Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071113g.jpg" align="left" border="0" height="265" width="353">
Spending patterns improved in September from August despite
their downward revision. Sequential rates of growth find 3-month and
6-month rates of growth are generally improved form their respective
year ago pace. Nominal auto sales were especially strong in the quarter
expanding at a growth rate of better than 20%. But excluding autos
consumer spending is still very restrained. For the quarter real German
retail sales excluding autos are up by just a rate of 0.7%. Nominal
retail sales are up at a 1.6% pace in the quarter. Nominal food and
tobacco sales are off by 0.9% in the quarter. Clothing and shoe sales
are up by just 2.3%. The sequential growth rates show more pop than the
quarterly growth rates do. Time will tell if the rebound is authentic
or not.


<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr><th colspan="9" scope="col">German Real and Nominal Retail Sales New QTR </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAGo</td>
<td>New Qtr Saar</td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td>2.0%</td>
<td>-1.1%</td>
<td>0.6%</td>
<td>6.3%</td>
<td>3.7%</td>
<td>1.9%</td>
<td>5.6%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">MV and Parts</td>
<td>-2.4%</td>
<td>4.3%</td>
<td>0.8%</td>
<td>10.7%</td>
<td>12.8%</td>
<td>-2.5%</td>
<td>15.2%</td>
<td>21.8%</td>
</tr>
<tr>
<td class="firstcol">Food Beverages &amp; Tobacco</td>
<td>2.9%</td>
<td>-0.8%</td>
<td>-0.2%</td>
<td>7.7%</td>
<td>4.4%</td>
<td>1.7%</td>
<td>5.1%</td>
<td>-0.9%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td>3.8%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>18.3%</td>
<td>8.2%</td>
<td>14.5%</td>
<td>3.4%</td>
<td>2.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Real</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td>1.6%</td>
<td>-1.5%</td>
<td>0.8%</td>
<td>3.7%</td>
<td>1.7%</td>
<td>0.7%</td>
<td>5.1%</td>
<td>0.7%</td>
</tr>
</tbody>
</table>
</body></html>

Spending patterns improved in September from August despite their downward revision. Sequential rates of growth find 3-month and 6-month rates of growth are generally improved form their respective year ago pace. Nominal auto sales [...]

German Sales Trends Improving; But Still a Moderate Quarter

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071113c.jpg" width="353">
Chain store sales last week eased 0.5% and reversed half of the gain earlier in November, according to the International Council of Shopping Centers (ICSC)-UBS.
For both weeks this month, sales were up a small 0.2% from the October average which fell 0.8% from September.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS rose 0.2% (-0.1% y/y) reversing a price of the prior week&#39;s rise.
The October 2007 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve Board is available <a href="http://www.federalreserve.gov/boarddocs/SnLoanSurvey/200711/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">11/10/07</th>
<th scope="col">11/03/07</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">Total Weekly Chain Store Sales</td>
<td>475.2</td>
<td>477.8</td>
<td>2.7%</td>
<td>3.3%</td>
<td>3.6%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>


</html>

Chain store sales last week eased 0.5% and reversed half of the gain earlier in November, according to the International Council of Shopping Centers (ICSC)-UBS. For both weeks this month, sales were up a small 0.2% from the October [...]

U.S. Chain Store Sales Eased

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071113a.jpg" align="left" border="0" height="265" width="353">
Small business optimism rose by 1.1% last month and reversed all of
its September increase. Nevertheless, the level remained near the lows
of this past Summer, according to the National Federation of
Independent Business (NFIB).
During the last ten years there has been a 70% correlation between
the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms indicating that credit was more difficult
to get reversed all of the September increase, though it remained in an
uptrend.
Respondents expecting the economy to improve fell and remained in
the low range of the last year. During the last ten years there has
been a 72% correlation between the NFIB percentage and the y/y change
in nonfarm payrolls.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071113b.jpg" align="right" border="0" height="265" width="353">
The percent planning to raise capital expenditures fell to near the
lows of this cycle and the percentage planning to raise employment fell
sharply m/m to the lowest level since last December.
The percentage of firms indicating that inventories were too low fell to the current cycle's low..The percentage of firms planning to raise average selling prices remained low as did the percentage of firms actually
raising prices, though the latter rose m/m. During the last ten years
there has been a 60% correlation between the change in the producer
price index and the level of the NFIB price index.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<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/SURVEYS/@S7/@S7.HTM">Nat'l Federation of Independent Business</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>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>96.2</td>
<td>97.3</td>
<td>-4.5%</td>
<td>98.9</td>
<td>101.6</td>
<td>104.6</td>
</tr>
</tbody>
</table>
</body></html>

Small business optimism rose by 1.1% last month and reversed all of its September increase. Nevertheless, the level remained near the lows of this past Summer, according to the National Federation of Independent Business (NFIB). [...]

Small Business Optimism Held Low, Credit Problems Eased

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071113a.jpg" align="left" border="0" height="265" width="353">
Small business optimism rose by 1.1% last month and reversed
all of its September increase. Nevertheless, the level remained near
the lows of this past Summer, according to the National Federation of
Independent Business (NFIB).
During the last ten years there has been a 70% correlation
between the level of the NFIB index and the two quarter change in real
GDP.
The percentage of firms indicating that credit was
more difficult to get reversed all of the September increase, though it
remained in an uptrend.
Respondents expecting the economy to improve fell and remained
in the low range of the last year. During the last ten years there has
been a 72% correlation between the NFIB percentage and the y/y change
in nonfarm payrolls.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071113b.jpg" align="right" border="0" height="265" width="353">
The percent planning to raise capital expenditures fell to
near the lows of this cycle and the percentage planning to raise
employment fell sharply m/m to the lowest level since last December.
The percentage of firms indicating that inventories were too
low fell to the current cycle's low..The percentage of firms planning
to raise average selling prices remained low as did the percentage of
firms actually raising prices, though the latter
rose m/m. During the last ten years there has been a 60% correlation
between the change in the producer price index and the level of the
NFIB price index.
About 24 million businesses exist in the United States. Small
business creates 80% of all new jobs in America.

<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/SURVEYS/@S7/@S7.HTM">Nat'l
Federation of Independent Business</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>
<td class="firstcol">Small Business Optimism Index
(1986=100)</td>
<td>96.2</td>
<td>97.3</td>
<td>-4.5%</td>
<td>98.9</td>
<td>101.6</td>
<td>104.6</td>
</tr>
</tbody>
</table>
U.S. Chain Store Sales Eased 
by <a href="/comment/Moeller.html">Tom
Moeller</a> November 13, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071113c.jpg" align="left" border="0" height="265" width="353">
Chain store sales last week eased 0.5% and reversed half of
the gain earlier in November, according to the International Council of
Shopping Centers (ICSC)-UBS.
For both weeks this month, sales were up a small 0.2% from the
October average which fell 0.8% from September.



During the last ten years there has been a 45% correlation
between the y/y change in chain store sales and the change in nonauto
retail sales less gasoline.

The ICSC-UBS retail
chain-store sales index is constructed using the same-store sales
(stores open for one year) reported by 78 stores of seven retailers:
Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.


The leading indicator of chain store sales from ICSC-UBS rose
0.2% (-0.1% y/y) reversing a price of the prior week's rise.
The October 2007 Senior Loan Officer Opinion Survey
on Bank Lending Practices from the Federal Reserve Board is
available <a href="http://www.federalreserve.gov/boarddocs/SnLoanSurvey/200711/default.htm">here</a>.
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">11/10/07</th>
<th scope="col">11/03/07</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">Total
Weekly Chain Store Sales</td>
<td>475.2</td>
<td>477.8</td>
<td>2.7%</td>
<td>3.3%</td>
<td>3.6%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
Economic Sentiment Among theGerman
Financial Community Takes a Tumble in November 
by <a href="/comment/Curley.html">Louise
Curley</a> November 13, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071113d.jpg" align="left" border="0" height="265" width="353">
After remaining steady in October at -18.1%, the ZEW indicator
of economic sentiment among institutional investors and analysts for
the next 6 months took a tumble in November, falling sharply to -32.5%.
The decline brought the indicator to its lowest value since February
1993. (The history of this indicator is shown in the first chart.)
The indicator is a percent balance measure, that is, it
measures the difference between those participants who are optimistic
and those who are pessimistic. In October, the pessimists outweighed
the optimists by 32.5%. The indicator is based on the qualitative
assessments of the participants regarding the macro economic outlook,
the inflation rate, short and long term interest rates, the stock
market and exchange rates. The decline in sentiment reflects the
deterioration that has been taking place in most of these components.
The continuing uncertainty
regarding the magnitude and spread of the sub prime mortgage collapse
in the U. S. has been a major depressant, but other factors have also
contributed to the decline in sentiment. Inflation has been rising and
in October was 2.45% compared with 1.65% in January. During the time
that the survey took place--October 29 to November 12, the Euro rose
7.23% from $1.3596 to $1.4579. The Frankfurt Xetra Dax (12/31/87=1000)
stock market index declined 2.5% during this same time. The second
chart shows the year over year changes in the daily figures for the
Euro and the Dax stock market index from late October to date, roughly
the time during which the survey took place.
In contrast to their pessimistic views about the next six
months, investors and analysts continue to view current conditions very
favorably with the optimists outweighing the pessimists by 70%, one of
the highest balances on record. The third chart shows the history of
the indicator of current conditions. 

 <img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071113e.jpg" height="265" width="314"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071113f.jpg" height="265" width="314">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;ZEW
INDICATOR OF ECONOMIC SENTIMENT&nbsp; (% Balance)&nbsp;</th>
<th scope="col">Nov 07</th>
<th scope="col">Oct 07&nbsp;</th>
<th scope="col">Nov 06&nbsp;</th>
<th scope="col">M/M&nbsp; Dif&nbsp;</th>
<th scope="col">Y/Y&nbsp;&nbsp;&nbsp;&nbsp;
Dif&nbsp;</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">
Macro Expectation (Next 6 Months)
</td>
<td>-32.5</td>
<td>-18.1</td>
<td>-28.5</td>
<td>-14.4</td>
<td>-4.0</td>
<td>22.3</td>
<td>34.8</td>
<td>44.6</td>
</tr>
<tr>
<td class="firstcol">Current
Economic Conditions&nbsp;</td>
<td>70.0</td>
<td>70.2</td>
<td>53.0</td>
<td>-0.2</td>
<td>17.0</td>
<td>18.3</td>
<td>-61.8</td>
<td>-67.7</td>
</tr>
</tbody>
</table>
German Sales Trends Improving; But
Still a Moderate Quarter 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 13, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071113g.jpg" align="left" border="0" height="265" width="353">
Spending patterns improved in September from August despite
their downward revision. Sequential rates of growth find 3-month and
6-month rates of growth are generally improved form their respective
year ago pace. Nominal auto sales were especially strong in the quarter
expanding at a growth rate of better than 20%. But excluding autos
consumer spending is still very restrained. For the quarter real German
retail sales excluding autos are up by just a rate of 0.7%. Nominal
retail sales are up at a 1.6% pace in the quarter. Nominal food and
tobacco sales are off by 0.9% in the quarter. Clothing and shoe sales
are up by just 2.3%. The sequential growth rates show more pop than the
quarterly growth rates do. Time will tell if the rebound is authentic
or not.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="9" scope="col">German
Real and Nominal Retail Sales New QTR </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Nominal</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Jul-07</td>
<td>3-MO</td>
<td>6-MO</td>
<td>12-MO</td>
<td>YrAGo</td>
<td>New Qtr Saar</td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td>2.0%</td>
<td>-1.1%</td>
<td>0.6%</td>
<td>6.3%</td>
<td>3.7%</td>
<td>1.9%</td>
<td>5.6%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">MV and Parts</td>
<td>-2.4%</td>
<td>4.3%</td>
<td>0.8%</td>
<td>10.7%</td>
<td>12.8%</td>
<td>-2.5%</td>
<td>15.2%</td>
<td>21.8%</td>
</tr>
<tr>
<td class="firstcol">Food Beverages &amp; Tobacco</td>
<td>2.9%</td>
<td>-0.8%</td>
<td>-0.2%</td>
<td>7.7%</td>
<td>4.4%</td>
<td>1.7%</td>
<td>5.1%</td>
<td>-0.9%</td>
</tr>
<tr>
<td class="firstcol">Clothing footwear</td>
<td>3.8%</td>
<td>0.3%</td>
<td>0.2%</td>
<td>18.3%</td>
<td>8.2%</td>
<td>14.5%</td>
<td>3.4%</td>
<td>2.3%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Real</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Retail Ex auto</td>
<td>1.6%</td>
<td>-1.5%</td>
<td>0.8%</td>
<td>3.7%</td>
<td>1.7%</td>
<td>0.7%</td>
<td>5.1%</td>
<td>0.7%</td>
</tr>
</tbody>
</table>
Inflation Trends Turn Bleak in the
Euro Area&#8230; 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 13, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071113h.jpg" align="left" border="0" height="265" width="353">
In October, as energy prices have surged again, the Euro area
is suffering inflation bulging beyond the limits of its ceiling. We
know that the ECB is not happy with this development even though most
of it is due to oil prices and core inflation seems less of a problem.
Still the ECB makes policy without an explicit reference to core prices
unlike the Federal Reserve in the US.
Despite a surging Euro that should help to combat any true
inflation forces in the Euro area economy, the ECB remains wary of this
over top inflation partly because of the ongoing strong money and
credit growth in the EMU. So Europeans find themselves in the sticky
position of seeing inflation flare, the central bank remain wary, ready
to act, even as their currency value remains quite strong and the
competitiveness pressures from that strength are squelching growth and
killing Europe&#8217;s export orders. The European policy dilemma has become
an economic oxymoron: the ECB&#8217;s own threat to hike rates is further
bolstering the euro and further exacerbating the economic problems
within the zone as the ECB does nothing and worries about inflation
pressure which worsen.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="8" scope="col"> Euro
area &amp; Friends: Headline Inflation Yr/Yr</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Year/year</td>
<td colspan="2">Mo/Mo</td>
<td>3Mo: AR</td>
<td>6Mo:Ar</td>
</tr>
<tr>
<td class="firstcol">Core HICP</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>Aug-07</td>
<td>Oct-07</td>
<td>Sep-07</td>
<td>May-07</td>
<td>Apr-07</td>
</tr>
<tr>
<td class="firstcol">Belgium</td>
<td style="color: red;">2.2%</td>
<td>1.5%</td>
<td>1.2%</td>
<td>0.8%</td>
<td>0.1%</td>
<td style="color: red;">3.5%</td>
<td style="color: red;">2.1%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td style="color: red;">2.1%</td>
<td>1.6%</td>
<td>1.3%</td>
<td>0.2%</td>
<td>0.1%</td>
<td style="color: red;">2.6%</td>
<td style="color: red;">2.3%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td style="color: red;">2.7%</td>
<td style="color: red;">2.6%</td>
<td>2.0%</td>
<td>0.2%</td>
<td>0.7%</td>
<td style="color: red;">3.1%</td>
<td style="color: red;">2.7%</td>
</tr>
<tr>
<td class="firstcol">Greece</td>
<td style="color: red;">3.1%</td>
<td style="color: red;">2.9%</td>
<td style="color: red;">2.7%</td>
<td>0.4%</td>
<td>0.3%</td>
<td>1.1%</td>
<td style="color: red;">4.0%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td style="color: red;">3.0%</td>
<td style="color: red;">2.9%</td>
<td style="color: red;">2.3%</td>
<td>0.2%</td>
<td>0.3%</td>
<td style="color: red;">2.3%</td>
<td style="color: red;">2.5%</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td style="color: red;">2.3%</td>
<td>1.8%</td>
<td>1.7%</td>
<td>0.7%</td>
<td>0.3%</td>
<td style="color: red;">4.7%</td>
<td style="color: red;">3.3%</td>
</tr>
<tr>
<td class="firstcol">Luxembourg</td>
<td style="color: red;">3.6%</td>
<td style="color: red;">2.5%</td>
<td>1.8%</td>
<td>0.6%</td>
<td>0.0%</td>
<td style="color: red;">2.8%</td>
<td style="color: red;">2.7%</td>
</tr>
<tr>
<td class="firstcol">The Netherlands</td>
<td>1.6%</td>
<td>1.3%</td>
<td>1.0%</td>
<td>0.4%</td>
<td>0.0%</td>
<td>1.5%</td>
<td>0.6%</td>
</tr>
<tr class="grey2">
<td class="firstcol" colspan="8">EU:
Other HICP/CPI</td>
</tr>
<tr>
<td class="firstcol">UK(HICP)</td>
<td style="color: red;">2.0%</td>
<td>1.7%</td>
<td>1.8%</td>
<td>0.5%</td>
<td>0.1%</td>
<td style="color: red;">2.7%</td>
<td>1.5%</td>
</tr>
</tbody>
</table>
</body></html>

Louise Curley

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112c.jpg" align="left" border="0" height="265" width="353">
Another indicator that all is not well in Japan was released today.
The seasonally unadjusted diffusion index of consumer confidence for a
two or more person household was 42.8% in October, compared with 44.1%
in September and 48.2% in October, 2006. A value below 50% means that
the majority of the participants in the survey have a negative view of
the outlook. While the decline in October is significant, it should be
noted that since June, 1982, when the series began, there have been few
times when the level of the index was above 50% as can
be seen in the first chart. Japanese consumers have not been
particularly optimistic over the past twenty-five years. Monthly data
for confidence are available only since December 2004.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112d.jpg" align="right" border="0" height="265" width="353">
The index is based on the average of four sentiment indexes: Overall
Livelihood, Income Growth, Employment and Willingness to Buy. The year
to year changes in each of these indexes are shown in the second chart.
As shown there, the year to year changes have been declining from their
early 2006 peak and, since early 2007, have become negative. The
declines in the Employment and Willingness to Buy indexes have been
particularly sharp.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;JAPAN:&nbsp; CONSUMER CONFIDENCE (Diffusion Indexes)&nbsp;</th>
<th scope="col">Oct 07</th>
<th scope="col">Sep 07&nbsp;</th>
<th scope="col">Oct 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 class="firstcol">Total: Two or More Persons Households</td>
<td>42.8</td>
<td>44.1</td>
<td>48.2</td>
<td>-1.3</td>
<td>-5.4</td>
<td>48.3</td>
<td>47.3</td>
<td>45.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Overall Livelihood</td>
<td>41.0</td>
<td>42.2</td>
<td>45.6</td>
<td>-1.2</td>
<td>-4.6</td>
<td>45.6</td>
<td>45.8</td>
<td>44.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Income Growth</td>
<td>42.2</td>
<td>42.4</td>
<td>44.9</td>
<td>-0.3</td>
<td>-1.9</td>
<td>44.7</td>
<td>44.8</td>
<td>43.1</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;&nbsp; Employment</td>
<td>45.3</td>
<td>46.4</td>
<td>52.4</td>
<td>-1.1</td>
<td>-7.1</td>
<td>52.8</td>
<td>48.9</td>
<td>45.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Willingness to Buy</td>
<td>42.5</td>
<td>45.5</td>
<td>49.8</td>
<td>-2.7</td>
<td>-7.0</td>
<td>50.0</td>
<td>49.5</td>
<td>48.9</td>
</tr>
</tbody>
</table>
</body></html>

Another indicator that all is not well in Japan was released today. The seasonally unadjusted diffusion index of consumer confidence for a two or more person household was 42.8% in October, compared with 44.1% in September and 48.2% [...]

Japanese Consumers Becoming More Pessimistic

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112b.jpg" align="left" border="0" height="265" width="353">
The OECD trend restored leading indicators are now indicating
an outright slowing rather than a moderating for growth. These signals
have been gradually shifting toward the more pessimistic. Japan&#8217;s
signal is now quite dour. The
US and Europe are showing almost the same degree of slowdown in the new
numbers. The table is arrayed with some six month calculations since
that is the OECD&#8217;s preferred way of assessing its data. No matter how
you slice this month the outlook is for weakening.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col">OECD
Trend-Restored Leading Indicators </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="5" class="firstcol">Growth
Progression-SAAR</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td style="color: red;">-5.8%</td>
<td style="color: red;">-1.0%</td>
<td style="color: red;">0.4%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD7</td>
<td style="color: red;">-7.8%</td>
<td style="color: red;">-1.8%</td>
<td style="color: red;">-0.4%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Europe</td>
<td style="color: red;">-4.5%</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">-0.3%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Japan</td>
<td style="color: red;">-21.6%</td>
<td style="color: red;">-12.1%</td>
<td style="color: red;">-6.6%</td>
<td style="color: red;">1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td style="color: red;">-5.3%</td>
<td style="color: red;">1.3%</td>
<td style="color: red;">1.4%</td>
<td>2.0%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Six-month
Readings at
6-Month Intervals:</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td style="color: red;">-1.0%</td>
<td>1.8%</td>
<td style="color: red;">0.5%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD 7</td>
<td style="color: red;">-1.8%</td>
<td>1.0%</td>
<td style="color: red;">-0.5%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Europe</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">1.1%</td>
<td style="color: red;">1.8%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Japan</td>
<td style="color: red;">-12.1%</td>
<td style="color: red;">-0.7%</td>
<td style="color: red;">-0.1%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td style="color: red;">1.3%</td>
<td>1.6%</td>
<td style="color: red;">-0.9%</td>
<td>5.1%</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD RED</td>
</tr>
</tbody>
</table>
</body></html>

The OECD trend restored leading indicators are now indicating an outright slowing rather than a moderating for growth. These signals have been gradually shifting toward the more pessimistic. Japan’s signal is now quite dour. The US [...]

OECD Shifts to Slowdown Signal

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112e.jpg" width="353">
The headline commodity price worry is the rise in oil and energy prices: 57.2% for WTI and 28.7% for gasoline since the beginning of the year. And gasoline prices look to be headed higher while rubber prices have soared 62.8% this year. 
With any luck, however, that isn&#39;t the whole story. There seem to be other factors which will mitigate the effect that these gains will have on overall consumer price inflation.
The first is that factory sector pricing depends both on overall demand growth, which is easing, and the overall rise in costs of which commodity prices account for 25% or less. The other 75% is labor costs, and the employment cost index for factory workers is up 1.2% so far this year versus a 1.8% gain last year, a 3.4% rise in 2005 and a 4.8% rise during 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112f.jpg" width="353">
The second is that for the economy overall, the dependence on oil is roughly half what it was in the early 1970s due to conservation and improved efficiencies in production techniques. And, in total, U.S. demand growth has slowed as well as the growth in the Fed&#39;s monetization of that growth. Year to year growth in the monetary base through October was 2.5% versus a 3.9% rise last year and a 4.3% 2005 increase.
Finally, other commodity prices have topped or have been declining. The housing market&#39;s weakness has dropped lumber prices 5% so far this year after a 15% decline last year, and a 4% decline in 2004. In addition, steel scrap prices have been roughly flat this year after strong gains in years prior. Zinc prices are 31% lower so far this year and have retraced most of a strong gain at the end of 2006. Similarly, aluminum prices have fallen 12% this year and have retraced the strong gains during the latter part of 2006.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112a.jpg" width="353"> 
In conclusion, inflation worries have affected the consumer&#39;s psychology greatly. The worries have been enough to drop consumer sentiment by nearly one quarter since the highs early this year. This would seem to guarantee some near term slowing in consumer spending. The mitigating factors sighted above, with that luck, will prevent a protracted decline.

</body>
</html>

The headline commodity price worry is the rise in oil and energy prices: 57.2% for WTI and 28.7% for gasoline since the beginning of the year. And gasoline prices look to be headed higher while rubber prices have soared 62.8% this [...]

Commodity Prices: Oil Up, Most Other Inflation Forces Topped

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112e.jpg" align="left" border="0" height="265" width="353">
The headline commodity price worry is the rise in oil and
energy prices: 57.2% for WTI and 28.7% for gasoline since the beginning
of the year. And gasoline prices look to be headed higher while rubber
prices have soared 62.8% this year. 
 

With any luck, however, that isn't the whole story. There seem
to be other factors which will mitigate the effect that these gains
will have on overall consumer price inflation.
The first is that factory sector pricing depends both on
overall demand growth, which is easing, and the overall rise in costs
of which commodity prices account for 25% or less. The other 75% is
labor costs, and the employment cost index for factory workers is up
1.2% so far this year versus a 1.8% gain last year, a 3.4% rise in 2005
and a 4.8% rise during 2004.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112f.jpg" align="right" border="0" height="265" width="353">
The second is that for the economy overall, the dependence on
oil is roughly half what it was in the early 1970s due to conservation
and improved efficiencies in production techniques. And, in total, U.S.
demand growth has slowed as well as the growth in the Fed's
monetization of that growth. Year to year growth in the monetary base
through October was 2.5% versus a 3.9% rise last year and a 4.3% 2005
increase.
Finally, other commodity prices have topped or have been
declining. The housing market's weakness has dropped lumber prices 5%
so far this year after a 15% decline last year, and a 4% decline in
2004. In addition, steel scrap prices have been roughly flat this year
after strong gains in years prior. Zinc prices are 31% lower so far
this year and have retraced most of a strong gain at the end of 2006.
Similarly, aluminum prices have fallen 12% this year and have retraced
the strong gains during the latter part of 2006.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112a.jpg" align="left" border="0" height="265" width="353"> 
 

In conclusion, inflation worries have affected the consumer's
psychology greatly. The worries have been enough to drop consumer
sentiment by nearly one quarter since the highs early this year. This
would seem to guarantee some near term slowing in consumer spending.
The mitigating factors sighted above, with that luck, will prevent a
protracted decline.

OECD Shifts to Slowdown Signal 
by <a href="/comment/Brusca.html">Robert
Brusca</a> November 12, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112b.jpg" align="left" border="0" height="265" width="353">
The OECD trend restored leading indicators are now indicating
an outright slowing rather than a moderating for growth. These signals
have been gradually shifting toward the more pessimistic. Japan&#8217;s
signal is now quite dour. The
US and Europe are showing almost the same degree of slowdown in the new
numbers. The table is arrayed with some six month calculations since
that is the OECD&#8217;s preferred way of assessing its data. No matter how
you slice this month the outlook is for weakening.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead><tr>
<th colspan="5" scope="col">OECD
Trend-Restored Leading Indicators </th>
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="5" class="firstcol">Growth
Progression-SAAR</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>3Mos</td>
<td>6Mos</td>
<td>12mos</td>
<td>Yr-Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td style="color: red;">-5.8%</td>
<td style="color: red;">-1.0%</td>
<td style="color: red;">0.4%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD7</td>
<td style="color: red;">-7.8%</td>
<td style="color: red;">-1.8%</td>
<td style="color: red;">-0.4%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Europe</td>
<td style="color: red;">-4.5%</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">-0.3%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Japan</td>
<td style="color: red;">-21.6%</td>
<td style="color: red;">-12.1%</td>
<td style="color: red;">-6.6%</td>
<td style="color: red;">1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td style="color: red;">-5.3%</td>
<td style="color: red;">1.3%</td>
<td style="color: red;">1.4%</td>
<td>2.0%</td>
</tr>
<tr>
<td colspan="5" class="firstcol">Six-month
Readings at
6-Month Intervals:</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Recent six</td>
<td>6Mo Ago</td>
<td>12Mo Ago</td>
<td>18MO Ago</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD</td>
<td style="color: red;">-1.0%</td>
<td>1.8%</td>
<td style="color: red;">0.5%</td>
<td>4.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD 7</td>
<td style="color: red;">-1.8%</td>
<td>1.0%</td>
<td style="color: red;">-0.5%</td>
<td>4.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Europe</td>
<td style="color: red;">-1.6%</td>
<td style="color: red;">1.1%</td>
<td style="color: red;">1.8%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD Japan</td>
<td style="color: red;">-12.1%</td>
<td style="color: red;">-0.7%</td>
<td style="color: red;">-0.1%</td>
<td>4.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">OECD US</td>
<td style="color: red;">1.3%</td>
<td>1.6%</td>
<td style="color: red;">-0.9%</td>
<td>5.1%</td>
</tr>
<tr class="odd">
<td colspan="5" class="firstcol">Slowdowns
indicated by BOLD RED</td>
</tr>
</tbody>
</table>
Japanese Consumers Becoming More
Pessimistic 
by <a href="/comment/Curley.html">Louise
Curley</a> November 12, 2007


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112c.jpg" align="left" border="0" height="265" width="353">
Another indicator that all is not well in Japan was released
today. The seasonally unadjusted diffusion index of consumer confidence
for a two or more person household was 42.8% in October, compared with
44.1% in September and 48.2% in October, 2006. A value below 50% means
that the majority of the participants in the survey have a negative
view of the outlook. While the decline in October is significant, it
should be noted that since June, 1982, when the series began, there
have been few times when the level
of the index was above 50% as can be seen in the first chart. Japanese
consumers have not been particularly optimistic over the past
twenty-five years. Monthly data for confidence are available only since
December 2004.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071112d.jpg" align="right" border="0" height="265" width="353">
The index is based on the average of four sentiment indexes:
Overall Livelihood, Income Growth, Employment and Willingness to Buy.
The year to year changes in each of these indexes are shown in the
second chart. As shown there, the year to year changes have been
declining from their early 2006 peak and, since early 2007, have become
negative. The declines in the Employment and Willingness to Buy indexes
have been particularly sharp.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol">&nbsp;JAPAN:&nbsp;
CONSUMER CONFIDENCE (Diffusion Indexes)&nbsp;</th>
<th scope="col">Oct 07</th>
<th scope="col">Sep 07&nbsp;</th>
<th scope="col">Oct 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 class="firstcol">Total: Two or More
Persons Households</td>
<td>42.8</td>
<td>44.1</td>
<td>48.2</td>
<td>-1.3</td>
<td>-5.4</td>
<td>48.3</td>
<td>47.3</td>
<td>45.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Overall
Livelihood</td>
<td>41.0</td>
<td>42.2</td>
<td>45.6</td>
<td>-1.2</td>
<td>-4.6</td>
<td>45.6</td>
<td>45.8</td>
<td>44.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Income
Growth</td>
<td>42.2</td>
<td>42.4</td>
<td>44.9</td>
<td>-0.3</td>
<td>-1.9</td>
<td>44.7</td>
<td>44.8</td>
<td>43.1</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;&nbsp; Employment</td>
<td>45.3</td>
<td>46.4</td>
<td>52.4</td>
<td>-1.1</td>
<td>-7.1</td>
<td>52.8</td>
<td>48.9</td>
<td>45.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;
Willingness to Buy</td>
<td>42.5</td>
<td>45.5</td>
<td>49.8</td>
<td>-2.7</td>
<td>-7.0</td>
<td>50.0</td>
<td>49.5</td>
<td>48.9</td>
</tr>
</tbody>
</table>
</body></html>

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

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

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Sandy Batten

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Total retail sales rose a much larger-than-expected 0.9% m/m (6.9%y/y) in May following a slightly downwardly revised 0.4% monthly gain in April (previously 0.5% m/m), according to data released by the U.S. Census Bureau. The Action Economics Forecast Survey looked for a 0.5% m/m gain. Excluding autos, other sales increased 0.8% m/m (7.5% y/y) after an unrevised 0.7% m/m increase in April. Expectations were for a 0.5% monthly rise.

Elevated retail gasoline prices continued to boost the value of gasoline sales in May. Gasoline sales increased 3.4% m/m (26.5% y/y) in May on top of a 2.8% m/m increase in April. However, both monthly increases were slower than the 14.2% monthly jump reported in March. Gasoline sales accounted for 31% of total sales in May. However, sales were solid even without gasoline sales. Total sales excluding gasoline rose 0.7% m/m in April, up from 0.2% m/m in April. Sales excluding both autos and gasoline increased 0.5% m/m in May, the same monthly gain as in April.

The control group of sales (total sales excluding food services, autos, gasoline and building materials that the BEA uses to construct PCE in the national accounts) posted another solid increase in May, rising 0.7% m/m (6.3% y/y) following an unrevised 0.5% monthly increase in April. The strong performance at the end of Q1 followed by solid gains in April and May put the April-May level of control group sales up 8.6% at an annual rate from the Q1 average, pointing to another solid contribution by consumption to overall GDP growth in Q2. Consumer spending remains surprisingly resilient notwithstanding the recent hit to disposable income from the marked increase in energy prices.

Sales generally increased across major sectors in May. Auto sales rebounded, rising 1.2% m/m in May and more than reversing the 0.9% monthly decline in April. This was the third gain in auto sales in the past four months. Furniture sales rose 1.0% m/m but sales at electronics and appliance stores slipped 0.5% m/m. Building material sales gained 1.0% m/m on top of a 1.1% monthly increase in April. Clothing sales rose 0.3% m/m. Sales at general merchandise stores gained 0.4% m/m in May. Miscellaneous sales jumped 2.3% m/m in May, their first monthly gain in three months. Sales by nonstore retailers continued their strong performance, increasing 1.5% m/m in May on top of a 1.1% monthly rise in April. Over the first five months of this year, nonstore retail sales have risen 7.2%, not annualized. By contrast, food sales were unchanged in May from April while sales at restaurants edged down 0.1% m/m in May, their first monthly decline in four months.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Total sales increased 0.9% m/m in May, nearly twice expectations.
- Auto sales rebounded, rising 1.2% m/m in May, more than reversing a 0.9% monthly decline in April. 
- Gasoline sales rose 3.4% m/m in May.
- Excluding auto and gasoline sales, remaining sales increased by a solid 0.5% m/m in May, the same monthly increase as in April.
- Sales of the retail control group that is used to construct PCE rose 0.7% m/m in May and are 8.6% annualized above the Q1 average.

U.S. Retail Sales Jumped More than Expected in May

Winnie Tapasanun

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Mortgage applications fell 3.8% w/w (+8.6% y/y) in the week ending June 12 following a 10.8% rebound in the week ending June 5, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The latest reading was the fourth w/w fall in five weeks, lowering the index to 269.5. Applications for loans to purchase a house slid 3.4% (+3.0% y/y) in the June 12 week, down for the fourth time in five weeks, after a 7.3% rise in the previous week. Applications for loan refinancing dropped 4.5% (+17.0% y/y) in the June 12 week, the seventh w/w decline in eight weeks, following a 15.3% jump in the June 5 week.

The effective interest rate on a 30-year fixed-rate loan was unchanged at 6.78% in the week ending June 12; it was above a low of 6.24% in the February 27 week but below a peak of 8.12% in the week of October 20, 2023. The rate on 15-year fixed-rate mortgages edged up 2bps to 6.18% in the June 12 week, the highest in three weeks, from 6.16% in the previous week; it was up from a low of 5.60% in the week of September 20, 2024 but down from a high of 7.44% in the week of October 27, 2023. Meanwhile, the rate on 30-year jumbo loans declined 4bps to 6.78% in the June 12 week from 6.82% in the prior week; it was above a low of 6.25% in the February 27 week but below a high of 7.99% in the week of October 27, 2023. The rate on a 5-year ARM fell 7bps to 6.16% in the June 12 week, the first w/w decline in six weeks, from 6.23% in the previous week (the highest since the week of August 15, 2025); it was above a low of 5.38% in the February 20 week but below a high of 7.31% in the week of October 27, 2023.

The share of applications for refinancing an existing loan edged up to 40.3% of total applications in the week ending June 12—the fourth w/w increase in five weeks and the highest level since the May 15 week—after rising to 40.2% in the week ending June 5; it remained below a peak of 61.9% in the January 16 week but above a low of 34.6% in the week of May 23, 2025. The adjustable-rate mortgage (ARM) share of activity slipped to 8.5% in the June 12 week from 8.6% in the prior week; it was below a peak of 12.9% in the week of September 12, 2025 but above a low of 4.7% in the week of January 3, 2025.

The average size of a mortgage loan fell 1.5% w/w (+3.7% y/y) to $394,100 in the June 12 week, the lowest level since the April 3 week, after a 0.4% rebound to $399,900 in the June 5 week. The average size of a purchase loan dropped 1.9% (+4.0% y/y) to $456,600 in the June 12 week following a 2.8% recovery to $465,300 in the prior week. The average size of a loan to refinance a mortgage fell 0.4% (+7.0% y/y) to $301,400 in the June 12 week on top of a 2.3% decline to $302,500 in the previous week, marking the third consecutive w/w fall, the sixth decline in seven weeks, and the lowest level since the week of July 25, 2025.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Purchase applications -3.4% w/w, down for fourth time in five weeks; refinance applications -4.5% w/w, seventh fall in eight weeks.
- Effective interest rate on 30-year fixed loans unchanged at 6.78%, up from a late-February low of 6.24%.
- Average loan size down for the second time in three weeks, lowest since the April 3 week.

U.S. Mortgage Applications Down 3.8% in the June 12 Week, Fourth Drop in Five Weeks

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It's an interesting time for the Bank of England to be meeting; it has its next policy meeting on June 18. Top money center central banks have been meeting, and the European Central Bank delivered a rate hike, with what is believed to be a likelihood of another hike before the end of the year. The Bank of Japan as just met and executed a 25-basis-point rate hike that brought the overnight interest rate up to 1% for the first time in 31 years. The Federal Reserve meets today and although the Fed is not expected to make an interest rate change, it is widely expected to remove the language that implies the next rate change is likely to be a reduction. Against that background, there is a pending deal to be signed on Friday between the United States and Iran to end the hostilities, to open the Strait of Hormuz, and to allow a normalization—or at least a transition toward normalization—of traffic flow through the Strait of Hormuz and the restoration of the delivery of the world's oil supplies.

Against this background, the Bank of England will be making its rate decision. Part of this background shows other central banks having taken steps to become less accommodative or more vigilant against inflation risks and what have been ongoing overshoots of inflation targets by monetary policy globally. The Bank of England is part of this phenomenon as its rate of inflation, measured by the CPIH, is 3% year-over-year, a full percentage point above where it's supposed to be. However, both the CPIH and the HICP treatments for measuring U.K. inflation show inflation edging slightly lower—from 3% for the CPIH over 12 months to 2.7% over three months annualized. For the HICP, it moves from 2.9% over 12 months to a 2.7% annual rate over three months. Both of these are small moves but in the right direction. In addition, the CPIH core measure, excluding food, energy, alcohol, and tobacco, shows inflation declining from 2.9% over 12 months to 2.6% at an annual rate over six months, and to 1.7% at an annual rate over three months.

In short, inflation progress in the U.K. is very much in gear for the headline; inflation is quite moderately easing, however. For the core, the move lower is impressive and considerable. The question is whether the MPC at the Bank of England will find these movements sufficient in and of themselves to stay their hand and hold interest rate policy, or whether the Committee will join the ranks of central banks hiking interest rates to make sure that inflation makes that turn lower.

The situation in the Strait of Hormuz is hopeful, but not definitive, and there have been a number of ceasefires in the Middle East that have been called and then broken up relatively quickly. This time, markets are reacting to this particular announcement much more decisively and treating it as if this one is the ‘Real McCoy’ with oil prices having fallen down into the mid $70/barrel range and other indicators showing that markets are convinced that prices are moving lower too. Are the Bank of England's MPC members buying onto this as well? Or are they going to treat this as perhaps one last opportunity to get interest rates up and to make sure that the inflation rate goes down?

U.K. inflation on a monthly basis shows a slight tendency to accelerate in May, with inflation diffusion measuring inflation acceleration month-to-month at 58.3%, above the neutral reading of 50. However, diffusion had been at 50% in April and at 41.7% in March. Acceleration has been broadly blunted. In addition, the May increase in the CPIH was only 0.1%, the same as in April, with March having posted a much stronger increase of 0.4%.

Looking at trends sequentially over 12 months, six months and three months, diffusion is only 25% over 12 months; it is 50% over six months and 25% over three months. These metrics reinforce the view that inflation is not broadly accelerating but rather decelerating and moving back into line.

Taking the year-over-year inflation rate, it's a ranking of overall inflation rates back to January 2000. The headline CPIH is still high at a 74.4 percentile standing; that means it has been higher than 3% about 25% of the time and lower about 75% of the time. The average ranking across the various metrics in the table is 61%. That's above a ranking of 50% that delineates the median for the period. And despite the fast fall in the CPIH core rate, the year-over-year core is at 2.9% and has an 81.2 percentile ranking, meaning it has been higher since January 2000, less than 20% of the time. However, that 12-month rate of 2.9% is now down to 1.7% over three months. There are too many ways to look at inflation, at the environment, at what other central banks have done, and at trends to know with any certainty what the BOE will do.

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The Bank of England has had a long period of overshooting its inflation target. It certainly will want to make sure that it's on a clear path toward getting inflation back to 2%. There's a question here about how much the Bank of England will want to trust the trend that it sees, how much it wants to trust the fast drop in the core rate, and then how much it wants to believe that the deal struck with Iran to open the Strait of Hormuz is going to prove durable. There are no real answers to these questions; they're going to be based upon opinions and perceptions, and they're also going to be based upon the pressure that the Bank of England feels about needing to make sure that it gets inflation back to 2% after its long period of intransigence. We'll find this out tomorrow.

United Kingdom

U.K. Inflation Dips and Shows Progress

Michael J. Moran

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The headline index on import prices rose 1.9% in May, close to the blistering pace in April and the fourth consecutive high-side reading. This recent pressure has pulled the year-over-year change to 6.7%, a distinct shift from last year when import prices showed no change over the 12 months of 2025.

Prices of petroleum products have been the most important factor behind the recent surge, increasing 13.0% in May after an average of 17.8% in the prior two months. However, prices excluding petroleum products also have stirred this year, as they have increased more than 0.6% in each of the past five months. May posted the firmest increase in this string of brisk readings (1.3%). Prices of consumer goods had been increasing moderately in early 2026, but they jumped 0.5% in May. The changes in capital and consumer goods led to an increase of 0.8% in nonpetroleum prices in May and an average of 0.6% in the first five months of the year.

Some observers might seek to look for the effects of tariffs on import prices, but these figures would not be especially helpful in this regard, as prices are recorded before the imposition of tariffs. However, if foreign producers wished to absorb the tariff burden to remain competitive in the US market, they could reduce invoiced prices to keep post-tariff prices steady. Indeed, nonpetroleum prices softened after April of last year following the announcement of President Trump’s Liberation Day tariffs. The subsequent easing of some of the draconian tariffs and the nullification of tariffs imposed under the International Emergency Economic Powers Act might be factors leading importers to return to original prices this year. Given that the pressure on import prices ex-petroleum has been concentrated in the capital goods area, there does not seem to be a rush to return to pre-tariff pricing.

On the export side, prices rose 1.3% in May, continuing the firm pace seen in the preceding four months. Petroleum prices have played a role in this pressure, as shown by an increase of 2.4% in the industrial supply category (petroleum prices alone are not available on the export side). Food prices also have jumped this year, increasing 0.8% in May after an average of 1.2% in the prior three months. Prices of capital goods were tame in the early months of the year, but they have firmed in the past two months (0.5% in April and 0.7% in May).

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Petroleum products led import prices higher, but capital goods also had an influence.
- Petroleum was also a factor on the export side; some stirring in food and capital goods.

Import and Export Prices: Firm in May

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Weighed down by further rises in longer-term interest rates, housing construction continued to languish in May. Housing starts plunged 15.4% m/m (-8.7% y/y) in May on top of a downwardly revised 8.5% monthly decline in April (previously -2.8% m/m). The level of starts plummeted to 1.177 million, the lowest since May 2020 when the economy was locked down during the COVID pandemic. The Action Economics Forecast Survey expected a 2.4% m/m decline to a level of 1.432 million units. The April/May average for starts was 1.285 million, 9.4% below the Q1 average. Residential investment has been a persistent drag on real GDP growth recently, subtracting from overall growth in each of the previous five quarters. Today’s report points to another subtraction in Q2.

Single-family starts fell 1.9% m/m (-6.7% y/y) in May on top of a downwardly revised 11.6% monthly plunge in April (previously -9.0% m/m). Multi-family starts, which had generally been trending up over the past year or so, albeit with quite a bit of volatility, plummeted 40.2% m/m (-14.2% y/y) in May following a downwardly revised 2.4% m/m decline in April (previously +10.3% m/m).

Starts fell in three of the four major geographic regions. Starts rose 3.7% m/m in the Midwest with gains in both single-family and multi-family starts. By contrast, starts fell in each of the other three regions, plunging 26.8% m/m in the Northeast, the third monthly decline in the past four months, falling 17.0% m/m in the South, also the third monthly decline in the past four months, and declining 17.2% m/m in the West, the fourth monthly decline in the past five months.

The performance of building permits is typically less volatile than that of starts. Total permits edged down 0.7% m/m (-0.2% y/y) to 1.413 million units in May following a 4.4% monthly gain in April and an 11.5% m/m fall in March. Expectations were for a 0.3% monthly increase in May. Single-family permits edged up 0.6% m/m (-1.8% y/y) in May versus a 1.6% monthly decline in April and a 3.7% m/m drop in March. By contrast, multi-family permits fell 2.8% m/m (+2.5 y/y) in May but this was after a 15.8% monthly surge in April.

In contrast to the regional performance of starts, permits fell in the Midwest (-18.7% m/m) but rose in each of the other three major geographic regions. Permits increased 3.1% m/m in the Northeast in May on top of a 18.1% monthly jump in April. They edged up 1.6% m/m in the South and rose 5.5% m/m in the West, the first monthly gain in three months.

The housing starts and permits figures can be found in Haver’s **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Housing starts plunged 15.4% m/m in May to the lowest level since May 2020 with a significant downward revision to the previously reported April decline.
- Single family starts fell 1.9% m/m while multi-family starts plummeted 40.2% m/m to their lowest level since November 2024.
- Less volatile permits slid 0.7% m/m in May with a slight rise (+0.6% m/m) in single-family permits and a 2.8% monthly drop in multi-family permits.

Economy in Brief

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German Sales Trends Improving; But Still a Moderate Quarter

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Small Business Optimism Held Low, Credit Problems Eased

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Commodity Prices: Oil Up, Most Other Inflation Forces Topped

Commodity Prices: Oil Up, Most Other Inflation Forces Topped