Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051111a.jpg" width="353">
The modest 0.2% increase in the September Leading Index of the Major 7 OECD economies marked the fourth consecutive gain and it improved the leaders&#39; six month growth rate to 1.1%, the best in twelve months.The increase reflected improvement in Japan &amp; Europe but declines in North America.
During the last ten years there has been a 68% correlation between the change in the leading index and the q/q change in the GDP Volume Index for the Big Seven countries in the OECD.
The leading index for Japan jumped 1.0%, the most for any month since early 2002, as share prices increased and the interest rate yield spread widened. The six month growth rate surged to 2.3%, the best since early 2004, and its correlation with real growth in Japan has been a meaningful 42% during the last ten years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051111b.jpg" width="353">
Leaders in the European Union (15 countries) rose for the fourth month and the 0.5% increase lifted the six month growth rate to 2.3%, the highest in a year. During the last ten years there has been a 60% correlation between the change in the leading index and the q/q change in the GDP volume index for the European Union.
German leaders increased for the fifth consecutive month. A 0.5% gain raised six month growth to 3.3% as new orders bounced back from an August drop and the business climate improved. The correlation between the leaders and the change in the German GDP volume index has been a low 19% during the last ten years.
The French leaders rose for the third consecutive month. The 0.5% increase pulled the six month growth rate into positive territory for the first time since March with a 0.3% growth rate and the correlation between the leaders with growth in France&#39;s GDP volume index has been a higher 43% during the last ten years. The Italian leading index showed perhaps the most meaningful monthly improvement with a 0.8% gain that followed an upwardly revised 0.9% August increase. The six month growth rate improved to 1.9%, the best since early 2004, although its correlation with GDP growth has been a low 0.9% during the last ten years.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051111c.jpg" width="353">
The UK leaders increased just 0.1% but it was the fourth rise in as many months. The gain raised the six month growth rate to 0.2% and its correlation with real GDP growth has been 29% during the last ten years.
The U.S. leaders fell for the second consecutive month and the 0.3% decline lowered the six month growth rate to 0.3%, the worst since May. The correlation between the leaders and real GDP growth has been a high 58% during the last ten years. The Canadian leaders also fell and the 0.5% decline dropped six month growth to -1.0%. The leaders&#39; growth also has been highly correlated with Canadian real GDP growth, to the tune of 49% during the last ten years.
The latest OECD Leading Indicator report is available <a href="http://www.oecd.org/dataoecd/33/31/35645542.pdf">here</a>.
What Caused The Great Moderation? Some Cross-Country Evidence from the Federal Reserve Bank of Kansas City is available <a href="http://www.kansascityfed.org/PUBLICAT/ECONREV/PDF/3q05summ.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/OECDMEI/OECDMEI.HTM">OECD</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</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">Composite Leading Index&nbsp;</td>
<td>102.51</td>
<td>102.31</td>
<td>0.6%</td>
<td>102.03</td>
<td>97.59</td>
<td>96.30</td>
</tr>
<tr>
<td class="firstcol">&nbsp;6 Month Growth Rate</td>
<td>1.1%</td>
<td>0.8%</td>
<td>&nbsp;</td>
<td>3.5%</td>
<td>2.6%</td>
<td>2.2%</td>
</tr>
</tbody>
</table>
</body>
</html>

The modest 0.2% increase in the September Leading Index of the Major 7 OECD economies marked the fourth consecutive gain and it improved the leaders' six month growth rate to 1.1%, the best in twelve months.The increase reflected [...]

OECD Leaders Up Again

Carol Stone, CBE

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051110b.jpg" width="353">
Several countries reported CPI data today for October.A common feature of all the countries we examined was a tempering of inflation as energy prices backed off their storm-related highs of September.
In France and Denmark, the October CPI actually declined 0.1% in the month, following 0.4% increases in both countries in September.For France, tellingly, the subset of the CPI excluding energy was flat in both months.
Ireland&#39;s total CPI rose 0.2% in October after 0.8% in September.It is seen to experience somewhat higher inflation trends overall than the others of these countries.Finally, in Norway, the total CPI was flat following September&#39;s 0.3% rise. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051110c.jpg" width="353">
Clearly, one month need not mark a turning point in inflation trends. But this is welcome relief however long it lasts.We have noted all along how relatively immune other prices have been to the energy situation.This agreeable circumstance may yet change, given the squeeze on business operating margins that has already taken place from the surge in energy.Demand responses could well limit the ultimate pass-through, though, as sluggish economies in Europe also have little capacity to shoulder further price burdens.
<span style="font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:&quot;MS Mincho&quot;;
mso-bidi-font-family:&quot;Times New Roman&quot;;mso-ansi-language:EN-US;mso-fareast-language:
JA;mso-bidi-language:AR-SA">As a footnote, the individual months&#39; figures we quote here are seasonally adjusted data found in Haver&#39;s G10 database.This database is a summary compilation of major data in major countries, the well-known G10, plus Australia, Austria, other Nordic nations, Ireland, Spain and so on.In that database Haver performs some additional seasonal adjustment of data beyond that provided by many countries.The more comprehensive databases covering individual countries consist largely in data provided by the countries&#39; official statistics sources, which we do not augment, while G10 is a database we compile ourselves for the convenience of having a quick summary of large countries, but with a modest amount of detail.

<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/G10/@GZ/@GZ5/@GZ501/@GZ501.HTM">CPI, % Changes, SA*</a></th>
<th scope="col">Oct 2005</th>
<th scope="col">Sept 2005</th>
<th scope="col">Aug 2005&nbsp;</th>
<th scope="col">Oct 2004**&nbsp;</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>-0.1</td>
<td>0.4</td>
<td>0.3</td>
<td>1.8</td>
<td>2.1</td>
<td>2.2</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Ex Energy</td>
<td>0.0</td>
<td>0.0</td>
<td>0.5</td>
<td>1.0</td>
<td>1.5</td>
<td>2.4</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>0.2</td>
<td>0.8</td>
<td>0.3</td>
<td>3.0</td>
<td>2.6</td>
<td>1.9</td>
<td>5.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Denmark</td>
<td>-0.1</td>
<td>0.4</td>
<td>0.2</td>
<td>2.0</td>
<td>1.2</td>
<td>1.4</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">Norway</td>
<td>0.0</td>
<td>0.3</td>
<td>0.5</td>
<td>1.8</td>
<td>1.1</td>
<td>0.6</td>
<td>2.8</td>
</tr>
</tbody>
</table>
</body>
</html>

Several countries reported CPI data today for October.A common feature of all the countries we examined was a tempering of inflation as energy prices backed off their storm-related highs of September. In France and Denmark, the [...]

CPI Data Show Some Relief for Energy in October

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051110f.jpg" width="353">
A 2,000 increase in initial claims for unemployment insurance to 326,000 reversed only a piece of the prior week&#39;s revised 6,000 decline. Consensus expectations had been for 323,000 claims.
The four-week moving average of initial claims fell sharply to 334,250 (-0.3% y/y).
Continuing claims for unemployment insurance rose 23,000 following a downwardly revised 72,000 drop during the prior week.
The insured rate of unemployment remained at 2.2% for the seventh week.

<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">11/05/05</th>
<th scope="col">10/29/05</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>326</td>
<td>324</td>
<td>-1.5%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,818</td>
<td>0.8%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
</body>
</html>

A 2,000 increase in initial claims for unemployment insurance to 326,000 reversed only a piece of the prior week's revised 6,000 decline. Consensus expectations had been for 323,000 claims. The four-week moving average of initial [...]

Initial Jobless Insurance Claims Remain Low

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051110e.jpg" width="353">
The preliminary reading of consumer sentiment in November from the University of Michigan rose 7.7% to 79.9, the highest level in three months. Consensus expectations had been for less of an improvement to 76.8.
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.
The mean expected inflation rate for the next twelve months fell sharply to 4.6 from 5.5% expected in October. That prompted Consumer expectations to rise 5.7% and expected business conditions during the next year to surge 14.7%.
The current conditions index also improved 10.0% m/m (-4.2% y/y) due to 10% gains in personal finances and in buying conditions for large household goods.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Nov</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>79.9</td>
<td>74.2</td>
<td>-13.9%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>100.3</td>
<td>91.2</td>
<td>-4.2%</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>66.8</td>
<td>63.2</td>
<td>-21.6%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The preliminary reading of consumer sentiment in November from the University of Michigan rose 7.7% to 79.9, the highest level in three months. Consensus expectations had been for less of an improvement to 76.8. During the last ten [...]

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

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051110d.jpg" width="353">
Import prices fell an expected 0.3% last month following the revised 2.3% spike in September. Petroleum prices were the source of weakness as they reversed more than half of the prior month&#39;s gain with a 4.4% drop. Crude oil prices fell 4.1% and &quot;other&quot; petroleum prices fell 14.4% but those decline were offset by a 20.9% (114.1% y/y) increase in natural gas.
Excluding petroleum, prices were strong for the second consecutive month and rose 0.8%. The gain reflected a 4.4% (16.1% y/y) rise in non-oil industrial supplies which repeated the gain in September. Elsewhere, paper prices rose 1.0% (3.8% y/y) and chemical prices jumped 2.1% (11.7% y/y). On the weak side, nonauto consumer goods prices fell 0.1% (+1.2% y/y) and capital goods prices slipped 0.3% (-0.5% y/y). Excluding another decline in computer prices, capital goods prices fell 0.1% (2.0% y/y).
During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies and a lower 57% against the real value of the dollar.
Export prices jumped 0.6% as nonagricultural prices rose 0.6% (3.5% y/y).
 Time-Varying Pass-Through from Import Prices to Consumer Prices: Evidence from an Event Study with Real-Time Data from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr228.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</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">Import - All Commodities</td>
<td>-0.3%</td>
<td>2.3%</td>
<td>8.1%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-4.4%</td>
<td>8.0%</td>
<td>30.9%</td>
<td>30.5%</td>
<td>21.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.8%</td>
<td>1.0%</td>
<td>3.7%</td>
<td>2.6%</td>
<td>1.1%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.6%</td>
<td>0.8%</td>
<td>3.6%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

Import prices fell an expected 0.3% last month following the revised 2.3% spike in September. Petroleum prices were the source of weakness as they reversed more than half of the prior month's gain with a 4.4% drop. Crude oil prices [...]

Import Prices Declined

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051110a.jpg" width="353">
The combination of higher oil prices, higher gasoline imports and lost aircraft exports due to the Boeing strike pushed the September U.S. foreign trade deficit deeper to a record $66.1B from a little revised $59.2B in August. Consensus expectations had been for less of a deepening to $61.0B.
Imports of goods &amp; services surged 2.4% in September. Petroleum imports jumped another 4.4% (58.7% y/y) as the per barrel price of crude petroleum rose 8.9% to $57.32 (52.8% y/y) though the value of crude oil imports fell 7.0% due to refinery shutdowns following Hurricane Katrina. Offsetting that decline, however, was a nearly one quarter surge in the value of imports of fuel oil &amp; gasoline.
Imports of nonpetroleum goods surged 2.4% (10.1% y/y) in September as foods, feeds &amp; beverages jumped 4.1% (17.6% y/y) and industrial supplies &amp; materials surged 6.2% (33.0% y/y) additionally reflecting a 30.0% spike in natural gas (88.05 y/y).
Capital goods imports also rose a strong 0.9% (8.8% y/y) as imports of advanced technology products jumped 3.7% (NSA, 11.0% y/y). Imports of nonauto consumer goods jumped 2.6 (10.7% y/y) though imports of autos, parts &amp; engines fell 3.5% (+3.7% y/y).
Total exports collapsed 2.6% due to a 7.4% drop in capital goods exports, driven by the four-week strike at Boeing Co. which caused exports of civilian aircraft to drop $2.4B or 72.3% m/m. Also, exports of advanced technology products more than reversed all of the prior month&#39;s gain with a 7.9% drop (NSA, -0.8% y/y). Finally, Gulf port closings contributed to the 5.8% m/m decline in exports of foods, feeds &amp; beverages though these declines were dampened by a 4.1% (12.3% y/y) rise in nonauto consumer goods exports.
Services exports surged 1.6% (10.9% y/y) due to a 1.8% (13.0% y/y) jump in private travel and a 3.0% (18.1% y/y) spike in &quot;other&quot; private transportation services.
The US trade deficit with China deepened sharply to a record $20.1B ($161.9B in 2004) due to a 4.2% (NSA, 26.8% y/y) surge in imports that was accompanied by a 17.8% drop in exports (NSA, +11.9% y/y). The US trade deficit with Japan again improved slightly m/m to $6.4B ($75.6B in 2004) while the monthly trade deficit with the Asian NICs deepened for the fifth consecutive month to $1.5B ($21.9B in 2004). The deficit with the European Union improved slightly to $10.1B ($109.3B in 2004) due to a 1.9% (3.5% y/y) gain in exports.

<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/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</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">Trade Deficit</td>
<td>$66.1B</td>
<td>$59.3B</td>
<td>$51.9B (9/04)</td>
<td>$617.6B</td>
<td>$494.8B</td>
<td>$421.2B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>-2.6%</td>
<td>1.5%</td>
<td>7.7%</td>
<td>12.6%</td>
<td>4.6%</td>
<td>-3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>2.4%</td>
<td>1.8%</td>
<td>14.5%</td>
<td>16.6%</td>
<td>8.5%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The combination of higher oil prices, higher gasoline imports and lost aircraft exports due to the Boeing strike pushed the September U.S. foreign trade deficit deeper to a record $66.1B from a little revised $59.2B in August. [...]

Record U.S. Trade Deficit Suffered Triple Whammy

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051110a.jpg" width="353">
The combination of higher oil prices, higher gasoline imports and lost aircraft exports due to the Boeing strike pushed the September U.S. foreign trade deficit deeper to a record $66.1B from a little revised $59.2B in August. Consensus expectations had been for less of a deepening to $61.0B.
Imports of goods &amp; services surged 2.4% in September. Petroleum imports jumped another 4.4% (58.7% y/y) as the per barrel price of crude petroleum rose 8.9% to $57.32 (52.8% y/y) though the value of crude oil imports fell 7.0% due to refinery shutdowns following Hurricane Katrina. Offsetting that decline, however, was a nearly one quarter surge in the value of imports of fuel oil &amp; gasoline.
Imports of nonpetroleum goods surged 2.4% (10.1% y/y) in September as foods, feeds &amp; beverages jumped 4.1% (17.6% y/y) and industrial supplies &amp; materials surged 6.2% (33.0% y/y) additionally reflecting a 30.0% spike in natural gas (88.05 y/y).
Capital goods imports also rose a strong 0.9% (8.8% y/y) as imports of advanced technology products jumped 3.7% (NSA, 11.0% y/y). Imports of nonauto consumer goods jumped 2.6 (10.7% y/y) though imports of autos, parts &amp; engines fell 3.5% (+3.7% y/y).
Total exports collapsed 2.6% due to a 7.4% drop in capital goods exports, driven by the four-week strike at Boeing Co. which caused exports of civilian aircraft to drop $2.4B or 72.3% m/m. Also, exports of advanced technology products more than reversed all of the prior month&#39;s gain with a 7.9% drop (NSA, -0.8% y/y). Finally, Gulf port closings contributed to the 5.8% m/m decline in exports of foods, feeds &amp; beverages though these declines were dampened by a 4.1% (12.3% y/y) rise in nonauto consumer goods exports.
Services exports surged 1.6% (10.9% y/y) due to a 1.8% (13.0% y/y) jump in private travel and a 3.0% (18.1% y/y) spike in &quot;other&quot; private transportation services.
The US trade deficit with China deepened sharply to a record $20.1B ($161.9B in 2004) due to a 4.2% (NSA, 26.8% y/y) surge in imports that was accompanied by a 17.8% drop in exports (NSA, +11.9% y/y). The US trade deficit with Japan again improved slightly m/m to $6.4B ($75.6B in 2004) while the monthly trade deficit with the Asian NICs deepened for the fifth consecutive month to $1.5B ($21.9B in 2004). The deficit with the European Union improved slightly to $10.1B ($109.3B in 2004) due to a 1.9% (3.5% y/y) gain in exports.

<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/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</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">Trade Deficit</td>
<td>$66.1B</td>
<td>$59.3B</td>
<td>$51.9B (9/04)</td>
<td>$617.6B</td>
<td>$494.8B</td>
<td>$421.2B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>-2.6%</td>
<td>1.5%</td>
<td>7.7%</td>
<td>12.6%</td>
<td>4.6%</td>
<td>-3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>2.4%</td>
<td>1.8%</td>
<td>14.5%</td>
<td>16.6%</td>
<td>8.5%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Import Prices Declined 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 10, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051110d.jpg" width="353">
Import prices fell an expected 0.3% last month following the revised 2.3% spike in September. Petroleum prices were the source of weakness as they reversed more than half of the prior month&#39;s gain with a 4.4% drop. Crude oil prices fell 4.1% and &quot;other&quot; petroleum prices fell 14.4% but those decline were offset by a 20.9% (114.1% y/y) increase in natural gas.
Excluding petroleum, prices were strong for the second consecutive month and rose 0.8%. The gain reflected a 4.4% (16.1% y/y) rise in non-oil industrial supplies which repeated the gain in September. Elsewhere, paper prices rose 1.0% (3.8% y/y) and chemical prices jumped 2.1% (11.7% y/y). On the weak side, nonauto consumer goods prices fell 0.1% (+1.2% y/y) and capital goods prices slipped 0.3% (-0.5% y/y). Excluding another decline in computer prices, capital goods prices fell 0.1% (2.0% y/y).
During the last ten years there has been a 66% (negative) correlation between the nominal trade-weighted exchange value of the US dollar vs. major currencies and the y/y change in non oil import prices. The correlation is a lower 47% against a broader basket of currencies and a lower 57% against the real value of the dollar.
Export prices jumped 0.6% as nonagricultural prices rose 0.6% (3.5% y/y).
 Time-Varying Pass-Through from Import Prices to Consumer Prices: Evidence from an Event Study with Real-Time Data from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr228.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</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">Import - All Commodities</td>
<td>-0.3%</td>
<td>2.3%</td>
<td>8.1%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>-2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-4.4%</td>
<td>8.0%</td>
<td>30.9%</td>
<td>30.5%</td>
<td>21.0%</td>
<td>3.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.8%</td>
<td>1.0%</td>
<td>3.7%</td>
<td>2.6%</td>
<td>1.1%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.6%</td>
<td>0.8%</td>
<td>3.6%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Lifted By Drop in Oil Prices 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 10, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051110e.jpg" width="353">
The preliminary reading of consumer sentiment in November from the University of Michigan rose 7.7% to 79.9, the highest level in three months. Consensus expectations had been for less of an improvement to 76.8.
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.
The mean expected inflation rate for the next twelve months fell sharply to 4.6 from 5.5% expected in October. That prompted Consumer expectations to rise 5.7% and expected business conditions during the next year to surge 14.7%.
The current conditions index also improved 10.0% m/m (-4.2% y/y) due to 10% gains in personal finances and in buying conditions for large household goods.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Nov</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>79.9</td>
<td>74.2</td>
<td>-13.9%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>100.3</td>
<td>91.2</td>
<td>-4.2%</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>66.8</td>
<td>63.2</td>
<td>-21.6%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Remain Low 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 10, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051110f.jpg" width="353">
A 2,000 increase in initial claims for unemployment insurance to 326,000 reversed only a piece of the prior week&#39;s revised 6,000 decline. Consensus expectations had been for 323,000 claims.
The four-week moving average of initial claims fell sharply to 334,250 (-0.3% y/y).
Continuing claims for unemployment insurance rose 23,000 following a downwardly revised 72,000 drop during the prior week.
The insured rate of unemployment remained at 2.2% for the seventh week.

<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">11/05/05</th>
<th scope="col">10/29/05</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>326</td>
<td>324</td>
<td>-1.5%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,818</td>
<td>0.8%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
</table>
CPI Data Show Some Relief for Energy in October 
by <a href="/comment/Stone.html">Carol Stone</a> November 10, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051110b.jpg" width="353">
Several countries reported CPI data today for October.A common feature of all the countries we examined was a tempering of inflation as energy prices backed off their storm-related highs of September.
In France and Denmark, the October CPI actually declined 0.1% in the month, following 0.4% increases in both countries in September.For France, tellingly, the subset of the CPI excluding energy was flat in both months.
Ireland&#39;s total CPI rose 0.2% in October after 0.8% in September.It is seen to experience somewhat higher inflation trends overall than the others of these countries.Finally, in Norway, the total CPI was flat following September&#39;s 0.3% rise. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051110c.jpg" width="353">
Clearly, one month need not mark a turning point in inflation trends. But this is welcome relief however long it lasts.We have noted all along how relatively immune other prices have been to the energy situation.This agreeable circumstance may yet change, given the squeeze on business operating margins that has already taken place from the surge in energy.Demand responses could well limit the ultimate pass-through, though, as sluggish economies in Europe also have little capacity to shoulder further price burdens.
<span style="font-size:10.0pt;font-family:Verdana;mso-fareast-font-family:&quot;MS Mincho&quot;;
mso-bidi-font-family:&quot;Times New Roman&quot;;mso-ansi-language:EN-US;mso-fareast-language:
JA;mso-bidi-language:AR-SA">As a footnote, the individual months&#39; figures we quote here are seasonally adjusted data found in Haver&#39;s G10 database.This database is a summary compilation of major data in major countries, the well-known G10, plus Australia, Austria, other Nordic nations, Ireland, Spain and so on.In that database Haver performs some additional seasonal adjustment of data beyond that provided by many countries.The more comprehensive databases covering individual countries consist largely in data provided by the countries&#39; official statistics sources, which we do not augment, while G10 is a database we compile ourselves for the convenience of having a quick summary of large countries, but with a modest amount of detail.

<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/G10/@GZ/@GZ5/@GZ501/@GZ501.HTM">CPI, % Changes, SA*</a></th>
<th scope="col">Oct 2005</th>
<th scope="col">Sept 2005</th>
<th scope="col">Aug 2005&nbsp;</th>
<th scope="col">Oct 2004**&nbsp;</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td>-0.1</td>
<td>0.4</td>
<td>0.3</td>
<td>1.8</td>
<td>2.1</td>
<td>2.2</td>
<td>2.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Ex Energy</td>
<td>0.0</td>
<td>0.0</td>
<td>0.5</td>
<td>1.0</td>
<td>1.5</td>
<td>2.4</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">Ireland</td>
<td>0.2</td>
<td>0.8</td>
<td>0.3</td>
<td>3.0</td>
<td>2.6</td>
<td>1.9</td>
<td>5.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Denmark</td>
<td>-0.1</td>
<td>0.4</td>
<td>0.2</td>
<td>2.0</td>
<td>1.2</td>
<td>1.4</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">Norway</td>
<td>0.0</td>
<td>0.3</td>
<td>0.5</td>
<td>1.8</td>
<td>1.1</td>
<td>0.6</td>
<td>2.8</td>
</tr>
</tbody>
</table>
</body>
</html>

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051109c.jpg" width="353">
The riots in France are widely believed to be linked to unemployment conditions, particularly among young people from North African immigrant families. As we discussed here September 30, national unemployment stands at just under 10%, and the rate for workers under 25 is more than twice this, at about 23%. This morning, the French Government statistical agency INSEE reported regional unemployment rates, which we carry in the FRANCE database. These cover the total labor force and are not broken down by age-group. These, along with September&#39;s monthly national data reported ten days ago, indicate that rates have been decreasing, now since June.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051109d.jpg" width="353">
In the accompanying charts and table, we highlight &quot;departments&quot; that the New York Times reports today contain cities on a list authorized by the central police to impose a curfew, that is, where the violence is deemed to be greatest. These include Paris, Nice, Marseille, Dijon, Toulouse, Strasbourg, Nancy, Rouen, Avignon. Ironically, as seen in the exhibits, unemployment rates in the relevant departments had started to ease in Q3. The national rate fell from 10.1% to 9.8%, and every department we show here was down by at least 0.1% on the quarter. Still, these decreases are a very recent development, with the longer runs of these series still generally headed upward. Only in Provence, in the South, is unemployment even steady with its level three years ago. Another fact of irony is the situation in Alsace, with one of the lowest unemployment levels in the country; it is also the locale with the largest increase, from just 6.6% on average in 2002 to 8.7% in Q3 2005. So conditions of relative prosperity there eroded markedly, at least through the middle of this year.
It&#39;s clearly too soon to see the effect of the disturbances on any other French economic data, but a final irony of course is that the situation is likely to be dampening activity, just when the worst of the unemployment conditions might have been starting to stabilize on their own. 

<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/FRANCE/@F05/@F05.HTM">France &amp; Selected Departments:</a> SA, %</th>
<th scope="col">Q3 2005</th>
<th scope="col">Q2 2005</th>
<th scope="col">Q3 2004</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">France: Total</td>
<td>9.8</td>
<td>10.1</td>
<td>10.0</td>
<td>10.0</td>
<td>9.8</td>
<td>9.1</td>
</tr>
<tr>
<td class="firstcol">Ile-de-France (Paris)</td>
<td>13.3</td>
<td>13.4</td>
<td>13.2</td>
<td>13.1</td>
<td>12.7</td>
<td>12.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Bourgogne (Dijon)</td>
<td>8.5</td>
<td>8.8</td>
<td>8.7</td>
<td>8.7</td>
<td>8.6</td>
<td>7.9</td>
</tr>
<tr>
<td class="firstcol">Haut-Normandie (Rouen)</td>
<td>10.8</td>
<td>11.0</td>
<td>11.0</td>
<td>10.9</td>
<td>10.6</td>
<td>10.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Alsace (Strasbourg)</td>
<td>8.7</td>
<td>8.9</td>
<td>8.6</td>
<td>8.5</td>
<td>7.8</td>
<td>6.6</td>
</tr>
<tr>
<td class="firstcol">Pyrenees (Toulouse)</td>
<td>9.8</td>
<td>9.9</td>
<td>9.9</td>
<td>9.9</td>
<td>9.9</td>
<td>9.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Provence (Avignon, Nice, Marseilles)</td>
<td>11.7</td>
<td>11.9</td>
<td>11.9</td>
<td>11.9</td>
<td>12.1</td>
<td>11.7</td>
</tr>
</tbody>
</table>
</body>
</html>

The riots in France are widely believed to be linked to unemployment conditions, particularly among young people from North African immigrant families. As we discussed here September 30, national unemployment stands at just under 10%, [...]

France: The Riots Come Just When Unemployment Was Starting To Ease

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

London

Singapore

Tokyo

New York

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

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.

260409Z1.jpg

**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.

260409Z2.jpg

**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.

260409Z3.jpg

**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.

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/4qBjHX7OmdXmxVN2oRe1nB?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: From Oil Shock to Policy Dilemma

Michael J. Moran

260409A.jpg

260409B.jpg

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

260409N1.jpg

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

260408A0.jpg

260408B0.jpg

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:

OECD Leaders Up Again

CPI Data Show Some Relief for Energy in October

Initial Jobless Insurance Claims Remain Low

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

Import Prices Declined

Record U.S. Trade Deficit Suffered Triple Whammy

Record U.S. Trade Deficit Suffered Triple Whammy

France: The Riots Come Just When Unemployment Was Starting To Ease