Robert Brusca

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411e.jpg" width="353">
France&#146;s trade deficit widened in February as imports outpaced exports. Import growth continues to look more vibrant than export growth as the trends are accelerating more uniformly across trade categories. 
Over the recent three months imports are growing at a pace of 7.5% nearly the same as the Yr/Yr pace. For exports the overall pace for three month is barely positive and well under the Yr/Yr growth rate of 5%. For the rest of imports growth rates are quite solid. For capital goods the pace of acceleration is quite clear with blow-off type growth over the last three months. That pace is sure to cool from the near 40% it currently posts. Motor vehicle imports are strong, running at a super strong 28% pace and 14% Yr/Yr. Other consumer goods however show weakness: imports at -6.4% for three months and they are steadily decelerating.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411f.jpg" width="353"> 
This is the mixed picture for France. Export growth is cooling. Imports are strong and seem to point to strong domestic demand. But consumer goods imports (non-auto) are very weak and do not signal that same type of domestic demand strength form the consumer. For the moment France is a bit enigmatic. 
After seeing export and import trends wither steadily throughout 2006 and early 2007 both exports and imports have sprung to life in February of 2007.

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French Trade Trends for Goods
</tr>
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<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M%</td>
<td colspan="3">% SAAR</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Feb-07</td>
<td>Jan-07</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>-&#128;&#128; 2,702.00</td>
<td>-&#128;&#128; 2,612.00</td>
<td>-&#128;&#128; 2,565.67</td>
<td>-&#128;&#128; 2,185.83</td>
<td>-&#128;&#128; 2,245.17</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All Exports</td>
<td>2.8%</td>
<td>-1.4%</td>
<td>0.2%</td>
<td>4.0%</td>
<td>5.1%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>1.3%</td>
<td>1.3%</td>
<td>-1.1%</td>
<td>18.9%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>4.8%</td>
<td>0.7%</td>
<td>2.8%</td>
<td>-1.8%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.5%</td>
<td>-4.3%</td>
<td>-6.2%</td>
<td>2.6%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All Imports</td>
<td>3.2%</td>
<td>-1.2%</td>
<td>7.5%</td>
<td>2.6%</td>
<td>7.6%</td>
</tr>
<tr>
<td class="firstcol">Capital goods</td>
<td>6.4%</td>
<td>2.6%</td>
<td>39.1%</td>
<td>10.8%</td>
<td>9.0%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>3.0%</td>
<td>0.8%</td>
<td>28.2%</td>
<td>16.8%</td>
<td>14.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer goods</td>
<td>2.0%</td>
<td>-1.9%</td>
<td>-6.4%</td>
<td>0.5%</td>
<td>6.2%</td>
</tr>
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<td colspan="6">*Bil. Euros; mo or period average</td>
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Frances trade deficit widened in February as imports outpaced exports. Import growth continues to look more vibrant than export growth as the trends are accelerating more uniformly across trade categories. Over the recent three [...]

French Trade Deficit Widens

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<th scope="col" class="firstcol">The JOLTS report (Job Openings and Labor Turnover Survey) is not a front-line jobs report but it is a report economists like that reveals a lot about what is going on behind the scenes in the labor market. This month&#146;s report is mixed as it shows&nbsp;a slowing in hires and in openings but fewer separations and a steady quit rate with lower layoff tendencies. At the bottom of the table below I try to bring theses reading to life by placing them in their respective ranges and defining each as being in a set percent of its range. There I also present the current readings expressed as percentages of their own respective means and medians. In that way the relative merit of each category comes through a bit clearer.&nbsp; The table shows that layoffs and separations are quite low. Layoffs are at a series low, in fact. Quits are high. To an economist this a good sign since people do not quit jobs unless prospects are good. A high quit rate is a good sign of labor market strength. Job openings are high and higher in their range than is hiring (hiring is at the two-thirds mark in its range). This configuration makes me wonder about skill mixes and labor shortages.</th>
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JOLTS Summary Statistics for the Nation
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<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="5">National Statistics Since January of 2000</td>
<td>&nbsp;</td>
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<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Openings</td>
<td>Hires</td>
<td>Separation</td>
<td>Quit</td>
<td>Layoffs &amp; D</td>
<td>Other Separations</td>
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<td class="firstcol">Feb-07</td>
<td>3.0</td>
<td>3.9</td>
<td>3.6</td>
<td>2.2</td>
<td>1.1</td>
<td>0.2</td>
</tr>
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<td class="firstcol">Jan-07</td>
<td>3.1</td>
<td>4.0</td>
<td>3.7</td>
<td>2.2</td>
<td>1.5</td>
<td>0.3</td>
</tr>
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<td class="firstcol">average</td>
<td>2.6</td>
<td>3.8</td>
<td>3.7</td>
<td>2.0</td>
<td>1.4</td>
<td>0.2</td>
</tr>
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<td class="firstcol">Median</td>
<td>2.6</td>
<td>3.8</td>
<td>3.7</td>
<td>2.0</td>
<td>1.4</td>
<td>0.2</td>
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<td class="firstcol">Percentile</td>
<td>75.0%</td>
<td>66.7%</td>
<td>37.5%</td>
<td>83.3%</td>
<td>0.0%</td>
<td>0.0%</td>
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<td class="firstcol">Range</td>
<td>1.2</td>
<td>0.9</td>
<td>0.8</td>
<td>0.6</td>
<td>0.7</td>
<td>0.1</td>
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<td class="firstcol">Max</td>
<td>3.3</td>
<td>4.2</td>
<td>4.1</td>
<td>2.3</td>
<td>1.8</td>
<td>0.3</td>
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<td class="firstcol">Min</td>
<td>2.1</td>
<td>3.3</td>
<td>3.3</td>
<td>1.7</td>
<td>1.1</td>
<td>0.2</td>
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<td colspan="7">Percent of</td>
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<td class="firstcol">Median</td>
<td>117.6%</td>
<td>102.6%</td>
<td>97.3%</td>
<td>110.0%</td>
<td>78.6%</td>
<td>100.0%</td>
</tr>
<tr>
<td class="firstcol">Average</td>
<td>115.9%</td>
<td>103.4%</td>
<td>98.0%</td>
<td>108.1%</td>
<td>78.2%</td>
<td>86.8%</td>
</tr>
<tr class="odd">
<td colspan="7">Recovery period only</td>
</tr>
<tr>
<td class="firstcol">Percentile</td>
<td>75.0%</td>
<td>66.7%</td>
<td>37.5%</td>
<td>83.3%</td>
<td>0.0%</td>
<td>0.0%</td>
</tr>
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<td class="firstcol">Median</td>
<td>115.4%</td>
<td>100.0%</td>
<td>97.3%</td>
<td>104.8%</td>
<td>78.6%</td>
<td>100.0%</td>
</tr>
<tr>
<td class="firstcol">Average</td>
<td>113.5%</td>
<td>102.2%</td>
<td>97.9%</td>
<td>107.7%</td>
<td>78.6%</td>
<td>86.4%</td>
</tr>
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<th scope="col" class="firstcol">Regional variances Regionally conditions can be and are quite different. Hiring has been strong in the Midwest, West and South, but it has lagged in the Northeast. Job openings are the highest in the South then the West followed by the Midwest with the Northeast decidedly trailing.But all regions see low layoffs. For three of them layoffs are at a cycle low. For the Midwest they are moderate in the lower one-third of its range. We know that a lot of auto company programs are trying to ease out high cost labor and that these firms concentrate in the Midwest.&nbsp; Still, the Midwest reading is quite moderate. The relatively high quit rates show strong local labor markets from the South across the Midwest to the West. But the Northeast has a low quit rate, a sign of a poor labor market since workers with jobs are reluctant to leave them.</th>
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<td><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411a.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411b.jpg" width="353"> <img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411c.jpg" width="353"><img border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411d.jpg" width="353"> </td>
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<th scope="col" class="firstcol">JOLTS by Industry We can weight and array JOLTS data by industry. On this basis some odd things emerge as well as some very understandable ones. The construction sector is clearly under some pressure. Yet, the JOLTS figures show that job openings in the sector are at a recovery period high.&nbsp; At the same time, separations, quits and hires in the sector are at or nearly at recovery period lows. This raises some questions about what the job openings are - for what kinds of jobs and what pay. Hires are the relative strongest for Government, followed by other services. Manufacturing sector hires are above the midpoint, in their 60th percentile. Quits are moderate for government and fairly robust for manufacturing and services. On balance the JOLTS data show a still vibrant labor market. The high quit rates are quite indicative of strength and they transcend most regions (except the NE) and industries (except construction). The service sector is a very solid sector. Even manufacturing is far short of being called soft; it looks pretty well-off despite all the industry restructuring.&nbsp; &nbsp;In short the JOLTS report looks behind the scenes of the jobs data and finds that the underpinnings look pretty good.</th>
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JOLTS Rankings by Main Sectors
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<td colspan="5">Major Job Sectors</td>
</tr>
<tr class="odd">
<td class="firstcol">Feb-07</td>
<td>Services</td>
<td>Manufacturing</td>
<td>Constructions</td>
<td>Government</td>
</tr>
<tr>
<td class="firstcol">Job Openings</td>
<td>67.8%</td>
<td>85.7%</td>
<td>100.0%</td>
<td>87.5%</td>
</tr>
<tr>
<td class="firstcol">Hires</td>
<td>79.7%</td>
<td>60.0%</td>
<td>0.0%</td>
<td>100.0%</td>
</tr>
<tr>
<td class="firstcol">Separations</td>
<td>57.4%</td>
<td>70.0%</td>
<td>4.0%</td>
<td>50.0%</td>
</tr>
<tr>
<td class="firstcol">Quits</td>
<td>89.0%</td>
<td>83.3%</td>
<td>0.0%</td>
<td>50.0%</td>
</tr>
</tbody>
</table>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411e.jpg" width="353">
France&#146;s trade deficit widened in February as imports outpaced exports. Import growth continues to look more vibrant than export growth as the trends are accelerating more uniformly across trade categories. 
Over the recent three months imports are growing at a pace of 7.5% nearly the same as the Yr/Yr pace. For exports the overall pace for three month is barely positive and well under the Yr/Yr growth rate of 5%. For the rest of imports growth rates are quite solid. For capital goods the pace of acceleration is quite clear with blow-off type growth over the last three months. That pace is sure to cool from the near 40% it currently posts. Motor vehicle imports are strong, running at a super strong 28% pace and 14% Yr/Yr. Other consumer goods however show weakness: imports at -6.4% for three months and they are steadily decelerating.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411f.jpg" width="353"> 
This is the mixed picture for France. Export growth is cooling. Imports are strong and seem to point to strong domestic demand. But consumer goods imports (non-auto) are very weak and do not signal that same type of domestic demand strength form the consumer. For the moment France is a bit enigmatic. 
After seeing export and import trends wither steadily throughout 2006 and early 2007 both exports and imports have sprung to life in February of 2007.

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French Trade Trends for Goods
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</thead>
<tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td colspan="2">M/M%</td>
<td colspan="3">% SAAR</td>
</tr>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Feb-07</td>
<td>Jan-07</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance*</td>
<td>-&#128;&#128; 2,702.00</td>
<td>-&#128;&#128; 2,612.00</td>
<td>-&#128;&#128; 2,565.67</td>
<td>-&#128;&#128; 2,185.83</td>
<td>-&#128;&#128; 2,245.17</td>
</tr>
<tr class="odd">
<td class="firstcol">Exports</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All Exports</td>
<td>2.8%</td>
<td>-1.4%</td>
<td>0.2%</td>
<td>4.0%</td>
<td>5.1%</td>
</tr>
<tr>
<td class="firstcol">Capital Goods</td>
<td>1.3%</td>
<td>1.3%</td>
<td>-1.1%</td>
<td>18.9%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>4.8%</td>
<td>0.7%</td>
<td>2.8%</td>
<td>-1.8%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods</td>
<td>0.5%</td>
<td>-4.3%</td>
<td>-6.2%</td>
<td>2.6%</td>
<td>3.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">IMPORTS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">All Imports</td>
<td>3.2%</td>
<td>-1.2%</td>
<td>7.5%</td>
<td>2.6%</td>
<td>7.6%</td>
</tr>
<tr>
<td class="firstcol">Capital goods</td>
<td>6.4%</td>
<td>2.6%</td>
<td>39.1%</td>
<td>10.8%</td>
<td>9.0%</td>
</tr>
<tr>
<td class="firstcol">Motor Vehicles</td>
<td>3.0%</td>
<td>0.8%</td>
<td>28.2%</td>
<td>16.8%</td>
<td>14.0%</td>
</tr>
<tr>
<td class="firstcol">Consumer goods</td>
<td>2.0%</td>
<td>-1.9%</td>
<td>-6.4%</td>
<td>0.5%</td>
<td>6.2%</td>
</tr>
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<td colspan="6">*Bil. Euros; mo or period average</td>
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</tbody>
</table>
French Trade Deficit Widens 
by <a href="/comment/Brusca.html">Robert Brusca</a> April 11, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411g.jpg" width="353">
The U.S. federal government ran a deficit of $96.3B during March, well ahead of last March&#39;s $85.3B and also larger than consensus forecasts of $89B.
This performance brought the fiscal-year-to-date deficit to $258.4B, down from $302.9B through March last year.
Summary data for the monthly budget, reported in the Monthly Treasury Statement, are available Haver&#39;s USECON database. Details are carried in the GOVFIN database.
The excess of the monthly deficit over the forecast amount may result from the acceleration into March of April payments for veterans&#39; benefits, supplemental security income and some Medicare outlays; these are ordinarily paid on the first day of each month, but are moved forward when the First falls on a weekend. April outlays will be commensurately reduced. Additionally, individual income tax refunds reached a record for a single month, $55.5B. The previous records were $52.4B in April 2004 and $52.2B in March last year. This is possibly due to earlier filing by taxpayers, and April and May refunds could turn out to be somewhat smaller.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070411h.jpg" width="353">
In total, net revenues were $166.5B in March, up just 1.2% from March 2006; for the fiscal-year-to-date, they were 8.0% above the comparable period of fiscal 2006. Individual income tax receipts were $35.4B in March, down 9.8% from March 2006, but fiscal 2007-to-date saw $479.2B, up 10.8%. Corporate income taxes were $40.2B, a record for March and up 11.8% from a year ago. Social insurance taxes were $76.5B in the month, up 6.2% from a year ago.
The U.S. Government&#39;s net outlays grew 5.2% from March 2006, reaching $262.8B, with the cumulative total for the first six fiscal months up 2.9%. Defense outlays were $52.0B in the month, up 2.4% on the year earlier. Social security outlays (benefits and administrative costs) were $48.9B, up 5.9%. Net interest turned somewhat higher, reaching $21.1B, up 8.8% on March a year ago, while smaller amounts in previous months put the total for the fiscal year so far up only 2.5%.
This report gives an inconclusive read on the state of the budget, since key tax payments are going on this month and the timing of other tax filing seems to be changing from year to year. Major outlay patterns are also erratic from month to month. Nonetheless, overall, revenues are continuing to grow faster than outlays and the budget deficit is continuing to diminish.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E106/@E10602/@E106021.HTM">US Government Budget</a>, Bil.$</th>
<th scope="col">Mar 2007</th>
<th scope="col">Feb 2007</th>
<th scope="col">Oct 2006 &nbsp; Mar 2007</th>
<th scope="col">Oct 2005 &nbsp; Mar 2006</th>
<th scope="col">FY 2006</th>
<th scope="col">FY 2005</th>
<th scope="col">FY 2004</th>
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<td class="firstcol">Budget Balance</td>
<td>-96.3</td>
<td>-120.0</td>
<td>-258.4</td>
<td>-302.9</td>
<td>-248.2</td>
<td>-318.7</td>
<td>-411.1</td>
</tr>
<tr>
<td class="firstcol">Net Revenues</td>
<td>166.5</td>
<td>120.3</td>
<td>1120.9</td>
<td>1037.6</td>
<td>11.8%</td>
<td>14.6%</td>
<td>5.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">8.0%</td>
<td>10.5%</td>
</tr>
<tr>
<td class="firstcol">Net Outlays</td>
<td>262.8</td>
<td>240.3</td>
<td>1379.3</td>
<td>1340.6</td>
<td>7.4%</td>
<td>7.9%</td>
<td>6.2%</td>
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<tr class="odd">
<td class="firstcol">2.9%</td>
<td>8.7%</td>
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JOLTS Report Shows U.S. Economy’s Complexities

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410c.jpg" width="353">
China&#39;s merchandise trade balance fell sharply in March to $84.7 billion from $108.0 billion in February. Exports fell by $23.4 billion and imports rose by $0.3 billion. As the data are not seasonally adjusted, the monthly ups and downs in the first quarter of the year are frequently affected by the variations in the dates of the Chinese New Year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410d.jpg" width="353"> In spite of the decline in the March trade balance, the balance for the whole quarter was a record at $63.7 billion, $7.5 billion above the previous quarter and $30.7 above the first quarter of 2006. The first chart shows China&#39;s merchandise exports, imports and balances of trade in goods over the past five years on a quarterly basis.
The surplus with the US was $42 billion in the first quarter of this year, $2.6 billion above the previous quarter and $7.8 billion above the first quarter of 2006. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410f.jpg" width="353">The growing surplus with the U.S. has been causing friction between China and the US over the last several years and has reached the point where the US has recently increased duties on Chinese coated paper and, just yesterday, filed two cases with the WTO (World Trade Organization) to reduce barriers to US goods and to criminalize piracy. The second chart shows the widening gap between China&#39;s exports to the US and its imports from the US.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410e.jpg" width="353">
In contrast to the US, China has run a deficit with Japan as shown in the third chart. Until 2005, China also ran a deficit in goods with Germany. Since then, however, China has been recording a growing surplus with Germany as shown in the fourth chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEPR/@P1/@P17/@P17.HTM">CHINA TRADE IN GOODS</a> &nbsp;(Bil US$)</th>
<th scope="col">Mar 07</th>
<th scope="col">Feb 07</th>
<th scope="col">Mar 06</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">Q1 07</th>
<th scope="col">Q4 06&nbsp;</th>
<th scope="col">Q1 06&nbsp;</th>
<th scope="col">Q/Q Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Export Total</td>
<td>84.7</td>
<td>108.0</td>
<td>76.5</td>
<td>-23.4</td>
<td>8.2</td>
<td>282.9</td>
<td>263.6</td>
<td>219.0</td>
<td>19.3</td>
<td>63.9</td>
<td>969.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;To US</td>
<td>16.8</td>
<td>21.4</td>
<td>16.9</td>
<td>-4.6</td>
<td>-0.1</td>
<td>58.2</td>
<td>54.7</td>
<td>47.9</td>
<td>3.5</td>
<td>10.3</td>
<td>203.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;To Germany</td>
<td>3.0</td>
<td>4.3</td>
<td>3.3</td>
<td>-1.3</td>
<td>-0.3</td>
<td>11.1</td>
<td>10.6</td>
<td>9.5</td>
<td>0.5</td>
<td>1.6</td>
<td>40.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;To Japan</td>
<td>7.1</td>
<td>9.3</td>
<td>7.5</td>
<td>-2.1</td>
<td>-0.4</td>
<td>25.1</td>
<td>23.8</td>
<td>22.3</td>
<td>1.3</td>
<td>2.8</td>
<td>91.8</td>
</tr>
<tr class="odd">
<td class="firstcol"> Imports Total </td>
<td>74.2</td>
<td>73.9</td>
<td>63.3</td>
<td>0.3</td>
<td>10.9</td>
<td>219.3</td>
<td>207.4</td>
<td>168.1</td>
<td>11.9</td>
<td>51.2</td>
<td>791.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;From US</td>
<td>6.1</td>
<td>4.9</td>
<td>4.8</td>
<td>1.3</td>
<td>1.6</td>
<td>16.3</td>
<td>15.4</td>
<td>13.8</td>
<td>0.9</td>
<td>2.5</td>
<td>59.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;From Germany</td>
<td>3.4</td>
<td>3.6</td>
<td>2.8</td>
<td>-0.2</td>
<td>0.6</td>
<td>10.2</td>
<td>10.3</td>
<td>8.7</td>
<td>-0.1</td>
<td>1.5</td>
<td>37.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;From Japan</td>
<td>10.9</td>
<td>10.8</td>
<td>9.2</td>
<td>0.1</td>
<td>1.7</td>
<td>32.3</td>
<td>30.4</td>
<td>27.2</td>
<td>1.9</td>
<td>5.1</td>
<td>115.8</td>
</tr>
<tr class="odd">
<td class="firstcol"> Balance Total </td>
<td>10.4</td>
<td>34.1</td>
<td>13.1</td>
<td>-23.6</td>
<td>-2.7</td>
<td>63.7</td>
<td>56.1</td>
<td>32.9</td>
<td>7.5</td>
<td>30.7</td>
<td>177.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;US</td>
<td>10.7</td>
<td>16.5</td>
<td>12.1</td>
<td>-5.8</td>
<td>-1.4</td>
<td>42.0</td>
<td>39.3</td>
<td>34.1</td>
<td>2.6</td>
<td>7.8</td>
<td>144.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Germany</td>
<td>-0.4</td>
<td>0.7</td>
<td>0.5</td>
<td>-1.1</td>
<td>-0.9</td>
<td>0.9</td>
<td>0.3</td>
<td>0.8</td>
<td>0.6</td>
<td>0.1</td>
<td>2.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Japan</td>
<td>-3.8</td>
<td>-1.5</td>
<td>-1.7</td>
<td>-2.3</td>
<td>-2.1</td>
<td>-7.2</td>
<td>-6.6</td>
<td>-4.9</td>
<td>-0.5</td>
<td>-2.3</td>
<td>-24.0</td>
</tr>
</tbody>
</table>
</body>
</html>

China's merchandise trade balance fell sharply in March to $84.7 billion from $108.0 billion in February. Exports fell by $23.4 billion and imports rose by $0.3 billion. As the data are not seasonally adjusted, the monthly ups and [...]

China's Trade Surplus Tumbles in March, but First Quarter Surplus Is Still A Record

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410b.jpg" width="353">
French industrial output was up especially strong rising by 1.1% and led by a 1.2% increase in the output of consumer goods. EU IP trends have been soft recently. Even Germany where conditions have been rather solid has showed some weakness in consumer goods output; of course Germany may still be fighting its way though some VAT effects early in the year. With this strong gain in February, France at least shows that one large EU country has some solid output growth in consumer goods. This has been led by autos where output is up by a strong 4.7% spurt in February alone. 
For France the chart now shows some building momentum trends in place as the 3-mo growth rate is rising sharply and the six month pace is firming along with the Yr/Yr pace.
In February France demonstrates good growth across sectors. Auto output is especially strong. Consumer goods output is surprisingly robust as that sector had lagged. Capital goods output trends are simply steady and above the pace of 4%. Intermediate goods output has picked up in February.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
French IP Excluding construction
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">SAAR except m/m </td>
<td>Feb-07</td>
<td>Jan-07</td>
<td>Dec-06</td>
<td>3-mo</td>
<td>&nbsp;6-mo </td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">IP total</td>
<td>1.1%</td>
<td>-0.2%</td>
<td>1.0%</td>
<td>7.7%</td>
<td>1.6%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>1.2%</td>
<td>0.4%</td>
<td>0.0%</td>
<td>6.4%</td>
<td>2.9%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>0.3%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>4.8%</td>
<td>4.4%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediary</td>
<td>1.3%</td>
<td>-1.2%</td>
<td>1.4%</td>
<td>6.3%</td>
<td>1.2%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Memo</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">Auto</td>
<td>4.7%</td>
<td>0.4%</td>
<td>1.5%</td>
<td>29.9%</td>
<td>3.9%</td>
<td>4.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

French industrial output was up especially strong rising by 1.1% and led by a 1.2% increase in the output of consumer goods. EU IP trends have been soft recently. Even Germany where conditions have been rather solid has showed some [...]

French Industrial Output Up Sharply in February

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410a.jpg" width="353">
Japan&#146;s economy watcher&#146;s survey shows the ongoing downshift in Japan&#146;s economy from a local peak reached back in March of 2006. Since then, the economy has showed less strength but in the recent three months or so the economy watcher&#146;s index has showed some lift in its overall position as well as in its outlook. During this period job market conditions have remained positive and have stabilized. This index is one of the reasons that the Bank of Japan (BoJ) may remain confident that the economy is still doing alright despite some uneven reports early this year. 
The indicators in the table below give a somewhat broader picture of the performance of the Japanese economy. The first panel of the chart shows the raw readings on several measures; the second panel re-expresses them as a percentile of the indicator&#146;s own range of values over the past five years. For example the current economy watchers index shows the future component is in the 70th percentile (top 30%) of this five-year range of values. The other economy watcher indicators are near or above the 60th percentile, significantly above even the midpoint of their respective ranges (the 50th percentile mark is the mid-point). But the NTC MFG reading is relatively weaker at a 52.5 raw reading it shows some expansion. As a percentile of its five-year range it is weak, residing in only its 43rd percentile. The Teikoku indexes are relatively stronger. They are based on a more comprehensive weighting of questions put to survey participants. The MFG reading is in the 86th percentile of its range, much stronger than the NTC reading in its range. Also the services and construction readings are in the top 10 percentile of their respective ranges. Retailing is at a weaker but still firm 75th percentile.
The BoJ decision to keep rates on hold seems reasonable. The economy has had some uneven numbers but there has also been some new flirtation with deflation. The BoJ board seems to be trying to make sure that recovery is in gear before moving rates up as deputy governor Muto had previously promised. For the moment BOJ policy seem to be right where it needs to be.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Key Japanese surveys
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Year range*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Mar-07</td>
<td>Feb-07</td>
<td>Jan-07</td>
<td>Dec-06</td>
<td>Mar-07</td>
<td>Feb-07</td>
<td>Jan-07</td>
</tr>
<tr>
<td class="firstcol">Diffusion</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Economy Watchers</td>
<td>50.8</td>
<td>49.2</td>
<td>47.2</td>
<td>48.9</td>
<td>65.6%</td>
<td>57.4%</td>
<td>53.7%</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>56.3</td>
<td>55.9</td>
<td>56.3</td>
<td>54.5</td>
<td>59.7%</td>
<td>57.9%</td>
<td>64.9%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>51.3</td>
<td>52.1</td>
<td>50.9</td>
<td>48.9</td>
<td>70.6%</td>
<td>75.0%</td>
<td>68.3%</td>
</tr>
<tr>
<td class="firstcol">NTC MFG</td>
<td>52.5</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>43.5%</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Econ Trends (Teikoku&#39;/50 neutral/weighted diffusion))</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">MFG</td>
<td>47.2</td>
<td>46.7</td>
<td>46.7</td>
<td>47.6</td>
<td>86.2%</td>
<td>84.5%</td>
<td>85.2%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>41.1</td>
<td>39.9</td>
<td>39.8</td>
<td>39.4</td>
<td>74.3%</td>
<td>69.9%</td>
<td>69.3%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>44.6</td>
<td>43.8</td>
<td>44.1</td>
<td>44.8</td>
<td>85.8%</td>
<td>82.1%</td>
<td>84.8%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>49.9</td>
<td>49.4</td>
<td>48.9</td>
<td>49.3</td>
<td>92.2%</td>
<td>90.2%</td>
<td>88.5%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>38.7</td>
<td>38.7</td>
<td>38.2</td>
<td>39.0</td>
<td>91.2%</td>
<td>91.0%</td>
<td>88.6%</td>
</tr>
<tr>
<td colspan="8">100 is high; Zero is low</td>
</tr>
</tbody>
</table>
</body>
</html>

Japans economy watchers survey shows the ongoing downshift in Japans economy from a local peak reached back in March of 2006. Since then, the economy has showed less strength but in the recent three months or so the economy [...]

Bank of Japan Holds Policy Steady on Unanimous Vote…

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410a.jpg" width="353">
Japan&#146;s economy watcher&#146;s survey shows the ongoing downshift in Japan&#146;s economy from a local peak reached back in March of 2006. Since then, the economy has showed less strength but in the recent three months or so the economy watcher&#146;s index has showed some lift in its overall position as well as in its outlook. During this period job market conditions have remained positive and have stabilized. This index is one of the reasons that the Bank of Japan (BoJ) may remain confident that the economy is still doing alright despite some uneven reports early this year. 
The indicators in the table below give a somewhat broader picture of the performance of the Japanese economy. The first panel of the chart shows the raw readings on several measures; the second panel re-expresses them as a percentile of the indicator&#146;s own range of values over the past five years. For example the current economy watchers index shows the future component is in the 70th percentile (top 30%) of this five-year range of values. The other economy watcher indicators are near or above the 60th percentile, significantly above even the midpoint of their respective ranges (the 50th percentile mark is the mid-point). But the NTC MFG reading is relatively weaker at a 52.5 raw reading it shows some expansion. As a percentile of its five-year range it is weak, residing in only its 43rd percentile. The Teikoku indexes are relatively stronger. They are based on a more comprehensive weighting of questions put to survey participants. The MFG reading is in the 86th percentile of its range, much stronger than the NTC reading in its range. Also the services and construction readings are in the top 10 percentile of their respective ranges. Retailing is at a weaker but still firm 75th percentile.
The BoJ decision to keep rates on hold seems reasonable. The economy has had some uneven numbers but there has also been some new flirtation with deflation. The BoJ board seems to be trying to make sure that recovery is in gear before moving rates up as deputy governor Muto had previously promised. For the moment BOJ policy seem to be right where it needs to be.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
Key Japanese surveys
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td colspan="4">Raw readings of each survey</td>
<td colspan="3">Percent of 5Year range*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Mar-07</td>
<td>Feb-07</td>
<td>Jan-07</td>
<td>Dec-06</td>
<td>Mar-07</td>
<td>Feb-07</td>
<td>Jan-07</td>
</tr>
<tr>
<td class="firstcol">Diffusion</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Economy Watchers</td>
<td>50.8</td>
<td>49.2</td>
<td>47.2</td>
<td>48.9</td>
<td>65.6%</td>
<td>57.4%</td>
<td>53.7%</td>
</tr>
<tr>
<td class="firstcol">Employment</td>
<td>56.3</td>
<td>55.9</td>
<td>56.3</td>
<td>54.5</td>
<td>59.7%</td>
<td>57.9%</td>
<td>64.9%</td>
</tr>
<tr>
<td class="firstcol">Future</td>
<td>51.3</td>
<td>52.1</td>
<td>50.9</td>
<td>48.9</td>
<td>70.6%</td>
<td>75.0%</td>
<td>68.3%</td>
</tr>
<tr>
<td class="firstcol">NTC MFG</td>
<td>52.5</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>43.5%</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">Econ Trends (Teikoku&#39;/50 neutral/weighted diffusion))</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">MFG</td>
<td>47.2</td>
<td>46.7</td>
<td>46.7</td>
<td>47.6</td>
<td>86.2%</td>
<td>84.5%</td>
<td>85.2%</td>
</tr>
<tr>
<td class="firstcol">Retail</td>
<td>41.1</td>
<td>39.9</td>
<td>39.8</td>
<td>39.4</td>
<td>74.3%</td>
<td>69.9%</td>
<td>69.3%</td>
</tr>
<tr>
<td class="firstcol">Wholesale</td>
<td>44.6</td>
<td>43.8</td>
<td>44.1</td>
<td>44.8</td>
<td>85.8%</td>
<td>82.1%</td>
<td>84.8%</td>
</tr>
<tr>
<td class="firstcol">Services</td>
<td>49.9</td>
<td>49.4</td>
<td>48.9</td>
<td>49.3</td>
<td>92.2%</td>
<td>90.2%</td>
<td>88.5%</td>
</tr>
<tr>
<td class="firstcol">Construction</td>
<td>38.7</td>
<td>38.7</td>
<td>38.2</td>
<td>39.0</td>
<td>91.2%</td>
<td>91.0%</td>
<td>88.6%</td>
</tr>
<tr>
<td colspan="8">100 is high; Zero is low</td>
</tr>
</tbody>
</table>
French Industrial Output Up Sharply in February 
by <a href="/comment/Brusca.html">Robert Brusca</a> April 10, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410b.jpg" width="353">
French industrial output was up especially strong rising by 1.1% and led by a 1.2% increase in the output of consumer goods. EU IP trends have been soft recently. Even Germany where conditions have been rather solid has showed some weakness in consumer goods output; of course Germany may still be fighting its way though some VAT effects early in the year. With this strong gain in February, France at least shows that one large EU country has some solid output growth in consumer goods. This has been led by autos where output is up by a strong 4.7% spurt in February alone. 
For France the chart now shows some building momentum trends in place as the 3-mo growth rate is rising sharply and the six month pace is firming along with the Yr/Yr pace.
In February France demonstrates good growth across sectors. Auto output is especially strong. Consumer goods output is surprisingly robust as that sector had lagged. Capital goods output trends are simply steady and above the pace of 4%. Intermediate goods output has picked up in February.

<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>
French IP Excluding construction
</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">SAAR except m/m </td>
<td>Feb-07</td>
<td>Jan-07</td>
<td>Dec-06</td>
<td>3-mo</td>
<td>&nbsp;6-mo </td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">IP total</td>
<td>1.1%</td>
<td>-0.2%</td>
<td>1.0%</td>
<td>7.7%</td>
<td>1.6%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>1.2%</td>
<td>0.4%</td>
<td>0.0%</td>
<td>6.4%</td>
<td>2.9%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital</td>
<td>0.3%</td>
<td>0.4%</td>
<td>0.5%</td>
<td>4.8%</td>
<td>4.4%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediary</td>
<td>1.3%</td>
<td>-1.2%</td>
<td>1.4%</td>
<td>6.3%</td>
<td>1.2%</td>
<td>3.5%</td>
</tr>
<tr>
<td class="firstcol">Memo</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">Auto</td>
<td>4.7%</td>
<td>0.4%</td>
<td>1.5%</td>
<td>29.9%</td>
<td>3.9%</td>
<td>4.5%</td>
</tr>
</tbody>
</table>
China's Trade Surplus Tumbles in March, but First Quarter Surplus Is Still A Record 
by <a href="/comment/Curley.html">Louise Curley</a> April 10, 2007


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410c.jpg" width="353">
China&#39;s merchandise trade balance fell sharply in March to $84.7 billion from $108.0 billion in February. Exports fell by $23.4 billion and imports rose by $0.3 billion. As the data are not seasonally adjusted, the monthly ups and downs in the first quarter of the year are frequently affected by the variations in the dates of the Chinese New Year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410d.jpg" width="353"> In spite of the decline in the March trade balance, the balance for the whole quarter was a record at $63.7 billion, $7.5 billion above the previous quarter and $30.7 above the first quarter of 2006. The first chart shows China&#39;s merchandise exports, imports and balances of trade in goods over the past five years on a quarterly basis.
The surplus with the US was $42 billion in the first quarter of this year, $2.6 billion above the previous quarter and $7.8 billion above the first quarter of 2006. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410f.jpg" width="353">The growing surplus with the U.S. has been causing friction between China and the US over the last several years and has reached the point where the US has recently increased duties on Chinese coated paper and, just yesterday, filed two cases with the WTO (World Trade Organization) to reduce barriers to US goods and to criminalize piracy. The second chart shows the widening gap between China&#39;s exports to the US and its imports from the US.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070410e.jpg" width="353">
In contrast to the US, China has run a deficit with Japan as shown in the third chart. Until 2005, China also ran a deficit in goods with Germany. Since then, however, China has been recording a growing surplus with Germany as shown in the fourth chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEPR/@P1/@P17/@P17.HTM">CHINA TRADE IN GOODS</a> &nbsp;(Bil US$)</th>
<th scope="col">Mar 07</th>
<th scope="col">Feb 07</th>
<th scope="col">Mar 06</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">Q1 07</th>
<th scope="col">Q4 06&nbsp;</th>
<th scope="col">Q1 06&nbsp;</th>
<th scope="col">Q/Q Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Export Total</td>
<td>84.7</td>
<td>108.0</td>
<td>76.5</td>
<td>-23.4</td>
<td>8.2</td>
<td>282.9</td>
<td>263.6</td>
<td>219.0</td>
<td>19.3</td>
<td>63.9</td>
<td>969.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;To US</td>
<td>16.8</td>
<td>21.4</td>
<td>16.9</td>
<td>-4.6</td>
<td>-0.1</td>
<td>58.2</td>
<td>54.7</td>
<td>47.9</td>
<td>3.5</td>
<td>10.3</td>
<td>203.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;To Germany</td>
<td>3.0</td>
<td>4.3</td>
<td>3.3</td>
<td>-1.3</td>
<td>-0.3</td>
<td>11.1</td>
<td>10.6</td>
<td>9.5</td>
<td>0.5</td>
<td>1.6</td>
<td>40.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;To Japan</td>
<td>7.1</td>
<td>9.3</td>
<td>7.5</td>
<td>-2.1</td>
<td>-0.4</td>
<td>25.1</td>
<td>23.8</td>
<td>22.3</td>
<td>1.3</td>
<td>2.8</td>
<td>91.8</td>
</tr>
<tr class="odd">
<td class="firstcol"> Imports Total </td>
<td>74.2</td>
<td>73.9</td>
<td>63.3</td>
<td>0.3</td>
<td>10.9</td>
<td>219.3</td>
<td>207.4</td>
<td>168.1</td>
<td>11.9</td>
<td>51.2</td>
<td>791.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;From US</td>
<td>6.1</td>
<td>4.9</td>
<td>4.8</td>
<td>1.3</td>
<td>1.6</td>
<td>16.3</td>
<td>15.4</td>
<td>13.8</td>
<td>0.9</td>
<td>2.5</td>
<td>59.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;From Germany</td>
<td>3.4</td>
<td>3.6</td>
<td>2.8</td>
<td>-0.2</td>
<td>0.6</td>
<td>10.2</td>
<td>10.3</td>
<td>8.7</td>
<td>-0.1</td>
<td>1.5</td>
<td>37.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;From Japan</td>
<td>10.9</td>
<td>10.8</td>
<td>9.2</td>
<td>0.1</td>
<td>1.7</td>
<td>32.3</td>
<td>30.4</td>
<td>27.2</td>
<td>1.9</td>
<td>5.1</td>
<td>115.8</td>
</tr>
<tr class="odd">
<td class="firstcol"> Balance Total </td>
<td>10.4</td>
<td>34.1</td>
<td>13.1</td>
<td>-23.6</td>
<td>-2.7</td>
<td>63.7</td>
<td>56.1</td>
<td>32.9</td>
<td>7.5</td>
<td>30.7</td>
<td>177.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;US</td>
<td>10.7</td>
<td>16.5</td>
<td>12.1</td>
<td>-5.8</td>
<td>-1.4</td>
<td>42.0</td>
<td>39.3</td>
<td>34.1</td>
<td>2.6</td>
<td>7.8</td>
<td>144.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Germany</td>
<td>-0.4</td>
<td>0.7</td>
<td>0.5</td>
<td>-1.1</td>
<td>-0.9</td>
<td>0.9</td>
<td>0.3</td>
<td>0.8</td>
<td>0.6</td>
<td>0.1</td>
<td>2.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Japan</td>
<td>-3.8</td>
<td>-1.5</td>
<td>-1.7</td>
<td>-2.3</td>
<td>-2.1</td>
<td>-7.2</td>
<td>-6.6</td>
<td>-4.9</td>
<td>-0.5</td>
<td>-2.3</td>
<td>-24.0</td>
</tr>
</tbody>
</table>
</body>
</html>

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070409a.jpg" width="353">
The results of the latest survey of Economy Watchers in Japan are lackluster. After losing confidence in both current conditions and the outlook since early last year, the Economy Watchers have increased their confidence regarding current conditions. The diffusion indexes for current conditions for households and corporations rose in February and March of this year, that for employment fell in February, but rose to its January level in March, as can be seen in the first chart.
The loss in confidence about the future outlook since early 2006 has been less pronounced than that of current conditions, but the diffusion indexes for future conditions in households and corporations have continued to decline in March of this year while that for employment rose, as can be seen in the second chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070409b.jpg" width="353">
The Economy Watchers currently number 2050 individuals who are in a position to observe developments that reflect economic activity in their particular fields of business. A diffusion index is calculated on the basis of the judgment of these individuals. That proportion of the individuals who see things better is assigned a weight of l; that proportion seeing things rather better, a weight of .75; that proportion seeing no change, a weight of .50; that proportion seeing things rather worse, .25; and that portion seeing things worse, a weight of 0. An index above 50% indicates that there are more optimists than pessimists.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/070409c.jpg" width="353">The Economy Watchers Index for Households can be thought of as the opinion of the suppliers of household goods whereas a consumer confidence index is based on the opinions of the actual consumer. In the third chart we compare the Economy Watchers Index for Household current conditions and the Consumer Confidence Index of 2 person Households. While the suppliers tend to be more volatile in their opinions, confidence on the part of both consumers and suppliers has shown little enthusiasm over the past few years.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">ECONOMY WATCHERS SURVEY &nbsp;(Diffusion Indexes)</th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Mar 05</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">Current Conditions</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>50.8</td>
<td>49.2</td>
<td>57.3</td>
<td>1.6</td>
<td>-6.5</td>
<td>51.4</td>
<td>49.0</td>
<td>50.0</td>
</tr>
<tr>
<td class="firstcol">Households</td>
<td>49.3</td>
<td>47.9</td>
<td>56.0</td>
<td>2.0</td>
<td>-6.1</td>
<td>49.8</td>
<td>49.0</td>
<td>47.8</td>
</tr>
<tr>
<td class="firstcol">Corporations</td>
<td>50.9</td>
<td>49.8</td>
<td>57.5</td>
<td>1.1</td>
<td>-6.6</td>
<td>51.8</td>
<td>50.5</td>
<td>51.6</td>
</tr>
<tr>
<td class="firstcol"> Employment </td>
<td>55.9</td>
<td>.56.3</td>
<td>65.5</td>
<td>0.4</td>
<td>-9.2</td>
<td>60.2</td>
<td>57.7</td>
<td>61.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Future Conditions</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Total</td>
<td>51.3</td>
<td>52.1</td>
<td>56.2</td>
<td>-0.8</td>
<td>-4.9</td>
<td>52.9</td>
<td>51.5</td>
<td>51.4</td>
</tr>
<tr>
<td class="firstcol">Households</td>
<td>51.6</td>
<td>52.3</td>
<td>56.2</td>
<td>-0.7</td>
<td>-4.6</td>
<td>52.5</td>
<td>50.9</td>
<td>50.4</td>
</tr>
<tr>
<td class="firstcol">Corporations</td>
<td>47.9</td>
<td>49.6</td>
<td>54.0</td>
<td>-1.7</td>
<td>-6.1</td>
<td>51.7</td>
<td>50.6</td>
<td>50.6</td>
</tr>
<tr>
<td class="firstcol"> Employment </td>
<td>56.6</td>
<td>55.9</td>
<td>56.6</td>
<td>0.7</td>
<td>-4.7</td>
<td>58.4</td>
<td>56.9</td>
<td>59.8</td>
</tr>
<tr>
<td class="firstcol"> Consumer Confidence (2 Person HH) </td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

The results of the latest survey of Economy Watchers in Japan are lackluster. After losing confidence in both current conditions and the outlook since early last year, the Economy Watchers have increased their confidence regarding [...]

Economy Watchers in Japan Are More Confident about Current Conditions but Less Confident about the Outlook

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

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Largest October layoffs since 2003, led by technology

Subdued global shipping costs not yet pointing to supply chain problems

PMIs show still-elevated but slowing US inflation

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Michael J. Moran

260428N.jpg

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The Conference Board’s index of Consumer Confidence inched higher in April from an upwardly revised reading in March. The combined changes left the measure 1.1% higher than the preliminary tally in March. Despite the improvement, the index remained in the low end of the range for the current expansion. The index in April totaled 92.8, down from an average of 96.1 in 2025 and an annual cyclical high of 105.4 in 2023.

The Improvement in April reflected a pickup in the expectations component, which rose 1.7%. The current conditions component inched 0.2% lower. Overall views on current conditions slipped despite more favorable assessments of the labor market. The so-called measure of the jobs gap (share of respondents indicating that jobs are plentiful less the share saying that jobs are hard to get) rose 1.4 percentage points higher to 7.5%. The pickup reflected a drop in the share indicating that jobs are hard to get (down 1.5 percentage points to 19.8%). The share indicating that jobs are plentiful eased 0.1 percentage point to 27.3%.

Although expectations improved in April, from a long-term perspective they could be viewed as the more important factor restraining the headline measure of confidence. As shown in the left chart below, the expectations component of confidence shows considerably less volatility than the current conditions component does. The contrasting patterns suggest that individuals realize that the economy will undergo possibly sharp cyclical swings, but they expect conditions at some point to return to an underlying norm.

The current conditions index in the current cycle has indeed dropped noticeably, but it is still above the long run average (123.8 in April versus the average of approximately 108 from 1990 to 2025). The expectations component, as usual, has eased less than the current conditions component, but its shift has pushed the measure to the low end of its long-run range (72.2 in April versus an average of approximately 88).

Interestingly, concern about the labor market seems to be a factor affecting expectations. While current views on the labor market are favorable (plentiful less hard to get jobs gap of 7.5%), Individual are concerned about the future. The survey asks respondents if they expect more jobs or fewer jobs six months hence. The share indicating fewer jobs has moved well into the upper end of the historical range. Such observations in the past were typically seen only during recession (chart, below right). An unfavorable view on interest rates also seems to be playing a role in depressing the expectations component. More than 60% of respondents to the current survey expect higher interest rates 12 months from now.

The results from the Conference Board survey of consumers differ markedly from those of the University of Michigan Survey Research Center. The Michigan results show consumer sentiment at a record low, while the Conference Board index is only slightly below its long-run average. The difference most likely reflects the nature of the questions in the surveys. The Conference Board focuses on business and employment conditions, while Michigan emphasizes personal finances. The focus on finances, along with questions on inflation, probably picks up concerns about affordability.

The Consumer Confidence data are available in Haver’s **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

260428P.jpg

260428Q.jpg

- Expectations improved slightly in April, but are still subdued relative to norms.
- Moderately favorable view of current conditions.

Consumer Confidence: Modest Change in April

Winnie Tapasanun

260428J35.jpg

260428K35.jpg

U.S. house prices were essentially unchanged m/m in February after rises of 0.2% in January (+0.1% initially) and 0.3% in December (unrevised), according to the Federal Housing Finance Agency (FHFA) House Price Index. February marked the first flat reading since September following four consecutive m/m increases. The HPI was at 441.43 in February, up 14.8% from its August 2022 low of 384.59. The year-on-year growth rate eased to 1.7% in February—the lowest since March 2012—from 1.8% in January (+4.1% in February 2025), down from a high of 6.9% in February 2024 and well below a peak of 18.5% in February 2022.

By region, February FHFA house prices showed a mixed performance. House prices fell m/m in February (vs. January) in four of the nine census divisions. Declines were led by Mountain (-1.1% vs. +0.4%), followed by Pacific (-0.5% vs. +0.6%), West North Central (-0.4% vs. +0.3%), and Middle Atlantic (-0.1% vs. +0.3%). To the upside, house prices rose m/m in four census divisions in February (vs. January): South Atlantic (+0.6% vs. -0.2%), East South Central (+0.2% vs. +1.2%), New England (+0.2% vs. +0.6%), and West South Central (+0.2% vs. -0.3%). Meanwhile, house prices in East North Central were virtually unchanged m/m for the second successive month in February following seven straight m/m gains.

Year-on-year house prices continued to rise in February in most regions, except Mountain, Pacific, and West South Central. The y/y growth rate accelerated in February (vs. January) in only two of the nine census divisions: East South Central (+4.0% vs. +3.2%) and South Atlantic (+0.9% vs. +0.4%). Meanwhile, house price growth decelerated y/y in February (vs. January) in four regions: New England (+3.1% vs. +3.9%), West North Central (+3.1% vs. +3.6%), East North Central (+3.8% vs. +4.5%), and Middle Atlantic (+4.2% vs. +4.5%). To the downside, Mountain (-0.7% vs. 0.0%), Pacific (-0.4% vs. -0.3%), and West South Central (-0.1% vs. -0.4%) posted y/y declines in February.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancing the same kind of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The FHFA data are available in Haver’s **USECON** database.

260428L35.jpg

260428M35.jpg

- February FHFA HPI 0.0% m/m; +1.7% y/y, lowest since Mar. ’12.
- House prices down m/m in four of nine census divisions, led by Mountain (-1.1%); up in four, driven by South Atlantic (+0.6%); flat in East North Central.
- House prices up y/y in six of nine regions, led by Middle Atlantic (+4.2%), but down in Mountain (-0.7%), Pacific (-0.4%), and West South Central (-0.1%).

U.S. FHFA House Prices Flat in February After Four Straight M/M Gains

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Early PPI reports in the monetary union show collective pressures building over the past year, with newly emergent pressures popping up strongly in March.

The sequence of monthly inflation observations for these five early reporters in March shows that inflation pressure has not been clearly building but did jump up suddenly in March. In February, before the Iran war, the median monthly PPI gain was -0.5%. In March, that jumped to +3.9% (median month-to-month gain). Monthly pressure does not show steady gains anywhere except moderately in Germany. Finland shows deceleration in progress (!) even through—especially through—March, as its PPI in March fell by 5.3%. But the whole Finish pattern is somewhat upside down, with prices up month-to-month by 6.2% in January and 2.9% in February. It is not a trend that is easy to understand.

However, the March monthly gains are strong enough to drive sequential inflation higher from 12-months, to 6-months, to 3-months across all early-reporting countries. Even the German ex-energy index shows acceleration on that profile.

On a year-on-year basis, two of the early reporters have PPI inflation below 2%. Finland has 12-month PPI inflation at 2.1%, but Italy and Spain have inflation much higher, up by 3.4% over 12 months in Spain and by 5.6% in Italy.

The PPI has been very well-behaved in the last few years. Looking at 12-month changes for the year ended in March, the median change for this group in 2025 was -0.1%, compared to -4.6% in 2024.

The chart shows the PPI flared sharply in 2021 and 2022, then fell quickly into line in 2023. Clearly, the inflation tune now is being called by oil prices, the same as for that spike prices in 2022 and 2023.

The hope is that the oil price bump up will not be as long-lived, that the war will end soon, with the Strait of Hormuz reopened, and that oil prices—and other inflation pressures—will sink back to prerevision norms relatively quickly. That could happen, but so could other outcomes so markets remain wary. One problem this time is the destruction of oil facilities and the shutting of oil fields that could cause high prices to linger longer.

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**A new dynamic**
However, there is now a new dynamic with the UAE leaving OPEC. OPEC has been a vehicle to harness common behavior to control oil prices mostly to keep them higher. While undermining OPEC (UAE pumps about 13% of OPEC capacity) at a time the U.S. oil prowess has risen, this defection will make it much harder for OPEC to control prices. When countries are not bound together, the incentive is for countries to cheat on their production quota. In a cartel arrangement, when many cheat, the output reduction does not hold, and oil prices fall. A cartel arrangement allows for supply control and reduction which raises prices. But once prices are up, each member has an individual incentive to cheat—to sell more than his quota share of oil at the higher price. But that undermines the cartel. So, this move, this exit of UAE from the cartel, will create instability in the OPEC by moving more production outside the OPEC framework, beyond its control. Unless the Saudis are willing to be the ‘swing man’ and cut back their output to keep prices on target—something the Saudis have been increasingly unwilling to do—OPEC will be in less control.

EMU PPIs Show Instant Pressure

Tian Yong Woon

In this week’s Letter, we cover the latest developments and implications of the Middle East conflict for Asia, while also making space for other important themes, including artificial intelligence (AI). The Middle East conflict remains in a no deal state coming out of the weekend, though some early Monday optimism emerged in Asian markets following Iran’s reported offer to reopen the Strait of Hormuz (chart 1). Nonetheless, as the Strait closure drags on, so too do the fiscal costs of domestic fossil fuel subsidies across Asia, which have been shown to move closely with crude oil prices (chart 2). While such measures offer direct relief by cushioning household energy costs, they remain difficult to sustain over the long haul.

Over the week, we also saw a further fraying in regional monetary policy trends, with the Philippines hiking its policy rate for the first time in about two years amid inflation concerns, while Indonesia stood pat on rates (chart 3). Investor attention is likely to remain fixed on monetary policy this week, with the Bank of Japan due to decide on policy. Expectations for an April hike have faded amid the persistent Middle East conflict, though yen weakness continues to present a source of concern (chart 4). The week also brings China’s latest PMI readings (chart 5), adding to the recent run of hard data accompanying the Q1 GDP release.

Beyond the Middle East conflict, the evolution of AI continues to demand close attention. Before geopolitical tensions took centre stage, AI was the dominant market narrative — and that enthusiasm has hardly faded. If anything, recent developments suggest the story is broadening: use cases are expanding, scalability is improving, and access is widening beyond large corporates to the mass market — increasingly spilling into the realm of physical AI. It may well be this persistent wave of optimism that is helping to underpin equity valuations, even as the geopolitical backdrop darkens (chart 6).

**The Middle East conflict**
About two months in, we remain stuck in the limbo of the US-Iran conflict, which has left the Strait of Hormuz largely closed and much of the world starved of the critical oil flows needed to power the global economy. The back and forth between the US and Iran has persisted in recent weeks, with both sides again failing to reach a peace deal over the weekend, though Monday’s news of Iran offering to reopen the Strait has revived some hope in markets. In truth, commodity and market valuations do not hinge so much on a peace deal itself, but rather on the resumption of oil flows through the Strait, something that could materialise even in the absence of a formal deal, though any agreement that includes and credibly delivers such a reopening would likely be warmly received by markets. Until then, market gyrations are likely to persist, with prices fluctuating in response to each new snippet of news. And until then, the world will continue both to be starved of, while gradually adapting to, the drip feed of oil flows emerging from the Strait.

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**The fiscal costs of the Middle East conflict**
As the Middle East conflict drags on, so too does the strain on fiscal resources across parts of Asia, as the costs of energy-related subsidy programmes continue to mount. While such programmes have an immediate, direct, and tangible impact in shielding households from surging energy costs, they are far from sustainable, particularly if oil prices remain well above targeted levels or stay elevated for an extended period. As chart 2 illustrates, the costs of these explicit subsidy programmes tend to rise closely with crude oil prices, as seen in India and Indonesia. Other measures adopted elsewhere, such as drawing down oil reserves, may be less fiscally costly, but are similarly difficult to sustain indefinitely. In both respects, the clock is ticking, and the world continues to hold its breath as the conflict drags on.

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**The latest central bank responses to the conflict**
Over the past week, Asia saw two central bank decisions. The Philippines’ (BSP) opted to deliver its first rate hike in about two years, while Indonesia’s (BI) chose to stand pat on policy rates and instead committed to stepped up FX intervention (chart 3). This latest round of decisions points to a further fraying of what had been a broad regional monetary policy consensus, namely that central banks would delay additional easing while maintaining a high bar for outright tightening. Domestic considerations, however, remain paramount. In the Philippines’ case, the central bank has moved to rein in inflation, which is already showing notable signs of price pass through stemming from disruptions linked to the Strait of Hormuz. That said, BSP is not the first in the region to buck the reluctance to tighten. Singapore’s central bank had already tightened policy in mid-April, albeit through its own distinct framework, given its use of the exchange rate rather than policy rates as the primary channel for monetary policy.

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**The week ahead**
Looking to the week ahead, a major central bank decision looms in Japan. Market expectations for the Bank of Japan to deliver a rate hike at its April meeting have ebbed amid the persistence of the Middle East conflict, to which Japan remains particularly vulnerable given its reliance on oil imports flowing through the Strait of Hormuz. At the same time, inflation in Japan has yet to become a major concern, with recent readings having picked up but not yet entering troubling territory. One potential source of concern, however, lies with the Japanese yen, which has remained on a weakening trend since early last year (chart 4). That depreciation has been one of the key arguments underpinning calls for further rate hikes.

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The week also brings China’s latest PMIs into focus. March saw a divergence between China’s official PMI readings, which improved, and the unofficial readings from RatingDog, which instead pulled back. Nonetheless, both official and unofficial gauges remained in expansionary territory (chart 5), with investors now watching closely to see whether that resilience can be sustained amid ongoing stresses from the Middle East, or whether offsetting drivers can continue to keep Chinese business sentiment and prospects buoyant.

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**Beyond the strait**
Moving beyond the Middle East conflict, a whole host of developments continue to unfold globally, many of which have in fact helped offset some of the pessimism wrought by the Strait’s chokehold. One such development is artificial intelligence (AI), which had dominated headlines before the outbreak of the conflict and continues to advance at breakneck pace. AI capabilities are still rapidly evolving, while practical applications, such as physical AI embodied in humanoid robots, are beginning to show broader and stronger use cases. Production of such robots is also becoming increasingly scalable and within reach not just for industrial complexes and healthcare, but for the mass market as well. It is perhaps growing optimism around these prospects that has helped keep equity valuations buoyant, even in the face of the festering conflict in the Middle East. Moreover, while concerns over AI-driven job displacement persist, new opportunities are emerging as well, particularly for AI adopters, with a growing share of job postings in Western economies increasingly referencing AI-related skills, as shown in chart 6.

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Asia

Economic Letter from Asia: Not Just About the Strait

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**The Distributive Trades Survey**

The U.K. Distributive Trades Survey for April 2026 and the look-ahead expectation readings for May paint an extremely soured outlook for the U.K. economy.

**Retail ranking**: Surveys for retail sales compared to a year ago, orders compared to a year ago, and sales evaluated for the time of year all have rankings near zero, which is the worst result on this timeline. This zero distinction applies to retail sales compared to a year ago. The best ranking is 11.6%; that is for sales evaluated for the time of year. Orders compared to a year ago have a 4.2 percentile standing. The stock-to-sales ratio—which is a completely different concept—shows that the inventory-to-sales ratio has a 29.9 percentile standing.

**Retail diffusion**: The raw April diffusion readings (up minus down diffusion) show that sales compared to a year ago slipped to a reading of -68 in April from -52 in March. Orders fell to -46 in April from -26 in March. Sales evaluated for the time of year fell to -32 April from -23 in March. All three measures weakened, and all three weakened decisively, resulting in extremely weak rankings. All of the rankings are executed on data back to 2002.

**Expectations for retailing**: The expectations readings for May show slippage again across all three metrics: expected sales compared to a year ago, expected orders compared to a year ago, and expected sales for the time of year. Expected sales compared to a year ago fell to -60 in May from -49 in April. Orders compared to a year ago declined to -45 in May from -30 in April, and sales for the time of year slipped to -43 from -19. In May, these readings have rankings in a 0.4 percentile standing for sales compared to a year ago, a 1.8 percentile standing for sales evaluated relative to the time of year, and a 4.6 percentile standing for orders compared to a year ago. These two panels on current and expected retail sales volumes are just simply terrible: weak monthly, weak in ranking terms, and showing slipping momentum.

The distributor trade series also provides data on the wholesale sector. While the wholesale sector is not quite as beat up as the retail sector, it's still extremely weak. There is no cause for any kind of hope that things are getting better based on wholesaling trends.

**Wholesaling**: The wholesale survey for sales compared to a year ago edged lower to -32 in April from -31 in March. Orders compared to a year ago remained at a reading of -41 in April. Sales evaluated for the time of year improved to a reading of -20 in April from -39 in March—a significant step up, but still very weak. The percentile standings for these three categories show sales compared to a year ago at the 8.8 percentile, orders compared to a year ago at the 5.6 percentile, and sales evaluated for the time of year at the 14.8 percentile.

**Wholesale Expectations**: The look-ahead observations, which provide expectations for wholesaling in May, show a similar constellation of readings, with sales compared to a year ago falling to -37 in May from -27 in April and orders compared to a year ago falling to -42 from -38, while sales evaluated for the time of year improved to  16 from  37. That category for wholesale sales improved both in April in real time and in May for expectations; however, it continues to have a very weak percentile standing, at the 17.9 percentile in May, while sales for a year ago have a 6.7 percentile standing and orders for a year ago have a 6.0 percentile standing.

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While some of the global PMI data have improved, these survey data for the U.K. are particularly dour. The war in Ukraine drags on, and there's a new conflict in Iran that has shut the Strait of Hormuz, creating energy problems for much of Europe. More broadly, supply chains have been harmed. In addition, the U.K. is undergoing a bout of political instability, as its Prime Minister is under pressure and a good deal of political uncertainty is being worsened by deteriorating economic performance.

Both the U.K. and the European Monetary Union had been showing some progress on inflation until the Iran war hit. Now, as the oil prices are up so sharply, headline inflation is going to be worse everywhere and there will probably be a bit more attention directed to the core inflation rate. However, the U.K. has had inflation too hot for a while, and it has failed to settle down. At its last meeting, the Bank of England’s Monetary Policy Committee warned that if the war was still ongoing at the next meeting, there would be a risk of a rate hike. So, it would seem that a rate hike is going to be in play unless the economy falls off a cliff first, which, based on the distributive trades data, is also something that could happen. The U.K. economy appears to be on very unsound footing, and what happens next is just about anybody's guess.

Economy in Brief

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