Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060613a.jpg" width="353">
US retail sales increased an expected 0.1% following an upwardly revised 0.8% rise during April. Retail sales during the first five months of 2006 rose at a 9.2% annual rate versus the 7.2% rise during all of last year.
Nonauto sales made up some of the prior month&#39;s disappointment and rose 0.5%. The 0.8% April increase was little revised. Consensus expectations had been for a 0.5% May increase.
Sales at gasoline stations jumped another 1.9% (21.9% y/y) due to the 6.0% m/m increase in retail gasoline prices to an average of $2.91 per gallon.
Less gasoline, nonauto retail sales rose 0.3% (7.5% y/y) following a 0.1% up tick during April which was downwardly revised. Year to date, nonauto retail sales less gasoline increased 8.4% at an annual rate versus a 6.7% increase during 2005.
Sales of discretionary items were mixed last month. General merchandise stores rose 0.3% (6.0% y/y) after a 0.7% increase during April and apparel store sales rose 0.2% (6.0% y/y) after two months of 0.5% increase. Sales of nonstore retailers (internet &amp; catalogue) jumped 1.8% (14.1% y/y) and have risen 10.8% (AR) year to date. To the downside were sales of furniture, electronics &amp; appliances which slipped 0.1% (+6.7% y/y) due to lower furniture sales (-0.5% m/m, +7.4% y/y). Building material sales also fell 0.4% (+11.2% y/y), down for the second consecutive month.
Sales by motor vehicle &amp; parts dealers fell 1.6% (+1.9% y/y) and reflected a 3.9% m/m decline in unit auto sales to 16.10M.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</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>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.1%</td>
<td>0.8%</td>
<td>7.6%</td>
<td>7.2%</td>
<td>6.2%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.5%</td>
<td>0.8%</td>
<td>9.1%</td>
<td>8.2%</td>
<td>7.2%</td>
<td>4.7%</td>
</tr>
</tbody>
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US retail sales increased an expected 0.1% following an upwardly revised 0.8% rise during April. Retail sales during the first five months of 2006 rose at a 9.2% annual rate versus the 7.2% rise during all of last year. Nonauto sales [...]

U.S. Retail Sales Increase As Expected

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060612c.jpg" width="353">
Wholesale prices in Germany rose 5% in May over a year ago. This was the largest year-over-year increase since the 6.05% recorded in November, 2000. Moreover, most of the prices in the underlying components of the index are now showing signs of accelerating.
The increases in wholesale prices in Germany have, in recent years, been dominated by movements in the Raw Materials, Intermediate Goods and Recyclables category where the price of oil is recorded. The first chart shows the year-to-year percent changes in the Wholesale Price Index and the sub index of prices of Raw Materials, Intermediate Goods and Recyclables. Although the year-to-year increases in these latter prices had, in recent months, shown some signs of declining from the 13-15% increases of reached in late 2005, they have now reversed trend and rose almost 11% in May.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060612d.jpg" width="353">
While the increases in the prices of Agricultural Products and Animals in late 2003 and into 2004 reinforced the impact of rising oil prices, the subsequent declines in these prices helped to mitigate the effect of the continued rise in oil prices. But now, these prices are once more beginning to rise and in May were 7.13% above May, 2005.
The deflationary tendencies in the prices for Consumer Goods began to lessen in late 2004 and, in the case of Machinery and Equipment, in mid 2005, as can be seen the second chart. Prices of consumer goods have been showing positive increases over year ago figures since August, 2005 and in May were up 1.3% over a year ago. Prices of machinery and Equipment are still declining, but in May the decline was only 1.73 % below a year ago compared with a year-to-year decline of 6.05% in April, 2005.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060612e.jpg" width="353">
The prices of the Food, Drink and Tobacco have risen in April and May after a sharp fall in March. These prices are now rising at 2.4% a year. The prices of the Other Wholesale Trade component rose 3.2% over a year ago from 2.4% in April. These prices are shown in the third chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Germany Wholesale Price Indexes (2000=1000</th>
<th scope="col">May 06</th>
<th scope="col">Apr 06</th>
<th scope="col">May 05</th>
<th scope="col">M/M % </th>
<th scope="col">Y/Y %</th>
<th scope="col">2005 %</th>
<th scope="col">2004&nbsp;%</th>
<th scope="col">2003&nbsp;&nbsp;%</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Wholesale Prices&nbsp;Total</td>
<td>112.6</td>
<td>111.8</td>
<td>107.2</td>
<td>0.72</td>
<td>5.04</td>
<td>2.74</td>
<td>2.80</td>
<td>0.57</td>
</tr>
<tr>
<td class="firstcol">Agricultural Products and Animals</td>
<td>103.7</td>
<td>104.1</td>
<td>96.8</td>
<td>-0.38</td>
<td>7.13</td>
<td>-4.97</td>
<td>-3.75</td>
<td>1.40</td>
</tr>
<tr class="odd">
<td class="firstcol">Food, Drink and Tobacco</td>
<td>114.9</td>
<td>114.8</td>
<td>112.2</td>
<td>0.09</td>
<td>2.41</td>
<td>2.98</td>
<td>1.41</td>
<td>0.74</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods, Durable and Nondurable</td>
<td>100.7</td>
<td>100.5</td>
<td>99.4</td>
<td>0.20</td>
<td>1.31</td>
<td>-0.23</td>
<td>-1.47</td>
<td>-0.35</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw Materials, Intermediate Goods and Recyclables&nbsp;</td>
<td>132.6</td>
<td>130.5</td>
<td>119.7</td>
<td>1.61</td>
<td>10.78</td>
<td>8.35</td>
<td>8.89</td>
<td>2.67</td>
</tr>
<tr>
<td class="firstcol">Machinery and Equipment&nbsp;</td>
<td>85.1</td>
<td>85.1</td>
<td>86.6</td>
<td>0.00</td>
<td>-1.73</td>
<td>-5.07</td>
<td>-2.17</td>
<td>-4.01</td>
</tr>
<tr class="odd">
<td class="firstcol">Other Wholesale Trade</td>
<td>109.7</td>
<td>109.5</td>
<td>106.3</td>
<td>0.14</td>
<td>3.20</td>
<td>1.40</td>
<td>1.96</td>
<td>0.99</td>
</tr>
</tbody>
</table>
</body>
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Wholesale prices in Germany rose 5% in May over a year ago. This was the largest year-over-year increase since the 6.05% recorded in November, 2000. Moreover, most of the prices in the underlying components of the index are now [...]

More Uncomfortable Signs of Inflation: German Wholesale Prices

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060612a.jpg" width="353">
The April Leading Index of the major 7 OECD economies rose 0.2% following a downwardly revised 0.1% increase during March. The leaders have risen 3.4% since the low last April and despite the recent slow gains, the six month growth rate of the index remained firm at 3.5%.
During the last ten years there has been a 64% correlation between the change in the leading index and the q/q change in the GDP Volume Index for the Big Seven OECD countries.
The leading index in Japan jumped 0.7% and that raised the index&#39;s six month growth rate to 3.2%, its best in over two years. Share prices and loans-to-deposits were firm as was construction of dwellings. The leaders&#39; correlation with Japan&#39;s real economic growth has been a meaningful 40% during the last ten years.
The leading index for the European Union (15 countries) remained quite firm and rose 0.4% after a downwardly revised 0.3% March rise. That lifted the index&#39;s six month growth rate to 4.7%, the best since April 2004. During the last ten years there has been a 59% correlation between the change in the leading index and the quarterly change in the European Union GDP volume index.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060612b.jpg" width="353">
The German leading index improved 0.6% following a March gain that was revised down to 0.4%. As a result, the six month growth rate was 7.9% that was still the strongest rate of increase since December 2003. New orders remained firm and interest rate spreads were less negative. During the last ten years there has been a 32% correlation between the change in the German leading index and the quarterly change in GDP volume.
A leaders in France rose 0.2% in April for the third consecutive month. At a stable 3.9%, the series&#39; six month growth rate is much improved versus the negative growth rates during the middle of last year. The future tendency of production improved despite still-languishing consumer confidence and depressed job vacancies.
The Italian leading index rose 0.4%, only the second monthly increase this year, and the series&#39; six month growth rate rose to 1.1%. New orders rose sharply and consumer confidence improved.
The U.S. leaders fell 0.1% and reversed the slim 0.1% March up tick. The recent weakness lowered the six month growth in the leaders to 3.6% as consumer sentiment fell as did most other leading series except share prices. The correlation between the leaders&#39; growth rate and real GDP growth has been a high 73% during the last ten years.
The UK leaders rose 0.2% after a 0.3% March gain that was half the initial reported rise. The six month growth rate at 1.7%, nevertheless, was the best in two years though consumer confidence fell to its lowest in three years.
The Canadian leaders fell 0.6% for the second consecutive month and were down for the third month this year. The weakness and the downwardly revised declines dropped the six month growth rate to -0.7%, the first negative reading since October. The correlation of the leaders&#39; growth with Canadian real GDP has been 49% during the last ten years.
The latest OECD Leading Indicator report is available <a href="http://www.oecd.org/document/37/0,2340,en_2649_201185_36884005_1_1_1_1,00.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/OECDMEI/OECDMEI.HTM">OECD</a></th>
<th scope="col">April</th>
<th scope="col">March</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">Composite Leading Index&nbsp;</td>
<td>105.42</td>
<td>105.22</td>
<td>3.4%</td>
<td>102.85</td>
<td>102.38</td>
<td>97.99</td>
</tr>
<tr>
<td class="firstcol">&nbsp;6 Month Growth Rate</td>
<td>3.5%</td>
<td>3.6%</td>
<td>&nbsp;</td>
<td>0.7%</td>
<td>3.5%</td>
<td>2.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

The April Leading Index of the major 7 OECD economies rose 0.2% following a downwardly revised 0.1% increase during March. The leaders have risen 3.4% since the low last April and despite the recent slow gains, the six month growth [...]

OECD Leaders Up Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060612a.jpg" width="353">
The April Leading Index of the major 7 OECD economies rose 0.2% following a downwardly revised 0.1% increase during March. The leaders have risen 3.4% since the low last April and despite the recent slow gains, the six month growth rate of the index remained firm at 3.5%.
During the last ten years there has been a 64% correlation between the change in the leading index and the q/q change in the GDP Volume Index for the Big Seven OECD countries.
The leading index in Japan jumped 0.7% and that raised the index&#39;s six month growth rate to 3.2%, its best in over two years. Share prices and loans-to-deposits were firm as was construction of dwellings. The leaders&#39; correlation with Japan&#39;s real economic growth has been a meaningful 40% during the last ten years.
The leading index for the European Union (15 countries) remained quite firm and rose 0.4% after a downwardly revised 0.3% March rise. That lifted the index&#39;s six month growth rate to 4.7%, the best since April 2004. During the last ten years there has been a 59% correlation between the change in the leading index and the quarterly change in the European Union GDP volume index.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060612b.jpg" width="353">
The German leading index improved 0.6% following a March gain that was revised down to 0.4%. As a result, the six month growth rate was 7.9% that was still the strongest rate of increase since December 2003. New orders remained firm and interest rate spreads were less negative. During the last ten years there has been a 32% correlation between the change in the German leading index and the quarterly change in GDP volume.
A leaders in France rose 0.2% in April for the third consecutive month. At a stable 3.9%, the series&#39; six month growth rate is much improved versus the negative growth rates during the middle of last year. The future tendency of production improved despite still-languishing consumer confidence and depressed job vacancies.
The Italian leading index rose 0.4%, only the second monthly increase this year, and the series&#39; six month growth rate rose to 1.1%. New orders rose sharply and consumer confidence improved.
The U.S. leaders fell 0.1% and reversed the slim 0.1% March up tick. The recent weakness lowered the six month growth in the leaders to 3.6% as consumer sentiment fell as did most other leading series except share prices. The correlation between the leaders&#39; growth rate and real GDP growth has been a high 73% during the last ten years.
The UK leaders rose 0.2% after a 0.3% March gain that was half the initial reported rise. The six month growth rate at 1.7%, nevertheless, was the best in two years though consumer confidence fell to its lowest in three years.
The Canadian leaders fell 0.6% for the second consecutive month and were down for the third month this year. The weakness and the downwardly revised declines dropped the six month growth rate to -0.7%, the first negative reading since October. The correlation of the leaders&#39; growth with Canadian real GDP has been 49% during the last ten years.
The latest OECD Leading Indicator report is available <a href="http://www.oecd.org/document/37/0,2340,en_2649_201185_36884005_1_1_1_1,00.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/OECDMEI/OECDMEI.HTM">OECD</a></th>
<th scope="col">April</th>
<th scope="col">March</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">Composite Leading Index&nbsp;</td>
<td>105.42</td>
<td>105.22</td>
<td>3.4%</td>
<td>102.85</td>
<td>102.38</td>
<td>97.99</td>
</tr>
<tr>
<td class="firstcol">&nbsp;6 Month Growth Rate</td>
<td>3.5%</td>
<td>3.6%</td>
<td>&nbsp;</td>
<td>0.7%</td>
<td>3.5%</td>
<td>2.6%</td>
</tr>
</tbody>
</table>
 More Uncomfortable Signs of Inflation:  German Wholesale Prices  
by <a href="/comment/Curley.html">Louise Curley</a> June 12, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060612c.jpg" width="353">
Wholesale prices in Germany rose 5% in May over a year ago. This was the largest year-over-year increase since the 6.05% recorded in November, 2000. Moreover, most of the prices in the underlying components of the index are now showing signs of accelerating.
The increases in wholesale prices in Germany have, in recent years, been dominated by movements in the Raw Materials, Intermediate Goods and Recyclables category where the price of oil is recorded. The first chart shows the year-to-year percent changes in the Wholesale Price Index and the sub index of prices of Raw Materials, Intermediate Goods and Recyclables. Although the year-to-year increases in these latter prices had, in recent months, shown some signs of declining from the 13-15% increases of reached in late 2005, they have now reversed trend and rose almost 11% in May.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060612d.jpg" width="353">
While the increases in the prices of Agricultural Products and Animals in late 2003 and into 2004 reinforced the impact of rising oil prices, the subsequent declines in these prices helped to mitigate the effect of the continued rise in oil prices. But now, these prices are once more beginning to rise and in May were 7.13% above May, 2005.
The deflationary tendencies in the prices for Consumer Goods began to lessen in late 2004 and, in the case of Machinery and Equipment, in mid 2005, as can be seen the second chart. Prices of consumer goods have been showing positive increases over year ago figures since August, 2005 and in May were up 1.3% over a year ago. Prices of machinery and Equipment are still declining, but in May the decline was only 1.73 % below a year ago compared with a year-to-year decline of 6.05% in April, 2005.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060612e.jpg" width="353">
The prices of the Food, Drink and Tobacco have risen in April and May after a sharp fall in March. These prices are now rising at 2.4% a year. The prices of the Other Wholesale Trade component rose 3.2% over a year ago from 2.4% in April. These prices are shown in the third chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Germany Wholesale Price Indexes (2000=1000</th>
<th scope="col">May 06</th>
<th scope="col">Apr 06</th>
<th scope="col">May 05</th>
<th scope="col">M/M % </th>
<th scope="col">Y/Y %</th>
<th scope="col">2005 %</th>
<th scope="col">2004&nbsp;%</th>
<th scope="col">2003&nbsp;&nbsp;%</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Wholesale Prices&nbsp;Total</td>
<td>112.6</td>
<td>111.8</td>
<td>107.2</td>
<td>0.72</td>
<td>5.04</td>
<td>2.74</td>
<td>2.80</td>
<td>0.57</td>
</tr>
<tr>
<td class="firstcol">Agricultural Products and Animals</td>
<td>103.7</td>
<td>104.1</td>
<td>96.8</td>
<td>-0.38</td>
<td>7.13</td>
<td>-4.97</td>
<td>-3.75</td>
<td>1.40</td>
</tr>
<tr class="odd">
<td class="firstcol">Food, Drink and Tobacco</td>
<td>114.9</td>
<td>114.8</td>
<td>112.2</td>
<td>0.09</td>
<td>2.41</td>
<td>2.98</td>
<td>1.41</td>
<td>0.74</td>
</tr>
<tr>
<td class="firstcol">Consumer Goods, Durable and Nondurable</td>
<td>100.7</td>
<td>100.5</td>
<td>99.4</td>
<td>0.20</td>
<td>1.31</td>
<td>-0.23</td>
<td>-1.47</td>
<td>-0.35</td>
</tr>
<tr class="odd">
<td class="firstcol">Raw Materials, Intermediate Goods and Recyclables&nbsp;</td>
<td>132.6</td>
<td>130.5</td>
<td>119.7</td>
<td>1.61</td>
<td>10.78</td>
<td>8.35</td>
<td>8.89</td>
<td>2.67</td>
</tr>
<tr>
<td class="firstcol">Machinery and Equipment&nbsp;</td>
<td>85.1</td>
<td>85.1</td>
<td>86.6</td>
<td>0.00</td>
<td>-1.73</td>
<td>-5.07</td>
<td>-2.17</td>
<td>-4.01</td>
</tr>
<tr class="odd">
<td class="firstcol">Other Wholesale Trade</td>
<td>109.7</td>
<td>109.5</td>
<td>106.3</td>
<td>0.14</td>
<td>3.20</td>
<td>1.40</td>
<td>1.96</td>
<td>0.99</td>
</tr>
</tbody>
</table>
</body>
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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/060609g.jpg" width="353">
We talked about UK trade just a month ago, but it seems worth revisiting right away. The trade deficit (on goods and services) in April held at March&#39;s level, &pound;4.0 billion (a slight revision from the initial &pound;3.8 billion). Both exports and imports eased, imports for a second month. At &pound;33.8 billion, imports are 2.5% below their February peak. Exports edged down 0.4% in April after a 1.7% increase in March. Even so, both exports and imports remain substantially above comparable 2005 amounts. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060609h.jpg" width="353">
Two-way trade in fuel remains an important contributor to total UK trade flows even though fuel is only around 8% of both total exports and imports. But exports of crude oil fell 17.6% in April after a 48.3% jump in March. Volume dropped while prices continued rising. The value per tonne increased 6% in April alone. Notably, other exports, excluding fuels, held steady with March and are still more than 13% above a year ago.<img align="left" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060609i.jpg" v:shapes="_x0000_i1025" width="353"> 
Imports of fuel had risen sharply in March and dropped even more sharply in April, maintaining a wide seesaw pattern for a fourth month. As with fuel exports, volume corrected while prices continued rising. A &pound;0.6 billion decline in the value of fuel imports more than offset an increase in other goods and services of 1.5%.
Among non-fuel products, manufactures are sustaining a trade deficit of about &pound;4.4 billion, although there is some tendency toward an improving turn as exports are growing while imports have moderated in both March and April. The other major segment showing a trade deficit is food, with food imports growing steadily while exports remain flat. That generates a widening deficit that reached &pound;1.2 billion on average for the first four months this year, 26% of the total trade deficit.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/UK/@U8/@U8.HTM">UK Trade</a>, SA, Bil.&pound;</th>
<th scope="col">Apr 2006</th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Apr 2005</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Trade Balance: Goods &amp; Services</td>
<td>-3.98</td>
<td>-4.00</td>
<td>-5.22</td>
<td>-3.86</td>
<td>-4.05</td>
<td>-3.29</td>
<td>-2.64</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>29.90</td>
<td>30.01</td>
<td>29.52</td>
<td>26.07</td>
<td>26.41</td>
<td>24.49</td>
<td>23.50</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>33.88</td>
<td>34.01</td>
<td>34.75</td>
<td>29.93</td>
<td>30.46</td>
<td>27.78</td>
<td>26.14</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods</td>
<td>-5.75</td>
<td>-5.71</td>
<td>-7.18</td>
<td>-5.65</td>
<td>-5.61</td>
<td>-5.07</td>
<td>-4.05</td>
</tr>
<tr>
<td class="firstcol">Fuels</td>
<td>+0.07</td>
<td>-0.43</td>
<td>-0.61</td>
<td>-0.20</td>
<td>-0.29</td>
<td>0.03</td>
<td>0.35</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>2.30</td>
<td>2.40</td>
<td>1.93</td>
<td>1.68</td>
<td>1.79</td>
<td>1.49</td>
<td>1.38</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>2.23</td>
<td>2.83</td>
<td>2.54</td>
<td>1.88</td>
<td>2.08</td>
<td>1.46</td>
<td>1.03</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>1.77</td>
<td>1.71</td>
<td>1.96</td>
<td>1.79</td>
<td>1.56</td>
<td>1.79</td>
<td>1.41</td>
</tr>
</tbody>
</table>
</body>
</html>

We talked about UK trade just a month ago, but it seems worth revisiting right away. The trade deficit (on goods and services) in April held at March's level, £4.0 billion (a slight revision from the initial £3.8 billion). Both [...]

UK Trade Deficit Stabilizes in April; Fuel Turns a Slight Surplus

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060609f.jpg" width="353">
Growth in total credit market debt outstanding rose 10.2% (AR) last quarter. That was a modest slowdown from the 12.1% advance during 4Q but it was enough to lift the y/y rate of growth to 9.7%, its fastest since 1999.
A jump in borrowing by the Federal government continued to lead debt growth with a 14.0% (AR) advance last quarter, its fastest in a year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060609e.jpg" width="353">
Moving in the other direction, growth in household sector borrowing slowed to 9.1%, its slowest quarterly gain in a year following the 11.7% surge during all of 2005.Home mortgage obligations grew at a still firm 12.6% rate (14.7% y/y) but consumer credit fell at a 5.1% (AR, +2.5% y/y). Bank loans jumped 12.3% (50.0% y/y).
Business borrowing picked up a bit and grew at an 8.3% annual rate (6.3% y/y).
Household sector asset values rose at a 10.8% annual rate (10.4% y/y) during 1Q driven by a 10.1% (14.6% y/y) gain in the value of real estate holdings. Financial asset values rose 11.6% (8.7% y/y) due to a 40.5% (AR, 20.3% y/y) rise in the value of mutual fund shares. The value of corporate equities held directly ticked up 0.7% (-1.6% y/y).
The net worth of the US household sector last quarter rose 2.7% (10.1% y/y) to a record $53.830 trillion. The gain lifted the ratio of net worth to income to 5.79 times.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/FFUNDS/@F2/@F201/@F201.HTM">Flow of Funds</a>&nbsp;</th>
<th scope="col">% of Total</th>
<th scope="col">1Q 06&nbsp; (AR)</th>
<th scope="col">4Q 05 &nbsp; (AR)</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 Credit Market Debt Outstanding</td>
<td></td>
<td>10.2%</td>
<td>12.1%</td>
<td>9.7%</td>
<td>8.9%</td>
<td>8.5%</td>
<td>9.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Federal Government</td>
<td>12%</td>
<td>14.0%</td>
<td>10.1%</td>
<td>6.5%</td>
<td>7.0%</td>
<td>9.0%</td>
<td>10.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Households</td>
<td>28%</td>
<td>9.1%</td>
<td>13.2%</td>
<td>12.3%</td>
<td>11.7%</td>
<td>11.3%</td>
<td>11.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Nonfinancial Corp. Business</td>
<td>14%</td>
<td>8.3%</td>
<td>6.1%</td>
<td>6.3%</td>
<td>5.5%</td>
<td>3.7%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Financial Sectors</td>
<td>32%</td>
<td>11.0%</td>
<td>14.9%</td>
<td>9.8%</td>
<td>8.3%</td>
<td>7.9%</td>
<td>10.0%</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Net Worth: Households &amp; Nonprofit Organizations (Trillions)</td>
<td>--</td>
<td>$53.830</td>
<td>$52.430</td>
<td>--</td>
<td>$52.430</td>
<td>$48.470</td>
<td>$44.206</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Tangible Assets</td>
<td>--</td>
<td>$26.223</td>
<td>$25.626</td>
<td>13.0%</td>
<td>$25.626</td>
<td>$22.556</td>
<td>$20.036</td>
</tr>
</tbody>
</table>
</body>
</html>

Growth in total credit market debt outstanding rose 10.2% (AR) last quarter. That was a modest slowdown from the 12.1% advance during 4Q but it was enough to lift the y/y rate of growth to 9.7%, its fastest since 1999. A jump in [...]

1Q Debt Growth Fastest Y/Y Since 1999

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060609c.jpg" width="353">
Total import prices advanced another 1.6% last month after a 2.1% jump during April. Again, the rise easily surpassed Consensus expectations which had been for a 0.7% increase.
Import prices less petroleum jumped 0.6%, the strongest monthly gain since October. That strength was led by higher prices for nonoil industrial materials which surged 2.5% (9.0% y/y) reflecting firm prices for paper (5.9% y/y), nonferrous metals (49.7% y/y) and chemicals (5.5% y/y).
Capital goods prices were unchanged as they have been all year (-1.6% y/y) and excluding computers, capital goods prices rose just 0.1% (0.6% y/y). Prices for nonauto consumer goods rose 0.3% (-0.1% y/y) following two months of decline. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060609d.jpg" width="353">
During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies and a lower 57% against the real value of the dollar.
Petroleum prices posted a 5.2% increase but recent declines in crude oil prices suggest moderation.
Export prices were firm again and rose 0.7%. Pricing strength has been broad based for industrial supplies (10.9% y/y) but foods &amp; beverages are down 1.2% (y/y), capital goods prices are just 0.2% higher y/y while nonauto consumer goods exports prices are up 1.0% y/y.

<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/@E807/@E807.HTM">Import/Export Prices (NSA)</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">Import - All Commodities</td>
<td>1.6%</td>
<td>2.1%</td>
<td>8.3%</td>
<td>7.5%</td>
<td>5.6%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>5.2%</td>
<td>11.5%</td>
<td>45.7%</td>
<td>37.6%</td>
<td>30.5%</td>
<td>21.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.6%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.7%</td>
<td>0.6%</td>
<td>3.4%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

Total import prices advanced another 1.6% last month after a 2.1% jump during April. Again, the rise easily surpassed Consensus expectations which had been for a 0.7% increase. Import prices less petroleum jumped 0.6%, the strongest [...]

Import Prices Jumped; Excl. Oil Strength in Industrial Materials

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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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

260422E.jpg

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.

260422.jpg

Belgium

National Bank of Belgium Consumer Survey for April

Sandy Batten

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Total retail sales rose a larger-than-expected 1.7% m/m (+4.0% y/y) in March following an upwardly revised 0.7% m/m gain in February (previously +0.6% m/m) in February, according to data from the U.S. Census Bureau. The Action Economics Forecast Survey looked for a 1.4% m/m increase. Excluding autos, other sales soared 1.9% m/m (+5.5% y/y) in March after an upwardly revised 0.7% monthly gain in February (previously +0.5% m/m). The Action Economics Forecast Survey looked for a 1.4% m/m increase in sales excluding autos. The March increase in total sales was the largest monthly increase since last March while the March jump in ex-auto sales was the largest monthly gain since January 2023.

As expected, a 15.5% m/m surge in sales at gasoline stations, largely reflecting a previously reported 21.2% m/m jump in retail gasoline prices, accounted for much of the monthly increase in both overall and ex-auto sales in March. However, sales were solid even without gasoline sales. Total sales excluding gasoline rose 0.6% in March versus a 0.7% monthly gain in February. Sales excluding both autos and gasoline increased 0.6% m/m in March, the same rise as in February. Forecasters expected only a 0.2% m/m increase in sales ex both autos and gasoline.

The control group of sales (total sales excluding food services, autos, gasoline and building materials that the BEA uses to construct PCE in the national accounts) posted another solid increase in March, rising 0.7% m/m following an upwardly revised 0.6% monthly increase in February (previously +0.5% m/m). For all of Q1, control group sales were up 1.2% q/q, up from a 0.7% quarterly gain in Q4. This points to a somewhat surprising pickup in household spending growth when Q1 GDP is reported on April 30. Many analysts had feared that the sharp rise in gasoline prices would put significant stress on household finances and thereby slow spending. A possible explanation for the recent resilience of sales is larger income tax refunds this year owing to the OBBBA which reduced taxes during last year while the withholding tables were not adjusted until this year (resulting in more over-withholding last year).

Sales across major sectors generally posted solid gains in March. Auto sales rose 0.5% m/m on top of a 1.0% m/m increase in February. Furniture and appliance sales jumped 1.6%, the third consecutive monthly gain and the largest since December 2024. General merchandise store sales jumped 1.0% m/m, their largest monthly gain since April 2023. Nonstore retail sales increased 1.0% m/m in March, their third consecutive month with an increase of 1% or more. Building material and garden supply store sales rose 0.7% m/m in March, their fifth consecutive monthly increase. Sales at food and beverage stores increased 0.7% m/m in March, their first monthly gain in three months. By contrast, clothing sales were unchanged following a 2.8% monthly jump in February. Sales at sporting goods, book and music stores were also unchanged in March after a 0.7% monthly rise in February. Eating out sales edged up 0.1% m/m in March following a 0.5% m/m increase in February. The only major category posting a monthly decline in March was “miscellaneous” sales which fell 0.9% m/m but this was after 2.2% m/m gains in both January and February.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- Total sales jumped 1.7% m/m in March with small upward revisions to January and February.
- Gasoline sales surged 15.5% m/m in March, but even excluding that increase, the remainder of retail sales rose 0.6% m/m.
- Excluding autos, sales soared 1.9% m/m in March with small upward revisions to January and February.
- Sales of the retail control group that is used to construct PCE rose 0.7% m/m in March and 1.2% q/q for all of Q1.

U.S. Retail Sales Jumped in March only Partly Due to Surging Gasoline Prices

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The Pending Home Sales Index, a forward-looking measure of home sales based on contract signings, rose 1.5% m/m to 73.7 in March following an upwardly revised 2.5% gain in February (+1.8% initially) and a 1.0% decline in January (unrevised), according to the National Association of Realtors (NAR). March marked the second straight m/m rise and the highest index level since November (77.2). The year-on-year rate was -1.1% in March, the fourth consecutive negative y/y reading, compared to -0.1% in February and -2.1% in March 2025. The index had fallen 41.1% since its October 2021 high of 125.1.

The m/m rise in March pending home sales coincided with an increase in the average 30-year fixed mortgage rate to a three-month-high 6.18% in March after a 6-bps decline to 6.05% in February. These rates, while below a peak of 7.62% in October 2023, had remained above a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

By region, March pending home sales showed a mixed performance. Sales in the Northeast rebounded 4.4% (-6.5% y/y) in March, the first m/m increase since November, after a 2.6% decrease in February. Sales in the South rose 3.9% (2.3% y/y) following a 3.5% February rise and two successive m/m declines. Sales in the West dropped 2.6% (-1.7% y/y) after a 0.9% February increase, and sales in the Midwest fell 1.3% (-3.1% y/y) after a 5.5% February gain; both regions declined m/m for the first time since December.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- PHSI +1.5% m/m (-1.1% y/y) to 73.7 in Mar., highest level since Nov.
- Home sales m/m up in the Northeast (+4.4%) and South (+3.9%); down in the Midwest (-1.3%) and West (-2.6%).
- Home sales y/y down in the Northeast (-6.5%), Midwest (-3.1%), and West (-1.7%); up in the South (+2.3%).

U.S. Pending Home Sales Up for Second Consecutive Month in March

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The overarching survey indicator for March stepped up despite enhanced global challenges. The March headline index rose to 99.3 from 98 in both January and February.

The March level of the headline compares to a 12-month average of 97.2. Nearly all the components in March are above their 12-month averages. The exception is the output change, which is substantially weaker than its 12-month average. Expected production, at 3.1 in March, is just a tick below its 12 month average of 3.2. Finally, expected employment in March is tied with its 12-month average.

In addition, only 3 readings weaker month-to-month in March were output change, expected production, and expected employment.

On the month, output change is a weak reading, falling by 3.5 points month-to-month; it may be the clearest example of the report showing weakness ahead, affected by upcoming global issues related to the war and rising oil and energy prices.

In addition to output change, expected production slipped to 3.1 in March from 4.8 in February. There was also a step back in expected employment, a modest one to 0.8 in March from 1.0 in February.

But order books showed a 10.2 reading in March, up from 5.6 in February. Changes in new foreign orders and total orders both showed more strength in March than in February, with foreign orders at 5.5 in March compared to 5.2 in February. The change in total orders, at 10.2 in March, was much stronger than 5.6 in February. Inventories registered 0.6 in March, up from -0.3 in February.

However, capacity space is being used up as capacity use rose to 77.0 in March from 76.6 in February.

The employment metric at 2.6 in March was much stronger than its zero reading in February.

On balance, the components indicate the sector is moving ahead as the headline gain suggests in March. But the major question mark is probably the strength in orders—which we take to be forward-looking compared to the setback in output change.

The index in March has a 64.1 percentile standing. Only three components in March ranked below their respective 50% marks (below their medians). The strongest readings generated standings in the 90th and mid-80th-percentile levels. These included finished inventories, the change in total orders, and order books. The lagging components, below their median values, were output change, expected production, and capacity utilization.

The French industrial readings are surprising for their resilience.

Economy in Brief

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