Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060628c.jpg" width="353">
Balance of payments reports for two emerging European economies show a mixed picture for Q1 2006. In Lithuania, the current account has widened markedly over the last year, in rough parallel with gaping trade accounts. By contrast, Bosnia and Herzegovina are seeing a steadier trend in both current account and trade balances, although these not-seasonally adjusted figures are fairly erratic from quarter to quarter.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060628d.jpg" width="353">
In Lithuania, imports surged in the spring of last year and continued rising through the summer. Until 2003, the usual seasonal pattern saw them ease in the summer quarter after their spring bounce. We presume the latest move is energy related. Fortunately, exports have been stronger in the last year than has been typical, but still not so vigorous as imports. Also fortunate have been larger surpluses on services and transfer receipts which have helped offset the larger trade deficit. On the financial accounts side of the balance of payments ledger, &quot;other investment&quot;, generally bank loans, has increased and even Lithuania&#39;s capital account has shown a persistent and non-trivial surplus. However, some financing has also come from a decrease in foreign exchange reserves, not likely a comfortable position for the central bank.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060628e.jpg" width="353">
In Bosnia, the rise in imports has been much more temperate. Indeed, in Q1, imports were actually very slightly smaller than in Q1 2005. Combined with a firm uptrend in exports, the goods balance has deteriorated only modestly, rather than losing major ground as in some other countries. Financing for the goods deficit has come from a sustained inflow of current transfers (see graph) and from inflows of direct investment and &quot;other&quot; investment. Interestingly, Bosnia &amp; Herzegovina has virtually no portfolio investment. There has been a moderate run-off of foreign exchange reserves.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060628f.jpg" width="353">
Both of these countries peg their currencies to the euro. Lithuania is a member of the EU-25, the segment added in 2004 that retain their own local currency, here the litas, which is 3.4528 to the euro. Bosnia has linked its currency, the Convertible Marka, to the euro since the inception of the euro in 1999. Monthly data for it are maintained by the Central Bank of Bosnia &amp; Herzegovina from 2002. All of these data are contained in Haver&#39;s EMERGECW database and some data for Lithuania are also in EUROSTAT.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q1 2005</th>
Quarterly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Lithuania: Mil Litai, SA</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>-2035.7</td>
<td>-1308.4</td>
<td>-1013.1</td>
<td>-1234.5</td>
<td>-1202.5</td>
<td>-963.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Trade Balance</td>
<td>-2529.1</td>
<td>-2202.6</td>
<td>-1569.0</td>
<td>-1982.0</td>
<td>-1657.7</td>
<td>-1285.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial Account Balance</td>
<td>1650.5</td>
<td>907.9</td>
<td>340.1</td>
<td>931.4</td>
<td>878.1</td>
<td>789.6</td>
</tr>
<tr>
<td class="firstcol">Bosnia: Mil. Convertible Marka, NSA</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>-221.5</td>
<td>-1154.4</td>
<td>-424.3</td>
<td>-829.0</td>
<td>-702.5</td>
<td>-705.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Trade Balance</td>
<td>-1089.4</td>
<td>-2387.2</td>
<td>-1400.1</td>
<td>-1958.3</td>
<td>-1798.2</td>
<td>-1795.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial Account Balance</td>
<td>44.8</td>
<td>688.8</td>
<td>234.1</td>
<td>412.8</td>
<td>276.1</td>
<td>371.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Balance of payments reports for two emerging European economies show a mixed picture for Q1 2006. In Lithuania, the current account has widened markedly over the last year, in rough parallel with gaping trade accounts. By contrast, [...]

Wider Current Account Deficit in Lithuania; Slight Improvement in Bosnia & Herzegovina

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060628a.jpg" width="353">
The total number of mortgage applications fell a sharp 6.7% last week after a slight decline the prior week. The drop pulled the average number of applications 1.8% in June below the May average and applications were 32.0% below the year ago level.
Applications to refinance cratered 7.5% last week, the fourth w/w drop this month. Refis in June were 3.2% below the May average and 46.4% below the year earlier level.
Purchase applications also fell sharply from the previous week. The 6.2% drop lowered the June average 1.3% below May and 18.5% below the year ago level.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The effective interest rate on a conventional 30-year mortgage rose another twelve basis points to 7.08%, the highest level since April 2002. The rate on 15-year financing also surged ten basis points to 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060628b.jpg" width="353">
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest 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>.
The Price of Residential Land in Large U.S. Citiesfrom the Federal Reserve Board is available <a href="http://www.federalreserve.gov/pubs/feds/2006/200625/200625pap.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">06/23/06</th>
<th scope="col">06/16/06</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>529.6</td>
<td>567.6</td>
<td>-32.0%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>389.0</td>
<td>414.8</td>
<td>-18.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,356.0</td>
<td>1,466.1</td>
<td>-46.4%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

The total number of mortgage applications fell a sharp 6.7% last week after a slight decline the prior week. The drop pulled the average number of applications 1.8% in June below the May average and applications were 32.0% below the [...]

Mortgage Applications Fell Hard, Rates Above 7%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060628a.jpg" width="353">
The total number of mortgage applications fell a sharp 6.7% last week after a slight decline the prior week. The drop pulled the average number of applications 1.8% in June below the May average and applications were 32.0% below the year ago level.
Applications to refinance cratered 7.5% last week, the fourth w/w drop this month. Refis in June were 3.2% below the May average and 46.4% below the year earlier level.
Purchase applications also fell sharply from the previous week. The 6.2% drop lowered the June average 1.3% below May and 18.5% below the year ago level.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The effective interest rate on a conventional 30-year mortgage rose another twelve basis points to 7.08%, the highest level since April 2002. The rate on 15-year financing also surged ten basis points to 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060628b.jpg" width="353">
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest 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>.
The Price of Residential Land in Large U.S. Citiesfrom the Federal Reserve Board is available <a href="http://www.federalreserve.gov/pubs/feds/2006/200625/200625pap.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/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">06/23/06</th>
<th scope="col">06/16/06</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>529.6</td>
<td>567.6</td>
<td>-32.0%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>389.0</td>
<td>414.8</td>
<td>-18.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,356.0</td>
<td>1,466.1</td>
<td>-46.4%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Wider Current Account Deficit in Lithuania; Slight Improvement in Bosnia & Herzegovina 
by <a href="/comment/Stone.html">Carol Stone</a> June 28, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060628c.jpg" width="353">
Balance of payments reports for two emerging European economies show a mixed picture for Q1 2006. In Lithuania, the current account has widened markedly over the last year, in rough parallel with gaping trade accounts. By contrast, Bosnia and Herzegovina are seeing a steadier trend in both current account and trade balances, although these not-seasonally adjusted figures are fairly erratic from quarter to quarter.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060628d.jpg" width="353">
In Lithuania, imports surged in the spring of last year and continued rising through the summer. Until 2003, the usual seasonal pattern saw them ease in the summer quarter after their spring bounce. We presume the latest move is energy related. Fortunately, exports have been stronger in the last year than has been typical, but still not so vigorous as imports. Also fortunate have been larger surpluses on services and transfer receipts which have helped offset the larger trade deficit. On the financial accounts side of the balance of payments ledger, &quot;other investment&quot;, generally bank loans, has increased and even Lithuania&#39;s capital account has shown a persistent and non-trivial surplus. However, some financing has also come from a decrease in foreign exchange reserves, not likely a comfortable position for the central bank.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060628e.jpg" width="353">
In Bosnia, the rise in imports has been much more temperate. Indeed, in Q1, imports were actually very slightly smaller than in Q1 2005. Combined with a firm uptrend in exports, the goods balance has deteriorated only modestly, rather than losing major ground as in some other countries. Financing for the goods deficit has come from a sustained inflow of current transfers (see graph) and from inflows of direct investment and &quot;other&quot; investment. Interestingly, Bosnia &amp; Herzegovina has virtually no portfolio investment. There has been a moderate run-off of foreign exchange reserves.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060628f.jpg" width="353">
Both of these countries peg their currencies to the euro. Lithuania is a member of the EU-25, the segment added in 2004 that retain their own local currency, here the litas, which is 3.4528 to the euro. Bosnia has linked its currency, the Convertible Marka, to the euro since the inception of the euro in 1999. Monthly data for it are maintained by the Central Bank of Bosnia &amp; Herzegovina from 2002. All of these data are contained in Haver&#39;s EMERGECW database and some data for Lithuania are also in EUROSTAT.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q1 2005</th>
Quarterly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Lithuania: Mil Litai, SA</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>-2035.7</td>
<td>-1308.4</td>
<td>-1013.1</td>
<td>-1234.5</td>
<td>-1202.5</td>
<td>-963.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Trade Balance</td>
<td>-2529.1</td>
<td>-2202.6</td>
<td>-1569.0</td>
<td>-1982.0</td>
<td>-1657.7</td>
<td>-1285.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial Account Balance</td>
<td>1650.5</td>
<td>907.9</td>
<td>340.1</td>
<td>931.4</td>
<td>878.1</td>
<td>789.6</td>
</tr>
<tr>
<td class="firstcol">Bosnia: Mil. Convertible Marka, NSA</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Current Account</td>
<td>-221.5</td>
<td>-1154.4</td>
<td>-424.3</td>
<td>-829.0</td>
<td>-702.5</td>
<td>-705.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Trade Balance</td>
<td>-1089.4</td>
<td>-2387.2</td>
<td>-1400.1</td>
<td>-1958.3</td>
<td>-1798.2</td>
<td>-1795.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial Account Balance</td>
<td>44.8</td>
<td>688.8</td>
<td>234.1</td>
<td>412.8</td>
<td>276.1</td>
<td>371.5</td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627e.jpg" width="353">
Germany, Italy and the Netherlands reported increased business confidence today. We noted yesterday that confidence in Belgium had also increased. France is the only Euro Zone country that, so far, has seen a decline in business confidence.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627f.jpg" width="353">
The German IFO measure of business confidence rose 1.0% from 105.7 to 106.8 (2000=100) in June, the highest level since February, 1991. In terms of the diffusion index the excess of optimists over pessimists rose 2.3 percentage points from 10.4% in May to 12.7% in June. In the Netherlands, where business confidence is measured by the excess of optimists over pessimists, the percent balance rose 3.1 percentage points from 3.3% to 6.4%. The first chart compares the percent balances indicators for Germany and the Netherlands. Business confidence in Italy, which has been lower than that in Germany, rose by almost 2% in June from May to reach 98.9 (2000=100), the highest level since December, 2000. The second chart compares the indexes of business confidence in Germany and Italy.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627g.jpg" width="353">
Italy and the Netherlands also reported on consumer confidence. The Italian consumer lost some confidence as the indicator of consumer confidence fell 0.7% from 107.1 (2000=100) in May to 106.8 in June. The Dutch consumer, on the contrary, became more optimistic in June as the optimists exceeded the pessimist by 5% in contrast to May when the pessimists exceeded the optimists by 4%. The third chart compares consumer confidence in Italy and in the Netherlands.
The rise in business confidence in these countries has occurred in spite of strength in the euro, continued high oil prices and the likelihood of a rise in the European Central Bank&#39;s main lending interest rate. It may be that the biggest threat to confidence is the possibility of greater than expected increases in ECB&#39;s lending rate. The rate is currently 2.75%, having risen by from the low 2% in three increments of 25 basis points in December of last year and in March and June of this year. In the past week six council members of the ECB have hinted that the bank may accelerate interest rate increases to combat inflationary pressures. And just today, in its Annual Report the Bank of International Settlements (BIS) called on central bankers to raise interest rates to combat these same global inflationary pressures. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Confidence Measures</th>
<th scope="col">Jun&nbsp; 06</th>
<th scope="col">May 06</th>
<th scope="col">Jun 05</th>
<th scope="col">M/M %</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">Germany&nbsp;Business Confidence</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Index (2000=100)</td>
<td>106.8</td>
<td>105.7</td>
<td>93.3</td>
<td>1.04</td>
<td>14.47</td>
<td>95.5</td>
<td>95.5</td>
<td>91.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Balance</td>
<td>12.7</td>
<td>10.4</td>
<td>-14.1</td>
<td>2.3*</td>
<td>24.5*</td>
<td>-9.7</td>
<td>-9.9</td>
<td>-17.2</td>
</tr>
<tr>
<td class="firstcol">Italy Business&nbsp;&nbsp;&nbsp; Confidence (2000=100)</td>
<td>98.9</td>
<td>92.0</td>
<td>84.8</td>
<td>1.96</td>
<td>16.62</td>
<td>87.5</td>
<td>89.5</td>
<td>87.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy Consumer Confidence (2000=100)</td>
<td>106.8</td>
<td>107.6</td>
<td>102.9</td>
<td>-0.74</td>
<td>3.79</td>
<td>104.2</td>
<td>101.4</td>
<td>106.1</td>
</tr>
<tr>
<td class="firstcol">Netherlands Business Confidence (% Balance&nbsp;</td>
<td>6.4</td>
<td>3.3</td>
<td>-1.7</td>
<td>3.1*</td>
<td>8.1*</td>
<td>0.6</td>
<td>-0.1</td>
<td>-5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands Consumer Confidence (% Balance)&nbsp;</td>
<td>5</td>
<td>-4</td>
<td>-26</td>
<td>9*</td>
<td>31*</td>
<td>-22</td>
<td>-25</td>
<td>-35</td>
</tr>
</tbody>
</table>
</body>
</html>

Germany, Italy and the Netherlands reported increased business confidence today. We noted yesterday that confidence in Belgium had also increased. France is the only Euro Zone country that, so far, has seen a decline in business [...]

Business Confidence in Europe Still Strong in Spite of Euro Strength, High Oil Prices and Rising Interest Rates

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627a.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS reported that chain store sales fell 0.4% last week after having been unchanged the prior period.
Sales in June are 0.2% below the May average which fell 0.4% from April. 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 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 fell 0.3% (-2.0% y/y) during the latest period after three consecutive weeks of increase.
Parsing Recent Inflation Data from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/eyi/usecon/archived/0606inflation.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">06/24/06</th>
<th scope="col">06/17/06</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>471.6</td>
<td>473.6</td>
<td>4.1%</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 reported that chain store sales fell 0.4% last week after having been unchanged the prior period. Sales in June are 0.2% below the May average which fell 0.4% from April. During [...]

Chain Store Sales Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627c.jpg" width="353">
Consumer confidence as reported by the Conference Board improved 1.0% in June to 105.7. The rise recovered a piece of the 4.6% May decline that was revised slightly shallower. It contrasted to Consensus expectations for a further decline to 103.5 and compared to a 4.2% rise in the University of Michigan&#39;s June Index of Consumer Sentiment.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Consumers&#39; assessment of the present situation fell for a second month and posted a 1.0% decline (+9.9% y/y). The percentage of respondents who viewed business conditions as good (26.8%) fell for a second month and the percentage that viewed jobs as hard to get (19.9%) reversed the prior month&#39;s rise.
The index of consumers&#39; expectations rose a modest 2.9% (-9.1% y/y) and recovered just part of the May decline. Expectations for business conditions in six months improved slightly as did expectations that the number of jobs would rise. Expectations for the inflation rate in twelve months slipped to 5.1% from 5.6% expected in May.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<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/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">June</th>
<th scope="col">May</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">Consumer Confidence</td>
<td>105.7</td>
<td>104.7</td>
<td>-0.5%</td>
<td>100.3</td>
<td>96.1</td>
<td>79.8</td>
</tr>
</tbody>
</table>
</body>
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Consumer confidence as reported by the Conference Board improved 1.0% in June to 105.7. The rise recovered a piece of the 4.6% May decline that was revised slightly shallower. It contrasted to Consensus expectations for a further [...]

Consumer Confidence Improved A Bit

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627b.jpg" width="353">
 Total existing home sales fell 1.2% during May to 6.670M following a little revised 2.2% decline during April. Consensus expectations had been for sales of 6.62M and the figures were reported by the National Association of Realtors.
Sales of single-family homes fell 1.5%, down for the fourth month this year. The data cover sales closed in the latest and previous months and contrast to the new home sales (up in May) data which count sales at the signing of a contract.
In May sales of existing single family homes were down 8.1% versus the peak last June and for the first five months of this year were off 4.0% from the 2005 average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627d.jpg" width="353">
Sales were weakest last month in the Northeast which posted a 4.8% drop (-5.9% y/y) and in the Midwest where they fell 4.3% (-5.6% y/y). In the South (-2.8% y/y) and in the West (-14.1% y/y), May sales were unchanged from the prior month.
The median price of an existing single-family home rose 3.2% (6.4% y/y). The price figures are not seasonally adjusted.
The inventory of unsold existing homes rose 5.5% and was up 41.0% from one year earlier. The supply of unsold single family homes was up 36.3% y/y and the supply of condos &amp; coops for sale was up 73.0%.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">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/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">May</th>
<th scope="col">April</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 Home Sales</td>
<td>&nbsp;6,670</td>
<td>6,750</td>
<td>-6.6%</td>
<td>7,064</td>
<td>6,722</td>
<td>6,176</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>5,820</td>
<td>5,910</td>
<td>-6.6%</td>
<td>6,170</td>
<td>5,912</td>
<td>5,443</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price (000) </td>
<td>$229.7 </td>
<td>$222.6 </td>
<td>6.4% </td>
<td>$206.3</td>
<td>$182.8 </td>
<td>$169.1 </td>
</tr>
</tbody>
</table>


</html>

Total existing home sales fell 1.2% during May to 6.670M following a little revised 2.2% decline during April. Consensus expectations had been for sales of 6.62M and the figures were reported by the National Association of Realtors. [...]

U.S. Existing Home Sales Decline As Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627b.jpg" width="353">
 Total existing home sales fell 1.2% during May to 6.670M following a little revised 2.2% decline during April. Consensus expectations had been for sales of 6.62M and the figures were reported by the National Association of Realtors.
Sales of single-family homes fell 1.5%, down for the fourth month this year. The data cover sales closed in the latest and previous months and contrast to the new home sales (up in May) data which count sales at the signing of a contract.
In May sales of existing single family homes were down 8.1% versus the peak last June and for the first five months of this year were off 4.0% from the 2005 average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627d.jpg" width="353">
Sales were weakest last month in the Northeast which posted a 4.8% drop (-5.9% y/y) and in the Midwest where they fell 4.3% (-5.6% y/y). In the South (-2.8% y/y) and in the West (-14.1% y/y), May sales were unchanged from the prior month.
The median price of an existing single-family home rose 3.2% (6.4% y/y). The price figures are not seasonally adjusted.
The inventory of unsold existing homes rose 5.5% and was up 41.0% from one year earlier. The supply of unsold single family homes was up 36.3% y/y and the supply of condos &amp; coops for sale was up 73.0%.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">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/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">May</th>
<th scope="col">April</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 Home Sales</td>
<td>&nbsp;6,670</td>
<td>6,750</td>
<td>-6.6%</td>
<td>7,064</td>
<td>6,722</td>
<td>6,176</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>5,820</td>
<td>5,910</td>
<td>-6.6%</td>
<td>6,170</td>
<td>5,912</td>
<td>5,443</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price (000) </td>
<td>$229.7 </td>
<td>$222.6 </td>
<td>6.4% </td>
<td>$206.3</td>
<td>$182.8 </td>
<td>$169.1 </td>
</tr>
</tbody>
</table>
Consumer Confidence Improved A Bit 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 27, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627c.jpg" width="353">
Consumer confidence as reported by the Conference Board improved 1.0% in June to 105.7. The rise recovered a piece of the 4.6% May decline that was revised slightly shallower. It contrasted to Consensus expectations for a further decline to 103.5 and compared to a 4.2% rise in the University of Michigan&#39;s June Index of Consumer Sentiment.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Consumers&#39; assessment of the present situation fell for a second month and posted a 1.0% decline (+9.9% y/y). The percentage of respondents who viewed business conditions as good (26.8%) fell for a second month and the percentage that viewed jobs as hard to get (19.9%) reversed the prior month&#39;s rise.
The index of consumers&#39; expectations rose a modest 2.9% (-9.1% y/y) and recovered just part of the May decline. Expectations for business conditions in six months improved slightly as did expectations that the number of jobs would rise. Expectations for the inflation rate in twelve months slipped to 5.1% from 5.6% expected in May.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<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/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">June</th>
<th scope="col">May</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">Consumer Confidence</td>
<td>105.7</td>
<td>104.7</td>
<td>-0.5%</td>
<td>100.3</td>
<td>96.1</td>
<td>79.8</td>
</tr>
</tbody>
</table>
Chain Store Sales Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 27, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627a.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS reported that chain store sales fell 0.4% last week after having been unchanged the prior period.
Sales in June are 0.2% below the May average which fell 0.4% from April. 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 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 fell 0.3% (-2.0% y/y) during the latest period after three consecutive weeks of increase.
Parsing Recent Inflation Data from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/eyi/usecon/archived/0606inflation.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">06/24/06</th>
<th scope="col">06/17/06</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>471.6</td>
<td>473.6</td>
<td>4.1%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
 Business Confidence in Europe Still Strong in Spite of Euro Strength, High Oil Prices and Rising Interest Rates 
by <a href="/comment/Curley.html">Louise Curley</a> June 27, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627e.jpg" width="353">
Germany, Italy and the Netherlands reported increased business confidence today. We noted yesterday that confidence in Belgium had also increased. France is the only Euro Zone country that, so far, has seen a decline in business confidence.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627f.jpg" width="353">
The German IFO measure of business confidence rose 1.0% from 105.7 to 106.8 (2000=100) in June, the highest level since February, 1991. In terms of the diffusion index the excess of optimists over pessimists rose 2.3 percentage points from 10.4% in May to 12.7% in June. In the Netherlands, where business confidence is measured by the excess of optimists over pessimists, the percent balance rose 3.1 percentage points from 3.3% to 6.4%. The first chart compares the percent balances indicators for Germany and the Netherlands. Business confidence in Italy, which has been lower than that in Germany, rose by almost 2% in June from May to reach 98.9 (2000=100), the highest level since December, 2000. The second chart compares the indexes of business confidence in Germany and Italy.<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627g.jpg">
Italy and the Netherlands also reported on consumer confidence. The Italian consumer lost some confidence as the indicator of consumer confidence fell 0.7% from 107.1 (2000=100) in May to 106.8 in June. The Dutch consumer, on the contrary, became more optimistic in June as the optimists exceeded the pessimist by 5% in contrast to May when the pessimists exceeded the optimists by 4%. The third chart compares consumer confidence in Italy and in the Netherlands.
The rise in business confidence in these countries has occurred in spite of strength in the euro, continued high oil prices and the likelihood of a rise in the European Central Bank&#39;s main lending interest rate. It may be that the biggest threat to confidence is the possibility of greater than expected increases in ECB&#39;s lending rate. The rate is currently 2.75%, having risen by from the low 2% in three increments of 25 basis points in December of last year and in March and June of this year. In the past week six council members of the ECB have hinted that the bank may accelerate interest rate increases to combat inflationary pressures. And just today, in its Annual Report the Bank of International Settlements (BIS) called on central bankers to raise interest rates to combat these same global inflationary pressures. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Confidence Measures</th>
<th scope="col">Jun&nbsp; 06</th>
<th scope="col">May 06</th>
<th scope="col">Jun 05</th>
<th scope="col">M/M %</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">Germany&nbsp;Business Confidence</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Index (2000=100)</td>
<td>106.8</td>
<td>105.7</td>
<td>93.3</td>
<td>1.04</td>
<td>14.47</td>
<td>95.5</td>
<td>95.5</td>
<td>91.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Balance</td>
<td>12.7</td>
<td>10.4</td>
<td>-14.1</td>
<td>2.3*</td>
<td>24.5*</td>
<td>-9.7</td>
<td>-9.9</td>
<td>-17.2</td>
</tr>
<tr>
<td class="firstcol">Italy Business&nbsp;&nbsp;&nbsp; Confidence (2000=100)</td>
<td>98.9</td>
<td>92.0</td>
<td>84.8</td>
<td>1.96</td>
<td>16.62</td>
<td>87.5</td>
<td>89.5</td>
<td>87.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy Consumer Confidence (2000=100)</td>
<td>106.8</td>
<td>107.6</td>
<td>102.9</td>
<td>-0.74</td>
<td>3.79</td>
<td>104.2</td>
<td>101.4</td>
<td>106.1</td>
</tr>
<tr>
<td class="firstcol">Netherlands Business Confidence (% Balance&nbsp;</td>
<td>6.4</td>
<td>3.3</td>
<td>-1.7</td>
<td>3.1*</td>
<td>8.1*</td>
<td>0.6</td>
<td>-0.1</td>
<td>-5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands Consumer Confidence (% Balance)&nbsp;</td>
<td>5</td>
<td>-4</td>
<td>-26</td>
<td>9*</td>
<td>31*</td>
<td>-22</td>
<td>-25</td>
<td>-35</td>
</tr>
</tbody>
</table>


</html>

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

AI boosting US investment in data centers

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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.

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**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.

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**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.

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**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.

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**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

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

Winnie Tapasanun

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Mortgage applications rose 7.9% w/w (29.9% y/y) in the week ending April 17 following a 1.8% rebound in the week ending April 10, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The latest reading was the second successive w/w gain and the largest since the February 27 week, lifting the index to 303.3, its highest level since the March 20 week. Applications for loans to purchase a house jumped 10.1% (14.5% y/y) in the April 17 week, the biggest w/w increase since the January 9 week, after a 1.0% decline in the previous week. Applications for loan refinancing rose 5.8% (51.9% y/y) in the April 17 week following a 5.1% rebound in the April 10 week.

The effective interest rate on a 30-year fixed-rate loan fell 7bps to 6.53% in the week ending April 17 from 6.60% in the week ending April 10; it was above a low of 6.29% in the week of September 20, 2024 but below a peak of 8.12% in the week of October 20, 2023. The rate on 15-year fixed-rate mortgages dropped 12bps to 5.92% in the April 17 week from 6.04% in the previous week; it was up from a low of 5.60% in the week of September 20, 2024 but down from a high of 7.44% in the week of October 27, 2023. The rate on 30-year jumbo loans declined 5bps to 6.56% in the April 17 week from 6.61% in the prior week; it was above its most recent low of 6.25% in the February 27 week but below a high of 7.99% in the week of October 27, 2023. These three rates hit their lowest levels since the March 13 week. Meanwhile, the rate on a 5-year ARM edged up to 5.81% in the April 17 week, the first w/w increase in four weeks, from 5.80% in the previous week (the lowest since the March 6 week); it was above its most recent low of 5.38% in the February 20 week but below a high of 7.31% in the week of October 27, 2023.

The share of applications for refinancing an existing loan fell to 44.2% of total applications in the week ending April 17—the sixth w/w fall in seven weeks and the lowest level since the week of August 1, 2025—after rising to 45.5% in the week ending April 10; those numbers remained below a peak of 61.9% in the January 16 week. The adjustable-rate mortgage (ARM) share of activity declined to a three-week-low 8.0% in the April 17 week from 8.4% in the prior week; it was below a peak of 12.9% in the week of September 12, 2025 but above a low of 4.7% in the week of January 3, 2025.

The average size of a mortgage loan, up for the third consecutive week, rose 1.2% w/w (3.4% y/y) to $399,900 in the April 17 week, the highest level since the March 13 week, after a 1.3% increase to $395,000 in the April 10 week. The average size of a purchase loan eased 0.1% (+3.6% y/y) to $455,600 in the April 17 week, the fourth w/w decline in five weeks, following a 1.8% rebound to $456,100 in the prior week. The average size of a loan to refinance a mortgage climbed 2.4% (10.7% y/y) to $329,500 in the April 17 week after a 1.5% rise to $321,800 in the previous week, marking the third successive w/w increase and the highest level since the March 20 week.

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 +10.1% w/w, biggest increase since the Jan. 9 week; refinancing loan applications +5.8% w/w, second consecutive rise.
- Effective interest rate on 30-year fixed loans down 7bps to 6.53%, a five-week low.
- Average loan size up for the third straight week, highest level since the March 13 week.

U.S. Mortgage Applications Up 7.9% in the April 17 Week, Largest Gain Since Late February

Robert Brusca

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The National Bank of Belgium consumer survey for April registered -9, compared to a reading of -6 in March and +1 in February. Since the war in the Middle East began, confidence readings have declined steadily. However, the April consumer confidence reading of -9 still shows improvement from its level of -14 recorded 2 months ago. The index has a 37.8 percentile standing based on data back to 1991, which places it below its historic median: the median ranking occurs at a percentile standing of 50.

The responses to the survey are mixed and some of them are quite negative; however, a few also are quite upbeat. For now, the main message is that the survey is mixed. While most confidence readings tend to the weak side, there are a few that are actually quite encouraging.

**Economic Situation**
A survey on the economic situation shows improvement for the next 12 months; its April reading rose to -43 in April from -45 in March. However, with the onset of war, the March reading had fallen to -45 from -25 in February, so the month-to-month uptick in April is really small potatoes. The 12-month change in the outlook for the economic situation over the next 12 months is a tick better in April 2026 than it was in April 2025. Continuing the back and forth on its “bad but not that bad” swing, the queue reading of the index on data back to 1991 has only a 1.8 percentile standing, marking it as weaker than its current level less than 2% of the time and ending the back-and-forth on whether the reading is poor or not. It is very weak.

The assessment of the economic situation over the last 12 months deteriorated to -57 in April from -42 in March, and it also worsened compared to its level of a year ago. In addition, its standing is in the bottom 8% of its historic queue data.

**Prices**
Price trends give us some of the clearest and most negative views. Prices over the next 12 months improved slightly from March, moving to a reading of 50 in April from 53 in March. Still, the April reading of 50 is higher than its reading of 35 one year ago, and its standing is in the top 1% of all observations on data back to 1991. Those are dismal statistics. Price trends for the last 12 months are shown to have been slightly more stable but still with readings that had been historically worse, only about 15% of the time, marking the past inflation environment as having been poor as well.

**Unemployment**
The consumers’ unemployment forecast went up in April to a reading of +6 from -3 in March; it had deteriorated to -3 in March from -11 in February. A rising unemployment response reflects deterioration. People are assessing the possibility of unemployment as getting higher, although at +6 the April reading is substantially reduced compared to what it was a year ago at +21. The standing for the unemployment forecast is only in its 16.7 percentile of its historic queue of data, meaning that the likelihood of unemployment has been lower than this, only about 16% to 17% of the time.

**Major Household Purchases**
If you look at the environment to make major household purchases, the responses of consumers become slightly more convoluted since the question as to whether it's favorable to buy at present deteriorated sharply in April to -44 from -23 in March; that was a sharp deterioration from -20 a year ago. Ranking the current -44 reading on data back to 1991, this is the weakest or the worst favorability for spending on this timeline. So that particular sequence of data doesn't fit really well with the unemployment responses, although being unemployed and finding it's a favorable time to buy goods are different things; both do speak to the economic environment which we can see is somewhat touch and go.

The outlook for making major purchases over the next 12 months deteriorated slightly over the last few months, with a reading of -19 compared to -17 a year ago. That current reading has a 24.3 percentile standing, placing it in the lower quartile of its historic queue of data. This underlines that the spending environment has been poor throughout the last year compared to historic experience since the 1990s.

**The Financial Situation of Households**
The financial situation of households over the next 12 months deteriorated slightly in April to -5 from -3, and it had deteriorated in March to -3 from -2 in February. Even so, the April reading of  5 was stronger than -8 recorded one year ago. Still, if we let the ranking on data back to 1991 be the arbiter of whether the assessment of conditions is weak, the 10.6 percentile standing for the financial situation ahead and the 12.2 percentile standing for the financial situation of households over the last 12 months both indicate decisive weakness.

**The Current Situation**
The next reading is a bit of a surprise given the drumbeat of weakness that we see from the data above. The current situation appraisal did backtrack in April to 21 from 25 in March, but it's only slightly weaker than a reading of 22 in February. The April 2026 reading of 21 is slightly weaker than a reading of 25 one year ago. However, the April reading has a percentile standing on data back to 1991 at its 74.5 percentile, putting it right at the border of its top 25th percentile.

So, the current situation is appraised as a top 25-percentile standing, but the environment for making purchases over the next 12 months has a lower 24-percentile standing; and the current situation has a favorability for buying which is the worst that we've seen in the entire period. However, expectations of unemployment remain low. To round out this situation, the favorability to save over the next 12 months has a ranking in its 86-percentile, making it a top 15-percentile reading. The favorability to save at present has a 58-percentile standing, placing it above its historic median and slightly better than average. What we have are crosscurrents.

On balance, you see the consumers view their situation as having a lot of crosscurrents. In terms of the thing they fear the most, unemployment conditions are not considered to be at risk and the economic situation is appraised to be in the upper tier of where it has been since the 1990s even though the favorability of spending is the worst experience for consumers on that same timeline. But the inflation readings are unambiguously bad—and worsening.

It would appear from these crosscurrents that the Belgian consumer is ripe for being pushed one way or the other if events were to markedly either improve or to deteriorate.

Economy in Brief

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Wider Current Account Deficit in Lithuania; Slight Improvement in Bosnia & Herzegovina

Mortgage Applications Fell Hard, Rates Above 7%

Mortgage Applications Fell Hard, Rates Above 7%

Business Confidence in Europe Still Strong in Spite of Euro Strength, High Oil Prices and Rising Interest Rates

Chain Store Sales Fell

Consumer Confidence Improved A Bit

U.S. Existing Home Sales Decline As Expected

U.S. Existing Home Sales Decline As Expected