Order books &amp;
Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-13</td>
<td>-8</td>
<td>-6</td>
<td>-7</td>
<td style="color: red;">38.1</td>
<td>54</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-16</td>
<td>-15</td>
<td>-9</td>
<td>-11</td>
<td style="color: red;">35.7</td>
<td>62</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-17</td>
<td>-11</td>
<td>-6</td>
<td>-9</td>
<td style="color: red;">36.4</td>
<td>53</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>5</td>
<td>5</td>
<td>6</td>
<td>6</td>
<td>66.7</td>
<td>51</td>
</tr>
<tr class="odd">
<td class="firstcol">Production</td>
<td>-13</td>
<td>-12</td>
<td>-4</td>
<td>-4</td>
<td style="color: red;">28.6</td>
<td>75</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="7">INTERMEDIATE</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="7">Order books &amp;
Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-14</td>
<td>-13</td>
<td>-13</td>
<td>-11</td>
<td style="color: red;">40.0</td>
<td>56</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-14</td>
<td>-17</td>
<td>-15</td>
<td>-12</td>
<td style="color: red;">43.4</td>
<td>49</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-21</td>
<td>-13</td>
<td>-13</td>
<td>-10</td>
<td style="color: red;">33.9</td>
<td>70</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>4</td>
<td>3</td>
<td>6</td>
<td>7</td>
<td>65.5</td>
<td>29</td>
</tr>
<tr class="odd">
<td class="firstcol">Production</td>
<td>-13</td>
<td>-14</td>
<td>-11</td>
<td>-5</td>
<td style="color: red;">31.0</td>
<td>64</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="7">INVESTMENT GOODS</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="7">Order books &amp;
Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-4</td>
<td>1</td>
<td>4</td>
<td>4</td>
<td>50.7</td>
<td>42</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-8</td>
<td>-5</td>
<td>0</td>
<td>-6</td>
<td>50.7</td>
<td>39</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-8</td>
<td>-1</td>
<td>2</td>
<td>-1</td>
<td style="color: red;">44.6</td>
<td>46</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>6</td>
<td>4</td>
<td>3</td>
<td>6</td>
<td>62.2</td>
<td>34</td>
</tr>
<tr class="odd">
<td class="firstcol">Production</td>
<td>-4</td>
<td>-1</td>
<td>6</td>
<td>5</td>
<td style="color: red;">40.9</td>
<td>46</td>
</tr>
<tr class="even">
<td class="firstcol" colspan="7">CONSUMER GOODS</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="7">Order books &amp;
Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-23</td>
<td>-18</td>
<td>-5</td>
<td>-10</td>
<td style="color: red;">13.6</td>
<td>93</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>-24</td>
<td>-21</td>
<td>-8</td>
<td>-15</td>
<td style="color: red;">11.1</td>
<td>90</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>-18</td>
<td>-24</td>
<td>-11</td>
<td>-15</td>
<td style="color: red;">36.2</td>
<td>57</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>6</td>
<td>6</td>
<td>5</td>
<td>8</td>
<td>65.4</td>
<td>47</td>
</tr>
<tr class="odd">
<td class="firstcol">Production</td>
<td>-20</td>
<td>-17</td>
<td>-2</td>
<td>-8</td>
<td style="color: red;">13.9</td>
<td>95</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="7">Total number of months: 110</td>
</tr>
</tbody>
</table>
</body></html>

Italy’s Business Confidence Indicator by ISAE is still dropping but not at the sort of speed that we saw in 1998 or in 2000. The downward gradient is steep enough to worry about but not as uncontrolled as in some recent past episodes. [...]

Italy’s Business Morale is Still Sinking

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080212a.jpg" align="left" border="0" height="265" width="353">
According to the International Council of Shopping Centers
ICSC-UBS Chain store survey, chain store sales rose 0.5% last week
after no change during the prior period. Sales so far this month are up
0.5% from January after a 1.3% gain during that period.

During the last ten years there has been a 45% correlation
between the y/y change in chain store sales and the change in nonauto
retail sales less gasoline.

The ICSC-UBS retail
chain-store sales index is constructed using the same-store sales
(stores open for one year) reported by 78 stores of seven retailers:
Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.


The leading indicator of chain store sales from ICSC-UBS fell
0.7% two weeks ago. It as the fifth decline in the last six weeks.
Retail gasoline prices recently moved further off the high
reached last Spring of over $3.20 per gallon, according to the US
Department of Energy survey.Last week the average retail price for
regular grade gasoline fell to $2.96, down 8.0% from last year's peak
in May. Prices did, however, remain up nearly 6% from an average of
$2.80 last year.
The recent decline in gasoline prices owes mostly to the
topping and decline in the price of crude oil. For spot WTI crude oil
prices last week of $88.42 per barrel were down 10% from last year's
high which nearly touched $100 per barrel.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">02/23/08</th>
<th scope="col">02/16/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>489.9</td>
<td>487.4</td>
<td>2.3%</td>
<td>2.8%</td>
<td>3.3%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">02/25/08</th>
<th scope="col">02/18/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Gasoline ($ per Gallon)</td>
<td>3.13</td>
<td>3.04</td>
<td>31.3%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>--</td>
<td>100.01</td>
<td>72.2%</td>
<td>94.00</td>
<td>61.11</td>
<td>58.16</td>
</tr>
</tbody>
</table>
</body></html>

According to the International Council of Shopping Centers ICSC-UBS Chain store survey, chain store sales rose 0.5% last week after no change during the prior period. Sales so far this month are up 0.5% from January after a 1.3% gain [...]

U.S. Chain Store Sales Up, Gasoline Prices Surged

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080226g.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080226h.jpg" height="265" width="312">
The Conference Board reported today that consumer confidence
plummeted this month. The 14.1% m/m decline to a reading of 75.0 was
the largest m/m give back since September of 2005 and it dropped the
level to its lowest since early 2003. A consensus of economists foresaw
less of a decline to a level of 82.
A decline in the expectations component accounted for much of
last month's decline in overall confidence. The 16.5% m/m drop followed
an 8.6% January decline and lowered the expectations component to its
lowest since early 1991. Expectations for business conditions
dropped to a 36 year low while expectations for employment dropped to
the lowest since 1980. 
Respondents planning to buy an automobile within the next six
months plummeted but plans to buy an appliance rose.
The present conditions index fell a somewhat lesser 12.0% m/m
to the lowest level since late 2004. Just 18.5% of respondents saw
business conditions as good, near the least since 2004. Jobs as
plentiful were seen by 18.6% while 23.8% saw them as hard to get. 
The expected inflation rate in twelve months was stable m/m at
5.3% but that still was up from the 5.1% expected rate during 2006 and
2007.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">Conference
Board &nbsp;(SA, 1985=100)</th>
<th scope="col">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">Consumer
Confidence Index</td>
<td>75.0</td>
<td>87.3</td>
<td>-32.6%</td>
<td>103.4</td>
<td>105.9</td>
<td>100.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;
Present Conditions</td>
<td>100.6</td>
<td>114.3</td>
<td>-26.6%</td>
<td>128.8</td>
<td>130.2</td>
<td>116.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;
Expectations</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

The Conference Board reported today that consumer confidence plummeted this month. The 14.1% m/m decline to a reading of 75.0 was the largest m/m give back since September of 2005 and it dropped the level to its lowest since early [...]

Consumer Confidence Plummet, Expectations the Dreariest

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Week to week, retail gasoline prices rose nearly a dime per
gallon to $3.13 per gallon, according to the US Department of Energy
survey. The retail price for regular grade gasoline was its highest
since early last June. This week, a rise in wholesale gasoline prices
portend further gains in the retail price.
The price for a barrel of WTI crude oil broke just over $100.
This week crude prices have backed off but just slightly to $99.41 per
barrel.
Natural gas prices were strong last week. They rose nearly
$1.00 per mmbtu from the January average due to colder Winter
temperatures.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080226e.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080226f.jpg" height="265" width="312">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">02/25/08</th>
<th scope="col">02/18/08</th>
<th scope="col">Y/Y</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Gasoline ($ per Gallon)</td>
<td>3.13</td>
<td>3.04</td>
<td>31.3%</td>
<td>2.80</td>
<td>2.57</td>
<td>2.27</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>--</td>
<td>100.01</td>
<td>72.2%</td>
<td>94.00</td>
<td>61.11</td>
<td>58.16</td>
</tr>
</tbody>
</table>
</body></html>

Week to week, retail gasoline prices rose nearly a dime per gallon to $3.13 per gallon, according to the US Department of Energy survey. The retail price for regular grade gasoline was its highest since early last June. This week, a [...]

Gasoline Prices Surged, Crude Oil Crested $100

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080226d.jpg" align="left" border="0" height="265" width="353">
According to the S&amp;P/Case-Shiller
Composite 20 home price index, U.S. home prices fell
2.1% m/m in December and repeated the prior months' decline. Home
prices have fallen in every month since July of 2006 and the total
decline over that period amounts to 10.5%. Prices were down 9.1% y/y.
The index of 20 U.S. cities and their surrounding areas is not
adjusted for the quality or the size of the home. The home price index
from the Office of Federal Housing Enterprise Oversight (OFHEO) does
make these adjustments. This series indicates that through the third
quarter home prices still were rising, but at a reduced 1.8% y/y rate.
The composite index of homes in 10 metropolitan areas fell
2.3% (-9.8% y/y) last month.
Home prices in San Diego California continued quite weak and
fell 15.0% y/y. Prices in Miami Florida also are down a sharp 17.5%
y/y. Home prices in Las Vegas Nevada also were on the list of very weak
home prices and fell 15.3% y/y while in Los Angeles prices fell 13.7%
y/y.
Relatively moderate declines were registered in New York
(-5.6% y/y), Chicago (-4.5% y/y) and Denver, also down 4.5% y/y.
An overview of the S&amp;P/Case-Shiller home price series
can be found <a href="http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html">here</a>.
The S&amp;P/Case-Shiller home price series can be found in
Haver's REGIONAL database.
Bubble, Bubble, Toil, and Trouble is a 2007
article from the Federal Reserve Bank of Chicago and it can be found <a href="http://www.chicagofed.org/publications/economicperspectives/ep_1qtr2007_part2_haines_rosen.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">S&amp;P/Case-Shiller
Home Price Index (NSA, Jan 00 = 100)</th>
<th scope="col">December</th>
<th scope="col">November</th>
<th scope="col">Y/Y</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">20 City Composite
Index</td>
<td>184.86</td>
<td>188.92</td>
<td>-9.1%</td>
<td>-3.9%</td>
<td>7.6%</td>
<td>15.8%</td>
</tr>
</tbody>
</table>
</body></html>

According to the S&P/Case-Shiller Composite 20 home price index, U.S. home prices fell 2.1% m/m in December and repeated the prior months' decline. Home prices have fallen in every month since July of 2006 and the total decline over [...]

Case-Shiller Home Price Index Lowest Since 2005

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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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

Sandy Batten

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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.

ZEW Shows Mixed Conditions and an Expectations Rebound

Winnie Tapasanun

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Industrial production (IP) increased a less-than-expected 0.1% m/m in May, the third monthly gain in four months, following an upwardly revised 0.9% rise in April (+0.7% initially) and a 0.3% decline in March (unrevised), according to data from the Federal Reserve Board. A 0.3% m/m May increase had been expected in the Action Economics Forecast Survey. The year-on-year rate accelerated to 1.7% in May, the highest since January, from 1.4% in April (0.3% in May 2025). The May IP index at 102.6 was 3.3% above a low of 99.3 in November 2024 and 3.4% above a low of 99.2 in January 2024.

By **industry groups**, manufacturing production was essentially unchanged m/m (+1.4% y/y) in May after upwardly revised gains of 0.7% in April (+0.6% initially) and 0.2% in March (+0.1% previously). Durable goods production rose 0.8% (3.2% y/y) in May, the fourth m/m rise in five months, after a 1.1% increase in April. Within durables, almost all categories rose m/m in May, led by a 2.3% gain (-2.0% y/y) in wood products, followed by increases of 1.8% (3.1% y/y) in nonmetallic mineral products, 1.3% (4.4% y/y) in primary metals, 1.2% (-1.7% y/y) in motor vehicles & parts, 1.0% (-4.5% y/y) in furniture & related products, 0.9% (10.3% y/y) in computer & electronic products, 0.8% (2.5% y/y) in fabricated metal products, 0.5% (6.9% y/y) in aerospace & miscellaneous transportation equipment, 0.5% (2.7% y/y) in electrical equipment, appliances & components, and 0.2% (4.3% y/y) in machinery. Notably, aircraft & parts production climbed 1.1% (11.7% y/y), the fourth consecutive m/m rise, after a 2.6% April gain. Meanwhile, miscellaneous durable goods were virtually unchanged m/m (+0.9% y/y) in May following a 0.8% decline in April.

Nondurable goods production slid 0.9% (-0.6% y/y) in May, the first m/m slide since January, after a 0.3% increase in April. The May output decline was led by a 3.0% drop (-1.1% y/y) in petroleum & coal products, followed by decreases of 2.4% (-4.1% y/y) in textiles & product mills, 1.6% (-2.3% y/y) in printing & related support activities, 0.8% (0.0% y/y) in chemicals, 0.8% (-3.0% y/y) in paper, 0.5% (-0.4% y/y) in food, beverages & tobacco, and 0.3% (-0.2% y/y) in plastics & rubber products. In contrast, apparel & leather goods—the only rising category—recovered 2.4% (-0.1% y/y) in May following two successive m/m declines.

Mining activity advanced 1.3% (2.0% y/y) in May, the fourth m/m gain in five months, after a 0.2% increase in April (-0.1% initially). Utilities output, however, fell 0.4% (+3.1% y/y) following a 2.2% April rebound (+1.9% initially), reflecting a 1.7% drop (+1.8% y/y) in electric utilities output and an 8.5% rise (12.5% y/y) in natural gas utilities output.

By **market groups**, construction supplies production increased 1.1% (2.3% y/y) in May, up for the second time in three months, reversing a 0.3% decline in April. Business equipment output rose 0.6% (5.7% y/y), the fifth m/m rise in six months, following a 1.8% April gain. Materials production grew 0.3% (1.9% y/y), the third m/m increase in four months, after a 0.7% April rise. In contrast, consumer goods output fell 0.5% (-0.6% y/y) after a 1.2% April rebound, reflecting a 0.5% increase (-3.0% y/y) in durable consumer goods and a 0.8% decrease (+0.1% y/y) in nondurable consumer goods.

In **special classifications**, factory output of selected high-tech industries rose 1.8% (12.6% y/y) in May on top of an upwardly revised 2.2% rise in April (+1.0% initially)—marking the third straight m/m gain and the seventh in eight months. Manufacturing production excluding selected high-tech industries held steady m/m (+1.1% y/y) in May after a 0.7% increase in April, while manufacturing production excluding selected high-tech and motor vehicles & parts dipped 0.1% (+1.3% y/y) following a 0.5% April rise.

Capacity utilization inched up to 76.2% in May, the highest since July 2025, from 76.1% in April (unrevised). The result matched the forecast by the Action Economics Forecast Survey. The May reading was 3.2 percentage points below its long-run (1972–2025) average. Manufacturing capacity utilization held at 75.7% in May and April (75.8% previously), the highest since September 2025; the May rate was 2.5 percentage points below its long-run average.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.

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- May IP +0.1% (+1.7% y/y), third m/m increase in four months, led by a 1.3% gain in mining.
- Manufacturing unchanged (+1.4% y/y), w/ durables +0.8% and nondurables -0.9%.
- Selected high-tech +1.8%, third straight m/m rise; motor vehicles +1.2%, fifth gain in six mths.
- Utilities -0.4%, led by a 1.7% drop in electric utilities output.
- Key categories in market groups mostly up.
- Capacity utilization up to a 10-month-high 76.2%; mfg. capacity utilization steady at 75.7%.

U.S. Industrial Production Up Marginally in May; Manufacturing Flat

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The economy watchers survey, along with other surveys, was doing fine until about March in the wake of the Iran war and the closing of the Strait of Hormuz. With that action, the economy watchers index dove sharply from a level of 48.9 in February to 42.2 in March and slipped further to 40.8 in April. The various sector gauges for the retail sector, eating & drinking places, the service sector, and employment are all lower. The only improvement in April came from the future index, where there was some minor optimism about the potential for conditions to improve ahead. And, of course, over the weekend, there is the announcement of a U.S.-Iran deal to end the hostilities between the two countries. That is expected to be signed on Friday and then will put the war into a pause phase for the next 60 days, with the hope that the two sides can come to agreement on some of the stickier elements, including Iran's access to nuclear materials, which has yet to be hammered out.

That omission makes the announcement of this arrangement as a conflict ending deal hugely speculative. Another sticking point is that Israel is not on board and is still engaged in fighting with Hezbollah.

The Teikoku survey, another survey using diffusion indexes that describes Japanese sectors, weakened sharply in March and weakened across the board again in April. Manufacturing, retailing, wholesaling, services, and construction sectors all are posting weaker numbers in April than in March.

The percentile rankings for the economy watchers survey and the Teikoku surveys are both very weak, with the economy watchers standings in the 10th percentile range or lower; the Teikoku rankings are generally higher, around the 30th percentile or perhaps as low as the 20th percentile, as seen in construction. These are still very weak readings. All the raw diffusion readings are below 50, indicating contraction.

The sector indexes from METI on manufacturing and services, which both weakened in March, rebounded in April; in both cases, the April readings were above the February readings. Standings of these indexes based on growth rates are around the 80th percentile; at the 79th percentile for industry and at the 82.5 percentile for the tertiary or services index. Based on the value of the index itself, the tertiary index has a standing at its 98.9 percentile, which we would expect over time for an index that simply grows, as is the case for the METI indexes that are not diffusion indexes. However, the industrial index for Japan has only a 19.9 percentile standing, indicating the stress that Japan's industrial sector has been through, although the current ranking based on the growth rate shows that there is some recovery in progress. The industry level index is 6.3% below its January 2020 level, while the tertiary index is 3.1% above its January 2020 level.

The leading economic index has continued to rise during all these times. It rose in February compared to January, and it rose again in March compared to February; now in April compared to March, it was up again to 115.9, from the March reading of 115.4. Based on year-over-year growth, the leading economic index has a 95.1 percentile standing, which is relatively strong. Based on the index level, we get another strong reading at the 93.2 percentile mark. The leading index is also up 12.9% from its January 2020 level.

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The report of a deal to end the U.S. embargo of Iran and open the Strait of Hormuz without tolls is potentially a real gamechanger for the economic outlook. However, the deal still had pieces to be negotiated, and I, for one, am very wary since we know Iran wants to have nuclear access and the U.S. wants to block it. I just don’t see what a 60-day cooling period for negotiation will do. It will push the U.S. closer to midterm elections and make Trump less willing to engage in conflict with Iran, which is likely to remain intransigent on this issue of nuclear access. I view this as the eye of a hurricane, a period in which there will be calm, with the potential for a reset of confrontation down the road, say 60 days on.

Economy in Brief

Jump to:

US New Home Sales Off 57.7%, Midwest Sales Down 71.5%

US New Home Sales Off 57.7%, Midwest Sales Down 71.5%

German Business Confidence Improves--A Big Increase In Confidence In Retail Trade

Italy’s Business Morale is Still Sinking

U.S. Chain Store Sales Up, Gasoline Prices Surged

Consumer Confidence Plummet, Expectations the Dreariest

Gasoline Prices Surged, Crude Oil Crested $100

Case-Shiller Home Price Index Lowest Since 2005