Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524b.jpg" width="353">
New home sales were revised lower in March but still managed to jump sharply to post a much stronger selling rate in April than had been expected. The jump of 16.2% m/m reverses out the weakening trend in housing. Sales are still down year/year but only by 10.6%. Conditions are still spotty. While Toll Brothers reported somewhat improved results, that home builder is still not comfortable enough with prospects to give earnings guidance. However, it did say that it had seen glimmerings of strength- not just an abatement of weakness. 
The new home sales report shows the small and volatile Northeast up by 43% Y/Y and the largest region, the South, off by just 3.4% Y/Y. The West and Midwest are off by Y/Y values in the range of 25% to 30%. 
Cleary the rise in sales is the big news in this report. But a rival bit of news is the drop in prices. Last month average and median pries were up Y/Y. But Median prices have swung from +7.9% Y/Y in March to -10.9% Y/Y in April. What&#146;s that line from Frank&#146;s song? Riding high in March, shot down in April &#133;hmmm not quite the verse, but those are the facts. Average prices have switched from a March gain of 8.7% Y/Y to a drop of 3.6% Y/Y in April. The relatively larger drop in median prices speaks of more weakness at the lower priced end of the market and may have something to do with sub-prime problems. Cleary builders have been cutting prices and just as clearly, the strategy has been working. 
If we look at trends in average new home prices around the time of the last recession, we see that builder capitulation on prices was the catalyst in that recession for spurring house prices back up and for ending the weakness in the sector as recovery took hold in the economy at large. House prices then snapped back up into a positive growth range quickly as the economy transitioned from recession to growth. House prices could be performing this same function again. The low prices jump start demand and get some inventory off homebuilder&#146;s hands giving the market a push and creating some buzz at the same time. With continued growth in the rest of the economy housing is able to move ahead and dig itself out of the slump. It looks like a good story to me&#133;Oh, and they all live happily ever after, too.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
New Single Family Home Sales
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="6">Momentum: Annualized Rates Of Change</td>
<td colspan="2">Prices</td>
</tr>
<tr class="odd">
<td class="firstcol">As of:</td>
<td>Total</td>
<td>Northeast</td>
<td>Midwest</td>
<td>South</td>
<td>West</td>
<td>Median</td>
<td>Average</td>
</tr>
<tr class="odd">
<td colspan="8">Month-to-month percent change</td>
</tr>
<tr>
<td class="firstcol">Apr.07</td>
<td>16.2%</td>
<td>3.8%</td>
<td>-4.0%</td>
<td>27.8%</td>
<td>8.5%</td>
<td>-11.1%</td>
<td>-7.9%</td>
</tr>
<tr>
<td class="firstcol">Mar.07</td>
<td>-1.4%</td>
<td>77.8%</td>
<td>1.6%</td>
<td>-8.9%</td>
<td>-2.9%</td>
<td>3.0%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">Feb.07</td>
<td>-3.8%</td>
<td>-27.4%</td>
<td>-25.9%</td>
<td>-2.0%</td>
<td>21.2%</td>
<td>-1.7%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td colspan="8">Annualized Rates</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Total</td>
<td>Northeast</td>
<td>Midwest</td>
<td>South</td>
<td>West</td>
<td>Median</td>
<td>Average</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>40.9%</td>
<td>135.5%</td>
<td>-110.8%</td>
<td>56.1%</td>
<td>110.6%</td>
<td>-34.2%</td>
<td>-18.3%</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>6.1%</td>
<td>225.6%</td>
<td>-24.8%</td>
<td>12.9%</td>
<td>-25.7%</td>
<td>-16.3%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">1-Yr</td>
<td>-10.6%</td>
<td>43.1%</td>
<td>-28.1%</td>
<td>-3.4%</td>
<td>-25.4%</td>
<td>-10.9%</td>
<td>-3.6%</td>
</tr>
</tbody>
</table>
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New home sales were revised lower in March but still managed to jump sharply to post a much stronger selling rate in April than had been expected. The jump of 16.2% m/m reverses out the weakening trend in housing. Sales are still down [...]

New Home Sales Jump and Prices Dive. Bad News as Good?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524a.jpg" width="353">
Durable goods orders now show signs of growth, shaking off some of the weaker performance from late last year and early 2007. The 0.6% headline marks the third straight month of orders increases. Order backlog growth continues to be strong as well. Excluding aircraft, nondefense capital goods orders are up strongly for two straight months. Shipments and most cuts on capital goods shipments were strong in the month. 
The chart for durable goods looks immediately better. 
While three-month growth rates for durable goods can be very volatile, the graphs on the left documents a strong rise in new orders. A reversal (one month only) in shipments growth now shows advance instead of decline. And, more impressive, is the reduction in the rate of slowing for the declining pace of inventory growth. If firms are no longer seeking to cut inventory growth that could be very helpful to the sector assuming, of course, that the shipment pick up and order pick up are for real. 
Diffusion to relieve confusion&#133; 
The statistics in the table below show that suddenly durable goods shipments and orders join unfilled orders in revealing that growth is broad-based across industries. Our (proprietary) diffusion readings are generally in the 70s or higher; 50 is neutral. These readings look for acceleration in sequential annualized growth rates (3-month Vs six-month, six-month Vs Yr/Yr, Yr/Yr Vs Yr ago, etc). We obtain these results from calculations of annualized growth rates performed across the main durables sectors. Diffusion calculations are helpful in this many-faceted report to distill common themes from an otherwise confusing array of components and subcomponent constructions. As of April, the various reading have begun to show signs of strength across most main sectors.
Sales have begun to exceed inventory growth in most industries over three and six months but are still lower in most for year/year growth (diffusion of 0.14 on this basis). Still, that weakness is an air-pocket of sorts since sales have begun to outpace inventories again just as they had done so one year ago. The report seems to show that the period of distress may have been put behind us even though the month&#146;s reading was no clarion call to growth. It was however a step in the right direction that followed two previous stronger steps.
Orders in the once weak machinery category have broken higher. Primary metals orders again are very strong and transportation orders are strong again. Shipments data show some spottiness across industries but where there is strength it is very strong: primary metals, machinery and electrical equipment.
The report is the most upbeat from durables that we have seen for sometime.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
All Main Industries DIFFUSION Category
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mo</td>
<td>6Mo</td>
<td>9Mo</td>
<td>12Mo</td>
<td>Year Ago</td>
</tr>
<tr class="odd">
<td colspan="6">Durables Diffusion</td>
</tr>
<tr>
<td class="firstcol"> Shipments</td>
<td>71.4</td>
<td>85.7</td>
<td>71.4</td>
<td>85.7</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> Orders</td>
<td>100.0</td>
<td>71.4</td>
<td>42.9</td>
<td>57.1</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> Unfilled Orders</td>
<td>100.0</td>
<td>100.0</td>
<td>85.7</td>
<td>100.0</td>
<td>85.7</td>
</tr>
<tr>
<td class="firstcol"> Inventories</td>
<td>71.4</td>
<td>85.7</td>
<td>100.0</td>
<td>100.0</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> S&gt;I Diffusion</td>
<td>85.7</td>
<td>57.1</td>
<td>28.6</td>
<td>14.3</td>
<td>57.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Durable goods orders now show signs of growth, shaking off some of the weaker performance from late last year and early 2007. The 0.6% headline marks the third straight month of orders increases. Order backlog growth continues to be [...]

U.S. Durable Goods Orders: Rise and Shine, A New Dawn?

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524a.jpg" width="353">
Durable goods orders now show signs of growth, shaking off some of the weaker performance from late last year and early 2007. The 0.6% headline marks the third straight month of orders increases. Order backlog growth continues to be strong as well. Excluding aircraft, nondefense capital goods orders are up strongly for two straight months. Shipments and most cuts on capital goods shipments were strong in the month. 
The chart for durable goods looks immediately better. 
While three-month growth rates for durable goods can be very volatile, the graphs on the left documents a strong rise in new orders. A reversal (one month only) in shipments growth now shows advance instead of decline. And, more impressive, is the reduction in the rate of slowing for the declining pace of inventory growth. If firms are no longer seeking to cut inventory growth that could be very helpful to the sector assuming, of course, that the shipment pick up and order pick up are for real. 
Diffusion to relieve confusion&#133; 
The statistics in the table below show that suddenly durable goods shipments and orders join unfilled orders in revealing that growth is broad-based across industries. Our (proprietary) diffusion readings are generally in the 70s or higher; 50 is neutral. These readings look for acceleration in sequential annualized growth rates (3-month Vs six-month, six-month Vs Yr/Yr, Yr/Yr Vs Yr ago, etc). We obtain these results from calculations of annualized growth rates performed across the main durables sectors. Diffusion calculations are helpful in this many-faceted report to distill common themes from an otherwise confusing array of components and subcomponent constructions. As of April, the various reading have begun to show signs of strength across most main sectors.
Sales have begun to exceed inventory growth in most industries over three and six months but are still lower in most for year/year growth (diffusion of 0.14 on this basis). Still, that weakness is an air-pocket of sorts since sales have begun to outpace inventories again just as they had done so one year ago. The report seems to show that the period of distress may have been put behind us even though the month&#146;s reading was no clarion call to growth. It was however a step in the right direction that followed two previous stronger steps.
Orders in the once weak machinery category have broken higher. Primary metals orders again are very strong and transportation orders are strong again. Shipments data show some spottiness across industries but where there is strength it is very strong: primary metals, machinery and electrical equipment.
The report is the most upbeat from durables that we have seen for sometime.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
All Main Industries DIFFUSION Category
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>3Mo</td>
<td>6Mo</td>
<td>9Mo</td>
<td>12Mo</td>
<td>Year Ago</td>
</tr>
<tr class="odd">
<td colspan="6">Durables Diffusion</td>
</tr>
<tr>
<td class="firstcol"> Shipments</td>
<td>71.4</td>
<td>85.7</td>
<td>71.4</td>
<td>85.7</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> Orders</td>
<td>100.0</td>
<td>71.4</td>
<td>42.9</td>
<td>57.1</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> Unfilled Orders</td>
<td>100.0</td>
<td>100.0</td>
<td>85.7</td>
<td>100.0</td>
<td>85.7</td>
</tr>
<tr>
<td class="firstcol"> Inventories</td>
<td>71.4</td>
<td>85.7</td>
<td>100.0</td>
<td>100.0</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol"> S&gt;I Diffusion</td>
<td>85.7</td>
<td>57.1</td>
<td>28.6</td>
<td>14.3</td>
<td>57.1</td>
</tr>
</tbody>
</table>
New Home Sales Jump and Prices Dive. Bad News as Good? 
by <a href="/comment/Brusca.html">Robert Brusca</a> May 24, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524b.jpg" width="353">
New home sales were revised lower in March but still managed to jump sharply to post a much stronger selling rate in April than had been expected. The jump of 16.2% m/m reverses out the weakening trend in housing. Sales are still down year/year but only by 10.6%. Conditions are still spotty. While Toll Brothers reported somewhat improved results, that home builder is still not comfortable enough with prospects to give earnings guidance. However, it did say that it had seen glimmerings of strength- not just an abatement of weakness. 
The new home sales report shows the small and volatile Northeast up by 43% Y/Y and the largest region, the South, off by just 3.4% Y/Y. The West and Midwest are off by Y/Y values in the range of 25% to 30%. 
Cleary the rise in sales is the big news in this report. But a rival bit of news is the drop in prices. Last month average and median pries were up Y/Y. But Median prices have swung from +7.9% Y/Y in March to -10.9% Y/Y in April. What&#146;s that line from Frank&#146;s song? Riding high in March, shot down in April &#133;hmmm not quite the verse, but those are the facts. Average prices have switched from a March gain of 8.7% Y/Y to a drop of 3.6% Y/Y in April. The relatively larger drop in median prices speaks of more weakness at the lower priced end of the market and may have something to do with sub-prime problems. Cleary builders have been cutting prices and just as clearly, the strategy has been working. 
If we look at trends in average new home prices around the time of the last recession, we see that builder capitulation on prices was the catalyst in that recession for spurring house prices back up and for ending the weakness in the sector as recovery took hold in the economy at large. House prices then snapped back up into a positive growth range quickly as the economy transitioned from recession to growth. House prices could be performing this same function again. The low prices jump start demand and get some inventory off homebuilder&#146;s hands giving the market a push and creating some buzz at the same time. With continued growth in the rest of the economy housing is able to move ahead and dig itself out of the slump. It looks like a good story to me&#133;Oh, and they all live happily ever after, too.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
New Single Family Home Sales
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="6">Momentum: Annualized Rates Of Change</td>
<td colspan="2">Prices</td>
</tr>
<tr class="odd">
<td class="firstcol">As of:</td>
<td>Total</td>
<td>Northeast</td>
<td>Midwest</td>
<td>South</td>
<td>West</td>
<td>Median</td>
<td>Average</td>
</tr>
<tr class="odd">
<td colspan="8">Month-to-month percent change</td>
</tr>
<tr>
<td class="firstcol">Apr.07</td>
<td>16.2%</td>
<td>3.8%</td>
<td>-4.0%</td>
<td>27.8%</td>
<td>8.5%</td>
<td>-11.1%</td>
<td>-7.9%</td>
</tr>
<tr>
<td class="firstcol">Mar.07</td>
<td>-1.4%</td>
<td>77.8%</td>
<td>1.6%</td>
<td>-8.9%</td>
<td>-2.9%</td>
<td>3.0%</td>
<td>0.7%</td>
</tr>
<tr>
<td class="firstcol">Feb.07</td>
<td>-3.8%</td>
<td>-27.4%</td>
<td>-25.9%</td>
<td>-2.0%</td>
<td>21.2%</td>
<td>-1.7%</td>
<td>2.5%</td>
</tr>
<tr class="odd">
<td colspan="8">Annualized Rates</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Total</td>
<td>Northeast</td>
<td>Midwest</td>
<td>South</td>
<td>West</td>
<td>Median</td>
<td>Average</td>
</tr>
<tr>
<td class="firstcol">3-Mo</td>
<td>40.9%</td>
<td>135.5%</td>
<td>-110.8%</td>
<td>56.1%</td>
<td>110.6%</td>
<td>-34.2%</td>
<td>-18.3%</td>
</tr>
<tr>
<td class="firstcol">6-Mo</td>
<td>6.1%</td>
<td>225.6%</td>
<td>-24.8%</td>
<td>12.9%</td>
<td>-25.7%</td>
<td>-16.3%</td>
<td>-5.0%</td>
</tr>
<tr>
<td class="firstcol">1-Yr</td>
<td>-10.6%</td>
<td>43.1%</td>
<td>-28.1%</td>
<td>-3.4%</td>
<td>-25.4%</td>
<td>-10.9%</td>
<td>-3.6%</td>
</tr>
</tbody>
</table>
-3.6% 
by <a href="/comment/Brusca.html">Robert Brusca</a> Germany’s IFO Steadies But Index Shows Threat of Decay May 24, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524c.jpg" width="353">
Germany&#146;s IFO index steadied at 108.6 in May a tick below its current cycle peak at 108.7 reached in December 2006. The reading continues to be a strong one and it is said to point to further expansion. But the index is slowing its rate of ascent, as the accompanying chart shows. On that score the good news this month is that expectations improved (to 104.8 in May from 104.3 in April) and that was enough to hike the growth rate for expectations and stave off a decay in the growth of the overall index. The index&#146;s peak growth rate came in mid- 2006 and it has been slowing ever since. The pace of decline reached a local low in March of this year but the renewed upward momentum in the growth rate is without conviction. Right now the trend is up for grabs even though the expectations index moved into a positive growth phase this month following four straight months of negative readings. The current situation index continues to improve at a decelerating pace.
While the index is said to portray conditions of continuing growth, we can see the opposite signal may well be waiting in the wings to supplant it. 
The diffusion readings for the IFO are up to date for May although much of the sector detail for this report is held back for another week. The diffusion indexes show us that overall conditions have been little changed month to month. The overall diffusion index is a tick lower at 16.3. Manufacturing is a bit stronger moving up to 27.6 from 27.1. Construction, however, is slipping. The wholesale sector improved sharply in May rising to 18.4 from a 17.2 in April to 18.4 in May. Retail, however gave ground as did the services sector. 
However the service sector is still at a relatively strong reading in its range (top 5%), while retailing is weak (middle of range at 56.6 percentile). Manufacturing is still the flagship of strength sitting at the top of its range of values back to 1991. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Summary of IFO Sector Climate Readings
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">CLIMATE Sum</td>
<td>Current</td>
<td>&nbsp;</td>
<td colspan="6">Since Jan 1991*</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>May-07</td>
<td>Apr-07</td>
<td>Average</td>
<td>Median</td>
<td>Max</td>
<td>Min</td>
<td>Range</td>
<td>% Range</td>
</tr>
<tr class="odd">
<td class="firstcol">All Sectors</td>
<td>16.3</td>
<td>16.4</td>
<td>-8.8</td>
<td>-9.6</td>
<td>16.5</td>
<td>-30.6</td>
<td>47.1</td>
<td>99.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Manufacturing</td>
<td>27.6</td>
<td>27.1</td>
<td>-1.2</td>
<td>0.3</td>
<td>27.6</td>
<td>-35.6</td>
<td>63.2</td>
<td>100.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>-14.6</td>
<td>-13.9</td>
<td>-29.1</td>
<td>-32.2</td>
<td>1.4</td>
<td>-50.7</td>
<td>52.1</td>
<td>69.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Wholesale</td>
<td>18.4</td>
<td>17.2</td>
<td>-14.8</td>
<td>-16.5</td>
<td>23.3</td>
<td>-39.6</td>
<td>62.9</td>
<td>92.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Retail</td>
<td>-3.2</td>
<td>-0.5</td>
<td>-14.7</td>
<td>-14.8</td>
<td>25.2</td>
<td>-40.3</td>
<td>65.5</td>
<td>56.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>26.5</td>
<td>28.5</td>
<td>8.2</td>
<td>7.8</td>
<td>28.5</td>
<td>-15.7</td>
<td>44.2</td>
<td>95.5%</td>
</tr>
<tr>
<td colspan="4">* May 2001 for Services</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
95.5% 
by <a href="/comment/Stone.html">Carol Stone</a> Canada Corporations Operating Profits Bolstered by Higher Commodity Prices, But ROE Edges Down May 24, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524d.jpg" width="353">
Corporate profits in Canada picked up vigorously in Q1, by 12.2% at an annual rate over Q4 2006 to C$63.8 billion, a record high. While profits have expanded more strongly in recent years, they had slowed in 2006, so this was the best performance since Q4 2005.
As might be expected, the gain was generated in commodity-related industries, where prices have been rising rapidly. A prime example is the oil &amp; gas sector, which staged something of a rebound from a steep decline in Q4. Metals processing industries within the manufacturing sector also saw increases, with manufacturing as a whole up 7.4% on the quarter (at a quarterly rate) and 15.2% from a year ago. Manufacturing profits, as evident in the second graph, struggled in 2005 and 2006, so this Q1 year-on-year performance is the best since late 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524e.jpg" width="353">
Among non-manufacturing sectors, retailing, information and culture, and business services had bounces in their operating profits after weak periods. Real estate and transportation extended trends of less dramatic but consistent growth.
Financial industries, in contrast, saw their profits fall, particularly among security dealers and insurance companies. The financial sector as a whole experienced a decline of 2.5% on the quarter; however, they had been strong in Q4, so the year-on-year result was up 10.4%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070524f.jpg" width="353">
These generally good operating results were offset by lower non-operating revenues and higher expenses and taxes, so that profits after tax rose only slightly, from C$41.6 billion in Q4 to C$42.0 billion. On a not seasonally adjusted basis, this was actually a small decline from Q4, cutting the rate of return on shareholders&#39; equity from 11.94% to 11.76%.
All of these data are contained in Haver&#39;s CANSIM database from Statistics Canada.The profits series are reported under &quot;National Accounts&quot;, and the non-operating data in &quot;Balance Sheet and Income Statement&quot; and &quot;Statement of Change in Cash Position&quot; in the &quot;Financial&quot; section. Data are available for 17 nonfinancial industries and five financial industries. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CANADA, Bil.C$</th>
<th scope="col">Q1 2007*</th>
<th scope="col">Q4 2006*</th>
<th scope="col">Q1 2006*</th>
Quarterly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">Total Operating Profit</td>
<td>63.8</td>
<td>62.0</td>
<td>59.6</td>
<td>60.9</td>
<td>55.9</td>
<td>48.5</td>
</tr>
<tr>
<td class="firstcol">% Change (Qtrs at Ann Rate)</td>
<td>12.2%</td>
<td>4.1%</td>
<td>7.5% (Yr/Yr)</td>
<td>8.8%</td>
<td>15.3%</td>
<td>19.9%</td>
</tr>
<tr>
<td class="firstcol">Nonfinancial Industries</td>
<td>46.2</td>
<td>43.9</td>
<td>43.8</td>
<td>44.1</td>
<td>41.1</td>
<td>35.1</td>
</tr>
<tr>
<td class="firstcol">Oil &amp; Gas Extraction</td>
<td>7.4</td>
<td>7.1</td>
<td>8.6</td>
<td>8.1</td>
<td>7.4</td>
<td>5.1</td>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>11.8</td>
<td>10.9</td>
<td>10.5</td>
<td>10.7</td>
<td>11.1</td>
<td>11.3</td>
</tr>
<tr>
<td class="firstcol">Finance &amp; Insurance </td>
<td>17.6</td>
<td>18.1</td>
<td>15.9</td>
<td>16.8</td>
<td>14.9</td>
<td>13.5</td>
</tr>
<tr>
<td class="firstcol">Total Net Profit</td>
<td>42.0</td>
<td>41.6</td>
<td>37.8</td>
<td>42.1</td>
<td>39.4</td>
<td>33.1</td>
</tr>
</tbody>
</table>
</body>
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U.S. Durable Goods Orders: Rise and Shine: A New Dawn?

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/070523a.jpg" width="353">
Growth in the Chilean economy strengthened in Q1, according to data released this morning by the Central Bank. GDP grew 3.0% from Q4 2006 versus 2.0% in Q4 from Q3; the latest was the largest quarter-to-quarter growth since Q4 1997 in data seasonally adjusted by Haver Analytics. On a year-to-year basis, the more closely watched not-seasonally-adjusted figure was up 5.8%, the largest growth since Q2 2005.
Among industries, the boost to year/year growth came from the leader in Chile, copper mining (6.2% of GDP in 2006), which escalated from a mere 0.5% in Q4 to 7.1% in the latest period. Another major contributor was the trade and hotel/restaurant sector (10.0% of GDP), which picked up from 3.8% in Q4 to 6.9% in Q1. Other gains were widespread as well.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523b.jpg" width="353">
The Chilean economy does appear to be diversifying. While copper mining remains the keystone, other industry sectors are moving ahead. The value-added data for industries are available since 2003. In the second graph, we&#39;ve indexed the NSA figures for Q2 2003 and then applied a 4-quarter moving average. This illustrates the &quot;nested function&quot; feature of the new DLXVG3, now in internal testing here at Haver. We&#39;ve also edited the titles a bit -- you can already do that, of course -- but ordinarily they will show the database &quot;code&quot; for the series to signal to the analyst that calculations are in &quot;nested&quot; mode. Anyway, this graph indicates that copper production has held basically steady over the last four years, but financial services are growing more rapidly than GDP. Other service sectors, especially communications, are also expanding.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523c.jpg" width="353">
On the demand side, every major line item performed well in Q1. Private consumption was up 7.7% from the year earlier versus 6.7% in Q4. Fixed investment accelerated to 7.9% in Q1 from 3.0% in Q4. And exports surged by 9.5% following &quot;just&quot; 2.3%, while imports grew 10.0% compared with 8.3%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CHILE (% Changes)</th>
<th scope="col">Q1 2007(SAQR*)</th>
<th scope="col">Q4 2006 (SAQR*)</th>
<th scope="col">Q3 2006 (SAQR*) </th>
<th scope="col">Year/Year</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>3.0</td>
<td>2.0</td>
<td>-0.3</td>
<td>5.8</td>
<td>4.0</td>
<td>5.7</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">Copper Industry</td>
<td>5.3</td>
<td>6.7</td>
<td>-4.5</td>
<td>7.1</td>
<td>0.1</td>
<td>-2.5</td>
<td>4.5</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>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Private Consumption</td>
<td>3.9</td>
<td>1.3</td>
<td>1.3</td>
<td>7.7</td>
<td>7.1</td>
<td>7.9</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Gross Fixed Investment</td>
<td>5.2</td>
<td>0.6</td>
<td>3.0</td>
<td>7.9</td>
<td>4.0</td>
<td>21.9</td>
<td>9.9</td>
</tr>
<tr>
<td class="firstcol">Exports G &amp; S</td>
<td>6.2</td>
<td>-1.0</td>
<td>3.1</td>
<td>9.5</td>
<td>4.2</td>
<td>3.5</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports G &amp; S</td>
<td>3.8</td>
<td>2.6</td>
<td>2.5</td>
<td>10.0</td>
<td>9.4</td>
<td>17.7</td>
<td>16.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Growth in the Chilean economy strengthened in Q1, according to data released this morning by the Central Bank. GDP grew 3.0% from Q4 2006 versus 2.0% in Q4 from Q3; the latest was the largest quarter-to-quarter growth since Q4 1997 in [...]

Chile GDP Growth Picks Up in Q1; Copper Up, but Other Sectors Also Expanding

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523d.jpg" width="353">
The graph on the left shows layoff trends by events - the number of reported layoff events - through the first quarter. While there is a bit of upward pressure evident in that chart, a good deal of that is purely seasonal. The services line seems to be accelerating. But a closer look at the data shows that services lay off events for January and February are below the levels in 2006; cumulative layoff events did rise in March above what is seasonably normal and that has boosted the year to date total to be even with 2006, after being below it for January and February.
As far as the number of workers laid off, those figures are lower in Q1 2007 than in Q1 2006. Their pattern has been choppy.
The big picture trend seems to show some slight upward pressure on the incidence of layoff events.
But if we construct the same sort of chart on the number of persons laid off, instead of events, the layoff total for Q1 is down sharply. So while the number of incidents may have risen in the service sector for April, for Q1, taken as a whole, the number of workers laid off is down sharply. Actually, the number of service workers laid off in mass events according to the definition* is closer to half of that for Q1 last year. For MFG the number of workers laid off is also low relative to last year and relative to this expansion cycle. Construction layoffs are up significantly in Q1 2007 compared to Q1 2006, at 27,000 compared to 21,341 in the year-ago quarter. But the number of construction layoffs is still moderate by the standards of the past six years where layoffs in Q1 had previously averaged 26,036. 
On balance there is no evidence of layoffs rising in a significant way in any sector although there is some tentative evidence that the incidence of layoff events - apparently smaller events -- may have stepped up its pace. Construction may yet prove to be an exception though the data are not clear.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Mass Corporate Layoffs
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="4">Number of Separations</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Manufacturing</td>
<td>Services</td>
<td>Construction</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-07</td>
<td>51,424</td>
<td>59,545</td>
<td>27,457</td>
</tr>
<tr>
<td colspan="4">Change Yr Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-07</td>
<td>-11,712</td>
<td>-38,688</td>
<td>6,116</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-06</td>
<td>22,079</td>
<td>17,573</td>
<td>5,572</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-06</td>
<td>530</td>
<td>-47,862</td>
<td>5,611</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-06</td>
<td>15,456</td>
<td>32,559</td>
<td>710</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

The graph on the left shows layoff trends by events - the number of reported layoff events - through the first quarter. While there is a bit of upward pressure evident in that chart, a good deal of that is purely seasonal. The [...]

U.S. Mass Corporate Layoffs Still Are Subdued

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523a.jpg" width="353">
Growth in the Chilean economy strengthened in Q1, according to data released this morning by the Central Bank. GDP grew 3.0% from Q4 2006 versus 2.0% in Q4 from Q3; the latest was the largest quarter-to-quarter growth since Q4 1997 in data seasonally adjusted by Haver Analytics. On a year-to-year basis, the more closely watched not-seasonally-adjusted figure was up 5.8%, the largest growth since Q2 2005.
Among industries, the boost to year/year growth came from the leader in Chile, copper mining (6.2% of GDP in 2006), which escalated from a mere 0.5% in Q4 to 7.1% in the latest period. Another major contributor was the trade and hotel/restaurant sector (10.0% of GDP), which picked up from 3.8% in Q4 to 6.9% in Q1. Other gains were widespread as well.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523b.jpg" width="353">
The Chilean economy does appear to be diversifying. While copper mining remains the keystone, other industry sectors are moving ahead. The value-added data for industries are available since 2003. In the second graph, we&#39;ve indexed the NSA figures for Q2 2003 and then applied a 4-quarter moving average. This illustrates the &quot;nested function&quot; feature of the new DLXVG3, now in internal testing here at Haver. We&#39;ve also edited the titles a bit -- you can already do that, of course -- but ordinarily they will show the database &quot;code&quot; for the series to signal to the analyst that calculations are in &quot;nested&quot; mode. Anyway, this graph indicates that copper production has held basically steady over the last four years, but financial services are growing more rapidly than GDP. Other service sectors, especially communications, are also expanding.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523c.jpg" width="353">
On the demand side, every major line item performed well in Q1. Private consumption was up 7.7% from the year earlier versus 6.7% in Q4. Fixed investment accelerated to 7.9% in Q1 from 3.0% in Q4. And exports surged by 9.5% following &quot;just&quot; 2.3%, while imports grew 10.0% compared with 8.3%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">CHILE (% Changes)</th>
<th scope="col">Q1 2007(SAQR*)</th>
<th scope="col">Q4 2006 (SAQR*)</th>
<th scope="col">Q3 2006 (SAQR*) </th>
<th scope="col">Year/Year</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>3.0</td>
<td>2.0</td>
<td>-0.3</td>
<td>5.8</td>
<td>4.0</td>
<td>5.7</td>
<td>6.0</td>
</tr>
<tr>
<td class="firstcol">Copper Industry</td>
<td>5.3</td>
<td>6.7</td>
<td>-4.5</td>
<td>7.1</td>
<td>0.1</td>
<td>-2.5</td>
<td>4.5</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>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Private Consumption</td>
<td>3.9</td>
<td>1.3</td>
<td>1.3</td>
<td>7.7</td>
<td>7.1</td>
<td>7.9</td>
<td>7.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Gross Fixed Investment</td>
<td>5.2</td>
<td>0.6</td>
<td>3.0</td>
<td>7.9</td>
<td>4.0</td>
<td>21.9</td>
<td>9.9</td>
</tr>
<tr>
<td class="firstcol">Exports G &amp; S</td>
<td>6.2</td>
<td>-1.0</td>
<td>3.1</td>
<td>9.5</td>
<td>4.2</td>
<td>3.5</td>
<td>11.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports G &amp; S</td>
<td>3.8</td>
<td>2.6</td>
<td>2.5</td>
<td>10.0</td>
<td>9.4</td>
<td>17.7</td>
<td>16.9</td>
</tr>
</tbody>
</table>
U.S. Mass Corporate Layoffs Still Are Subdued 
by <a href="/comment/Brusca.html">Robert Brusca</a> May 23, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070523d.jpg" width="353">
The graph on the left shows layoff trends by events - the number of reported layoff events - through the first quarter. While there is a bit of upward pressure evident in that chart, a good deal of that is purely seasonal. The services line seems to be accelerating. But a closer look at the data shows that services lay off events for January and February are below the levels in 2006; cumulative layoff events did rise in March above what is seasonably normal and that has boosted the year to date total to be even with 2006, after being below it for January and February.
As far as the number of workers laid off, those figures are lower in Q1 2007 than in Q1 2006. Their pattern has been choppy.
The big picture trend seems to show some slight upward pressure on the incidence of layoff events.
But if we construct the same sort of chart on the number of persons laid off, instead of events, the layoff total for Q1 is down sharply. So while the number of incidents may have risen in the service sector for April, for Q1, taken as a whole, the number of workers laid off is down sharply. Actually, the number of service workers laid off in mass events according to the definition* is closer to half of that for Q1 last year. For MFG the number of workers laid off is also low relative to last year and relative to this expansion cycle. Construction layoffs are up significantly in Q1 2007 compared to Q1 2006, at 27,000 compared to 21,341 in the year-ago quarter. But the number of construction layoffs is still moderate by the standards of the past six years where layoffs in Q1 had previously averaged 26,036. 
On balance there is no evidence of layoffs rising in a significant way in any sector although there is some tentative evidence that the incidence of layoff events - apparently smaller events -- may have stepped up its pace. Construction may yet prove to be an exception though the data are not clear.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Mass Corporate Layoffs
</tr>
</thead>
<tbody>
<tr class="even">
<td colspan="4">Number of Separations</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Manufacturing</td>
<td>Services</td>
<td>Construction</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-07</td>
<td>51,424</td>
<td>59,545</td>
<td>27,457</td>
</tr>
<tr>
<td colspan="4">Change Yr Yr</td>
</tr>
<tr class="odd">
<td class="firstcol">Q1-07</td>
<td>-11,712</td>
<td>-38,688</td>
<td>6,116</td>
</tr>
<tr class="odd">
<td class="firstcol">Q4-06</td>
<td>22,079</td>
<td>17,573</td>
<td>5,572</td>
</tr>
<tr class="odd">
<td class="firstcol">Q3-06</td>
<td>530</td>
<td>-47,862</td>
<td>5,611</td>
</tr>
<tr class="odd">
<td class="firstcol">Q2-06</td>
<td>15,456</td>
<td>32,559</td>
<td>710</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522a.jpg" width="353">
Among the Euro area analysts and institutional investors surveyed by the Center for European Economic Research (ZEW) in Manheim Germany, the excess of those who feel good about the current situation over those who feel bad rose to an all time high of 81.8% in May, an increase of 11.9 percentage points over April, and 63.5 points above May 2006. These same financial types became more optimistic regarding the economic outlook six months ahead. The optimists exceeded the pessimists by 24.0% in May. This is 11.6 percentage points higher than in April, but 26.0 percentage points below May of 2006. In the eight plus years that the data have been available, the level of optimism seems cautious as can be seen in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522b.jpg" width="353">
A similar pattern emerges in the ZEW results for Germany alone, as shown in the second chart. An excess of 88% (again an all time high) of the respondents found current conditions good over those who found them bad. This was 11.1 percentage points above April and 79.3 points above May 2006. The excess of optimists over pessimists regarding the economic outlook rose to 24.0% in May, 7.5 percentage points above April, but 26.0 points below May 2006. It is also well below the long term average of expectations in Germany, which is an excess of optimists over pessimists of 33%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522c.jpg" width="353">
Two indicators of consumer confidence were also released today--one for Italy and one for Turkey. Consumer confidence in Italy, expressed in terms of an index with the base 1980, has increased irregularly since May 2004 as can be seen in the third chart that shows the historical record for this series. The May figure was 109.5 up 1.6 points from April but still well below the previous peaks of 126.9 in February 2002 and 130.7 in November 1988.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522d.jpg" width="353">
The Turkish measure of consumer confidence has four components: Personal Financial Standing, General Economic Situation, Expenditures and Price Expectations. The results of the surveys of these factors are shown as four diffusion indexes. The general index is calculated by taking arithmetic means of the four diffusion indexes. The range of the general index is 0 to 200. If it is above (below)100, it means consumer confidence is optimistic (pessimistic). A value of 100 indicates a neutral position. Data are available only since December 2003. The fourth chart shows that while consumer confidence in Turkey has recovered from a low point reached in July 2006, it is still in pessimistic territory.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">BUSINESS AND CONSUMER CONFIDENCE IN EUROPE</th>
<th scope="col">May 07</th>
<th scope="col">Apr 07&nbsp;</th>
<th scope="col">May 06</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</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">Euro Area&nbsp; (ZEW)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Conditions % Balance</td>
<td>81.8</td>
<td>69.9</td>
<td>18.3</td>
<td>11.9</td>
<td>63.5</td>
<td>23.8</td>
<td>-28.7</td>
<td>-41.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Expectations Six Months Ahead, &nbsp; % Balance</td>
<td>22.3</td>
<td>10.7</td>
<td>47.7</td>
<td>11.6</td>
<td>-25.4</td>
<td>26.6</td>
<td>32.3</td>
<td>52.1</td>
</tr>
<tr>
<td class="firstcol"> Germany (ZEW) </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current Conditions % Balance</td>
<td>88.0</td>
<td>76.9</td>
<td>8.7</td>
<td>11.1</td>
<td>79.3</td>
<td>18.3</td>
<td>-61.8</td>
<td>-67.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Expectations Six Months Ahead, &nbsp; % Balance</td>
<td>24.0</td>
<td>16.5</td>
<td>50.0</td>
<td>7.5</td>
<td>-26.0</td>
<td>22.3</td>
<td>34.8</td>
<td>44.6</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>May 07</td>
<td>Apr 07&nbsp;</td>
<td>Mar 07</td>
<td>Feb 07&nbsp;</td>
<td>Jan 07</td>
<td>2006</td>
<td>2005</td>
<td>2004</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp; Consumer Confidence&nbsp; (1980=100) </td>
<td>109.5</td>
<td>107.9</td>
<td>112.5</td>
<td>111.6</td>
<td>110.3</td>
<td>105.7</td>
<td>104.2</td>
<td>101.5</td>
</tr>
<tr>
<td class="firstcol"> Turkey&nbsp; </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol"> &nbsp;Consumer Confidence (Index &gt;100, &nbsp;Optimistic: &lt; 100, Pessimistic: &nbsp;100=Neutral) </td>
<td>n.a.</td>
<td>93.7</td>
<td>92.4</td>
<td>92.7</td>
<td>91.8</td>
<td>95.6</td>
<td>100.2</td>
<td>106.7</td>
</tr>
</tbody>
</table>
</body>
</html>

Among the Euro area analysts and institutional investors surveyed by the Center for European Economic Research (ZEW) in Manheim Germany, the excess of those who feel good about the current situation over those who feel bad rose to an [...]

European Surveys of Business and Consumer Confidence Show Increases in Optimism but Level Remains Subdued

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070522f.jpg" width="353">
The Richmond Index rose by one point to a still very weak -10. The chart on the left puts the index in context, plotting the 12-month moving average vs 2-year trailing maximums and minimums, forming a tunnel. At -11 the Richmond MFG index is coming off a 2-year low and has not risen off that low very robustly. 
Looking back, the weakness seen in Richmond in the monthly index is similarly to the sort that preceded that last recession. The 12-month average however is not nearly that low. Still the degree of weakness in Richmond MFG is clearly established and is not minor. These are not spike lows, but lows that persist. 
The ranges below show that the current MFG readings are quite low in their respective ranges. Among the current readings only wages and prices are above the midpoint in their ranges. The forward-looking indexes show some firmness in jobs hours and prices. 
The Richmond services report is substantially stronger. Expected production is very strong. Current readings are firm to strong. The surveys - with or without retailing show that the service sector firmness is widespread. Readings are generally above the midpoints of their ranges. Wage readings are the relative weakest within their ranges. Revenues are firm. Employment is strong. The outlook index is upbeat in stark contrast with conditions in MFG. 

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Richmond MFG Index
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Since Nov 1993</td>
<td>May-07</td>
<td>Apr-07</td>
<td colspan="2">Percentile of own range</td>
</tr>
<tr>
<td class="firstcol">Component</td>
<td>Levels</td>
<td>Levels</td>
<td>Current</td>
<td>6-mos Ahead</td>
</tr>
<tr>
<td class="firstcol">Index</td>
<td>-10</td>
<td>-11</td>
<td>30.4%</td>
<td>36.9%</td>
</tr>
<tr>
<td class="firstcol">Shipments</td>
<td>-7</td>
<td>-11</td>
<td>32.7%</td>
<td>37.9%</td>
</tr>
<tr>
<td class="firstcol">New Order</td>
<td>-13</td>
<td>-14</td>
<td>24.1%</td>
<td>34.4%</td>
</tr>
<tr>
<td class="firstcol">backlogs</td>
<td>-18</td>
<td>-13</td>
<td>39.1%</td>
<td>48.6%</td>
</tr>
<tr>
<td class="firstcol">Capacity</td>
<td>-17</td>
<td>1</td>
<td>13.6%</td>
<td>43.9%</td>
</tr>
<tr>
<td class="firstcol">Vendor Speed</td>
<td>-1</td>
<td>-6</td>
<td>15.4%</td>
<td>36.8%</td>
</tr>
<tr>
<td class="firstcol">Employees</td>
<td>-9</td>
<td>-14</td>
<td>43.6%</td>
<td>64.3%</td>
</tr>
<tr>
<td class="firstcol">Workweek</td>
<td>-9</td>
<td>12</td>
<td>26.8%</td>
<td>51.2%</td>
</tr>
<tr>
<td class="firstcol">Wages</td>
<td>16</td>
<td>27</td>
<td>69.6%</td>
<td>29.7%</td>
</tr>
<tr>
<td class="firstcol">Inventories</td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Finished Goods</td>
<td>21</td>
<td>19</td>
<td>42.9%</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Raw Materials</td>
<td>12</td>
<td>0</td>
<td>47.8%</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Prices Paid</td>
<td>2.62</td>
<td>0.94</td>
<td>63.8%</td>
<td>82.8%</td>
</tr>
<tr>
<td class="firstcol">Prices Received</td>
<td>1.5</td>
<td>0.94</td>
<td>62.7%</td>
<td>45.0%</td>
</tr>
<tr>
<td class="firstcol">Capital Expenditures</td>
<td>16</td>
<td>14</td>
<td>--</td>
<td>40.0%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Richmond Seasonally Adjusted Services Index
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>Number of</td>
<td>Average</td>
<td>Prod expected next</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Revenues</td>
<td>employees</td>
<td>wage</td>
<td>six months</td>
</tr>
<tr class="even">
<td class="firstcol">May-07</td>
<td>7</td>
<td>9</td>
<td>21</td>
<td>62</td>
</tr>
<tr class="even">
<td class="firstcol">Apr-07</td>
<td>5</td>
<td>0</td>
<td>19</td>
<td>80</td>
</tr>
<tr class="even">
<td class="firstcol">avg</td>
<td>10</td>
<td>2</td>
<td>19</td>
<td>33</td>
</tr>
<tr class="even">
<td class="firstcol">max</td>
<td>45</td>
<td>20</td>
<td>39</td>
<td>66</td>
</tr>
<tr class="even">
<td class="firstcol">min</td>
<td>-34</td>
<td>-25</td>
<td>3</td>
<td>1</td>
</tr>
<tr class="even">
<td class="firstcol">%range</td>
<td>51.9%</td>
<td>75.6%</td>
<td>50.0%</td>
<td>93.8%</td>
</tr>
<tr class="odd">
<td colspan="5">Richmond Services Excluding Retailing</td>
</tr>
<tr class="even">
<td class="firstcol">%range</td>
<td>59.0%</td>
<td>73.5%</td>
<td>42.5%</td>
<td>40.8%</td>
</tr>
<tr>
<td colspan="5">Richmond Services - Retail</td>
</tr>
<tr class="even">
<td class="firstcol">%range</td>
<td>64.0%</td>
<td>61.2%</td>
<td>42.4%</td>
<td>87.3%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Richmond Index rose by one point to a still very weak -10. The chart on the left puts the index in context, plotting the 12-month moving average vs 2-year trailing maximums and minimums, forming a tunnel. At -11 the Richmond MFG [...]

Richmond Fed MFG Index Rose to -10 From -11

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**.

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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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