Robert Brusca

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802f.jpg" width="353">
Headline rise in June is +0.1% after +0.3% in May. 
Core trends pointing right directions but still at strong pace.
While the ECB may be happy with the direction for inflation, the pace is nonetheless too high and the rate of reduction is still slow (except in Italy where this partial &#145;core measure&#146; of inflation is falling from a much higher pace). 
For all of EMU, PPI excluding energy and construction peaked at 3.6% in August of 2006 and has edged lower to 3.1% in June of 2007. That&#146;s a reduction of 0.5% in the annual rate over a period of 10 months. That means it will take this quasi-core measure ( Q-core) about 22 months to get back to the CEILING rate of acceptability at 2%. That is a long wait for an inflation rate that already has been over the 2% limit for 36 months already. It would make one-half of a decade that the ECB &#145;allowed&#146; Q-core inflation to run at a pace above its expressed ceiling. 
The various key countries in the second graph do not have characteristics much different from this.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802e.jpg" width="353"> 
The table below gives us a sense of some of the details of the EMU PPI and some country level trends for overall and excluding energy PPI inflation. We express in RED those inflation rates where the pace is lower than in the previous period provided in the table. For example, nearly all categories and countries show inflation lower over the recent 12 months than in the previous 12 months. But only the UK shows inflation lower in the recent six month compared to the previous 12 months as well. And while some countries show lower inflation in the past three months than in the past six months, the general speed up for inflation in the six month pace compared to a year-ago does not make the current step down look like it is part of a fundamental trend. And that is a problem.
For the EMU PPI categories, only capital goods prices are below the 2% mark over three months although capital goods almost makes the grade for six months and the index is well below 2% for the past and previous 12 months. But this category stands alone in those respects. Capital goods prices have remained well behaved and have only one small and technical violation of the 2% ceiling. Of course I don&#146;t mean to imply that the ECB &#145;targets&#146; inflation below 2% for each price category; the rate ceiling applies to only headline inflation. But it is instructive to look at member countries as well as various categories to see where the outliers are.
Among countries only the Non EMU member EU-member UK has sequentially lower inflation rates with inflation falling steadily across all horizons in the table. UK ex-energy inflation trend does not do so well but it is on a better track than any EMU member.
On balance, neither overall nor country level trends in the PPI can encourage the ECB on inflation. And theses figure are for the PPI; services sector inflation, a key ingredient in national CPI (HICP) inflation rates is generally a bit more stubborn.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Euro area and UK PPI Trends
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M</td>
<td colspan="4">SAAR</td>
</tr>
<tr>
<td class="firstcol">EA 13</td>
<td>Jun-07</td>
<td>May-07</td>
<td>3-Mo</td>
<td>6-MO</td>
<td>Yr/Yr</td>
<td>Y/Y Yr Ago</td>
</tr>
<tr>
<td class="firstcol">Total ex Construction</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>3.8%</td>
<td>2.3%</td>
<td>5.8%</td>
</tr>
<tr>
<td class="firstcol">Excl Energy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.6%</td>
<td>3.8%</td>
<td>3.1%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.7%</td>
<td>2.1%</td>
<td>1.9%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.6%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Intermediate &amp;Capital Goods</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.8%</td>
<td>4.5%</td>
<td>3.9%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">Energy</td>
<td>0.1%</td>
<td>0.6%</td>
<td>4.9%</td>
<td>3.8%</td>
<td>-0.5%</td>
<td>15.9%</td>
</tr>
<tr>
<td class="firstcol">MFG</td>
<td>0.2%</td>
<td>0.4%</td>
<td>6.0%</td>
<td>5.1%</td>
<td>2.6%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>2.2%</td>
<td>1.7%</td>
<td>6.1%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.3%</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.6%</td>
<td>3.4%</td>
<td>1.9%</td>
<td>3.9%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">Itlay</td>
<td>0.2%</td>
<td>0.4%</td>
<td>4.4%</td>
<td>3.9%</td>
<td>2.8%</td>
<td>6.2%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>3.5%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">UK</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>-7.6%</td>
<td>-7.1%</td>
<td>0.6%</td>
<td>9.8%</td>
</tr>
<tr>
<td class="firstcol">Ex Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.4%</td>
<td>3.6%</td>
<td>2.9%</td>
<td>3.1%</td>
</tr>
<tr>
<td colspan="4">EA 13 Harmonized PPI excluding Construction</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td colspan="6">The EA 13 countries are Austria, Belgium, Finland, France,&nbsp; Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia.</td>
<td></td>
</tr>
<tr>
<td class="firstcol">6COLSPAN</td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

Headline rise in June is +0.1% after +0.3% in May. Core trends pointing right directions but still at strong pace. While the ECB may be happy with the direction for inflation, the pace is nonetheless too high and the rate of reduction [...]

PPI Trends Flatten Out and Decline Across EMU

Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802c.jpg" width="353">
During July, U.S. sales of light vehicles fell for the seventh consecutive month this year. The decline was attributed by manufactures to spillover effects from weak housing &amp; construction activity.
The 0.4% m/m decline to an annualized selling rate of 15.5M units, according to the Autodata Corporation, was slight but it dropped sales nearly 10% below the year earlier level. The decline was to the lowest since October 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802d.jpg" width="353">
Sales of imported vehicles dropped a very slight 0.2% m/m to 3.99M (-5.3% y/y), again propped up by sharp discounting. Sales of imported cars ticked up by 0.6% m/m but that was not enough to prevent an 8.6% decline versus a year ago. Sales of imported light trucks fell 1.7% m/m (+1.5% y/y).
Domestic car sales again suffered a steep decline with a hard 5.4%m/m drop (-11.2% y/y). Sales of domestic light trucks recovered a bit of the prior two month&#146;s steep declines with a 3.3% m/m increase (-10.8% y/y).
U.S Exporters: A Rare Breed from the Federal Reserve Bank of St. Louis is available <a href="http:/research.stlouisfed.org/publications/net/20070801/cover.pdf">here</a>. </div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a> </th>
<th scope="col">June </th>
<th scope="col">May </th>
<th scope="col">Y/Y </th>
<th scope="col">2006 </th>
<th scope="col">2005 </th>
<th scope="col">2004 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total </td>
<td>15.54 </td>
<td>15.60 </td>
<td>-9.6% </td>
<td>16.55 </td>
<td>16.96 </td>
<td>16.87 </td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos </td>
<td>7.37</td>
<td>7.63</td>
<td>-10.3% </td>
<td>7.77 </td>
<td>7.65 </td>
<td>7.49 </td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks </td>
<td>8.16 </td>
<td>7.97 </td>
<td>-8.9% </td>
<td>8.78 </td>
<td>9.32 </td>
<td>9.37 </td>
</tr>
</tbody>
</table>
</body>
</html>

During July, U.S. sales of light vehicles fell for the seventh consecutive month this year. The decline was attributed by manufactures to spillover effects from weak housing & construction activity. The 0.4% m/m decline to an [...]

U.S. Vehicle Sales Suffer Housing Market Woes

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>

 



 <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802a.jpg" width="353">
Initial unemployment insurance claims rose slightly last week. The 4,000 increase to 307,000 was the first uptick in five weeks. It followed an upwardly revised no change w/w during the prior period. 
A claims level below 400,000 typically has been associated with growth in nonfarm payrolls. The jobs figure will be released tomorrow.
During the last ten years there has been a (negative) 78% correlation between the level of initial claims and the m/m change in nonfarm payroll employment. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070802b.jpg" width="353">
The four-week moving average of initial claims fell to 305,500 (-2.3% y/y).
Continuing claims for unemployment insurance fell 16,000 after a revised 22,000 decline during the prior week. The continuing claims numbers lag the initial claims figures by one week.
The insured rate of unemployment was stable at 1.9%. 
A Brain Drain or an Insufficient Brain Gain? from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/regional_economy/glance/upstate_glance1_07.pdf">here</a>. 
Consensus expectations had been for a rise to 310,000 claims. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a> </th>
<th scope="col">7/28/07 </th>
<th scope="col">07/21/07 </th>
<th scope="col">Y/Y</th>
<th scope="col">2006 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims </td>
<td>&nbsp;307 </td>
<td>303 </td>
<td>-2.5% </td>
<td>313 </td>
<td>331 </td>
<td>343 </td>
</tr>
<tr>
<td class="firstcol">Continuing Claims </td>
<td>-- </td>
<td>2,525 </td>
<td>3.5%</td>
<td>2,545 </td>
<td>3.3% </td>
<td>2,459 </td>
</tr>
</tbody>
</table>


</html>

Initial unemployment insurance claims rose slightly last week. The 4,000 increase to 307,000 was the first uptick in five weeks. It followed an upwardly revised no change w/w during the prior period. A claims level below 400,000 [...]

U.S. Claims for Unemployment Insurance Rose Slightly

Carol Stone, CBE

Sweden's GDP expanded by a 1.0% quarterly amount in Q2, Statistics Sweden reported this morning, a pickup from 0.7% in Q1. Year-on-year growth was 3.5%, compared to 3.0% in Q1. The gain during 2006 was 4.2%. Two demand sectors [...]

Swedish GDP Grows 1.0% in Q2, Led by Fixed Investment and Exports of Services

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<div align="left"><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801h.jpg" width="353">
Today, August 1st, as we write at mid-afternoon, the stock market is hovering near yesterday&#39;s close, following its up-and-down lurches of recent days, as investors have been factoring more risk into their portfolios. In this note, we highlight a couple of indicators of risk that are available in Haver databases and a piece of new economic data pertinent to the current troubles.
Yesterday&#39;s 1.3% decline in the S&amp;P 500 index was the fifth daily fall in eight trading days since the July 19 all-time high close of 1,553.08 (and 14,000.41 in the Dow). It almost goes without saying that the day-to-day movements have been noticeably more volatile. One indication of this is that during June, the market drifted lower from the beginning of the month to the end. But it then reversed to set new highs just after mid-July and reversed again to show a decline of 3.2% for July as a whole and 6.3% from July 19 to month-end. Press reports have noted the greater volatility and called our attention to the &quot;VIX&quot; index, a measure based on the behavior of put-and-call options on the Standard &amp; Poor&#39;s 500 stocks. VIX, the ticker symbol for &quot;Volatility Index&quot;, is calculated from options prices on the Chicago Board Options Exchange, CBOE, and can be traded on its own without the complications of the actual options features. Daily changes in the VIX have an 87% negative correlation with daily movements in the S&amp;P 500 index. This index, along with other indicators of options trading, is in Haver&#39;s DAILY database, and is seen in the first graph here. From an average just under 15 in June, the VIX reached 23.52 yesterday.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801i.jpg" width="353">
Also in DAILY, we carry a collection of Merrill Lynch fixed income yields. These are handy because they cover many sectors of the bond market and are calculated in standard ways, so they are all comparable with each other. Part of the markets&#39; distress relates to the rise in short-term interest rates and the impact they have on instruments carrying adjustable rates. The Merrill yields include the class of asset-backed securities (ABS) that have floating rates, and we can compare that with a risk-free fixed Treasury rate of roughly the same maturity. The credit quality of the ABS &quot;floaters&quot; is not low; they differ from ordinary ABS&#39;s only in their floating- rate feature. But we can see in the second graph that their spread to Treasury&#39;s has widened sharply in just the last few weeks. While the spread of a fixed-rate ABS has also widened, the increment is much smaller.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801j.jpg" width="353">
Finally, yesterday, S&amp;P Case-Schiller reported its monthly house price index. This indicator of national home price movements edged down yet again in May, by 0.23% from April, a tenth consecutive monthly reduction. The Case-Schiller index has the advantage over other house price measures of using a collection of &quot;repeat sales&quot;. The compilers canvass records of deeds, so their index is not a sample; it covers all house sale transactions in a particular area that meet certain specifications. The repeat-sales feature means the index is measuring price change in the same house, so it only reflects price change, not bigger vs. smaller houses, houses with pools vs. houses with no pool and so on. We can see in the last graph that despite an upturn in the median price of existing home sales compiled by the National Association of Realtors, the actual &quot;price&quot; of a given house has not yet started to improve. This is exactly the problem facing real estate markets generally at the present time: sellers can&#39;t get their price. This too adds risk to financial markets and we are seeing how widespread are the ramifications of this shortfall. The S&amp;P Case-Schiller Index is in the USECON database and data for several cities appear in REGIONAL.</div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">July 31</th>
<th scope="col">July 30</th>
<th scope="col">July 27</th>
<th scope="col">July 26</th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Jan-May</th>
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">S&amp;P 500*</td>
<td>1455.27</td>
<td>1473.91</td>
<td>1458.95</td>
<td>1482.66</td>
<td>1520.70</td>
<td>1514.49</td>
<td>1450.14</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp; % Chg*</td>
<td>-1.3</td>
<td>+1.0</td>
<td>-1.6</td>
<td>-2.3</td>
<td>-3.2</td>
<td>-1.8</td>
<td>+1.5</td>
</tr>
<tr class="even">
<td class="firstcol">S&amp;P VIX</td>
<td>23.52</td>
<td>20.87</td>
<td>24.17</td>
<td>20.74</td>
<td>17.29</td>
<td>14.95</td>
<td>12.72</td>
</tr>
<tr class="even">
<td class="firstcol">Merrill Lynch Treasury: 3Yr</td>
<td>4.546</td>
<td>4.555</td>
<td>4.522</td>
<td>4.522</td>
<td>4.823</td>
<td>4.992</td>
<td>4.675</td>
</tr>
<tr class="even">
<td class="firstcol">Merrill Lynch Asset-Backed Floater</td>
<td>6.206</td>
<td>6.269</td>
<td>6.106</td>
<td>6.057</td>
<td>5.944</td>
<td>5.742</td>
<td>5.681</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Spread</td>
<td>1.660</td>
<td>1.714</td>
<td>1.584</td>
<td>1.535</td>
<td>1.121</td>
<td>0.750</td>
<td>1.005</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>May 2007</td>
<td>Apr 2007</td>
<td>Mar 2007</td>
<td>May 2006</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr class="even">
<td class="firstcol">S&amp;P Case- Schiller Home Price Index**</td>
<td>200.04</td>
<td>200.51</td>
<td>200.97</td>
<td>205.86</td>
<td>204.85</td>
<td>190.43</td>
<td>164.48</td>
</tr>
<tr class="even">
<td class="firstcol">-0.23</td>
<td>-0.23</td>
<td>-0.29</td>
<td>-2.83</td>
<td>+7.58</td>
<td>+15.78</td>
<td>+15.40</td>
</tr>
<tr class="even">
<td class="firstcol">NAR Existing Home Median Price Index**</td>
<td>159</td>
<td>159</td>
<td>155</td>
<td>164</td>
<td>159</td>
<td>156</td>
<td>138</td>
</tr>
<tr class="even">
<td class="firstcol">+1.2</td>
<td>+1.4</td>
<td>+1.8</td>
<td>-2.9</td>
<td>+2.0</td>
<td>+12.8</td>
<td>+8.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Today, August 1st, as we write at mid-afternoon, the stock market is hovering near yesterday's close, following its up-and-down lurches of recent days, as investors have been factoring more risk into their portfolios. In this note, we [...]

Greater Risk Evident in (1) More Stock Options Volatility, (2) Wider Yield Spreads and (3) Sluggish House Prices

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801e.jpg" width="353">
</div>

</body>
</html>

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801g.jpg" width="353">
The total number of mortgage applications ticked down 0.3% last week following the 3.6% decline the week prior, according to the Mortgage Bankers Association.
Purchase applications dropped another 1.8% after the prior week&rsquo;s 5.0% decline, the fifth decline in the last six weeks. The decline was to the lowest level since late April.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance recouped the prior week&rsquo;s decline with a 1.8% increase.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801h.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage fell another six basis points w/w to 6.84%. Rates averaged roughly 6.91% last month, up from 6.28% in December. The peak for 30 year financing was 6.92% in mid-June. Rates for 15-year financing similarly fell to 6.53% last week. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.
The Mortgage Bankers Association surveys between 20 and 35 top lenders in the U.S. housing industry. Then it derives its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>. 
Higher Risk Does Bring Higher Returns in Stock Markets Worldwide from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/iet/20070801/cover.pdf"> here</a>. </div>

<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/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100) </a></th>
<th scope="col">7/27/07 </th>
<th scope="col">7/20/07 </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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>607.1</td>
<td>609.0</td>
<td>15.1%</td>
<td>584.2</td>
<td>708.6</td>
<td>735.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>416.6</td>
<td>424.2</td>
<td>10.7%</td>
<td>406.9</td>
<td>470.9</td>
<td>454.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,724.1</td>
<td>1,692.9</td>
<td>21.7%</td>
<td>1,633.0</td>
<td>2,092.3</td>
<td>2,366.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications ticked down 0.3% last week following the 3.6% decline the week prior, according to the Mortgage Bankers Association. Purchase applications dropped another 1.8% after the prior week’s 5.0% [...]

Mortgage Applications Down Again

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<div align="left"> <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070801f.jpg" width="353">
Challenger, Grey &amp; Christmas reported that job cut announcements in July fell to the lowest level in a year, and that was the lowest level since 2000. The 23.1% m/m decline to 42,897 announcements followed a 21.6% decline during June. 
Job cut announcements fell across most industries such as apparel (-32.0% y/y), chemical (-81.3% y/y), consumer goods (-43.9% y/y), industrial goods (-49.7% y/y), and services (-69.05 y/y. Increases in layoffs m/m occurred in the electronics, retail, and transportation industries.
During the last ten years there has been a 79% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported that announced hiring plans nearly doubled last month versus June and they were up sharply from a year ago.</div>

<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/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">July</th>
<th scope="col">June</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">Announced Job Cuts</td>
<td>42,897</td>
<td>55,726</td>
<td>12.0%</td>
<td>839,822</td>
<td>1,072,054</td>
<td>1,039,935</td>
</tr>
</tbody>
</table>
</body>
</html>

Challenger, Grey & Christmas reported that job cut announcements in July fell to the lowest level in a year, and that was the lowest level since 2000. The 23.1% m/m decline to 42,897 announcements followed a 21.6% decline during June. [...]

Challenger Layoffs Retreated

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

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Sandy Batten

260430A.jpg

260430B.jpg

This monthly report contains a wealth of information concerning the state of the consumer. The anticipation ahead of today’s report centered on how much the surge in energy prices since the escalation of the US-Iran conflict in early March would push up overall PCE inflation. Prices of energy goods and services jumped 11.6% m/m not annualized in March. This was the largest monthly increase since September 2005. As a result, the headline PCE price index increased 0.7% m/m (3.5% y/y versus 2.8% y/y in February), the largest monthly gain since July 2022 but in line with expectations of the Action Economics Forecast Survey.

The core index (that is, excluding food and energy prices) rose by a more modest 0.3% m/m in March, down from a 0.4% monthly increase in February and in line with expectations. However, the yearly rate rose further to 3.2% y/y in March from 3.0% in February, well above and moving away from the Fed’s 2% target. The FOMC left its fed funds rate target unchanged at yesterday’s meeting, but some committee members dissented, opposing the implied easing bias contained in the statement. Chair Powell, in his press conference, noted that a number of members have become more concerned over the inflation outlook and the possible need for a Fed response.

Nominal personal income posted a solid 0.6% m/m (3.7% y/y) increase in March following an upwardly revised unchanged reading in February (previously -0.1% m/m). The March increase was twice the 0.3% monthly gain expected by the Action Economics Forecast Survey. However, after adjusting for inflation, real personal income slipped 0.1% m/m in March on top of a 0.4% m/m decline in February.

Employee compensation continued to be a major driver of personal income in March. It rose 0.4% m/m (4.1% y/y) in March after a 0.2% monthly increase in February. In March, proprietors’ income jumped 2.8%. This outsized increase reflected payments to farmers from the federal government’s Farmer Bridge Assistance Program. Rental income rose a solid 0.7% m/m, the same gain as in February. Income from financial assets increased 0.4% m/m following a 0.9% m/m decline in February. Personal current transfer payments edged up 0.1% m/m versus a 0.3% m/m decline in February.

Nominal consumption expenditures jumped 0.9% m/m (5.7% y/y) in March following an upwardly revised 0.6% monthly gain in February (previously +0.5% m/m). Spending on goods rose 2.0% m/m (4.5% y/y) while spending on services increased 0.4% m/m (6.3% y/y). As for overall inflation, the surge in energy prices also accounted for a large portion of the March gain in nominal spending. After adjusting for overall inflation, real PCE rose a more modest 0.2% m/m following an upwardly revised 0.3% m/m increase in February (previously +0.1% m/m). Still, the solid gains in February and March provide a strong starting point for Q2. The March level is 1.5% at an annual rate above the Q1 average. For all of Q1, real PCE rose 1.6% q/q saar.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

260430C.jpg

260430D.jpg

- The PCE price index jumped 0.7%, reflecting an 11.6% m/m surge in energy prices.
- The core index was up 0.3%, in line with expectations but still well above the Fed’s target.
- Personal income increased 0.6% m/m, led by a 0.4% m/m rise in compensation.
- Personal consumption jumped 0.9% m/m with a slight upward revision to February.
- However, much of the March gain in nominal consumption also reflected the jump in energy prices.
- Real consumption rose by a more modest 0.2% m/m.

Surging Energy Prices Push Up PCE Prices and Consumption in March

Michael J. Moran

260430N.jpg

260430O.jpg

Real GDP grew at an annual rate of 2.0% in the first quarter of 2026, almost identical to the expected advance of 2.1%. The latest change was comfortably within the range of recent observations and close to the economy’s potential rate of growth. The year-over-year change totaled 2.7%, but that shift reflected what might be viewed as a special factor (robust growth in the second and third quarters that offset a trade-tariff-induced drop in 2025-Q1 GDP).

Business fixed investment was the star of the show in the first quarter, registering growth of 10.4%. Outlays for information processing equipment and software were especially strong, while outlays for industrial equipment and Research & Development contributed positively as well. Outlays for structures remained decidedly soft, dropping for the ninth consecutive quarter. Building of data centers have been vigorous, but softness in offices and manufacturing facilities has dwarfed the strength in this new area.

Federal spending surged 9.4% in Q1, but the rise reflected the reopening of most federal agencies after their closure during much of the fourth quarter. Excluding this noise, support from the federal government has been softening. Nondefense outlays peaked in the fourth quarter of 2024, and they were 6.9% shy of that total in the first quarter. Defense spending also peaked in 2024-Q4 and has eased 2.4% since then. Defense spending most likely will grow in coming quarters because of the efforts in the Middle East. Orders for defense goods have already started to rise.

Consumer spending rose 1.5% in the first quarter, a bit shy of the 2.1% pace over the four quarters of last year and less than half the rates in 2023 and 2024. Consumer spending showed signs of softening in late 2025 and January of this year, but activity picked up in February and March. Firm tax refunds might have provided a boost to household spending in the latest months. Some of the tax cuts from the One Big Beautiful Bill were applied retroactively to 2025, but withholding schedules were not adjusted last year. Thus, many households are receiving larger-than-normal tax refunds.

International trade acted as a drag on economic growth in Q1, with net exports subtracting 1.3 percentage points from the GDP increase. Exports did well in the first quarter with growth of 12.9%, but imports were even stronger with a jump of 21.4%. The real trade deficit of $1.1 trillion was noticeably smaller than the shortfall of $1.4 trillion in 2025-Q1 when importers were rushing to get goods into the US before the imposition of tariffs. Still, the trade shortfall was sizeable and its effect on growth noticeable.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

260430P.jpg

260430Q.jpg

- Robust business investment led the advance; moderate support from consumers.
- Government spending jumped with the reopening of most federal agencies.
- The trade sector remained volatile, making a sizeable negative contribution in Q1.

Q1 GDP: Weathering the Challenges; Trend-Like Growth

Andrew Cates

**Front-End Yields Reflect Policy Reassessment**
Against a backdrop of key central bank meetings either having just taken place or imminent, short-dated government bond yields have moved decisively higher across most major economies since the escalation of the Middle East conflict, with the sharpest increase seen in the UK. The rise in 2-year yields reflects a repricing of near-term monetary policy expectations, as markets respond to the inflationary implications of higher energy prices and the growing likelihood that central banks will delay easing cycles. Moves have been most pronounced in economies where inflation is expected to be more persistent—most notably the UK—while increases have been more modest in the US and particularly Japan, where policy normalisation remains gradual. In effect, the front end of the curve is signalling a shift away from the “rate cuts soon” narrative that prevailed earlier in the year toward a more cautious, higher-for-longer policy outlook.

260430Z1.jpg

**US Recession Risks Remain Contained—For Now**
Despite the recent deterioration in the macro backdrop, real-time recession risk indicators for the US remain relatively subdued. This is notable given the combination of softer growth momentum, higher bond yields and heightened geopolitical risk. The nowcast—derived from a blend of high-frequency activity data and financial stress measures—has historically tended to move sharply when conditions turn, rather than drift higher gradually. That asymmetry is important in the current environment. While recession risks are not yet flashing red, past cycles suggest they can reprice abruptly, and arguably at present if energy-driven inflation were to feed much more forcefully into financial conditions or begin to weigh more materially on demand.

260430Z2.jpg

**Consumer Confidence Diverges: Europe and UK Slide, US Stabilises**
Consumer confidence has weakened across the major economies, but the deterioration has been more pronounced in the euro area and the UK than in the US. While sentiment in the US has recently edged up, it remains at relatively subdued levels. By contrast, confidence in Europe and the UK has fallen more sharply, reflecting greater exposure to higher energy costs and a more direct squeeze on real household incomes. This divergence is consistent with broader macro trends, suggesting that demand in Europe may prove more sensitive to the current shock, with weaker sentiment feeding more quickly into consumption.

260430Z3.jpg

**Euro area Credit Conditions Turn More Restrictive**
The latest ECB lending survey points to a clear tightening in credit conditions across the euro area, with banks raising lending standards for both firms and households while loan demand weakens. This combination—more restrictive supply alongside softer demand—is typically associated with a cooling in activity, particularly in interest-sensitive sectors. Recent evidence suggests that higher perceived risks, rising funding costs and geopolitical uncertainty are all weighing on banks’ willingness to lend, while weaker confidence and reduced investment appetite are dampening borrowing needs. The result is a tightening in financial conditions that is likely to amplify the broader slowdown already evident in survey data, reinforcing the more fragile growth dynamics now emerging across the region.

260430Z4.jpg

**An Intensifying AI Boom with Supply-Side Undercurrents**
Against the backdrop of surging AI-related investment, semiconductor prices are not just high—they are rising at an increasingly rapid pace. This chart shows a clear acceleration in both prices and export values, pointing to an intensifying boom in global chip demand. While this is in part a reflection of strong, structural demand, supply-side factors may also be playing a growing role. Although the Middle East is not a direct source of key chip-making minerals, it is central to the energy and petrochemical inputs that underpin semiconductor production. Ongoing geopolitical tensions are therefore likely feeding into higher costs and renewed frictions across supply chains. The combination of accelerating demand and tightening supply conditions suggests that semiconductor inflation could prove more persistent—and more globally consequential—than currently assumed.

260430Z5.jpg

**Labour Markets Reflect the AI Acceleration**
Our final chart this week highlights the extent to which the current AI boom is now feeding through into labour markets. This high-frequency indicator—based on the share of job listings containing AI-related keywords—shows a sharp and sustained increase since the widespread adoption of generative AI tools in late 2022. What began as a more traditional build-out in machine learning roles has evolved into a broader and more intense wave of hiring tied to generative AI capabilities, with demand accelerating markedly across multiple economies. The scale and persistence of this trend point to a structural shift rather than a cyclical upswing, reinforcing the view that AI is becoming an increasingly important driver of investment, productivity expectations and, potentially, broader macroeconomic dynamics.

260430Z6.jpg

Against a backdrop of persistent geopolitical tensions, firmer energy prices and a busy week of central bank meetings—including the Fed, ECB, BoE and BoJ—financial markets have remained notably resilient, even as the macro narrative has softened at the margin. The message from this week’s charts is one of growing tension beneath that surface calm. Front-end bond yields have moved higher, signalling a shift toward a more cautious, “higher-for-longer” policy outlook (chart 1). At the same time, real-time recession indicators for the United States suggest risks remain contained for now (chart 2). Consumer confidence data paint a more uneven picture, with sharper declines in the euro area and UK than in the US, highlighting regional vulnerabilities to the current energy shock (chart 3). The ECB’s latest bank lending survey reinforces this, pointing to tighter credit conditions and weaker demand—factors that are likely to weigh further on European growth (chart 4). By contrast, developments in the semiconductor sector underline a different dynamic: an intensifying global boom, with accelerating price pressures reflecting both strong AI-driven demand and emerging supply-side constraints linked indirectly to energy and logistics disruptions (chart 5). Finally, labour market data confirm that the AI surge is not merely a market narrative but a tangible structural shift, with hiring for AI-related roles accelerating across economies (chart 6). Taken together, these signals point to a more complex macro environment—one in which resilient markets coexist with softening growth, more persistent inflation risks and increasingly delicate policy trade-offs.

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/20j2LcPyLFkPvV7NrquXuj?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Tension Beneath the Surface

Kathleen Stephansen, CBE

260430A2.jpg

260430B2.jpg

Initial claims for unemployment insurance dropped by 26,000 to 189,000 in the week ending April 25, from 215,000 in the week ending April 18, revised from 214,000. The four-week average declined by 3,500 to 207,500 in the week ending April 25, from 211,000 the April 18 week, revised from 210,750. The Action Economics/Haver Analytics Survey looked for 214,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—dropped by 23,000 to 1.785 million in the week ending April 18, from 1.808 million in the week ending April 11, revised from 1.821 million. The four-week moving average declined to 1.797 million in the latest week from 1.809 million in the April 11 week. The insured unemployment rate remained at 1.2% in the week of April 11. It has remained at that level since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending April 11, the highest unemployment rates were in New Jersey (2.51%), Washington (2.25%), Massachusetts (2.21%), Rhode Island (2.10%), and California (2.06%). The lowest rates were in Florida (0.31%), Louisiana (0.32%), Arkansas, North Carolina and Mississippi (all 0.35%), Alabama (0.36%), South Dakota (0.41%) and Tennessee (0.43%). Rates in other notable states include New York (1.96%), Illinois (1.77%), Pennsylvania (1.40%), and Texas (1.04%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

260430C2.jpg

260430D2.jpg

- New claims dropped by 26,000 to 189,000.
- Continuing claims declined by 23,000 to 1.785 million.
- The insured unemployment rate remained at 1.2%.

U.S. Initial Unemployment Claims dropped in the Week of April 25

260429F4.jpg

260429G4.jpg

Housing starts and permits data were released for both February and March today. Release of these data has been delayed by the federal government shutdown in October 2025. Total starts fell 3.0% m/m in February to 1.356 million units from a downwardly revised 1.398 million in January (previously 1.487 million) but then rebounded to 1.502 million (+10.8% m/m) in March. The March level was the highest since December 2024 and 10.8% higher than a year earlier. The Action Economics Forecast Survey expected a 5.9% decline in March from January to a level of 1.4 million units. The 7.2% q/q increase in starts in Q1 is the first quarterly increase since Q1 2025. Residential investment has been a drag on overall GDP growth over the past year. The sharp Q1 increase raises hope that residential investment could make a small contribution to Q1 GDP growth in tomorrow’s report.

Single-family starts rose 4.8% m/m in February and 9.7% m/m in March to be 8.9% higher than a year ago. Multi-family starts plunged 17.0% m/m in February following an 18.2% monthly surge in January. They rebounded in March, rising 13.2% m/m to be up 15.5% y/y. The strong performance of starts in March following weakness earlier this year most likely reflects some catch-up as building conditions improved in March after having been very challenging in January and February.

Across the four major geographic regions, starts in the Northeast increased 24.8% m/m in March but fell 21.2% m/m in February. They were up 18.9% y/y. In the Midwest, starts increased 12.2% m/m in Mach on top of a 20.9% monthly gain in February. The March figure was down 0.9% from a year ago. In the South, starts rose 9.1% m/m in March but fell 3.6% m/m in February. In March they were up 14.1% from a year ago. In the West, starts rose 7.2% m/m in March after monthly declines of 7.7% in January and 3.7% in February. Compared with a year ago, they were up 8.0%.

The performance of building permits in February and March mirrored that of starts. Total permits rose 11.0% m/m in February but fell 10.8% m/m in March to be down 7.4% from a year ago. Single-family permits rose 6.2% m/m in February and then fell 3.8% m/m in March. They were 7.9% lower than a year ago. Multi-family permits rebounded 19.2% m/m in February after an 11.1% m/m fall in January. In March, they plunged 21.5% m/m and were down 6.3% from a year earlier.

In March, permits fell in each of the four major regions. In the Northeast, permits plunged 29.0% m/m in March following a 5.9% monthly gain in February. In the Midwest, permits declined 3.1% m/m in February and another 2.3% m/m in March. In the South, permits slumped 7.7% m/m in March but this following a 11.8% monthly jump in February. The March decline was the third in the past four months. In the West, permits fell 14.2% m/m in March following a 21.8% monthly surge in February and a 13.8% m/m slump in January.

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

260429H4.jpg

260429I4.jpg

- Data for both February and March were included in today’s report to catch up from delays due to the federal government shutdown last October.
- Starts fell 3.0% m/m in February but rebounded 10.8% m/m in March.
- The 7.2% q/q increase in Q1 was the largest quarterly gain since the economy reopened after the pandemic shutdown in 2020.
- In contrast, permits jumped 11.0% m/m in February but fell 10.8% m/m in March and were up only 1.0% q/q in Q1.