Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070606a.jpg" width="353">
Productivity is trending lower for manufacturing (MFG) as well as overall for nonfarm businesses. The accompanying chart makes the downturn clear. For nonfarm business the erosion seems to date back to mid-2005. For nonfarm productivity it looks like a trend decline is still in train - that would be very bad news indeed. It&#146;s bad enough that productivity has slowed to 1% Yr/Yr. 
With productivity at 1% Yr/Yr and population growth at about 1% Yr/Yr, GDP growth faces strong constraints. While labor force growth can surpass population growth, one-half of one percent is about all the extra growth it might be prudent to look for. And to encourage greater labor force participation it generally takes higher wages and that would be a problem for the Fed since it is trying to keep inflation contained. On balance, 2.5% growth seems about the limit to GDP under this new productivity growth rate scenario. 
Of course productivity is a fickle series. The chart on the left shows a good deal of variation in Yr/Yr growth. Quarterly growth in productivity and GDP can move around by a lot more. Still it is the trend we should be most concerned with. That is what the Fed will be looking at as it makes an assessment of its own policy options. 
The main implication of structurally weaker productivity growth is that the Fed will be seeing the economy with a lower speed limit. This is something markets have been having a hard time dealing with for sometime now. We have seen the slowing in labor force growth that has meant that 118K jobs per month (in nonfarm payrolls) is all that the job market needs to produce to steady the unemployment rate. Now a lower GDP number will also associate with that weaker job growth. 
The paradox is that this low growth will not be a cause for alarm that growth is slipping, rather the Fed will get worried about inflation pressures and speeding at growth rates that used to be quite acceptable and sustainable. 
Productivity is one of the most important contributors to growth and it is one of the most volatile. As such it is a variable that is hard to pin down. Even so the Fed will not be pleased with the new result and the trend it hints at. 
A diminished trend in productivity means that wage pressures can become inflation problems more easily. With high productivity in train sizeable wage increases can be blunted and &#145;paid for&#146; by accelerated productivity growth. But when productivity growth is low, firms have to be more careful about giving in to wage demands since the productivity cushion is smaller. 
In Q1 2007 compensation per hour of 3.2% less productivity of 1% leaves unit labor costs higher by 2.2%. In Q4 of 2005 compensation per hour of 3.7% translated into unit labor costs of just +1.5% because productivity was up by 2.1%. 
With the Fed putting the top of its inflation comfort zone at 2% in terms of Core PCE it is easy to see that wages are to be held in a narrow band if productivity stays this low and if the Fed is to be successful in keeping inflation at bay.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Nonfarm Productivity
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Year/Year Pct</td>
<td>07/Q1</td>
<td>06/Q4</td>
<td>06/Q3</td>
<td>06/Q2</td>
<td>06/Q1</td>
<td>05/Q4</td>
</tr>
<tr class="odd">
<td class="firstcol">NF Unit Labor Cost</td>
<td>2.2%</td>
<td>4.0%</td>
<td>2.6%</td>
<td>3.1%</td>
<td>3.6%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">NF Output/Hr</td>
<td>1.0%</td>
<td>1.6%</td>
<td>0.9%</td>
<td>1.9%</td>
<td>2.0%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">NF Comp/Hr</td>
<td>3.2%</td>
<td>5.6%</td>
<td>3.5%</td>
<td>5.1%</td>
<td>5.7%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">NF Real Comp/Hr</td>
<td>0.7%</td>
<td>3.6%</td>
<td>0.1%</td>
<td>1.0%</td>
<td>1.9%</td>
<td>0.0%</td>
</tr>
<tr>
<td colspan="7">Manufacturing</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Unit Labor Cost</td>
<td>-0.4%</td>
<td>0.7%</td>
<td>-2.3%</td>
<td>0.1%</td>
<td>2.0%</td>
<td>-1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Output/Hour</td>
<td>3.5%</td>
<td>3.9%</td>
<td>4.2%</td>
<td>3.6%</td>
<td>4.1%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Comp/Hour</td>
<td>3.1%</td>
<td>4.6%</td>
<td>1.8%</td>
<td>3.7%</td>
<td>6.1%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG Real Comp/Hour</td>
<td>0.6%</td>
<td>2.6%</td>
<td>-1.5%</td>
<td>-0.3%</td>
<td>2.3%</td>
<td>-0.4%</td>
</tr>
</tbody>
</table>
Challenger Lay Offs Stay Elevated 
by <a href="/comment/Brusca.html">Robert Brusca</a> June 6, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070606b.jpg" width="353">
The first issue to grapple with in trying to assess the Challenger report is that its data are not seasonally adjusted. At the same time it is clear that this series has seasonal patterns. To get around this we compare the data to the year before.. We also have created the accompanying chart that plots each month of the year in a non-binding tunnel bearing two values representing averages for each month drawn from the period of recession and depressed growth as well as from the pre-recession times when layoffs were much lower. We add, as another reference line to the chart, the midpoint between these two cases. The chart reveals that the 2007 figures were regularly at or below the midpoint line until May when the level of layoffs is higher relative to that standard. It may be that the economy is throwing off more layoffs in May than what is normal either because of calendar quirks or because of a real deterioration that is setting in.
But the chart, even though it uses NSA data, flags May 2007 as a month of backtracking on reducing layoffs. 
The comprehensive table below provides even more comparisons. May ranks as the fifth highest layoff total in the past 14 years. April was also the fifth highest layoff month. March had ranked 9th and layoffs appeared as if they were diminishing. The three-month average ranks sixth over these same 14 years. The six-month average ranks eighth. The 12-month is displayed in the table and as of May that ranks 8th. So the ranking has been creeping up as we shorten the length to measure the moving average or to look at the month directly. The improving trend is not so clear any more, indeed it appears to have switched to one of deterioration. We can see that there has been some slippage compared to historic standards; standards that are free from the effects of seasonality. 
A slight bump up in the layoff pace is not an unequivocal message. 
But the steadiness of the slippage of the rankings on shorted moving averages is indicative of a true deterioration. A pick up in layoffs need not be a sign of economic weakness, however. At the moment both jobless claims and nonfarm job growth are indicating that the job market is solid &#150; as is the 4.5% rate of unemployment. Layoffs are another way to supply labor to an already tight labor market. We know that manufacturing firms continue to shed employees and have been doing so for decades. With the pick up in M&amp;A activity it is no surprise that layoffs step-up since that is one common result of mergers and their drive for greater efficiency. 
The gradual up turn in layoffs is a trend to be aware of, but is not yet a clear signal for policy. It may be constructive or it may be a sign of true erosion and of encroaching weakness. It bears watching.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
Summary Of Announced Corporate Layoffs
<th scope="col">Rank of</th>
<th scope="col">&quot;13-Yr&quot;</th>
</tr>
</thead>
<tbody>
<tr class="grey8">
<td colspan="4">Challenger, Gray and Christmas:</td>
<td>3-Mo Avg</td>
<td>6-Mo Avg</td>
<td>12-Mo Avg</td>
<td>12-Mo</td>
<td>Rank Of</td>
</tr>
<tr class="grey7">
<td class="firstcol">&nbsp;</td>
<td>May</td>
<td>Apr</td>
<td>Mar</td>
<td>May</td>
<td>May</td>
<td>May</td>
<td>Average</td>
<td>May</td>
</tr>
<tr class="grey6">
<td class="firstcol">Announced Layoffs: 2007</td>
<td>71,115</td>
<td>70,672</td>
<td>48,997</td>
<td>63,595</td>
<td>65,736</td>
<td>67,523</td>
<td>8</td>
<td>5</td>
</tr>
<tr class="grey5">
<td class="firstcol">Same Mo. Year ago (2006):</td>
<td>53,716</td>
<td>59,688</td>
<td>64,975</td>
<td>59,460</td>
<td>79,514</td>
<td>84,503</td>
<td>6</td>
<td>9</td>
</tr>
<tr class="grey5">
<td class="firstcol">Same Mo. Year ago (2005):</td>
<td>82,283</td>
<td>57,861</td>
<td>86,396</td>
<td>75,513</td>
<td>89,387</td>
<td>88,218</td>
<td>5</td>
<td>2</td>
</tr>
<tr class="grey5">
<td class="firstcol">Same Mo. 2-Years ago (2004):</td>
<td>73,368</td>
<td>72,184</td>
<td>68,034</td>
<td>71,195</td>
<td>83,569</td>
<td>89,500</td>
<td>4</td>
<td>4</td>
</tr>
<tr class="grey5">
<td class="firstcol">Same Mo. 3-Years ago (2003):</td>
<td>68,623</td>
<td>146,399</td>
<td>85,396</td>
<td>100,139</td>
<td>110,622</td>
<td>113,426</td>
<td>2</td>
<td>6</td>
</tr>
<tr class="grey5">
<td class="firstcol">Same Mo .4-Years ago (2002):</td>
<td>84,978</td>
<td>112,649</td>
<td>102,315</td>
<td>99,981</td>
<td>139,686</td>
<td>154,906</td>
<td>1</td>
<td>1</td>
</tr>
<tr class="grey5">
<td class="firstcol">Same Mo.5-years ago (2001):</td>
<td>80,140</td>
<td>165,564</td>
<td>162,867</td>
<td>136,190</td>
<td>131,037</td>
<td>74,439</td>
<td>7</td>
<td>3</td>
</tr>
<tr class="grey5">
<td class="firstcol">Same Mo.6-years ago (2000):</td>
<td>27,036</td>
<td>37,291</td>
<td>55,783</td>
<td>40,037</td>
<td>41,644</td>
<td>103,205</td>
<td>3</td>
<td>12</td>
</tr>
<tr class="grey5">
<td class="firstcol">Same Mo.7-years ago (1999):</td>
<td>55,231</td>
<td>54,399</td>
<td>68,984</td>
<td>59,538</td>
<td>70,553</td>
<td>65,201</td>
<td>9</td>
<td>8</td>
</tr>
<tr class="grey5">
<td class="firstcol">Same Mo.8-years ago (1998):</td>
<td>27,631</td>
<td>48,758</td>
<td>23,028</td>
<td>33,139</td>
<td>45,637</td>
<td>39,950</td>
<td>11</td>
<td>11</td>
</tr>
<tr class="grey5">
<td class="firstcol">Same Mo.9-years ago (1997):</td>
<td>21,004</td>
<td>15,214</td>
<td>50,182</td>
<td>28,800</td>
<td>34,646</td>
<td>31,851</td>
<td>13</td>
<td>13</td>
</tr>
<tr class="grey5">
<td class="firstcol">Same Mo.10-years ago (1996):</td>
<td>30,845</td>
<td>30,810</td>
<td>37,486</td>
<td>33,047</td>
<td>47,598</td>
<td>41,526</td>
<td>10</td>
<td>10</td>
</tr>
<tr class="grey5">
<td class="firstcol">Same Mo.11-years ago (1995):</td>
<td>58,530</td>
<td>15,678</td>
<td>27,809</td>
<td>34,006</td>
<td>33,240</td>
<td>35,253</td>
<td>12</td>
<td>7</td>
</tr>
<tr class="grey4">
<td class="firstcol">Comparative Data</td>
<td>May</td>
<td>Apr</td>
<td>Mar</td>
<td colspan="3">Values for previous months</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey3">
<td class="firstcol">Recession &amp; Post Recession</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>3-Mo</td>
<td>6-Mo</td>
<td>12-Mo</td>
<td>Month of</td>
<td>May</td>
</tr>
<tr class="grey3">
<td class="firstcol">&nbsp; Median (3-Yrs)</td>
<td>80,140</td>
<td>146,399</td>
<td>102,315</td>
<td>100,139</td>
<td>131,037</td>
<td>113,426</td>
<td>tends to be</td>
<td>lower than</td>
</tr>
<tr class="grey2">
<td class="firstcol">Pre-Recession (1995-2000)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>Apr</td>
<td>60.0%</td>
</tr>
<tr class="grey2">
<td class="firstcol">&nbsp; Median (6-Yrs)</td>
<td>29,238</td>
<td>83,524</td>
<td>77,190</td>
<td>79,759</td>
<td>90,588</td>
<td>88,822</td>
<td>of the</td>
<td>time</td>
</tr>
<tr class="grey1">
<td class="firstcol">MIDPOINT-Median</td>
<td>54,689</td>
<td>114,962</td>
<td>89,753</td>
<td>89,949</td>
<td>110,812</td>
<td>101,124</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="grey1">
<td class="firstcol">% of Pre &amp; Post Gap</td>
<td>82.3%</td>
<td>-20.4%</td>
<td>-112.2%</td>
<td>-79.3%</td>
<td>-61.4%</td>
<td>-86.6%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
Australia GDP Up 1.6% in Q1; Best Quarter in 3 Years  
by <a href="/comment/Stone.html">Carol Stone</a> June 6, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070606c.jpg" width="353">
Australian GDP grew 1.6% in Q1, up from 1.1% in Q4 and the strongest quarter since Q4 2003. This compared with 1.3% expected in one major forecast survey. Year-to-year growth was 4.0%. Data for Australia are contained in Haver&#39;s ANZ database and in G10+ as well as numerous international databases from the OECD, IMF and others.
The pick-up resulted from positive inputs in several demand areas. Private consumption was up 1.5% compared to 1.2% the quarter before. Exports expanded 1.4%, up from 1.0%, while growth in imports was lower, 2.1% from 6.5%. This latter, of course, helps raise the total growth rate since imports enter the GDP calculation negatively. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070606d.jpg" width="353">
Fixed capital formation grew nicely as well, although the Q1 rise of 2.0% was less than Q4&#39;s 2.6%. It is important to note here the impact of the privatization of the telephone and telecommunications utility in Australia, Telstra. The government sold this company to private owners in November and it enters the GDP accounts in the private investment category for the first time in this report. Thus, the 5.8% surge in private fixed investment and the 16.9% plunge in public investment exaggerate the underlying movements. The Australian Bureau of Statistics reports that private investment would still have looked pretty good, at 4.8% growth in Q1, if the telephone company had been in the private sector all during Q4 as well. Public investment would still have fallen in Q1, but by &quot;only&quot; 7.5%. These latter growth rates are recorded in a footnote in our ANZ menu.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070606c.jpg" width="353">
Interestingly, among the various industrial sectors, manufacturing output declined, despite the gain in overall GDP. Gross value added in manufacturing eased by 0.5%, although that did follow two very good quarters of 1.7% and 2.0%. Agricultural output also declined, but only 0.3% and far less than in the prior two quarters. So agriculture actually contributed to the increase in GDP growth by subtracting less. Construction activity gained 2.5%, a reputable figure, but less than Q4&#39;s 3.9%. The best performances came in retail trade, up 2.4%, and finance, up 2.3%, with both at least a percentage point stronger than the quarter before. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">AUSTRALIA, % Chg,&nbsp; Chn A$, Q3/2004-Q2/2005</th>
<th scope="col">Q1 2007*</th>
<th scope="col">Q4 2006*</th>
<th scope="col">Q3 2006*</th>
<th scope="col">Year Ago</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP</td>
<td>1.6</td>
<td>1.1</td>
<td>0.5</td>
<td>4.0</td>
<td>2.7</td>
<td>2.7</td>
<td>3.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Private Consumption</td>
<td>1.5</td>
<td>1.2</td>
<td>0.7</td>
<td>4.2</td>
<td>3.1</td>
<td>3.0</td>
<td>5.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Gross Fixed Capital Formation</td>
<td>2.0</td>
<td>2.6</td>
<td>-0.5</td>
<td>5.8</td>
<td>6.3</td>
<td>7.8</td>
<td>7.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Private</td>
<td>5.8**</td>
<td>0.9</td>
<td>-1.5</td>
<td>7.1</td>
<td>5.4</td>
<td>7.6</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Public</td>
<td>-16.9**</td>
<td>-11.3</td>
<td>5.2</td>
<td>-2.1</td>
<td>11.9</td>
<td>8.7</td>
<td>9.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>1.4</td>
<td>1.0</td>
<td>0.2</td>
<td>4.6</td>
<td>3.4</td>
<td>2.4</td>
<td>4.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports</td>
<td>2.1</td>
<td>6.5</td>
<td>-0.5</td>
<td>11.4</td>
<td>7.7</td>
<td>8.5</td>
<td>15.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>-0.5</td>
<td>2.0</td>
<td>1.8</td>
<td>3.3</td>
<td>-1.3</td>
<td>0.2</td>
<td>0.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Finance &amp; Insurance</td>
<td>2.3</td>
<td>1.0</td>
<td>0.9</td>
<td>5.9</td>
<td>6.1</td>
<td>2.5</td>
<td>3.7</td>
</tr>
</tbody>
</table>
</body>
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Productivity is trending lower for manufacturing (MFG) as well as overall for nonfarm businesses. The accompanying chart makes the downturn clear. For nonfarm business the erosion seems to date back to mid-2005. For nonfarm [...]

Productivity is Down and Unit Labor Costs are Up

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070605c.jpg" width="353">
Eurostat released preliminary data for April retail trade today for the aggregates of the 13 countries in the Euro Area and the 27 countries in the European Union. The preliminary data are based on reports by countries representing at least 60% of the weight of the total. As a result data for all countries are not available at this time.
Eurostat does not publish, nor is it possible to derive, an index for total retail trade of the &quot;Fourteen&quot; non Euro Area countries included in the total. However, the fact that retail trade in the Euro Area increased 0.18% in April from March while trade in the entire Union declined, albeit slightly, 0.05%, suggests that retail trade in the &quot;Fourteen&quot; declined in April. The first chart shows the indexes of retail trade in the Euro Area and the European Union. The widening gap between the two series suggests that the greater growth in the retail trade of the European Union has been due largely to the &quot;Fourteen&quot;.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070605d.jpg" width="353">
The &quot;Fourteen&quot; non Euro Area countries includes three developed countries--the United Kingdom, Sweden and Denmark and eleven emerging countries of central and eastern Europe. Retail trade in the three developed countries has shown more strength than the total of the Euro Area as can be seen in the second chart. This growth, however, falls short of the dramatic growth of retail trade in the central and eastern European countries, as shown in the third chart where the paths of retail trade in Latvia, Estonia and Bulgaria are taken as illustrative of the group of emerging countries. It should however be kept in mind that these countries began to grow only after the fall of the Berlin Wall hence their growth has been from a very low base compared with that of the developed countries.
Growth of retail trade within the Euro Area has varied widely with Germany being the laggard. The fourth chart compares retail trade in Germany with that of France, Finland, and Spain among those with good growth. It appears that retail trade in Germany may finally be showing signs of growth.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070605e.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070605f.jpg" width="353">

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<thead>
<tr>
<th scope="col" class="firstcol">VOLUME OF RETAIL TRADE EX AUTOS&nbsp; (SA, 2000=100)&nbsp;</th>
<th scope="col">Apr&nbsp;&nbsp; 07</th>
<th scope="col">Mar&nbsp; 07&nbsp;</th>
<th scope="col">Apr&nbsp;&nbsp; 06</th>
<th scope="col">M/M %</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">European Area 13</td>
<td>110.22</td>
<td>110.02</td>
<td>108.41</td>
<td>0.18</td>
<td>1.67</td>
<td>108.84</td>
<td>106.72</td>
<td>105.32</td>
</tr>
<tr>
<td class="firstcol">European Union 27</td>
<td>118.01</td>
<td>118.07</td>
<td>114.84</td>
<td>-0.05</td>
<td>2.76</td>
<td>115.46</td>
<td>112.14</td>
<td>109.97</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>120.6</td>
<td>119.5</td>
<td>116.1</td>
<td>0.92</td>
<td>3.88</td>
<td>116.9</td>
<td>114.7</td>
<td>113.2</td>
</tr>
<tr>
<td class="firstcol"> Germany </td>
<td>104.0</td>
<td>101.3</td>
<td>103.3</td>
<td>2.67</td>
<td>0.68</td>
<td>103.5</td>
<td>101.7</td>
<td>100.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>122.22</td>
<td>124.40</td>
<td>119.69</td>
<td>-1.75</td>
<td>2.11</td>
<td>120.38</td>
<td>118.02</td>
<td>116.27</td>
</tr>
<tr>
<td class="firstcol">Finland</td>
<td>132.0</td>
<td>136.1</td>
<td>128.7</td>
<td>-3.01</td>
<td>2.56</td>
<td>129.0</td>
<td>122.2</td>
<td>116.5</td>
</tr>
<tr class="odd">
<td class="firstcol">United Kingdom</td>
<td>133.14</td>
<td>133.09</td>
<td>127.45</td>
<td>0.04</td>
<td>4.46</td>
<td>128.65</td>
<td>124.65</td>
<td>122.28</td>
</tr>
<tr>
<td class="firstcol">Sweden</td>
<td>145.6</td>
<td>145.5</td>
<td>136.6</td>
<td>0.07</td>
<td>6.59</td>
<td>138.3</td>
<td>126.7</td>
<td>118.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Denmark</td>
<td>132.0</td>
<td>134.0</td>
<td>130.0</td>
<td>-1.49</td>
<td>1.54</td>
<td>130.7</td>
<td>126.4</td>
<td>116.8</td>
</tr>
<tr>
<td class="firstcol">Latvia</td>
<td>249.98</td>
<td>251.69</td>
<td>202.48</td>
<td>-0.68</td>
<td>23.46</td>
<td>213.49</td>
<td>178.03</td>
<td>146.91</td>
</tr>
<tr class="odd">
<td class="firstcol">Bulgaria</td>
<td>232.14</td>
<td>232.71</td>
<td>210.84</td>
<td>-0.24</td>
<td>10.10</td>
<td>215.48</td>
<td>190.29</td>
<td>102.49</td>
</tr>
<tr>
<td class="firstcol">Estonia</td>
<td>233.51</td>
<td>242.72</td>
<td>205.19</td>
<td>-3.79</td>
<td>13.80</td>
<td>211.88</td>
<td>181.86</td>
<td>158.98</td>
</tr>
</tbody>
</table>
</body>
</html>

Eurostat released preliminary data for April retail trade today for the aggregates of the 13 countries in the Euro Area and the 27 countries in the European Union. The preliminary data are based on reports by countries representing at [...]

April Retail Trade in the Euro Area Picks Up, Trade in Other EU Countries Slows

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070605b.jpg" width="353">
The NonMFG ISM shows that its components are indeed cycling higher. Prices are up strongly. Backlogs while below the neutral value of 50 are nonetheless rising strongly from their six month average. Still, they edged lower in the month of May. Orders also are edging higher. And activity is firming but not yet stronger on a three-month vs six month comparison. 
In May the Non MFG ISM activity index moved up sharply. Orders also rose briskly. The report generated exactly the sort of strength we thought we would see after seeing employment strength in May. 
The percentile positions of the various ISM components show a great deal of variation in the various ISM components (see table below). For the most part the readings are strong but not all are. The supplier deliveries reading, for example is in the bottom 12 percentile of its range and shows the same sort of slack or absence of tension on deliveries as the ISM MFG and other regional reports. Even as activity has ramped up slack has increased. Contrarily exports and inventories are at the top of their respective ranges going back to 1998. Activity is high in its range. Orders, prices and employment are at firm relative readings (Percentiles). While prices are 10 % above their average value, they has such large variation (std dev= 8.2) that they are still at a moderate position within their range of values. 
Private non MFG jobs statistics are at the bottom of this table. Readings (monthly changes in non MFG jobs) are in the 65th percentile of their range since 1998 close to the 68.8 percentile for the Non Mfg ISM job diffusion reading. We appear to be getting consistent signals about the growing strength and firmness of the economy. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
ISM Non Manufacturing Statistics from Jan 1998 to Date
<th scope="col">&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">ISM-Non MFG</td>
<td>Current</td>
<td>Last Mo</td>
<td>Std Dev</td>
<td>Average</td>
<td>SD% Avg</td>
<td>MAX</td>
<td>MIN</td>
<td>Range</td>
<td>Percentile</td>
<td>% of AVG</td>
</tr>
<tr>
<td class="firstcol">PM Activity</td>
<td>59.7</td>
<td>56.0</td>
<td>4.7</td>
<td>57.6</td>
<td>8.2</td>
<td>67.9</td>
<td>40.5</td>
<td>27.4</td>
<td>70.1</td>
<td>104</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>57.4</td>
<td>55.5</td>
<td>4.7</td>
<td>57.2</td>
<td>8.2</td>
<td>66.9</td>
<td>41.3</td>
<td>25.6</td>
<td>62.9</td>
<td>100</td>
</tr>
<tr>
<td class="firstcol">Backlogs</td>
<td>48.0</td>
<td>50.0</td>
<td>3.7</td>
<td>51.0</td>
<td>7.2</td>
<td>57.0</td>
<td>40.5</td>
<td>16.5</td>
<td>45.5</td>
<td>94</td>
</tr>
<tr>
<td class="firstcol">Supplier Deliveries</td>
<td>49.5</td>
<td>51.0</td>
<td>2.2</td>
<td>53.6</td>
<td>4.1</td>
<td>60.5</td>
<td>48.0</td>
<td>12.5</td>
<td>12.0</td>
<td>92</td>
</tr>
<tr>
<td class="firstcol">Inventory Sentiment*</td>
<td>61.0</td>
<td>60.5</td>
<td>2.7</td>
<td>63.0</td>
<td>4.3</td>
<td>69.0</td>
<td>55.0</td>
<td>14.0</td>
<td>42.9</td>
<td>97</td>
</tr>
<tr>
<td class="firstcol">Inventories</td>
<td>61.0</td>
<td>52.0</td>
<td>3.3</td>
<td>50.6</td>
<td>6.6</td>
<td>61.0</td>
<td>43.5</td>
<td>17.5</td>
<td>100.0</td>
<td>121</td>
</tr>
<tr>
<td class="firstcol">Prices</td>
<td>66.4</td>
<td>63.5</td>
<td>8.2</td>
<td>60.1</td>
<td>13.6</td>
<td>80.5</td>
<td>41.3</td>
<td>39.2</td>
<td>64.0</td>
<td>110</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>54.9</td>
<td>51.9</td>
<td>3.7</td>
<td>51.7</td>
<td>7.1</td>
<td>59.9</td>
<td>43.9</td>
<td>16.0</td>
<td>68.8</td>
<td>106</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>66.0</td>
<td>55.5</td>
<td>4.6</td>
<td>55.0</td>
<td>8.4</td>
<td>66.0</td>
<td>44.5</td>
<td>21.5</td>
<td>100.0</td>
<td>120</td>
</tr>
<tr>
<td class="firstcol">Import Orders</td>
<td>55.5</td>
<td>52.5</td>
<td>4.0</td>
<td>54.8</td>
<td>7.3</td>
<td>63.5</td>
<td>45.5</td>
<td>18.0</td>
<td>55.6</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Private Non MFG jobs</td>
<td>154.0</td>
<td>98.0</td>
<td>112.5</td>
<td>99.6</td>
<td>113.0</td>
<td>346.0</td>
<td>-202.0</td>
<td>548.0</td>
<td>65.0</td>
<td>155</td>
</tr>
</tbody>
</table>
</body>
</html>

The NonMFG ISM shows that its components are indeed cycling higher. Prices are up strongly. Backlogs while below the neutral value of 50 are nonetheless rising strongly from their six month average. Still, they edged lower in the [...]

Non MFG ISM strength is cycling higher—so are prices

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070605b.jpg" width="353">
The nonmanufacturing ISM shows that its components are indeed cycling higher. Prices are up strongly. Backlogs while below the neutral value of 50 are nonetheless rising strongly from their six month average. Still, they edged lower in the month of May. Orders also are edging higher. And activity is firming but not yet stronger on a three-month vs six-month comparison. 
In May the nonmanufacturing ISM activity index moved up sharply. Orders also rose briskly. The report generated exactly the sort of strength we thought we would see after seeing employment strength in May. 
The percentile positions of the various ISM components show a great deal of variation in the various ISM components (see table below). For the most part the readings are strong but not all are. The supplier deliveries reading, for example is in the bottom 12 percentile of its range and shows the same sort of slack or absence of tension on deliveries as the ISM MFG and other regional reports. Even as activity has ramped up slack has increased. Contrarily exports and inventories are at the top of their respective ranges going back to 1998. Activity is high in its range. Orders, prices and employment are at firm relative readings (Percentiles). While prices are 10 % above their average value, they have such large variation (std dev = 8.2) that they are still at a moderate position within their range of values. 
Private nonmanufacturing jobs statistics are at the bottom of this table. Readings (monthly changes in nonmanufacturing jobs) are in the 65th percentile of their range since 1998 close to the 68.8 percentile for the nonmanufacturing ISM job diffusion reading. We appear to be getting consistent signals about the growing strength and firmness of the economy. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
ISM Non Manufacturing Statistics from Jan 1998 to Date
<th scope="col">&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">ISM-Non MFG</td>
<td>Current</td>
<td>Last Mo</td>
<td>Std Dev</td>
<td>Average</td>
<td>SD% Avg</td>
<td>MAX</td>
<td>MIN</td>
<td>Range</td>
<td>Percentile</td>
<td>% of AVG</td>
</tr>
<tr>
<td class="firstcol">PM Activity</td>
<td>59.7</td>
<td>56.0</td>
<td>4.7</td>
<td>57.6</td>
<td>8.2</td>
<td>67.9</td>
<td>40.5</td>
<td>27.4</td>
<td>70.1</td>
<td>104</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>57.4</td>
<td>55.5</td>
<td>4.7</td>
<td>57.2</td>
<td>8.2</td>
<td>66.9</td>
<td>41.3</td>
<td>25.6</td>
<td>62.9</td>
<td>100</td>
</tr>
<tr>
<td class="firstcol">Backlogs</td>
<td>48.0</td>
<td>50.0</td>
<td>3.7</td>
<td>51.0</td>
<td>7.2</td>
<td>57.0</td>
<td>40.5</td>
<td>16.5</td>
<td>45.5</td>
<td>94</td>
</tr>
<tr>
<td class="firstcol">Supplier Deliveries</td>
<td>49.5</td>
<td>51.0</td>
<td>2.2</td>
<td>53.6</td>
<td>4.1</td>
<td>60.5</td>
<td>48.0</td>
<td>12.5</td>
<td>12.0</td>
<td>92</td>
</tr>
<tr>
<td class="firstcol">Inventory Sentiment*</td>
<td>61.0</td>
<td>60.5</td>
<td>2.7</td>
<td>63.0</td>
<td>4.3</td>
<td>69.0</td>
<td>55.0</td>
<td>14.0</td>
<td>42.9</td>
<td>97</td>
</tr>
<tr>
<td class="firstcol">Inventories</td>
<td>61.0</td>
<td>52.0</td>
<td>3.3</td>
<td>50.6</td>
<td>6.6</td>
<td>61.0</td>
<td>43.5</td>
<td>17.5</td>
<td>100.0</td>
<td>121</td>
</tr>
<tr>
<td class="firstcol">Prices</td>
<td>66.4</td>
<td>63.5</td>
<td>8.2</td>
<td>60.1</td>
<td>13.6</td>
<td>80.5</td>
<td>41.3</td>
<td>39.2</td>
<td>64.0</td>
<td>110</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>54.9</td>
<td>51.9</td>
<td>3.7</td>
<td>51.7</td>
<td>7.1</td>
<td>59.9</td>
<td>43.9</td>
<td>16.0</td>
<td>68.8</td>
<td>106</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>66.0</td>
<td>55.5</td>
<td>4.6</td>
<td>55.0</td>
<td>8.4</td>
<td>66.0</td>
<td>44.5</td>
<td>21.5</td>
<td>100.0</td>
<td>120</td>
</tr>
<tr>
<td class="firstcol">Import Orders</td>
<td>55.5</td>
<td>52.5</td>
<td>4.0</td>
<td>54.8</td>
<td>7.3</td>
<td>63.5</td>
<td>45.5</td>
<td>18.0</td>
<td>55.6</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Private Non MFG jobs</td>
<td>154.0</td>
<td>98.0</td>
<td>112.5</td>
<td>99.6</td>
<td>113.0</td>
<td>346.0</td>
<td>-202.0</td>
<td>548.0</td>
<td>65.0</td>
<td>155</td>
</tr>
</tbody>
</table>
</body>
</html>

The nonmanufacturing ISM shows that its components are indeed cycling higher. Prices are up strongly. Backlogs while below the neutral value of 50 are nonetheless rising strongly from their six month average. Still, they edged lower [...]

Nonmfg ISM Strength is Cycling Higher - so are Prices

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070605b.jpg" width="353">
The nonmanufacturing ISM shows that its components are indeed cycling higher. Prices are up strongly. Backlogs while below the neutral value of 50 are nonetheless rising strongly from their six month average. Still, they edged lower in the month of May. Orders also are edging higher. And activity is firming but not yet stronger on a three-month vs six- month comparison. 
In May the nonmanufacturing ISM activity index moved up sharply. Orders also rose briskly. The report generated exactly the sort of strength we thought we would see after seeing employment strength in May. 
The percentile positions of the various ISM components show a great deal of variation in the various ISM components (see table below). For the most part the readings are strong but not all are. The supplier deliveries reading, for example is in the bottom 12 percentile of its range and shows the same sort of slack or absence of tension on deliveries as the ISM MFG and other regional reports. Even as activity has ramped up slack has increased. Contrarily exports and inventories are at the top of their respective ranges going back to 1998. Activity is high in its range. Orders, prices and employment are at firm relative readings (Percentiles). While prices are 10 % above their average value, they have such large variation (std dev = 8.2) that they are still at a moderate position within their range of values. 
Private nonmanufacturing jobs statistics are at the bottom of this table. Readings (monthly changes in nonmanufacturing jobs) are in the 65th percentile of their range since 1998 close to the 68.8 percentile for the nonmanufacturing ISM job diffusion reading. We appear to be getting consistent signals about the growing strength and firmness of the economy. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
ISM Non Manufacturing Statistics from Jan 1998 to Date
<th scope="col">&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">ISM-Non MFG</td>
<td>Current</td>
<td>Last Mo</td>
<td>Std Dev</td>
<td>Average</td>
<td>SD% Avg</td>
<td>MAX</td>
<td>MIN</td>
<td>Range</td>
<td>Percentile</td>
<td>% of AVG</td>
</tr>
<tr>
<td class="firstcol">PM Activity</td>
<td>59.7</td>
<td>56.0</td>
<td>4.7</td>
<td>57.6</td>
<td>8.2</td>
<td>67.9</td>
<td>40.5</td>
<td>27.4</td>
<td>70.1</td>
<td>104</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>57.4</td>
<td>55.5</td>
<td>4.7</td>
<td>57.2</td>
<td>8.2</td>
<td>66.9</td>
<td>41.3</td>
<td>25.6</td>
<td>62.9</td>
<td>100</td>
</tr>
<tr>
<td class="firstcol">Backlogs</td>
<td>48.0</td>
<td>50.0</td>
<td>3.7</td>
<td>51.0</td>
<td>7.2</td>
<td>57.0</td>
<td>40.5</td>
<td>16.5</td>
<td>45.5</td>
<td>94</td>
</tr>
<tr>
<td class="firstcol">Supplier Deliveries</td>
<td>49.5</td>
<td>51.0</td>
<td>2.2</td>
<td>53.6</td>
<td>4.1</td>
<td>60.5</td>
<td>48.0</td>
<td>12.5</td>
<td>12.0</td>
<td>92</td>
</tr>
<tr>
<td class="firstcol">Inventory Sentiment*</td>
<td>61.0</td>
<td>60.5</td>
<td>2.7</td>
<td>63.0</td>
<td>4.3</td>
<td>69.0</td>
<td>55.0</td>
<td>14.0</td>
<td>42.9</td>
<td>97</td>
</tr>
<tr>
<td class="firstcol">Inventories</td>
<td>61.0</td>
<td>52.0</td>
<td>3.3</td>
<td>50.6</td>
<td>6.6</td>
<td>61.0</td>
<td>43.5</td>
<td>17.5</td>
<td>100.0</td>
<td>121</td>
</tr>
<tr>
<td class="firstcol">Prices</td>
<td>66.4</td>
<td>63.5</td>
<td>8.2</td>
<td>60.1</td>
<td>13.6</td>
<td>80.5</td>
<td>41.3</td>
<td>39.2</td>
<td>64.0</td>
<td>110</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>54.9</td>
<td>51.9</td>
<td>3.7</td>
<td>51.7</td>
<td>7.1</td>
<td>59.9</td>
<td>43.9</td>
<td>16.0</td>
<td>68.8</td>
<td>106</td>
</tr>
<tr>
<td class="firstcol">Export Orders</td>
<td>66.0</td>
<td>55.5</td>
<td>4.6</td>
<td>55.0</td>
<td>8.4</td>
<td>66.0</td>
<td>44.5</td>
<td>21.5</td>
<td>100.0</td>
<td>120</td>
</tr>
<tr>
<td class="firstcol">Import Orders</td>
<td>55.5</td>
<td>52.5</td>
<td>4.0</td>
<td>54.8</td>
<td>7.3</td>
<td>63.5</td>
<td>45.5</td>
<td>18.0</td>
<td>55.6</td>
<td>101</td>
</tr>
<tr>
<td class="firstcol">Private Non MFG jobs</td>
<td>154.0</td>
<td>98.0</td>
<td>112.5</td>
<td>99.6</td>
<td>113.0</td>
<td>346.0</td>
<td>-202.0</td>
<td>548.0</td>
<td>65.0</td>
<td>155</td>
</tr>
</tbody>
</table>
April Retail Trade in the Euro Area Picks Up, Trade in Other EU Countries Slows  
by <a href="/comment/Curley.html">Louise Curley</a> June 5, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070605c.jpg" width="353">
Eurostat released preliminary data for April retail trade today for the aggregates of the 13 countries in the Euro Area and the 27 countries in the European Union. The preliminary data are based on reports by countries representing at least 60% of the weight of the total. As a result data for all countries are not available at this time.
Eurostat does not publish, nor is it possible to derive, an index for total retail trade of the &quot;Fourteen&quot; non Euro Area countries included in the total. However, the fact that retail trade in the Euro Area increased 0.18% in April from March while trade in the entire Union declined, albeit slightly, 0.05%, suggests that retail trade in the &quot;Fourteen&quot; declined in April. The first chart shows the indexes of retail trade in the Euro Area and the European Union. The widening gap between the two series suggests that the greater growth in the retail trade of the European Union has been due largely to the &quot;Fourteen&quot;.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070605d.jpg" width="353">
The &quot;Fourteen&quot; non Euro Area countries includes three developed countries--the United Kingdom, Sweden and Denmark and eleven emerging countries of central and eastern Europe. Retail trade in the three developed countries has shown more strength than the total of the Euro Area as can be seen in the second chart. This growth, however, falls short of the dramatic growth of retail trade in the central and eastern European countries, as shown in the third chart where the paths of retail trade in Latvia, Estonia and Bulgaria are taken as illustrative of the group of emerging countries. It should however be kept in mind that these countries began to grow only after the fall of the Berlin Wall hence their growth has been from a very low base compared with that of the developed countries.
Growth of retail trade within the Euro Area has varied widely with Germany being the laggard. The fourth chart compares retail trade in Germany with that of France, Finland, and Spain among those with good growth. It appears that retail trade in Germany may finally be showing signs of growth.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070605e.jpg" width="353"><img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070605f.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">VOLUME OF RETAIL TRADE EX AUTOS&nbsp; (SA, 2000=100)&nbsp;</th>
<th scope="col">Apr&nbsp;&nbsp; 07</th>
<th scope="col">Mar&nbsp; 07&nbsp;</th>
<th scope="col">Apr&nbsp;&nbsp; 06</th>
<th scope="col">M/M %</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">European Area 13</td>
<td>110.22</td>
<td>110.02</td>
<td>108.41</td>
<td>0.18</td>
<td>1.67</td>
<td>108.84</td>
<td>106.72</td>
<td>105.32</td>
</tr>
<tr>
<td class="firstcol">European Union 27</td>
<td>118.01</td>
<td>118.07</td>
<td>114.84</td>
<td>-0.05</td>
<td>2.76</td>
<td>115.46</td>
<td>112.14</td>
<td>109.97</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>120.6</td>
<td>119.5</td>
<td>116.1</td>
<td>0.92</td>
<td>3.88</td>
<td>116.9</td>
<td>114.7</td>
<td>113.2</td>
</tr>
<tr>
<td class="firstcol"> Germany </td>
<td>104.0</td>
<td>101.3</td>
<td>103.3</td>
<td>2.67</td>
<td>0.68</td>
<td>103.5</td>
<td>101.7</td>
<td>100.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Spain</td>
<td>122.22</td>
<td>124.40</td>
<td>119.69</td>
<td>-1.75</td>
<td>2.11</td>
<td>120.38</td>
<td>118.02</td>
<td>116.27</td>
</tr>
<tr>
<td class="firstcol">Finland</td>
<td>132.0</td>
<td>136.1</td>
<td>128.7</td>
<td>-3.01</td>
<td>2.56</td>
<td>129.0</td>
<td>122.2</td>
<td>116.5</td>
</tr>
<tr class="odd">
<td class="firstcol">United Kingdom</td>
<td>133.14</td>
<td>133.09</td>
<td>127.45</td>
<td>0.04</td>
<td>4.46</td>
<td>128.65</td>
<td>124.65</td>
<td>122.28</td>
</tr>
<tr>
<td class="firstcol">Sweden</td>
<td>145.6</td>
<td>145.5</td>
<td>136.6</td>
<td>0.07</td>
<td>6.59</td>
<td>138.3</td>
<td>126.7</td>
<td>118.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Denmark</td>
<td>132.0</td>
<td>134.0</td>
<td>130.0</td>
<td>-1.49</td>
<td>1.54</td>
<td>130.7</td>
<td>126.4</td>
<td>116.8</td>
</tr>
<tr>
<td class="firstcol">Latvia</td>
<td>249.98</td>
<td>251.69</td>
<td>202.48</td>
<td>-0.68</td>
<td>23.46</td>
<td>213.49</td>
<td>178.03</td>
<td>146.91</td>
</tr>
<tr class="odd">
<td class="firstcol">Bulgaria</td>
<td>232.14</td>
<td>232.71</td>
<td>210.84</td>
<td>-0.24</td>
<td>10.10</td>
<td>215.48</td>
<td>190.29</td>
<td>102.49</td>
</tr>
<tr>
<td class="firstcol">Estonia</td>
<td>233.51</td>
<td>242.72</td>
<td>205.19</td>
<td>-3.79</td>
<td>13.80</td>
<td>211.88</td>
<td>181.86</td>
<td>158.98</td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070604a.jpg" width="353">
Indonesia and Malaysia reported today data on trade in goods for April. Because of the volatility in the month to month data we have used a three month moving average in the discussion that follows and in the charts. Indonesia reports its trade date in U. S. dollars while Malaysia reports its data in Malayasian ringgits. To facilitate comparison between the two countries we have used trade figures for Malaysia expressed in U.S. dollars that Haver has calculated. All these data are found in Indonesia and Malaysia in the EMERGEPR data base<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070604b.jpg" width="353">
In the first four months of this year, the three month moving average of Indonesia&#39;s trade balance has risen steadily while that of Malaysia has steadily declined as can be seen in the first chart. The composition of exports, which is very different in the two countries, accounts, in large part, for the divergent trends. Indonesia&#39;s main exports are oil and gas, agricultural products, mineral, rubber and wood products, which are in demand world wide. Malay&#39;s exports, on the other hand, are largely manufactured goods. For the last several years, manufactured goods accounted for roughly 80% of total exports. And of the manufactured goods exports, electronics and electrical products accounted for some 60-65%. The demand for electronic and electrical products has fallen off recently, particularly in the United States, Malaysia&#39;s largest export market.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070604c.jpg" width="353">
Indonesia&#39; trade balance has increased not only due to a rise in exports, but also a decline in imports as shown in the second chart. Imports into Malaysia have also declined, but the greater decline in exports has resulted in a narrowing of its trade balance as shown in the third chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Trade in Goods:&nbsp; Indonesia &amp; Malaysia &nbsp;(3 mo moving avg.&nbsp; Mil US$)</th>
<th scope="col">Apr&nbsp; 07</th>
<th scope="col">Mar 07&nbsp;</th>
<th scope="col">Feb&nbsp; 07</th>
<th scope="col">Jan&nbsp; 07</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Indonesia&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>9,156.9</td>
<td>8,968.0</td>
<td>8,833.5</td>
<td>9,109.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>5,182.1</td>
<td>5,200.6</td>
<td>5,093.6</td>
<td>5,609.3</td>
</tr>
<tr>
<td class="firstcol"> &nbsp;&nbsp; Balance </td>
<td>3,944.8</td>
<td>3,767.9</td>
<td>3,739.9</td>
<td>3,500.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Malaysia</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>13,370</td>
<td>13,814</td>
<td>14,099</td>
<td>14,587</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>11,518</td>
<td>11,814</td>
<td>11,596</td>
<td>11,897</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Balance</td>
<td>1,852.6</td>
<td>2,000.4</td>
<td>2,502.9</td>
<td>2,689.8</td>
</tr>
</tbody>
</table>
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Indonesia and Malaysia reported today data on trade in goods for April. Because of the volatility in the month to month data we have used a three month moving average in the discussion that follows and in the charts. Indonesia reports [...]

Indonesia's Trade Balance Rises: Malaysia's Declines Reflecting Composition of Exports

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070530c.jpg" width="353">
Which data are telling the better story in Japan? Production or the labor market?
Today&#39;s industrial production report continues the theme of &quot;relapse&quot; that Bob Brusca was talking about here on May 15. Total industrial production fell 0.1% in April, a small decline to be sure, but the second in a row. Production in two key sources of prior strength, &quot;producer goods&quot; and the vehicle industry, contributed to the decline, the latter also for a second month. The peak in total output was actually back in December, at 109.6, just over 2 points above the April amount.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070530d.jpg" width="353">
In sharp contrast, the labor market looks good: employment has risen and unemployment declined. According to the April labor force survey, which was published May 29 in Japan, the number of people employed increased 23,000 in the month, a third consecutive rise, reaching 64,390,000, the highest since March 2001. In the Haver database &quot;G10+&quot;, we include seasonally adjusted data for a number of industry sectors. Manufacturing contributed 220,000 to the latest monthly increase.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070530e.jpg" width="353"> Construction also gained, and miscellaneous services rebounded from a sudden drop in March. The numbers employed in trade and finance decreased, however.
The unemployment rate went down in April to 3.8% from 4.0%, where it had been since November. The number unemployed fell to 2,560,000 in April from 2,690,000 in March. Importantly, this decline accompanied a small increase in labor force participation. As seen in the last graph, the participation rate edged up to 60.66% from 60.57% in March. This is the highest ratio of labor force or economically active to the population over age 15 since the summer of 2003. Sometimes, as we remind frequently here, the unemployment rate falls because discouraged workers back away from the labor force. But in this case, more Japanese people are actually working or are seeking work.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070530f.jpg" width="353"> This pattern suggests some confidence in the economy. Indeed, it goes along with an entirely separate gauge, the &quot;Living Anxiety&quot; survey, which fell 5 points from February to April. Measured bi-monthly, this private research index goes down when people feel less bad. That strikes us as an appropriate approach presently, when there are many questions about the economies of Japan and its neighbors: less emphasis on ebullience and more on being cautious. Employment goes up as production goes down: which force will prevail?

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">JAPAN</th>
<th scope="col">Apr 2007*</th>
<th scope="col">Mar 2007*</th>
<th scope="col">Feb 2007*</th>
<th scope="col">Year Ago*</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production (2000=100)</td>
<td>107.5</td>
<td>107.6</td>
<td>107.9</td>
<td>104.9</td>
<td>106.2</td>
<td>101.3</td>
<td>100.2</td>
</tr>
<tr>
<td class="firstcol">Producer Goods</td>
<td>115.9</td>
<td>116.3</td>
<td>115.2</td>
<td>111.2</td>
<td>113.3</td>
<td>106.2</td>
<td>104.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Transport Goods**</td>
<td>127.9</td>
<td>130.9</td>
<td>132.7</td>
<td>125.8</td>
<td>127.6</td>
<td>118.2</td>
<td>113.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment (10,000 people)</td>
<td>64.39</td>
<td>64.16</td>
<td>64.15</td>
<td>63.64</td>
<td>63.82</td>
<td>63.56</td>
<td>63.29</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>11.84</td>
<td>11.52</td>
<td>11.59</td>
<td>11.74</td>
<td>11.61</td>
<td>11.42</td>
<td>11.50</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>3.8</td>
<td>4.0</td>
<td>4.0</td>
<td>4.1</td>
<td>4.1</td>
<td>4.4</td>
<td>4.7</td>
</tr>
<tr>
<td class="firstcol">Participation Rate (%)</td>
<td>60.7</td>
<td>60.6</td>
<td>60.6</td>
<td>60.3</td>
<td>60.1</td>
<td>60.4</td>
<td>60.4</td>
</tr>
</tbody>
</table>
</body>
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Which data are telling the better story in Japan? Production or the labor market? Today's industrial production report continues the theme of "relapse" that Bob Brusca was talking about here on May 15. Total industrial production fell [...]

Japan's Labor Market Looks Its Best in Several Years, but Industry May Have Lost Steam

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070525d.jpg" width="353">
The Federal Reserve released commercial bank &quot;loan performance&quot; data for Q1 2007 late yesterday, May 24. This information includes the dollar amounts of delinquent loans and loan charge-offs, which are taken as percentages of bank assets outstanding to produce delinquency and charge-off rates. Both kinds of rates are published with seasonal adjustment and the charge-off rates are annualized.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070525e.jpg" width="353">
The overall delinquency rate for Q1 was 1.72%, up 0.03% from Q4&#39;s 1.69%. These are somewhat high compared with the last couple of years, but the period from 2000 to 2004 averaged 2.30%, that is, higher still. The latter time span included the recession following the tech boom/bust cycle. The charge-off rate in Q1 was 0.53%. As with delinquencies, this is higher than the most recent periods, but noticeably lower than the 0.82% average of 2000-2004. Delinquencies are loans overdue by 30 days or more; these remain active loans and continue to accrue interest. Charge-offs are loans removed from the books as uncollectible.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070525f.jpg" width="353">
We illustrate the behavior of a few major types of bank loans. Total consumer loan delinquencies were just under 3% of the total amount of those loans, and as with total loans, larger than most recent quarters, but less than earlier times. In the second graph, we see that credit card debt, included within total consumer loans, has about a percentage point higher delinquency rate presently; this too has been higher in the past, both absolutely and relative to the total consumer loan amount.
The behavior of residential real estate credit highlights the secured nature of these loans. As widely publicized, the delinquency rate is rising. The new data here show that slightly more than 2% of banks&#39; residential mortgages were delinquent in Q1, the largest proportion since Q3 2002. As with other loans, these delinquencies also remain lower than most prior periods, although the steep rise from just 1.62% in Q2 last year is discomforting. As to charge-offs, they are much different because they are &quot;net&quot;; the bank forecloses on the house and then sells it, recouping a good part of its loan value. So the amount it must charge off is really quite modest, as seen in the third graph. In looking at the graph, recall that the charge-off rates are annualized, so 0.16% in Q1 is really 0.04% at a quarterly rate. In other measures of mortgage quality, such as those from the Mortgage Bankers&#39; Association, we focus on the foreclosure itself, so those rates are much higher than the net charge-off rate.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070525g.jpg" width="353">
Business loans are seen to behave differently still. Delinquency rates in this sector are still going down, and Q1, at 1.18%, is the lowest in the 20-year history of the delinquency data. Charge-offs came at a 0.39% annual rate in Q1, also among the lowest for this series. These rates have ranged from 0.14% in Q2 1995 to 2.04% in Q3 2002. This latter would be quite severe: in that quarter 0.51% of business loans outstanding were deemed total losses. The US economy was coming out of a shallow recession, so the cyclical sensitivity of business credit is readily apparent.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Commercial Banks, SA</th>
<th scope="col">Q1 2007</th>
<th scope="col">Q4 2006</th>
<th scope="col">Q3 2006</th>
<th scope="col">Q1 2006</th>
<th scope="col">2006</th>
<th scope="col">2005</th>
<th scope="col">Avg 2000 -2004</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Delinquency Rate: Total </td>
<td>1.72</td>
<td>1.69</td>
<td>1.58</td>
<td>1.50</td>
<td>1.57</td>
<td>1.57</td>
<td>2.30</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Loans</td>
<td>2.96</td>
<td>2.96</td>
<td>2.95</td>
<td>2.79</td>
<td>2.90</td>
<td>2.81</td>
<td>3.40</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential Real Estate</td>
<td>2.04</td>
<td>1.94</td>
<td>1.76</td>
<td>1.59</td>
<td>1.75</td>
<td>1.55</td>
<td>1.93</td>
</tr>
<tr class="odd">
<td class="firstcol">Business*</td>
<td>1.18</td>
<td>1.18</td>
<td>1.26</td>
<td>1.39</td>
<td>1.27</td>
<td>1.51</td>
<td>2.92</td>
</tr>
<tr>
<td class="firstcol">Annual Rates</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Charge-Off Rate: Total </td>
<td>0.53</td>
<td>0.40</td>
<td>0.42</td>
<td>0.40</td>
<td>0.42</td>
<td>0.54</td>
<td>0.82</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer Loans</td>
<td>2.44</td>
<td>2.18</td>
<td>2.15</td>
<td>1.84</td>
<td>2.06</td>
<td>2.75</td>
<td>2.78</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential Real Estate</td>
<td>0.16</td>
<td>0.13</td>
<td>0.11</td>
<td>0.09</td>
<td>0.11</td>
<td>0.08</td>
<td>0.16</td>
</tr>
<tr class="odd">
<td class="firstcol">Business*</td>
<td>0.39</td>
<td>0.31</td>
<td>0.31</td>
<td>0.26</td>
<td>0.30</td>
<td>0.26</td>
<td>1.14</td>
</tr>
</tbody>
</table>
</body>
</html>

The Federal Reserve released commercial bank "loan performance" data for Q1 2007 late yesterday, May 24. This information includes the dollar amounts of delinquent loans and loan charge-offs, which are taken as percentages of bank [...]

Bank Loan Delinquencies & Charge-Offs Increase in Q1, But Remain Lower than During Last Recession; Great Variation [...]

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.

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**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.

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**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.

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**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.

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

260618Z5.jpg

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

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

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Charts of the Week: Between Relief and Reality

Winnie Tapasanun

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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**.

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- 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

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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.

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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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