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/060512h.jpg" width="353">
After some contraction in 2004, home finance in Australia has strengthened considerably. In data reported at midday May 12 in Canberra, the Australian Bureau of Statistics (ABS) indicated that housing commitments totaled 59,724 in March, up 423 from February and 7.5% from March 2005. The value of these commitments was A$13,124.4 million, up 11% from the year-earlier month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512i.jpg" width="353">
In the table below, we show the finance commitment data by purpose. We have combined it a bit differently than ABS presents. We added construction commitments to those for the purchase of new homes; this &quot;new home financing&quot; was nearly flat in March, up just 0.2%, but these commitments are up 10.5% from a year ago. ABS&#39;s measure of existing home purchase commitments includes those for refinancing, but we have pulled them out, so the entry in our table includes only actual purchases of &quot;established dwellings&quot;. These financing commitments were up 0.9% for the month and 7.3% for the year.
The number of commitments for refinancing was 17,509 in March, 0.5% larger than in February and, moderating a bit, just 6.7% above March 2005. The volume of refinancing activity hit a peak during 2003, just a few months after a trough in interest rates, shown in the graph using 10-year Treasury bonds. Looking at this interest rate with a 6-month lead, we see a substantial 76% negative correlation with refinancing activity since 2000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512j.jpg" width="353">
The number of existing home purchase commitments also peaked during 2003, and are only now re-approaching that amount.
These data are contained in Haver&#39;s ANZ database. All of the various calculations discussed above are made using DLXVG3. We can add or subtract two series and take growth rates on the newly constructed series, just as with the original ones. We can also edit the title to match the calculation, using the Graph dropdown menu item &quot;Titles&quot;. Lead and lags in a series are implemented using CTRL together with the left- or right-arrow key.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Australia: Housing Finance Commitments, SA</th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
<th scope="col">Mar 2005</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Total Units (000s)</td>
<td>59.72</td>
<td>59.30</td>
<td>58.46</td>
<td>55.57</td>
<td>56.11</td>
<td>51.18</td>
<td>56.66</td>
</tr>
<tr class="odd">
<td class="firstcol">Value (Bil.A$)</td>
<td>$13.124</td>
<td>$13.040</td>
<td>$12.731</td>
<td>$11.829</td>
<td>$12.046</td>
<td>$10.400</td>
<td>$10.336</td>
</tr>
<tr>
<td class="firstcol">Construction + Purchase of Newly Built Houses (000s)</td>
<td>7.27</td>
<td>7.25</td>
<td>6.99</td>
<td>6.58</td>
<td>6.68</td>
<td>6.33</td>
<td>6.63</td>
</tr>
<tr class="odd">
<td class="firstcol">Purchase of Established Houses (000s)*</td>
<td>34.95</td>
<td>34.63</td>
<td>34.22</td>
<td>32.58</td>
<td>32.56</td>
<td>29.21</td>
<td>33.55</td>
</tr>
<tr>
<td class="firstcol">Refinance of Established Houses (000s)</td>
<td>17.51</td>
<td>17.42</td>
<td>17.26</td>
<td>16.41</td>
<td>16.86</td>
<td>15.64</td>
<td>16.48</td>
</tr>
</tbody>
</table>
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After some contraction in 2004, home finance in Australia has strengthened considerably. In data reported at midday May 12 in Canberra, the Australian Bureau of Statistics (ABS) indicated that housing commitments totaled 59,724 in [...]

Australia Home Financing Commitments Recoup 2004 Reductions

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512f.jpg" width="353">
Consumer sentiment fell hard early this month. The preliminary May reading from the University of Michigan dropped 9.6% m/m to 79.0, the lowest level since last October. Consensus expectations had been for a far lesser decline to 86.8. During the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
Expectations for the economy dropped 7.4% on top of a 3.3% April decline. Higher gasoline prices probably were behind the jump in the twelve month mean expected inflation rate to 4.8% from 4.4% last month, its highest level since October. That dragged down expectations for personal finances as well as expected business conditions.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512g.jpg" width="353">
The current conditions index also suffered and fell 11.9% m/m. The current index of personal finances dropped 16.0% (-8.3% y/y) and the reading of buying conditions for large household goods fell 9.7% (-8.6% y/y). Consumers&#39; assessment of gov&#39;t economic policy cratered 8.3% m/m (-10.5% y/y).
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.
Household energy expenditures, 1982-2005 from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cfljune2006_227.pdf">here</a>.

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<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 (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>79.0</td>
<td>87.4</td>
<td>-9.1%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>96.2</td>
<td>109.2</td>
<td>-8.3%</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>68.0</td>
<td>73.4</td>
<td>-9.7%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
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Consumer sentiment fell hard early this month. The preliminary May reading from the University of Michigan dropped 9.6% m/m to 79.0, the lowest level since last October. Consensus expectations had been for a far lesser decline to [...]

U.S. Consumer Sentiment Fell: Inflation Expectations Surged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512e.jpg" width="353">
Total import prices jumped 2.1% last month following declines during the prior two months. The gain was nearly double consensus expectations for a 1.1% increase.
Petroleum prices were notably strong and rose 11.5% (32.5% y/y). Nonpetroleum import prices also firmed and were unchanged after two consecutive months of decline.
Industrial materials prices less petroleum rose 0.5% (6.1% y/y) after two months of sharp decline. Prices for nonauto consumer goods fell 0.2% (-0.3% y/y) and capital goods prices were unchanged for the third consecutive month (-1.5% y/y). Excluding a 0.4% decline in computer prices, capital goods prices rose 0.1% for the second month (0.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512d.jpg" width="353">
During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies and a lower 57% against the real value of the dollar.
Export prices rose 0.6%, the strongest increase since January.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">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">Import - All Commodities</td>
<td>2.1%</td>
<td>-0.2%</td>
<td>5.9%</td>
<td>7.5%</td>
<td>5.6%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>11.5%</td>
<td>0.5%</td>
<td>32.5%</td>
<td>37.6%</td>
<td>30.5%</td>
<td>21.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>0.8%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.6%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
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Total import prices jumped 2.1% last month following declines during the prior two months. The gain was nearly double consensus expectations for a 1.1% increase. Petroleum prices were notably strong and rose 11.5% (32.5% y/y). [...]

Import Prices Jumped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512a.jpg" width="353">
The U.S. foreign trade deficit fell to $62.0B during March, the lowest level since last August. The decline exceeded Consensus expectations for a deficit of $67.0B.
Total exports recovered from the prior month&#39;s drop with a 1.9% jump led by a 1.5% (16.0% y/y) surge in capital goods exports. Exports of advanced technology products led that gain and surged 24.2% (NSA, 17.3% y/y). Nonauto consumer goods exports also were strong and rose 1.7% (12.0% y/y). Exports of industrial supplies &amp; materials posted outsized strength with a 6.0% (18.0% y/y) increase that was offset by a 4.2% (+11.3% y/y) decline in automotive exports.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512b.jpg" width="353">
Imports contracted by 0.8% during March, pulled down by an 8.3% (+21.0% y/y) drop in petroleum imports. That seasonally adjusted decline reflected a 7.4% (-4.1% y/y) rise in the quantity of crude oil imports and 5.1% rise in the quantity of all energy-related petroleum product imports. Crude oil prices dropped 2.7% (+27.0% y/y) to an average $52.26 per bbl. Brent crude oil prices have since risen to an average $71.49 per barrel this month from an average $69.51 in April and $61.71 during March.
Imports of capital goods reversed a February decline with a 4.5% (15.1% y/y) increase. Imports of advanced technology products jumped 27.9% (NSA, 20.9% y/y) while nonauto consumer goods imports rose 2.5% (13.0% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512c.jpg" width="353">
The US trade deficit with China deepened to $15.6B ($201.6B for 2005) and the trade deficit with Japan rose to $7.6B ($82.7B in 2005). The trade deficit with the Asian NICs halved again versus February to $0.5B ($15.9B in 2005). The deficit with the European Union deepened sharply to $10.1B ($122.4B in 2005) after four months of narrowing.
Racing To The Top: How Global Competition Disciplines Public Policy from the Federal Reserve Bank of Dallas can be found <a href="http://www.dallasfed.org/fed/annual/2005/ar05b.pdf">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/USECON/@EE/@EE03/@EE03.HTM">Foreign Trade</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 class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$62.0B</td>
<td>$65.5B</td>
<td>$53.7B (3/05)</td>
<td>$723.6B</td>
<td>$617.6B</td>
<td>$494.8B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>1.9%</td>
<td>-1.6%</td>
<td>11.6%</td>
<td>10.5%</td>
<td>12.6%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>-0.8%</td>
<td>-2.6%</td>
<td>12.9%</td>
<td>12.8%</td>
<td>16.6%</td>
<td>8.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. foreign trade deficit fell to $62.0B during March, the lowest level since last August. The decline exceeded Consensus expectations for a deficit of $67.0B. Total exports recovered from the prior month's drop with a 1.9% jump [...]

U.S. Trade Deficit Lower: Exports Surged, Oil Prices Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512a.jpg" width="353">
The U.S. foreign trade deficit fell to $62.0B during March, the lowest level since last August. The decline exceeded Consensus expectations for a deficit of $67.0B.
Total exports recovered from the prior month&#39;s drop with a 1.9% jump led by a 1.5% (16.0% y/y) surge in capital goods exports. Exports of advanced technology products led that gain and surged 24.2% (NSA, 17.3% y/y). Nonauto consumer goods exports also were strong and rose 1.7% (12.0% y/y). Exports of industrial supplies &amp; materials posted outsized strength with a 6.0% (18.0% y/y) increase that was offset by a 4.2% (+11.3% y/y) decline in automotive exports.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512b.jpg" width="353">
Imports contracted by 0.8% during March, pulled down by an 8.3% (+21.0% y/y) drop in petroleum imports. That seasonally adjusted decline reflected a 7.4% (-4.1% y/y) rise in the quantity of crude oil imports and 5.1% rise in the quantity of all energy-related petroleum product imports. Crude oil prices dropped 2.7% (+27.0% y/y) to an average $52.26 per bbl. Brent crude oil prices have since risen to an average $71.49 per barrel this month from an average $69.51 in April and $61.71 during March.
Imports of capital goods reversed a February decline with a 4.5% (15.1% y/y) increase. Imports of advanced technology products jumped 27.9% (NSA, 20.9% y/y) while nonauto consumer goods imports rose 2.5% (13.0% y/y).<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512c.jpg" width="353">
The US trade deficit with China deepened to $15.6B ($201.6B for 2005) and the trade deficit with Japan rose to $7.6B ($82.7B in 2005). The trade deficit with the Asian NICs halved again versus February to $0.5B ($15.9B in 2005). The deficit with the European Union deepened sharply to $10.1B ($122.4B in 2005) after four months of narrowing.
Racing To The Top: How Global Competition Disciplines Public Policy from the Federal Reserve Bank of Dallas can be found <a href="http://www.dallasfed.org/fed/annual/2005/ar05b.pdf">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/USECON/@EE/@EE03/@EE03.HTM">Foreign Trade</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 class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$62.0B</td>
<td>$65.5B</td>
<td>$53.7B (3/05)</td>
<td>$723.6B</td>
<td>$617.6B</td>
<td>$494.8B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>1.9%</td>
<td>-1.6%</td>
<td>11.6%</td>
<td>10.5%</td>
<td>12.6%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>-0.8%</td>
<td>-2.6%</td>
<td>12.9%</td>
<td>12.8%</td>
<td>16.6%</td>
<td>8.5%</td>
</tr>
</tbody>
</table>
Import Prices Jumped 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 12, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512e.jpg" width="353">
Total import prices jumped 2.1% last month following declines during the prior two months. The gain was nearly double consensus expectations for a 1.1% increase.
Petroleum prices were notably strong and rose 11.5% (32.5% y/y). Nonpetroleum import prices also firmed and were unchanged after two consecutive months of decline.
Industrial materials prices less petroleum rose 0.5% (6.1% y/y) after two months of sharp decline. Prices for nonauto consumer goods fell 0.2% (-0.3% y/y) and capital goods prices were unchanged for the third consecutive month (-1.5% y/y). Excluding a 0.4% decline in computer prices, capital goods prices rose 0.1% for the second month (0.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512d.jpg" width="353">
During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies and a lower 57% against the real value of the dollar.
Export prices rose 0.6%, the strongest increase since January.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">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">Import - All Commodities</td>
<td>2.1%</td>
<td>-0.2%</td>
<td>5.9%</td>
<td>7.5%</td>
<td>5.6%</td>
<td>2.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>11.5%</td>
<td>0.5%</td>
<td>32.5%</td>
<td>37.6%</td>
<td>30.5%</td>
<td>21.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>0.8%</td>
<td>2.7%</td>
<td>2.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.6%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Fell: Inflation Expectations Surged 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 12, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512f.jpg" width="353">
Consumer sentiment fell hard early this month. The preliminary May reading from the University of Michigan dropped 9.6% m/m to 79.0, the lowest level since last October. Consensus expectations had been for a far lesser decline to 86.8. During the last ten years there has been a 76% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
Expectations for the economy dropped 7.4% on top of a 3.3% April decline. Higher gasoline prices probably were behind the jump in the twelve month mean expected inflation rate to 4.8% from 4.4% last month, its highest level since October. That dragged down expectations for personal finances as well as expected business conditions.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512g.jpg" width="353">
The current conditions index also suffered and fell 11.9% m/m. The current index of personal finances dropped 16.0% (-8.3% y/y) and the reading of buying conditions for large household goods fell 9.7% (-8.6% y/y). Consumers&#39; assessment of gov&#39;t economic policy cratered 8.3% m/m (-10.5% y/y).
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.
Household energy expenditures, 1982-2005 from the Federal Reserve Bank of Chicago is available <a href="http://www.chicagofed.org/publications/fedletter/cfljune2006_227.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></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>79.0</td>
<td>87.4</td>
<td>-9.1%</td>
<td>88.6</td>
<td>95.2</td>
<td>87.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>96.2</td>
<td>109.2</td>
<td>-8.3%</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>68.0</td>
<td>73.4</td>
<td>-9.7%</td>
<td>77.4</td>
<td>88.5</td>
<td>81.4</td>
</tr>
</tbody>
</table>
Australia Home Financing Commitments Recoup 2004 Reductions 
by <a href="/comment/Stone.html">Carol Stone</a> May 12, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512h.jpg" width="353">
After some contraction in 2004, home finance in Australia has strengthened considerably. In data reported at midday May 12 in Canberra, the Australian Bureau of Statistics (ABS) indicated that housing commitments totaled 59,724 in March, up 423 from February and 7.5% from March 2005. The value of these commitments was A$13,124.4 million, up 11% from the year-earlier month.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512i.jpg" width="353">
In the table below, we show the finance commitment data by purpose. We have combined it a bit differently than ABS presents. We added construction commitments to those for the purchase of new homes; this &quot;new home financing&quot; was nearly flat in March, up just 0.2%, but these commitments are up 10.5% from a year ago. ABS&#39;s measure of existing home purchase commitments includes those for refinancing, but we have pulled them out, so the entry in our table includes only actual purchases of &quot;established dwellings&quot;. These financing commitments were up 0.9% for the month and 7.3% for the year.
The number of commitments for refinancing was 17,509 in March, 0.5% larger than in February and, moderating a bit, just 6.7% above March 2005. The volume of refinancing activity hit a peak during 2003, just a few months after a trough in interest rates, shown in the graph using 10-year Treasury bonds. Looking at this interest rate with a 6-month lead, we see a substantial 76% negative correlation with refinancing activity since 2000.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060512j.jpg" width="353">
The number of existing home purchase commitments also peaked during 2003, and are only now re-approaching that amount.
These data are contained in Haver&#39;s ANZ database. All of the various calculations discussed above are made using DLXVG3. We can add or subtract two series and take growth rates on the newly constructed series, just as with the original ones. We can also edit the title to match the calculation, using the Graph dropdown menu item &quot;Titles&quot;. Lead and lags in a series are implemented using CTRL together with the left- or right-arrow key.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Australia: Housing Finance Commitments, SA</th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
<th scope="col">Mar 2005</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Total Units (000s)</td>
<td>59.72</td>
<td>59.30</td>
<td>58.46</td>
<td>55.57</td>
<td>56.11</td>
<td>51.18</td>
<td>56.66</td>
</tr>
<tr class="odd">
<td class="firstcol">Value (Bil.A$)</td>
<td>$13.124</td>
<td>$13.040</td>
<td>$12.731</td>
<td>$11.829</td>
<td>$12.046</td>
<td>$10.400</td>
<td>$10.336</td>
</tr>
<tr>
<td class="firstcol">Construction + Purchase of Newly Built Houses (000s)</td>
<td>7.27</td>
<td>7.25</td>
<td>6.99</td>
<td>6.58</td>
<td>6.68</td>
<td>6.33</td>
<td>6.63</td>
</tr>
<tr class="odd">
<td class="firstcol">Purchase of Established Houses (000s)*</td>
<td>34.95</td>
<td>34.63</td>
<td>34.22</td>
<td>32.58</td>
<td>32.56</td>
<td>29.21</td>
<td>33.55</td>
</tr>
<tr>
<td class="firstcol">Refinance of Established Houses (000s)</td>
<td>17.51</td>
<td>17.42</td>
<td>17.26</td>
<td>16.41</td>
<td>16.86</td>
<td>15.64</td>
<td>16.48</td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060511e.jpg" width="353">
GDP growth picked up in the first quarter for the EuroZone and several individual countries.Eurostat reported this morning that GDP in the EuroZone grew 0.6% over Q4 following 0.3% in that period. The year/year gain was 2.0% from Q1 2005. This is the best since Q2 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060511f.jpg" width="353">
No details are presented in this &quot;flash&quot; estimate, but totals for several constituent countries are available. Germany reported growth of 0.4% in Q1 after no change in Q4. Its yearly growth rate was 1.4%. The German Federal Statistics Office described that a rebound in consumption was the spur to Q1 growth, after its outright decline in Q4. The data for this and other components will be released May 23.
Similarly, Italy&#39;s growth bounced by 0.6% after its flat performance in Q4. This produced a 1.5% gain from Q1 2005, the largest increase since Q2 2001. In Spain, growth has been on a much firmer track generally, and it actually ticked down in Q1 to 0.8% from 0.9% in Q4. This still, however, maintained the recent 3.5% year/year pace.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060511g.jpg" width="353">
Growth slowed in the Netherlands, to 0.2% from 0.6% in Q4; however, the last three quarters were all at a moderately firm rate, yielding year-on-year growth of 2.1% in Q1, one of the strongest yearly increases since the late 1990s boom period.
The improvements in most of these growth rates seem to confirm the EC Commission&#39;s optimism in its latest forecast issued Monday and discussed here by Louise Curley. The Commission raised its outlook for the EuroZone12 by 0.2 percentage points to 2.3% for the year 2006. In the actual Q1 data reported today, perhaps the most important single factor is the gain in Germany; we await the specific figures for private consumption on May 23, but increased spending by the people of Europe&#39;s largest nation has to be a help to the entire region. It is all the more significant in light of the accelerating cost of energy.

<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/G10/@GZ/@GZ2/@GZ2.HTM">GDP</a></th>
<th scope="col">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q1 2005</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">EU - Flash</td>
<td>0.6</td>
<td>0.3</td>
<td>0.7</td>
<td>2.0</td>
<td>1.4</td>
<td>1.8</td>
<td>0.7</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>0.4</td>
<td>0.0</td>
<td>0.6</td>
<td>1.4</td>
<td>1.2</td>
<td>1.1</td>
<td>-0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy</td>
<td>0.6</td>
<td>-0.0</td>
<td>0.3</td>
<td>1.5</td>
<td>0.1</td>
<td>0.9</td>
<td>0.1</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>0.8</td>
<td>0.9</td>
<td>0.9</td>
<td>3.5</td>
<td>3.4</td>
<td>3.1</td>
<td>3.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands</td>
<td>0.2</td>
<td>0.6</td>
<td>0.7</td>
<td>2.1</td>
<td>1.1</td>
<td>1.7</td>
<td>-0.1</td>
</tr>
</tbody>
</table>
</body>
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GDP growth picked up in the first quarter for the EuroZone and several individual countries.Eurostat reported this morning that GDP in the EuroZone grew 0.6% over Q4 following 0.3% in that period. The year/year gain was 2.0% from Q1 [...]

First Q1 GDP Releases Show Signs of Life in Europe

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060511b.jpg" width="353">
Initial unemployment insurance claims fell 1,000 last week to 324,000 after an upwardly revised 9,000 increase during the prior week. Consensus expectations had been for 315,000 claims.
The four week moving average of initial claims rose to 317,250 (-3.9% y/y).
Continuing claims for unemployment insurance dropped a sharp 49,000 and followed a downwardly revised no change during the prior week.
The insured unemployment rate slipped to 1.8% from 1.9% where it&#39;s been since early February.

<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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">05/06/06</th>
<th scope="col">04/29/06</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">Initial Claims</td>
<td>324</td>
<td>325</td>
<td>-4.4%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,392</td>
<td>-8.6%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial unemployment insurance claims fell 1,000 last week to 324,000 after an upwardly revised 9,000 increase during the prior week. Consensus expectations had been for 315,000 claims. The four week moving average of initial claims [...]

Initial Claims for Jobless Insurance Rose Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060511d.jpg" width="353">
The 0.7% rise in total business inventories during March handily outpaced Consensus expectations for a 0.5% increase. It followed an upwardly revised 0.1% up tick during February and was the strongest rose so far this year.
Retail inventories gained 1.0% after a slight slip during February. Motor vehicle inventories rose 1.7% (1.8% y/y) while less autos, retail inventories rose 0.7%. Strength was led by a 1.9% (7.9% y/y) jump in building materials. Furniture inventories also rose a firm 0.6% (7.2% y/y) and apparel inventories jumped 1.3% (4.1% y/y). Inventories at general merchandise stores slipped for the third straight month (+0.6% y/y). <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060511c.jpg" width="353">
Wholesale inventories rose 0.2% though petroleum inventories fell 2.0%. Durables rose 0.6% (6.6% y/y). During the last ten years there has been a 67% correlation between the y/y change in wholesale inventories and the change in imports of nonpetroleum goods.
Factory sector inventories jumped 0.7% after a 0.4% decline during February.
The inventory to sales ratio for total business was an unrevised 1.26 during February.

<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/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</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 class="odd">
<td class="firstcol">Total</td>
<td>0.7%</td>
<td>0.1%</td>
<td>4.2%</td>
<td>4.5%</td>
<td>7.9%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>1.0%</td>
<td>-0.0%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>6.7%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.7%</td>
<td>0.1%</td>
<td>4.2%</td>
<td>4.5%</td>
<td>7.1%</td>
<td>1.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.2%</td>
<td>0.9%</td>
<td>6.3%</td>
<td>7.1%</td>
<td>9.8%</td>
<td>1.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.7%</td>
<td>-0.4%</td>
<td>3.4%</td>
<td>4.4%</td>
<td>7.7%</td>
<td>-1.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The 0.7% rise in total business inventories during March handily outpaced Consensus expectations for a 0.5% increase. It followed an upwardly revised 0.1% up tick during February and was the strongest rose so far this year. Retail [...]

U.S. Business Inventories Gain

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

Sandy Batten

260421V50.jpg

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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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