Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222f.jpg" align="left" border="0" height="265" width="353">
EMU PMIs show continued weakness. 
 

The EMU PMIs were weak in February. The MFG index fell further
while the services barometer, already very weak, edged higher. The MFG
index is in the 12th percentile of its range over 24 months. Services
reside in the bottom 2 percent of their range.The MFG indexes have been
slipping since mid-2006. They fell to a lower plateau in early 2007
then fell sharply again as 2007 drew to a close. MFG has steadied above
its lowest pace around a MFG reading of 52.The service sector has
weakened on roughly the same profile except it did not rebound and
steady above its low as 2008 began. Services have made a small rebound
in February but continue to cling near the lower reaches of its 24
month range. Europe is continuing to look weak despite this small
up-tick in February.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="3" class="firstcol">NTC
PMIs for the Euro Area</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Feb-08</td>
<td>52.25</td>
<td>52.25</td>
</tr>
<tr>
<td class="firstcol">Jan-08</td>
<td>52.60</td>
<td>52.01</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>52.44</td>
<td>52.50</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>52.43</td>
<td>53.47</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>53.73</td>
<td>55.51</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">24-Mo Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>51.46</td>
<td>52.01</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>12.8%</td>
<td>2.6%</td>
</tr>
</tbody>
</table>
</body></html>

EMU PMIs show continued weakness. The EMU PMIs were weak in February. The MFG index fell further while the services barometer, already very weak, edged higher. The MFG index is in the 12th percentile of its range over 24 months. [...]

EMU Flash PMIs are Weak; Especially for Services

Tom Moeller

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<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222c.jpg" width="353">
During 4Q 2007, the Federal Reserve Board Reported that the delinquency rate on all consumer loan &amp; leases jumped to 2.49% from 2.13% during the third quarter. The latest reading was the highest since early 2003, but that performance masks some the real troubles being had in making payments.
The dollar value of these loans totaled a record $170 billion last quarter, more than double the level at the recent low during 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222d.jpg" width="353">
Driving the rise were delinquent payments on residential real estate loans. Delinquent payments on residential real estate loans surged to 3.09% of the loans extended. The current rate is the highest since 1991. Delinquencies on commercial real estate loans, which had been relatively current, jumped. The rate of 2.71% was the highest since late 1996 with a delinquency rate of 2.71%.
The dollar value of those delinquent residential real estate loans jumped to $68.4 billion (+71.2% y/y), more than four times the level ten years ago and 40% of the dollar value of late payments on banks&#39; books.
Delinquent payments on consumer loans also rose sharply to a 3.39% rate versus 3.13% for the full year 2007. Delinquent payments on credit card debt rose to 4.55%, 4.25% for the whole year. The rise for credit card debt was larger from the low of 3.52% late in 2005.End of the Credit Line is a 2006 article from the Federal Reserve Bank of Minneapolis and it can be found <a href="http://www.minneapolisfed.org/pubs/fedgaz/06-07/credit.cfm"> here</a>.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222e.jpg" width="353">
The dollar value of those delinquent credit card payments amounted to $17.4 brillion, nearly triple the low in 1993.
Delinquencies on C&amp;I loans rose slightly q/q to 1.35% from 1.23% during 3Q, up slightly from 2006 but down from years prior.The dollar values of these loans amounted to $18.1 trillion during 4Q, up by more than one third from one year prior.
These data series are available in Haver&#39;s USECON database.
Another Widow: The Term Auction Facility from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/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">Loan Delinquency Rate (%)</th>
<th scope="col">4Q &#39;07</th>
<th scope="col">3Q &#39;07</th>
<th scope="col">4Q &#39;06</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Loan &amp; Leases</td>
<td>2.49</td>
<td>2.13</td>
<td>1.68</td>
<td>2.06</td>
<td>1.57</td>
<td>1.56</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Loans</td>
<td>3.39</td>
<td>3.17</td>
<td>2.93</td>
<td>3.13</td>
<td>2.90</td>
<td>2.81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Credit Cards</td>
<td>4.55</td>
<td>4.34</td>
<td>3.92</td>
<td>4.25</td>
<td>4.01</td>
<td>3.70</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Real Estate Loans</td>
<td>2.88</td>
<td>2.40</td>
<td>1.67</td>
<td>2.27</td>
<td>1.48</td>
<td>1.37</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Residential</td>
<td>3.09</td>
<td>2.75</td>
<td>1.91</td>
<td>2.55</td>
<td>1.73</td>
<td>1.55</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Commercial</td>
<td>2.71</td>
<td>1.98</td>
<td>1.32</td>
<td>1.94</td>
<td>1.13</td>
<td>1.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Commercial &amp; Industrial Loans</td>
<td>1.35</td>
<td>1.23</td>
<td>1.17</td>
<td>1.23</td>
<td>1.27</td>
<td>1.51</td>
</tr>
</tbody>
</table>
</body>
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During 4Q 2007, the Federal Reserve Board Reported that the delinquency rate on all consumer loan & leases jumped to 2.49% from 2.13% during the third quarter. The latest reading was the highest since early 2003, but that performance [...]

U.S. Loan Delinquencies Up Across the Board

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222b.jpg" align="left" border="0" height="265" width="353">
The INSEE industry climate index fell to 107 from 108. The
index stands in the 68th percentile of its range. The recent trend
rates a -14 and stands below its midpoint in the 43rd percentile of its
range. 
 

In the chart we plot the business indicator as an index and as
a percentage change from a year ago. On a percentage basis the level is
falling. On a level basis the erosion is minor. 
 

France has held up longer than most other EMU economies. Its
indicators currently stand at a still strong level but the newest
information is that some of this weakness is beginning to take a toll
in France. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="11" scope="col"> INSEE Industry Survey</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 Jan 1990</td>
<td colspan="4">Since Jan 1990</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>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr class="odd">
<td class="firstcol">Climate</td>
<td>107</td>
<td>108</td>
<td>109</td>
<td>110</td>
<td>68.0</td>
<td>64</td>
<td>123</td>
<td>73</td>
<td>50</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Production</td>
</tr>
<tr class="odd">
<td class="firstcol">Recent Trend</td>
<td>-14</td>
<td>-6</td>
<td>4</td>
<td>3</td>
<td>43.1</td>
<td>134</td>
<td>44</td>
<td>-58</td>
<td>102</td>
<td>-5</td>
</tr>
<tr class="odd">
<td class="firstcol">Likely trend</td>
<td>43</td>
<td>47</td>
<td>44</td>
<td>43</td>
<td>79.2</td>
<td>8</td>
<td>63</td>
<td>-33</td>
<td>96</td>
<td>8</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Orders/Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Orders &amp; Demand</td>
<td>-1</td>
<td>-1</td>
<td>1</td>
<td>4</td>
<td>70.1</td>
<td>46</td>
<td>25</td>
<td>-62</td>
<td>87</td>
<td>-14</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign Orders &amp; Demand</td>
<td>1</td>
<td>0</td>
<td>6</td>
<td>4</td>
<td>66.3</td>
<td>67</td>
<td>31</td>
<td>-58</td>
<td>89</td>
<td>-10</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Prices</td>
</tr>
<tr class="odd">
<td class="firstcol">Likely Sales Prices Trend</td>
<td>17</td>
<td>12</td>
<td>12</td>
<td>10</td>
<td>85.1</td>
<td>12</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>1</td>
</tr>
</tbody>
</table>
</body></html>

The INSEE industry climate index fell to 107 from 108. The index stands in the 68th percentile of its range. The recent trend rates a -14 and stands below its midpoint in the 43rd percentile of its range. In the chart we plot the [...]

Business Climate Edges Lower in France

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222a.jpg" align="left" border="0" height="265" width="353">
Rising order trends mask encroaching weakness.
Despite a sharp 3.6% drop in orders in December EMU orders are
still rising strongly over three months and a strong 8.5% in the
quarter. Order trends are even turning higher despite the sharp drop in
orders in December. But MFG sales already are very weak and are
declining in the quarter. Domestic orders are clearly weaker than
foreign orders. In the quarter domestic orders are up at nearly a 7%
pace and foreign orders are up at a nearly 14% pace. The country detail
shows that Germany is a major counterbalance to the overall results.
Germany&#8217;s orders are up by 20% in the quarter. France, Italy and the UK
are showing orders drop in the fourth quarter. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col"> E-zone
and UK Industrial Orders &amp; Sales Trends
</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar except m/m</td>
<td style="font-weight: bold;" colspan="3">%
m/m</td>
<td>Dec 
07</td>
<td>Dec 
07</td>
<td>Dec 
07</td>
<td>Dec 
06</td>
<td>Dec 
05</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro Area Detail</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Saar</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG Orders</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>-5.8%</td>
<td>3.6%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>8.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG Sales</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>7.3%</td>
<td>6.3%</td>
<td>-0.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Consumer goods</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.9%</td>
<td>2.6%</td>
<td>3.2%</td>
<td>7.3%</td>
<td>6.3%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Capital goods</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>2.1%</td>
<td>4.7%</td>
<td>4.7%</td>
<td>3.2%</td>
<td>1.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Intermediate goods</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>6.1%</td>
<td>-2.1%</td>
<td>0.1%</td>
<td>8.3%</td>
<td>5.6%</td>
<td>6.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="10">MFG
Orders</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Orders</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>-5.8%</td>
<td>3.6%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>8.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-4.6%</td>
<td>1.9%</td>
<td>4.5%</td>
<td>6.1%</td>
<td>-2.1%</td>
<td>0.1%</td>
<td>7.4%</td>
<td>-0.7%</td>
<td>6.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-5.5%</td>
<td>3.6%</td>
<td>2.3%</td>
<td>0.4%</td>
<td>-14.5%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>11.5%</td>
<td>13.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Countries:</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>-2.2%</td>
<td>3.5%</td>
<td>4.0%</td>
<td>22.8%</td>
<td>-3.3%</td>
<td>10.5%</td>
<td>8.7%</td>
<td>5.1%</td>
<td>20.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France</td>
<td>-2.0%</td>
<td>-0.3%</td>
<td>2.2%</td>
<td>-0.3%</td>
<td>-7.0%</td>
<td>3.8%</td>
<td>2.7%</td>
<td>0.5%</td>
<td>-3.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>-5.4%</td>
<td>2.9%</td>
<td>-1.1%</td>
<td>-14.1%</td>
<td>-8.8%</td>
<td>1.6%</td>
<td>8.1%</td>
<td>3.6%</td>
<td>-3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>5.2%</td>
<td>-4.2%</td>
<td>2.6%</td>
<td>14.0%</td>
<td>7.2%</td>
<td>13.9%</td>
<td>-2.8%</td>
<td>-2.6%</td>
<td>-20.6%</td>
</tr>
</tbody>
</table>
</body></html>

Rising order trends mask encroaching weakness. Despite a sharp 3.6% drop in orders in December EMU orders are still rising strongly over three months and a strong 8.5% in the quarter. Order trends are even turning higher despite the [...]

Euro Area Orders Drop Sharply in December

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222c.jpg" align="left" border="0" height="265" width="353">
During 4Q 2007, the Federal Reserve Board Reported that the
delinquency rate on all consumer loan &amp; leases jumped to 2.49%
from 2.13% during the third quarter. The latest reading was the highest
since early 2003, but that performance masks some the real troubles
being had in making payments.
The dollar value of these loans totaled a record $170 trillion
last quarter, more than double the level at the recent low during 2005.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222d.jpg" align="right" border="0" height="265" width="353">
Driving the rise were delinquent payments on residential real
estate loans. Delinquent payments on residential real estate
loans surged to 3.09% of the loans extended. The current rate
is the highest since 1991. Delinquencies on commercial real
estate loans, which had been relatively current, jumped. The
rate of 2.71% was the highest since late 1996 with a delinquency rate
of 2.71%.
The dollar value of those delinquent residential real estate
loans jumped to $68.4 trillion (+71.2% y/y), more than four times the
level ten years ago and 40% of the dollar value of late payments on
banks' books.
Delinquent payments on consumer loans also
rose sharply to a 3.39% rate versus 3.13% for the full year 2007.
Delinquent payments on credit card debt rose to
4.55%, 4.25% for the whole year. The rise for credit card debt was
larger from the low of 3.52% late in 2005.End of the Credit
Line is a 2006 article from the Federal Reserve Bank of
Minneapolis and it can be found <a href="http://www.minneapolisfed.org/pubs/fedgaz/06-07/credit.cfm">
here</a>.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222e.jpg" align="left" border="0" height="265" width="353">
The dollar value of those delinquent credit card payments
amounted to $17.4 trillion, nearly triple the low in 1993.
Delinquencies on C&amp;I loans rose slightly q/q to 1.35%
from 1.23% during 3Q, up slightly from 2006 but down from years
prior.The dollar values of these loans amounted to $18.1 trillion
during 4Q, up by more than one third from one year prior.
These data series are available in Haver's USECON
database.
Another Widow: The Term Auction Facility
from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/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">Loan
Delinquency Rate (%)</th>
<th scope="col">4Q '07</th>
<th scope="col">3Q '07</th>
<th scope="col">4Q '06</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Loan &amp; Leases</td>
<td>2.49</td>
<td>2.13</td>
<td>1.68</td>
<td>2.06</td>
<td>1.57</td>
<td>1.56</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Loans</td>
<td>3.39</td>
<td>3.17</td>
<td>2.93</td>
<td>3.13</td>
<td>2.90</td>
<td>2.81</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Credit Cards</td>
<td>4.55</td>
<td>4.34</td>
<td>3.92</td>
<td>4.25</td>
<td>4.01</td>
<td>3.70</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Real Estate Loans</td>
<td>2.88</td>
<td>2.40</td>
<td>1.67</td>
<td>2.27</td>
<td>1.48</td>
<td>1.37</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Residential</td>
<td>3.09</td>
<td>2.75</td>
<td>1.91</td>
<td>2.55</td>
<td>1.73</td>
<td>1.55</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Commercial</td>
<td>2.71</td>
<td>1.98</td>
<td>1.32</td>
<td>1.94</td>
<td>1.13</td>
<td>1.07</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Commercial &amp;
Industrial Loans</td>
<td>1.35</td>
<td>1.23</td>
<td>1.17</td>
<td>1.23</td>
<td>1.27</td>
<td>1.51</td>
</tr>
</tbody>
</table>
Euro Area Orders Drop Sharply
inDecember 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222a.jpg" align="left" border="0" height="265" width="353">
Rising order trends mask encroaching weakness.
Despite a sharp 3.6% drop in orders in December EMU orders are
still rising strongly over three months and a strong 8.5% in the
quarter. Order trends are even turning higher despite the sharp drop in
orders in December. But MFG sales already are very weak and are
declining in the quarter. Domestic orders are clearly weaker than
foreign orders. In the quarter domestic orders are up at nearly a 7%
pace and foreign orders are up at a nearly 14% pace. The country detail
shows that Germany is a major counterbalance to the overall results.
Germany&#8217;s orders are up by 20% in the quarter. France, Italy and the UK
are showing orders drop in the fourth quarter. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="10" scope="col"> E-zone
and UK Industrial Orders &amp; Sales Trends
</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">Saar except m/m</td>
<td style="font-weight: bold;" colspan="3">%
m/m</td>
<td>Dec 
07</td>
<td>Dec 
07</td>
<td>Dec 
07</td>
<td>Dec 
06</td>
<td>Dec 
05</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey3">
<td class="firstcol">Euro Area Detail</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Saar</td>
</tr>
<tr class="grey2">
<td class="firstcol">MFG Orders</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>-5.8%</td>
<td>3.6%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>8.5%</td>
</tr>
<tr class="grey1">
<td class="firstcol">MFG Sales</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>0.3%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>7.3%</td>
<td>6.3%</td>
<td>-0.3%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Consumer goods</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.9%</td>
<td>2.6%</td>
<td>3.2%</td>
<td>7.3%</td>
<td>6.3%</td>
<td>2.0%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Capital goods</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>0.1%</td>
<td>-0.4%</td>
<td>2.1%</td>
<td>4.7%</td>
<td>4.7%</td>
<td>3.2%</td>
<td>1.1%</td>
</tr>
<tr class="grey1">
<td class="firstcol">Intermediate goods</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.3%</td>
<td>6.1%</td>
<td>-2.1%</td>
<td>0.1%</td>
<td>8.3%</td>
<td>5.6%</td>
<td>6.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan="10">MFG
Orders</td>
</tr>
<tr class="grey2">
<td class="firstcol">Total Orders</td>
<td>-3.6%</td>
<td>2.0%</td>
<td>2.7%</td>
<td>3.8%</td>
<td>-5.8%</td>
<td>3.6%</td>
<td>6.8%</td>
<td>6.4%</td>
<td>8.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">E-13 Domestic MFG orders</td>
<td>-4.6%</td>
<td>1.9%</td>
<td>4.5%</td>
<td>6.1%</td>
<td>-2.1%</td>
<td>0.1%</td>
<td>7.4%</td>
<td>-0.7%</td>
<td>6.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">E-13 Foreign MFG orders</td>
<td>-5.5%</td>
<td>3.6%</td>
<td>2.3%</td>
<td>0.4%</td>
<td>-14.5%</td>
<td>4.4%</td>
<td>4.4%</td>
<td>11.5%</td>
<td>13.9%</td>
</tr>
<tr class="grey3">
<td class="firstcol">Countries:</td>
<td>Dec-07</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>3Mo</td>
<td>6mo</td>
<td>12mo</td>
<td>12mo</td>
<td>12mo</td>
<td>Qtr-2 
Date</td>
</tr>
<tr class="grey2">
<td class="firstcol">Germany</td>
<td>-2.2%</td>
<td>3.5%</td>
<td>4.0%</td>
<td>22.8%</td>
<td>-3.3%</td>
<td>10.5%</td>
<td>8.7%</td>
<td>5.1%</td>
<td>20.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">France</td>
<td>-2.0%</td>
<td>-0.3%</td>
<td>2.2%</td>
<td>-0.3%</td>
<td>-7.0%</td>
<td>3.8%</td>
<td>2.7%</td>
<td>0.5%</td>
<td>-3.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Italy</td>
<td>-5.4%</td>
<td>2.9%</td>
<td>-1.1%</td>
<td>-14.1%</td>
<td>-8.8%</td>
<td>1.6%</td>
<td>8.1%</td>
<td>3.6%</td>
<td>-3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">UK</td>
<td>5.2%</td>
<td>-4.2%</td>
<td>2.6%</td>
<td>14.0%</td>
<td>7.2%</td>
<td>13.9%</td>
<td>-2.8%</td>
<td>-2.6%</td>
<td>-20.6%</td>
</tr>
</tbody>
</table>
Business Climate Edges Lower in
France&nbsp; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222b.jpg" align="left" border="0" height="265" width="353">
The INSEE industry climate index fell to 107 from 108. The
index stands in the 68th percentile of its range. The recent trend
rates a -14 and stands below its midpoint in the 43rd percentile of its
range. 
 

In the chart we plot the business indicator as an index and as
a percentage change from a year ago. On a percentage basis the level is
falling. On a level basis the erosion is minor. 
 

France has held up longer than most other EMU economies. Its
indicators currently stand at a still strong level but the newest
information is that some of this weakness is beginning to take a toll
in France. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="11" scope="col"> INSEE
Industry Survey</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 Jan 1990</td>
<td colspan="4">Since Jan 1990</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>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr class="odd">
<td class="firstcol">Climate</td>
<td>107</td>
<td>108</td>
<td>109</td>
<td>110</td>
<td>68.0</td>
<td>64</td>
<td>123</td>
<td>73</td>
<td>50</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Production</td>
</tr>
<tr class="odd">
<td class="firstcol">Recent Trend</td>
<td>-14</td>
<td>-6</td>
<td>4</td>
<td>3</td>
<td>43.1</td>
<td>134</td>
<td>44</td>
<td>-58</td>
<td>102</td>
<td>-5</td>
</tr>
<tr class="odd">
<td class="firstcol">Likely trend</td>
<td>43</td>
<td>47</td>
<td>44</td>
<td>43</td>
<td>79.2</td>
<td>8</td>
<td>63</td>
<td>-33</td>
<td>96</td>
<td>8</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Orders/Demand</td>
</tr>
<tr class="odd">
<td class="firstcol">Orders &amp; Demand</td>
<td>-1</td>
<td>-1</td>
<td>1</td>
<td>4</td>
<td>70.1</td>
<td>46</td>
<td>25</td>
<td>-62</td>
<td>87</td>
<td>-14</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign Orders &amp; Demand</td>
<td>1</td>
<td>0</td>
<td>6</td>
<td>4</td>
<td>66.3</td>
<td>67</td>
<td>31</td>
<td>-58</td>
<td>89</td>
<td>-10</td>
</tr>
<tr>
<td class="firstcol" colspan="11">Prices</td>
</tr>
<tr class="odd">
<td class="firstcol">Likely Sales Prices Trend</td>
<td>17</td>
<td>12</td>
<td>12</td>
<td>10</td>
<td>85.1</td>
<td>12</td>
<td>24</td>
<td>-23</td>
<td>47</td>
<td>1</td>
</tr>
</tbody>
</table>
EMU Flash PMIs are Weak;
Especially for Services 
by <a href="/comment/Brusca.html">Robert
Brusca</a> February 22, 2008


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080222f.jpg" align="left" border="0" height="265" width="353">
EMU PMIs show continued weakness. 
 

The EMU PMIs were weak in February. The MFG index fell further
while the services barometer, already very weak, edged higher. The MFG
index is in the 12th percentile of its range over 24 months. Services
reside in the bottom 2 percent of their range.The MFG indexes have been
slipping since mid-2006. They fell to a lower plateau in early 2007
then fell sharply again as 2007 drew to a close. MFG has steadied above
its lowest pace around a MFG reading of 52.The service sector has
weakened on roughly the same profile except it did not rebound and
steady above its low as 2008 began. Services have made a small rebound
in February but continue to cling near the lower reaches of its 24
month range. Europe is continuing to look weak despite this small
up-tick in February.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="3" scope="col"> FLASH
Readings</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td colspan="3" class="firstcol">NTC
PMIs for the Euro Area</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>MFG</td>
<td>Services</td>
</tr>
<tr>
<td class="firstcol">Feb-08</td>
<td>52.25</td>
<td>52.25</td>
</tr>
<tr>
<td class="firstcol">Jan-08</td>
<td>52.60</td>
<td>52.01</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">Averages</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>52.44</td>
<td>52.50</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>52.43</td>
<td>53.47</td>
</tr>
<tr>
<td class="firstcol">12-Mo</td>
<td>53.73</td>
<td>55.51</td>
</tr>
<tr class="odd">
<td colspan="3" class="firstcol">24-Mo
Range</td>
</tr>
<tr>
<td class="firstcol">High</td>
<td>57.61</td>
<td>61.21</td>
</tr>
<tr>
<td class="firstcol">Low</td>
<td>51.46</td>
<td>52.01</td>
</tr>
<tr>
<td class="firstcol">% Range</td>
<td>12.8%</td>
<td>2.6%</td>
</tr>
</tbody>
</table>
</body></html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221d.jpg" width="353">
The Philadelphia Federal Reserve Bank reported that it&#39;s Index of General Business Conditions in the manufacturing sector fell to -24.0 this month from -20.9 in January. The latest level was the lowest since the recession year 2001.
The index is a diffusion index for each component or series. It reflects the increase in activity reported less the decrease.
During the last ten years there has been a 59% correlation between the level of the Philadelphia Fed Business Conditions Index and the three-month growth in factory sector industrial production. There has been a 42% correlation with q/q growth in real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221e.jpg" width="353">
The decline in the overall index represented broad based declines in each of the sub indexes except new orders and the number of employees which ticked up. During the last ten years there has been a 75% correlation between the employment index and the three-month growth in factory payrolls.
The business conditions index reflects a separate survey question, not the sub indexes.
The prices paid index also fell slightly after strong up moves during the prior five months. During the last ten years there has been a 76% correlation between the prices paid index and the three-month growth in the intermediate goods PPI. There has been an 85% correlation with the change in core intermediate goods prices.
The separate index of expected business conditions in six months fell sharply to the lowest reading since 1990. Expectations for new orders, shipments and for the number of employees fell sharply.
Are Shocks to the Terms of Trade, Shocks to Productivity? from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/research/SR/SR391.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">&nbsp;</th>
<th scope="col">February</th>
<th scope="col">January</th>
<th scope="col">Feb. &#39;07</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>-24.0</td>
<td>-20.9</td>
<td>0.3</td>
<td>5.1</td>
<td>8.1</td>
<td>11.5</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>46.6</td>
<td>&nbsp;49.8</td>
<td>&nbsp;18.8</td>
<td>26.4</td>
<td>36.6</td>
<td>40.1</td>
</tr>
</tbody>
</table>
</body>
</html>

The Philadelphia Federal Reserve Bank reported that it's Index of General Business Conditions in the manufacturing sector fell to -24.0 this month from -20.9 in January. The latest level was the lowest since the recession year 2001. [...]

Philadelphia Fed Index Lowest Since 2001

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221f.jpg" width="353">
For January, the Conference Board reported that the composite index of leading economic indicators fell 0.1% after a revised 0.1% decline during December. The latest drop matched Consensus expectations. It was the fifth decline in the last six months and since the series&#39; peak last July it has fallen 2.0%.
For all of last year the leaders fell 0.4% and the six month growth rate, calculated as the latest month&#39;s reading divided by the average of the prior twelve months, was -4.0%, the lowest since early 2001.
During the last ten years there has been a 59% correlation between the y/y change in the leading indicators index and the lagged change in real GDP.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221g.jpg" width="353">
The breadth of one month gain amongst the 10 components of the leading index rose slightly to a break even 50.0%. Over a six month period, the breadth of gain amongst the leaders components cratered to 20%, equal to its lowest level since 2002.
Last month lower stock prices made the largest contribution to the decline in the overall leading index.
The method of calculating the contribution to the leading index from the spread between 10 year Treasury securities and the Fed funds rate has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.1% after a 0.1% December uptick. Over the last ten years there has been an 86% correlation between the y/y change in the coincident indicators and real GDP growth. Three of the four coincident series components rose very slightly and employment fell.
The lagging index was unchanged and the ratio of coincident to lagging indicators (a measure of economic excess) ticked up slightly but remained near its lowest since 1991. 
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM">Business Cycle Indicators</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</th>
<th scope="col">2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-1.5%</td>
<td>-0.4%</td>
<td>1.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>1.8%</td>
<td>2.5%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>3.5%</td>
</tr>
</tbody>
</table>


</html>

For January, the Conference Board reported that the composite index of leading economic indicators fell 0.1% after a revised 0.1% decline during December. The latest drop matched Consensus expectations. It was the fifth decline in the [...]

U.S. Leading Economic Indicators Down

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/080221c.jpg" align="left" border="0" height="265" width="353">
French inflation is showing pressure. In January the Yr/Yr
HICP pace is up to 3.2% from 1.4% in the previous 12-month period. The
CPI excl food and energy rate is up to 2% from 1.4% a year ago. The
3-month CPI excl food and energy pace is a bit lower than it was over
six months, but it is still above the 2% mark. While the main CPI
categories show that 90% of them have inflation higher than it was a
year ago, 72% have higher inflation over six months that over 12-months
but only 54% have higher inflation over three months than over
6-months, Clothing and Communications inflation is cooling the fastest.
Education plus food and energy intensive categories show the most
inflation pressure. 
 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> France HICP and CPI details</th>
</tr>
</thead>
<tbody>
<tr class="grey4">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Mo/Mo %</td>
<td colspan="3">Saar %</td>
<td>Yr/Yr</td>
</tr>
<tr class="grey3">
<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>Yr Ago</td>
</tr>
<tr class="grey2">
<td class="firstcol">HICP Total</td>
<td>0.3%</td>
<td>0.4%</td>
<td>0.7%</td>
<td>5.9%</td>
<td>4.6%</td>
<td>3.2%</td>
<td>1.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Core&nbsp;</td>
<td>--</td>
<td>0.3%</td>
<td>0.3%</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>1.4%</td>
</tr>
<tr class="grey1">
<td colspan="8" class="firstcol">CPI</td>
</tr>
<tr class="grey2">
<td class="firstcol">All</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.6%</td>
<td style="color: red;">5.4%</td>
<td style="color: red;">4.0%</td>
<td>2.9%</td>
<td>1.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">CPI excl Food and Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.6%</td>
<td style="color: red;">2.8%</td>
<td>2.0%</td>
<td>1.4%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Food</td>
<td>1.2%</td>
<td>0.6%</td>
<td>0.4%</td>
<td style="color: red;">8.8%</td>
<td style="color: red;">8.1%</td>
<td style="color: red;">4.4%</td>
<td>1.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Alcohol</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.8%</td>
<td style="color: red;">7.0%</td>
<td style="color: red;">4.5%</td>
<td>0.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Clothing &amp; Shoes</td>
<td>-0.7%</td>
<td>0.1%</td>
<td>0.0%</td>
<td>-2.0%</td>
<td>0.2%</td>
<td style="color: red;">0.6%</td>
<td>0.1%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Rent &amp; Utilities</td>
<td>0.5%</td>
<td>0.6%</td>
<td>1.1%</td>
<td style="color: red;">9.0%</td>
<td style="color: red;">6.7%</td>
<td style="color: red;">4.7%</td>
<td>3.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Health Care</td>
<td>0.1%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>0.0%</td>
<td style="color: red;">0.4%</td>
<td style="color: red;">0.3%</td>
<td>0.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Transport</td>
<td>0.1%</td>
<td>1.0%</td>
<td>1.9%</td>
<td style="color: red;">13.0%</td>
<td style="color: red;">7.7%</td>
<td style="color: red;">6.1%</td>
<td>0.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Communication</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-2.8%</td>
<td style="color: red;">0.2%</td>
<td style="color: red;">-1.2%</td>
<td>-1.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Recreation &amp; Culture</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>0.2%</td>
<td style="color: red;">-0.6%</td>
<td>-1.6%</td>
<td style="color: red;">-1.3%</td>
<td>-1.8%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Education</td>
<td>0.5%</td>
<td>0.2%</td>
<td>0.6%</td>
<td style="color: red;">5.1%</td>
<td style="color: red;">3.4%</td>
<td style="color: red;">3.0%</td>
<td>2.5%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Restaurant &amp; Hotel</td>
<td>0.4%</td>
<td>0.3%</td>
<td>0.2%</td>
<td style="color: red;">3.3%</td>
<td>2.5%</td>
<td style="color: red;">2.8%</td>
<td>2.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Other</td>
<td>0.0%</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.3%</td>
<td style="color: red;">1.9%</td>
<td>1.9%</td>
<td>2.7%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Diffusion</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>54.5%</td>
<td>72.7%</td>
<td>90.9%</td>
<td>--</td>
</tr>
<tr class="grey1">
<td class="firstcol">Type:</td>
<td colspan="3">Diffusion: Compared to</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Yr-Ago</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

French inflation is showing pressure. In January the Yr/Yr HICP pace is up to 3.2% from 1.4% in the previous 12-month period. The CPI excl food and energy rate is up to 2% from 1.4% a year ago. The 3-month CPI excl food and energy [...]

French Inflation: Core and Headline Rates Move Higher

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

Considerably more monetary ease expected from US and UK as Japan tightens

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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

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EMU Flash PMIs are Weak; Especially for Services

U.S. Loan Delinquencies Up Across the Board

Business Climate Edges Lower in France

Euro Area Orders Drop Sharply in December

U.S. Loan Delinquencies Up Across the Board

Philadelphia Fed Index Lowest Since 2001

U.S. Leading Economic Indicators Down

French Inflation: Core and Headline Rates Move Higher