Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516c.jpg" width="353">
The April finished goods producer price index jumped 0.9%. That was the largest gain since a 1.4% spike last September but it about matched Consensus expectations had been for a 0.8% rise.
Less food &amp; energy the (core) PPI increased 0.1% last month and fell short of expectations for a 0.2% rise. Durable consumer goods prices were unchanged (0.3% y/y) following two months of 0.1% increase and core consumer nondurable prices rose 0.1% (2.6% y/y) following three months of stronger gain. Apparel prices continued lower. Prices of all finished consumer goods less food &amp; energy rose 0.1% (1.6% y/y).
Capital equipment prices rose 0.2% (1.4% y/y) after two months of 0.1% gains.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516d.jpg" width="353">
Finished energy prices jumped 4.0% (17.8% y/y) as gasoline prices increased 12.3% (33.9% y/y) and home heating oil rose 13.7% (27.6% y/y). A 3.0% decline in natural gas prices (+12.4% y/y) was the third consecutive monthly drop.
Intermediate goods prices jumped 0.9% on higher energy prices which rose 2.8% (18.4% y/y). Core intermediate prices increased 0.4%.
Crude goods prices regained about half of the prior month&#39;s decline with a 1.2% increase. Energy prices rose 1.3% higher crude oil prices were offset by lower prices for natural gas. Core crude prices, however, were notably strong and posted a 4.7% gain and are up 8.4% year to date. Copper base scrap (59.1% y/y), aluminum scrap (28.7% y/y) and iron &amp; steel scrap (8.7% y/y) all continued strong. During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">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">Finished Goods</td>
<td>0.9%</td>
<td>0.5%</td>
<td>4.0%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.9%</td>
<td>-0.1%</td>
<td>7.3%</td>
<td>8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.1%</td>
<td>4.9%</td>
<td>5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>1.2%</td>
<td>-2.7%</td>
<td>3.3%</td>
<td>14.6%</td>
<td>17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>4.7%</td>
<td>0.8%</td>
<td>16.0%</td>
<td>4.8%</td>
<td>26.5%</td>
<td>12.4%</td>
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The April finished goods producer price index jumped 0.9%. That was the largest gain since a 1.4% spike last September but it about matched Consensus expectations had been for a 0.8% rise. Less food & energy the (core) PPI increased [...]

PPI Up Expected 0.9%, Core Tame

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516b.jpg" width="353">
During April, housing starts fell 7.4% m/m to 1.849M units following the 6.4% March decline that was revised slightly shallower. Again, the decline by far exceeded Consensus expectations for a modest drop to 1.95M starts and reduced the number of starts to the lowest level since November 2004.
Since the peak this past January, total starts have fallen 18.4%.
Single-family starts dropped 5.6% to 1.535M units and added to the 10.3% March decline. The latest level is down 15.4% from the January peak and is the lowest since November 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516a.jpg" width="353">
By region, single family housing starts were quite mixed last month. Starts in the South fell 15.9% m/m to a level that was off 19.9% from the January peak. In the West starts fell a moderate 3.6% but that added to the 19.1% slide in March and pulled the latest level down 22.0% from the February peak. In the Midwest single family starts moved in the opposite direction and reversed the prior month&#39;s decline with a 21.4% (+3.2% y/y) gain. In the Northeast starts also recovered the prior month&#39;s down draft and rose 6.7% though starts were still 17.7% off the January peak.
Multi family starts reversed the sharp March increase with a 15.1% decline to the lowest level since March of last years.
Building permits dropped by 5.4% for the third consecutive monthly decline and are off 10.7% from the peak last September.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">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">Total</td>
<td>1,849</td>
<td>1,996</td>
<td>-11.1%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,535</td>
<td>1,626</td>
<td>-8.6%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>314</td>
<td>370</td>
<td>-21.3%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,984</td>
<td>2,097</td>
<td>-8.0%</td>
<td>2,144</td>
<td>2,057</td>
<td>1,8 88</td>
</tr>
</tbody>
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During April, housing starts fell 7.4% m/m to 1.849M units following the 6.4% March decline that was revised slightly shallower. Again, the decline by far exceeded Consensus expectations for a modest drop to 1.95M starts and reduced [...]

Housing Starts Lowest Since 2004

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516b.jpg" width="353">
During April, housing starts fell 7.4% m/m to 1.849M units following the 6.4% March decline that was revised slightly shallower. Again, the decline by far exceeded Consensus expectations for a modest drop to 1.95M starts and reduced the number of starts to the lowest level since November 2004.
Since the peak this past January, total starts have fallen 18.4%.
Single-family starts dropped 5.6% to 1.535M units and added to the 10.3% March decline. The latest level is down 15.4% from the January peak and is the lowest since November 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516a.jpg" width="353">
By region, single family housing starts were quite mixed last month. Starts in the South fell 15.9% m/m to a level that was off 19.9% from the January peak. In the West starts fell a moderate 3.6% but that added to the 19.1% slide in March and pulled the latest level down 22.0% from the February peak. In the Midwest single family starts moved in the opposite direction and reversed the prior month&#39;s decline with a 21.4% (+3.2% y/y) gain. In the Northeast starts also recovered the prior month&#39;s down draft and rose 6.7% though starts were still 17.7% off the January peak.
Multi family starts reversed the sharp March increase with a 15.1% decline to the lowest level since March of last years.
Building permits dropped by 5.4% for the third consecutive monthly decline and are off 10.7% from the peak last September.

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</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a> </th>
<th scope="col">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">Total</td>
<td>1,849</td>
<td>1,996</td>
<td>-11.1%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,535</td>
<td>1,626</td>
<td>-8.6%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>314</td>
<td>370</td>
<td>-21.3%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,984</td>
<td>2,097</td>
<td>-8.0%</td>
<td>2,144</td>
<td>2,057</td>
<td>1,8 88</td>
</tr>
</tbody>
</table>
PPI Up Expected 0.9%, Core Tame 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516c.jpg" width="353">
The April finished goods producer price index jumped 0.9%. That was the largest gain since a 1.4% spike last September but it about matched Consensus expectations had been for a 0.8% rise.
Less food &amp; energy the (core) PPI increased 0.1% last month and fell short of expectations for a 0.2% rise. Durable consumer goods prices were unchanged (0.3% y/y) following two months of 0.1% increase and core consumer nondurable prices rose 0.1% (2.6% y/y) following three months of stronger gain. Apparel prices continued lower. Prices of all finished consumer goods less food &amp; energy rose 0.1% (1.6% y/y).
Capital equipment prices rose 0.2% (1.4% y/y) after two months of 0.1% gains.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516d.jpg" width="353">
Finished energy prices jumped 4.0% (17.8% y/y) as gasoline prices increased 12.3% (33.9% y/y) and home heating oil rose 13.7% (27.6% y/y). A 3.0% decline in natural gas prices (+12.4% y/y) was the third consecutive monthly drop.
Intermediate goods prices jumped 0.9% on higher energy prices which rose 2.8% (18.4% y/y). Core intermediate prices increased 0.4%.
Crude goods prices regained about half of the prior month&#39;s decline with a 1.2% increase. Energy prices rose 1.3% higher crude oil prices were offset by lower prices for natural gas. Core crude prices, however, were notably strong and posted a 4.7% gain and are up 8.4% year to date. Copper base scrap (59.1% y/y), aluminum scrap (28.7% y/y) and iron &amp; steel scrap (8.7% y/y) all continued strong. During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM">Producer Price Index</a></th>
<th scope="col">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">Finished Goods</td>
<td>0.9%</td>
<td>0.5%</td>
<td>4.0%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.5%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.9%</td>
<td>-0.1%</td>
<td>7.3%</td>
<td>8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.4%</td>
<td>0.1%</td>
<td>4.9%</td>
<td>5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>1.2%</td>
<td>-2.7%</td>
<td>3.3%</td>
<td>14.6%</td>
<td>17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>4.7%</td>
<td>0.8%</td>
<td>16.0%</td>
<td>4.8%</td>
<td>26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
Industrial Production Jumped 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516e.jpg" width="353">
Total industrial output jumped 0.8% last month following two months of 0.5% gain. Consensus expectations had been for another 0.5% increase.
Factory sector output surged 0.8% (5.5% y/y) after an unrevised 0.5% March increase. That increase matched a 0.8% January spike and lifted the y/y gain in factory output to its highest since in over a year.
A 1.7% (12.4% y/y) rise in business equipment output provided umph to last month&#39;s gain in output as output of computers, communication equipment and semiconductors jumped 2.4% (21.7% y/y). Factory output excluding high tech, however, also was strong and rose 0.7% (4.6% y/y).
Output of nondurable consumer goods rose 0.4% (2.1% y/y) as appliance &amp; furniture output rose 0.2% (4.0% y/y). Automotive products&#39; production fell 1.1% (+4.2% y/y). Excluding motor vehicles and high tech factory output increased 0.9% (4.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516f.jpg" width="353">
Output of primary metals jumped 1.2% (6.7% y/y) following two months of decline and fabricated metals output rose 0.5% (6.1% y/y).
Total capacity utilization surged to 81.9%, the highest level since July of 2000. Factory sector utilization rose to 80.5%, also its highest level since 2000. During the last twenty years there has been a 36% correlation between the level of factory sector utilization and the y/y change in &quot;core&quot; producer prices. There also has been a 37% correlation with the change in core consumer prices.
Industrial capacity grew 0.1% (1.9% y/y) and the annual rate of growth is up from 1.3% last year and 0.3% during 2004. Factor sector capacity grew 0.2% (2.3% y/y) compared to 1.6% growth last year and 0.2% growth during 2004. Much of that growth has been in the high tech sector. Excluding high tech, factory sector capacity is up 1.0% y/y.
The 1990s Acceleration in Labor Productivity: Causes and Measurement from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/review/06/05/Anderson.pdf"> here</a>.

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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">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">Total Industrial Production</td>
<td>0.8%</td>
<td>0.6%</td>
<td>4.8%</td>
<td>3.2%</td>
<td>4.1%</td>
<td>0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.8%</td>
<td>0.5%</td>
<td>5.5%</td>
<td>3.9%</td>
<td>4.8%</td>
<td>0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Consumer Goods</td>
<td>0.2%</td>
<td>0.8%</td>
<td>2.7%</td>
<td>2.1%</td>
<td>2.1%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Business Equipment</td>
<td>1.7%</td>
<td>0.7%</td>
<td>12.4%</td>
<td>9.1%</td>
<td>9.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Capacity Utilization</td>
<td>81.9%</td>
<td>81.4%</td>
<td>79.7% (4/05)</td>
<td>80.1%</td>
<td>78.6%</td>
<td>75.7%</td>
</tr>
</tbody>
</table>
  A Stronger Euro and Rising Oil Prices Shake German Investors' Confidence  
by <a href="/comment/Curley.html">Louise Curley</a> May 16, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516g.jpg" width="353">
German investors and analysts, who report to the ZEW Center for European Economic Research, have become less optimistic regarding the economic outlook over the next six months. The excess of those expecting better conditions over those expecting worsening conditions dropped sharply from 62.7% in April to 50.0% in May. It is, however, still above the historical average of 35.3%. The consensus had expected a more modest drop. There has been a steady erosion of confidence since January when the percent balance reached 71.1%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060516h.jpg" width="353">
At the same time, the excess of those German investors and analysts who rate current conditions as &quot;good&quot; over those who rate them &quot;bad&quot; rose from 2.9% in April to 8.7% in May. These two ratings were the first positive ratings since April 2001. They may have reflected the improvement in the economy as measured by the 0.04% increase in GDP in the first quarter of this year, up from 0.01% in the fourth quarter of 2005. From the beginning of the this year until April, the price of a barrel of oil had remained below $66 and the euro had ranged in a fairly narrow band between $1.19 and $1.23. Investor expectations and appraisals of current conditions are shown in the first chart.
Since then, however, the price of oil has spiked up to more than $74 a barrel and the euro has climbed to $1.29. (See the second chart.) The threat to German exports from a higher euro and the impact of higher oil prices on consumer demand have, no doubt, made investors and analysts more cautious.

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<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/GERMANY/@D8/@D8.HTM">Germany: ZEW</a></th>
<th scope="col">May 06</th>
<th scope="col">Apr 06</th>
<th scope="col">May 05</th>
<th scope="col">M/M dif </th>
<th scope="col">Y/Y dif</th>
<th scope="col">2005</th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Expectations &nbsp;&nbsp;</td>
<td>50.0</td>
<td>62.7</td>
<td>13.9</td>
<td>-12.7</td>
<td>36.1</td>
<td>34.8</td>
<td>44.6</td>
<td>38.4</td>
</tr>
<tr>
<td class="firstcol">Current conditions</td>
<td>8.7</td>
<td>2.9</td>
<td>-69.3</td>
<td>5.8</td>
<td>78.0</td>
<td>-61.8</td>
<td>-67.7</td>
<td>-92.6</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515e.jpg" width="353">
Stock markets around the world began to falter last week and continued to do so this morning. Both developed and emerging markets are succumbing to rising interest rates, the falling dollar and most recently signs of overshooting in commodity prices.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515f.jpg" width="353">
Morgan Stanley International Capital (MSCI) computes stock market indexes and returns on stock market investments for a wide range of individual countries and various aggregates. Among the latter are a world index, regional indexes, EAFE, (includes the developed markets of western Europe and Japan, Hong Kong, Singapore, Australia and New Zealand) and Emerging Markets, among others. The data are available on a daily, weekly and monthly bases in the Haver databases, MSCID, MSCIW, MSCIM.
The Dow Jones declined 1.76% from Monday, May 8th to Friday May 12th. The (MSCI) EAFE index declined 1.61% in the same period and MSCI&#39;s emerging market index fell 2.79%. The first chart shows the recent down turn in the Dow Jones Index and in MSCI&#39;s EFAE index. The second chart compares the trends in MSCI&#39;s EAFE and Emerging markets indexes.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515g.jpg" width="353">
Haver Analytic&#39;s DAILY and WEEKLY databases of interest rates, commodity prices, and exchange rates provide much of the data needed to monitor the short term data that may affect stock markets. In the third chart we show the trade weighted value of the U. S Dollar and the price of oil as two of the many factors that may affect stock prices. The rise in oil prices generally has a dampening effect on domestic and foreign stock markets. The impact of a decline in the dollar may be mixed. As far as the US market is concerned it could be positive, but foreign markets are likely to view a decline in the dollar as a negative since it will make their exports less competitive.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"></th>
<th scope="col">May 12&nbsp;</th>
<th scope="col">May 11</th>
<th scope="col">May 10&nbsp;</th>
<th scope="col">May 9 </th>
<th scope="col">May 8</th>
<th scope="col">% Change</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Dow Jones&nbsp;</td>
<td>11380</td>
<td>11501</td>
<td>11643</td>
<td>11640</td>
<td>11584</td>
<td>-1.76</td>
</tr>
<tr>
<td class="firstcol">MSCI&nbsp; EAFE (12/31/69=1000</td>
<td>1938.7</td>
<td>1966.8</td>
<td>1973.1</td>
<td>1966.82</td>
<td>1970.5</td>
<td>-1.61</td>
</tr>
<tr class="odd">
<td class="firstcol">MSCI&nbsp; Emerging Mkts (12/31/87=100)</td>
<td>&nbsp;856.9</td>
<td>873.3</td>
<td>879.9</td>
<td>881.2</td>
<td>881.5</td>
<td>-2.79</td>
</tr>
<tr>
<td class="firstcol">Trade Weighted Dollar (Jan 97=100)</td>
<td>106.73</td>
<td>106.43</td>
<td>106.51</td>
<td>06.85</td>
<td>107.85</td>
<td>-0.23</td>
</tr>
<tr class="odd">
<td class="firstcol">Price of Oil Brent Crude ($ per barrel)</td>
<td>71.49</td>
<td>72.30</td>
<td>69.74</td>
<td>70.66</td>
<td>68.83</td>
<td>3.86</td>
</tr>
</tbody>
</table>
</body>
</html>

Stock markets around the world began to falter last week and continued to do so this morning. Both developed and emerging markets are succumbing to rising interest rates, the falling dollar and most recently signs of overshooting in [...]

A Bad Week for Domestic and International Stock Markets

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515h.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) reported that the May Composite Housing Market Index dropped 11.8% from April to the lowest level since June 1995. The figure was quite a bit weaker than Consensus expectations for stability at 50 and was one-third below the level of May 2005.
During the last twenty years there has been an 82% correlation between the y/y change in the annual composite index and the change in single family housing starts and there has been a 75% correlation between the current sales index and new single family home sales.
The sub indexes covering current sales of single family homes (-34.2% y/y) and sales in six months (-29.9% y/y) both fell roughly 9% month-to-month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515i.jpg" width="353">
An index of the traffic of prospective home buyers plunged 17.9% m/m, also to more than a ten year low (-39.6% y/y).
Housing markets around the country weakened in May with the index for the Northeast off 6.0% (-32.9% y/y) and in the Midwest it fell 6.3% (-40.0% y/y). Out West the housing market index dropped 11.6% (-27.4% y/y) and in the South it fell 10.5% (-32.0% y/y).
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</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/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>45</td>
<td>51</td>
<td>70</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
</body>
</html>

The National Association of Home Builders' (NAHB) reported that the May Composite Housing Market Index dropped 11.8% from April to the lowest level since June 1995. The figure was quite a bit weaker than Consensus expectations for [...]

NAHB Housing Market Index Lowest Since 1995

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515d.jpg" width="353">
The Empire State Index of General Business Conditions for May slipped further to 12.36 from an unrevised 15.81 in April. These levels are down sharply from the series&#39; March high of 29.03 and are reported by the Federal Reserve Bank of New York. Consensus expectations had been for stability at 16.2.
Since the series&#39; inception in 2001 there has been a 76% correlation between the index level and the three month change in factory sector industrial production.
Many of the index components improved in May with the exception of employment which fell sharply to its lowest level since February. Orders &amp; shipments both recovered modestly from sharp declines during April.
Pricing pressure recovered to the highest level since February.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515c.jpg" width="353">
The index of expectations for business conditions in six months fell sharply to the lowest level since 2001 as expected pricing pressure rose and expected new orders fell.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>12.36</td>
<td>15.81</td>
<td>-10.36</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>
</body>
</html>

The Empire State Index of General Business Conditions for May slipped further to 12.36 from an unrevised 15.81 in April. These levels are down sharply from the series' March high of 29.03 and are reported by the Federal Reserve Bank [...]

Empire State Index Easier Again, Expected Conditions Off Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515a.jpg" width="353">
During March, the Leading Index of the Major 7 OECD economies increased another 0.2% after five consecutive months of 0.4% gain. The leaders&#39; six month growth rate held at 3.9%, its best since early 2004.
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.
Leaders in the European Union (15 countries) rose 0.4% on top of an upwardly revised 0.5% February rise. That improved 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.
The 0.7% rise in theGerman leading index continued the trend of strong gain that started just under a year ago. The six month growth rate now is up to 8.4%, the highest level since December 2003, as the business climate indicator continued to surge along with new orders. Inventories fell to a record low versus trend. 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 ticked up 0.1% and left the series&#39; six month growth rate at a firm 3.9%. The industrial sector&#39;s prospects improved along with the future tendency of production. New car registrations rose but new job prospects &amp; consumer confidence remained depressed.
The Italian leading index fell for the first time since last July. The 0.1% decline eased the series&#39; six month growth rate to a still-improved 1.3%. New orders surged &amp; the future tendency of production rose but consumer confidence remained depressed.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515b.jpg" width="353">
A 0.2% rise in the U.S. leaders was the slimmest gain since last September. Nevertheless, six month growth in the leaders was a firm 4.8% as share prices surged and the business climate indicator improved. 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 jumped 0.6% after two months of small gain and improved the six month growth rate to 1.3%, its best since mid-2004. Share prices and the future tendency of production surged.
The Canadian leaders improved 0.3% following a 0.1% decline in February that was very much downwardly revised. The six month growth rate stood at still-improved 2.4%. The correlation of the leaders&#39; growth with Canadian real GDP has been 49% during the last ten years.
The leading index in Japan was unchanged in March for the second consecutive month. That dropped the index&#39;s six month growth rate to 1.6%, its lowest since November. Share prices and loans-to-deposits were firm but imports versus exports fell to a twenty year low. The leaders&#39; correlation with Japan&#39;s real economic growth has been a meaningful 40% during the last ten years.
The latest OECD Leading Indicator report is available <a href="http://www.oecd.org/dataoecd/0/58/36674269.pdf">here</a>.
Recent Volatility Trends in the Foreign Exchange Market from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/newsevents/speeches/2006/kos060511.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">Mar</th>
<th scope="col">Feb</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>105.28</td>
<td>105.03</td>
<td>2.1%</td>
<td>102.75</td>
<td>102.40</td>
<td>97.87</td>
</tr>
<tr>
<td class="firstcol">&nbsp;6 Month Growth Rate</td>
<td>3.9%</td>
<td>3.9%</td>
<td>&nbsp;</td>
<td>0.6%</td>
<td>3.6%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
</body>
</html>

During March, the Leading Index of the Major 7 OECD economies increased another 0.2% after five consecutive months of 0.4% gain. The leaders' six month growth rate held at 3.9%, its best since early 2004. During the last ten years [...]

Europe Led the OECD Leaders Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515a.jpg" width="353">
During March, the Leading Index of the Major 7 OECD economies increased another 0.2% after five consecutive months of 0.4% gain. The leaders&#39; six month growth rate held at 3.9%, its best since early 2004.
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.
Leaders in the European Union (15 countries) rose 0.4% on top of an upwardly revised 0.5% February rise. That improved 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.
The 0.7% rise in theGerman leading index continued the trend of strong gain that started just under a year ago. The six month growth rate now is up to 8.4%, the highest level since December 2003, as the business climate indicator continued to surge along with new orders. Inventories fell to a record low versus trend. 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 ticked up 0.1% and left the series&#39; six month growth rate at a firm 3.9%. The industrial sector&#39;s prospects improved along with the future tendency of production. New car registrations rose but new job prospects &amp; consumer confidence remained depressed.
The Italian leading index fell for the first time since last July. The 0.1% decline eased the series&#39; six month growth rate to a still-improved 1.3%. New orders surged &amp; the future tendency of production rose but consumer confidence remained depressed.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515b.jpg" width="353">
A 0.2% rise in the U.S. leaders was the slimmest gain since last September. Nevertheless, six month growth in the leaders was a firm 4.8% as share prices surged and the business climate indicator improved. 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 jumped 0.6% after two months of small gain and improved the six month growth rate to 1.3%, its best since mid-2004. Share prices and the future tendency of production surged.
The Canadian leaders improved 0.3% following a 0.1% decline in February that was very much downwardly revised. The six month growth rate stood at still-improved 2.4%. The correlation of the leaders&#39; growth with Canadian real GDP has been 49% during the last ten years.
The leading index in Japan was unchanged in March for the second consecutive month. That dropped the index&#39;s six month growth rate to 1.6%, its lowest since November. Share prices and loans-to-deposits were firm but imports versus exports fell to a twenty year low. The leaders&#39; correlation with Japan&#39;s real economic growth has been a meaningful 40% during the last ten years.
The latest OECD Leading Indicator report is available <a href="http://www.oecd.org/dataoecd/0/58/36674269.pdf">here</a>.
Recent Volatility Trends in the Foreign Exchange Market from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/newsevents/speeches/2006/kos060511.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">Mar</th>
<th scope="col">Feb</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>105.28</td>
<td>105.03</td>
<td>2.1%</td>
<td>102.75</td>
<td>102.40</td>
<td>97.87</td>
</tr>
<tr>
<td class="firstcol">&nbsp;6 Month Growth Rate</td>
<td>3.9%</td>
<td>3.9%</td>
<td>&nbsp;</td>
<td>0.6%</td>
<td>3.6%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
Empire State Index Easier Again, Expected Conditions Off Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515d.jpg" width="353">
The Empire State Index of General Business Conditions for May slipped further to 12.36 from an unrevised 15.81 in April. These levels are down sharply from the series&#39; March high of 29.03 and are reported by the Federal Reserve Bank of New York. Consensus expectations had been for stability at 16.2.
Since the series&#39; inception in 2001 there has been a 76% correlation between the index level and the three month change in factory sector industrial production.
Many of the index components improved in May with the exception of employment which fell sharply to its lowest level since February. Orders &amp; shipments both recovered modestly from sharp declines during April.
Pricing pressure recovered to the highest level since February.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515c.jpg" width="353">
The index of expectations for business conditions in six months fell sharply to the lowest level since 2001 as expected pricing pressure rose and expected new orders fell.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;05 </th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>12.36</td>
<td>15.81</td>
<td>-10.36</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index Lowest Since 1995 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515h.jpg" width="353">
The National Association of Home Builders&#39; (NAHB) reported that the May Composite Housing Market Index dropped 11.8% from April to the lowest level since June 1995. The figure was quite a bit weaker than Consensus expectations for stability at 50 and was one-third below the level of May 2005.
During the last twenty years there has been an 82% correlation between the y/y change in the annual composite index and the change in single family housing starts and there has been a 75% correlation between the current sales index and new single family home sales.
The sub indexes covering current sales of single family homes (-34.2% y/y) and sales in six months (-29.9% y/y) both fell roughly 9% month-to-month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515i.jpg" width="353">
An index of the traffic of prospective home buyers plunged 17.9% m/m, also to more than a ten year low (-39.6% y/y).
Housing markets around the country weakened in May with the index for the Northeast off 6.0% (-32.9% y/y) and in the Midwest it fell 6.3% (-40.0% y/y). Out West the housing market index dropped 11.6% (-27.4% y/y) and in the South it fell 10.5% (-32.0% y/y).
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</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/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Composite Housing Market Index</td>
<td>45</td>
<td>51</td>
<td>70</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
A Bad Week for Domestic and International Stock Markets  
by <a href="/comment/Curley.html">Louise Curley</a> May 15, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515e.jpg" width="353">
Stock markets around the world began to falter last week and continued to do so this morning. Both developed and emerging markets are succumbing to rising interest rates, the falling dollar and most recently signs of overshooting in commodity prices.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515f.jpg" width="353">
Morgan Stanley International Capital (MSCI) computes stock market indexes and returns on stock market investments for a wide range of individual countries and various aggregates. Among the latter are a world index, regional indexes, EAFE, (includes the developed markets of western Europe and Japan, Hong Kong, Singapore, Australia and New Zealand) and Emerging Markets, among others. The data are available on a daily, weekly and monthly bases in the Haver databases, MSCID, MSCIW, MSCIM.
The Dow Jones declined 1.76% from Monday, May 8th to Friday May 12th. The (MSCI) EAFE index declined 1.61% in the same period and MSCI&#39;s emerging market index fell 2.79%. The first chart shows the recent down turn in the Dow Jones Index and in MSCI&#39;s EFAE index. The second chart compares the trends in MSCI&#39;s EAFE and Emerging markets indexes.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060515g.jpg" width="353">
Haver Analytic&#39;s DAILY and WEEKLY databases of interest rates, commodity prices, and exchange rates provide much of the data needed to monitor the short term data that may affect stock markets. In the third chart we show the trade weighted value of the U. S Dollar and the price of oil as two of the many factors that may affect stock prices. The rise in oil prices generally has a dampening effect on domestic and foreign stock markets. The impact of a decline in the dollar may be mixed. As far as the US market is concerned it could be positive, but foreign markets are likely to view a decline in the dollar as a negative since it will make their exports less competitive.

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<tr>
<th scope="col" class="firstcol"></th>
<th scope="col">May 12&nbsp;</th>
<th scope="col">May 11</th>
<th scope="col">May 10&nbsp;</th>
<th scope="col">May 9 </th>
<th scope="col">May 8</th>
<th scope="col">% Change</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Dow Jones&nbsp;</td>
<td>11380</td>
<td>11501</td>
<td>11643</td>
<td>11640</td>
<td>11584</td>
<td>-1.76</td>
</tr>
<tr>
<td class="firstcol">MSCI&nbsp; EAFE (12/31/69=1000</td>
<td>1938.7</td>
<td>1966.8</td>
<td>1973.1</td>
<td>1966.82</td>
<td>1970.5</td>
<td>-1.61</td>
</tr>
<tr class="odd">
<td class="firstcol">MSCI&nbsp; Emerging Mkts (12/31/87=100)</td>
<td>&nbsp;856.9</td>
<td>873.3</td>
<td>879.9</td>
<td>881.2</td>
<td>881.5</td>
<td>-2.79</td>
</tr>
<tr>
<td class="firstcol">Trade Weighted Dollar (Jan 97=100)</td>
<td>106.73</td>
<td>106.43</td>
<td>106.51</td>
<td>06.85</td>
<td>107.85</td>
<td>-0.23</td>
</tr>
<tr class="odd">
<td class="firstcol">Price of Oil Brent Crude ($ per barrel)</td>
<td>71.49</td>
<td>72.30</td>
<td>69.74</td>
<td>70.66</td>
<td>68.83</td>
<td>3.86</td>
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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

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

Robert Brusca

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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.

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France

Bank of France Survey Advances in March

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The German PPI rose by 2.4% month-to-month in March. That was, of course, boosted by oil prices as Brent crude soared, gaining 46.9% month-over-month (yikes!). However, very little of that got into German ex-energy prices, which did rise, but by only 0.4%. Still, do not be fooled by that ‘only.’ That 0.4% rise is the largest rise of that magnitude since February 2023—a period of about 2¼ years. So be wary of what might be in train here; 0.4% does not seem so large, but it annualizes to about a 5% pace.

In addition, 12 months to six months to three months, the headline PPI is accelerating—from a 12-month drop, to a well-behaved 2.1% pace of expansion over six months, and then to an elevated 3.9% annual rate over three months.

The core PPI is a bit more copacetic, but it shows clear acceleration, rising from a 12-month pace of 1.3%, to a 1.8% pace over six months, and to 2.4% annualized over three months.

**Consumer prices in Germany**
The sky is not falling. So far, there is no evidence of inflation in consumer goods: the consumer goods index does not even rise over 12 months, six months, or three months—though it is flat over three months. Investment goods, by contrast, show clear price acceleration, rising from 1.9% over 12 months, to 2.6% over six months, and to 4.1% over three months. Intermediate goods show the inflation wallop as prices rise by 1.5% over 12 months, to a 5.1% pace over six months, and at an 8.1% annual rate pace over three months. That annualized intermediate goods gain is something to watch. It is driven by oil, but other commodities and goods are caught up in supply chain woes as well.

For reference, the headline CPI shows acceleration, rising from a 12-month pace of 2.7% to a 5% annualized rate over three months. The ex-energy CPI, however, remains subdued, rising 2.3% over 12 month and at a more modest 2% annualized pace over three months.

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**Global conditions will call the tune**
The Strait of Hormuz, once shut, was opened. Then, once open, it was again shut. So, we are back at square one with the Trump deadline on Tuesday fast approaching. Soon something will have to give, and that something will affect oil, oil prices, and inflation. Conditions in the Strait and in the oil market globally are distorted by warfare and the threat of it.

Oil is an extremely important commodity and that is doubly so in Europe where nations have still not fully adjusted to the loss of the Russian pipelines.

But fertilizer and helium are two other commodities reported to be put in short supply because of the closing of the Strait. Iran is trying to gain a toehold here for leverage and survival—and to be able to claim victory; meanwhile, they have lost nearly all their military prowess, but they retain the means to enforce their policies on the domestic population—at least for now.

Trump has been declaring that they gave him everything he asked for, but then they close the strait and the U.S. kept its blockage of Iran’s ports in place. There is still a lot going on here. Despite the rhetoric, there is a lot that is unsettled and not agreed to, and a lot that could still go wrong or escalate. This puts both inflation and growth outlooks in jeopardy.

Economy in Brief

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