Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919f.jpg" width="353">
More German investors and analysts participating in the ZEW surveys continue to attest to improved economic conditions, but have grave doubts concerning economic conditions six months ahead.
The balance between those saying current conditions were improving and those saying current conditions were deteriorating rose from 33.6% in August to 38.9% in September and was 92.0 percentage points above the -58.1% of September, 2005. It has only been since April of this year that more people believed that current conditions were improving than those who believed they were deteriorating. The current balance is close to the most recent peak of 45.8% in September, 2000 as can be seen n the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919g.jpg" width="353">
While feeling better about the current situation, the participants in the September ZEW survey have become decidedly more wary about the future. The balance between optimists and pessimists went from -5.6% in August to -22.2% in September and was 60.8 percentage points lower than that of September, 2005 when the balance favored the optimists to the extent of 38.6%. The sharp decline in sentiment is probably a reflection of the increasing probability of a slowdown in the United States economy and hence a reduced demand for German exports, plus the likely negative effect on consumer spending with the three point scheduled increase on January 1, 2007 of the VAT, and the uncertainty of other reforms. The contrast between opinions of current conditions and the future are shown in the second chart.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919h.jpg" width="353">
While the ZEW measure of expectations has often been an indicator of the future trend of the economy, it has not been a particularly good indicator of the magnitude of change in the economy. In the third chart we show the quarterly values of the expectations balances and the year to year change in real, seasonally unadjusted Gross National Product. As can be seen, there is only a small correlation (0.26) between the expectations balances and the year to year change in GDP. Moreover, the R2 suggests that only 6.76% of the change in the year to year GDP is accounted for by the expectations balance.

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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/@D8/@D82/@D82.HTM">Germany ZEW Survey</a></th>
<th scope="col">Sep&nbsp; 06</th>
<th scope="col">Aug 06</th>
<th scope="col">Sep 05</th>
<th scope="col">M/M&nbsp; dif&nbsp;</th>
<th scope="col">Y/Y&nbsp; dif &nbsp;&nbsp;</th>
<th scope="col">2005&nbsp;&nbsp;</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Balance on Current Situation (%)&nbsp;</td>
<td>38.9</td>
<td>33.6</td>
<td>-58.1</td>
<td>5.3</td>
<td>92.0</td>
<td>-34.8</td>
<td>44.6</td>
<td>38.4</td>
</tr>
<tr>
<td class="firstcol">Balance on Situation Six Months Ahead&nbsp;(%)</td>
<td>-22.2</td>
<td>-5.6</td>
<td>38.6</td>
<td>-16.6</td>
<td>-60.8</td>
<td>34.8</td>
<td>44.6</td>
<td>38.4</td>
</tr>
</tbody>
</table>
</body>
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More German investors and analysts participating in the ZEW surveys continue to attest to improved economic conditions, but have grave doubts concerning economic conditions six months ahead. The balance between those saying current [...]

German Investors and Analysts Confident of the Present but Wary of the Future

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919e.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey indicated that chain store sales fell a hard 1.1% last week. The second consecutive w/w drop pulled the average sales level in September about even with August.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The retail price for a gallon of regular unleaded gasoline dropped twelve cents w/w to an average $2.50 (-10.4% y/y), the lowest level since early March.
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.
The leading indicator of chain store sales from ICSC-UBS increased 0.8% (1.0% y/y) in the latest week and raised the y/y gain into positive territory for the first time since April.
Household Energy Expenditures, 1982-2005 from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cfljune2006_227.pdf">here</a>
The latest Short-Term Energy Outlook from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.

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<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">09/16/06</th>
<th scope="col">09/09/06</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>466.8</td>
<td>471.8</td>
<td>4.9%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers (ICSC)-UBS survey indicated that chain store sales fell a hard 1.1% last week. The second consecutive w/w drop pulled the average sales level in September about even with August.

Chain Store Sales Fell Hard Along With Gasoline Prices

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919c.jpg" width="353">
Housing starts in August fell hard for the sixth month this year to 1.665M units. The 6.0% m/m decline outpaced Consensus expectations for a drop to 1.75M, lowered starts 19.8% below last August and left the latest level 26.5% below the series&#39; peak reached this past January.
Single-family starts fell 5.9% last month to 1.36M, off 25.0% from the January peak while multi family starts dropped 6.7% for the third straight monthly decline.
By region single family housing starts in the West fell 4.4% m/m (-33.4% y/y) and in the Midwest starts fell 12.9% (-28.7% y/y). Single family starts in the South also fell by 6.1% (-9.9% y/y) but in the Northeast starts rose for the second consecutive month after a one-third drop during June (-19.3% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919d.jpg" width="353">
Building permits fell for the seventh consecutive month, off 2.3%. Permits to start singe family homes were even weaker and fell 3.5% (-25.0% y/y).
Beyond Neighborhood Revitalization from the Federal Reserve Bank of Boston can be found <a href="http://www.bos.frb.org/commdev/c&amp;b/2006/winter/beyond.pdf">here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">August</th>
<th scope="col">July</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</td>
<td>1,665</td>
<td>1,772</td>
<td>-19.8%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,360</td>
<td>1,445</td>
<td>-20.6%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>305</td>
<td>327</td>
<td>-15.7%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,722</td>
<td>1,763</td>
<td>-21.9%</td>
<td>2,159</td>
<td>2,058</td>
<td>1,888</td>
</tr>
</tbody>
</table>
</body>
</html>

Housing starts in August fell hard for the sixth month this year to 1.665M units. The 6.0% m/m decline outpaced Consensus expectations for a drop to 1.75M, lowered starts 19.8% below last August and left the latest level 26.5% below [...]

Housing Starts Off 20% Y/Y

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919a.jpg" width="353">
The finished goods producer price index increased 0.1% in August, the same as in July and below Consensus expectations for a 0.2% rise.Excluding food &amp; energy finished producer prices were similarly under control last month and unexpectedly fell 0.4% after a 0.3% drop in July. Expectations had been for a 0.2% increase in the core PPI. 
Finished consumer goods prices less food &amp; energy dropped 0.5% (+0.7% y/y) as passenger car prices dropped 2.6% (-5.4% y/y). Capital equipment prices also fell by 0.3% (+1.0% y/y) for the second consecutive monthly decline as light truck prices fell 3.4% (-7.5% y/y). Prices of pumps, compressors &amp; equipment were, however, strong and posted a 0.6% (3.7% y/y) increase. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919b.jpg" width="353">
Finished energy goods prices posted a 0.3% (13.1% y/y) August gain as . residential natural gas prices rose 1.6% (5.2% y/y) and residential electric power costs increased 1.3% (7.4% y/y). Gasoline prices fell 2.2% (+20.9% y/y) though fuel oil prices rose 0.7% (25.1% y/y). 
Intermediate goods prices posted another strong increase and rose 0.4%. The gain reflected a like 0.4% rise in prices less food &amp; energy. 
The crude materials PPI again was strong posting a 2.2% increase led by a 15.7% (NSA, -9.2% y/y) gain in natural gas. Less food &amp; energy crude goods prices fell 2.8% led lower by a 14.7% (+20.1% y/y) drop in iron &amp; steel scrap prices. Aluminum base scrap prices also were weak last month and fell 4.6% (+30.1% y/y).
The Internationalization of the Dollar and Trade Balance Adjustment from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr255.pdf"> here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">August</th>
<th scope="col">July</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">Finished Goods</td>
<td>0.1%&nbsp;</td>
<td>0.1%</td>
<td>&nbsp; 3.6%&nbsp;</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>&nbsp;0.9%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.4%</td>
<td>0.5%</td>
<td>8.7%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.7%</td>
<td>8.3%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>&nbsp;2.2%&nbsp;</td>
<td>3.1%</td>
<td>&nbsp;5.4%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-2.8%</td>
<td>1.3%</td>
<td>&nbsp;25.2%</td>
<td>4.8%</td>
<td>&nbsp;26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The finished goods producer price index increased 0.1% in August, the same as in July and below Consensus expectations for a 0.2% rise.Excluding food & energy finished producer prices were similarly under control last month and [...]

PPI Up 0.1%, Core Prices Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919a.jpg" width="353">
The finished goods producer price index increased 0.1% in August, the same as in July and below Consensus expectations for a 0.2% rise.Excluding food &amp; energy finished producer prices were similarly under control last month and unexpectedly fell 0.4% after a 0.3% drop in July. Expectations had been for a 0.2% increase in the core PPI. 
Finished consumer goods prices less food &amp; energy dropped 0.5% (+0.7% y/y) as passenger car prices dropped 2.6% (-5.4% y/y). Capital equipment prices also fell by 0.3% (+1.0% y/y) for the second consecutive monthly decline as light truck prices fell 3.4% (-7.5% y/y). Prices of pumps, compressors &amp; equipment were, however, strong and posted a 0.6% (3.7% y/y) increase. 
Finished energy goods prices posted a 0.3% (13.1% y/y) August gain as . residential natural gas prices rose 1.6% (5.2% y/y) and residential electric power costs increased 1.3% (7.4% y/y). Gasoline prices fell 2.2% (+20.9% y/y) though fuel oil prices rose 0.7% (25.1% y/y). 
Intermediate goods prices posted another strong increase and rose 0.4%. The gain reflected a like 0.4% rise in prices less food &amp; energy. 
The crude materials PPI again was strong posting a 2.2% increase led by a 15.7% (NSA, -9.2% y/y) gain in natural gas. Less food &amp; energy crude goods prices fell 2.8% led lower by a 14.7% (+20.1% y/y) drop in iron &amp; steel scrap prices. Aluminum base scrap prices also were weak last month and fell 4.6% (+30.1% y/y).
The Internationalization of the Dollar and Trade Balance Adjustment from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr255.pdf"> here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">August</th>
<th scope="col">July</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">Finished Goods</td>
<td>0.1%&nbsp;</td>
<td>0.1%</td>
<td>&nbsp; 3.6%&nbsp;</td>
<td>&nbsp;4.9%&nbsp;</td>
<td>3.6%&nbsp;</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.4%</td>
<td>-0.3%</td>
<td>&nbsp;0.9%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.4%</td>
<td>0.5%</td>
<td>8.7%</td>
<td>&nbsp;8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.7%</td>
<td>8.3%</td>
<td>&nbsp;5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>&nbsp;2.2%&nbsp;</td>
<td>3.1%</td>
<td>&nbsp;5.4%</td>
<td>14.6%</td>
<td>&nbsp;17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-2.8%</td>
<td>1.3%</td>
<td>&nbsp;25.2%</td>
<td>4.8%</td>
<td>&nbsp;26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
Housing Starts Off 20% Y/Y 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919c.jpg" width="353">
Housing starts in August fell hard for the sixth month this year to 1.665M units. The 6.0% m/m decline outpaced Consensus expectations for a drop to 1.75M, lowered starts 19.8% below last August and left the latest level 26.5% below the series&#39; peak reached this past January.
Single-family starts fell 5.9% last month to 1.36M, off 25.0% from the January peak while multi family starts dropped 6.7% for the third straight monthly decline.
By region single family housing starts in the West fell 4.4% m/m (-33.4% y/y) and in the Midwest starts fell 12.9% (-28.7% y/y). Single family starts in the South also fell by 6.1% (-9.9% y/y) but in the Northeast starts rose for the second consecutive month after a one-third drop during June (-19.3% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919d.jpg" width="353">
Building permits fell for the seventh consecutive month, off 2.3%. Permits to start singe family homes were even weaker and fell 3.5% (-25.0% y/y).
Beyond Neighborhood Revitalization from the Federal Reserve Bank of Boston can be found <a href="http://www.bos.frb.org/commdev/c&amp;b/2006/winter/beyond.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<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/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">August</th>
<th scope="col">July</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</td>
<td>1,665</td>
<td>1,772</td>
<td>-19.8%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,360</td>
<td>1,445</td>
<td>-20.6%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>305</td>
<td>327</td>
<td>-15.7%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,722</td>
<td>1,763</td>
<td>-21.9%</td>
<td>2,159</td>
<td>2,058</td>
<td>1,888</td>
</tr>
</tbody>
</table>
Chain Store Sales Fell Hard Along With Gasoline Prices 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919e.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey indicated that chain store sales fell a hard 1.1% last week. The second consecutive w/w drop pulled the average sales level in September about even with August.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The retail price for a gallon of regular unleaded gasoline dropped twelve cents w/w to an average $2.50 (-10.4% y/y), the lowest level since early March.
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.
The leading indicator of chain store sales from ICSC-UBS increased 0.8% (1.0% y/y) in the latest week and raised the y/y gain into positive territory for the first time since April.
Household Energy Expenditures, 1982-2005 from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cfljune2006_227.pdf">here</a>
The latest Short-Term Energy Outlook from the U.S. Energy Information Administration is available <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">09/16/06</th>
<th scope="col">09/09/06</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>466.8</td>
<td>471.8</td>
<td>4.9%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
German Investors and Analysts Confident of the Present but Wary of the Future 
by <a href="/comment/Curley.html">Louise Curley</a> September 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919f.jpg" width="353">
More German investors and analysts participating in the ZEW surveys continue to attest to improved economic conditions, but have grave doubts concerning economic conditions six months ahead.
The balance between those saying current conditions were improving and those saying current conditions were deteriorating rose from 33.6% in August to 38.9% in September and was 92.0 percentage points above the -58.1% of September, 2005. It has only been since April of this year that more people believed that current conditions were improving than those who believed they were deteriorating. The current balance is close to the most recent peak of 45.8% in September, 2000 as can be seen n the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919g.jpg" width="353">
While feeling better about the current situation, the participants in the September ZEW survey have become decidedly more wary about the future. The balance between optimists and pessimists went from -5.6% in August to -22.2% in September and was 60.8 percentage points lower than that of September, 2005 when the balance favored the optimists to the extent of 38.6%. The sharp decline in sentiment is probably a reflection of the increasing probability of a slowdown in the United States economy and hence a reduced demand for German exports, plus the likely negative effect on consumer spending with the three point scheduled increase on January 1, 2007 of the VAT, and the uncertainty of other reforms. The contrast between opinions of current conditions and the future are shown in the second chart.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060919h.jpg" width="353">
While the ZEW measure of expectations has often been an indicator of the future trend of the economy, it has not been a particularly good indicator of the magnitude of change in the economy. In the third chart we show the quarterly values of the expectations balances and the year to year change in real, seasonally unadjusted Gross National Product. As can be seen, there is only a small correlation (0.26) between the expectations balances and the year to year change in GDP. Moreover, the R2 suggests that only 6.76% of the change in the year to year GDP is accounted for by the expectations balance.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/@D8/@D82/@D82.HTM">Germany ZEW Survey</a></th>
<th scope="col">Sep&nbsp; 06</th>
<th scope="col">Aug 06</th>
<th scope="col">Sep 05</th>
<th scope="col">M/M&nbsp; dif&nbsp;</th>
<th scope="col">Y/Y&nbsp; dif &nbsp;&nbsp;</th>
<th scope="col">2005&nbsp;&nbsp;</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Balance on Current Situation (%)&nbsp;</td>
<td>38.9</td>
<td>33.6</td>
<td>-58.1</td>
<td>5.3</td>
<td>92.0</td>
<td>-34.8</td>
<td>44.6</td>
<td>38.4</td>
</tr>
<tr>
<td class="firstcol">Balance on Situation Six Months Ahead&nbsp;(%)</td>
<td>-22.2</td>
<td>-5.6</td>
<td>38.6</td>
<td>-16.6</td>
<td>-60.8</td>
<td>34.8</td>
<td>44.6</td>
<td>38.4</td>
</tr>
</tbody>
</table>


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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060918c.jpg" width="353">
The National Association of Home Builders (NAHB) indicated that the September Composite Housing Market Index fell to 30 from a slightly revised 33 in August. The latest level is down by more than one half from last year. 
During the last twenty years there has been a 75% correlation between the y/y change in the Composite Index and the change in single family housing starts. 
The sub-indexes covering current sales of single family homes (-13.5% m/m, -55.6% y/y) and sales in the next six months (-9.8% m/m, -47.1% y/y) both fell sharply. 
Traffic of prospective home buyers was stable m/m but down 55.1% y/y and was at the lowest since January, 1991. 
Housing markets in all regions of the U.S. weakened this month. The index in the Northeast was down -58.8% y/y). In the Midwest the index fell 61.9% y/y and in the West fell 54.2% y/y. In the South the index fell 46.5%. 
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Sept. &#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">Composite Housing Market Index</td>
<td>30</td>
<td>33</td>
<td>65</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Home Builders (NAHB) indicated that the September Composite Housing Market Index fell to 30 from a slightly revised 33 in August. The latest level is down by more than one half from last year. During the [...]

NAHB Housing Market Index Down By One Half

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060918a.jpg" width="353">
The US current account deficit in 2Q&#39;06 deepened to $218.4B versus a revised and deepened deficit of $213.2B during 1Q. The deficit last quarter equaled 6.6% of GDP, greater than the 6.35% during all of last year .
Consensus expectations had been for a 2Q deficit of $213.0B.
The deficit in merchandise trade deteriorated to $210.6B versus $208.0 during 1Q. Exports grew 3.4% (13.6% y/y) although that strong gain was offset by a 2.4% gain in imports (12.8% y/y). Higher oil prices last quarter caused the value of crude oil imports to surge 20.0% (34.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060918b.jpg" width="353">
The surplus in services trade remained about unchanged at $16.8B. Exports of services grew 3.1% (9.5% y/y) while imports grew 3.8% (10.7% y/y).
From the capital account, net US foreign direct investment abroad improved modestly to 47.1B, a still-reduced figure versus last year. Foreign direct investment in the US, however, rose again to $48.4B.
Going Global: The Changing Pattern of U.S. Investment Abroad from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/3Q06mma.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Int&#39;l Balance of Payments</a></th>
<th scope="col">2Q &#39;06</th>
<th scope="col">1Q &#39;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">Current Account Deficit</td>
<td>$218.4</td>
<td>$213.2B</td>
<td>$193.3B (2Q&#39;05)</td>
<td>$791.5B</td>
<td>$665.3B</td>
<td>$527.5B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Goods/Services/Income Deficit</td>
<td>$198.0</td>
<td>$193.7B</td>
<td>$170.1B</td>
<td>$705.4B</td>
<td>$583.7B</td>
<td>$458.3B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>5.3%</td>
<td>4.8%</td>
<td>18.8%</td>
<td>14.6%</td>
<td>15.7%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>4.4%</td>
<td>2.8%</td>
<td>18.1%</td>
<td>16.3%</td>
<td>18.7%</td>
<td>7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unilateral Transfers Deficit</td>
<td>$20.4B</td>
<td>$19.5B</td>
<td>$23.2B (2Q&#39;05)</td>
<td>$86.1B</td>
<td>$81.6B</td>
<td>$69.2B</td>
</tr>
</tbody>
</table>
</body>
</html>

The US current account deficit in 2Q'06 deepened to $218.4B versus a revised and deepened deficit of $213.2B during 1Q. The deficit last quarter equaled 6.6% of GDP, greater than the 6.35% during all of last year . Consensus [...]

U.S. Current Account Deficit Deeper: Oil Imports Surged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060918a.jpg" width="353">
The US current account deficit in 2Q&#39;06 deepened to $218.4B versus a revised and deepened deficit of $213.2B during 1Q. The deficit last quarter equaled 6.6% of GDP, greater than the 6.35% during all of last year .
Consensus expectations had been for a 2Q deficit of $213.0B.
The deficit in merchandise trade deteriorated to $210.6B versus $208.0 during 1Q. Exports grew 3.4% (13.6% y/y) although that strong gain was offset by a 2.4% gain in imports (12.8% y/y). Higher oil prices last quarter caused the value of crude oil imports to surge 20.0% (34.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060918b.jpg" width="353">
The surplus in services trade remained about unchanged at $16.8B. Exports of services grew 3.1% (9.5% y/y) while imports grew 3.8% (10.7% y/y).
From the capital account, net US foreign direct investment abroad improved modestly to 47.1B, a still-reduced figure versus last year. Foreign direct investment in the US, however, rose again to $48.4B.
Going Global: The Changing Pattern of U.S. Investment Abroad from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/3Q06mma.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Int&#39;l Balance of Payments</a></th>
<th scope="col">2Q &#39;06</th>
<th scope="col">1Q &#39;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">Current Account Deficit</td>
<td>$218.4</td>
<td>$213.2B</td>
<td>$193.3B (2Q&#39;05)</td>
<td>$791.5B</td>
<td>$665.3B</td>
<td>$527.5B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Goods/Services/Income Deficit</td>
<td>$198.0</td>
<td>$193.7B</td>
<td>$170.1B</td>
<td>$705.4B</td>
<td>$583.7B</td>
<td>$458.3B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>5.3%</td>
<td>4.8%</td>
<td>18.8%</td>
<td>14.6%</td>
<td>15.7%</td>
<td>5.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>4.4%</td>
<td>2.8%</td>
<td>18.1%</td>
<td>16.3%</td>
<td>18.7%</td>
<td>7.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unilateral Transfers Deficit</td>
<td>$20.4B</td>
<td>$19.5B</td>
<td>$23.2B (2Q&#39;05)</td>
<td>$86.1B</td>
<td>$81.6B</td>
<td>$69.2B</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index Down By One Half 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 18, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060918c.jpg" width="353">
The National Association of Home Builders (NAHB) indicated that the September Composite Housing Market Index fell to 30 from a slightly revised 33 in August. The latest level is down by more than one half from last year. 
During the last twenty years there has been a 75% correlation between the y/y change in the Composite Index and the change in single family housing starts. 
The sub-indexes covering current sales of single family homes (-13.5% m/m, -55.6% y/y) and sales in the next six months (-9.8% m/m, -47.1% y/y) both fell sharply. 
Traffic of prospective home buyers was stable m/m but down 55.1% y/y and was at the lowest since January, 1991. 
Housing markets in all regions of the U.S. weakened this month. The index in the Northeast was down -58.8% y/y). In the Midwest the index fell 61.9% y/y and in the West fell 54.2% y/y. In the South the index fell 46.5%. 
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions good than poor. 
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">September</th>
<th scope="col">August</th>
<th scope="col">Sept. &#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">Composite Housing Market Index</td>
<td>30</td>
<td>33</td>
<td>65</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
</body>
</html>

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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Andrew Cates

**Energy shock lifts inflation, trims growth**
The IMF’s latest WEO revisions for 2026 broadly reflect the classic stagflationary impact of the recent Middle East energy shock, with growth downgraded and inflation revised higher across most major economies. Higher energy prices act as a tax on real incomes while simultaneously pushing up costs. That said, the picture is not uniform: a number of economies—notably the US, China and India—have seen growth upgrades, reflecting stronger-than-expected momentum so far in 2026. By contrast, the UK stands out at the stagflationary extreme, combining one of the largest growth downgrades with a relatively strong inflation uplift—consistent with its weaker underlying momentum, greater energy sensitivity and more persistent domestic inflation dynamics. More broadly, while the global revisions remain modest—pointing to resilience in activity—the message is that disinflation is no longer a smooth glide back to target but increasingly contingent on energy prices and geopolitical developments.

260423Z1.jpg

**Markets largely shrug off rising economic pessimism**
Notwithstanding a more downbeat assessment from economists—including the IMF’s stagflationary tilt to the outlook—there has been remarkably little follow-through into financial markets. Measures of systemic stress in both the US and UK remain low by historical standards, suggesting that investors are, for now, largely looking through the Middle East conflict. There are several possible explanations: corporate profits remain resilient, the AI-driven investment narrative continues to dominate market thinking, and markets may be assuming that any energy shock will be temporary and contained. In effect, investors appear to be pricing a benign baseline in which geopolitical risks do not materially disrupt growth, inflation expectations or policy. The UK is a partial exception, with a somewhat more visible uptick in stress, which aligns more closely with the IMF’s more challenging growth-inflation trade-off and the economy’s greater sensitivity to energy prices.

260423Z2.jpg

**Volatility falls despite deteriorating growth surprises**
Market optimism is also increasingly at odds with the incoming data flow. Typically, equity volatility declines when growth surprises are positive and inflation surprises are benign. However, the recent pattern has broken that relationship. Growth surprises across the G10 have turned increasingly negative (our series is inverted in the chart below), yet volatility has continued to fall. In other words, markets are becoming less sensitive to weakening macro data, continuing to price a benign outlook even as the data deteriorate. This divergence reinforces the broader theme: investors are, for now, looking through both geopolitical risks and softer economic momentum, placing greater weight on resilience in earnings, the AI-driven narrative and the assumption that policy will remain supportive.

260423Z3.jpg

**Inflation Nowcasts Have Jumped**
Incoming data suggest that headline inflation has moved higher in recent weeks, broadly in line with expectations given the rise in energy prices following the Middle East shock. Nowcasts for CPI across the major economies show a clear rebound in March and April from the lows seen at the start of 2026, with the move occurring in a relatively synchronised fashion. This reinforces the view that the recent pickup in inflation is being driven primarily by a common external factor—energy.

260423Z4.jpg

**Energy shock not yet feeding into underlying inflation**
However, the detailed breakdown of March inflation outcomes suggests that this remains, for now, a largely headline-driven phenomenon. While headline CPI prints were firm across most economies, core inflation—stripping out energy and food—was more subdued and in some cases weaker. This indicates that there has been very limited pass-through from higher energy prices into broader goods and services inflation at this early stage. In other words, the shock is still being absorbed rather than propagated. That distinction is critical for policy and markets alike: as long as second-round effects remain contained, central banks may be able to look through the near-term rise in inflation, even as headline rates move higher.

260423Z5.jpg

**Inflation Expectations Rising as Growth Sentiment Falters**
It remains early days, and much will hinge on how inflation expectations evolve from here. The latest ZEW survey for Germany already conveys the hallmarks of a classic stagflationary shock, with macroeconomic expectations weakening even as inflation expectations have ratcheted sharply higher. This shift is important: while the recent rise in headline inflation has so far shown limited pass-through into core, a sustained increase in expectations would raise the risk of second-round effects and make the inflation process more persistent. In that sense, the ZEW data highlight the key fault line in the current environment—whether the energy-driven shock remains contained, or begins to embed itself more broadly through expectations and pricing behaviour.

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Financial markets have remained notably calm in recent weeks despite rising geopolitical tensions in the Middle East, a more downbeat macroeconomic narrative and elevated uncertainty. Measures of financial stress and volatility remain low, and equity markets continue to look through both the conflict and softer data. That resilience sits alongside a more nuanced macro backdrop. The IMF’s latest WEO revisions point to a classic stagflationary energy shock—growth downgraded and inflation revised higher—although the global impact remains modest and uneven, with some economies still benefiting from stronger momentum (chart 1). At the same time, market pricing appears increasingly detached from the data flow, with volatility declining even as growth surprises have turned more negative relative to inflation (charts 2 and 3). Incoming inflation data reinforce the idea of a largely headline-driven shock, with nowcasts rising in line with higher energy prices but only limited pass-through into core inflation so far (charts 4 and 5). However, it remains early days. Survey evidence, such as the latest ZEW release, suggests that inflation expectations may already be responding in a more concerning way, with a marked rise alongside weakening growth sentiment (chart 6). Taken together, the key question for markets is whether this remains a contained, energy-driven shock that can be looked through—or whether it begins to embed more persistently via expectations, forcing a reassessment of the currently benign outlook.

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Charts of the Week: Risks Build, Markets Shrug

Robert Brusca

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The onset of the war in Iran appears to have hit the German economy extremely hard as the Ifo survey shows very substantial and broad-based decline across its survey in April. The Ifo survey features readings for five sectors as well as an aggregate reading, and it surveys them for climate, current conditions, and expectations. The decline in the Ifo survey is present for all three concepts and across all five sectors, marking the weakening in April as a highly significant and extremely disturbing development. Only manufacturing in the current conditions survey escapes a month-to-month decline.

**The Ifo sequences**: The **climate** reading fell both overall and across each of the five sectors. **Current conditions** declined for the overall and for four of the five sectors, with manufacturing the sole exception. **Expectations** declined for the overall and for all sectors. Several of the sector declines were for a very substantial magnitude, especially when compared to historic changes in these indexes.

**Monthly changes in readings—severe broad deterioration**
The month-to-month change in the climate reading has weakened more month-to-month 19% of the time. That overall result, however, is boosted by manufacturing where the monthly change has been weaker 35% of the time (on data back to 2011). However, all other sectors have seen climate weaker m/m only 2.3% to 6.3% of the time! The current situation readings weakened, with the headline weakening more m/m 11% of the time. This was boosted by manufacturing, the only sector that improved on the month; its ranking on change was in its 85th percentile—quite good and truly stand-alone good news. The other current changes by sector ranged from construction being weaker 1.7% of the time, to retailing that has been weaker about 30% of the time in terms of m/m changes. Expectation changes were uniformly terrible, with the headline drop weaker only 6.3% of the time and sector change month-to-month weaker between 9% and 1.7% of the time. The monthly weakening was uniform and substantial. I document it with these calculations, but you can also see it on the chart above.

**Climate**: The bottom line is that the all-sector index for climate fell to -20.3 in April from -18 in March, placing it at a 10.5 percentile standing on data since 1993. The sector ranking is the highest for construction with a 42.2 percentile standing and the weakness for services at a 1.1 percentile standing—weaker than the table reading nearly 99% of the time. In terms of percentile standing levels or monthly changes, conditions are closing in on grim.

**Current conditions**: Current conditions saw the all-sector index slip to -5.3 in April from -2.4 in March. The headline ranking stands at a 9.8 percentile mark, making it—like the climate reading—weaker than its current reading only about 10% of the time. The strongest reading under current conditions is for construction which has a 60.6 percentile standing; it is the only ranking in the table above its historic median. Manufacturing, the only sector in the survey that improved month-to-month, has a 22.5 percentile standing, while services record the weakest percentile standing under current conditions, at an 8.4 percentile standing.

**Expectations:** The all-sector index for expectations fell to -25.3 in April from -19.9 in March, placing it at a 6.3 percentile standing. The percentile standings across sectors range from a high of 9.5% for manufacturing to a low of 1.5% for retailing. Up until earlier this year, the Ifo was showing signs of improvement; however, all of that has simply collapsed in the last month. Weakness is across economic concepts and sectors, as documented above. For reference, the table also gives a separate set of rankings on where the various indexes stand since the invasion of Ukraine, since that was another marked event that drove the index, that had been improving after Covid, down to lower levels.  Ranked even on this reduced scale looking at conditions only since the invasion of Ukraine, when conditions have generally been weaker, the current rankings across the Ifo survey remained extremely weak. This is a very disturbing survey for the German economy.

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Germany

German Ifo Plunges Everywhere

Sandy Batten

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The National Activity Index published by the Federal Reserve Bank of Chicago (CFNAI) slipped to -0.20 in March from an upwardly revised +0.03 in February (previously (-0.11). This is the lowest monthly reading since last November. Smoothing out the monthly volatility, the index's three-month moving average (CFNAI-MA3) declined to -0.03 in March from an upwardly revised +0.03 in February (previously -0.01).

This index is expressed in standard deviation units from zero (with a value of zero defined as trend real GDP growth). Research at the FRB Chicago indicates that readings on the 3-month average of -0.70 or below are consistent with the economy being in a recession. Therefore, even though the March reading on the 3-month average was negative, it indicates that the US economy is still growing, just slightly slower than trend, and is well away from recessionary conditions. The 3-month average would be much deeper in negative territory if the economy was at risk of contracting.

The National Activity Index is a composite of 85 economic indicators, grouped into four major categories: production and income; employment, unemployment, and hours worked; personal consumption and housing; sales, orders, and inventories. Three of the four broad categories of indicators used to construct the index decreased from February, and three categories made negative contributions in March. Production-related indicators contributed –0.20 to the CFNAI in March, down from +0.13 in February. The sales, orders, and inventories category's contribution to the CFNAI was –0.01 in March, down from +0.05 in February. Employment-related indicators contributed +0.02 to the CFNAI in March, up from –0.15 in February. The personal consumption and housing category's contribution to the CFNAI was –0.01 in March, down from a neutral value in February.

The CFNAI Diffusion Index, which measures the breadth of the change in the component series and is also a three-month moving average, increased to –0.04 in March from –0.08 in February. This is the highest reading since February 2025. A reading of zero indicates that all of the indicators are growing at their long-term average. If all of the underlying indicators in a given month are below their long-run averages, the diffusion index will equal -1. If all of the indicators are above their long-run averages, it will equal +1. Thirty-four of the 85 individual indicators made positive contributions to the CFNAI in March, while 51 made negative contributions. Forty-three indicators improved from February to March, while 40 indicators deteriorated and two were unchanged. Of the indicators that improved, 16 made negative contributions.

These figures are available in Haver's **SURVEYS** database.

- The monthly reading fell to -0.20 in March from an upwardly revised +0.03 in February.
- The three-month average slipped from +0.03 to -0.03.
- Despite the slip in March, the index points to near-trend economic growth and is well above recession territory.

Chicago Fed National Activity Index Slipped in March

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance rose by 6,000 to 214,000 in the week ending April 18, from 208,000 in the week ending April 11, revised from 207,000. The four-week average rose 750 to 210,750 in the week ending April 18, from 210,000 the April 11 week, revised from 209,750. The Action Economics/Haver Analytics Survey looked for 210,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 12,000 to 1.821 million in the week ending April 11, from 1.809 million in the week ending April 4. The four-week moving average rose to 1.812 million in the latest week from 1.811 million in the March 28 week. The insured unemployment rate remained at 1.2% in the week of April 11. It has remained at that level since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending April 4, the highest unemployment rates were in New Jersey (2.51%), Massachusetts (2.37%), Rhode Island (2.31%), Washington (2.25%), Minnesota (2.11%), and California (2.02%). The lowest rates were in Florida (0.30%), Louisiana (0.31%), Arkansas (0.35%), Alabama (0.36%), North Carolina (0.39%), Tennessee (0.46%), South Dakota (0.47%), Kansas and Virginia (both 0.49%). Rates in other notable states include New York (1.92%), Illinois (1.82%), Pennsylvania (1.52%), and Texas (1.04%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- New claims rose by 6,000 to 214,000.
- Continuing claims rose by 12,000 to 1.821 million.
- The insured unemployment rate remained at 1.2%.


U.S. Initial Unemployment Claims Rose in the Week of April 18

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**Manufacturing looks strong while service sectors weaken**
S&P's April flash PMI readings show some very mixed results. For the United States, India, Australia, and the United Kingdom, there is a strengthening in the readings month-to-month for services, manufacturing, and the composite.

For Japan, France, and the European Monetary Union as a whole, there is improvement in the manufacturing sector on the month but a weaker services reading and a weaker composite overall.

Germany is the only responding area in the table showing weakness all around—in all three sectors—a weaker composite, a weaker manufacturing sector, and a weaker services sector in April. For Germany, this follows a weaker composite and service sector in March as well.

Most reporters—France, the United Kingdom, Japan, Australia, and India—had weaker readings for all three metrics in March: the composite, services, and manufacturing. The March exceptions were the United States, Germany, and the European Monetary Union; in each case, the exception was that the manufacturing sector improved month-to-month, while the composite and services both weakened.

This has been a period of weakening—in March and April—since the war in Iran began. The 48 separate sector readings produced 30 readings that were weaker month-to-month in March and April. Among the 16 composite readings, 12 reported weaker conditions month-to-month. In March, the immediate aftermath of the outbreak of war brought instantaneous step backs across the PMI readings, while April, responding to at least a military success in the area, has shown a significant bounce back that is now more common than further weakness.

The sequential data over three months, six months, and 12 months are based only on completed data; therefore, they're up to date through March. On that basis, we have triple sector weakness in the U.S., India, and Australia, with only Japan and the United Kingdom showing triple-sector improvement over three months. However, if we look at six months compared to 12 months, we have triple sector strength in the Monetary Union, Germany, France, the United Kingdom, Japan, and Australia. India and the U.S. each show only one stronger sector over that comparison—services in India’s case and manufacturing in the U.S. case.

**Ranking Peculiarity**
The ranking data take the current flash data and compare them to the history of observations back to January 2022. What is quite surprising is that, on that timeline, the manufacturing sectors of all the countries in the table—except for Australia and India—show manufacturing standings in their respective 80th to 90th percentiles. Meanwhile, services standings are typically in the 30th percentile or lower.

**Odd Impact of War**
If the war in Iran has an impact on something, we would expect that to fall on the goods trade sector. We would expect this to have an impact on manufacturing although it's the opposite thing that's happening. Manufacturing is showing a revival, while services sectors are showing weaker performance across these countries generally. India is an interesting case, with manufacturing only in its 32nd percentile; however, India’s raw diffusion reading for manufacturing is the strongest raw diffusion reading in the table. What India's ranking is telling us is that India had been extremely strong over the period since 2022, and now compared to that past standard, it's relatively weaker. However, it's still strong in absolute terms, showing a great deal of strength based on its pure diffusion value, just not in comparison to historic performance.

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**Next?**
At this point, it's not clear to me at least what these PMI data are telling us since the strength in manufacturing is a curiosity as is the weakness in the services sector. You see these two phenomena displayed in the chart above, in the case of the European Monetary Union’s flash readings as well.

**War breeds negative effects**
It's not a surprise that war would take some toll on consumer confidence or that it would be reflected in the services sector. However, seeing the kind of weakness being portrayed now in services against the strength in manufacturing is simply a bit hard to rationalize and understand. So, I think we're going to have to keep an eye on these readings as well as other readings in the months ahead to try to discern how global events, the war, conditions in the Strait of Hormuz, inflation currency shifts, and central bank policy are playing out across these various countries. None of what is happening is obvious to me. Japan clearly continues to benefit from a weak yen as its manufacturing sector is flying high, at its best reading since January 2022.

Economy in Brief

Jump to:

German Investors and Analysts Confident of the Present but Wary of the Future

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