Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060511a.jpg" width="353">
The 0.5% rise in US retail sales during April was a bit short of Consensus expectations for a 0.7% gain. It followed an unrevised 0.6% rise the prior month. Despite the disappointment, retail sales during the first four months of this year rose at a 10.2% annual rate.
Also disappointing was the 0.7% increase in nonauto sales which followed an unrevised 0.4% March rise. Consensus expectations had been for a 0.9% increase. However, that disappointment must be labeled slight given that year to date nonauto sales surged 11.8% (AR) versus an 8.2% rise during all of last year.
Sales at gasoline stations jumped 4.6% (17.4% y/y) as retail gasoline prices rose 13.1% m/m to an April average of $2.74 per gallon.
During April, nonauto retail sales less gasoline rose just 0.2% (7.4% y/y) following an upwardly revised 0.6% March increase. Year to date nonauto retail sales less gasoline rose at a 10.0% annual rate versus a 6.7% increase during 2005.
Sales by motor vehicle &amp; parts dealers fell 0.4% (-0.3% y/y) and reflected a 0.9% m/m increase unit auto sales to 16.74M.
Sales of discretionary items rose moderately led by a 0.8% increase in general merchandise store sales (5.7% y/y). Apparel store sales rose 0.3% (4.5% y/y) but the prior month&#39;s modest decline was revised to a 0.4% gain. Sales of furniture, electronics &amp; appliances rose 0.2% (6.9% y/y) and matched an upwardly revised March up tick.
Building material sales retraced all of an upwardly revised 1.6% (+13.0% y/y) March increase while sales of nonstore retailers (internet &amp; catalogue) rose 0.5% (13.3% y/y) following jumps of 2.1% and 3.3% during the prior two months.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</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>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.5%</td>
<td>0.6%</td>
<td>6.6%</td>
<td>7.2%</td>
<td>6.2%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.7%</td>
<td>0.5%</td>
<td>8.6%</td>
<td>8.2%</td>
<td>7.2%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
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The 0.5% rise in US retail sales during April was a bit short of Consensus expectations for a 0.7% gain. It followed an unrevised 0.6% rise the prior month. Despite the disappointment, retail sales during the first four months of this [...]

U.S. Retail Sales Gain Light

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060511a.jpg" width="353">
The 0.5% rise in US retail sales during April was a bit short of Consensus expectations for a 0.7% gain. It followed an unrevised 0.6% rise the prior month. Despite the disappointment, retail sales during the first four months of this year rose at a 10.2% annual rate.
Also disappointing was the 0.7% increase in nonauto sales which followed an unrevised 0.4% March rise. Consensus expectations had been for a 0.9% increase. However, that disappointment must be labeled slight given that year to date nonauto sales surged 11.8% (AR) versus an 8.2% rise during all of last year.
Sales at gasoline stations jumped 4.6% (17.4% y/y) as retail gasoline prices rose 13.1% m/m to an April average of $2.74 per gallon.
During April, nonauto retail sales less gasoline rose just 0.2% (7.4% y/y) following an upwardly revised 0.6% March increase. Year to date nonauto retail sales less gasoline rose at a 10.0% annual rate versus a 6.7% increase during 2005.
Sales by motor vehicle &amp; parts dealers fell 0.4% (-0.3% y/y) and reflected a 0.9% m/m increase unit auto sales to 16.74M.
Sales of discretionary items rose moderately led by a 0.8% increase in general merchandise store sales (5.7% y/y). Apparel store sales rose 0.3% (4.5% y/y) but the prior month&#39;s modest decline was revised to a 0.4% gain. Sales of furniture, electronics &amp; appliances rose 0.2% (6.9% y/y) and matched an upwardly revised March up tick.
Building material sales retraced all of an upwardly revised 1.6% (+13.0% y/y) March increase while sales of nonstore retailers (internet &amp; catalogue) rose 0.5% (13.3% y/y) following jumps of 2.1% and 3.3% during the prior two months.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol">&nbsp;</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>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM">Retail Sales &amp; Food Services</a></td>
<td>0.5%</td>
<td>0.6%</td>
<td>6.6%</td>
<td>7.2%</td>
<td>6.2%</td>
<td>4.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.7%</td>
<td>0.5%</td>
<td>8.6%</td>
<td>8.2%</td>
<td>7.2%</td>
<td>4.7%</td>
</tr>
</tbody>
</table>
U.S. Business Inventories Gain 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 11, 2006


<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%">
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<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>
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</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>
Initial Claims for Jobless Insurance Rose Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 11, 2006


<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%">
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<thead>
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<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>
First Q1 GDP Releases Show Signs of Life in Europe 
by <a href="/comment/Stone.html">Carol Stone</a> May 11, 2006


<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%">
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<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>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510f.jpg" width="353">
UK trade flows are strong. In both directions. A quick glance at today&#39;s March report would likely draw the most attention to a widening tendency in monthly deficit. The March figure, &pound;3.84 billion, came down from February&#39;s &pound;5.38 billion, but the general run has been toward larger gaps. See the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510g.jpg" width="353">
Nonetheless, the growth of exports as well as imports has been impressive. Exports are up13.7% from a year ago, with goods alone up 19.8%. Imports have risen 15.0%, with the goods portion up 18.9%. While some of this is a pick-up in prices, the volume indexes have also shown vigor: exports of goods are up 16.0% and imports, 13.3%.
Oil exports and imports are obviously up in value terms, and the trend may be shifting in the volume of oil exports. These are still below year ago amounts, but the one-month increase for March over February was a whopping 61.3%. Imports are quite erratic month-to-month, but for the first quarter as a whole, the amount of crude oil imported was 4.2% larger than in last year&#39;s first quarter. As seen in the table below, the overall &quot;fuel&quot; account recovered a bit in March from its recent unprecedented deficits. The recent high oil prices may be making it more economical for UK producers to raise the volume they pump, and indeed, the volume index for fuel, at 94 (2002=100) is the highest since last March, when it was 101.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510h.jpg" width="353">
Non-oil trade has generally been on an upswing as well, and many countries are increasing their purchases from the UK. The ONS cautions that some of the apparent gains may be due to the results of VAT fraud investigations, but even so, their carefully worded text suggests that much of the gains are genuine. The ONS release is available <a href="http://www.statistics.gov.uk/pdfdir/trd0506.pdf">here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK Trade, SA, Bil.&pound;</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">Trade Balance: Goods &amp; Services</td>
<td>-3.84</td>
<td>-5.38</td>
<td>-4.45</td>
<td>-3.04</td>
<td>-3.91</td>
<td>-3.25</td>
<td>-2.58</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>29.29</td>
<td>28.81</td>
<td>28.68</td>
<td>25.76</td>
<td>26.33</td>
<td>24.49</td>
<td>23.52</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>33.12</td>
<td>34.20</td>
<td>33.13</td>
<td>28.80</td>
<td>30.23</td>
<td>27.74</td>
<td>26.10</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods</td>
<td>-5.46</td>
<td>-7.05</td>
<td>-6.14</td>
<td>-4.72</td>
<td>-5.47</td>
<td>-5.04</td>
<td>-3.99</td>
</tr>
<tr>
<td class="firstcol">Fuels</td>
<td>-0.28</td>
<td>-0.71</td>
<td>-0.81</td>
<td>0.35</td>
<td>-0.23</td>
<td>0.09</td>
<td>0.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>2.34</td>
<td>1.86</td>
<td>2.01</td>
<td>1.90</td>
<td>1.80</td>
<td>1.49</td>
<td>1.38</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>2.62</td>
<td>2.57</td>
<td>2.82</td>
<td>1.55</td>
<td>2.03</td>
<td>1.40</td>
<td>0.96</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>1.62</td>
<td>1.66</td>
<td>1.96</td>
<td>1.68</td>
<td>1.56</td>
<td>1.79</td>
<td>1.41</td>
</tr>
</tbody>
</table>
</body>
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UK trade flows are strong. In both directions. A quick glance at today's March report would likely draw the most attention to a widening tendency in monthly deficit. The March figure, £3.84 billion, came down from February's £5.38 [...]

UK Trade Flows Show Strengthening Trend; Deficit Narrows in March

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510e.jpg" width="353">
The U.S. federal government ran a budget surplus in April of $118.9B that was more than double the surplus during the same month last year. The surplus improved the FY06 to-date budget deficit to $184.1B versus a deficit of $236.9B during the first seven months of FY05.
A quirky 21.5% m/m drop in U.S. net outlays helped minimize the government&#39;s red ink. As a result of the drop the y/y growth in FYTD outlays fell to 5.7% from 8.7% one month earlier. Lower spending during April was logged by most outlay categories. Defense spending (19% of total outlays) reversed all of the prior month&#39;s surge and fell 21.6% (-10.9% y/y) and for the first seven months of FY06 rose 5.7% from &#39;05.
Medicare spending (12% of total outlays) also reversed the March jump and fell by about half m/m. Still the FYTD growth in Medicare spending was strong at 7.9%, helped by the initiation of prescription drug coverage. Spending on social security (21% of total outlays) remained strong at 5.7%.
Net revenues nearly doubled m/m during April and that lifted growth to 11.2% during the first seven months of this fiscal year versus FY05. Individual income tax receipts (44% of total receipts) rose 13.8% from last April and that pulled FYTD growth to 9.9%. Corporate income taxes (10% of total receipts) similarly were strong and rose 28.0% y/y and rose 29.9% during fiscal year 06&#39;s first seven months.
The improved job market raised employment taxes (36% of total receipts) 7.4% y/y and estate &amp; gift taxes surged by 13.1% y/y.
Presidential Approval Ratings: How Low Can Bush Go? from the American Enterprise Institute (AEI) can be found <a href="http://www.aei.org/publications/pubID.24359,filter.all/pub_detail.asp">here</a>.
Also from AEI is Taking Stock of Congress: A Lot of Bad to Go Around and it is available <a href="http://www.aei.org/publications/filter.all,pubID.24357/pub_detail.asp">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/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2005</th>
<th scope="col">FY 2004</th>
<th scope="col">FY 2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$118.9B</td>
<td>$-85.5B</td>
<td>$57.7B (4/05)</td>
<td>$-318.3B</td>
<td>$-412.7B</td>
<td>$-377.6B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Revenues</td>
<td>$315.1B</td>
<td>$164.6B</td>
<td>13.5%</td>
<td>14.5%</td>
<td>5.5%</td>
<td>-3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Outlays</td>
<td>$196.2B</td>
<td>$250.0B</td>
<td>-10.8%</td>
<td>7.8%</td>
<td>6.2%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The U.S. federal government ran a budget surplus in April of $118.9B that was more than double the surplus during the same month last year. The surplus improved the FY06 to-date budget deficit to $184.1B versus a deficit of $236.9B [...]

U.S. Budget Surplus Doubled in April

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510c.jpg" width="353">
The Federal Open Market Committee raised the target interest rate for Federal funds 25 basis points to 5.00% at today&#39;s meeting. This sixteenth 25 basis point increase since June of 2004 was the result of a unanimous decision and was widely expected by analysts.
The discount rate also was raised 25 basis points to 6.00%.
The Fed&#39;s rationale for raising the rate was succinct. &quot;Economic growth has been quite strong so far this year.&quot;
Future rate increases were perhaps suggested by the statement &quot;... further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information.&quot;<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510d.jpg" width="353">
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/BoardDocs/press/monetary/2006/20060510/default.htm.">link</a>.
Is Price Stability Enough? by William R. White at the Bank for International Settlements can be found <a href="http://www.bis.org/publ/work205.htm">here</a>.
Transparency, Expectations and Forecasts from the Federal Reserve Bank of Atlanta is available <a href="http://www.frbatlanta.org/filelegacydocs/erq106_bauer.pdf">here</a>.
Enhancing Fed Credibility from the Federal Reserve Bank of San Francisco is found <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-05.pdf">here</a>.

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The Federal Open Market Committee raised the target interest rate for Federal funds 25 basis points to 5.00% at today's meeting. This sixteenth 25 basis point increase since June of 2004 was the result of a unanimous decision and was [...]

Fed Funds Rate Increased to 5.00%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510a.jpg" width="353">
The total number of mortgage applications fell another 5.8% last week. It was the fourth decline during the last five weeks and pulled the opening level in May 2.0% below April which fell 1.1% from the March average.
Purchase applications gave back 3.9% w/w of an 11.3% recovery at the end of April. Nevertheless, at the start of May purchase applications were 1.1% ahead of April which rose 1.1% versus March.
During the last ten years there has been a negative 80% correlation between the interest rate level on 30-year financing and purchase applications while during those years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
An 8.8% w/w decline in applications to refinance lowered the level in early May 6.6% below the April average which fell 4.1% from March.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510b.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage rose again to 6.84% from 6.81% at the end of April. The rate on 15-year financing similarly increased to 6.51%, the highest level since early 2002. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">05/05/06</th>
<th scope="col">04/28/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>562.1</td>
<td>596.8</td>
<td>-28.0%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>416.5</td>
<td>433.3</td>
<td>-20.8%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,427.4</td>
<td>1,565.6</td>
<td>-36.9%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
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The total number of mortgage applications fell another 5.8% last week. It was the fourth decline during the last five weeks and pulled the opening level in May 2.0% below April which fell 1.1% from the March average. Purchase [...]

Mortgage Applications Crimped By Higher Rates

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510c.jpg" width="353">
The Federal Open Market Committee raised the target interest rate for Federal funds 25 basis points to 5.00% at today&#39;s meeting. This sixteenth 25 basis point increase since June of 2004 was the result of a unanimous decision and was widely expected by analysts.
The discount rate also was raised 25 basis points to 6.00%.
The Fed&#39;s rationale for raising the rate was succinct. &quot;Economic growth has been quite strong so far this year.&quot;
Future rate increases were perhaps suggested by the statement &quot;... further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information.&quot;<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510d.jpg" width="353">
For the complete text of the Fed&#39;s latest press release please follow this <a href="http://www.federalreserve.gov/BoardDocs/press/monetary/2006/20060510/default.htm.">link</a>.
Is Price Stability Enough? by William R. White at the Bank for International Settlements can be found <a href="http://www.bis.org/publ/work205.htm">here</a>.
Transparency, Expectations and Forecasts from the Federal Reserve Bank of Atlanta is available <a href="http://www.frbatlanta.org/filelegacydocs/erq106_bauer.pdf">here</a>.
Enhancing Fed Credibility from the Federal Reserve Bank of San Francisco is found <a href="http://www.frbsf.org/publications/economics/letter/2006/el2006-05.pdf">here</a>.

U.S. Budget Surplus Doubled in April 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 10, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510e.jpg" width="353">
The U.S. federal government ran a budget surplus in April of $118.9B that was more than double the surplus during the same month last year. The surplus improved the FY06 to-date budget deficit to $184.1B versus a deficit of $236.9B during the first seven months of FY05.
A quirky 21.5% m/m drop in U.S. net outlays helped minimize the government&#39;s red ink. As a result of the drop the y/y growth in FYTD outlays fell to 5.7% from 8.7% one month earlier. Lower spending during April was logged by most outlay categories. Defense spending (19% of total outlays) reversed all of the prior month&#39;s surge and fell 21.6% (-10.9% y/y) and for the first seven months of FY06 rose 5.7% from &#39;05.
Medicare spending (12% of total outlays) also reversed the March jump and fell by about half m/m. Still the FYTD growth in Medicare spending was strong at 7.9%, helped by the initiation of prescription drug coverage. Spending on social security (21% of total outlays) remained strong at 5.7%.
Net revenues nearly doubled m/m during April and that lifted growth to 11.2% during the first seven months of this fiscal year versus FY05. Individual income tax receipts (44% of total receipts) rose 13.8% from last April and that pulled FYTD growth to 9.9%. Corporate income taxes (10% of total receipts) similarly were strong and rose 28.0% y/y and rose 29.9% during fiscal year 06&#39;s first seven months.
The improved job market raised employment taxes (36% of total receipts) 7.4% y/y and estate &amp; gift taxes surged by 13.1% y/y.
Presidential Approval Ratings: How Low Can Bush Go? from the American Enterprise Institute (AEI) can be found <a href="http://www.aei.org/publications/pubID.24359,filter.all/pub_detail.asp">here</a>.
Also from AEI is Taking Stock of Congress: A Lot of Bad to Go Around and it is available <a href="http://www.aei.org/publications/filter.all,pubID.24357/pub_detail.asp">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/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">FY 2005</th>
<th scope="col">FY 2004</th>
<th scope="col">FY 2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$118.9B</td>
<td>$-85.5B</td>
<td>$57.7B (4/05)</td>
<td>$-318.3B</td>
<td>$-412.7B</td>
<td>$-377.6B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Revenues</td>
<td>$315.1B</td>
<td>$164.6B</td>
<td>13.5%</td>
<td>14.5%</td>
<td>5.5%</td>
<td>-3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Net Outlays</td>
<td>$196.2B</td>
<td>$250.0B</td>
<td>-10.8%</td>
<td>7.8%</td>
<td>6.2%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
Mortgage Applications Crimped By Higher Rates 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 10, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510a.jpg" width="353">
The total number of mortgage applications fell another 5.8% last week. It was the fourth decline during the last five weeks and pulled the opening level in May 2.0% below April which fell 1.1% from the March average.
Purchase applications gave back 3.9% w/w of an 11.3% recovery at the end of April. Nevertheless, at the start of May purchase applications were 1.1% ahead of April which rose 1.1% versus March.
During the last ten years there has been a negative 80% correlation between the interest rate level on 30-year financing and purchase applications while during those years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
An 8.8% w/w decline in applications to refinance lowered the level in early May 6.6% below the April average which fell 4.1% from March.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510b.jpg" width="353">
The effective interest rate on a conventional 30-year mortgage rose again to 6.84% from 6.81% at the end of April. The rate on 15-year financing similarly increased to 6.51%, the highest level since early 2002. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">05/05/06</th>
<th scope="col">04/28/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>562.1</td>
<td>596.8</td>
<td>-28.0%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>416.5</td>
<td>433.3</td>
<td>-20.8%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,427.4</td>
<td>1,565.6</td>
<td>-36.9%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
UK Trade Flows Show Strengthening Trend; Deficit Narrows in March 
by <a href="/comment/Stone.html">Carol Stone</a> May 10, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510f.jpg" width="353">
UK trade flows are strong. In both directions. A quick glance at today&#39;s March report would likely draw the most attention to a widening tendency in monthly deficit. The March figure, &pound;3.84 billion, came down from February&#39;s &pound;5.38 billion, but the general run has been toward larger gaps. See the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510g.jpg" width="353">
Nonetheless, the growth of exports as well as imports has been impressive. Exports are up13.7% from a year ago, with goods alone up 19.8%. Imports have risen 15.0%, with the goods portion up 18.9%. While some of this is a pick-up in prices, the volume indexes have also shown vigor: exports of goods are up 16.0% and imports, 13.3%.
Oil exports and imports are obviously up in value terms, and the trend may be shifting in the volume of oil exports. These are still below year ago amounts, but the one-month increase for March over February was a whopping 61.3%. Imports are quite erratic month-to-month, but for the first quarter as a whole, the amount of crude oil imported was 4.2% larger than in last year&#39;s first quarter. As seen in the table below, the overall &quot;fuel&quot; account recovered a bit in March from its recent unprecedented deficits. The recent high oil prices may be making it more economical for UK producers to raise the volume they pump, and indeed, the volume index for fuel, at 94 (2002=100) is the highest since last March, when it was 101.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060510h.jpg" width="353">
Non-oil trade has generally been on an upswing as well, and many countries are increasing their purchases from the UK. The ONS cautions that some of the apparent gains may be due to the results of VAT fraud investigations, but even so, their carefully worded text suggests that much of the gains are genuine. The ONS release is available <a href="http://www.statistics.gov.uk/pdfdir/trd0506.pdf">here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">UK Trade, SA, Bil.&pound;</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">Trade Balance: Goods &amp; Services</td>
<td>-3.84</td>
<td>-5.38</td>
<td>-4.45</td>
<td>-3.04</td>
<td>-3.91</td>
<td>-3.25</td>
<td>-2.58</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>29.29</td>
<td>28.81</td>
<td>28.68</td>
<td>25.76</td>
<td>26.33</td>
<td>24.49</td>
<td>23.52</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>33.12</td>
<td>34.20</td>
<td>33.13</td>
<td>28.80</td>
<td>30.23</td>
<td>27.74</td>
<td>26.10</td>
</tr>
<tr class="odd">
<td class="firstcol">Goods</td>
<td>-5.46</td>
<td>-7.05</td>
<td>-6.14</td>
<td>-4.72</td>
<td>-5.47</td>
<td>-5.04</td>
<td>-3.99</td>
</tr>
<tr>
<td class="firstcol">Fuels</td>
<td>-0.28</td>
<td>-0.71</td>
<td>-0.81</td>
<td>0.35</td>
<td>-0.23</td>
<td>0.09</td>
<td>0.42</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>2.34</td>
<td>1.86</td>
<td>2.01</td>
<td>1.90</td>
<td>1.80</td>
<td>1.49</td>
<td>1.38</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>2.62</td>
<td>2.57</td>
<td>2.82</td>
<td>1.55</td>
<td>2.03</td>
<td>1.40</td>
<td>0.96</td>
</tr>
<tr class="odd">
<td class="firstcol">Services</td>
<td>1.62</td>
<td>1.66</td>
<td>1.96</td>
<td>1.68</td>
<td>1.56</td>
<td>1.79</td>
<td>1.41</td>
</tr>
</tbody>
</table>
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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/060509e.jpg" width="353">
March industrial production in Germany fell 2.4% in contrast to expectations of a small rise. The decline was the biggest monthly fall since June, 2000. Excluding construction, which declined by 14.5%, production still declined by 1.7%. Manufacturing output declined 1.3% with declines in capital goods production of 2.5%, in consumer goods, 1.0%, in energy, 5.3% and in intermediate goods, 0.5%. Production in Manufacturing and Construction are compared in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060509f.jpg" width="353">
The set back in production is not necessarily a sign that the moderate upturn in the German economy is in danger. The month of March was unseasonally very cold, a fact that could account for some of the sharp drop in construction activity. In addition there was a brief work stoppage in late March when 700,000 workers in North Rhine-Westphalia were called off the job in connection with the 2006 wage negotiations of IG Metall (Germany&#39;s union of some 3.4 million engineering workers). The union&#39;s initial demand was for a 5% wage increase, but the workers in North Rhine-Westphalia subsequently settled for a 3% wage increase. Expectations are that this settlement will be accepted by the six remaining regional chapters of the union and become a model for a nationwide agreement.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060509g.jpg" width="353">
Industrial production in Eastern Europe continues to show strength--Slovakia, in particular, with an 11% rise in production from February to March. Production in Hungary was up a more modest 1.5% in the same period. Industrial production in the two countries is shown in the second chart. The year-over-year gains were 16.6% in Slovakia and 10.1% in Hungary. (These data are found in the Haver data base EMERGECW.) The data for Hungary are preliminary and are based on the output of firms with five or more employees.
As an example of the different trends in industrial production in Western and Eastern Europe, production in Germany and Hungary are shown in the third chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/JAPAN/@J5/@J5.HTM">Industrial Production</a> (2000=100)</th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 06</th>
<th scope="col">Mar 05</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2005</th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total</td>
<td>105.0</td>
<td>107.6</td>
<td>101.1</td>
<td>-2.42</td>
<td>3.86</td>
<td>103.8</td>
<td>100.8</td>
<td>98.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total ex &nbsp;Construction</td>
<td>108.4</td>
<td>110.3</td>
<td>104.1</td>
<td>-1.72</td>
<td>4.13</td>
<td>106.1</td>
<td>102.5</td>
<td>99.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Construction</td>
<td>64.3</td>
<td>75.2</td>
<td>65.5</td>
<td>-14.49</td>
<td>-1.83</td>
<td>76.1</td>
<td>80.4</td>
<td>85.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Manufacturing&nbsp;</td>
<td>109.2</td>
<td>110.2</td>
<td>104.3</td>
<td>-1.27</td>
<td>4.70</td>
<td>106.6</td>
<td>102.7</td>
<td>99.4</td>
</tr>
<tr>
<td class="firstcol">Hungary</td>
<td>&nbsp;139.36</td>
<td>137.3&nbsp;</td>
<td>126.6&nbsp;</td>
<td>1.50&nbsp;</td>
<td>10.08&nbsp;</td>
<td>131.5&nbsp;</td>
<td>122.11&nbsp;</td>
<td>114.42&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Slovakia</td>
<td>146.5</td>
<td>132.0</td>
<td>125.6</td>
<td>10.98</td>
<td>16.64</td>
<td>129.1</td>
<td>124.6</td>
<td>119.6</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
</html>

March industrial production in Germany fell 2.4% in contrast to expectations of a small rise. The decline was the biggest monthly fall since June, 2000. Excluding construction, which declined by 14.5%, production still declined by [...]

European Industrial Production: Germany, an Unexpected Sharp Decline; Hungary and Slovakia, Show Continued Strength

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. Those mentioned 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, after 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

Jump to:

U.S. Retail Sales Gain Light

U.S. Retail Sales Gain Light

UK Trade Flows Show Strengthening Trend; Deficit Narrows in March

U.S. Budget Surplus Doubled in April

Fed Funds Rate Increased to 5.00%

Mortgage Applications Crimped By Higher Rates

Fed Funds Rate Increased to 5.00%

European Industrial Production: Germany, an Unexpected Sharp Decline; Hungary and Slovakia, Show Continued Strength