Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051025a.jpg" width="353">
The US average retail gasoline price continued lower last week and fell to $2.60 per gallon from $2.73 during the prior week.
Crude oil prices continued lower as well. WTI crude fell yesterday to $61.13 per barrel versus an average of $62.44 during last week and versus the late August high of $69.82.
Deflation: Making Sure &quot;It&quot; Doesn&#39;t Happen Here, a 2002 speech made by Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/daily/@D3/@D306/@D306.HTM">Energy Prices</a></th>
<th scope="col">10/24/05</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>$2.60</td>
<td>$1.79</td>
<td>28.1%</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>$61.13</td>
<td>$41.78</td>
<td>10.7%</td>
<td>$41.78</td>
<td>$32.78</td>
<td>$31.23</td>
</tr>
</tbody>
</table>
</body>
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The US average retail gasoline price continued lower last week and fell to $2.60 per gallon from $2.73 during the prior week. Crude oil prices continued lower as well. WTI crude fell yesterday to $61.13 per barrel versus an average of [...]

Gasoline Prices Fell Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051025d.jpg" width="353">
Chain store sales slipped 0.2% last week and reversed half of the prior week&#39;s increase, according to the International Council of Shopping Centers (ICSC)-UBS survey. For the month, the level of sales is even with the September average. 
During the last ten years there has been a 56% 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 jumped 0.9% (-2.3% y/y) during the latest week but for the month so far is down 0.1% from the September average.
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.

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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">10/22/05</th>
<th scope="col">10/15/05</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>449.7</td>
<td>450.6</td>
<td>3.6%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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Chain store sales slipped 0.2% last week and reversed half of the prior week's increase, according to the International Council of Shopping Centers (ICSC)-UBS survey. For the month, the level of sales is even with the September [...]

Chain Store Sales Slipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051025b.jpg" width="353">
The National Association of Realtors reported that September total existing home sales remained unchanged from the prior month at 7.28M. The August level was revised down slightly. Consensus expectations had been for a slightly steeper decline to 7.20M sales. 
Sales of single-family homes rose 0.6% to 6.38 million while condo &amp; co-op sales fell 4.3% to 900,000 (+9.8% y/y). 
The data cover sales closed in the latest and previous months, and contrast to the new home sales data which count sales at the signing of a contract. 
By region, changes in single family home sales were mixed in September. In the Northeast sales rose by 1.2% (4.8% y/y) for the second consecutive month and rose 4.9% (12.6% y/y) in the South.In the West single family sales slipped 3.3% (+1.4% y/y) and have fallen in two of the last three months. In the Midwest sales fell 3.4% m/m but remained up 3.6% y/y. 
The median price of an existing single-family home fell 3.4% m/m to $212,200 (14.3% y/y). It was the second decline during the last three months.Prices are not seasonally adjusted and frequently soften following the peak Spring-Summer selling season. 
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">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/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</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>
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</thead>
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<td class="firstcol">Total Home Sales</td>
<td>7,280</td>
<td>7,280</td>
<td>7.2%</td>
<td>6,723</td>
<td>6,170</td>
<td>5,653</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>6,380</td>
<td>6,340</td>
<td>6.9%</td>
<td>5,913</td>
<td>5,441</td>
<td>4,995</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price ($,000) </td>
<td>$212.2 </td>
<td>$219.7 </td>
<td>14.3% </td>
<td>$182.8 </td>
<td>$169.1 </td>
<td>$157.6 </td>
</tr>
</tbody>
</table>


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The National Association of Realtors reported that September total existing home sales remained unchanged from the prior month at 7.28M. The August level was revised down slightly. Consensus expectations had been for a slightly [...]

U.S. Existing Home Sales Unchanged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051025c.jpg" width="353">
In October, the Conference Board&#39;s index of Consumer Confidence fell to 85.0 and added 2.9% to the 17.9% m/m decline during the prior month.
Consensus expectations had been for little change at 88.0. Last week, the University of Michigan reported that its October measure of consumer sentiment fell 2.0% m/m (-17.8% y/y).
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
The index of consumers&#39; expectations fell 3.9% m/m (-24.6% y/y) and the assessment of the present situation slipped 2.0% (+15.1% y/y). Jobs were viewed as hard to get by an increased 25.3% of survey participants.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<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/@EF1401/@EF1401.HTM">Conference Board</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>
<td class="firstcol">Consumer Confidence</td>
<td>85.0</td>
<td>87.5</td>
<td>-8.5%</td>
<td>96.1</td>
<td>79.8</td>
<td>96.6</td>
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</tbody>
</table>
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In October, the Conference Board's index of Consumer Confidence fell to 85.0 and added 2.9% to the 17.9% m/m decline during the prior month. Consensus expectations had been for little change at 88.0. Last week, the University of [...]

Consumer Confidence Down Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051025c.jpg" width="353">
In October, the Conference Board&#39;s index of Consumer Confidence fell to 85.0 and added 2.9% to the 17.9% m/m decline during the prior month.
Consensus expectations had been for little change at 88.0. Last week, the University of Michigan reported that its October measure of consumer sentiment fell 2.0% m/m (-17.8% y/y).
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
The index of consumers&#39; expectations fell 3.9% m/m (-24.6% y/y) and the assessment of the present situation slipped 2.0% (+15.1% y/y). Jobs were viewed as hard to get by an increased 25.3% of survey participants.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</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>
<td class="firstcol">Consumer Confidence</td>
<td>85.0</td>
<td>87.5</td>
<td>-8.5%</td>
<td>96.1</td>
<td>79.8</td>
<td>96.6</td>
</tr>
</tbody>
</table>
U.S. Existing Home Sales Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 25, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051025b.jpg" width="353">
The National Association of Realtors reported that September total existing home sales remained unchanged from the prior month at 7.28M. The August level was revised down slightly. Consensus expectations had been for a slightly steeper decline to 7.20M sales. 
Sales of single-family homes rose 0.6% to 6.38 million while condo &amp; co-op sales fell 4.3% to 900,000 (+9.8% y/y). 
The data cover sales closed in the latest and previous months, and contrast to the new home sales data which count sales at the signing of a contract. 
By region, changes in single family home sales were mixed in September. In the Northeast sales rose by 1.2% (4.8% y/y) for the second consecutive month and rose 4.9% (12.6% y/y) in the South.In the West single family sales slipped 3.3% (+1.4% y/y) and have fallen in two of the last three months. In the Midwest sales fell 3.4% m/m but remained up 3.6% y/y. 
The median price of an existing single-family home fell 3.4% m/m to $212,200 (14.3% y/y). It was the second decline during the last three months.Prices are not seasonally adjusted and frequently soften following the peak Spring-Summer selling season. 
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">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/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</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">Total Home Sales</td>
<td>7,280</td>
<td>7,280</td>
<td>7.2%</td>
<td>6,723</td>
<td>6,170</td>
<td>5,653</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>6,380</td>
<td>6,340</td>
<td>6.9%</td>
<td>5,913</td>
<td>5,441</td>
<td>4,995</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price ($,000) </td>
<td>$212.2 </td>
<td>$219.7 </td>
<td>14.3% </td>
<td>$182.8 </td>
<td>$169.1 </td>
<td>$157.6 </td>
</tr>
</tbody>
</table>
Chain Store Sales Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 25, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051025d.jpg" width="353">
Chain store sales slipped 0.2% last week and reversed half of the prior week&#39;s increase, according to the International Council of Shopping Centers (ICSC)-UBS survey. For the month, the level of sales is even with the September average. 
During the last ten years there has been a 56% 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 jumped 0.9% (-2.3% y/y) during the latest week but for the month so far is down 0.1% from the September average.
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.

<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">10/22/05</th>
<th scope="col">10/15/05</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>449.7</td>
<td>450.6</td>
<td>3.6%</td>
<td>4.6%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
Gasoline Prices Fell Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 25, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051025a.jpg" width="353">
The US average retail gasoline price continued lower last week and fell to $2.60 per gallon from $2.73 during the prior week.
Crude oil prices continued lower as well. WTI crude fell yesterday to $61.13 per barrel versus an average of $62.44 during last week and versus the late August high of $69.82.
Deflation: Making Sure &quot;It&quot; Doesn&#39;t Happen Here, a 2002 speech made by Ben S. Bernanke can be found <a href="http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm"> 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/daily/@D3/@D306/@D306.HTM">Energy Prices</a></th>
<th scope="col">10/24/05</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>$2.60</td>
<td>$1.79</td>
<td>28.1%</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>$61.13</td>
<td>$41.78</td>
<td>10.7%</td>
<td>$41.78</td>
<td>$32.78</td>
<td>$31.23</td>
</tr>
</tbody>
</table>
 Business Confidence Strengthens in the Euro Zone: German and Dutch Business Join the More Optimistic Groups  
by <a href="/comment/Curley.html">Louise Curley</a> October 25, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051025e.jpg" width="353">
The healthy October rises in German and Dutch measures of business confidence following yesterday&#39;s report of continued rising business confidence in France are beginning to suggest a pickup in economic activity within the Euro Zone.
Although the pessimists still outweigh the optimists in Germany, the excess of pessimists declined in October to 3.5% from 8.9% in September according to the IFO measure of confidence. In the Netherlands, the optimists who had exceeded the pessimists in September by 1.3% increased their excess over the pessimists to 4.3% in October. The percent balances of the optimists over the pessimists for both German and Dutch business are shown in the first chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051025f.jpg" width="353">
In appraising current economic conditions in Germany, businessmen have generally been more pessimistic than optimistic. In the entire history of the IFO confidence data, from January, 1991 to date, the only time when the balance of opinion on current conditions was positive was the period from January 1991 to March 1992 and the month of May 2000.In their expectations of conditions six month ahead, German businessmen have generally been more optimistic, but even here, the times when the optimists outweighed the pessimists have been few and the positive balances small. The second chart shows the history of the IFO&#39;s percent balances of opinion of German businessmen for current conditions and expectations of conditions six months ahead. Because of this apparent bias in the IFO data, it is more useful to look at the changes in the data rather than the absolute values. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051025g.jpg" width="353">
In the third chart we show the year-to-year changes in the appraisals of current conditions and expectations of conditions six month ahead. Here we see a marked increase in confidence in October both in current conditions and expectations for conditions six month ahead.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Business Confidence Indicators (% Balance)</th>
<th scope="col">Oct 05&nbsp;</th>
<th scope="col">Sep&nbsp; 05</th>
<th scope="col">Oct 04</th>
<th scope="col">M/M&nbsp; Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2004 &nbsp; </th>
<th scope="col">2003 &nbsp;</th>
<th scope="col">2002&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Netherlands</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Producers&#39; Confidence</td>
<td>4.3</td>
<td>1.3</td>
<td>1.1</td>
<td>3.0</td>
<td>3.2</td>
<td>-0.1</td>
<td>-5.6</td>
<td>-1.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany IFO&nbsp;&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Business Climate</td>
<td>-3.5</td>
<td>-8.9</td>
<td>-10.7</td>
<td>5.4</td>
<td>7.2</td>
<td>-9.6</td>
<td>-17.6</td>
<td>-22.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Business Situation</td>
<td>-7.4</td>
<td>-12.1</td>
<td>-16.1</td>
<td>4.7</td>
<td>8.7</td>
<td>-17.0</td>
<td>-27.9</td>
<td>-34.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Business Expectations</td>
<td>0.5</td>
<td>-5.6</td>
<td>-5.2</td>
<td>6.1</td>
<td>5.7</td>
<td>-1.8</td>
<td>-6.5</td>
<td>-9.1</td>
</tr>
</tbody>
</table>


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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051024c.jpg" width="353">
Business confidence in France has been improving since June of this year when the balance of opinion on the general outlook registered 24% more pessimists than optimists. According to data released today by the French Institute of Statistics and Economic Studies (INSEE), the excess of pessimists over optimists regarding the outlook among businessmen has declined to only 1% in October. Over the past five years, business opinion on the outlook has tended to be more pessimistic and more volatile than business opinion of actual trends in production as can be seen in the first chart. The various components of the overall view are shown in the table below.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051024b.jpg" width="353">
INSEE also publishes a composite indicator of business confidence. It is based on the balances of opinions on past production, personal production forecasts, inventories, total and foreign order book and demand and general production forecasts and is constructed in such a way that the series has an average of 100 and a standard deviation of 10. According to this measure, business confidence weakened from mid 2004 to April and May of this year and is currently improving. Since late 2001, however, French business confidence has been subdued, ranging much closer to the average than in the past, as can be seen in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/FRANCE/@F09/@F09.HTM">French Business Confidence Indicators (% Balance)</a></th>
<th scope="col">Oct 05&nbsp;</th>
<th scope="col">Sep 05</th>
<th scope="col">Oct 04</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2004 &nbsp; </th>
<th scope="col">2003 &nbsp;</th>
<th scope="col">2002&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Outlook</td>
<td>-1</td>
<td>-13</td>
<td>23</td>
<td>12</td>
<td>-24</td>
<td>5</td>
<td>-29</td>
<td>-22</td>
</tr>
<tr>
<td class="firstcol">Recent Production Trend</td>
<td>4</td>
<td>4</td>
<td>17</td>
<td>0</td>
<td>-13</td>
<td>12</td>
<td>-8</td>
<td>-8</td>
</tr>
<tr class="odd">
<td class="firstcol">Order Book and Demand</td>
<td>-14</td>
<td>-19</td>
<td>-12</td>
<td>5</td>
<td>-2</td>
<td>-15</td>
<td>-23</td>
<td>-18</td>
</tr>
<tr>
<td class="firstcol">Foreign Order Book and Demand</td>
<td>-8</td>
<td>-12</td>
<td>-8</td>
<td>4</td>
<td>0</td>
<td>-11</td>
<td>-20</td>
<td>-17</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>13</td>
<td>13</td>
<td>6</td>
<td>0</td>
<td>7</td>
<td>8</td>
<td>10</td>
<td>13</td>
</tr>
<tr>
<td class="firstcol">Prices</td>
<td>-4</td>
<td>2</td>
<td>2</td>
<td>-6</td>
<td>-6</td>
<td>1</td>
<td>-7</td>
<td>-5</td>
</tr>
<tr class="odd">
<td class="firstcol">Composite Synthetic Indicator*</td>
<td>102</td>
<td>100</td>
<td>108</td>
<td>2.0%</td>
<td>-5.6%</td>
<td>105</td>
<td>95</td>
<td>97</td>
</tr>
</tbody>
</table>
</body>
</html>

Business confidence in France has been improving since June of this year when the balance of opinion on the general outlook registered 24% more pessimists than optimists. According to data released today by the French Institute of [...]

Some Improvement in French Business Confidence

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051024a.jpg" width="353">
The weekly leading index of the US economy published by the Economic Cycle Research Institute (ECRI) increased 0.7% last week and rose to a record high for the series. The gain followed no change during the prior week and w/w declines during much of September.
Despite the somewhat erratic performance recently, the six month growth rate of the leading index at 2.1% is near the middle of its recent range and is up from the low of -0.6% in early June.
During the last ten years there has been a 53% correlation between the change in the weekly leading index and US real GDP growth during the following quarter. The correlation has risen to 76% during the last five years.
Visit the <a href="http://www.businesscycle.com/">Economic Cycle Research Institute</a> for analysis of US and international business cycles.
Tax Reform Options in the Real World from the Brookings Institution is available <a href="http://www.brookings.edu/dybdocroot/views/papers/gale/200510.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">Economic Cycle Research Institute&nbsp;</th>
<th scope="col">10/14/05</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">Weekly Leading Index</td>
<td>135.9</td>
<td>132.5</td>
<td>2.9%</td>
<td>132.6</td>
<td>124.9</td>
<td>119.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; 6 Month Growth Rate</td>
<td>2.1%</td>
<td>1.6%</td>
<td>&nbsp;</td>
<td>4.2%</td>
<td>6.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The weekly leading index of the US economy published by the Economic Cycle Research Institute (ECRI) increased 0.7% last week and rose to a record high for the series. The gain followed no change during the prior week and w/w declines [...]

ECRI Leading Index Reached a New High

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051024a.jpg" width="353">
The weekly leading index of the US economy published by the Economic Cycle Research Institute (ECRI) increased 0.7% last week and rose to a record high for the series. The gain followed no change during the prior week and w/w declines during much of September.
Despite the somewhat erratic performance recently, the six month growth rate of the leading index at 2.1% is near the middle of its recent range and is up from the low of -0.6% in early June.
During the last ten years there has been a 53% correlation between the change in the weekly leading index and US real GDP growth during the following quarter. The correlation has risen to 76% during the last five years.
Visit the <a href="http://www.businesscycle.com/">Economic Cycle Research Institute</a> for analysis of US and international business cycles.
Tax Reform Options in the Real World from the Brookings Institution is available <a href="http://www.brookings.edu/dybdocroot/views/papers/gale/200510.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">Economic Cycle Research Institute&nbsp;</th>
<th scope="col">10/14/05</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">Weekly Leading Index</td>
<td>135.9</td>
<td>132.5</td>
<td>2.9%</td>
<td>132.6</td>
<td>124.9</td>
<td>119.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; 6 Month Growth Rate</td>
<td>2.1%</td>
<td>1.6%</td>
<td>&nbsp;</td>
<td>4.2%</td>
<td>6.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
Some Improvement in French Business Confidence  
by <a href="/comment/Curley.html">Louise Curley</a> October 24, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051024c.jpg" width="353">
Business confidence in France has been improving since June of this year when the balance of opinion on the general outlook registered 24% more pessimists than optimists. According to data released today by the French Institute of Statistics and Economic Studies (INSEE), the excess of pessimists over optimists regarding the outlook among businessmen has declined to only 1% in October. Over the past five years, business opinion on the outlook has tended to be more pessimistic and more volatile than business opinion of actual trends in production as can be seen in the first chart. The various components of the overall view are shown in the table below.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/051024b.jpg" width="353">
INSEE also publishes a composite indicator of business confidence. It is based on the balances of opinions on past production, personal production forecasts, inventories, total and foreign order book and demand and general production forecasts and is constructed in such a way that the series has an average of 100 and a standard deviation of 10. According to this measure, business confidence weakened from mid 2004 to April and May of this year and is currently improving. Since late 2001, however, French business confidence has been subdued, ranging much closer to the average than in the past, as can be seen in the second chart.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/FRANCE/@F09/@F09.HTM">French Business Confidence Indicators (% Balance)</a></th>
<th scope="col">Oct 05&nbsp;</th>
<th scope="col">Sep 05</th>
<th scope="col">Oct 04</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2004 &nbsp; </th>
<th scope="col">2003 &nbsp;</th>
<th scope="col">2002&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">General Outlook</td>
<td>-1</td>
<td>-13</td>
<td>23</td>
<td>12</td>
<td>-24</td>
<td>5</td>
<td>-29</td>
<td>-22</td>
</tr>
<tr>
<td class="firstcol">Recent Production Trend</td>
<td>4</td>
<td>4</td>
<td>17</td>
<td>0</td>
<td>-13</td>
<td>12</td>
<td>-8</td>
<td>-8</td>
</tr>
<tr class="odd">
<td class="firstcol">Order Book and Demand</td>
<td>-14</td>
<td>-19</td>
<td>-12</td>
<td>5</td>
<td>-2</td>
<td>-15</td>
<td>-23</td>
<td>-18</td>
</tr>
<tr>
<td class="firstcol">Foreign Order Book and Demand</td>
<td>-8</td>
<td>-12</td>
<td>-8</td>
<td>4</td>
<td>0</td>
<td>-11</td>
<td>-20</td>
<td>-17</td>
</tr>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>13</td>
<td>13</td>
<td>6</td>
<td>0</td>
<td>7</td>
<td>8</td>
<td>10</td>
<td>13</td>
</tr>
<tr>
<td class="firstcol">Prices</td>
<td>-4</td>
<td>2</td>
<td>2</td>
<td>-6</td>
<td>-6</td>
<td>1</td>
<td>-7</td>
<td>-5</td>
</tr>
<tr class="odd">
<td class="firstcol">Composite Synthetic Indicator*</td>
<td>102</td>
<td>100</td>
<td>108</td>
<td>2.0%</td>
<td>-5.6%</td>
<td>105</td>
<td>95</td>
<td>97</td>
</tr>
</tbody>
</table>
</body>
</html>

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.

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

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.

U.S. Mortgage Applications Edged Down in the April 3 Week

Robert Brusca

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**Chaotic trends**
Producer price trends for the European Monetary Union in February show great deal of weakness. The headline measure in February for total PPI prices (excluding construction) fell 0.5% after rising 0.5% in January. The three-month annualized change was -1.3%, over six months it was -0.7%, and year-over-year it was -3.1%. The trend is not particularly conclusive although the table also produces the trend for the HICP-core on the same timeline where there is acceleration in train. Despite this report and any trends, it may show that the risk to inflation in the PPI is now through elevated Brent crude prices, which we see in the chart has been historically well correlated with changes in the PPI.

**The past may not be prologue**
The chart offers some insight into this matter as we see that recently the spike in Brent crude is substantial—and the chart doesn't even take us up-to-date to what we're dealing with in the markets today! We can see that in 2021 when all prices went up sharply, that preceded a spike in the PPI as well. However, in 2017 when there was a short-lived spike, there wasn't much impact on producer prices at all. Then, later in 2018, when prices spiked not quite so high or suddenly, but had a bit more sustained growth, there also was a very small knock-on impact on producer prices. One of the key features for whether the Brent rise gets into producer prices or not is how long-lived the spike remains in force and how people perceive it. In this case, there's closing of the Strait of Hormuz and a war in place; there's a good chance that investors are going to treat this as a real event and one with potential longevity. That means that this spike will elevate producer prices.

**Overall PPI is tempered but, by country...not so much**
However, the table is based on data through February, and so oil spiking prices really haven't entered the picture as far as the table is concerned. On that basis, we're seeing a lot of price declines: an annualized three-month decline of 7.9% in Spain, 7.3% in Portugal, 3.6% in Germany, and so on. These figures clearly do not reflect what will be the lasting effect on oil prices as we get deeper into 2026. Even despite this weakness in headline inflation across countries in the monetary union, and in Europe generally, inflation is tempered year-over-year where it only rises compared to a year earlier for 7.7% of the reporters, but then over six months inflation accelerates for all of the reporters compared to its 12-month pace, and then, over three months it accelerates for about 70% of the reporters compared to the six-month pace.

**PPI headline vs. core... where available**
There are two observations at the bottom of the table for the PPI excluding energy—for France and Germany. In both cases, the difference between the excluding energy price and the headline price is remarkable. For Germany, the ex-energy price is rising and clearly accelerating; in contrast, the headline trends show prices declining or a tendency toward deceleration. For France, the ex-energy prices are rising and sustaining larger increases over six months and three months than over 12 months. However, for France, in the table, the total PPI headline inflation rate declines on all horizons although the pace of decline is undergoing erosion. Once we set aside the weighting scheme for the monetary union, the PPI is looking instead at the average result of the countries in the table (an average that includes some non-monetary union members) where the inflation rate is clearly headed higher, not lower.

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**The trend and the future**
Despite the controversies implicit in these data, at its last meeting the European Central Bank put markets on notice that, if the war were still ongoing, there was a high likelihood that the ECB would raise interest rates at its next meeting. It's easy to see why since the inflation picture isn't particularly glowing. Even before the new oil price impact is factored in, there is evidence of acceleration in producer prices.

**War! And price trends**
War creates a lot of uncertainty. In addition to oil prices, there are going to be knock-on effects for weakness across the global economy and also a tendency for oil prices to spread increases since the oil price increase is high enough that it's likely to have a significant impact on transportation costs for all goods. Central banks are clearly going to be on notice and wary. Even so, it's also true that spiking oil prices, even if they spread inflation, tend to spread economic weakness. Policymaking in 2026 is going to be far more contentious and difficult than it was in 2025, everywhere globally.

Economy in Brief

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