Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051123d.jpg" width="353">
The November reading of consumer sentiment from the University of Michigan rose 10.0% m/m to 81.6, adding a bit to the improvement through mid-month. Consensus expectations had been for a rise to 81.0.
During the last ten years there has been a 78% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
Improved expectations fostered the m/m rise. The index of Consumer expectations rose 10.1% as expected business conditions during the next year surged 22.1% while expectations for personal finances recovered all of the prior month&#39;s drop. The mean expected inflation rate for the next twelve months fell further to 4.1% from 5.5% expected in October &amp; September.
The current conditions index held onto the improvement through mid-month and rose 9.9% versus October. The reading of personal finances rose 7.3% and reversed all of the October decline and the reading of buying conditions for large household goods jumped 12.9% to the highest level since August.
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.
Why Hasn&#39;t the Jump in Oil Prices Led to a Recession? from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-31.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Nov (Final)</th>
<th scope="col">Nov (Prelim)</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>81.6</td>
<td>79.9</td>
<td>74.2</td>
<td>-12.1%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>100.2</td>
<td>100.3</td>
<td>91.2</td>
<td>-4.3%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>69.6</td>
<td>66.8</td>
<td>63.2</td>
<td>-18.3%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
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The November reading of consumer sentiment from the University of Michigan rose 10.0% m/m to 81.6, adding a bit to the improvement through mid-month. Consensus expectations had been for a rise to 81.0. During the last ten years there [...]

U.S. Consumer Sentiment Lifted Further By Drop in Oil Prices

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051123d.jpg" width="353">
The November reading of consumer sentiment from the University of Michigan rose 10.0% m/m to 81.6, adding a bit to the improvement through mid-month. Consensus expectations had been for a rise to 81.0.
During the last ten years there has been a 78% correlation between the level of consumer sentiment and the y/y change in real consumer spending.
Improved expectations fostered the m/m rise. The index of Consumer expectations rose 10.1% as expected business conditions during the next year surged 22.1% while expectations for personal finances recovered all of the prior month&#39;s drop. The mean expected inflation rate for the next twelve months fell further to 4.1% from 5.5% expected in October &amp; September.
The current conditions index held onto the improvement through mid-month and rose 9.9% versus October. The reading of personal finances rose 7.3% and reversed all of the October decline and the reading of buying conditions for large household goods jumped 12.9% to the highest level since August.
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.
Why Hasn&#39;t the Jump in Oil Prices Led to a Recession? from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-31.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Nov (Final)</th>
<th scope="col">Nov (Prelim)</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>81.6</td>
<td>79.9</td>
<td>74.2</td>
<td>-12.1%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>100.2</td>
<td>100.3</td>
<td>91.2</td>
<td>-4.3%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Expectations</td>
<td>69.6</td>
<td>66.8</td>
<td>63.2</td>
<td>-18.3%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
Mortgage Applications Fell Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 23, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051123c.jpg" width="353">
The total number of mortgage applications dropped 3.4% last week to the lowest level since January, according to the Mortgage Bankers Association. The decline pulled the average level in November 5.5% below October.
Applications to refinance, down 6.9%, fell sharply for the fifth consecutive week. The November average is down 14.0% from October.
Purchase applications fell 1.2% and reversed about half of the prior week&#39;s gain. Purchase applications in November are 0.6% ahead of October. During the last ten years there has been a 49% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
The effective interest rate on a conventional 30-year mortgage slipped to 6.48% from 6.59% the prior week. The effective rate on a 15-year mortgage also fell to 6.11% from 6.18%. The interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
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>.
Can U.S. Monetary Policy Fall (Again) into an Expectation Trap? from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr229.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">11/18/05</th>
<th scope="col">11/11/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>635.4</td>
<td>657.6</td>
<td>-11.1%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>472.3</td>
<td>477.9</td>
<td>1.9%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,584.1</td>
<td>1,702.4</td>
<td>-27.3%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Stable 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 23, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051123a.jpg" width="353">
The Conference Board&#39;s Index of Help-Wanted Advertising held at 38 in October versus the downwardly revised September level and 38 in August. The average level so far this year is 39.
During the last ten years there has been a 62% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume improved further to 57% in October after gains during the prior two months.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;04</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>38</td>
<td>38</td>
<td>36</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 23, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051123b.jpg" width="353">
Initial claims for unemployment insurance rose 30,000 to 335,000 last week and reversed the little revised 23,000 decline the prior week. Consensus expectations had been for a lesser increase to 311,000 claims.
Hurricane related claims totaled 21,000 and brought the total of the three storms during the last twelve weeks to 582,000.
The four-week moving average of initial claims ticked up slightly to 323,250 (-2.5% y/y).
Continuing claims for unemployment insurance rose a sharp 59,000 following three successive weeks of decline.
The insured rate of unemployment held at 2.2% for the ninth consecutive week.
Minutes of the Federal Open Market Committee November 1, 2005 can be found <a href="http://www.federalreserve.gov/fomc/minutes/20051101.htm"> here</a>.
Estimating the &quot;Neutral&quot; Real Interest Rate in Real Time from the Federal Reserve Bank of San Francisco is available <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-27.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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">11/19/05</th>
<th scope="col">11/12/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>335</td>
<td>305</td>
<td>3.4%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,824</td>
<td>3.1%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
Italian Consumer Confidence Improves in November as Inflation Concerns Moderate 
by <a href="/comment/Stone.html">Carol Stone</a> November 23, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051123e.jpg" width="353">
Italy&#39;s private institute ISAE reported its monthly consumer survey results for November this morning. They show an improving trend in the overall confidence indicator, albeit well below the highs of about four years ago. The indicator is 108.8 this month, 1980=100 and seasonally adjusted, up 3.2 points from October and well above the average of 101.5 for 2004.
Looking at some of the broad components, it&#39;s a little hard to see the total index&#39;s better than 7% improvement in people&#39;s confidence levels over last year&#39;s average level. Only the same tiny portion of survey respondents believe the &quot;general situation&quot; is getting better, and the number of those perceiving a worsening trend has declined only minimally. Household financial expectations rated a -7 in November, compared with -8 in 2004. Unemployment expectations seem still to be deteriorating. The share of respondents looking for unemployment to increase over the coming year was 48%, compared with 40% for last year as a whole and only 35% in 2002. This group has taken away from those expecting steady unemployment, which has fallen to 35% this month from 44% for 2004. These movements toward increasing concerns about unemployment extend a pattern that has prevailed since 2001. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051123f.jpg" width="353">
However, there are some positive hints on the inflation front. More consumers look for inflation to pick up than did so last year, but these are many fewer than expected so in 2001 and 2002. This is illustrated in the second graph, where it is also seen that the November figures show marked improvement from October. These price expectations are giving some aid to plans for &quot;major purchases&quot;; the outlook there is still absolutely negative, but it has stabilized in recent months. Referring to durable goods, the survey item &quot;present ability for purchases&quot; has a 10% &quot;favorable&quot; reading in November, up from 7 last year. The &quot;unfavorable&quot; reading is 58% compared with 58% last year. These hardly indicate a consumer spending boom on the horizon, but they do suggest that consumers are less stressed about the buying environment than they have been for some time.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Italy ISAE Consumer Survey</th>
<th scope="col">Nov 2005</th>
<th scope="col">Oct 2005</th>
<th scope="col">Nov 2004</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Confidence Indicator (SA, 1980 =100)</td>
<td>108.8</td>
<td>105.6</td>
<td>103.8</td>
<td>101.5</td>
<td>106.2</td>
<td>115.8</td>
<td>122.6</td>
</tr>
<tr>
<td colspan="8">General Situation Last 12 Mos.</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Improving</td>
<td>4</td>
<td>3</td>
<td>4</td>
<td>3</td>
<td>4</td>
<td>9</td>
<td>15</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Worsening</td>
<td>72</td>
<td>77</td>
<td>76</td>
<td>77</td>
<td>73</td>
<td>54</td>
<td>43</td>
</tr>
<tr class="odd">
<td colspan="8">Price Trends Next 12 Mos.</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Rapid Increase</td>
<td>7</td>
<td>11</td>
<td>6</td>
<td>5</td>
<td>7</td>
<td>16</td>
<td>21</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Modest Increase</td>
<td>17</td>
<td>21</td>
<td>13</td>
<td>14</td>
<td>15</td>
<td>35</td>
<td>37</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Flat</td>
<td>47</td>
<td>41</td>
<td>52</td>
<td>54</td>
<td>51</td>
<td>31</td>
<td>25</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unsure</td>
<td>10</td>
<td>8</td>
<td>8</td>
<td>5</td>
<td>5</td>
<td>2</td>
<td>5</td>
</tr>
<tr>
<td colspan="8">Unemployment Next 12 Mos.</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Large Increase</td>
<td>14</td>
<td>17</td>
<td>13</td>
<td>8</td>
<td>8</td>
<td>7</td>
<td>7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Modest Increase</td>
<td>34</td>
<td>33</td>
<td>32</td>
<td>32</td>
<td>31</td>
<td>28</td>
<td>23</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unchanged</td>
<td>35</td>
<td>35</td>
<td>36</td>
<td>44</td>
<td>42</td>
<td>43</td>
<td>39</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122e.jpg" width="353">
Final results for Germany&#39;s third quarter Gross Domestic Product were released today. In addition to revisions of the preliminary estimates of total GDP released a week ago, details of the composition of both the expenditure and income sides of the national accounts are given. Estimates of the contribution to growth of the various sectors are also available and are shown in the table below for the first three quarters of 2005.
In the first chart we show the contribution of domestic demand and net exports to total GDP growth. Over the past five years changes in both net exports and domestic demand have been erratic and have tended to offset one another. In the last quarter, a positive contribution of 1.30 percentage points from net exports was offset by a negative contribution of 0.60 percentage points from domestic demand.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122f.jpg" width="353">
According to data on the income side of the National Accounts there has been a marked change in the distribution of income in Germany over the past five years. The share of compensation of employees in net national income has been declining over this period, as shown in the second chart. From 62.9% of net national income in the first quarter of 2001, employee compensation has declined to 58.5&amp; in the third quarter of 2005. The counterpart to the decline in the share of compensation has been the rise in the share of entrepreneurial income (shown in the third chart) from 25.1% in the first quarter of 2001 to 29.1% in the third quarter of 2005. The changing distribution of income may account for a part of the sluggish trend in private consumption over this period.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122g.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Germany Contribution to Growth</th>
<th scope="col">Q3 05&nbsp; % Pts</th>
<th scope="col">Q2 05 % Pts </th>
<th scope="col">Q1 05 % Pts</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Growth of Gross Domestic Product</td>
<td>0.70</td>
<td>0.0</td>
<td>0.10</td>
</tr>
<tr>
<td class="firstcol">Net Exports</td>
<td>1.30</td>
<td>-1.00</td>
<td>-0.50</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Demand</td>
<td>-0.60</td>
<td>0.90</td>
<td>-0.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumption</td>
<td>-0.10</td>
<td>0.30</td>
<td>-0.30</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Private</td>
<td>-0.10</td>
<td>0.00</td>
<td>-0.60</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Government</td>
<td>0.00</td>
<td>0.30</td>
<td>0.20</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Gross Fixed Investment</td>
<td>0.20</td>
<td>0.10</td>
<td>0.10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventories</td>
<td>-0.70</td>
<td>0.50</td>
<td>-0.20</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Share of Net National Income</td>
<td>Q1 01&nbsp; %&nbsp;</td>
<td>Q3 05 %&nbsp; </td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Compensation of Employees</td>
<td>62.9</td>
<td>59.5</td>
<td></td>
</tr>
<tr>
<td class="firstcol">Entrepreneurial Income</td>
<td>25.1&nbsp;</td>
<td>&nbsp;29.1</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
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Final results for Germany's third quarter Gross Domestic Product were released today. In addition to revisions of the preliminary estimates of total GDP released a week ago, details of the composition of both the expenditure and [...]

Revisions and Additions to German National Accounts Data for Q3

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122c.jpg" width="353">
Last week, the US average retail gasoline price continued lower to $2.20 per gallon from $2.30 during the prior week and from $2.73 one month earlier. As of yesterday, the spot market price for gasoline was $1.44 per gallon and has roughly held that level for seven days.
Retail gasoline prices peaked in early September at $3.07 per gallon and have since fallen 72 cents or 28%. During that period spot gasoline prices are down $1.18 or 45%. The implied rise in gasoline retailers&#39; margins has restored profitability. However, that rise in the retail price of gasoline versus the spot price followed several years of margin decline.
During the past month margins have fallen roughly 20%, in part reflecting a decline in gasoline demand of up to 3.5% versus the year ago level. In turn, lower prices seem to have revived demand which spiked last week and raised the four week average level of gasoline demand to roughly even with a year earlier after declining sharply through September &amp; October. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122d.jpg" width="353">
Crude oil prices have continued lower as well. WTI crude yesterday at $57.21 per barrel was down versus an average of $62.50 during October and was 18% lower than the late August high of $69.82.
In November, natural gas prices reversed some of the strength of the prior three months. During the last three weeks gas prices averaged $10.08/mmbtu versus the high of $13.53 averaged during October. Nevertheless, prices still are up 71% versus all of last year.

<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/daily/@D3/@D306/@D306.HTM">Energy Prices</a></th>
<th scope="col">11/21/05</th>
<th scope="col">12/31/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">US Retail Gasoline, Regular ($/Gal.)</td>
<td>$2.20</td>
<td>$1.79</td>
<td>13.0%</td>
<td>$1.85</td>
<td>$1.56</td>
<td>$1.35</td>
</tr>
<tr>
<td class="firstcol">Domestic Spot Market Price: West Texas Intermediate ($/Barrel)</td>
<td>$57.21</td>
<td>$41.78</td>
<td>18.0%</td>
<td>$41.78</td>
<td>$32.78</td>
<td>$31.23</td>
</tr>
</tbody>
</table>
</body>
</html>

Last week, the US average retail gasoline price continued lower to $2.20 per gallon from $2.30 during the prior week and from $2.73 one month earlier. As of yesterday, the spot market price for gasoline was $1.44 per gallon and has [...]

Gasoline Prices Fell In A Competitive Market

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122b.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey indicated that last week, chain store sales recovered more than all of the prior period&#39;s decline with a 1.0% jump. It was the second w/w jump that strong this month and it lifted the average level of sales in November 1.2% above October which rose 0.1% from September.
During the last ten years there has been a 51% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC rose 0.6% (-1.7% y/y) during the latest week following a 0.2% increase the prior week.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122a.jpg" width="353">
Through the second week of November, the Johnson Redbook survey indicated a lesser 0.2% (3.5% y/y) gain in store sales versus October. The survey tracks 15 stores and reflects same-store sales of retailers that account for roughly 85% of the department store category in the Census Bureau&#39;s monthly retail sales report.
During the last nine years there has been a 67% correlation between the y/y change in the Redbook store sales index and the change in non-auto retail sales less gasoline, as published by the US Census Department.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">11/19/05</th>
<th scope="col">11/12/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>458.0</td>
<td>453.3</td>
<td>4.2%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


</html>

The International Council of Shopping Centers (ICSC)-UBS survey indicated that last week, chain store sales recovered more than all of the prior period's decline with a 1.0% jump. It was the second w/w jump that strong this month and [...]

Chain Store Sales Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122b.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS survey indicated that last week, chain store sales recovered more than all of the prior period&#39;s decline with a 1.0% jump. It was the second w/w jump that strong this month and it lifted the average level of sales in November 1.2% above October which rose 0.1% from September.
During the last ten years there has been a 51% correlation between the y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department. Chain store sales correspond directly with roughly 14% of non-auto retail sales less gasoline.
The leading indicator of chain store sales from ICSC rose 0.6% (-1.7% y/y) during the latest week following a 0.2% increase the prior week.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122a.jpg" width="353">
Through the second week of November, the Johnson Redbook survey indicated a lesser 0.2% (3.5% y/y) gain in store sales versus October. The survey tracks 15 stores and reflects same-store sales of retailers that account for roughly 85% of the department store category in the Census Bureau&#39;s monthly retail sales report.
During the last nine years there has been a 67% correlation between the y/y change in the Redbook store sales index and the change in non-auto retail sales less gasoline, as published by the US Census Department.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">11/19/05</th>
<th scope="col">11/12/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>458.0</td>
<td>453.3</td>
<td>4.2%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
Gasoline Prices Fell In A Competitive Market 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 22, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122c.jpg" width="353">
Last week, the US average retail gasoline price continued lower to $2.20 per gallon from $2.30 during the prior week and from $2.73 one month earlier. As of yesterday, the spot market price for gasoline was $1.44 per gallon and has roughly held that level for seven days.
Retail gasoline prices peaked in early September at $3.07 per gallon and have since fallen 72 cents or 28%. During that period spot gasoline prices are down $1.18 or 45%. The implied rise in gasoline retailers&#39; margins has restored profitability. However, that rise in the retail price of gasoline versus the spot price followed several years of margin decline.
During the past month margins have fallen roughly 20%, in part reflecting a decline in gasoline demand of up to 3.5% versus the year ago level. In turn, lower prices seem to have revived demand which spiked last week and raised the four week average level of gasoline demand to roughly even with a year earlier after declining sharply through September &amp; October. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122d.jpg" width="353">
Crude oil prices have continued lower as well. WTI crude yesterday at $57.21 per barrel was down versus an average of $62.50 during October and was 18% lower than the late August high of $69.82.
In November, natural gas prices reversed some of the strength of the prior three months. During the last three weeks gas prices averaged $10.08/mmbtu versus the high of $13.53 averaged during October. Nevertheless, prices still are up 71% versus all of last year.

<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/daily/@D3/@D306/@D306.HTM">Energy Prices</a></th>
<th scope="col">11/21/05</th>
<th scope="col">12/31/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">US Retail Gasoline, Regular ($/Gal.)</td>
<td>$2.20</td>
<td>$1.79</td>
<td>13.0%</td>
<td>$1.85</td>
<td>$1.56</td>
<td>$1.35</td>
</tr>
<tr>
<td class="firstcol">Domestic Spot Market Price: West Texas Intermediate ($/Barrel)</td>
<td>$57.21</td>
<td>$41.78</td>
<td>18.0%</td>
<td>$41.78</td>
<td>$32.78</td>
<td>$31.23</td>
</tr>
</tbody>
</table>
Revisions and Additions to German National Accounts Data for Q3   
by <a href="/comment/Curley.html">Louise Curley</a> November 22, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122e.jpg" width="353">
Final results for Germany&#39;s third quarter Gross Domestic Product were released today. In addition to revisions of the preliminary estimates of total GDP released a week ago, details of the composition of both the expenditure and income sides of the national accounts are given. Estimates of the contribution to growth of the various sectors are also available and are shown in the table below for the first three quarters of 2005.
In the first chart we show the contribution of domestic demand and net exports to total GDP growth. Over the past five years changes in both net exports and domestic demand have been erratic and have tended to offset one another. In the last quarter, a positive contribution of 1.30 percentage points from net exports was offset by a negative contribution of 0.60 percentage points from domestic demand.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122f.jpg" width="353">
According to data on the income side of the National Accounts there has been a marked change in the distribution of income in Germany over the past five years. The share of compensation of employees in net national income has been declining over this period, as shown in the second chart. From 62.9% of net national income in the first quarter of 2001, employee compensation has declined to 58.5&amp; in the third quarter of 2005. The counterpart to the decline in the share of compensation has been the rise in the share of entrepreneurial income (shown in the third chart) from 25.1% in the first quarter of 2001 to 29.1% in the third quarter of 2005. The changing distribution of income may account for a part of the sluggish trend in private consumption over this period.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051122g.jpg" width="353">

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Germany Contribution to Growth</th>
<th scope="col">Q3 05&nbsp; % Pts</th>
<th scope="col">Q2 05 % Pts </th>
<th scope="col">Q1 05 % Pts</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Growth of Gross Domestic Product</td>
<td>0.70</td>
<td>0.0</td>
<td>0.10</td>
</tr>
<tr>
<td class="firstcol">Net Exports</td>
<td>1.30</td>
<td>-1.00</td>
<td>-0.50</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Demand</td>
<td>-0.60</td>
<td>0.90</td>
<td>-0.40</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumption</td>
<td>-0.10</td>
<td>0.30</td>
<td>-0.30</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Private</td>
<td>-0.10</td>
<td>0.00</td>
<td>-0.60</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Government</td>
<td>0.00</td>
<td>0.30</td>
<td>0.20</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Gross Fixed Investment</td>
<td>0.20</td>
<td>0.10</td>
<td>0.10</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventories</td>
<td>-0.70</td>
<td>0.50</td>
<td>-0.20</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Share of Net National Income</td>
<td>Q1 01&nbsp; %&nbsp;</td>
<td>Q3 05 %&nbsp; </td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Compensation of Employees</td>
<td>62.9</td>
<td>59.5</td>
<td></td>
</tr>
<tr>
<td class="firstcol">Entrepreneurial Income</td>
<td>25.1&nbsp;</td>
<td>&nbsp;29.1</td>
<td>&nbsp;</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/051121b.jpg" width="353">
The Euro Zone&#39;s surplus on trade in goods rose in September to 1,239.5 million euros from 190.0 million euros in August. This was only the third month this year in which a rise in the trade balance took place. For the nine months through September, the trade surplus is 57% below the corresponding period of 2004. The deterioration in the trade surplus is shown in the first chart.
The main factors in the deterioration of the trade surplus have been the rise in the euro which tended to dampen export demand and the rise in the price of oil which increased imports. The second chart shows the year-to-year increases in total imports and imports of mineral fuels and lubricants. Since early 2004 the year-to-year increase in imports of mineral fuels and lubricants has ranged between 25 and 50%. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051121c.jpg" width="353">
The euro has been declining for most of this year and the price of crude has recently eased suggesting that the outlook for the balance of trade in goods is improving. The Euro has declined about 14% from the peak reached on December 30, 2004.Just two months ago the Brent Crude oil was $64.49 a barrel. It is now 18% lower at $52.66. The dollar value of the euro and the price of Brent Crude oil are shown in the third chart on a daily basis.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051121d.jpg" width="353"> 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Euro Zone Trade in Goods (Millions of Euros)</th>
<th scope="col">Sep 05&nbsp;</th>
<th scope="col">Aug 05</th>
<th scope="col">Sep 04</th>
<th scope="col">M/M %&nbsp;</th>
<th scope="col">Y/Y&nbsp;&nbsp;&nbsp; %</th>
<th scope="col">2004 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;</th>
<th scope="col">2003 &nbsp;</th>
<th scope="col">2002&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Balance</td>
<td>1,239</td>
<td>190</td>
<td>2,673</td>
<td>1,049*</td>
<td>-1,434*</td>
<td>71,827</td>
<td>70,027</td>
<td>99,097</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Exports</td>
<td>107,019</td>
<td>106,672</td>
<td>95,492</td>
<td>0.33</td>
<td>12.07</td>
<td>1,144,937</td>
<td>1,059,880</td>
<td>1,083,611</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Imports</td>
<td>105,779</td>
<td>106,482</td>
<td>92,818</td>
<td>-0.66</td>
<td>13.96</td>
<td>1,073,110</td>
<td>989,853</td>
<td>984,514</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp; Mineral Fuels &amp; Lubricants</td>
<td>22,285</td>
<td>23,126</td>
<td>15,545</td>
<td>-3.66</td>
<td>43.36</td>
<td>164,390</td>
<td>143,620</td>
<td>137,521</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Peak&nbsp;</td>
<td>Date</td>
<td>Current</td>
<td>Date</td>
<td>Pct Chg</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Euro&nbsp; ($)</td>
<td>1.3623&nbsp;</td>
<td>12/30/04&nbsp;</td>
<td>1.1741&nbsp;</td>
<td>11/18/05&nbsp;</td>
<td>-13.8&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Brent Crude Oil&nbsp; ($/bbl)</td>
<td>64.49&nbsp;</td>
<td>9/21/05&nbsp;</td>
<td>52.66&nbsp;</td>
<td>11/18/05&nbsp;</td>
<td>-18.3&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;*Difference</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
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<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
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The Euro Zone's surplus on trade in goods rose in September to 1,239.5 million euros from 190.0 million euros in August. This was only the third month this year in which a rise in the trade balance took place. For the nine months [...]

Declines in the Euro and the Price of Oil Improve the Euro Zone Balance of Trade in Goods

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051121a.jpg" width="353">
The Conference Board reported that the Composite Index of Leading Economic Indicators recovered 0.9% in October. The rise recouped virtually all of the index&#39;s declines since June.
The breadth of one month gain amongst the 10 components of the leading index improved to 70% and was the broadest since June. Lower claims for unemployment insurance and longer hours worked in the factory sector had the largest positive effects on the leaders&#39; one month change and offset large negative influences from lower stock prices and lower building permits.
The method of calculating the contribution to the index from the interest rate yield spread has been revised. A negative contribution will now occur only when the spread inverts rather than when declining as in the past. More details can be found <a href="http://www.conference-board.org/pdf_free/economics/bci/lei0705.pdf">here</a>.
The leading index is based on eight previously reported economic data series. Two series, orders for consumer goods and orders for capital goods, are estimated.
The coincident indicators rose 0.1% following an upwardly revised 0.3% rise during September. During the last ten years there has been a 64% correlation between the change in the coincident indicators and real GDP.
The lagging indicators rose 0.8%. Higher C&amp;I loans and a higher services CPI growth rate contributed greatly to the October increase. The ratio of coincident to lagging indicators, a measure of actual economic performance versus excess, fell after an upwardly revised September gain to its lowest level since late 2003.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world. 

<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/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">6 Month Chg., AR</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.9%</td>
<td>-0.8%</td>
<td>2.4%</td>
<td>7.7%</td>
<td>5.1%</td>
<td>5.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.2%</td>
<td>2.7%</td>
<td>0.4%</td>
<td>-0.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.8%</td>
<td>-0.2%</td>
<td>3.4%</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>-0.7%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Conference Board reported that the Composite Index of Leading Economic Indicators recovered 0.9% in October. The rise recouped virtually all of the index's declines since June. The breadth of one month gain amongst the 10 [...]

Leading Economic Indicators Recovered

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

US productivity growth has been significantly faster than in other major economies

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Andrew Cates

**Positive Growth Surprises, Negative Inflation Surprises—For Now**
The global macro backdrop heading into the latest Middle East shock was, by recent standards, relatively constructive. As the chart shows, growth data had been consistently surprising to the upside, while inflation surprises have been in negative territory—an unusually benign combination suggesting resilient activity alongside easing price pressures. What is striking, however, is that—at least through March and into early April—this pattern has not yet been meaningfully dislodged. For now, the data flow still reflects a world that was stabilising rather than deteriorating. That said, this is almost certainly a lagging signal. Supply-side shocks of this nature—particularly those centred on energy—tend to work with a delay but can be highly disruptive once they feed through. The risk, therefore, is that the current “goldilocks” surprise dynamic proves short-lived as higher energy costs, supply chain frictions and rising uncertainty begin to reshape the incoming data in the weeks ahead.

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**Monetary Policy Expectations Shift as Easing Bets Are Repriced**
How policymakers respond to the evolving situation in the Middle East will be critical in shaping both market dynamics and the broader global outlook. This chart, based on the latest April Blue Chip Financial Forecasts survey, suggests that expectations are already beginning to shift. Forecasters are now less inclined to anticipate policy easing in the period ahead—particularly in the euro area, where expectations for rate cuts have been scaled back. Similarly, some of the easing previously priced for the Federal Reserve and the Bank of England has been pared back over the next 12 months. While this is not yet a full pivot toward tightening, it does point to a more cautious policy backdrop, reflecting the risk that renewed energy-driven inflation pressures could constrain central banks’ ability to support growth.

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**Delay, Don’t Tighten: Central Banks’ Likely Playbook**
If the previous chart highlights a shift in policy expectations, this one gives a clearer sense of the reaction function underpinning it. When asked how central banks would respond if energy-driven inflation proves more persistent, most panellists point not to renewed tightening, but to a more cautious delay in easing. In other words, the hurdle for rate cuts has risen, even if the bar for  hikes remains relatively high. This distinction matters. It suggests that policymakers are likely to treat the shock as a supply-driven inflation impulse—one that complicates the outlook but does not automatically warrant aggressive tightening. At the same time, the responses underscore a second important theme: divergence. A sizeable share of forecasters expect policy paths to vary significantly across regions, reflecting differences in energy exposure, inflation dynamics and domestic growth conditions. Taken together, the message is one of constrained flexibility. Central banks may want to support growth, but persistent energy pressures could keep them on hold for longer than previously anticipated—reinforcing the more cautious policy outlook already evident in market pricing.

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**Markets Signal Fiscal Concern, Not Inflation Panic**
If central banks are likely to proceed cautiously, financial markets are already beginning to draw their own conclusions. This chart shows that the recent adjustment in US Treasury markets has been driven primarily by a rise in real yields rather than a meaningful increase in inflation expectations. In other words, markets are not yet pricing a loss of monetary policy credibility or a sharp unanchoring of inflation expectations. Instead, the move points more toward concerns around the broader policy mix—particularly the fiscal backdrop and the potential for increased borrowing needs in an environment of heightened geopolitical risk. This distinction is important. A rise in inflation expectations would suggest fears of central banks falling behind the curve. What we are seeing instead is a repricing of real rates, consistent with tighter financial conditions and a higher risk premium. For now, at least, markets appear to view the shock less as a classic inflation spiral and more as a development that complicates the growth outlook and places greater strain on policy frameworks—especially on the fiscal side.

260409Z4.jpg

**Electricity Prices Reflect Energy Dependence**
The initial response in electricity markets since the Middle East disruption has followed a familiar pattern. Economies with greater domestic energy capacity—such as Scandinavia and, to a lesser extent, the US—have seen relatively contained electricity prices. By contrast, those more reliant on imported energy—most notably the UK and parts of Europe—continue to face significantly higher costs

260409Z5.jpg

**Generation Capacity Determines Energy Resilience**
These price dynamics are closely linked to underlying differences in electricity generation capacity. As the sixth chart shows, countries with higher per capita electricity production—again including Scandinavia and the US—are structurally better positioned to absorb external shocks. In contrast, economies with more limited domestic generation capacity, such as the UK and Germany, are inherently more exposed to fluctuations in global energy markets. This structural divide is likely to prove increasingly important in the period ahead, influencing not just near-term inflation outcomes but also the relative resilience of growth across economies as energy costs remain volatile.

260409Z6.jpg

Amid further tentative signs of de-escalation—most notably President Trump’s decision on April 7th to step back from further escalation—financial markets have stabilised somewhat, but the macroeconomic implications of the Middle East crisis remain highly uncertain. As our charts show, the global economy entered this shock from a position of relative strength, with positive growth surprises and easing inflation pressures still evident in the data (chart 1). However, that benign backdrop now looks vulnerable. Central banks are already reassessing the outlook, with expectations for policy easing being pared back (chart 2) and a growing consensus that any response to persistent energy-driven inflation will likely involve delaying cuts rather than tightening aggressively—albeit with significant regional divergence (chart 3). Financial markets, for their part, are not yet signalling a loss of inflation control, but the rise in real yields suggests increasing concern around the broader policy mix, particularly fiscal pressures (chart 4). Finally, the adjustment to the shock is unlikely to be uniform. Structural differences in domestic energy capacity are already driving wide divergences in electricity prices, leaving more import-dependent economies exposed to higher costs and sharper trade-offs between growth and inflation (charts 5 and 6). Taken together, the message is clear: even if geopolitical tensions ease, the economic aftershocks are likely to be uneven, persistent and increasingly shaped by structural constraints.

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Charts of the Week: From Oil Shock to Policy Dilemma

Michael J. Moran

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This monthly report is always packed with information relating to the household sector. At this time, most observers will probably be most interested in price developments, and the results for February were a bit unsettling. The headline price index rose 0.4%, influenced by a jump of 0.8% in energy prices. This increase was largely anticipated and not especially troubling when viewed in isolation. Energy prices have shown little net change in the past two years, and the latest reading of the index was comfortably within the recent range of observations. However, given developments in the Middle East, energy prices undoubtedly will surge out of that recent range in the months ahead.

Core PCE prices also rose 0.4%, a touch firmer than the expected increase of 0.3%. An increase of 0.4% in core inflation is a quick pace even when viewed in Isolation, but this advance followed a similar increase in January, and the December reading almost rounded to 0.4%. These recent changes pulled the year-over-year increase in core prices to 3.0%, a full percentage point above the Federal Reserve’s target.

Nominal personal income dipped 0.1% in February, which translated to a decline of 0.4% after adjusting for inflation (almost rounding to -0.5%). The softness is striking, but a review of the detail suggests that special factors played a role. Much of the weakness reflected a decline of 1.7% in dividend income, which followed a jump of 1.9% in January. Dividend payments in the prior two years followed the same pattern, leaving one to suspect that seasonal adjustment has gone awry. Government transfer payments also declined, with the miscellaneous category accounting for most of the drop. Medicaid payments also fell, marking the fifth consecutive decline, most likely driven by the tightening of provisions included in the One Big Beautiful Bill Act.

Nominal consumer expenditures rose 0.5%, a seemingly strong result, but the change amounted to only 0.1% in real terms. The small increase followed a flat reading in January and increases of only 0.1% in November and December. Consumers spent actively in the second and third quarters of last year, but they have become cautious recently. The data in hand suggest real outlay growth of approximately 1.0% in the first quarter, slower than the average pace of 3.0% in the middle of last year and 1.9% in 2025-Q4.

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

260409C.jpg

260409D.jpg

- The energy component contributed to a high-side reading on the price index for personal consumption expenditures; the core component was firm as well.
- Consumer spending showed signs of slowing.

Personal Income, Consumption, and Prices: Higher Prices Dampen Real Gains

Sandy Batten

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260409C1.jpg

The third estimate of Q4 2025 GDP showed that real GDP growth slowed to 0.5% q/q saar versus 0.7% in the second estimate and 1.4% in the advance estimate. GDP had grown 4.4% in Q3. The more than one-month long shutdown of the federal government continued to have been a notable restraint on GDP growth in Q4, subtracting 1.0%-point from overall growth, the same as in the second estimate.

Revisions were very small across major expenditure categories. Growth of personal consumption expenditures was revised down slightly to 1.9% q/q saar from 2.0% previously. Nonresidential fixed investment increased 2.4%, up slightly from the 2.2% reported in the second estimate. The 0.5% q/q decline previously reported for residential investment was revised to a larger decline of 1.7%, subtracting 0.1%-point from overall growth versus 0.0%-point in the previous estimate. Inventories declined more than previously estimated, reducing their contribution to growth from 0.3%-point in the second estimate to 0.1%-point in today’s estimate.

260409O1.jpg

260409P1.jpg

There were slight downward revisions to the declines previously reported for both exports and imports, leaving net exports essentially unrevised. As already noted, a 16.6% q/q saar plunge in federal government spending (revised down slightly from -16.7%) accounted for most of the weakness in Q4. This included a 24.3% q/q collapse in nondefense spending, the second largest quarterly decline in nearly forty years. By contrast, state and local government spending increased 1.5%, revised up from 1.2% in the previous estimate.

Private domestic demand growth (final sales to private domestic purchasers, a favored gauge of demand by the Federal Reserve) was revised slower to 1.8% q/q saar in Q4 from 1.9% in the second estimate and 2.4% in the advance report. However, even the revised pace of growth is respectable and close to the economy’s potential growth rate.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

260409Q1.jpg

260409S1.jpg

- Q4 GDP growth revised to 0.5% q/q saar from 0.7% in the first revision and 1.4% in the advance report.
- The shutdown of the federal government still played a critical role in the slowdown, subtracting 1.0%-point from Q4 growth.
- Domestic demand slowed further with final sales to private domestic purchasers revised down to 1.8% from 1.9% in the first revision and 2.4% in the advance report.

U.S. Q4 2025 Real GDP Growth Revised Slower

Robert Brusca

260409E.jpg

Germany’s industrial production slipped in February, driven lower by dropping output of consumer goods. Sequential growth rates over 12 months, six months, and three months show a confusing array of patterns, except for intermediate goods, where annualized growth rates for output sequentially weaken and show declines on each horizon. All German sector growth rates for the quarter-to-date are showing declines, and the growth rankings by sector are below 50% across the broad, indicating below median performance across German sectors.  It’s a very unimpressive report.

Real manufacturing orders rose modestly in February against the backdrop of a very sharp drop in January. Real manufacturing sales have been erratic.

German output and industrial gauges, ranked on annual sales growth against historic norms, have been very weak. Only real orders post a standing above 50%, which represents the median.
 
France, Spain, Portugal, Sweden, and Norway provide some perspective on European growth. The northern European non-EMU member countries are much stronger than the EMU reporters, two of which have standings below their median levels (rankings below 50).

260409.jpg

Germany

German IP Is Weak in February

Kathleen Stephansen, CBE

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Mortgage applications declined 0.8% w/w (-5.6% y/y) in the week ending April 3. The weekly decline eased relative to the prior three weeks, when mortgage applications dropped by 10.4% w/w (+14.2% y/y) in the week ending March 27, and by 10.5% and 10.9% in the March 20 and 13 weeks, respectively, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house rose 1.1% w/w (-6.7% y/y) in the April 3 week, after declining 2.6% w/w (+0.8% y/y) in the week ending March 27.  Applications for loan refinancing dropped by a smaller 2.8% w/w (-4.3% y/y) in the latest week, following weekly declines of 17.3% (+33.2% y/y) in the March 27 week, 14.6% in the March 20 week, and of 18.5% in the week ending March 13.

The effective interest rate on a 30-year fixed-rate loan declined 8bps to 6.68% in the week ending April 3 from 6.76% in the week ending March 27 and after having risen by 52bps since the February 27 week. The rate on 15-year fixed-rate mortgages rose 1bp to 6.09% in the latest week from 6.08% in the prior week. The 30-year Jumbo rate declined 6bps to 6.65% in the week ending April 3 from 6.71% in the March 27 week. The rate on a 5-year ARM eased 3bps to 5.85% in the latest week from 5.88% in the week ending March 27.

The share of applications for refinancing an existing loan declined to 44.3% of total applications in the week of April 3, from 45.3% in the March 27 week. The adjustable-rate mortgage (ARM) share of activity rose to 8.6% in the week ending April 3 from 8.0% in the week ending March 27.

The average size of a mortgage loan edged up 0.2% w/w (-9.1% y/y) to $390,100 in the week ending April 3, after declining 1.3% w/w (-1.9% y/y) to $389,200 in the week ending March 27. The average size of a purchase loan edged down 0.3% w/w (-0.9% y/y) to $448,100 in the latest week, following a decline of 0.8% w/w (+0.4% y/y) to $449,400 in the March 27 week. The average size of a loan to refinance a mortgage edged up 0.1% w/w (-20.7% y/y) to $317,000 in the week ending April 3 after declining 5.5% w/w (+0.3% y/y) to $316,600 in the March 27 week. From the week ending February 27 to the week ending March 27, the average size of a loan to refinance a mortgage had declined 21.8%.

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.

- Signs of stabilization in mortgage applications emerged in the latest week.
- Applications for loans to purchase posted a small increase, while applications for loan refinancing posted a small decline in the latest week.
- Interest rate on 30-year fixed-rate loans eased 8bps to 6.68%. 
- Average loan size edged up.

Economy in Brief

Jump to:

U.S. Consumer Sentiment Lifted Further By Drop in Oil Prices

U.S. Consumer Sentiment Lifted Further By Drop in Oil Prices

Revisions and Additions to German National Accounts Data for Q3

Gasoline Prices Fell In A Competitive Market

Chain Store Sales Up

Chain Store Sales Up

Declines in the Euro and the Price of Oil Improve the Euro Zone Balance of Trade in Goods

Leading Economic Indicators Recovered