Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213f.jpg" width="353">
November U.S. retail sales doubled expectations for a 0.6% increase and rose 1.2%. That followed an unrevised 0.2% gain during October. The gains occurred despite the recent sharp drop in consumer sentiment.
Excluding autos sales also beat expectations for a 0.7% gain and rose 1.8% after a 0.4% increase during the prior month.
The strength was not all attributable to higher gasoline prices. Less gasoline, nonauto sales rose 1.1% following the meager 0.1% October uptick
Sales of discretionary items were notably firm last month. Apparel store sales surged 2.6% (6.6% y/y) but the prior month was revised down to a 0.5% decline. Furniture, home furnishings &amp; appliance stores sales also surged 1.7% after the 0.3% rise during October. Prior months&#39; slight declines were revised positive. Sales of electronics &amp; appliances jumped 2.5% (5.0% y/y). Sales at general merchandise stores increased 0.9% (5.0% y/y) after a little revised 0.1% October uptick.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213g.jpg" width="353">
Even sales of building materials were strong during November and posted a 1.2% (0.8% y/y) increase, though the prior month was revised down to a 0.8% decline.
Sales of nonstore retailers (internet &amp; catalogue) ballooned 1.9% (10.7% y/y) and the prior month&#39;s decline was revised to a 0.4% increase.
Motor vehicle &amp; parts purchases fell 1.0% (+1.9% y/y). The decline was somewhat at odds with the 0.9% m/m rise in unit sales of light vehicles during November.
Gasoline service station sales jumped 6.8%, lifted by the 9.9% m/m rise in gasoline prices. The 3.1% rise during October was very much upwardly revised. So far this month gas prices are down 1.6% from the November average of $3.08 per gallon.
Corporate Access to External Financing from the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-31.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">November</th>
<th scope="col">October</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 class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>1.2%</td>
<td>0.2%</td>
<td>6.3%</td>
<td>6.2%</td>
<td>6.6%</td>
<td>6.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>1.8%</td>
<td>0.4%</td>
<td>7.4%</td>
<td>7.3%</td>
<td>7.6%</td>
<td>7.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Less Gasoline</td>
<td>1.1%</td>
<td>0.1%</td>
<td>5.3%</td>
<td>7.2%</td>
<td>6.6%</td>
<td>6.1%</td>
</tr>
</tbody>
</table>


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November U.S. retail sales doubled expectations for a 0.6% increase and rose 1.2%. That followed an unrevised 0.2% gain during October. The gains occurred despite the recent sharp drop in consumer sentiment. Excluding autos sales also [...]

U.S. Retail Sales Beat Expectations, Sales of Discretionary Items Firm

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213c.jpg" align="left" border="0" height="265" width="353">
Finished producer prices surged 3.2% last month after little
change during October. A 1.5% rise had been expected. Core
finished goods producer prices rose a firm 0.4%, the
strongest gain since this past February.
Energy prices increased 14.1% (25.7% y/y) led by a 34.8%
(50.9% y/y) pop in the price of gasoline. Home heating oil prices also
surged by 31.5% (36.0% y/y) but natural gas prices fell 5.2% (+1.0%
y/y).
The firm gain in the core PPI almost wholly reflected a 0.6%
rise in passenger car prices and a 2.3% surge in
light truck prices.
Capital equipment prices rose 0.3% (1.3% y/y on the strength
of light truck prices.
Food prices were unchanged (7.2% y/y) after 1.0%+ gains during
the prior two months.
Intermediate goods prices surged 3.7% on the strength of
higher energy prices and a 1.2% (16.3% y/y) surge in food prices.
Excluding food &amp; energy prices were also firm and rose 1.0%
(3.3% y/y).
The crude materials PPI surged 8.7% led higher by a 17.0%
(23.5% y/y) jump in energy prices. The core crude materials PPI fell
0.5%.
A Comparison of Measures of Core Inflation
from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/epr/07v13n3/0712rich.pdf">
here</a>.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213d.jpg" height="265" width="312">
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213e.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/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a></th>
<th scope="col">November</th>
<th scope="col">October</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 class="odd">
<td class="firstcol">Finished Goods</td>
<td>3.2%</td>
<td>0.1%&nbsp;</td>
<td>&nbsp; 7.7%&nbsp;</td>
<td>2.9%</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.0%</td>
<td>&nbsp;1.9%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>3.7%</td>
<td>0.1%</td>
<td>8.6%</td>
<td>6.4%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.0%</td>
<td>0.1%</td>
<td>3.3%</td>
<td>6.0%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>8.7%</td>
<td>&nbsp;2.4%&nbsp;</td>
<td>&nbsp;22.2%</td>
<td>1.4%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.5%</td>
<td>1.4%</td>
<td>&nbsp;18.9%</td>
<td>20.9%</td>
<td>4.9%</td>
<td>&nbsp;26.5%</td>
</tr>
</tbody>
</table>
</body></html>

Finished producer prices surged 3.2% last month after little change during October. A 1.5% rise had been expected. Core finished goods producer prices rose a firm 0.4%, the strongest gain since this past February. Energy prices [...]

U.S. PPI Total Surged, Core Firm

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213c.jpg" align="left" border="0" height="265" width="353">
Finished producer prices surged 3.2% last month after little
change during October. A 1.5% rise had been expected. Core
finished goods producer prices rose a firm 0.4%, the
strongest gain since this past February.
Energy prices increased 14.1% (25.7% y/y) led by a 34.8%
(50.9% y/y) pop in the price of gasoline. Home heating oil prices also
surged by 31.5% (36.0% y/y) but natural gas prices fell 5.2% (+1.0%
y/y).
The firm gain in the core PPI almost wholly reflected a 0.6%
rise in passenger car prices and a 2.3% surge in
light truck prices.
Capital equipment prices rose 0.3% (1.3% y/y on the strength
of light truck prices.
Food prices were unchanged (7.2% y/y) after 1.0%+ gains during
the prior two months.
Intermediate goods prices surged 3.7% on the strength of
higher energy prices and a 1.2% (16.3% y/y) surge in food prices.
Excluding food &amp; energy prices were also firm and rose 1.0%
(3.3% y/y).
The crude materials PPI surged 8.7% led higher by a 17.0%
(23.5% y/y) jump in energy prices. The core crude materials PPI fell
0.5%.
A Comparison of Measures of Core Inflation
from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/epr/07v13n3/0712rich.pdf">
here</a>.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213d.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213e.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/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer
Price Index</a></th>
<th scope="col">November</th>
<th scope="col">October</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 class="odd">
<td class="firstcol">Finished Goods</td>
<td>3.2%</td>
<td>0.1%&nbsp;</td>
<td>&nbsp; 7.7%&nbsp;</td>
<td>2.9%</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.0%</td>
<td>&nbsp;1.9%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>3.7%</td>
<td>0.1%</td>
<td>8.6%</td>
<td>6.4%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.0%</td>
<td>0.1%</td>
<td>3.3%</td>
<td>6.0%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>8.7%</td>
<td>&nbsp;2.4%&nbsp;</td>
<td>&nbsp;22.2%</td>
<td>1.4%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.5%</td>
<td>1.4%</td>
<td>&nbsp;18.9%</td>
<td>20.9%</td>
<td>4.9%</td>
<td>&nbsp;26.5%</td>
</tr>
</tbody>
</table>
U.S. Retail Sales Beat
Expectations, Sales of Discretionary Items Firm 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 13, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213f.jpg" align="left" border="0" height="265" width="353">
November U.S. retail sales doubled expectations for a 0.6%
increase and rose 1.2%. That followed an unrevised 0.2% gain during
October. The gains occurred despite the recent sharp drop in consumer
sentiment.
Excluding autos sales also beat expectations for a 0.7% gain
and rose 1.8% after a 0.4% increase during the prior month.
The strength was not all attributable to higher
gasoline prices. Less gasoline, nonauto sales rose 1.1% following the
meager 0.1% October uptick
Sales of discretionary items were notably
firm last month. Apparel store sales surged 2.6%
(6.6% y/y) but the prior month was revised down to a 0.5% decline. Furniture,
home furnishings &amp; appliance stores sales also
surged 1.7% after the 0.3% rise during October. Prior months' slight
declines were revised positive. Sales of electronics &amp;
appliances jumped 2.5% (5.0% y/y). Sales at general
merchandise stores increased 0.9% (5.0% y/y) after a little
revised 0.1% October uptick.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213g.jpg" align="right" border="0" height="265" width="353">
Even sales of building materials were strong during November
and posted a 1.2% (0.8% y/y) increase, though the prior month was
revised down to a 0.8% decline.
Sales of nonstore retailers (internet &amp;
catalogue) ballooned 1.9% (10.7% y/y) and the prior month's
decline was revised to a 0.4% increase.
Motor vehicle &amp; parts purchases fell 1.0% (+1.9% y/y).
The decline was somewhat at odds with the 0.9% m/m rise in unit sales
of light vehicles during November.
Gasoline service station sales jumped 6.8%, lifted by the 9.9%
m/m rise in gasoline prices. The 3.1% rise during October was very much
upwardly revised. So far this month gas prices are down 1.6% from the
November average of $3.08 per gallon.
Corporate Access to External Financing from
the Federal Reserve Bank of San Francisco can be found <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-31.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">November</th>
<th scope="col">October</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 class="odd">
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail
Sales &amp; Food Services</a></td>
<td>1.2%</td>
<td>0.2%</td>
<td>6.3%</td>
<td>6.2%</td>
<td>6.6%</td>
<td>6.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding
Autos</td>
<td>1.8%</td>
<td>0.4%</td>
<td>7.4%</td>
<td>7.3%</td>
<td>7.6%</td>
<td>7.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;
Less Gasoline</td>
<td>1.1%</td>
<td>0.1%</td>
<td>5.3%</td>
<td>7.2%</td>
<td>6.6%</td>
<td>6.1%</td>
</tr>
</tbody>
</table>
U.S. Initial Unemployment
Insurance Claims Remained High 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 13, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213h.jpg" align="left" border="0" height="265" width="353">
Last week, initial claims for jobless insurance fell a modest
7,000 to 333,000 but the prior week's level was revised up slightly.
The four week moving average of initial claims, a
measure which smoothes out most of the series' w/w volatility, dipped
to 338,750 (4.0% y/y), near the highest level since 2005.
A claims level below 400,000 typically has been associated
with growth in nonfarm payrolls. During the last six years there has
been a (negative) 78% correlation between the level of initial claims
and the m/m change in nonfarm payroll employment.
Continuing claims for unemployment insurance rose 38,000 after
an unrevised 59,000 decline during the prior week.
The continuing claims numbers lag the initial claims figures
by one week.
The insured rate of unemployment held at 2.0% for the third
consecutive week.
Fixing the New Keynesian Phillips Curve
also from the Federal Reserve Bank of San
Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-35.pdf">
here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment
Insurance (000s)</a></th>
<th scope="col">12/08/07 </th>
<th scope="col">12/01/07 </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">Initial Claims</td>
<td>&nbsp;333</td>
<td>340</td>
<td>6.7%</td>
<td>313</td>
<td>331</td>
<td>343</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,639</td>
<td>7.0%</td>
<td>2,459</td>
<td>2,662</td>
<td>2,924</td>
</tr>
</tbody>
</table>
RICS House Prices Sag Badly by <a href="/comment/Brusca.html">Robert
Brusca</a> December 13, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213b.jpg" align="left" border="0" height="265" width="353">
The RICs survey presents as its metric a net balance reading
as surveys respond by saying house prices are higher or lower. Both
series show a larger progressive trend lower that is represented by
sequentially lower peaks in the various cycles and, for the most part,
sequentially lower troughs as well. Beyond this longer term trend
decline in this metric is the sharp plunge in both prices over the past
three months and expected prices in the next three months. The price
expectations series gives off useful signals at the peaks since it
peaks at a lower level than the past three month series but it is
usually too pessimistic at the troughs. The look-ahead series is
looking for even deeper declines in the next three months than in the
last three months at this time. Look for the actual data to turn more
positive ahead of the expectations series. But, for the moment, both
show bleak readings and both are on their respective lowest readings
since 1999. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col">RICS:
House prices and expectations for prices and sales </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Nov-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>3-Mo Avg</td>
<td>6-Mo Avg</td>
<td>12-Mo Avg</td>
<td>Range 
Percentile</td>
</tr>
<tr>
<td class="firstcol">Prices</td>
<td>-41</td>
<td>-23</td>
<td>-15</td>
<td>-26</td>
<td>-10</td>
<td>9</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Price Expectations</td>
<td>-47</td>
<td>-35</td>
<td>-21</td>
<td>-34</td>
<td>-21</td>
<td>-2</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Sales expectations</td>
<td>-8</td>
<td>-6</td>
<td>-9</td>
<td>-8</td>
<td>-5</td>
<td>6</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">New Sales</td>
<td>-36</td>
<td>-33</td>
<td>-28</td>
<td>-32</td>
<td>-24</td>
<td>-11</td>
<td>0.0%</td>
</tr>
<tr class="grey2">
<td colspan="8" class="firstcol">Range
percentile takes range back to
1999</td>
</tr>
</tbody>
</table>
</body></html>

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213a.jpg" align="left" border="0" height="265" width="353">
Japans exports and imports each show generally declining
trends. Imports are up by just 4.4% year/year while exports are
advancing at a pace of 11.4%. Japan&#8217;s services deficit is shrinking.
Its good surplus and current account surplus are each widening. The
current account surplus is widening in both dollar and yen terms (see
table).

Recent macroeconomic data make it clear that Japan&#8217;s economy
is slowing. This is reflected in the import slowing that is in
progress. Japan&#8217;s imports fell by a sharp 6.3% in August then by 0.1%
in September before rebounding with a rise of 0.8% in October. Import
weakness is likely a reflection of the weakness in domestic demand. 



<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="8" scope="col"> Japan Current Account Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">In period level of % change</td>
<td colspan="4">Average in period/or %
change</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>12-Mo Prev</td>
</tr>
<tr>
<td class="firstcol">Current Account in $, Millions</td>
<td>$ 22,135</td>
<td>$ 19,489</td>
<td>$ 18,789</td>
<td>$ 20,138</td>
<td>$ 18,303</td>
<td>$ 17,425</td>
<td>$ 14,049</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">In Yen, 100 Millions</td>
</tr>
<tr>
<td class="firstcol">Overall Balance</td>
<td>25,648</td>
<td>22,420</td>
<td>21,932</td>
<td>23,333</td>
<td>21,680</td>
<td>20,641</td>
<td>16,375</td>
</tr>
<tr>
<td class="firstcol">Services Balance</td>
<td>(365)</td>
<td>(1,546)</td>
<td>(2,286)</td>
<td>(1,399)</td>
<td>(1,790)</td>
<td>(1,929)</td>
<td>(1,789)</td>
</tr>
<tr>
<td class="firstcol">Balance on Goods</td>
<td>13,141</td>
<td>10,704</td>
<td>14,404</td>
<td>12,750</td>
<td>10,877</td>
<td>10,651</td>
<td>7,471</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td colspan="4">% SAAR</td>
</tr>
<tr>
<td class="firstcol">Export Goods %</td>
<td>4.4%</td>
<td>-5.4%</td>
<td>3.4%</td>
<td>8.1%</td>
<td>16.0%</td>
<td>11.8%</td>
<td>24.4%</td>
</tr>
<tr>
<td class="firstcol">Import Goods %</td>
<td>0.8%</td>
<td>-0.1%</td>
<td>-6.3%</td>
<td>-18.8%</td>
<td>10.9%</td>
<td>4.4%</td>
<td>16.4%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">Prices in %, SAAR</td>
</tr>
<tr>
<td class="firstcol">Export Prices</td>
<td>0.8%</td>
<td>-0.7%</td>
<td>-3.2%</td>
<td>-16.7%</td>
<td>-1.5%</td>
<td>-0.1%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Import Prices</td>
<td>4.4%</td>
<td>-1.4%</td>
<td>-2.5%</td>
<td>-2.1%</td>
<td>11.1%</td>
<td>7.5%</td>
<td>20.5%</td>
</tr>
<tr>
<td class="firstcol">Memo: Yen/$, AVG, Level</td>
<td>115.87</td>
<td>115.04</td>
<td>116.73</td>
<td>115.88</td>
<td>118.75</td>
<td>118.69</td>
<td>116.54</td>
</tr>
</tbody>
</table>
</body></html>

Japans exports and imports each show generally declining trends. Imports are up by just 4.4% year/year while exports are advancing at a pace of 11.4%. Japan’s services deficit is shrinking. Its good surplus and current account surplus [...]

Japan’s Exports Continue to Outpace Imports

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071212e.jpg" width="353">
During November, another jump in petroleum prices raised overall import prices by 2.7% after a 1.4% October increase. Consensus expectations had been for a 2.4% gain. 
Petroleum prices, overall, gained 18.0% (68.7% y/y). Fuel oil prices rose 18.0% (68.7% y/y) and crude petroleum prices rose 7.5% (53.0% y/y).
Less petroleum, import prices rose 0.7% after a 0.5% rise uptick during October. 
 During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a reduced 47% against a broader basket of currencies. Why a Dollar Depreciation May Not Close the U.S. Trade Deficit from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/current_issues/ci13-5/ci13-5.html">here</a>
Prices for industrial supplies &amp; materials excluding petroleum surged 2.7% (7.9% y/y). The detailed import price series can be found in the Haver USINT database. 
Capital goods import prices rose 0.2% (0.8% y/y). Prices of computers, peripheral and semiconductors fell 0.2% (-5.1% y/y). Less the high tech sector, capital goods prices rose an accelerated 0.3% (3.2% y/y).
Prices for imports of consumer goods rose 0.2% (1.7% y/y) as apparel prices were unchanged after firm gains early this year (1.5% y/y). Prices for furniture and household items rose 0.2% (2.0% y/y).
Overall export prices were strong again and posted a 0.9% gain (6.1%y/y). Agricultural prices rose another strong 1.4% (23.0% y/y) while nonagricultural prices also were firm and rose 0.8% (4.6% y/y). 
Global Savings, Investment and World Real Interest Rates is a 2007 working paper from the Royal Bank of Canada and it can be found <a href="http://www.bankofcanada.ca/en/review/winter06-07/desroches.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">November</th>
<th scope="col">October</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 class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>2.7%</td>
<td>1.4%</td>
<td>11.4%</td>
<td>4.8%</td>
<td>7.5%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>9.8%</td>
<td>5.1%</td>
<td>53.0%</td>
<td>20.6%</td>
<td>37.6%</td>
<td>30.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.7%</td>
<td>0.5%</td>
<td>3.0%</td>
<td>1.7%</td>
<td>2.7%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>0.9%</td>
<td>0.8%</td>
<td>6.1%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>3.9%</td>
</tr>
</tbody>
</table>


</html>

During November, another jump in petroleum prices raised overall import prices by 2.7% after a 1.4% October increase. Consensus expectations had been for a 2.4% gain. Petroleum prices, overall, gained 18.0% (68.7% y/y). Fuel oil [...]

U.S. Import Prices Boosted in November by Oil

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071212c.jpg" width="353">
The U.S. foreign trade deficit deepened slightly to $57.8B from $57.1B in September which was slightly deeper than the deficit initially reported. Consensus expectations had been for a deficit of 57.3B.
The deficit averaged $58.7B during the first ten months of this year compared to an average of $64.0B during the first ten months of 2006.
U.S. exports rose 0.9% after a downwardly revised 0.8% during September. he revision was due a slightly lower gain in services exports
Exports of goods rose 0.7% (14.6% y/y) after a 1.4% jump during September. Exports of capital goods surged 3.4% (10.4% y/y) led by a 21.9% pop in exports of civilian aircraft (37.9% y/y. That rise was offset by a 10.4% decline (+5.1% y/y) in exports of computers while exports of electric apparatus rose 2.2% (4.6% y/y) after two months of sharp decline. Exports of nonauto consumer goods also fell by 3.2% +11.1% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071212d.jpg" width="353">
U.S. exports of services rose 1.4% after a decline of 0.5% during September, initially reported as an increase. Travel exports recovered 1.4% (19.4% y/y) and passenger fares surged 2.2% 16.8% y/y).
Overall imports rose 1.0% as higher oil prices pushed up imports of industrial supplies by 3.6% (16.3% y/y). Imports of nonauto consumer goods also rose a firm 1.1% (4.6% y/y) but capital goods imports fell 1.2% (+6.6% y/y) after a 2.1% September jump.
The U.S. trade deficit in goods with China again deteriorated m/m to $25.9B versus a deficit of $24.4B during October of &#39;06. During the first ten months of this year the deficit with China averaged $21.4B versus $19.1B in 2006. Exports to China rose 13.9% y/y and imports rose 7.6%.
Today&#39;s announcement by the Federal Reserve of actions by it, and other Central Banks, designed to address elevated pressures in short-term funding markets can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20071212a.htm"> here</a>.Is the United States Losing Its Productivity Advantage? from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci13-8/ci13-8.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">Foreign Trade&nbsp;</a></th>
<th scope="col">October</th>
<th scope="col">September</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 class="odd">
<td class="firstcol">U.S. Trade Deficit</td>
<td>$57.8B</td>
<td>$57.1B</td>
<td>$58.2B (10/06)</td>
<td>$758.5</td>
<td>$714.4B</td>
<td>$612.1B</td>
</tr>
<tr>
<td class="firstcol">Exports - Goods &amp; Services</td>
<td>0.9%</td>
<td>0.8%</td>
<td>13.7%</td>
<td>12.7%</td>
<td>10.9%</td>
<td>13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports - Goods &amp; Services</td>
<td>1.0%</td>
<td>0.7%</td>
<td>9.2%</td>
<td>10.4%</td>
<td>12.9%</td>
<td>16.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. foreign trade deficit deepened slightly to $57.8B from $57.1B in September which was slightly deeper than the deficit initially reported. Consensus expectations had been for a deficit of 57.3B. The deficit averaged $58.7B [...]

U.S. Trade Deficit Deepened Slightly in October

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071212c.jpg" align="left" border="0" height="265" width="353">
The U.S. foreign trade deficit deepened slightly to $57.8B
from $57.1B in September which was slightly deeper than the deficit
initially reported. Consensus expectations had been for a deficit of
57.3B.
The deficit averaged $58.7B during the first ten months of
this year compared to an average of $64.0B during the first ten months
of 2006.
U.S. exports rose 0.9% after a downwardly revised 0.8% during
September. he revision was due a slightly lower gain in services exports
Exports of goods rose 0.7% (14.6% y/y) after a 1.4% jump
during September. Exports of capital goods surged 3.4% (10.4% y/y) led
by a 21.9% pop in exports of civilian aircraft (37.9% y/y. That rise
was offset by a 10.4% decline (+5.1% y/y) in exports of computers while
exports of electric apparatus rose 2.2% (4.6% y/y) after two months of
sharp decline. Exports of nonauto consumer goods also fell by 3.2%
+11.1% y/y).<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071212d.jpg" align="right" border="0" height="265" width="353">
U.S. exports of services rose 1.4% after a decline of 0.5%
during September, initially reported as an increase. Travel exports
recovered 1.4% (19.4% y/y) and passenger fares surged 2.2% 16.8% y/y).
Overall imports rose 1.0% as higher oil prices pushed up
imports of industrial supplies by 3.6% (16.3% y/y). Imports of nonauto
consumer goods also rose a firm 1.1% (4.6% y/y) but capital goods
imports fell 1.2% (+6.6% y/y) after a 2.1% September jump.
The U.S. trade deficit in goods with China again deteriorated
m/m to $25.9B versus a deficit of $24.4B during October of '06. During
the first ten months of this year the deficit with China averaged
$21.4B versus $19.1B in 2006. Exports to China rose 13.9% y/y and
imports rose 7.6%.
Today's announcement by the Federal Reserve of
actions by it, and other Central Banks, designed to address elevated
pressures in short-term funding markets can be found <a href="http://www.federalreserve.gov/newsevents/press/monetary/20071212a.htm">
here</a>.Is the United States Losing Its Productivity
Advantage? from the Federal Reserve Bank of New York can be
found <a href="http://www.newyorkfed.org/research/current_issues/ci13-8/ci13-8.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">Foreign
Trade&nbsp;</a></th>
<th scope="col">October</th>
<th scope="col">September</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 class="odd">
<td class="firstcol">U.S. Trade Deficit</td>
<td>$57.8B</td>
<td>$57.1B</td>
<td>$58.2B 
(10/06)</td>
<td>$758.5</td>
<td>$714.4B</td>
<td>$612.1B</td>
</tr>
<tr>
<td class="firstcol">Exports - Goods &amp;
Services</td>
<td>0.9%</td>
<td>0.8%</td>
<td>13.7%</td>
<td>12.7%</td>
<td>10.9%</td>
<td>13.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports - Goods &amp;
Services</td>
<td>1.0%</td>
<td>0.7%</td>
<td>9.2%</td>
<td>10.4%</td>
<td>12.9%</td>
<td>16.8%</td>
</tr>
</tbody>
</table>
U.S. Import Prices Boosted in
November by Oil 
by <a href="/comment/Moeller.html">Tom
Moeller</a> December 12, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071212e.jpg" align="left" border="0" height="265" width="353">
During November, another jump in petroleum prices raised
overall import prices by 2.7% after a 1.4% October increase. Consensus
expectations had been for a 2.4% gain. 

Petroleum prices, overall, gained 18.0% (68.7% y/y). Fuel oil
prices rose 18.0% (68.7% y/y) and crude petroleum prices rose 7.5%
(53.0% y/y).
Less petroleum, import prices rose 0.7% after a 0.5% rise
uptick during October.
 
 During
the last ten years there has been a 66% (negative) correlation between
the nominal trade-weighted exchange value of the US dollar vs. major
currencies and the y/y change in non oil import prices. The correlation
is a reduced 47% against a broader basket of currencies. Why
a Dollar Depreciation May Not Close the U.S. Trade Deficit from
the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/current_issues/ci13-5/ci13-5.html">here</a>
Prices
for industrial supplies &amp; materials excluding petroleum surged
2.7% (7.9% y/y). The detailed import price series can be found in the Haver
USINT database. 
Capital goods import prices rose 0.2% (0.8% y/y). Prices of
computers, peripheral and semiconductors fell 0.2% (-5.1% y/y). Less
the high tech sector, capital goods prices rose an accelerated 0.3%
(3.2% y/y).
Prices for imports of consumer goods rose 0.2% (1.7% y/y) as
apparel prices were unchanged after firm gains early this year (1.5%
y/y). Prices for furniture and household items rose 0.2% (2.0% y/y).
Overall export prices were strong again and posted a 0.9% gain
(6.1%y/y). Agricultural prices rose another strong 1.4% (23.0% y/y)
while nonagricultural prices also were firm and rose 0.8% (4.6% y/y). 

Global Savings, Investment and World Real Interest
Rates is a 2007 working paper from the Royal Bank of Canada
and it can be found <a href="http://www.bankofcanada.ca/en/review/winter06-07/desroches.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export
Prices (NSA)</a></th>
<th scope="col">November</th>
<th scope="col">October</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 class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>2.7%</td>
<td>1.4%</td>
<td>11.4%</td>
<td>4.8%</td>
<td>7.5%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>9.8%</td>
<td>5.1%</td>
<td>53.0%</td>
<td>20.6%</td>
<td>37.6%</td>
<td>30.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.7%</td>
<td>0.5%</td>
<td>3.0%</td>
<td>1.7%</td>
<td>2.7%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">Export- All Commodities</td>
<td>0.9%</td>
<td>0.8%</td>
<td>6.1%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>3.9%</td>
</tr>
</tbody>
</table>
Japan&#8217;s Exports Continue toOutpace Imports 
by <a href="/comment/Brusca.html">Robert
Brusca</a> December
12, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071213a.jpg" align="left" border="0" height="265" width="353">
Japans exports and imports each show generally declining
trends. Imports are up by just 4.4% year/year while exports are
advancing at a pace of 11.4%. Japan&#8217;s services deficit is shrinking.
Its good surplus and current account surplus are each widening. The
current account surplus is widening in both dollar and yen terms (see
table).

Recent macroeconomic data make it clear that Japan&#8217;s economy
is slowing. This is reflected in the import slowing that is in
progress. Japan&#8217;s imports fell by a sharp 6.3% in August then by 0.1%
in September before rebounding with a rise of 0.8% in October. Import
weakness is likely a reflection of the weakness in domestic demand. 


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Japan
Current Account Trends</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="3">In period level of % change</td>
<td colspan="4">Average in period/or %
change</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>12-Mo Prev</td>
</tr>
<tr>
<td class="firstcol">Current Account in $, Millions</td>
<td>$ 22,135</td>
<td>$ 19,489</td>
<td>$ 18,789</td>
<td>$ 20,138</td>
<td>$ 18,303</td>
<td>$ 17,425</td>
<td>$ 14,049</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">In Yen, 100
Millions</td>
</tr>
<tr>
<td class="firstcol">Overall Balance</td>
<td>25,648</td>
<td>22,420</td>
<td>21,932</td>
<td>23,333</td>
<td>21,680</td>
<td>20,641</td>
<td>16,375</td>
</tr>
<tr>
<td class="firstcol">Services Balance</td>
<td>(365)</td>
<td>(1,546)</td>
<td>(2,286)</td>
<td>(1,399)</td>
<td>(1,790)</td>
<td>(1,929)</td>
<td>(1,789)</td>
</tr>
<tr>
<td class="firstcol">Balance on Goods</td>
<td>13,141</td>
<td>10,704</td>
<td>14,404</td>
<td>12,750</td>
<td>10,877</td>
<td>10,651</td>
<td>7,471</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">% m/m</td>
<td colspan="4">% SAAR</td>
</tr>
<tr>
<td class="firstcol">Export Goods %</td>
<td>4.4%</td>
<td>-5.4%</td>
<td>3.4%</td>
<td>8.1%</td>
<td>16.0%</td>
<td>11.8%</td>
<td>24.4%</td>
</tr>
<tr>
<td class="firstcol">Import Goods %</td>
<td>0.8%</td>
<td>-0.1%</td>
<td>-6.3%</td>
<td>-18.8%</td>
<td>10.9%</td>
<td>4.4%</td>
<td>16.4%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan="8">Prices
in %, SAAR</td>
</tr>
<tr>
<td class="firstcol">Export Prices</td>
<td>0.8%</td>
<td>-0.7%</td>
<td>-3.2%</td>
<td>-16.7%</td>
<td>-1.5%</td>
<td>-0.1%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Import Prices</td>
<td>4.4%</td>
<td>-1.4%</td>
<td>-2.5%</td>
<td>-2.1%</td>
<td>11.1%</td>
<td>7.5%</td>
<td>20.5%</td>
</tr>
<tr>
<td class="firstcol">Memo: Yen/$, AVG, Level</td>
<td>115.87</td>
<td>115.04</td>
<td>116.73</td>
<td>115.88</td>
<td>118.75</td>
<td>118.69</td>
<td>116.54</td>
</tr>
</tbody>
</table>
</body></html>

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071211d.jpg" height="265" width="312"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071211e.jpg" height="265" width="312">


Institutional investors and analysts surveyed by ZEW the
Center for European Economic Research at Manheim are becoming
increasingly concerned about the economic outlook for the Euro Area and
Germany, in particular. Among other concerns, the continued rise in the
Euro and the widening repercussions of the problems in the U.S. sub
prime mortgage market are taking their toll. The excess of pessimists
over optimists regarding the outlook for the Euro Area increased to
35.7% in December from 30.0% in November. For Germany alone, the
comparable figures were 37.2% and 32.5%.
The participants in the Survey are also becoming less
confident about current conditions. The excess of optimists over
pessimists regarding current conditions in the euro Area declined to
59.6% from 60.2% in November. The comparable figures for Germany were
63.5% and 70.0%. The first chart shows the balance of opinion on
current conditions and expectations for the outlook for Germany and the
second chart shows the comparable data for the Euro Area.
While confidence regarding current conditions is diminishing,
it should be noted that in the historical context confidence both in
Germany and the Euro Area as a whole remains at a high level, well
above the period of low confidence in current conditions in the first
half of this decade.


<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">ZEW
INDICATORS (Percent Balance)&nbsp;</th>
<th scope="col">Dec 07</th>
<th scope="col">Nov 07&nbsp;</th>
<th scope="col">Dec 06&nbsp;</th>
<th scope="col">M/M 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 colspan="9" class="firstcol">EUROSTAT</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Current
Conditions&nbsp;</td>
<td>59.6</td>
<td>60.2</td>
<td>56.8</td>
<td>-0.6</td>
<td>2.8</td>
<td>70.0</td>
<td>23.8</td>
<td>-28.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Expectations&nbsp;</td>
<td>-35.7</td>
<td>-30.0</td>
<td>-3.0</td>
<td>-5.7</td>
<td>-32.7</td>
<td>-3.5</td>
<td>26.6</td>
<td>32.3</td>
</tr>
<tr class="odd">
<td colspan="9" class="firstcol"> GERMANY&nbsp;&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Current
Conditions&nbsp;</td>
<td>63.5</td>
<td>70.0</td>
<td>63.5</td>
<td>-6.5</td>
<td>0.0</td>
<td>75.9</td>
<td>18.3</td>
<td>-61.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Expectations&nbsp;</td>
<td>-37.2</td>
<td>-32.5</td>
<td>-19.0</td>
<td>-4.7</td>
<td>-18.2</td>
<td>-3.0</td>
<td>22.3</td>
<td>34.8</td>
</tr>
</tbody>
</table>
</body></html>

Institutional investors and analysts surveyed by ZEW the Center for European Economic Research at Manheim are becoming increasingly concerned about the economic outlook for the Euro Area and Germany, in particular. Among other [...]

Pessimism Increases in the Financial Community of the Euro Area

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

260616E.jpg

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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U.S. Retail Sales Beat Expectations, Sales of Discretionary Items Firm

U.S. PPI Total Surged, Core Firm

U.S. PPI Total Surged, Core Firm

Japan’s Exports Continue to Outpace Imports

U.S. Import Prices Boosted in November by Oil

U.S. Trade Deficit Deepened Slightly in October

U.S. Trade Deficit Deepened Slightly in October

Pessimism Increases in the Financial Community of the Euro Area