Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071030a.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS reported that chain store sales held steady last week (2.5% y/y) after a 1.5% decline during the week prior.
The average level of store sales in October is down 0.8% from the September average. That follows a 0.8% decline in the average level of chain store sales during September versus the August average.
During the last ten years there has been a 45% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS fell 0.2% (-0.7% y/y) after a 0.2% decline during the prior week.
The decline in chain store sales accompanied a another nickel rise in average gasoline prices across the country to $2.87 (27.9% y/y) per gallon.
Higher gasoline prices followed the 4.7% m/m increase in crude oil prices so far in October to $83.47 per barrel. That rise since has backed off slightly from the daily high this month of $89.48 per barrel but only to $87.57.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<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">10/27/07</th>
<th scope="col">10/20/07</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>473.3</td>
<td>472.9</td>
<td>2.5%</td>
<td>3.3%</td>
<td>3.6%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>


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The International Council of Shopping Centers (ICSC)-UBS reported that chain store sales held steady last week (2.5% y/y) after a 1.5% decline during the week prior. The average level of store sales in October is down 0.8% from the [...]

U.S. Chain Store Sales Sustain Lower Level, Gasoline Prices Up Again

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029c.jpg" width="353">
The average price of the quality adjusted house in the UK declined 0.11% in October to 176.1 thousands of British pounds, the first decline since December, 2005. Other measures of activity in the housing market revealed in the Hometrack Housing Survey also showed weakness. The ratio of the selling price to the asking price declined to 94.3 from 94.8 in September. The average time to sell a house rose to 7.4 weeks from 6.9 and the number of viewings before a sale rose to 11.5 from 11.0. These last two indicators are shown with the house price in the first chart. The house price is on an inverted scale.
December, 2005 marked the end of a year and a half of year of almost constant year to year declines in the quarterly house prices. In spite of the price declines, which may well have resulted from rising interest rates at that time, the housing market did not collapse. Construction remained strong. Once again, there has been a period of rising interest rates that has now begun to affect the housing market. The standard average variable interest rate on mortgages is shown in the second chart together with the house price. The question now is: Will the current rise in interest rates leave the housing market as unscathed as it did in the 2004-5 period?
In one respect, that regarding housing starts, the effect is already apparent. There were only two year to year declines in England&#39;s quarterly housing starts in 2005, one of 4.6% in the first quarter and one of 0.74% in the third quarter. Contrast that with the current decline beginning in the second quarter of 2006 and continuing into the second quarter of 2007. Data for housing starts for all of Great Britain are available only through 2006, but data for England are available through the second quarter of 2007. Since the trend in activity in England largely determine the trend in activity for the whole United Kingdom, as the third chart attests, it is clear that there has already been a significant impact on actual housing starts. 

 <img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029d.jpg"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029e.jpg">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK HOMETRACK HOUSING SURVEY&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">Weighted Average Price (1000 GBP)</td>
<td>176.1</td>
<td>176.3</td>
<td>168.6</td>
<td>-0.11</td>
<td>4.45</td>
<td>165.7</td>
<td>161.9</td>
<td>165.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Sale&#39;s Price as % of Asking Price</td>
<td>94.3</td>
<td>94.8</td>
<td>94.9</td>
<td>-0.5*</td>
<td>-0.6*</td>
<td>94.7</td>
<td>93.3</td>
<td>95.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Time to Sell in weeks</td>
<td>7.4</td>
<td>6.9</td>
<td>6.5</td>
<td>0.5*</td>
<td>0.9*</td>
<td>6.8</td>
<td>7.8</td>
<td>5.3</td>
</tr>
<tr class="odd">
<td class="firstcol"> Average Number of Viewings per Sale </td>
<td>11.5</td>
<td>11.0</td>
<td>10.8</td>
<td>0.5*</td>
<td>0.7*</td>
<td>10.9</td>
<td>12.3</td>
<td>11.00</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Q2 07</td>
<td>Q1 07&nbsp;</td>
<td>Q2&nbsp; 06&nbsp;</td>
<td>Q/Q Chg&nbsp;</td>
<td>Y/Y Chg&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr class="odd">
<td class="firstcol">Housing Starts in England (000)</td>
<td>39.7</td>
<td>42.8</td>
<td>47.2</td>
<td>-7.18</td>
<td>-9.92</td>
<td>178.5</td>
<td>177.0</td>
<td>176.6</td>
</tr>
<tr class="odd">
<td class="firstcol">* difference</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
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The average price of the quality adjusted house in the UK declined 0.11% in October to 176.1 thousands of British pounds, the first decline since December, 2005. Other measures of activity in the housing market revealed in the [...]

U.K. Housing Market Cooling Off

Robert Brusca

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029b.jpg" width="353">
Real retail sales surged in August but they fell in September. Still, the combination leaves retail sales net better off over the past two months. The Yr/Yr chart (real retail sales) shows that the downtrend that has been in place is blunted by these recent movements. Still retail sales in the quarter are going to be lower; they are falling at a 3.2% annual rate in Q3. The main nominal measures show distinct slowing as well. 
Japan continues to be caught in between as the central bank looks for recovery and anticipates rate hikes and as the government plans for tax hikes to address Japan&#39;s excessive fiscal situation. Yet the economy, after a few hopeful quarters, has failed to deliver on the promise of growth and failed to let either of these policy moves occur. Moreover, the backsliding on the inflation front is a clear reminder of how fragile this economy is. The ongoing weakness in the yen should be a constant reminder of Japan&#146;s weakness as export growth continues to drive growth. In short, Japan&#146;s retail sales in September are not so encouraging despite the fact that they let much of the August strength stand. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th colspan=9 scope="col">Japan Real and Nominal Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="even">
<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>QTR Q3 Saar</td>
</tr>
<tr>
<td class="firstcol">Retail Total</td>
<td>-0.6%</td>
<td>3.6%</td>
<td>-2.8%</td>
<td>0.8%</td>
<td>1.6%</td>
<td>0.5%</td>
<td>0.5%</td>
<td>-3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol"> Motor Vehicles and Parts</td>
<td>-6.5%</td>
<td>8.0%</td>
<td>-0.4%</td>
<td>2.3%</td>
<td>-1.9%</td>
<td>0.0%</td>
<td>-6.9%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Food Beverages &amp; Tobacco</td>
<td>0.9%</td>
<td>1.2%</td>
<td>-1.0%</td>
<td>4.7%</td>
<td>-1.4%</td>
<td>0.4%</td>
<td>1.8%</td>
<td>-2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing footwear</td>
<td>-0.4%</td>
<td>8.7%</td>
<td>-8.3%</td>
<td>-3.1%</td>
<td>0.4%</td>
<td>-1.1%</td>
<td>-1.5%</td>
<td>-10.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Real</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Total</td>
<td>-1.5%</td>
<td>3.9%</td>
<td>-2.5%</td>
<td>-0.8%</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>-3.2%</td>
</tr>
</tbody>
</table>
</body>
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Real retail sales surged in August but they fell in September. Still, the combination leaves retail sales net better off over the past two months. The Yr/Yr chart (real retail sales) shows that the downtrend that has been in place is [...]

Japan Retail Sales Edge Back in Sept...Is Slowing Trend Still in Place?

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029a.jpg" align="left" border="0" height="265" width="353">

Readings are mostly firm, strong. 


France's service sector continues to claim strong readings.
While Euro area and French manufacturing measures have softened, the
service sector continues to post its strongest overall reading since
2000. The outlook index shows a bit more weakness, dropping by one
point in October and holding to the 87th percentile in its range. Sales
held to their second strongest reading on the period and were flat on
the month. Expected sales (next 3-months) slipped by one point and
remained in their 82nd percentile. Price expectations slipped and were
in the 30th to 40th percentiles. Employment readings showed current of
&#8216;observed' employment in only its 40th percentile but expected
employment (3-mos) was at 100%. Viva la optimism!


The service sector readings indicate that for France at least
expectations remain somewhat compartmentalized. Manufacturing
indicators have been weakening but the services survey shows no hint of
this or fear of its consequences. The same goes for the unrelenting
rise in the euro which has brought forth a good deal of negative
commentaries from French officials. There appears to have been no
spillover impact into the services sector stemming from these sorts of
concerns. Still, the upward momentum in the services index has clearly
slowed both for the climate and the outlook indicators. We may soon see
if the service sector is really this strong or if survey participants
have just been excessively optimistic. 



<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="11" scope="col">France
INSEE Services Survey Jan 2000-date</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>Jul 
07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr class="grey3">
<td class="firstcol">Climate Indicator</td>
<td>113</td>
<td>112</td>
<td>113</td>
<td>113</td>
<td>100.0</td>
<td>1</td>
<td>113</td>
<td>83</td>
<td>30</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Climate:
3-Mo MAV</td>
<td>113</td>
<td>113</td>
<td>112</td>
<td>111</td>
<td>100.0</td>
<td>1</td>
<td>113</td>
<td>85</td>
<td>28</td>
<td>102</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Climate:
12-Mo MAV</td>
<td>110</td>
<td>110</td>
<td>110</td>
<td>109</td>
<td>100.0</td>
<td>1</td>
<td>110</td>
<td>91</td>
<td>20</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Outlook</td>
<td>7</td>
<td>8</td>
<td>8</td>
<td>8</td>
<td>87.9</td>
<td>11</td>
<td>11</td>
<td>-22</td>
<td>33</td>
<td>-1</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan=11>Sales</td>

</tr>
<tr>
<td class="firstcol" >&nbsp; Observed 3-mos</td>
<td>18</td>
<td>18</td>
<td>16</td>
<td>13</td>
<td>96.7</td>
<td>2</td>
<td>19</td>
<td>-11</td>
<td>30</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected 3-Mos</td>
<td>13</td>
<td>14</td>
<td>15</td>
<td>16</td>
<td>82.1</td>
<td>12</td>
<td>18</td>
<td>-10</td>
<td>28</td>
<td>7</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan=11>Sales Price</td>

</tr>
<tr>
<td class="firstcol">&nbsp; Observed over 3-Mos</td>
<td>0</td>
<td>2</td>
<td>1</td>
<td>0</td>
<td>33.3</td>
<td>34</td>
<td>8</td>
<td>-4</td>
<td>12</td>
<td>0&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected over 3-Mos</td>
<td>-1</td>
<td>1</td>
<td>1</td>
<td>2</td>
<td>40.0</td>
<td>59</td>
<td>5</td>
<td>-5</td>
<td>10</td>
<td>1</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan=11>Employment</td>

</tr>
<tr>
<td class="firstcol">&nbsp; Observed over 3-Mos</td>
<td>3</td>
<td>8</td>
<td>10</td>
<td>13</td>
<td>41.2</td>
<td>50</td>
<td>23</td>
<td>-11</td>
<td>34</td>
<td>5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected over 3-Mos</td>
<td>17</td>
<td>9</td>
<td>8</td>
<td>6</td>
<td>100.0</td>
<td>1</td>
<td>17</td>
<td>-5</td>
<td>22</td>
<td>5</td>
</tr>
</tbody>
</table>
</html>

Readings are mostly firm, strong. France's service sector continues to claim strong readings. While Euro area and French manufacturing measures have softened, the service sector continues to post its strongest overall reading since [...]

France's Service Sector Holds Its Strength

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029a.jpg" align="left" border="0" height="265" width="353">

Readings are mostly firm, strong. 


France's service sector continues to claim strong readings.
While Euro area and French manufacturing measures have softened, the
service sector continues to post its strongest overall reading since
2000. The outlook index shows a bit more weakness, dropping by one
point in October and holding to the 87th percentile in its range. Sales
held to their second strongest reading on the period and were flat on
the month. Expected sales (next 3-months) slipped by one point and
remained in their 82nd percentile. Price expectations slipped and were
in the 30th to 40th percentiles. Employment readings showed current of
&#8216;observed' employment in only its 40th percentile but expected
employment (3-mos) was at 100%. Viva la optimism!


The service sector readings indicate that for France at least
expectations remain somewhat compartmentalized. Manufacturing
indicators have been weakening but the services survey shows no hint of
this or fear of its consequences. The same goes for the unrelenting
rise in the euro which has brought forth a good deal of negative
commentaries from French officials. There appears to have been no
spillover impact into the services sector stemming from these sorts of
concerns. Still, the upward momentum in the services index has clearly
slowed both for the climate and the outlook indicators. We may soon see
if the service sector is really this strong or if survey participants
have just been excessively optimistic. 



<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th colspan="11" scope="col">France
INSEE Services Survey Jan 2000-date</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Oct 
07</td>
<td>Sep 
07</td>
<td>Aug 
07</td>
<td>Jul 
07</td>
<td>%tile</td>
<td>Rank</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>Mean</td>
</tr>
<tr class="grey3">
<td class="firstcol">Climate Indicator</td>
<td>113</td>
<td>112</td>
<td>113</td>
<td>113</td>
<td>100.0</td>
<td>1</td>
<td>113</td>
<td>83</td>
<td>30</td>
<td>102</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Climate:
3-Mo MAV</td>
<td>113</td>
<td>113</td>
<td>112</td>
<td>111</td>
<td>100.0</td>
<td>1</td>
<td>113</td>
<td>85</td>
<td>28</td>
<td>102</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Climate:
12-Mo MAV</td>
<td>110</td>
<td>110</td>
<td>110</td>
<td>109</td>
<td>100.0</td>
<td>1</td>
<td>110</td>
<td>91</td>
<td>20</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Outlook</td>
<td>7</td>
<td>8</td>
<td>8</td>
<td>8</td>
<td>87.9</td>
<td>11</td>
<td>11</td>
<td>-22</td>
<td>33</td>
<td>-1</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan=11>Sales</td>

</tr>
<tr>
<td class="firstcol" >&nbsp; Observed 3-mos</td>
<td>18</td>
<td>18</td>
<td>16</td>
<td>13</td>
<td>96.7</td>
<td>2</td>
<td>19</td>
<td>-11</td>
<td>30</td>
<td>6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected 3-Mos</td>
<td>13</td>
<td>14</td>
<td>15</td>
<td>16</td>
<td>82.1</td>
<td>12</td>
<td>18</td>
<td>-10</td>
<td>28</td>
<td>7</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan=11>Sales Price</td>

</tr>
<tr>
<td class="firstcol">&nbsp; Observed over 3-Mos</td>
<td>0</td>
<td>2</td>
<td>1</td>
<td>0</td>
<td>33.3</td>
<td>34</td>
<td>8</td>
<td>-4</td>
<td>12</td>
<td>0&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected over 3-Mos</td>
<td>-1</td>
<td>1</td>
<td>1</td>
<td>2</td>
<td>40.0</td>
<td>59</td>
<td>5</td>
<td>-5</td>
<td>10</td>
<td>1</td>
</tr>
<tr class="grey3">
<td class="firstcol" colspan=11>Employment</td>

</tr>
<tr>
<td class="firstcol">&nbsp; Observed over 3-Mos</td>
<td>3</td>
<td>8</td>
<td>10</td>
<td>13</td>
<td>41.2</td>
<td>50</td>
<td>23</td>
<td>-11</td>
<td>34</td>
<td>5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expected over 3-Mos</td>
<td>17</td>
<td>9</td>
<td>8</td>
<td>6</td>
<td>100.0</td>
<td>1</td>
<td>17</td>
<td>-5</td>
<td>22</td>
<td>5</td>
</tr>
</tbody>
</table>
Japan Retail Sales Edge Back in Sept...Is Slowing Trend Still in Place? 
by <a href="/comment/Brusca.html">Robert Brusca</a> October 29, 2007


<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029b.jpg" width="353">
Real retail sales surged in August but they fell in September. Still, the combination leaves retail sales net better off over the past two months. The Yr/Yr chart (real retail sales) shows that the downtrend that has been in place is blunted by these recent movements. Still retail sales in the quarter are going to be lower; they are falling at a 3.2% annual rate in Q3. The main nominal measures show distinct slowing as well. 
Japan continues to be caught in between as the central bank looks for recovery and anticipates rate hikes and as the government plans for tax hikes to address Japan&#39;s excessive fiscal situation. Yet the economy, after a few hopeful quarters, has failed to deliver on the promise of growth and failed to let either of these policy moves occur. Moreover, the backsliding on the inflation front is a clear reminder of how fragile this economy is. The ongoing weakness in the yen should be a constant reminder of Japan&#146;s weakness as export growth continues to drive growth. In short, Japan&#146;s retail sales in September are not so encouraging despite the fact that they let much of the August strength stand. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
<th colspan=9 scope="col">Japan Real and Nominal Retail Sales</th>
</tr>
</thead>
<tbody>
<tr class="even">
<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>QTR Q3 Saar</td>
</tr>
<tr>
<td class="firstcol">Retail Total</td>
<td>-0.6%</td>
<td>3.6%</td>
<td>-2.8%</td>
<td>0.8%</td>
<td>1.6%</td>
<td>0.5%</td>
<td>0.5%</td>
<td>-3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol"> Motor Vehicles and Parts</td>
<td>-6.5%</td>
<td>8.0%</td>
<td>-0.4%</td>
<td>2.3%</td>
<td>-1.9%</td>
<td>0.0%</td>
<td>-6.9%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Food Beverages &amp; Tobacco</td>
<td>0.9%</td>
<td>1.2%</td>
<td>-1.0%</td>
<td>4.7%</td>
<td>-1.4%</td>
<td>0.4%</td>
<td>1.8%</td>
<td>-2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Clothing footwear</td>
<td>-0.4%</td>
<td>8.7%</td>
<td>-8.3%</td>
<td>-3.1%</td>
<td>0.4%</td>
<td>-1.1%</td>
<td>-1.5%</td>
<td>-10.9%</td>
</tr>
<tr class="grey2">
<td class="firstcol">Real</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail Total</td>
<td>-1.5%</td>
<td>3.9%</td>
<td>-2.5%</td>
<td>-0.8%</td>
<td>-0.2%</td>
<td>0.5%</td>
<td>-0.1%</td>
<td>-3.2%</td>
</tr>
</tbody>
</table>
U.K. Housing Market Cooling Off 
by <a href="/comment/Curley.html">Louise Curley</a> October 29, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029c.jpg" width="353">
The average price of the quality adjusted house in the UK declined 0.11% in October to 176.1 thousands of British pounds, the first decline since December, 2005. Other measures of activity in the housing market revealed in the Hometrack Housing Survey also showed weakness. The ratio of the selling price to the asking price declined to 94.3 from 94.8 in September. The average time to sell a house rose to 7.4 weeks from 6.9 and the number of viewings before a sale rose to 11.5 from 11.0. These last two indicators are shown with the house price in the first chart. The house price is on an inverted scale.
December, 2005 marked the end of a year and a half of year of almost constant year to year declines in the quarterly house prices. In spite of the price declines, which may well have resulted from rising interest rates at that time, the housing market did not collapse. Construction remained strong. Once again, there has been a period of rising interest rates that has now begun to affect the housing market. The standard average variable interest rate on mortgages is shown in the second chart together with the house price. The question now is: Will the current rise in interest rates leave the housing market as unscathed as it did in the 2004-5 period?
In one respect, that regarding housing starts, the effect is already apparent. There were only two year to year declines in England&#39;s quarterly housing starts in 2005, one of 4.6% in the first quarter and one of 0.74% in the third quarter. Contrast that with the current decline beginning in the second quarter of 2006 and continuing into the second quarter of 2007. Data for housing starts for all of Great Britain are available only through 2006, but data for England are available through the second quarter of 2007. Since the trend in activity in England largely determine the trend in activity for the whole United Kingdom, as the third chart attests, it is clear that there has already been a significant impact on actual housing starts. 

 <img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029d.jpg"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071029e.jpg">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK HOMETRACK HOUSING SURVEY&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">Weighted Average Price (1000 GBP)</td>
<td>176.1</td>
<td>176.3</td>
<td>168.6</td>
<td>-0.11</td>
<td>4.45</td>
<td>165.7</td>
<td>161.9</td>
<td>165.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Sale&#39;s Price as % of Asking Price</td>
<td>94.3</td>
<td>94.8</td>
<td>94.9</td>
<td>-0.5*</td>
<td>-0.6*</td>
<td>94.7</td>
<td>93.3</td>
<td>95.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Time to Sell in weeks</td>
<td>7.4</td>
<td>6.9</td>
<td>6.5</td>
<td>0.5*</td>
<td>0.9*</td>
<td>6.8</td>
<td>7.8</td>
<td>5.3</td>
</tr>
<tr class="odd">
<td class="firstcol"> Average Number of Viewings per Sale </td>
<td>11.5</td>
<td>11.0</td>
<td>10.8</td>
<td>0.5*</td>
<td>0.7*</td>
<td>10.9</td>
<td>12.3</td>
<td>11.00</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Q2 07</td>
<td>Q1 07&nbsp;</td>
<td>Q2&nbsp; 06&nbsp;</td>
<td>Q/Q Chg&nbsp;</td>
<td>Y/Y Chg&nbsp;</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr class="odd">
<td class="firstcol">Housing Starts in England (000)</td>
<td>39.7</td>
<td>42.8</td>
<td>47.2</td>
<td>-7.18</td>
<td>-9.92</td>
<td>178.5</td>
<td>177.0</td>
<td>176.6</td>
</tr>
<tr class="odd">
<td class="firstcol">* difference</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</html>

Carol Stone, CBE

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<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026f.jpg" width="353">
Spain&#39;s National Institute of Statistics reported Q3 labor force data today. Their formal term is &quot;Economically Active Population Survey&quot; or EAPS. Employment in this survey rose 143,300 from Q2 to 20.511 million workers, up 3.1% from a year ago. There were notable gains in services, up 4.2% from Q3 2006, and construction, up 4.9%. Employment in industry (mining and manufacturing) is falling off gradually and stood a 3.26 million in Q3 compared to a peak of 3.32 million in Q4 2006. That sector had shown vigorous growth from 1997 through 2003 and has been basically on a plateau since then, so the current reductions would not seem to be a sign of weakness. Construction employment, in contrast, has been growing rapidly since 1997, an average rate of 7.5%; the 4.9% in Q3 is actually the &quot;slowest&quot; since Q4 2005. The service sector, too, has shown vigor, with growth at nearly a 5% pace since 1995.
The Q3 unemployment rate was steady at 8.0%. There was a modest rise in the number of people unemployed, 32,000 from Q1 and 26,000 from a year ago. Unemployment has been restrained, however, in view of a notable advance in the number of economically active population. This rose 175,000 in Q3 and is up 3.0% from Q3 2006. The participation rate stands at a record 59.1% of the population over age 16, up 0.2% from Q2 and 0.7% from a year ago.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026g.jpg" width="353">
Since 2005, the Spanish labor force data have been distinctive in breaking out Spanish nationals and foreign nationals explicitly. Immigrant workers are important in many countries, and it is really worthwhile to have the Spanish statisticians compile this information. Foreign nationals constitute just under 14% of employment in Spain, 2.846 million of the total 20.511 million; their working numbers grew 328,400 in Q3 from the year earlier, 13.0%. They have a high participation rate, 76.2% in Q3, but one assumes that they come to Spain from their home country in order to seek out job opportunities. Not all are successful; their unemployment rate is 11.8%, higher than the year-ago 10.8%, but off from a recent high in Q1 of 12.6%. The participation rate among Spaniards is 57.0%; this is also up 0.2% from Q2. Their unemployment rate is 7.4%; their employment grew 286,500 over the last year, 1.6%. These series by citizenship group are too short still to do much for any precise econometric analysis, but the differential pattern of the two groups may already be helping describe forces on wages and factors that will affect the further expansion of Spanish industry and markets.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026h.jpg" width="353">
All of these data are in Haver&#39;s SPAIN database, as well as G10. The SPAIN database includes &quot;country-sourced&quot; data. In G10, Haver combines summary data for a number of major countries. Our analysts compile some select ratios and conduct seasonal adjustment on some series where it seems warranted. In that database, Spain&#39;s employment is seen to be up 91,600 from Q2, and the unemployment rate up 0.2% to 8.2%.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">SPAIN: &quot;EAPS&quot; Data, NSA</th>
<th scope="col">Q3 2007</th>
<th scope="col">Q2 2007</th>
<th scope="col">Year Ago</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 Employment, Millions</td>
<td>20.51</td>
<td>20.37</td>
<td>19.90</td>
<td>19.75</td>
<td>18.97</td>
<td>17.97</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Chg</td>
<td>3.1</td>
<td>3.4</td>
<td>3.7</td>
<td>4.1</td>
<td>5.6</td>
<td>3.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>8.0</td>
<td>8.0</td>
<td>8.2</td>
<td>8.5</td>
<td>9.1</td>
<td>11.0</td>
</tr>
<tr>
<td class="firstcol">Spanish Nationals, Millions</td>
<td>17.66</td>
<td>17.61</td>
<td>17.38</td>
<td>17.29</td>
<td>16.90</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Participation Rate (%)</td>
<td>57.0</td>
<td>56.8</td>
<td>56.4</td>
<td>56.3</td>
<td>55.7</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Foreign Nationals, Millions</td>
<td>2.84</td>
<td>2.75</td>
<td>2.52</td>
<td>2.46</td>
<td>2.07</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Participation Rate (%)</td>
<td>76.2</td>
<td>76.0</td>
<td>77.1</td>
<td>77.1</td>
<td>75.5</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
</html>

Spain's National Institute of Statistics reported Q3 labor force data today. Their formal term is "Economically Active Population Survey" or EAPS. Employment in this survey rose 143,300 from Q2 to 20.511 million workers, up 3.1% from [...]

Spain Employment Up 3.1% from Year Ago; Spanish Workers and Immigrants Both Gain

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<img align="left" class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026a.jpg">
The Conference Board indicated that its index of help-wanted advertising did rise slightly last month but only to 24 from 23 in August. The figures are near the record low for the series which dates back to the 1950s.
The index had shown slight improvement during the third quarter but it has since dissipated.
During the last ten years there has been a 57% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ads improved to 57% from a low 16% in August.
In most regions of the country the index of help-wanted advertising remained low or fell further in September with the exception of the South where moderate improvement occurred. 
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.
Recent Financial Developments and the U.S. Economic Outlook also from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2007/el2007-26-27.pdf"> here</a>. 

<img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026b.jpg"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/071026c.jpg" class="small">
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">September 2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>24</td>
<td>23</td>
<td>29</td>
</tr>
</tbody>
</table>
</body>
</html>

The Conference Board indicated that its index of help-wanted advertising did rise slightly last month but only to 24 from 23 in August. The figures are near the record low for the series which dates back to the 1950s. The index had [...]

U.S. Help-Wanted Advertising Remained Low

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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Andrew Cates

**US Outperformance Holds; Europe and China Continue to Disappoint**
One of the most persistent features of the global macro landscape in 2026 has been the widening divergence between growth outcomes in the United States and those in Europe and China. Citigroup’s global growth surprise indices—which measure the gap between actual economic releases and consensus expectations—capture this divergence with unusual clarity. US data have continued to surprise on the upside, supported by resilient consumer spending, a stronger-than-expected labour market and the ongoing AI-driven capital spending boom. The picture elsewhere is less encouraging. Growth surprises have turned negative across the euro area, reflecting the cumulative toll of elevated energy costs, weak industrial activity and subdued business confidence. And China's growth surprise index has also fallen sharply in recent weeks, with weaker-than-expected retail sales and fixed asset investment data for May this week reinforcing concerns that domestic demand remains fragile and that policy support is yet to gain meaningful traction.

260618Z1.jpg

**The Oil Risk Premium in the UK Has Been Fading**
One of the more notable features of UK markets this year has been the close relationship between oil prices and two-year gilt yields. The link is not mechanical, but in an economy heavily exposed to imported energy, swings in oil prices can materially alter the inflation outlook and, by extension, expectations for Bank of England policy. That relationship was on display again this week. A softer-than-expected UK CPI reading for May—helped in part by easing energy price pressures—led investors to scale back expectations that inflation would remain persistently above target, pushing two-year gilt yields to their lowest level in six weeks. The question now is whether this marks the start of a more sustained easing in inflation pressures or merely a temporary reprieve. Much will depend on whether the recent decline in oil prices following the US-Iran ceasefire agreement proves durable.

260618Z2.jpg

**The AI Investment Boom Is Rewriting the Rule Book for the Chip Industry**
If the divergence in global growth surprises noted above tells a story of a world economy under strain, the semiconductor sales data tell a very different one — of a technology-driven investment cycle that is accelerating almost regardless of the broader macro environment. Global semiconductor sales have surged to record levels over the past twelve months, driven primarily by insatiable demand for the chips that underpin AI infrastructure: graphics processing units, high-bandwidth memory, and advanced logic chips. Data centre capital expenditure from the hyperscalers continues to exceed even the most optimistic forecasts from a year ago, and the investment pipeline shows no sign of moderating. The gains are concentrated in AI-adjacent products; legacy chips for consumer electronics and industrial applications remain relatively soft.

260618Z3.jpg

**Copper Holds Firm As Oil Retreats**
The commodity markets are telling two quite different stories this week, and the contrast is instructive. Oil has moved sharply lower on the US-Iran MoU news as investors trim the conflict risk premium that has been embedded in energy markets since March — a welcome development for inflation and central bank optionality alike. But the three commodities shown in this chart tell a different story. Copper, one of the most reliable proxies for global electricity infrastructure investment, remains near multi-year highs, reflecting the extraordinary volume of data centre construction, grid expansion and electrification spending flowing through the global economy. Aluminium — energy-intensive to produce and increasingly in demand for the structural components of both data centres and electric vehicles — has, until quite recently, held its ground. Lithium hydroxide, the battery-grade refining product that sits at the heart of the energy storage supply chain, has seen some cyclical softness but remains structurally underpinned by the scale of demand being projected for grid-scale storage and electric mobility over the next decade.

260618Z4.jpg

**Is Energy Availability a Binding Constraint on Growth?**
This next chart is a scatter plot that maps electricity generation per capita against GDP growth per capita across a broad sample of countries over the past five years. The positive relationship is striking. Economies with higher electricity generation per capita, including the United States, have generally delivered stronger GDP growth, while those with more constrained electricity systems have tended to lag. The obvious objection is reverse causality: richer economies generate more electricity because they have more to power. That is partly true. But the broader evidence is difficult to dismiss. The US shale revolution delivered an abundance of cheap energy that supported a sustained period of industrial outperformance relative to many advanced economies. Mainstream commentary often attributed this advantage to factors such as labour market flexibility or technological innovation, but energy costs were arguably at least as important.

260618Z5.jpg

**Corporate America Is Investing from a Position of Unusual Financial Strength**
The surge in US corporate investment—particularly in AI infrastructure, data centres and semiconductors—has inevitably drawn comparisons with the late-1990s dot-com boom. Yet the financial balance data suggest an important difference. During the dot-com era, US non-financial corporates moved into a financial deficit approaching 4% of GDP, relying heavily on external financing to fund investment. Today, despite another ambitious investment cycle, the sector remains in surplus, currently around 1.8% of GDP. Corporate America is investing aggressively, but it is still generating more cash than it is spending. The boom is being financed largely through profits rather than debt. Risks remain—not least the growing fiscal burden on the federal government—but the balance-sheet fragilities that turned previous investment booms into systemic crises appear far less pronounced. If a major constraint emerges in the years ahead, it may be energy and resources rather than leverage.

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The signing of a Memorandum of Understanding (MoU) between the United States and Iran earlier this week has offered financial markets their most significant moment of geopolitical relief since the Middle East conflict escalated in early March. Oil prices fell sharply on the news, short-dated bond yields moved lower across several major economies, and risk assets recovered ground. But relief, as investors have learnt repeatedly over the past three months, is arguably not the same as resolution. The MoU sets a framework for negotiations rather than a final settlement, and the history of US-Iran diplomacy is not one that encourages complacency. Meanwhile, the Federal Reserve — concluding its June meeting yesterday under new chair Kevin Warsh — held rates steady but delivered a distinctly hawkish dot plot that shifted the median year-end projection from a cut to a hike, a reminder that the easing cycle the market had been pricing is no longer the base case. Against this backdrop, this week's charts take stock of where the global economy presently stands — and what the underlying data, beneath the geopolitical noise, are telling us. The picture that emerges is one of divergence. The United States continues to outperform consensus growth expectations while Europe and China disappoint (chart 1). UK short-dated yields have tracked oil prices with unusual consistency this year, and today's softer-than-expected CPI print for May — arriving just as the MoU has knocked crude lower — potentially changes the policy calculus for the Bank of England (chart 2). Global semiconductor sales, meanwhile, are storming ahead regardless of the geopolitical noise, powered by AI infrastructure spending that shows no sign of fatigue (chart 3). A cross-section of commodity prices tells two stories simultaneously: the geopolitical risk premium is draining out of oil, but the metals and materials the AI economy actually needs — copper, uranium, critical minerals — are holding firm (chart 4). Meanwhile a cross-country scatter of electricity generation and GDP growth over the past five years raises a question that deserves more attention than it typically gets: is energy availability a constraint on growth, or merely a consequence of it? The evidence, we would argue, points firmly in one direction (chart 5). And finally, for all the comparisons being drawn between the current investment boom and the late 1990s, the financial balance of the US corporate sector tells a rather different story — one that matters for how any correction might unfold (chart 6).

Charts of the Week: Between Relief and Reality

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.

Economy in Brief

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