Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717c.jpg" width="353">
The Composite Housing Market Index from the National Association of Home Builders&#39; (NAHB) fell last month to the lowest level since early 1991. At 28 for June, the index fell 6.7% from May and fell by one third from a year earlier. 
During the last twenty years there has been a 76% correlation between the y/y change in the Composite Index and the change in single family housing starts. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717d.jpg" width="353"> 
The sub-index for current sales also fell 6.5% from May (-38.3% y/y) and the sub-index covering prospective sales in the next six months fell 4.9% m/m (-23.5% y/y). 
Traffic of prospective home buyers fell 4.5% (-27.6% y/y).
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>. 

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;06 </th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>28</td>
<td>30</td>
<td>42</td>
<td>42</td>
<td>67</td>
<td>68</td>
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</tbody>
</table>
</body>
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The Composite Housing Market Index from the National Association of Home Builders' (NAHB) fell last month to the lowest level since early 1991. At 28 for June, the index fell 6.7% from May and fell by one third from a year earlier. [...]

NAHB Housing Market Index Fell Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717a.jpg" width="353">
The producer price index for finished goods fell 0.2% last month following its 0.9% rise in May. The decline compared to Consensus forecasts for a 0.1% increase and it was the first decline since January.
Food prices fell 0.8% (+6.3% y/y) after May&#39;s 0.2% dip.
Energy prices, in addition, declined a sharp 1.1% (+4.3% y/y) as gasoline prices fell 3.9% (+3.8% y/y).Fuel oil dipped 0.5% (-0.6% y/y/y) but natural gas prices increased a hefty 2.6% (6.8% y/y), the firmest y/y increase since June 2006.
The core finished goods PPI increased 0.3%, bit more than the 0.2% May rise but the last two increases followed two months of unchanged readings during March and April. Consensus estimates were for a 0.2% increase in June.
Finished consumer goods prices less food &amp; energy rose 0.3% (1.7% y/y) as passenger car prices rose 0.9% (-1.8% y/y) after an unchanged reading during May.
Capital equipment prices increased 0.2% (1.8% y/y) after unchanged prices during the prior two months. Most of the June increase was due to a 1.0% (0.8% y/y) in prices of light motor trucks.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717b.jpg" width="353">
Intermediate goods prices added 0.5% to the firm 1.1% increase during May.Intermediate food prices rose a large 1.6% (15.3% y/y), suggesting future strength in finished food prices. The index excluding food &amp; energy prices rose the same 0.4% (2.7% y/y) as it did during May. 
The crude materials PPI rose 0.3% (14.9% y/y), as energy prices rose 0.6% (8.5% y/y) and food prices rose 0.5% (27.1% y/y). The core crude materials PPI fell 0.2% (10.2% y/y) as copper scrap prices fell 6.6% NSA (+9.6% y/y) and aluminum scrap prices fell 2.3% NSA (-3.3% y/y). 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">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">Finished Goods</td>
<td>-0.2</td>
<td>0.9%&nbsp;</td>
<td>&nbsp; 3.2%&nbsp;</td>
<td>2.9%</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3</td>
<td>0.2%</td>
<td>&nbsp;1.8%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.5%</td>
<td>1.1%</td>
<td>3.4%</td>
<td>6.4%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.4%</td>
<td>2.7%</td>
<td>6.0%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>0.3%</td>
<td>&nbsp;2.0%&nbsp;</td>
<td>&nbsp;14.9%</td>
<td>1.4%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>&nbsp;10.1%</td>
<td>20.9%</td>
<td>4.9%</td>
<td>&nbsp;26.5%</td>
</tr>
</tbody>
</table>
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The producer price index for finished goods fell 0.2% last month following its 0.9% rise in May. The decline compared to Consensus forecasts for a 0.1% increase and it was the first decline since January. Food prices fell 0.8% (+6.3% [...]

Lower Energy Prices Ease U.S. PPI; Core Prices Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717a.jpg" width="353">
The producer price index for finished goods fell 0.2% last month following its 0.9% rise in May. The decline compared to Consensus forecasts for a 0.1% increase and it was the first decline since January.
Food prices fell 0.8% (+6.3% y/y) after May&#39;s 0.2% dip.
Energy prices, in addition, declined a sharp 1.1% (+4.3% y/y) as gasoline prices fell 3.9% (+3.8% y/y).Fuel oil dipped 0.5% (-0.6% y/y/y) but natural gas prices increased a hefty 2.6% (6.8% y/y), the firmest y/y increase since June 2006.
The core finished goods PPI increased 0.3%, bit more than the 0.2% May rise but the last two increases followed two months of unchanged readings during March and April. Consensus estimates were for a 0.2% increase in June.
Finished consumer goods prices less food &amp; energy rose 0.3% (1.7% y/y) as passenger car prices rose 0.9% (-1.8% y/y) after an unchanged reading during May.
Capital equipment prices increased 0.2% (1.8% y/y) after unchanged prices during the prior two months. Most of the June increase was due to a 1.0% (0.8% y/y) in prices of light motor trucks.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717b.jpg" width="353">
Intermediate goods prices added 0.5% to the firm 1.1% increase during May.Intermediate food prices rose a large 1.6% (15.3% y/y), suggesting future strength in finished food prices. The index excluding food &amp; energy prices rose the same 0.4% (2.7% y/y) as it did during May. 
The crude materials PPI rose 0.3% (14.9% y/y), as energy prices rose 0.6% (8.5% y/y) and food prices rose 0.5% (27.1% y/y). The core crude materials PPI fell 0.2% (10.2% y/y) as copper scrap prices fell 6.6% NSA (+9.6% y/y) and aluminum scrap prices fell 2.3% NSA (-3.3% y/y). 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">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>
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</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.2</td>
<td>0.9%&nbsp;</td>
<td>&nbsp; 3.2%&nbsp;</td>
<td>2.9%</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3</td>
<td>0.2%</td>
<td>&nbsp;1.8%</td>
<td>1.4%</td>
<td>2.4%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.5%</td>
<td>1.1%</td>
<td>3.4%</td>
<td>6.4%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.4%</td>
<td>2.7%</td>
<td>6.0%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>0.3%</td>
<td>&nbsp;2.0%&nbsp;</td>
<td>&nbsp;14.9%</td>
<td>1.4%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.2%</td>
<td>0.1%</td>
<td>&nbsp;10.1%</td>
<td>20.9%</td>
<td>4.9%</td>
<td>&nbsp;26.5%</td>
</tr>
</tbody>
</table>
Tom Moeller 
by <a href="/comment/Moeller.html">Tom Moeller</a> Industrial Production Rebounded In June July 17, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717e.jpg" width="353">
For June, industrial production rebounded 0.5% after a revised 0.1% decline during the prior month. The magnitude of the rebound matched Consensus expectations.
Little of the figures were distorted by movement in the utility or in the mining categories. As a result, factory output rose 0.5% after a revised no change in May. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717f.jpg" width="353">
Consumer goods output surged 0.7% (1.6% y/y) led by a 2.5% (-1.7% y/y) pop in motor vehicle output. Production of computers &amp; electronics also rose a strong 1.1% (9.3% y/y) while output of furniture rose a tentative 1.2% (-4.1% y/y). To the downside was production of apparel by 2.4% (-3.4% y/y.
Production of business equipment was unchanged for the second consecutive month (3.4% y/y), held back by a 0.6% decline in output of industrial &amp; other equipment. Information processing &amp; related equipment rose 0.4% (5.7% y/y.
Capacity utilization rose to 81.7%from 81.4% in May as capacity rose 0.1% (2.1% y/y for the fifth strait month.
How Accurate Are Real-Time Estimates of Output Trends and Gaps? from the Federal Reserve Bank of Richmond can be found <a href="http://www.richmondfed.org/publications/economic_research/economic_quarterly/pdfs/spring2007/watson.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">INDUSTRIAL PRODUCTION (SA)</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>0.5%</td>
<td>-0.1%</td>
<td>1.3%</td>
<td>4.0%</td>
<td>3.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>0.5%</td>
<td>0.0%</td>
<td>1.6%</td>
<td>4.7%</td>
<td>3.9%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Mining</td>
<td>0.6%</td>
<td>0.3%</td>
<td>-0.9%</td>
<td>2.7%</td>
<td>-1.6%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">Utilities</td>
<td>0.3%</td>
<td>-1.6%</td>
<td>0.7%</td>
<td>0.2%</td>
<td>2.0%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index Fell Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 17, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717c.jpg" width="353">
The Composite Housing Market Index from the National Association of Home Builders&#39; (NAHB) fell last month to the lowest level since early 1991. At 28 for June, the index fell 6.7% from May and fell by one third from a year earlier. 
During the last twenty years there has been a 76% correlation between the y/y change in the Composite Index and the change in single family housing starts. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717d.jpg" width="353"> 
The sub-index for current sales also fell 6.5% from May (-38.3% y/y) and the sub-index covering prospective sales in the next six months fell 4.9% m/m (-23.5% y/y). 
Traffic of prospective home buyers fell 4.5% (-27.6% y/y).
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;06 </th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>28</td>
<td>30</td>
<td>42</td>
<td>42</td>
<td>67</td>
<td>68</td>
</tr>
</tbody>
</table>
Confidence Among the German Financial Community Weakens in July  
by <a href="/comment/Curley.html">Louise Curley</a> July 17, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717g.jpg" width="353">
The July ZEW survey of German institutional investors and analysts revealed a sharp deterioration in the excess of those who see improvement in the economic outlook six months ahead and those who see worsening conditions. The excess in July was 10.4% compared with 20.3% in June. The historical average of optimists over pessimists is 32.8%.
The participants in the ZEW survey also expressed slightly less confidence in the current situation. The excess of optimists regarding current conditions fell to 88.2% in July from 88.7% in June, nevertheless, the confidence in the current situation is among the strongest reported over the entire history of the survey, as can be seen in the first chart.
Concerns over the rising price of oil, the strengthening of the euro and higher interest rates may have accounted for some of the weakening confidence among the financial community. Although there was some relief to the rising price of oil and strengthening of the Euro in the second quarter of this year, the price of oil has risen almost 58% from the low point of the year of January 18, to July 16 and the euro is up almost 7% over the same period. The daily prices of a barrel of Brent Crude and the dollar exchange rates of the euro for the current year are shown in the second chart. While the European Central Bank (ECB) did not raise rates at its last meeting, its base rate has risen steadily over the last 18 months from 2% in November, 2005 to 4% currently, as shown in the third chart. Moreover, the bank continues to stress that further tightening may be needed. 

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<td><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717h.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717i.jpg" width="353"> </td>
</tr>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GERMANY&nbsp;&nbsp;</th>
<th scope="col">July 07</th>
<th scope="col">June 07&nbsp;</th>
<th scope="col">July&nbsp; 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="even">
<td class="firstcol">ZEW Indicator (%)</td>
<td>&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations 6 mo ahead</td>
<td>10.4</td>
<td>20.3</td>
<td>15.1</td>
<td>-9.9</td>
<td>-4.7</td>
<td>22.3</td>
<td>34.8</td>
<td>44.6</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current conditions</td>
<td>88.2</td>
<td>88.7</td>
<td>23.3</td>
<td>-0.5</td>
<td>64.9</td>
<td>18.3</td>
<td>-61.8</td>
<td>-67.0</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>7/16/07</td>
<td>1/18/07</td>
<td>% Chg</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Euro/Dollar Exchange rate</td>
<td>1.38</td>
<td>1.29</td>
<td>6.98</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Price of&nbsp; Oil per bbl. Brent Crude</td>
<td>79.73</td>
<td>50.83</td>
<td>57.91</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
METI Sector Surveys Show Some Weakness in May 
by <a href="/comment/Brusca.html">Robert Brusca</a> July 17, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070717j.jpg" width="353">
The Industry index from METI is in a sharp decline and is lower over six months for a period of three months running. Services (the tertiary index) tend to be more stable. Their index has slowed in the past few months and even fell in May but it is growing at pace just below 2%.
The tertiary and industry index are still relatively strong in their five year context. Fixing them in the range of values they have experienced over the past five years we find that the tertiary index is in its 95Th percentile (top 5-percent). The Industrial gauge is a bit lower but resides in the 84th percentile about the top 15 percentile of its range. The percentile standing of the MFG sector is higher than we get from other surveys of Japan (NTC has the MFG sector in the bottom 30 percent of its five year range). Japan remains unconcerned about this weakness and the BoJ continues to talk of when it will go back to hiking rates. Onew BOJ board member thinks they should already have hiked them again.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
 Key Japanese Sector Surveys
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="3">Raw readings of each survey</td>
<td colspan="2">Percent of 5Yr range*</td>
</tr>
<tr>
<td class="firstcol">Biz Activity (METI:Indexes)</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Mar-07</td>
<td>May-07</td>
<td>Apr-07</td>
</tr>
<tr class="odd">
<td class="firstcol"> Industry</td>
<td>107.1</td>
<td>107.4</td>
<td>107.6</td>
<td>84.9%</td>
<td>86.7%</td>
</tr>
<tr class="odd">
<td class="firstcol"> Tertiary (Services)</td>
<td>110.2</td>
<td>110.3</td>
<td>108.6</td>
<td>95.1%</td>
<td>96.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">*100 is high; Zero is low</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716g.jpg" width="353">
The chart on select core HICP readings violates the rule on how many lines to plot on a graph (sorry). But the clear message is that few of these are trending lower and most are trending up. Among those that have any trend lower, there is usually abysmally high inflation rate anyway (Greece and Spain, for example).
The table below presents the discernable detail on core inflation trends on data that were not available last week. The table shows that inflation is accelerating in too many countries for comfort. In the same table we slice the data into a number of 12-month periods ended in June since that is the most recent observation.
As of June 2007 inflation was accelerating in half of the select 12 EMU members. Over the past year inflation also was higher on a year/year basis in seven countries than it had been in June of 2004. Any way you look at the inflation comparisons there is a hint of inflation. And these data look at core prices excluding the direct effects of food and energy inflation. These four presentations, the chars and the table below, make it clear why the ECB remains wary about inflation forces.
Inflation is simply trending higher into many categories to be ignored and across too many EMU countries to assume that it will go down all by itself. 

<table border="0" cellspacing="0" width="100%">
<tr>
<td><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716h.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716i.jpg" width="353"> </td>
</tr>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Euro area Select Members: Core Inflation Yr/Yr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>Jun-07</td>
<td>Jun-06</td>
<td>Jun-05</td>
<td>Jun-04</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>1.9%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Belgium</td>
<td>1.7%</td>
<td>1.7%</td>
<td>1.4%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Finland</td>
<td>1.4%</td>
<td>0.8%</td>
<td>0.6%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>1.4%</td>
<td>1.4%</td>
<td>1.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>2.1%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Greece</td>
<td>2.9%</td>
<td>3.0%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>2.4%</td>
<td>2.1%</td>
<td>1.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>1.8%</td>
<td>1.8%</td>
<td>1.9%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Luxembourg</td>
<td>2.3%</td>
<td>2.3%</td>
<td>2.5%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">The Netherlands</td>
<td>1.5%</td>
<td>0.8%</td>
<td>0.6%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Portugal</td>
<td>2.4%</td>
<td>2.5%</td>
<td>0.2%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>2.4%</td>
<td>3.1%</td>
<td>2.5%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">EMU Core HICP</td>
<td>1.9%</td>
<td>2.5%</td>
<td>1.9%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
</body>
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The chart on select core HICP readings violates the rule on how many lines to plot on a graph (sorry). But the clear message is that few of these are trending lower and most are trending up. Among those that have any trend lower, [...]

HICP Trends Show Pressure

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716e.jpg" width="353">
The Central Bank of the Philippines announced today that the &quot;overall balance of payments&quot; for June amounted to $834 million, $169 million above May and $602 million above June of last year. The overall balance of payments is defined by the Bank as equal to the change in reserve assets less the change in reserve liabilities.
Because of the identity underlying the balance of payments concept, the change in reserves is shown with its sign reversed in the balance of payments table. Thus in the Balance of Payments Table in the PHILIPPINE@EMERGEPR data base, the Change in Reserves has the opposite sign of the Overall Balance of Payments, as shown in the first chart. The Overall Balance is equal to the sum of the Current Account, the Capital and Financial Account and the Net Unclassified Items (Errors and Omissions). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716f.jpg" width="353">
The Philippines balance on current account has shown a surplus, more often than not, since mid 2001. The improvement in the current account has been due mostly to remittances from citizens working abroad. The balance on trade in goods and services continues to be negative. The second chart shows the quarterly balance on current account together with the balance on trade in goods and services and the balance on transfers (largely workers&#39; remittances). These data are available only through the first quarter of 2007. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">PHILIPPINE BALANCE OF PAYMENTS&nbsp; (Millions U. S. $)</th>
<th scope="col">Q1 07</th>
<th scope="col">Q4 07&nbsp;</th>
<th scope="col">Q1 06&nbsp;</th>
<th scope="col">Q/Q 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">Current Account</td>
<td>1823</td>
<td>1676</td>
<td>1153</td>
<td>147</td>
<td>670</td>
<td>5022</td>
<td>1955</td>
<td>1628</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital and Financial Account</td>
<td>154</td>
<td>-825</td>
<td>1427</td>
<td>974</td>
<td>-1185</td>
<td>-1722</td>
<td>1661</td>
<td>-1630</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Unclassified Items</td>
<td>-559</td>
<td>297</td>
<td>-459</td>
<td>-856</td>
<td>-100</td>
<td>469</td>
<td>-1206</td>
<td>-278</td>
</tr>
<tr class="odd">
<td class="firstcol"> Overall Balance of Payments=Sum of above </td>
<td>1418</td>
<td>1150</td>
<td>2121</td>
<td>268</td>
<td>-703</td>
<td>3769</td>
<td>2410</td>
<td>-280</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Reserves</td>
<td>-1418</td>
<td>-1150</td>
<td>-2121</td>
<td>-268</td>
<td>703</td>
<td>-3769</td>
<td>-2410</td>
<td>280</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>1823</td>
<td>1676</td>
<td>1153</td>
<td>147</td>
<td>670</td>
<td>5022</td>
<td>1955</td>
<td>1628</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods and Services Balance</td>
<td>-1229</td>
<td>-2147</td>
<td>-1532</td>
<td>848</td>
<td>237</td>
<td>-7624</td>
<td>-9192</td>
<td>-7461</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Transfer Balance</td>
<td>3445</td>
<td>3747</td>
<td>2911</td>
<td>-302</td>
<td>534</td>
<td>13189</td>
<td>11391</td>
<td>9160</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Jun 07</td>
<td>May&nbsp; 07&nbsp;</td>
<td>Jun&nbsp; 06&nbsp;</td>
<td>M/M 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">Overall Balance of Payments</td>
<td>834</td>
<td>665</td>
<td>232</td>
<td>169</td>
<td>602</td>
<td>3769</td>
<td>2410</td>
<td>-280</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Reserves</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 Central Bank of the Philippines announced today that the "overall balance of payments" for June amounted to $834 million, $169 million above May and $602 million above June of last year. The overall balance of payments is defined [...]

Favorable Trends in the Philippine Balance of Payments

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716d.jpg" width="353">
After deceleration through April, total business inventories in May rose 0.5% following a 0.4% increase the month prior. The increases were sufficient to raise the three month growth rates. Consensus expectations had been for a 0.3% one month rise.
Three month average growth in business inventories rose to 0.8%, its highest since last October.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716c.jpg" width="353">
Business sales jumped 1.3% (4.0% y/y). Wholesale sales led the gain with a 1.3% (8.7%y/y) jump and retail sales surged 1.6% (4.9% y/y) for May. Factory shipments rose 1.0% for the second month. 
Due to the strong sales gain in May, the inventory to sales ratio fell to its lowest level since last August. 
Retail inventories rose 0.6%, double the rise in April. General merchandise inventories halved their April rise with a 0.4% (6.6% y/y) but clothing store inventories surged 0.7% (8.1% y/y) after a 0.2% April decline. Furniture inventories fell 0.7% (-0.2% y/y) after no change during April. Auto inventories fell for the fourth straight month. 

<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/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">May</th>
<th scope="col">April</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>0.5%</td>
<td>0.4%</td>
<td>4.0%</td>
<td>5.9%</td>
<td>6.2%</td>
<td>7.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.6%</td>
<td>0.3%</td>
<td>1.6%</td>
<td>3.2%</td>
<td>2.8%</td>
<td>6.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.7%</td>
<td>0.4%</td>
<td>4.3%</td>
<td>4.5%</td>
<td>4.5%</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.5%</td>
<td>0.3%</td>
<td>6.7%</td>
<td>8.6%</td>
<td>7.4%</td>
<td>9.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.3%</td>
<td>0.4%</td>
<td>4.3%</td>
<td>6.4%</td>
<td>7.9%</td>
<td>7.7%</td>
</tr>
</tbody>
</table>


</html>

After deceleration through April, total business inventories in May rose 0.5% following a 0.4% increase the month prior. The increases were sufficient to raise the three month growth rates. Consensus expectations had been for a 0.3% [...]

U.S. Inventory Accumulation Showed Some Life

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716a.jpg" width="353">
 The July index of manufacturing activity in New York State added slightly to the improvement in June. The Index of General Business Conditions rose 0.71 points on top of its 17.72 jump during June. Consensus expectations for the Empire State index had been for a decline to a reading of 18.0. The figures are reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 75% correlation between the index level and the three month change in U.S. factory sector industrial production.
The index for new orders improved slightly and the index for employment jumped. Conversely, the shipments index fell considerably as did inventories and the index &amp; delivery times, each into negative territory.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716b.jpg" width="353">
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
Pricing pressure also fell considerably with the prices paid index and the prices received index falling into negative territory. Since 2001 there has been an 88% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months improved. The index of expected new orders led the gain to the highest level in over a year.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July. &#39;06 </th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>26.46</td>
<td>25.75</td>
<td>20.33</td>
<td>20.33</td>
<td>15.62</td>
<td>28.70</td>
</tr>
</tbody>
</table>


</html>

The July index of manufacturing activity in New York State added slightly to the improvement in June. The Index of General Business Conditions rose 0.71 points on top of its 17.72 jump during June. Consensus expectations for the [...]

Empire State Index Adds To June Surge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716a.jpg" width="353">
 The July index of manufacturing activity in New York State added slightly to the improvement in June. The Index of General Business Conditions rose 0.71 points on top of its 17.72 jump during June. Consensus expectations for the Empire State index had been for a decline to a reading of 18.0. The figures are reported by the Federal Reserve Bank of New York.
Since the series&#39; inception in 2001 there has been a 75% correlation between the index level and the three month change in U.S. factory sector industrial production.
The index for new orders improved slightly and the index for employment jumped. Conversely, the shipments index fell considerably as did inventories and the index &amp; delivery times, each into negative territory.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716b.jpg" width="353">
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
Pricing pressure also fell considerably with the prices paid index and the prices received index falling into negative territory. Since 2001 there has been an 88% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.
The Empire State index of expected business conditions in six months improved. The index of expected new orders led the gain to the highest level in over a year.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html">here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July. &#39;06 </th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>26.46</td>
<td>25.75</td>
<td>20.33</td>
<td>20.33</td>
<td>15.62</td>
<td>28.70</td>
</tr>
</tbody>
</table>
U.S. Inventory Accumulation Showed Some Life 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 16, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716d.jpg" width="353">
After deceleration through April, total business inventories in May rose 0.5% following a 0.4% increase the month prior. The increases were sufficient to raise the three month growth rates. Consensus expectations had been for a 0.3% one month rise.
Three month average growth in business inventories rose to 0.8%, its highest since last October.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716c.jpg" width="353">
Business sales jumped 1.3% (4.0% y/y). Wholesale sales led the gain with a 1.3% (8.7%y/y) jump and retail sales surged 1.6% (4.9% y/y) for May. Factory shipments rose 1.0% for the second month. 
Due to the strong sales gain in May, the inventory to sales ratio fell to its lowest level since last August. 
Retail inventories rose 0.6%, double the rise in April. General merchandise inventories halved their April rise with a 0.4% (6.6% y/y) but clothing store inventories surged 0.7% (8.1% y/y) after a 0.2% April decline. Furniture inventories fell 0.7% (-0.2% y/y) after no change during April. Auto inventories fell for the fourth straight month. 

<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/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">May</th>
<th scope="col">April</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>0.5%</td>
<td>0.4%</td>
<td>4.0%</td>
<td>5.9%</td>
<td>6.2%</td>
<td>7.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.6%</td>
<td>0.3%</td>
<td>1.6%</td>
<td>3.2%</td>
<td>2.8%</td>
<td>6.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.7%</td>
<td>0.4%</td>
<td>4.3%</td>
<td>4.5%</td>
<td>4.5%</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.5%</td>
<td>0.3%</td>
<td>6.7%</td>
<td>8.6%</td>
<td>7.4%</td>
<td>9.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.3%</td>
<td>0.4%</td>
<td>4.3%</td>
<td>6.4%</td>
<td>7.9%</td>
<td>7.7%</td>
</tr>
</tbody>
</table>
 Favorable Trends in the Philippine Balance of Payments   
by <a href="/comment/Curley.html">Louise Curley</a> July 16, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716e.jpg" width="353">
The Central Bank of the Philippines announced today that the &quot;overall balance of payments&quot; for June amounted to $834 million, $169 million above May and $602 million above June of last year. The overall balance of payments is defined by the Bank as equal to the change in reserve assets less the change in reserve liabilities.
Because of the identity underlying the balance of payments concept, the change in reserves is shown with its sign reversed in the balance of payments table. Thus in the Balance of Payments Table in the PHILIPPINE@EMERGEPR data base, the Change in Reserves has the opposite sign of the Overall Balance of Payments, as shown in the first chart. The Overall Balance is equal to the sum of the Current Account, the Capital and Financial Account and the Net Unclassified Items (Errors and Omissions). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716f.jpg" width="353">
The Philippines balance on current account has shown a surplus, more often than not, since mid 2001. The improvement in the current account has been due mostly to remittances from citizens working abroad. The balance on trade in goods and services continues to be negative. The second chart shows the quarterly balance on current account together with the balance on trade in goods and services and the balance on transfers (largely workers&#39; remittances). These data are available only through the first quarter of 2007. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">PHILIPPINE BALANCE OF PAYMENTS&nbsp; (Millions U. S. $)</th>
<th scope="col">Q1 07</th>
<th scope="col">Q4 07&nbsp;</th>
<th scope="col">Q1 06&nbsp;</th>
<th scope="col">Q/Q 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">Current Account</td>
<td>1823</td>
<td>1676</td>
<td>1153</td>
<td>147</td>
<td>670</td>
<td>5022</td>
<td>1955</td>
<td>1628</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital and Financial Account</td>
<td>154</td>
<td>-825</td>
<td>1427</td>
<td>974</td>
<td>-1185</td>
<td>-1722</td>
<td>1661</td>
<td>-1630</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Unclassified Items</td>
<td>-559</td>
<td>297</td>
<td>-459</td>
<td>-856</td>
<td>-100</td>
<td>469</td>
<td>-1206</td>
<td>-278</td>
</tr>
<tr class="odd">
<td class="firstcol"> Overall Balance of Payments=Sum of above </td>
<td>1418</td>
<td>1150</td>
<td>2121</td>
<td>268</td>
<td>-703</td>
<td>3769</td>
<td>2410</td>
<td>-280</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Reserves</td>
<td>-1418</td>
<td>-1150</td>
<td>-2121</td>
<td>-268</td>
<td>703</td>
<td>-3769</td>
<td>-2410</td>
<td>280</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>1823</td>
<td>1676</td>
<td>1153</td>
<td>147</td>
<td>670</td>
<td>5022</td>
<td>1955</td>
<td>1628</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods and Services Balance</td>
<td>-1229</td>
<td>-2147</td>
<td>-1532</td>
<td>848</td>
<td>237</td>
<td>-7624</td>
<td>-9192</td>
<td>-7461</td>
</tr>
<tr class="odd">
<td class="firstcol">Net Transfer Balance</td>
<td>3445</td>
<td>3747</td>
<td>2911</td>
<td>-302</td>
<td>534</td>
<td>13189</td>
<td>11391</td>
<td>9160</td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Jun 07</td>
<td>May&nbsp; 07&nbsp;</td>
<td>Jun&nbsp; 06&nbsp;</td>
<td>M/M 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">Overall Balance of Payments</td>
<td>834</td>
<td>665</td>
<td>232</td>
<td>169</td>
<td>602</td>
<td>3769</td>
<td>2410</td>
<td>-280</td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Reserves</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
HICP Trends Show Pressure 
by <a href="/comment/Brusca.html">Robert Brusca</a> July 16, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716g.jpg" width="353">
The chart on select core HICP readings violates the rule on how many lines to plot on a graph (sorry). But the clear message is that few of these are trending lower and most are trending up. Among those that have any trend lower, there is usually abysmally high inflation rate anyway (Greece and Spain, for example).
The table below presents the discernable detail on core inflation trends on data that were not available last week. The table shows that inflation is accelerating in too many countries for comfort. In the same table we slice the data into a number of 12-month periods ended in June since that is the most recent observation.
As of June 2007 inflation was accelerating in half of the select 12 EMU members. Over the past year inflation also was higher on a year/year basis in seven countries than it had been in June of 2004. Any way you look at the inflation comparisons there is a hint of inflation. And these data look at core prices excluding the direct effects of food and energy inflation. These four presentations, the chars and the table below, make it clear why the ECB remains wary about inflation forces.
Inflation is simply trending higher into many categories to be ignored and across too many EMU countries to assume that it will go down all by itself. 

<table border="0" cellspacing="0" width="100%">
<tr>
<td><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716h.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070716i.jpg" width="353"> </td>
</tr>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Euro area Select Members: Core Inflation Yr/Yr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"></td>
<td>Jun-07</td>
<td>Jun-06</td>
<td>Jun-05</td>
<td>Jun-04</td>
</tr>
<tr>
<td class="firstcol">Austria</td>
<td>1.9%</td>
<td>1.3%</td>
<td>1.6%</td>
<td>1.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Belgium</td>
<td>1.7%</td>
<td>1.7%</td>
<td>1.4%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Finland</td>
<td>1.4%</td>
<td>0.8%</td>
<td>0.6%</td>
<td>-0.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>1.4%</td>
<td>1.4%</td>
<td>1.2%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>2.1%</td>
<td>0.8%</td>
<td>0.8%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Greece</td>
<td>2.9%</td>
<td>3.0%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>2.4%</td>
<td>2.1%</td>
<td>1.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>1.8%</td>
<td>1.8%</td>
<td>1.9%</td>
<td>2.4%</td>
</tr>
<tr>
<td class="firstcol">Luxembourg</td>
<td>2.3%</td>
<td>2.3%</td>
<td>2.5%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">The Netherlands</td>
<td>1.5%</td>
<td>0.8%</td>
<td>0.6%</td>
<td>1.3%</td>
</tr>
<tr>
<td class="firstcol">Portugal</td>
<td>2.4%</td>
<td>2.5%</td>
<td>0.2%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>2.4%</td>
<td>3.1%</td>
<td>2.5%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">EMU Core HICP</td>
<td>1.9%</td>
<td>2.5%</td>
<td>1.9%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>


</html>

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

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

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

US is big leader in global surge in private AI investment

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

Sharply rising share of AI-related jobs

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

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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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.

260618Z6.jpg

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).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/7rw2v1Ri8gUVHbFrZfgANL?utm_source=generator&si=75d98727e9524d75" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Between Relief and Reality

Winnie Tapasanun

260618N12.jpg

260618O12.jpg

The current general activity diffusion index rebounded to a slightly stronger-than-expected 10.3 in June following a 27.1-point drop to -0.4 in May, the latest Manufacturing Business Outlook Survey (MBOS) from the Federal Reserve Bank of Philadelphia showed, indicating a return to expansion in manufacturing activity in the Third Federal Reserve District this month. A reading of 10.0 for June had been expected by the Action Economics Forecast Survey. June marked the fifth m/m increase in six months, showing a sharp improvement from -1.4 in June 2025. In June, 32.1% of firms reported increases in current general activity (up from 22.5% in May), while 21.9% reported decreases (down from 22.9%); 45.4% reported no change (down from 54.6%). Survey responses were collected from June 8 to June 15.

Haver Analytics calculates an ISM-adjusted current activity diffusion index from five key components using the methodology along the lines of the national ISM index. The index rose to 53.1 in June after a 4.8-point decline to a contraction-level 49.7 in May, indicating manufacturing activity expanded for the third time in four months; it was slightly above 51.0 in June 2025.

In the latest survey, the new orders index surged to 27.3 in June following a 34.7-point plunge to -1.7 in May, signaling new orders expanded for the sixth time in seven months. The shipments index rebounded to 14.9 this month from 4.9 in May, registering the seventh consecutive expansion. The unfilled orders index advanced to 10.5 from -2.5, indicating expansion for the first time since July 2025 and the highest level since January 2025. In contrast, the inventories index dropped to -8.5 in June from 6.6 in May, showing inventories contracted for the second time in three months and at the lowest level since July 2024. Meanwhile, the delivery times index increased to -2.6 this month from -10.4 in May (the lowest reading since March 2024).

On the labor front, the number of employees index climbed to 7.9 in June from -2.8 in May, indicating employment expanded for the first time in three months and at the highest level since January. In June, a higher 17.0% of respondents reported increases in employment, while 9.2% reported declines; 73.8% reported no change in employment levels. The average employee workweek index fell to -6.5 this month, the first negative reading and lowest since February, from 1.2 in May.

Inflation indicators were mixed in June. The prices paid index rose to 53.2 this month following an 11.4-point drop to 47.9 in May. A higher 53.5% of respondents reported increases in input prices in June, while only 0.4% reported decreases. The prices received index fell to 20.3, a four-month low, after a 7.2-point May decline to 26.3. In June, 20.3% of respondents reported increases in prices received, while 0.0% reported decreases.

The future indexes remained in positive territory, signaling continued overall growth over the next six months, with most future indicators rising. The future general activity diffusion index edged down to 50.2 in June from 53.2 in May, staying positive since February 2024. Future indexes for new orders (60.8 vs. 53.5) and shipments (60.3 vs. 45.7) increased in June (vs. May) and remained positive. Notably, the future capital expenditures index rose to 41.2 this month, the highest level since June 2021, from 30.9 in May. The following future indexes slipped in June (vs. May) but stayed in positive territory: employment (30.8 vs. 31.7), unfilled orders (17.3 vs. 19.2), and inventories (10.0 vs. 11.8). Prices continued to increase, with the future prices paid index easing to a still-elevated 63.2 in June from 70.0 in May and the future prices received index rising to 67.2, the highest level since August 2021, from 60.5.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The indexes range from -100 to +100 with positive values indicating an increase in activity. The series from the survey dating back to May 1968 can be found in Haver’s **SURVEYS** database. The expectations forecast figures are from the Action Economics Forecast Survey in **AS1REPNA**.

260618P12.jpg

260618Q12.jpg

- Current General Activity Index up 10.7 pts. to 10.3 in June; fifth rise in six months.
- New Orders (27.3), sixth expansion in seven mths.; Shipments (14.9), seventh straight expansion; Unfilled Orders (10.5), first expansion since July ’25.
- Employment (7.9), a five-month high after two mths. of contraction.
- Inflation indicators: Prices Paid up (53.2); Prices Received down (20.3, a four-month low).
- Future General Activity Index down to a still-expansion-level 50.2; most subindexes up and positive; future price indexes remaining above long-run avgs.

U.S. Philadelphia Fed Index Returns to Positive Territory in June

260618E.jpg

Unemployment in the European Monetary Union stayed at 6.3% in April, just a tick above its all-time low. In the more inclusive EU, the unemployment rate hovered at 6%, just two tenths of a percentage point above its all-time low. Unemployment conditions in the monetary union remain low without many signs of acceleration.

The unemployment rate in April fell in Italy, Ireland, Greece, Portugal, and the Netherlands. The unemployment rate increased month-to-month in Finland.

In March, the unemployment rate declined in Austria, Belgium, Germany, Finland, Italy, and the Netherlands. It rose month-to-month in Greece and Luxembourg.

Over three months, the unemployment rate in these 12-early reporting monetary union members fell in five countries: Belgium, Germany, Italy, Ireland, and the Netherlands. In contrast, unemployment rose in five countries: Portugal, Greece, France, Finland, and Austria.

Over six months, unemployment rates fell in six countries: the Netherlands, Portugal, Italy, Germany, Belgium, and Austria. This was against increases in six countries: Greece, Finland, France, Luxembourg, Spain, and Ireland.

Year over year, the degree of inflation progress is much thinner, with the unemployment rates falling in only three countries Italy, Spain, and Portugal with increases in unemployment for all the other countries in the table.

Unemployment rates continue to rank low in the monetary union, with only three monetary union countries having their unemployment rates ranked above 50%, putting them above their respective medians on data back to the year 2000. Those three countries are Luxembourg, Finland, and Austria. For the remaining countries, the rankings of their unemployment rates over this period are not even as high as their 30th percentiles. Italy, at present, is experiencing its lowest unemployment rate of the period.

Unemployment conditions in the monetary union remain solid. The past two weeks were significant for monetary policy and global economics, with the ECB raising rates, Japan raising rates, and the United States keeping rates unchanged but moving away from an easing bias in policy that had been in effect for quite a number of months. Today the Bank of England, after experiencing some significant inflation progress, decided to keep its policy on hold for another session. An agreement between the U.S. and Iran securing an opening of the Strait of Hormuz was signed, paving the way for potentially improved oil flows, lower inflation, and less uncertainty in the period ahead.

260618.jpg

EMU Unemployment Remains Low

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

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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.

Economy in Brief

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