Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060531a.jpg" width="353">
The total number of mortgage applications fell another 1.9% last week on the heels of the prior week&#39;s 6.0% decline. The weakness dropped the average level in May 2.2% below April and 30.0% below last June.
Purchase applications fell another 0.2% w/w after the 7.1% w/w drop the prior week. That lowered the May average 0.8% versus April and 17.5% versus last July.
During the last ten years there has been a negative 80% correlation between the interest rate level on 30-year financing and purchase applications while during those years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
A 4.8% w/w drop in applications to refinance added to the 4.3% decline during the prior week. That lowered the May level 4.1% below the April average which fell 4.1% from March. The May level was 43.8% below last June.
The effective interest rate on a conventional 30-year mortgage backed up two basis points to 6.86% and left the May average at 6.86%, up sharply from the 5.81% low last June. The rate on 15-year financing was stable at 6.52%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
Inversion, a speech by St. Louis Federal Reserve Bank President William Poole, can be found <a href="http://www.stlouisfed.org/news/speeches/2006/05_18_06.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<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">05/26/06</th>
<th scope="col">05/19/06</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>541.9</td>
<td>552.6</td>
<td>-23.6%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>395.5</td>
<td>396.4</td>
<td>-14.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,409.0</td>
<td>1,480.5</td>
<td>-34.2%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
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The total number of mortgage applications fell another 1.9% last week on the heels of the prior week's 6.0% decline. The weakness dropped the average level in May 2.2% below April and 30.0% below last June. Purchase applications fell [...]

Mortgage Applications Off

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060531b.jpg" width="353">
Chain store sales fell sharply last week. The 1.0% w/w decline followed a similar 0.8% drop the prior week, reported the International Council of Shopping Centers (ICSC)-UBS.
Declines during three of the four weeks this month pulled the average level of May sales down 0.6% from the April average which rose 1.6% from March. 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 continued its recent decline with another 0.6% drop. The indicator was down 2.7% versus one year ago and 4.5% from the recent peak in early January.
Inflation, Banking and Economic Growth from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/com2006/0515.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">05/27/06</th>
<th scope="col">05/20/06</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>467.5</td>
<td>472.0</td>
<td>3.6%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

Chain store sales fell sharply last week. The 1.0% w/w decline followed a similar 0.8% drop the prior week, reported the International Council of Shopping Centers (ICSC)-UBS. Declines during three of the four weeks this month pulled [...]

Chain Store Sales Fell Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060531g.jpg" width="353">
The Nat&#39;l Employment Report published by ADP, the payroll processors for many employers, indicated that nonfarm private payrolls in May increased 122,000.
For April, a 178,000 rise in ADP&#39;s nonfarm private payrolls was accompanied by a 131,000 rise private nonfarm payrolls as published by the Bureau of Labor Statistics. The May figure from BLS will be published Friday.
ADP has compiled the estimate from its database of individual companies&#39; payroll information. Macroeconomic Advisers, LLC, the St. Louis economic consulting firm, developed the methodology for transforming the raw data into an economic indicator.
According to ADP and Macro Advisers, the correlation between the monthly percentage change in the ADP estimate and that in the BLS data is 0.90.
The ADP National Employment Report data is maintained in Haver&#39;s USECON database; historical data go back to December 2000. The figures in this report cover only private sector jobs and exclude employment in the public sector, which grew an average of 11,333 per month over the last year.
The full ADP National Employment Report can be found <a href="http://www.adpemploymentreport.com/PDF/ADP_NER_Report_May.pdf">here</a>, and the ADP methodology is explained <a href="http://www.adpemploymentreport.com/PDF/ADPNERMethodology.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB25/@EB25.HTM">LAXEPA@USECON</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>
<td class="firstcol">Nonfarm Private Payroll Employment (Chg.)</td>
<td>122,000</td>
<td>178,000</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>-0.4%</td>
</tr>
</tbody>
</table>
Chain Store Sales Fell Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 31, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060531b.jpg" width="353">
Chain store sales fell sharply last week. The 1.0% w/w decline followed a similar 0.8% drop the prior week, reported the International Council of Shopping Centers (ICSC)-UBS.
Declines during three of the four weeks this month pulled the average level of May sales down 0.6% from the April average which rose 1.6% from March. 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 continued its recent decline with another 0.6% drop. The indicator was down 2.7% versus one year ago and 4.5% from the recent peak in early January.
Inflation, Banking and Economic Growth from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/research/com2006/0515.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/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">05/27/06</th>
<th scope="col">05/20/06</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>467.5</td>
<td>472.0</td>
<td>3.6%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
Mortgage Applications Off 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 31, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060531a.jpg" width="353">
The total number of mortgage applications fell another 1.9% last week on the heels of the prior week&#39;s 6.0% decline. The weakness dropped the average level in May 2.2% below April and 30.0% below last June.
Purchase applications fell another 0.2% w/w after the 7.1% w/w drop the prior week. That lowered the May average 0.8% versus April and 17.5% versus last July.
During the last ten years there has been a negative 80% correlation between the interest rate level on 30-year financing and purchase applications while during those years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
A 4.8% w/w drop in applications to refinance added to the 4.3% decline during the prior week. That lowered the May level 4.1% below the April average which fell 4.1% from March. The May level was 43.8% below last June.
The effective interest rate on a conventional 30-year mortgage backed up two basis points to 6.86% and left the May average at 6.86%, up sharply from the 5.81% low last June. The rate on 15-year financing was stable at 6.52%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
Inversion, a speech by St. Louis Federal Reserve Bank President William Poole, can be found <a href="http://www.stlouisfed.org/news/speeches/2006/05_18_06.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">05/26/06</th>
<th scope="col">05/19/06</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>541.9</td>
<td>552.6</td>
<td>-23.6%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>395.5</td>
<td>396.4</td>
<td>-14.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,409.0</td>
<td>1,480.5</td>
<td>-34.2%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Q1 GDP Strong in India; Growth Uneven but on Trend in Malaysia & the Philippines 
by <a href="/comment/Stone.html">Carol Stone</a> May 31, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060531c.jpg" width="353">
Economic growth in South Asia was firm in Q1, according to reports out today from government statistics offices in India, Malaysia and Philippines. India, especially, with a 9.3% year/year gain in GDP, saw its strongest quarter since the end of 2003. In Malaysia, growth appears uneventful, with year-on-year gains hovering between 5% and 7%, but after the steep recession of 1998 and the slowdown in 2001, this looks attractive. In the Philippines, the latest quarter was up a modest 0.8% from Q4 but 5.5% from the year earlier. This pace compares to a 4.9% average over the past 5 years. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060531d.jpg" width="353">
In India, agriculture continues to dominate the economy, although as seen in the second graph, the trade and transport sector surpassed it in 2002; that industrial segment also continues to grow rapidly now, surging 12.9% in Q1. The same group also includes hotels and communications; we&#39;d suspect that as the Indian infrastructure builds, &quot;communications&quot; would be expanding rapidly. The same holds for construction; it is smaller in absolute size, but has sustained better than 10% average growth for the last five years. Other sectors are chasing along, too. Manufacturing gained 8.9% over the last four quarters, while finance, insurance and business services was up 10.8%.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060531e.jpg" width="353">
The Malaysian economy has the interesting feature that exports are larger than total GDP -- by a sizable amount. In Q1, exports were 82.0 billion ringgit (1987 prices) while GDP was 68.1 billion. See the third graph. Imports are sizable too, of course, at 77.8 billion ringgit. So goods and services are imported into the country, processed, and shipped out. This chain of events yielded GDP growth of 2.2% in Q1 alone (from Q4), the largest single quarter since early 2000. The domestic economy is fairly vibrant; it expanded 5.7% in the quarter, pushed by an 11.1% surge in fixed investment. But it is also more volatile, with Q4 down 3.7%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060531f.jpg" width="353">
In the Philippines, quarterly movements in individual sectors are frequently uneven. In Q1, total GDP slowed to 0.8% from 1.4% growth in Q4. Agriculture, mining, manufacturing, trade and real estate contributed to the slowing, transportation and private services were steady to somewhat slower, but construction, finance and government picked up considerably. On the demand side, total domestic demand accelerated to 1.4% growth from -0.1% in Q4; net exports also added to growth through a much smaller deficit. But the statistical discrepancy turned sharply negative, so it is hard to identify the genuine demand-side source of the slower pace in total GDP. At the same time, gains in prior quarters meant, as noted above, that the overall economy still saw 5.3% year-on-year growth. See in the last graph how the lurches in quarter-to-quarter performance still produce the respectable yearly pace.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GDP: % Changes*</th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Year/ Year</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">India</td>
<td>2.7</td>
<td>1.1</td>
<td>1.8</td>
<td>9.3</td>
<td>8.2</td>
<td>7.3</td>
<td>7.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing </td>
<td>3.4</td>
<td>2.6</td>
<td>1.5</td>
<td>8.9</td>
<td>8.8</td>
<td>8.0</td>
<td>7.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Trade, Hotels,&nbsp; Transport, Etc.</td>
<td>4.4</td>
<td>2.1</td>
<td>2.5</td>
<td>12.9</td>
<td>10.9</td>
<td>11.4</td>
<td>10.9</td>
</tr>
<tr>
<td class="firstcol">Finance, Business Services, Etc.</td>
<td>1.3</td>
<td>1.7</td>
<td>3.1</td>
<td>10.8</td>
<td>9.7</td>
<td>7.8</td>
<td>4.9</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Malaysia</td>
<td>2.2</td>
<td>1.1</td>
<td>1.7</td>
<td>5.3</td>
<td>5.2</td>
<td>7.2</td>
<td>5.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Philippines</td>
<td>0.8</td>
<td>1.4</td>
<td>0.7</td>
<td>5.5</td>
<td>5.0</td>
<td>6.2</td>
<td>4.9</td>
</tr>
</tbody>
</table>


</html>

The Nat'l Employment Report published by ADP, the payroll processors for many employers, indicated that nonfarm private payrolls in May increased 122,000. For April, a 178,000 rise in ADP's nonfarm private payrolls was accompanied by [...]

ADP Nat'l Employment Report: Slimmer Gain in May Payrolls

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060530a.jpg" width="353">
Consumer confidence, as reported by the Conference Board, fell less than expected in May from what was a four year high in April. The 6.0% decline to 103.2 from a revised 109.9 contrasted with Consensus expectations for a decline to 100.0 and compared to a 9.5% decline in the University of Michigan&#39;s May 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.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060530b.jpg" width="353">
The index of consumers&#39; expectations slumped 9.3% (-10.4% y/y). Expectations for employment in six months slipped but expectations for an increase in income fell to the lowest level (16.6%) since 2003. Expectations for the inflation rate in twelve months rose to 5.6% versus a recent low of 4.8% in March.
Consumers&#39; assessment of the present situation reversed the increase in April with a 2.7% decline (+12.5% y/y). The percentage of respondents who viewed jobs as plentiful (28.6%) fell moderately but the percentage that viewed jobs as hard to get (20.5%) rose to the highest level this year.
Consumers&#39; appraisal of current business conditions fell as a lesser 28% viewed it as good and an increased 15.4% viewed it as bad.
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>
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<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">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">Consumer Confidence</td>
<td>103.2</td>
<td>109.8</td>
<td>12.4%</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, fell less than expected in May from what was a four year high in April. The 6.0% decline to 103.2 from a revised 109.9 contrasted with Consensus expectations for a decline to [...]

Consumer Confidence Fell Less Than Expected

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/060526e.jpg" width="353">
The Bank of Japan today reported on Japan&#39;s international investment position for year-end 2005. Total assets abroad stood at &yen;506.2 trillion, up 16.7% from the end of 2004. All of the major asset categories climbed by significant amounts, such as direct investment abroad, which was up 18.2%, and holdings of equity securities, which rose 26.9%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526f.jpg" width="353">
We find it interesting that both of the equity components, direct investment and equity securities holdings, constitute only moderate amounts of total assets abroad. Equities were 5.6% of total international assets at the end of 1995; while they have increased, they still constitute just 9.5% of Japanese investors&#39; holdings abroad. Direct investment has ranged between 8.4% and 10.4% of total assets over the 11-year history of these data; at the end of 2005, this item was 9% of the total. It was also right at 9% of Japanese GDP for the year. In contrast, US direct ownership interests abroad constituted 26.2% of total US assets abroad and 20.2% of US GDP in 2004 (latest available).
Foreign investors have interests in Japan, of course, and at the end of 2005, these totaled &yen;325.9 trillion, up a sizable 31.2% from year-end 2004. The gain was concentrated in equity securities, which increased 71.6%, helped by the 40.2% surge in Japanese stock prices (measured by the Nikkei 225). Foreign direct investment in Japan rose 17.9%, but it is a much smaller amount, only &yen;11.9 billion.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526g.jpg" width="353">
With the big gain in the value of liabilities to foreigners, Japan&#39;s net investment position actually decreased in 2005, falling 2.7% to &yen;180.7 billion. Sometimes such a movement is seen as unhealthy for a country. But on this occasion, it seems more to reflect the emerging improvement in Japan that makes it more attractive for investment.
In releasing these data today, the Bank of Japan added industry and country detail. Haver Analytics will be adding these data to the JAPAN database soon. They will greatly enhance the understanding Japan&#39;s capital flows and values in world markets.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Japan: End of Year, Bil.&yen;</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2000</th>
<th scope="col">1995</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Assets Abroad</td>
<td>506,191</td>
<td>433,864</td>
<td>385,538</td>
<td>341,206</td>
<td>270,738</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Direct Investment</td>
<td>45,605</td>
<td>38,581</td>
<td>35,932</td>
<td>31,993</td>
<td>24,520</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Portfolio Investment</td>
<td>249,493</td>
<td>209,247</td>
<td>184,353</td>
<td>150,115</td>
<td>88,257</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Equity</td>
<td>48,200</td>
<td>37,972</td>
<td>29,394</td>
<td>30,133</td>
<td>15,040</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Debt Securities</td>
<td>201,294</td>
<td>171,275</td>
<td>154,959</td>
<td>119,982</td>
<td>73,217</td>
</tr>
<tr>
<td class="firstcol">Domestic Liabilities</td>
<td>325,942</td>
<td>248,067</td>
<td>212,720</td>
<td>208,159</td>
<td>186,666</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Direct Investment</td>
<td>11,903</td>
<td>10,098</td>
<td>9,610</td>
<td>5,782</td>
<td>3,448</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Portfolio Investment</td>
<td>181,959</td>
<td>120,091</td>
<td>92,873</td>
<td>101,609</td>
<td>56,379</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Loans</td>
<td>98,105</td>
<td>90,776</td>
<td>83,665</td>
<td>76,212</td>
<td>97,759</td>
</tr>
<tr>
<td class="firstcol">Net Assets</td>
<td>180,699</td>
<td>185,797</td>
<td>172,818</td>
<td>133,047</td>
<td>84,072</td>
</tr>
</tbody>
</table>
</body>
</html>

The Bank of Japan today reported on Japan's international investment position for year-end 2005. Total assets abroad stood at ¥506.2 trillion, up 16.7% from the end of 2004. All of the major asset categories climbed by significant [...]

Japan's Net Investment Position Eased in 2005 as the Value of Foreign Investment Surged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526c.jpg" width="353">
The University of Michigan reported that for all of May, consumer sentiment held steady at the preliminary level indicated two weeks ago. Nevertheless, sentiment fell 9.5% m/m to 79.1, the lowest level since last October. Consensus expectations had been for some improvement to 79.4.
During the last ten years there has been a 77% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
Expectations for the economy dropped 7.1% m/m as higher gasoline prices boosted the twelve month mean expected inflation rate to 4.7% versus 3.6% expected in February. That dragged expectations for personal finances down 10.4% m/m and expected business conditions down 5.8%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526d.jpg" width="353">
The current conditions index fell 12.0% m/m, the same as the mid-month read. The current index of personal finances dropped 14.3% (-6.4% y/y) and the reading of buying conditions for large household goods dropped 10.9% (-9.8% y/y).
Consumers&#39; assessment of gov&#39;t economic policy fell 8.3% m/m (-10.5% y/y) and is at nearly half the level of early 2000.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<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/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">May (final)</th>
<th scope="col">May (prelim.</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">Consumer Sentiment</td>
<td>79.1</td>
<td>79.0</td>
<td>87.4</td>
<td>-9.0%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>96.1</td>
<td>96.2</td>
<td>109.2</td>
<td>-8.4%</td>
<td>105.9</td>
<td>105.6</td>
<td>97.2</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>68.2</td>
<td>68.0</td>
<td>73.4</td>
<td>-9.4%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
</body>
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The University of Michigan reported that for all of May, consumer sentiment held steady at the preliminary level indicated two weeks ago. Nevertheless, sentiment fell 9.5% m/m to 79.1, the lowest level since last October. Consensus [...]

U.S. Consumers' Funk Didn't Deepen in Late May

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526a.jpg" width="353">
Personal income rose 0.5% last month following a downwardly revised 0.5% gain during March. The latest compared to Consensus expectations for a 0.7% increase.
Wage &amp; salary disbursements soared 0.9% (5.3% y/y) following an upwardly revised 0.5% March increase. Private sector wages jumped 1.0% (5.7% y/y) as strong gains were logged in manufacturing (0.7%, 2.8% y/y) and in service producing industries (1.1%, 6.1% y/y).
Government transfer payments for health insurance &amp; disability rose 0.6% (11.4% y/y) and a March surge was revised down.
Disposable personal income increased 0.4% (4.7% y/y) but a revised 0.4% gain in March was half that initially reported. Personal taxes jumped 1.6% (10.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060526b.jpg" width="353">
Adjusted for price inflation, disposable personal income fell 0.1% (+1.7% y/y) following a revised no change during March that was initially reported up 0.5%. Real disposable income per capita fell 0.2% (+0.8% y/y), the third m/m decline this year.
Personal consumption matched Consensus expectations for a 0.6% rise. Adjusted for price inflation, spending rose 0.1% (3.1% y/y) for the second consecutive month. Real spending on gasoline &amp; oil jumped 1.7% (0.8% y/y) following two months of decline.
The PCE chain price index rose 0.5% boosted by an 8.7% (19.1% y/y) surge in gasoline &amp; oil prices. Less food &amp; energy the chain price index increased 0.2% (2.1% y/y), down from the 0.3% gain in March. Prices for clothing &amp; shoes rose 0.4% (-0.7% y/y) but furniture &amp; household equipment prices fell another 0.4% (-4.8% y/y).
The personal savings rate was a negative 1.6% in April and recent figures were revised more negative.
The Trend Growth Rate of Employment: Past, Present and Future from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/1q06clar.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</a></th>
<th scope="col">April</th>
<th scope="col">Mar</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">Personal Income</td>
<td>0.5%</td>
<td>0.5%</td>
<td>5.4%</td>
<td>5.4%</td>
<td>5.9%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.6%</td>
<td>0.5%</td>
<td>6.2%</td>
<td>6.5%</td>
<td>6.5%</td>
<td>4.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>-1.6%</td>
<td>-1.4%</td>
<td>-0.2% (April &#39;05)</td>
<td>-0.5%</td>
<td>1.7%</td>
<td>2.1%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.5%</td>
<td>0.4%</td>
<td>2.9%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>1.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.1%</td>
<td>2.0%</td>
<td>2.0%</td>
<td>1.3%</td>
</tr>
</tbody>
</table>


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Personal income rose 0.5% last month following a downwardly revised 0.5% gain during March. The latest compared to Consensus expectations for a 0.7% increase. Wage & salary disbursements soared 0.9% (5.3% y/y) following an upwardly [...]

U.S. Personal Income Gain Light, Wages Soared, Prices Up

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

260422A17.jpg

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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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