Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215b.jpg" width="353">
The February Empire State Index of General Business Conditions, published by the Federal Reserve Bank of New York, was roughly stable at 20.31 following the 6.16 point January decline to 20.12. Consensus expectations for the factory sector index had been for the index to fall further to 18.0.
Since the series&#39; inception in 2001 there has been a 76% correlation between the index level and the three month change in factory sector production.
Most of the index components showed the same stability in February. The shipments index dipped marginally after a 13 point rise during January but new orders fell for the second month. The inventory index recouped more than all of a sharp January decline.
An exception was the employment index which reversed about all of a sharp January increase.
Pricing pressure picked up during February as indicated by a 6.3 point jump to the highest level since November.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215c.jpg" width="353">
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The index of expectations for business conditions in six months fell a sharp 9.7 points to the lowest level since October. Expectations for future capital spending improved sharply.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>20.31</td>
<td>20.12</td>
<td>18.05</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
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The February Empire State Index of General Business Conditions, published by the Federal Reserve Bank of New York, was roughly stable at 20.31 following the 6.16 point January decline to 20.12. Consensus expectations for the factory [...]

Empire State Index Stable

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215d.jpg" width="353">
Overall industrial output fell last month by 0.7% following an upwardly revised 0.9% rise during December. The decline, however, wholly reflected the warm temperatures which reduced utility output by 10.2% (-4.7% y/y). Consensus expectations had been for a 0.3% increase in total output.
Factory sector production increased 0.7% (4.5% y/y) following a December increase of 0.4% that was double the initial estimated gain.
A rebound in output of motor vehicles &amp; parts accounted for only some of last month&#39;s factory output gain as a 2.3% m/m increase still left production 3.8% below last June&#39;s level. Excluding motor vehicles, factory output rose 0.5% (4.7% y/y). Output of appliances, furniture &amp; carpeting recovered 2.1% (3.2% y/y) following three months of decline and clothing output rose 0.3% (1.6% y/y), the third straight monthly increase.
Output of business equipment rose a strong 1.0% (10.7% y/y) led by a 1.6% (24.3% y/y) increase in high tech output. Excluding the high tech sector, factory output rose 0.6% (3.3% y/y) and excluding both autos &amp; high tech factory output rose 0.5% (3.3% y/y).
Total capacity utilization fell to 80.9% but factory sector utilization rose to 80.5%, the highest level since 2000.
Today&#39;s testimony by Federal Reserve Board Chairman Ben S. Bernanke is available <a href="http://www.federalreserve.gov/boarddocs/hh/2006/february/testimony.htm"> here</a>.
The complete Monetary Policy Report and the Economic Outlook can be found <a href="http://www.federalreserve.gov/boarddocs/hh/2006/february/ReportSection1.htm"> here</a>.

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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
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<td class="firstcol">Industrial Production</td>
<td>-0.2%</td>
<td>0.9%</td>
<td>3.2%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>-0.4%</td>
<td>0.3%</td>
<td>1.8%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business Equipment</td>
<td>1.0%</td>
<td>0.6%</td>
<td>10.7%</td>
<td>9.0%</td>
<td>9.3%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>80.9%</td>
<td>81.2%</td>
<td>79.8% (1/05)</td>
<td>80.1%</td>
<td>78.6%</td>
<td>75.7%</td>
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</tbody>
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Overall industrial output fell last month by 0.7% following an upwardly revised 0.9% rise during December. The decline, however, wholly reflected the warm temperatures which reduced utility output by 10.2% (-4.7% y/y). Consensus [...]

Industrial Production Off Due to Warm Weather

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215d.jpg" width="353">
Overall industrial output fell last month by 0.7% following an upwardly revised 0.9% rise during December. The decline, however, wholly reflected the warm temperatures which reduced utility output by 10.2% (-4.7% y/y). Consensus expectations had been for a 0.3% increase in total output.
Factory sector production increased 0.7% (4.5% y/y) following a December increase of 0.4% that was double the initial estimated gain.
A rebound in output of motor vehicles &amp; parts accounted for only some of last month&#39;s factory output gain as a 2.3% m/m increase still left production 3.8% below last June&#39;s level. Excluding motor vehicles, factory output rose 0.5% (4.7% y/y). Output of appliances, furniture &amp; carpeting recovered 2.1% (3.2% y/y) following three months of decline and clothing output rose 0.3% (1.6% y/y), the third straight monthly increase.
Output of business equipment rose a strong 1.0% (10.7% y/y) led by a 1.6% (24.3% y/y) increase in high tech output. Excluding the high tech sector, factory output rose 0.6% (3.3% y/y) and excluding both autos &amp; high tech factory output rose 0.5% (3.3% y/y).
Total capacity utilization fell to 80.9% but factory sector utilization rose to 80.5%, the highest level since 2000.
Today&#39;s testimony by Federal Reserve Board Chairman Ben S. Bernanke is available <a href="http://www.federalreserve.gov/boarddocs/hh/2006/february/testimony.htm"> here</a>.
The complete Monetary Policy Report and the Economic Outlook can be found <a href="http://www.federalreserve.gov/boarddocs/hh/2006/february/ReportSection1.htm"> here</a>.

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<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Industrial Production</td>
<td>-0.2%</td>
<td>0.9%</td>
<td>3.2%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer Goods</td>
<td>-0.4%</td>
<td>0.3%</td>
<td>1.8%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>1.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business Equipment</td>
<td>1.0%</td>
<td>0.6%</td>
<td>10.7%</td>
<td>9.0%</td>
<td>9.3%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>80.9%</td>
<td>81.2%</td>
<td>79.8% (1/05)</td>
<td>80.1%</td>
<td>78.6%</td>
<td>75.7%</td>
</tr>
</tbody>
</table>
Empire State Index Stable 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 15, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215b.jpg" width="353">
The February Empire State Index of General Business Conditions, published by the Federal Reserve Bank of New York, was roughly stable at 20.31 following the 6.16 point January decline to 20.12. Consensus expectations for the factory sector index had been for the index to fall further to 18.0.
Since the series&#39; inception in 2001 there has been a 76% correlation between the index level and the three month change in factory sector production.
Most of the index components showed the same stability in February. The shipments index dipped marginally after a 13 point rise during January but new orders fell for the second month. The inventory index recouped more than all of a sharp January decline.
An exception was the employment index which reversed about all of a sharp January increase.
Pricing pressure picked up during February as indicated by a 6.3 point jump to the highest level since November.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215c.jpg" width="353">
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The index of expectations for business conditions in six months fell a sharp 9.7 points to the lowest level since October. Expectations for future capital spending improved sharply.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

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<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">Feb</th>
<th scope="col">Jan</th>
<th scope="col">Feb &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>20.31</td>
<td>20.12</td>
<td>18.05</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>
Mortgage Applications Reversed January Uptick 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 15, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215a.jpg" width="353">
The total number of mortgage applications fell 7.3% last week, the third consecutive weekly decline. The declines have been sufficient to reverse virtually all of the 5.2% increase in applications during the month of January.
Purchase applications dropped a sharp 7.9% w/w and added to declines during the prior four months. The average level of purchase applications in February is down 17.6% from the peak month of July last year.
During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance fell 6.5% w/w to the lowest level in one month.
The effective interest rate on a conventional 30-year mortgage rose for the third straight week and settled at 6.52% versus an average 6.34% in January. The effective rate on a 15-year mortgage also rose to 6.21% versus an average 5.98% last month. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">02/10/06</th>
<th scope="col">02/03/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>574.1</td>
<td>619.3</td>
<td>-21.6%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>391.7</td>
<td>425.1</td>
<td>-7.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,636.7</td>
<td>1,751.0</td>
<td>-35.3%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Foreign Investors Slow Net Buying of Securities from US Investors in December 
by <a href="/comment/Stone.html">Carol Stone</a> February 15, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215e.jpg" width="353">
Foreign investors sharply reduced their net purchases of securities from US investors in December, according to the US Treasury&#39;s monthly Treasury International Capital (&quot;TIC&quot;) data reported this morning. Foreigners bought $74.16 billion in US securities from US resident investors, down from $105.70 billion in November. At the same time, they sold $17.56 billion in foreign securities to US investors, making their overall net transactions with US investors $56.60 billion, down from $91.6 billion in November and the smallest amount since May&#39;s $56.57 billion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215f.jpg" width="353">
The TIC data, carried in Haver&#39;s USINT database, constitute a sizable body of information about interest in US markets from investors in many countries around the world. In the past, Japan has been the prime region absorbing US bonds and stocks. In the second graph, we show this with the share of Japanese gross purchases of US securities. In the late 1980s and early 1990s, Japan&#39;s purchase took about 35 - 40% of total foreign purchases. In more recent years, Japanese investors have reduced their buying. Not surprisingly, China&#39;s purchases have picked up. Additional monthly data are available on foreign holdings of Treasury securities and these show that Japan&#39;s portfolio has flattened. China&#39;s has trended consistently higher, but its Treasury ownership is still a mere fraction of Japan&#39;s.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060215g.jpg" width="353">
In interpreting these data, it&#39;s important to remember that they mark the first transaction between a US investor and a non-US investor. That foreign party may be an intermediary between the American and the final foreign owner. Thus, the UK and Caribbean centers are large purchasers of US securities. But they may not be large &quot;owners&quot;. For instance, UK gross purchases of US Treasuries were 9 times as much as those of Japanese investors in 2005, but their holdings of Treasuries at the end of the year were only 34% as much as Japan&#39;s. China&#39;s holdings are just a little bit larger than the UK&#39;s, but they are growing consistently. See the third graph. 

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<colgroup><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USINT/@U3/@U3.HTM">Net Foreign Purchases of Securities from US Investors</a> <a href="http://www.haverselect.com/dlx/USINT/@U3/@U3.HTM"> (Billions US$) </a></th>
<th scope="col">Dec 2005</th>
<th scope="col">Nov 2005 </th>
<th scope="col">Oct 2005 </th>
Monthly Averages&nbsp; 
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004 </td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Total </td>
<td>56.6</td>
<td>91.6</td>
<td>105.6</td>
<td>75.9</td>
<td>63.6</td>
<td>55.3</td>
<td>47.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Total Domestic Securities</td>
<td>74.2</td>
<td>105.7</td>
<td>108.8</td>
<td>87.4</td>
<td>76.4</td>
<td>60.0</td>
<td>45.6</td>
</tr>
<tr>
<td class="firstcol">Treasuries </td>
<td>18.5</td>
<td>54.5</td>
<td>29.2</td>
<td>29.2</td>
<td>29.3</td>
<td>22.0</td>
<td>10.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Federal Agencies (mostly &quot;GSEs&quot;) </td>
<td>9.8</td>
<td>9.1</td>
<td>34.9</td>
<td>18.9</td>
<td>18.9</td>
<td>13.0</td>
<td>16.3</td>
</tr>
<tr>
<td class="firstcol">US Corporate Bonds </td>
<td>37.3</td>
<td>37.3</td>
<td>36.1</td>
<td>32.6</td>
<td>25.8</td>
<td>22.1</td>
<td>15.2</td>
</tr>
<tr class="odd">
<td class="firstcol">US Corporate Stocks </td>
<td>8.7</td>
<td>4.8</td>
<td>8.0</td>
<td>6.6</td>
<td>2.4</td>
<td>2.9</td>
<td>4.2</td>
</tr>
<tr>
<td class="firstcol">Foreign Bonds </td>
<td>-3.7</td>
<td>2.2</td>
<td>2.8</td>
<td>-1.4</td>
<td>-5.7</td>
<td>2.7</td>
<td>2.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign Stocks </td>
<td>-13.8</td>
<td>-16.4</td>
<td>-6.0</td>
<td>-10.1</td>
<td>-7.1</td>
<td>-7.4</td>
<td>-0.1</td>
</tr>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060214h.jpg" width="353">
According to flash estimates published today, growth in real gross domestic product of the twenty-five countries of the European Union slowed to 0.4% in the fourth quarter of 2005, down from a 0.6% increase in the third quarter. Growth in the Euro Zone, alone, was 0.3%, down from a 0.6% increase in the third quarter. Incidentally, the slowdowns in the fourth quarter in the Euro Zone and in the EU were less marked than that of the United States, where fourth quarter growth fell to 0.3% from 1.0% in the third quarter.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060214i.jpg" width="353"> As a result, growth in the Euro Zone equaled the 0.3% quarter-to-quarter growth of the U.S., and growth in the European Union was greater than that of the U.S. for the first time since comparable data on the Euro Zone and EU have been available. The first chart compares the quarter-to-quarter growth rates in GDP in the U.S. and the Euro Zone.
Within the Euro Zone there was a marked slowdown in Germany, from 0.6% growth in the third quarter to practically zero in the fourth. Growth in France also decelerated from 0.7% in the third quarter to 0.2% in the fourth. There were, however, countries where growth picked up in the fourth quarter--Spain and Austria among them.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060214j.jpg" width="353">
In spite of the fourth quarter slowdown, the institutional investors and analysts of the ZEW survey remain confident that conditions will improve over the next six months. In Germany, the balance of those expecting improvement over those expecting a worsening was 69.8% in February, very little changed from the 71% in January. As recently as May, 2005, the balance of optimists was only 13.9%. The second chart plots the balance of the optimists over the pessimists with the quarterly change in real GDP for Germany. A similar picture is shown in the third chart for the Euro Zone as a whole. The balance of optimists over pessimists was 66.0% in February, virtually identical with January&#39;s 66.1% and well above the May 2005 low point of 14.8%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/G10/@GZ/@GZ2/@GZ202/@GZ202.HTM">Gross Domestic Product (Q/Q % Change)</a></th>
<th scope="col">Q4 05</th>
<th scope="col">Q3 05</th>
<th scope="col">Q2 05</th>
<th scope="col">Q1 05</th>
<th scope="col">--</th>
<th scope="col">--</th>
<th scope="col">--</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">United States</td>
<td>0.3</td>
<td>1.0</td>
<td>0.8</td>
<td>0.9</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">EU (25)</td>
<td>0.4</td>
<td>0.6</td>
<td>0.5</td>
<td>0.3</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Euro Zone (12)</td>
<td>0.3</td>
<td>0.4</td>
<td>0.6</td>
<td>0.3</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Germany</td>
<td>0.0</td>
<td>0.6</td>
<td>0.3</td>
<td>0.6</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;France</td>
<td>0.2</td>
<td>0.7</td>
<td>0.0</td>
<td>0.3</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Spain</td>
<td>&nbsp;0.9</td>
<td>0.8&nbsp;</td>
<td>0.8&nbsp;</td>
<td>0.9&nbsp;</td>
<td>&nbsp;--</td>
<td>&nbsp;--</td>
<td>&nbsp;--</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Austria</td>
<td>0.7</td>
<td>0.5</td>
<td>0.5</td>
<td>0.2</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/@D8/@D82/@D82.HTM">ZEW Financial Market Survey Expectations 6 months ahead (% balance)</a></td>
<td>Feb 06</td>
<td>Jan 06</td>
<td>Dec 05</td>
<td>Nov 05</td>
<td>2005&nbsp; </td>
<td>2004&nbsp;</td>
<td>2003&nbsp;&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>69.8</td>
<td>71.0</td>
<td>61.6</td>
<td>38.7</td>
<td>34.8</td>
<td>44.6</td>
<td>38.4</td>
</tr>
<tr>
<td class="firstcol">Euro zone</td>
<td>66.0</td>
<td>66.1</td>
<td>51.2</td>
<td>40.0</td>
<td>32.3</td>
<td>52.1</td>
<td>48.1</td>
</tr>
</tbody>
</table>
</body>
</html>

According to flash estimates published today, growth in real gross domestic product of the twenty-five countries of the European Union slowed to 0.4% in the fourth quarter of 2005, down from a 0.6% increase in the third quarter. [...]

Estimates of GDP Growth in Europe Confirm the Slowdown in Q4, 2005 But Investors Remain Confident That Improvement [...]

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060214g.jpg" width="353">
The January index of small business optimism from the National Federation of Independent Business (NFIB) reversed the small December rise and fell 0.3%. The latest index level was 6.1% lower than the peak during November 2004.
The latest m/m decline reflected fewer firms (6%) firms expecting the expecting the economy to improve, down from a high 51% during late 2003, although the percentage with one or more job openings jumped to the highest level (26%) since 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060214d.jpg" width="353">
During the last ten years there has been a 70% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms planning to raise average selling prices rose to 29% from 27% during all of last year but the percentage of firms actually raising average selling prices was stable at 18%, down from a 22% average during 2005. During the last ten years there has been a 60% correlation between the change in the producer price index and the level of the NFIB price index.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>101.1</td>
<td>101.4</td>
<td>-2.4%</td>
<td>101.6</td>
<td>104.6</td>
<td>101.3</td>
</tr>
</tbody>
</table>
</body>
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The January index of small business optimism from the National Federation of Independent Business (NFIB) reversed the small December rise and fell 0.3%. The latest index level was 6.1% lower than the peak during November 2004. The [...]

Small Business Optimism Dipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060214e.jpg" width="353">
Total business inventories posted another solid increase during December. The 0.7% increase followed an upwardly revised 0.6% November gain and was firmer than the 0.4% Consensus expectation.
The latest increases, however, have lagged the firm growth in business sales. As a result the ratio of inventories-to-sales fell back to the postwar low of 1.25.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060214f.jpg" width="353">
Retail inventories gained 0.7% after an upwardly revised 1.0% November rise. A 0.9% rise in motor vehicle inventories was the fifth in as many months but auto inventories still fell 0.6% y/y. Retail inventories less autos rose 0.6% as furniture inventories increased 0.8% (3.5% y/y). Apparel inventories also rose a firm 0.6% (5.2$ % y/y) and general merchandise inventories posted a 0.6% (4.6% y/y) gain.
Wholesale inventories jumped 1.0% as imports on nonpetroleum goods jumped 3.4% (8.1% y/y). During the last ten years there has been a 67% correlation between the y/y change in wholesale inventories and the change in imports of nonpetroleum goods.
Factory sector inventories added to the prior month&#39;s gain and rose 0.5%.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7%</td>
<td>0.6%</td>
<td>4.3%</td>
<td>7.7%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.7%</td>
<td>1.0%</td>
<td>2.7%</td>
<td>5.5%</td>
<td>3.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.6%</td>
<td>0.4%</td>
<td>4.4%</td>
<td>5.9%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.0%</td>
<td>0.5%</td>
<td>6.7%</td>
<td>10.8%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.5%</td>
<td>0.3%</td>
<td>4.3%</td>
<td>7.7%</td>
<td>-1.1%</td>
</tr>
</tbody>
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Total business inventories posted another solid increase during December. The 0.7% increase followed an upwardly revised 0.6% November gain and was firmer than the 0.4% Consensus expectation. The latest increases, however, have lagged [...]

U.S. Business Inventories Up Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060214c.jpg" width="353">
Chain store sales dipped 0.4% last week following a 2.0% surge during the opening week of February, according to the International Council of Shopping Centers (ICSC)-UBS survey.
So far in February sales are 0.7% ahead of the January average which rose 1.0% from December.
The leading indicator of chain store sales fell sharply for the second consecutive week The 1.1% w/w decline lowered the February level 1.4% below the January average.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">02/11/06</th>
<th scope="col">02/04/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>460.9</td>
<td>462.9</td>
<td>3.3%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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Chain store sales dipped 0.4% last week following a 2.0% surge during the opening week of February, according to the International Council of Shopping Centers (ICSC)-UBS survey. So far in February sales are 0.7% ahead of the January [...]

Chain Store Sales Dipped Last Week

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060214b.jpg" width="353">
January US retail sales surged 2.3% as temperatures posted record highs. The increase by far exceeded Consensus expectations for a 0.8% gain and the December increase was revised down to 0.4% due to a lowered estimate of auto sales.
Unseasonably warm temperatures in the U.S. last month were evident in the record low number (662) of heating degree days which were down 22% from the warm January 2005.
Sales by motor vehicle &amp; parts dealers rose 2.9% (4.9% y/y) and the increase about matched the 2.7% m/m rise in unit auto sales.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060214a.jpg" width="353">
Discretionary spending surged as consumers went shopping. Apparel store sales jumped 4.2% (10.0% y/y) following marginal declines during the prior two months. General merchandise store sales surged 2.1% (7.4% y/y) after no change in December and sales of furniture, electronics &amp; appliances recovered 2.9% (7.9% y/y) after a downwardly revised 1.0% December decline.
Building material sales certainly benefited from the mild weather and jumped 3.4% (14.7% y/y).
Sales at gasoline stations rebounded following three consecutive months of decline. The 5.5% rise, however, lagged the 6.0% m/m recovery in gasoline prices. In February, gasoline prices have averaged about the same level as during January.
Less gasoline, nonauto retail sales spiked 1.8% (8.3% y/y) and the December increase was revised up to 0.3%.
Sales of nonstore retailers (internet &amp; catalogue) dropped 2.6% (8.3% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>2.3%</td>
<td>0.4%</td>
<td>8.8%</td>
<td>7.5%</td>
<td>7.3%</td>
<td>4.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>2.2%</td>
<td>0.2%</td>
<td>9.9%</td>
<td>8.6%</td>
<td>8.2%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

January US retail sales surged 2.3% as temperatures posted record highs. The increase by far exceeded Consensus expectations for a 0.8% gain and the December increase was revised down to 0.4% due to a lowered estimate of auto sales. [...]

U.S. Retail Sales Surged As Temperatures Warmed

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

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Robert Brusca

250514E.JPG

Measured on the HICP headline scale, German inflation has reached the promised land. Sequentially Germany’s HICP measure is up 1.9% over 12-months up at a 1.9% annual rate over six-months and much weaker at a -0.6% annual rate over three-months. A year ago, the pace of the HICP was 2.6% so this slide of German inflation into its overall target zone for European Monetary Union-wide inflation rate has been slow and relatively consistent.

The German domestic inflation measure isn't quite as well behaved and shows more signs of simply being stable skimming just above that hallowed 2% mark. A year ago, German domestic inflation ran at a 2.2% annual rate, currently, year-over-year it's at 2.1%, the six-month pace is at 2.3%, the same as the three-month pace, which is 2.3%. None of these are deal-breakers for monetary policy since German inflation has been within a couple of ticks of the desired path even on this domestic scale now for over a year, tracking the target that the ECB seeks for the monetary union as a whole.

However, a good deal of inflation progress continues to reside in the behavior of oil prices Brent oil prices are down for three-months in a row and they've certainly helped to contribute to good performance on the overall and domestic inflation measures. Germany's domestic CPI excluding energy was up 2.6% a year ago, currently it's up by 2.8% over 12-months it's up at a 2.6% annual rate over six-months, and at a 2.7% annual rate over three-months. Once energy is excluded, Germany's domestic inflation measure is steady, much like its headline measure, however it's skimming somewhere between half a percent and eight-tenths of a percentage point above the 2% target that the ECB sets for the European Monetary Union as a whole.

The point of saying it that way, talking about German inflation compared to the target for the monetary union as a whole, is to remind everyone that there is no target for inflation in Germany there's only a target for the monetary union as a complete entity. But Germany is the largest economy in the monetary union; what Germany does goes a long way toward putting the overall European measure in its proper place. Currently Brent inflation is down 27.7% over 12 months, it's falling at a 25.4% annual rate over six-months, and dropping at a 60.3% annual rate over three-months. These sharp declines in energy prices certainly go a long way toward making the headline inflation pace for Germany as well as for EMU behave.

The HICP measure doesn't give us up-to-date energy readings yet so we cannot calculate comparable statistics for the monetary union as a whole. However, the German data are quite suggestive that if we were to do that, we would find a similar outcome, that the HICP headline appears to be well behaved but that the core would probably appear to be a little more stubborn. Regardless of that fact, the question is where the ECB would come down with its discretion. And recently central banks have been quite tolerant about inflation-overshooting. However, that worm may have turned.

**A new future…unfolds or unravels**
Economies now face different challenges. Europe is going to be in charge of more of its own military defense and that's going to require more spending; that will create more stimulus and possibly generate more inflation pressures. In addition, there is this tariff imbroglio that could resolve either with a closer-to-free-trade result with tariffs being reduced, or a worse-result with more tariffs being imposed. A world with more tariffs or higher tariffs would be a world that was likely to be flirting with inflation a little bit more, at least over the next year or so. The ECB might still continue to be tolerant of that. However, a lot about these economic circumstances remains unknown. There's a lot of uncertainty about the performance of the US economy that can help to set the stage for how the global economy is going to perform. So, the future still offers the potential for more economic drag from a high tariff world or lower inflation performance from a lower tariff world and it's still hard to judge which of these worlds we're going to be in over the next 12- to 24-months. And now, German headline inflation is behaving quite well although the core reminds us that Germany may be farther away from its goal than the headline makes it appear, like that famous rearview mirror image in the movie Jurassic Park. Looking at things through mirrors can distort them. And at this point I don't think policymakers know exactly how to look at the future whether they know the rearview mirror from the windshield or the future from the present. There's a great deal of uncertainty, a great deal of disagreement and very little trust. Stirred together, it's not a good combination for policymakers. Double, double toil and...trouble? We shall see.


250514.JPG

Germany

German Inflation Affirmed as Stable 

250514a0.jpg

250514B0.jpg

Mortgage applications increased 1.1% (26.8% y/y) in the week ended May 9, after rising 11.0% in the week ended May 2, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications to purchase a home rose 2.3% (17.5% y/y) in the week ended May 9 after rising 11.1% in the previous week. Applications to refinance a home loan eased 0.4% (+43.6% y/y) last week after increasing 11.1% in the prior week.

The effective interest rate on a 30-year fixed rate loan of 7.06% in the week ended May 9 compared to 7.03% in the prior week. The effective rate on a 15-year fixed rate loan fell to 6.27% in the week ended May 9 from 6.34% in the prior week. The rate on a 30-year jumbo loan of 7.00% compared to 6.99% in the prior week, while the rate on a 5-year ARM rose to 6.36% in the week ended May 9 from 6.08% in the prior week.

The share of applications to refinance an existing mortgage eased to 36.4% in the week ended May 9 from 37.1% in the prior week. The share of loans with an adjustable rate declined to 7.4% last week from 8.3% one week earlier.

The average size of a mortgage loan eased 0.7% (+4.7% y/y) to $397,300 in the week ended May 9, after rising 4.2% to $400,200 in the prior week. The average size of a loan to purchase a home increased 1.1% (2.7% y/y) to $449,300 in the latest week after rising to $444,300 in the week prior. The average size of a loan to refinance an outstanding mortgage declined 5.8% (+20.1% y/y) last week to $306,500 after rising 12.3% to $325,400 one week earlier.

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 rise but loan refinancing edges down.
- Effective interest rates remain range-bound.
- Average loan size increases.


Mortgage Applications Edge Higher Last Week as Interest Rates Remain Elevated

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The Consumer Price Index rose 0.2% in April after easing 0.1% in March and rising 0.2% in February. A 0.3% rise had been expected in the Action Economics Forecast Survey. The y/y increase in the headline CPI dropped to 2.3% from 2.4% in March, the weakest y/y gain since February 2021. It stood below the 9.1% peak in June 2022. The CPI excluding food & energy rose 0.2% in April following increases of 0.1% in March and 0.2% in February. A 0.3% rise had been expected. The 2.8% y/y gain remained the weakest rise in core prices in four years and below the 6.6% peak in September 2022.

Energy prices rose 0.7% (-3.7% y/y) last month after falling 2.4% in March. Gasoline prices slipped 0.1% (-11.7% y/y) after falling 6.3% in March. Fuel oil prices weakened 1.3% (-9.6% y/y) after falling 4.2% in March. Natural gas prices jumped 3.7% (15.7% y/y) following a 3.6% gain, and electricity prices gained 0.8% (3.6% y/y) after rising 0.9% in March.

Food prices eased 0.1% (+2.8% y/y) in April after a 0.4% March increase as egg prices fell 12.7% (+49.3% y/y) following a 5.9% gain. Meat, poultry & fish prices held steady (+3.4% y/y) after a 0.6% rise, while dairy product prices slipped 0.2% (+1.6% y/y) after a 1.0% March strengthening. Cereal & bakery product costs weakened 0.5% (unchanged y/y) after a 0.1% easing while fruit & vegetable prices dropped 0.4% (-0.9% y/y), the fifth decline in six months. Nonalcoholic beverage prices rose 0.7% (3.2% y/y) in April after rising 0.6% in March.

Goods prices less food and energy rose 0.1% both m/m and y/y in April after easing 0.1% in March. Prices of used cars and trucks fell 0.5% (+1.5% y/y) last month after falling 0.7% in March while new vehicle costs held steady (0.3% y/y) after edging up 0.1% in March. Apparel prices eased 0.2% (-0.7% y/y) following a 0.4% gain. Appliance prices increased 0.8% (-1.2% y/y) after a 0.1% easing. Home furnishings prices increased 0.2% (0.3% y/y) after holding steady in March. Recreation product costs rose 0.4% (-1.8% y/y) in April after falling 0.3%. Education & communication product costs rose 0.3% last month (-5.3% y/y) after rising 0.5% in March.

Services prices less energy moved up 0.3% (3.6% y/y) last month following a 0.1% March gain. Shelter prices rose 0.3% (4.0% y/y) last month after a 0.2% rise as owners’ equivalent rent of primary residences increased 0.4% (4.3% y/y), the same as in March. The cost of lodging away from home eased 0.1% (-1.4% y/y) after falling 3.5% in March. Rents of primary residences gained 0.3% (4.0% y/y) for the fifth consecutive month. Transportation service prices edged 0.1% higher (2.5% y/y) after falling 1.4% in March reflecting a 0.6% rise (6.4% y/y) in the cost of motor vehicle insurance. Public transportation costs declined 1.8% (-5.6% y/y) after falling 4.2% during March. The cost of medical services increased 0.5% (3.1% y/y), the same as in March, but the cost of recreation services fell 0.3% (3.6% y/y) after increasing 0.1% in March. Education & communication services prices fell 0.2% (+1.2% y/y) after rising 0.2%.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Annual total & core gains are the weakest in four-years.
- Energy costs move up but food prices slip.
- Core goods prices edge higher & service price gain picks up.

U.S. Consumer Price Index & Core Prices Rise Modestly in April

Winnie Tapasanun

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The NFIB Small Business Optimism Index fell to 95.8 in April, the lowest level since October, after a 3.3-point decline to 97.4 in March, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. This was the second successive month that the index was below the 51-year average of 98. The index was down from its recent peak of 105.1 in December but up from 89.7 in April 2024 and a low of 88.5 in March 2024. Six of the 10 index components fell, three rose, and one was unchanged. The NFIB Small Business Uncertainty Index declined to 92 in April, the lowest level since December, after an eight-point drop to 96 in March. The index, while down from its record high of 110 in October, was well above a low of 65 in November 2023 and its historical average of 68.

The outlook for business conditions in the next six months remained positive for the sixth consecutive month in the latest survey. The net balance of respondents expecting the economy to improve decreased to 15% in April, the lowest level since October, on top of a 16-point plunge to 21% in March; however, having remained significantly above a record low of -61% in June 2022. Expected real sales dropped to a net -1% in April after an 11-point slide to 3% in March, posting the first negative reading and the lowest since October. The latest figure was up from its recent low of -18% in August. A net -8% of respondents reported higher nominal sales in the past three months, up from -11% in March and registering the highest reading since September 2023. The latest result, however, was below the most recent positive reading of 1% in May 2022 and a peak of 9% in June 2021.

Plans to make capital outlays slid to 18% in April, the lowest level since April 2020, following a two-point increase to 21% in March. These numbers were down from their recent high of 28% in November and a high of 31% in October 2021. Plans to expand the business registered at 9% in April and March, the lowest reading since October, following 12% in February; the latest figure was down from its most recent high of 20% in December but up from a low of 2% in March 2023. Meanwhile, expected credit conditions declined to -7% in April, the lowest reading since September, from -4% in March; these readings were above a low of -11% in November 2023.

On the labor front, forty-seven percent of respondents reported that qualified workers to fill job openings were hard to find in April, unchanged from 47% in March. These numbers were below their recent high of 56% in August, a high of 57% in September 2023, and a peak of 62% in September 2021. A net 13% planned to increase employment in April, slightly up from 12% in March; it was below a high of 26% in May 2022 and a peak of 32% in August 2021. Notably, 34% reported positions not able to be filled in April, down from 40% in March and the lowest reading since September; these figures remained below a high of 51% in May 2022.

Overall earnings trends had remained in negative territory since December 2019. The figure improved to -21% in April, still a poor reading, following a four-point drop to -28% in March. These readings were up from a low of -37% in August; nevertheless, having remained below a high of -18% in March 2023 and a high of -5% in June 2021.

On the pricing front, inflation pressures, while trending down, remained at an inflationary level. The net percent of firms raising their average selling prices slipped to 25% in April, the lowest reading since January, after a six-point decline to 26% in March. These numbers were virtually unchanged from 25% in April 2024 but well below a high of 66% in March 2022. The percentage planning to raise prices eased to a three-month-low 28% in April following a one-point increase to 30% in March; these figures were above 26% in April 2024 but below a high of 33% in March 2024 and a high of 52% in March 2022.

Wage inflation, while relatively high, eased somewhat in the April survey. A net 33% of respondents raised compensation during the last three months, down from 38% reported in the March survey and the same reading as in February and January. It was down from a high of 46% in February 2023 and a peak of 50% in January 2022. A net 17% of firms planned to raise worker compensation in the next three months, down from 19% reported in March and the lowest reading since March 2021; these numbers were below a high of 28% in November, a high of 30% in November 2023, and a high of 32% in October 2022.

The quality of labor was reported as the single most important problem facing small businesses, as reported by 19% of NFIB members in April, March, and February. Taxes were reported as the next most important problem, with 16% reported in April vs. 18% in March. Inflation continued to be a problem facing small businesses, as reported by 14% in April; the figure was down from 16% in March and a peak of 37% in July 2022. Other concerns (in April vs. March) included insurance cost/availability (10% vs. 8%), poor sales (9% vs. 9%), government requirements (9% vs. 8%), the cost of labor (8% vs. 11%), and competition from large businesses (7% vs. 6%).

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s **SURVEYS** database.

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- Apr. NFIB Small Business Optimism Index down 1.6 pts. to 95.8; the fourth straight m/m fall.
- Uncertainty Index down 4 pts. to 92, the lowest since Dec.
- Expectations for economy down 6 pts. to 15%, the lowest since Oct.
- Expected real sales down 4 pts. to -1%, the first negative reading since Oct.
- Net percent of firms raising avg. selling prices down 1 pt. to a 3-month-low 25%.
- Quality of labor (19%), taxes (16%), and inflation (14%) are the top three business concerns.

U.S. NFIB Small Business Optimism Falls to a Six-month Low in April Amid Continued Uncertainty

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Retail gasoline prices for all grades fell to an average $3.25 per gallon (-12.9% y/y) in the week ended May 12 after rising to $3.27 in the previous week, but	 remained above their low of $3.13 in the week of December 9. An earlier high was $3.79 in the week ending April 22, 2024. The all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel declined to $3.48 per gallon (-9.7% y/y) in the week of May 12 from $3.50 in the prior week. The latest diesel price stood well below a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil at $59.04 per barrel (-25.9% y/y) in the week ended May 9 compared to $59.64 per barrel in the prior week. Prices remained below a high of $91.45 in the week of September 29, 2023. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $61.95 per barrel. The price of European Brent crude oil declined to $62.29 per barrel (-24.9% y/y) in the week of May 9 from $63.50 in the previous week. Prices remained well below a recent high of $95.61 in the week of September 29, 2023 and compared to a peak of $127.40 in the week of June 10, 2022. Yesterday the price was $65.28 per barrel.

Natural gas prices edged up to an average $3.19 per mmbtu (59.5% y/y) in the week ended May 9, after improving to $3.09/mmbtu in the prior week. Prices have been well below earlier highs for four weeks but were well above a low of $1.40/mmbtu in the week of March 15, 2024. Prices peaked at $9.56/mmbtu in the week of August 26, 2022. Yesterday’s price was $3.19/mmbtu.

Gasoline demand rose 3.5% y/y in the four weeks ending May 2 following a 3.2% y/y rise in the prior four weeks. Demand for all petroleum products eased 0.6% y/y in the four weeks ending May 2 after a 0.3% y/y rise in the previous four-week period. Crude oil input to refineries rose 0.4% y/y in the four weeks ending May 2 after a 0.1% y/y slip in the prior four weeks.

Gasoline inventories fell 1.0% y/y in the week ending May 2 after a 0.7% y/y fall in the week ending April 25. Residual fuel oil inventories fell 10.9% y/y in the week of May 2, after an 18.7% y/y fall in the prior week. Crude oil inventories rose 1.3% y/y in the week of May 2 after a 1.4% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories fell w/w to 25.3 days in the week of May 2 from 25.5 days in the prior. The recent low was 22.9 days in the week of November 8. The supply of crude oil eased w/w to 27.6 days in the week of May 2 from 27.9 days in the prior week, and remained below a high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** & **USENERGY** database.

- Gasoline prices decline.
- Crude oil prices ease.
- Natural gas costs rise.

Economy in Brief

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Empire State Index Stable

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