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/050601a.jpg" width="353">
Manufacturing activity in Europe is decreasing. The widely followed &quot;PMI&quot; surveys, compiled by NTC Research in London and published by Reuters, indicate net decreases in overall manufacturing in the Euro-Zone for May, the second consecutive month. The total index is 48.70, off from 49.19 in April. All the major component countries registered readings below 50 as well. In fact, only the Czech Republic is holding onto growth, and at 51.39, that is slowing. Readings above 50 indicate net gains in business, while below 50 show a net contraction.
Yesterday in this space, Louise Curley described weakness in business and consumer confidence in Europe, and of course, French voters surprised their own government and Euro-Zone officials by soundly rejecting the European Union constitution, surely a manifestation of this lack of overall &quot;confidence&quot; in the region. Today&#39;s manufacturing data underscore some fundamental sources for that malaise.
Among the components of the PMI survey, new orders are below 50 for a second month and order backlogs are down for a third successive month. May is the first month that total output has fallen below the 50% breakeven level.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050601b.jpg" width="353">
There is one notable sign of hope in these data. Input prices have been very strong in recent months, reaching a high of 76.7% last October. But the upward pressure on these costs has been dissipating, and in May nearly disappeared altogether. The input price index was 50.73 for the Euro-Zone, the lowest since September 2003. We&#39;d surmise that the recent moderation in energy markets has contributed to this, and other commodity price movements have tempered as well.
In contrast, as we illustrate in the table below, manufacturing in two Asian economies is still growing. In Japan, a modest rise in the PMI index in May extends an uptrend to a fifth month. The China PMI eased from 54.36 to 53.27, but those followed a spurt in March to over 55; the Chinese series remain inconclusive at this time though, because there is only 13 months&#39; worth of data.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">PMI for Manufacturing&nbsp;</th>
<th scope="col">May 2005</th>
<th scope="col">April 2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro-Zone</td>
<td>48.70</td>
<td>49.19</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>49.44</td>
<td>49.73</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>48.76</td>
<td>49.80</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>47.12</td>
<td>47.98</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Japan</td>
<td>53.53</td>
<td>53.32</td>
</tr>
<tr class="odd">
<td class="firstcol">China</td>
<td>53.27</td>
<td>54.36</td>
</tr>
</tbody>
</table>
</body>
</html>

Manufacturing activity in Europe is decreasing. The widely followed "PMI" surveys, compiled by NTC Research in London and published by Reuters, indicate net decreases in overall manufacturing in the Euro-Zone for May, the second [...]

Euro-Zone Manufacturing PMI Shows Net Contraction for Second Month

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/050601c.jpg" width="353">
Total mortgage applications last week gave back more than half of the prior week&#39;s bounce and fell 2.8%. Applications so far in May are 6.5% ahead of April, according to the Mortgage Bankers Association.
Purchase applications dropped 4.1% but in May still are 3.1% ahead of April. During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance fell 1.2% yet in May are 11.2% higher than in April.
The effective interest rate on a conventional 30-year mortgage fell to 5.83% from 5.88% the week prior. The effective rate on a 15-year mortgage fell to 5.42%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">05/27/05</th>
<th scope="col">05/20/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>709.1</td>
<td>729.6</td>
<td>13.5%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>462.7</td>
<td>482.3</td>
<td>0.6%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,142.1</td>
<td>2,167.9</td>
<td>35.3%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Total mortgage applications last week gave back more than half of the prior week's bounce and fell 2.8%. Applications so far in May are 6.5% ahead of April, according to the Mortgage Bankers Association. Purchase applications dropped [...]

Mortgage Applications Off Again

<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/050601d.jpg" width="353">
After a reasonable start in May, chain store sales subsequently fell during the last three weeks according to the International Council of Shopping Centers (ICSC)-UBS survey. Sales fell 1.0% last week and pulled the May average just 0.3% above April, half the gain during that month.
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 did rise 0.2% w/w (0.5% y/y) pulling the monthly average up 0.4% versus April, the first monthly increase since February.
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><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">05/28/05</th>
<th scope="col">05/21/05</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">Total Weekly Chain Store Sales</td>
<td>451.2</td>
<td>455.9</td>
<td>3.1%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

After a reasonable start in May, chain store sales subsequently fell during the last three weeks according to the International Council of Shopping Centers (ICSC)-UBS survey. Sales fell 1.0% last week and pulled the May average just [...]

Weekly Chain Store Sales Fell For Third Week

<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/050601g.jpg" width="353">
The total value of construction put in place rose another 0.5% in April and about matched Consensus expectations for a 0.7% gain.
Private residential building activity rose 0.6% for the second month but the value of new single family building declined 0.1% (+11.1% y/y), the first sequential decline since September. Building on new multi-family units jumped 1.4% (16.5% y/y).
Nonresidential building surged 1.3% led higher by a 1.8% (3.0% y/y) advance in office building. Manufacturing building also rose a strong 1.3% (38.7% y/y) but spending on power facilities fell 3.5% (-5.3% y/y).
Public construction fell as spending on highways &amp; streets, nearly one third of the value of public construction spending, dropped for the second consecutive month (-3.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050601h.jpg" width="353">
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">April</th>
<th scope="col">March</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</td>
<td>0.5%</td>
<td>0.6%</td>
<td>8.2%</td>
<td>8.9%</td>
<td>5.1%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.8%</td>
<td>0.7%</td>
<td>10.9%</td>
<td>10.7%</td>
<td>6.0%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.6%</td>
<td>0.6%</td>
<td>13.3%</td>
<td>13.9%</td>
<td>13.1%</td>
<td>8.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.3%</td>
<td>1.0%</td>
<td>5.3%</td>
<td>3.7%</td>
<td>-7.1%</td>
<td>-12.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>3.3%</td>
<td>2.6%</td>
<td>7.0%</td>
</tr>
</tbody>
</table>
</body>
</html>

The total value of construction put in place rose another 0.5% in April and about matched Consensus expectations for a 0.7% gain. Private residential building activity rose 0.6% for the second month but the value of new single family [...]

U.S. Construction Again Led Higher By Residential Building

<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/050601e.jpg" width="353">
In a move foreshadowed by earlier reports from regions around the US, the May Composite Index of activity in the manufacturing sector compiled by the Institute of Supply Management fell another 1.9 points to 51.4. The index has fallen steadily from the peak of 62.8 in January 2004. Consensus expectations had been for a lesser decline to 52.5.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
A lower new orders (51.7) component led the composite down for the fourth month this year while the index of export orders (54.9) fell to its lowest since September.
The employment index (48.8) fell below the break even level of 50 for the first month since October 2003. During the last twenty years there has been a 67% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050601f.jpg" width="353">
The production index (54.9) fell to its lowest since June 2003 and the pace of vendor deliveries sped up to the quickest in nearly two years.
The prices paid index fell sharply to the lowest since October 2003. During the last twenty years there has been an 81% correlation between vendor delivery speed and prices.

<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/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;04</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">Composite Index</td>
<td>51.4</td>
<td>53.3</td>
<td>62.6</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>51.7</td>
<td>53.7</td>
<td>63.9</td>
<td>63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>58.0</td>
<td>71.0</td>
<td>86.0</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
</body>
</html>

In a move foreshadowed by earlier reports from regions around the US, the May Composite Index of activity in the manufacturing sector compiled by the Institute of Supply Management fell another 1.9 points to 51.4. The index has fallen [...]

ISM Factory Index Fell Again

<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/050601e.jpg" width="353">
In a move foreshadowed by earlier reports from regions around the US, the May Composite Index of activity in the manufacturing sector compiled by the Institute of Supply Management fell another 1.9 points to 51.4. The index has fallen steadily from the peak of 62.8 in January 2004. Consensus expectations had been for a lesser decline to 52.5.
During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
A lower new orders (51.7) component led the composite down for the fourth month this year while the index of export orders (54.9) fell to its lowest since September.
The employment index (48.8) fell below the break even level of 50 for the first month since October 2003. During the last twenty years there has been a 67% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050601f.jpg" width="353">
The production index (54.9) fell to its lowest since June 2003 and the pace of vendor deliveries sped up to the quickest in nearly two years.
The prices paid index fell sharply to the lowest since October 2003. During the last twenty years there has been an 81% correlation between vendor delivery speed and prices.

<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/@EF02/@EF02.HTM">ISM Manufacturing Survey</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">May &#39;04</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">Composite Index</td>
<td>51.4</td>
<td>53.3</td>
<td>62.6</td>
<td>60.5</td>
<td>53.3</td>
<td>52.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>51.7</td>
<td>53.7</td>
<td>63.9</td>
<td>63.5</td>
<td>57.9</td>
<td>56.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>58.0</td>
<td>71.0</td>
<td>86.0</td>
<td>79.8</td>
<td>59.6</td>
<td>57.6</td>
</tr>
</tbody>
</table>
U.S. Construction Again Led Higher By Residential Building  
by <a href="/comment/Moeller.html">Tom Moeller</a> June 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050601g.jpg" width="353">
The total value of construction put in place rose another 0.5% in April and about matched Consensus expectations for a 0.7% gain.
Private residential building activity rose 0.6% for the second month but the value of new single family building declined 0.1% (+11.1% y/y), the first sequential decline since September. Building on new multi-family units jumped 1.4% (16.5% y/y).
Nonresidential building surged 1.3% led higher by a 1.8% (3.0% y/y) advance in office building. Manufacturing building also rose a strong 1.3% (38.7% y/y) but spending on power facilities fell 3.5% (-5.3% y/y).
Public construction fell as spending on highways &amp; streets, nearly one third of the value of public construction spending, dropped for the second consecutive month (-3.7% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050601h.jpg" width="353">
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<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/@E907/@E90701/@E90701.HTM">Construction Put-in-place</a></th>
<th scope="col">April</th>
<th scope="col">March</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</td>
<td>0.5%</td>
<td>0.6%</td>
<td>8.2%</td>
<td>8.9%</td>
<td>5.1%</td>
<td>1.5%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>0.8%</td>
<td>0.7%</td>
<td>10.9%</td>
<td>10.7%</td>
<td>6.0%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>0.6%</td>
<td>0.6%</td>
<td>13.3%</td>
<td>13.9%</td>
<td>13.1%</td>
<td>8.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.3%</td>
<td>1.0%</td>
<td>5.3%</td>
<td>3.7%</td>
<td>-7.1%</td>
<td>-12.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>-0.4%</td>
<td>0.4%</td>
<td>-0.4%</td>
<td>3.3%</td>
<td>2.6%</td>
<td>7.0%</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Fell For Third Week 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050601d.jpg" width="353">
After a reasonable start in May, chain store sales subsequently fell during the last three weeks according to the International Council of Shopping Centers (ICSC)-UBS survey. Sales fell 1.0% last week and pulled the May average just 0.3% above April, half the gain during that month.
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 did rise 0.2% w/w (0.5% y/y) pulling the monthly average up 0.4% versus April, the first monthly increase since February.
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><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">05/28/05</th>
<th scope="col">05/21/05</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">Total Weekly Chain Store Sales</td>
<td>451.2</td>
<td>455.9</td>
<td>3.1%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
Mortgage Applications Off Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050601c.jpg" width="353">
Total mortgage applications last week gave back more than half of the prior week&#39;s bounce and fell 2.8%. Applications so far in May are 6.5% ahead of April, according to the Mortgage Bankers Association.
Purchase applications dropped 4.1% but in May still are 3.1% ahead of April. During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance fell 1.2% yet in May are 11.2% higher than in April.
The effective interest rate on a conventional 30-year mortgage fell to 5.83% from 5.88% the week prior. The effective rate on a 15-year mortgage fell to 5.42%.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">05/27/05</th>
<th scope="col">05/20/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>709.1</td>
<td>729.6</td>
<td>13.5%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>462.7</td>
<td>482.3</td>
<td>0.6%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,142.1</td>
<td>2,167.9</td>
<td>35.3%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Euro-Zone Manufacturing PMI Shows Net Contraction for Second Month 
by <a href="/comment/Stone.html">Carol Stone</a> June 1, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050601a.jpg" width="353">
Manufacturing activity in Europe is decreasing. The widely followed &quot;PMI&quot; surveys, compiled by NTC Research in London and published by Reuters, indicate net decreases in overall manufacturing in the Euro-Zone for May, the second consecutive month. The total index is 48.70, off from 49.19 in April. All the major component countries registered readings below 50 as well. In fact, only the Czech Republic is holding onto growth, and at 51.39, that is slowing. Readings above 50 indicate net gains in business, while below 50 show a net contraction.
Yesterday in this space, Louise Curley described weakness in business and consumer confidence in Europe, and of course, French voters surprised their own government and Euro-Zone officials by soundly rejecting the European Union constitution, surely a manifestation of this lack of overall &quot;confidence&quot; in the region. Today&#39;s manufacturing data underscore some fundamental sources for that malaise.
Among the components of the PMI survey, new orders are below 50 for a second month and order backlogs are down for a third successive month. May is the first month that total output has fallen below the 50% breakeven level.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050601b.jpg" width="353">
There is one notable sign of hope in these data. Input prices have been very strong in recent months, reaching a high of 76.7% last October. But the upward pressure on these costs has been dissipating, and in May nearly disappeared altogether. The input price index was 50.73 for the Euro-Zone, the lowest since September 2003. We&#39;d surmise that the recent moderation in energy markets has contributed to this, and other commodity price movements have tempered as well.
In contrast, as we illustrate in the table below, manufacturing in two Asian economies is still growing. In Japan, a modest rise in the PMI index in May extends an uptrend to a fifth month. The China PMI eased from 54.36 to 53.27, but those followed a spurt in March to over 55; the Chinese series remain inconclusive at this time though, because there is only 13 months&#39; worth of data.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">PMI for Manufacturing&nbsp;</th>
<th scope="col">May 2005</th>
<th scope="col">April 2005</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Euro-Zone</td>
<td>48.70</td>
<td>49.19</td>
</tr>
<tr>
<td class="firstcol">Germany</td>
<td>49.44</td>
<td>49.73</td>
</tr>
<tr class="odd">
<td class="firstcol">France</td>
<td>48.76</td>
<td>49.80</td>
</tr>
<tr>
<td class="firstcol">Italy</td>
<td>47.12</td>
<td>47.98</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Japan</td>
<td>53.53</td>
<td>53.32</td>
</tr>
<tr class="odd">
<td class="firstcol">China</td>
<td>53.27</td>
<td>54.36</td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

<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/050531d.jpg" width="353">
Both business and consumer confidence in the Euro Zone declined in May as shown in the first chart. Consumers have been more pessimistic than businesses since October 2002. The percent balance between those consumers who were optimistic and those who were pessimistic reached a low point of -21 in March 2003. After improving through the rest of 2003, the percent balance has ranged between -13 and -15. The percent balance was at the low end of this range in May. The high unemployment rate in the Euro zone may account for much of the pessimism of consumers. The rate has ranged narrowly between 8.8% and 8.9% for the past year and a half.
Business confidence as represented by the percent balance of respondents in the industrial sector who believe conditions will improve over those who believe conditions will worsen declined to -11 from -9 in April. Although business confidence has been stronger--in that it has been less negative--than that of consumers since October, 2002, it has since declined sharply--from -3 in November of last year to -11 in May, a level last seen in August 2003. Among the more commonly cited causes of the decline in business confidence are the high and rising oil prices and the rise in the value of the Euro that are shown in the second chart.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050531e.jpg" width="353">
Business confidence has been affected adversely by rising oil prices and the rising value of the euro. The recent history of both of these factors are shown 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/EUROSTAT/EUROSTAT.htm">Euro Zone Confidence</a> (Percent Balance)</th>
<th scope="col">May 05</th>
<th scope="col">Apr 05</th>
<th scope="col">May&nbsp; 04</th>
<th scope="col">M/M dif</th>
<th scope="col">Y/Y dif</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col">&nbsp;2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer</td>
<td>-15</td>
<td>-13</td>
<td>-15</td>
<td>-2</td>
<td>0</td>
<td>-14</td>
<td>-18</td>
<td>-11</td>
</tr>
<tr>
<td class="firstcol">Business</td>
<td>-11</td>
<td>*13</td>
<td>-5</td>
<td>-2</td>
<td>-6</td>
<td>-5</td>
<td>-10</td>
<td>-11</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Factors Affecting Business Confidence</td>
<td>Apr 05</td>
<td>Mar 05</td>
<td>Apr&nbsp; 04</td>
<td>M/M %</td>
<td>Y/Y %</td>
<td>&nbsp;2004&nbsp;&nbsp;</td>
<td>&nbsp;2003</td>
<td>&nbsp;2002</td>
</tr>
<tr class="odd">
<td class="firstcol">Brent Crude $/bbl.)</td>
<td>52.22</td>
<td>53.13</td>
<td>33.15</td>
<td>-1.71</td>
<td>57.53</td>
<td>38.22</td>
<td>28.80</td>
<td>24.89</td>
</tr>
<tr>
<td class="firstcol">Euro/US$</td>
<td>1.2957</td>
<td>1.2964</td>
<td>1.1947</td>
<td>-1.99</td>
<td>7.95</td>
<td>1.3621</td>
<td>1.263</td>
<td>1.0487</td>
</tr>
</tbody>
</table>
</body>
</html>

Both business and consumer confidence in the Euro Zone declined in May as shown in the first chart. Consumers have been more pessimistic than businesses since October 2002. The percent balance between those consumers who were [...]

Consumer and Business Confidence in the Euro Zone Declines in May

<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/050531a.jpg" width="353">
The Chicago Purchasing Managers Business Barometer fell sharply in May. The 11.5 point decline to 54.1 was the steepest drop since 1974, nearly matched the record for a one month decline and pulled the index to its lowest since June 2003. Consensus expectations had been for a more moderate drop to 62.0.
During the last ten years there has been a 65% correlation between the level of Chicago PMI and the three month change in factory sector industrial production. 
New orders and production posted the sharpest declines of the component series and the employment index fell to the lowest level since January. During the last ten years there has been a 75% correlation between the level of the employment index and the three month change in factory sector employment.
The index of prices paid fell again to the lowest level since September 2003. During the last ten years there has been an 86% correlation between the Chicago price index and the three month change in the &quot;core&quot; intermediate goods PPI.

<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/@EF05/@EF05.HTM">Chicago Purchasing Managers Index, SA</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">&nbsp;May &#39;04</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">Business Barometer</td>
<td>54.1</td>
<td>65.6</td>
<td>66.1</td>
<td>62.9</td>
<td>54.6</td>
<td>52.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>57.9</td>
<td>71.0</td>
<td>72.0</td>
<td>67.0</td>
<td>58.0</td>
<td>56.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>54.3</td>
<td>66.1</td>
<td>79.5</td>
<td>80.1</td>
<td>55.8</td>
<td>56.9</td>
</tr>
</tbody>
</table>
</body>
</html>

The Chicago Purchasing Managers Business Barometer fell sharply in May. The 11.5 point decline to 54.1 was the steepest drop since 1974, nearly matched the record for a one month decline and pulled the index to its lowest since June [...]

Chicago Purchasing Agents' Index Down Big

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

Consumers' short-term US inflation expectations still elevated while longer-term expectations of financial markets are steady

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

Tian Yong Woon

In this week’s Letter, we examine the first-round price impacts of the surge in oil prices stemming from the ongoing Middle East conflict in Asia. Despite recent rhetoric and reports suggesting a potentially swift resolution, the conflict continues to unfold, with a ceasefire hanging in the balance, and with some measures of shipping volumes through the Strait of Hormuz still reduced to a trickle. At the same time, crude oil prices have been whipsawing amid shifting market perceptions about the persistence of the current supply shock (chart 1). The initial effects of higher oil prices are already showing up in hard data, particularly in energy- and fuel-related inflation across Indonesia, South Korea, and Vietnam (chart 2). In response, several governments have rolled out sizeable subsidy programmes to cushion rising energy costs, though these measures come with significant fiscal strain.

We also assess recent consumer inflation expectations in South Korea and Taiwan, which show early signs of edging higher (chart 3), although there is as yet no clear evidence of a meaningful unanchoring. To add further nuance, our latest Blue Chip survey suggests that most panellists expect only a limited and temporary pass-through from higher energy prices to core inflation, though a non-trivial minority anticipate a more persistent effect (chart 4). On the policy front, respondents broadly expect central banks to delay easing while avoiding outright tightening, with outcomes likely to diverge across regions (chart 5). In the near term, upcoming policy decisions in India, New Zealand, and South Korea—alongside other key data releases—will provide a useful test of these expectations (chart 6).

**The Middle East conflict**
The Middle East conflict continues to rage, with IMF-tracked shipping volumes through the Strait of Hormuz still reduced to a trickle. Meanwhile, crude oil prices remain volatile, gyrating alongside shifting perceptions over how soon normal oil flows might resume. In reality, there is still little sign of a substantive resolution, and no agreement to fully reopen the strait appears imminent, suggesting that oil flows are likely to remain constrained at low levels in the near term. That said, some investors are closely monitoring developments following reports of discussions around a potential 45-day ceasefire, which could pave the way toward a more lasting resolution. Until then, and absent any meaningful supply relief, crude oil prices—and by extension, energy-related inflation—are likely to face continued upward pressure, particularly for oil-dependent, importing economies.

260406T1.jpg

**Initial price impacts**
The initial inflation concerns among policymakers and investors stemming from the surge in oil prices are now beginning to show up in the data, as illustrated in chart 2. The latest March readings—capturing the period after the onset of the Middle East conflict—already point to a sharp acceleration in energy-related prices on a year-ago basis. Indonesia’s energy CPI basket has risen by around 9%, while diesel prices in South Korea have jumped 17%. Vietnam’s retail gasoline prices have seen an even more pronounced increase, at roughly 25.6%. Given the scale of these price surges, and their direct impact on everyday essentials—particularly fuel for daily commutes and broader economic activity—governments across Asia have begun rolling out sizeable subsidy programmes. These measures, often implemented at significant fiscal cost, aim to cushion the burden on households and firms. For instance, South Korea’s finance ministry proposed a supplementary budget of around $17.3 billion in late March to support low-income households, youth, and businesses amid higher oil prices, with approval expected by April 10. Meanwhile, Indonesia has allocated approximately $22.4 billion toward energy subsidies and support for selected energy and utilities firms to help keep prices affordable.

260406T2.jpg

**Consumer inflation expectations**
What policymakers are likely to focus on—beyond the immediate price impacts—is how the recent surge in oil prices feeds into inflation expectations. If left unanchored, these expectations could pose a far greater challenge than the supply-driven price shock itself, including reduced monetary policy effectiveness in reining in inflation and the risk of a self-fulfilling inflation cycle—though it is worth noting that such dynamics are not yet close to materialising. So far, there are some early, albeit inconclusive, signs that near-term consumer inflation expectations are beginning to drift higher in certain economies. As shown in chart 3, one-year-ahead inflation expectations edged up to 2.7% in March, while in Taiwan, consumer sentiment regarding domestic price trends over the next six months has turned notably more pessimistic relative to overall confidence.

260406T3.jpg

**The latest Blue Chip survey**
Turning to investor perspectives on how higher energy prices may feed into inflation, our special questions in the latest Blue Chip Financial Forecasts (BCFF) survey offer some useful nuance. As shown in chart 4, around two-thirds of panellists expect only a limited and temporary pass-through from higher oil prices to core inflation. That said, a non-trivial minority (31%) anticipate a more moderate and persistent pass-through. This is notable given the focus on core inflation, and underscores how energy prices can generate second-round effects even in typically non-energy components, reflecting the pervasive role of energy in everyday economic activity—from manufacturing to the upkeep of a wide range of goods and services.

260406T4.jpg

Delving deeper, we also asked panellists about their views on the prospective path of central bank policy should energy-driven inflation prove persistent. As shown in chart 5, responses broadly coalesce around two themes: central banks are likely to delay easing rather than tighten, and policy responses will vary meaningfully across regions. The former is already playing out to some extent in recent central bank decisions across Asia, with several explicitly citing the ongoing Middle East conflict as a reason to remain vigilant on inflation and refrain from easing policy prematurely. As for the latter, there are already signs of divergence in how different central banks are approaching the situation.

260406T5.jpg

**The week ahead**
Looking to the week ahead, there will be ample opportunities to assess whether investor expectations for central bank policy moves play out across Asia, with several rate decisions due—most notably in India, New Zealand, and South Korea. Also on the docket are China’s March CPI print and a range of Japan-related releases. Policymakers are likely to remain focused on balancing inflation control with supporting growth and maintaining currency stability. For now, and absent offsetting domestic factors, expectations for further near-term easing have been tempered by rising inflation risks. In China, recent CPI readings point to a modest pickup, while producer price deflation has begun to ease after a prolonged period of weak or negative inflation.

260406T6.jpg

Asia

Economic Letter from Asia: First-Round Effects

Michael J. Moran

260403A.jpg

260403B.jpg

The report on payroll employment for March was impressive when viewed in isolation. Job growth was strong at 178,000, and the advance was broadly based. The construction and manufacturing sectors both posted solid gains, and the service-producing sector registered its firmest performance in more than a year. However, the gain might be viewed as a continuation of an unusual bout of random volatility. The March advance followed a notable drop in February (-133,000, revised down from -92,000), which followed an upside surprise in January (160,000, revised up from 126,000).

To be sure, statistical noise has been a factor in the past three months, but the results also represent an encouraging shift in job growth from that in the second half of last year, when employment rose only marginally in the third quarter and fell in the fourth. The net change in the past three months seems to signal that job growth is not drying up. The net advance so far this year is far from brisk, but it is clearly in the plus column and noticeably better than results in late 2025.

The unemployment rate also might be viewed as favorable, as it dipped 0.1 percentage point to 4.3%, although it was a “soft” decline. That is, employment as measured by the household survey declined 64,000, but the size of the labor force fell by a larger amount (off 396,000). Still, the jobless rate has climbed only modestly higher since the labor market started to ease in 2023, and it has inched lower in the past few months.

Unemployment has been contained despite modest hiring because layoffs also have been light. Initial claims for unemployment benefits have moved sideways in the past few years, indicating no change in the pace of layoffs. This pattern is confirmed by terminations data in the report on job openings and labor turnover (JOLTs) from the Bureau of Labor Statistics.

A supply-side shift in the labor market also has helped to contain the unemployment rate. Growth in the size of the labor force has slowed, and with fewer individuals seeking employment, those searching are more easily absorbed. Measures of the size of the labor force can be difficult to assess because there are breaks in the series every year. The Bureau of Labor Statistics adjusts the population controls used in its estimating procedure every January without revising past data to align with the new estimates. Thus, every January involves a discontinuity in the series, which will distort year-over-year changes.

However, Haver Analytics maintains a smoothed series originally developed by BLS to eliminate the breaks in the labor force data. As shown in the chart below, the smoothed series on the size of the labor force had been growing at a pace centered on 1.2% through 2022, but it has slowed irregularly since then (an observation for October is not available because of limited data collection during the government shutdown). The overall labor force is still growing, but the slower pace means fewer individuals looking for work, which most likely results in fewer being counted as unemployed.

The BLS collects data every month on both native-born and foreign-born individuals in the labor force. The breaks in these series are an issue, and Haver does not maintain smoothed series. However, the use of moving averages achieves enough smoothing to provide a sense of underlying changes. The native-born labor force has moved erratically in the past couple of years, but it has continued to advance. The foreign-born labor force, in contrast, seems to have peaked in mid-2025 and has generally declined since then.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

260403C.jpg

260403D.jpg

- The jump of 178,000 in payroll employment in March easily exceeded the expected gain of 51,000.
- Following a net gain in January and February, the employment setting seems to have brightened slightly.
- A dip in the unemployment rate continued the recent pattern of marginal changes.

Payroll Employment: Another Surprise in March, The Third Consecutive

Robert Brusca

260403E.jpg

French manufacturing industrial production was flat in February after a January rebound; output rose by 0.2% following a 0.8% decline in December.

The components of industrial production in February showed 2.6% increase in consumer durables, a 0.4% increase in consumer nondurables, flat output from capital goods, and a 0.7% month to month decline in intermediate output.

Sequentially, French output had been growing at a slow, steady pace of 0.8% at an annual rate over both 12 months and six months, but then slipped to a 6.1% contraction at an annual rate over three months. Consumer durable goods output on this span shows consistent increases, but there are no trends to clear acceleration or deceleration. Consumer nondurables trace an accelerating path of moderate means from -1.8% over 12 months, to -0.4% over six months, and then rising at a 5.5% annual rate over three months. Capital goods output is moving in the opposite direction, growing by 3.4% over 12 months, slowing to a 0.7% annual pace over six months, and then contracting at a 9.5% annual rate over three months. Intermediate goods output is falling at 0.8% pace over 12 months, but then it switches to an expansion rate of 0.8% over six months and 0.6% and over three months. There's nothing remarkable about these patterns, except there's some acceleration, some deceleration, and a lot of mulling about at low growth rates.

As a separate item, French auto production is slipping and decelerating, falling by 7.1% at an annual rate over 12 months, falling at a 7.9% pace over six months, and then plunging at a 19.3% annual rate over three months. On these same horizons, motor vehicle registrations fall by 14.7% over 12 months; the weakness pares back to an 11.2% annual rate decline over six months, and then it steps up to a 22.1% decline at an annual rate over three months. French demand for autos is not in good shape.

In the quarter to date—now two months into the first quarter—manufacturing industrial production is falling at a 0.8% annual rate. That pace is boosted by 9.4% annual rate gain in consumer durables output but restrained by just a 0.2% annual rate increase in consumer nondurable goods. Capital goods output is falling at a 1.9% annual rate, while intermediate goods output is falling at a 1% annual rate. Also in the quarter to date, automobile production is plunging at a 24.3% annual rate, while on the demand side, motor vehicle registrations are falling at a 15% annual rate.

French manufacturing data are somewhat confusing. The chart shows that the industrial production trend has been showing consistent increases over 12 months, but it has recently been pulling back relatively sharply. On the other hand, the manufacturing PMI for France has been consistently negative going back to mid-2022 and only in early 2026 has the manufacturing PMI been posting some values above the 50% mark, indicating that output was starting to actually expand. In March, the PMI reading for manufacturing has slipped back by the thinnest margin below the 50% mark.

260403.jpg

Of course, events in the Middle East make everything more speculative, with the war effectively closing the Strait of Hormuz and no certainty about how or when that is going to be sorted out. In the meantime, the potential threat of ongoing oil price pressures has put both the ECB and the Bank of England in a position to be more wary with policy, and they warned markets about the potential for rate hikes as soon as their next meetings are engaged. That also raises questions about the outlook for growth. But we continue to track and chronicle trends in the data. It's also quite clear that we could have events that will play out that could completely undermine these trends before they get a chance to run to conclusion. It's an important time to be wary and watch all developments—a lot is in play.

France

French IP Waffles

Kathleen Stephansen, CBE

260402A5.jpg

260402B5.jpg

Initial claims for unemployment insurance declined by 9,000 to 202,000 in the week ending March 28, from 211,000 in the week ending March 21, revised from 210,000. The four-week average declined 3,000 to 207,750 in the week ending March 28, from 210,750 the March 21 week, revised from 210,500. The Forecast Survey looked for 212,000 claims to have been filed.

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 25,000 to 1.841 million in the week ending March 21, from 1.816 million in the week ending March 14. The four-week moving average declined to 1.839 million in the latest week from 1.846 million in the March 14 week. This is the lowest level for this average since September 28, 2024 when it was 1.834 million. The insured unemployment rate remained at 1.2% in the week of March 21. It has remained at that level since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending March 14, the highest unemployment rates were in Rhode Island (2.83%), New Jersey (2.73%), Massachusetts (2.66%), Washington (2.39%), Minnesota (2.31%), California (2.17%), and New York (2.01%). The lowest rates were in Florida (0.31%), Louisiana (0.32%), Arkansas (0.36%), Alabama (0.38%), and North Carolina (0.40%). Rates in other notable states include Illinois (1.99%), Connecticut (1.82%), Pennsylvania (1.72%), and Texas (1.07%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

260402C5.jpg

260402D5.jpg

- New claims declined by 9,000 to 202,000.
- Continuing claims rose by 25,000 to 1.841 million.
- The insured unemployment rate remained at 1.2%.

U.S. Initial Unemployment Claims Edged Down in the Week of March 28

260402E.jpg

The S&P manufacturing PMIs for March showed improvements in 44.4% of the 18 reporters. The median reading for the month was at 50.9, indicating that expanding output was the median reading through the period. The median change showed a small step back of 0.1 diffusion points month-to-month.

Sequentially, looking at average yearly activity compared to a year ago, six months compared to 12 months, and three months compared to six months, we see progress in train. For three months compared to six months, the proportion of reporters showing improvement is 72.2%. For these reporters, over six months compared to 12 months, there is a 61.1% improvement proportion, while for 12 months compared to 12 months ago, there is only a 27.8% improvement.

The median reading over three months on average is 50.7, while the median reading over six months is 50.0 and the median reading over 12 months is 49.4. These readings show a very slow but steady improvement in manufacturing over this horizon.

In addition, we calculate the queue percentile standings for each reporter—that is, the level of the current diffusion index compared to all of the observations back to January 2022, expressing the final number as the percentile standing for the current month in that queue. On that basis, the median percentile standing for this group of reporters is 76.5%. It tells us that the median standing is in the top 25 percentile of all the readings since January 2022 to date. That's a reasonably good result. For the euro area, the queue percentile standing is at the 89.8 percentile, while for Germany it's at its 91.8 percentile. For the Monetary Union and for Germany, the current numbers are some of the best we've seen during this period. However, that doesn't mean that they're necessarily stellar readings.

**PMI diffusion vs. PMI rank standings**
German diffusion in manufacturing is 52.2 in March; for the EMU it is 51.6. Germany posts the fourth-highest PMI rank standing and the fifth highest raw standing in March. The highest standing among all reporters is 52.6 from South Korea. This is a period in which no country was posting very strong manufacturing results. In fact, the United States, with a manufacturing PMI rank standing of 79.6, has a diffusion reading in March just a tick below Germany’s whose queue standing at 91.8 seems miles ahead of the U.S.—but it isn’t. Remember that the queue standings are about relative positioning.

Looking at the details, we see that below-median rank readings were logged by Mexico, Russia, India, Brazil, Indonesia, and Turkey. The Asian markets and developing economies seem to have a harder time working up to the standards achieved by other countries.

We also have averages by certain groups of countries. For example, the U.S., the U.K., the Monetary Union, Canada, and Japan—an expanded G10 groping—had an average reading of 51.3 in March, and for that group of countries, the improvements have been steady from 12 months to six months to three months. For the BRIC countries in March, the average standing was 50.4, and for that group there has been a very slight ongoing erosion. For the Asian group, on average, the March reading is 51.2, and there has been a progression to stronger readings from 49.9 over 12 months to 50.5 over six months and to 50.8 over three months.

260402.jpg

On balance, manufacturing was quite uneven in March; however, there's a progression of improvement that is still in place. But with rising oil prices, war in Iran, and lots of knock-on effects to supply trains, it's likely that these readings are going to fall on harder times in the months ahead—unless the Iran war can be wrapped up in very, very, short order. According to the Baltic Dry index, there hasn't been much reduction in global shipping of dry goods. That index excludes oil and other wet goods shipments that clearly have been impeded. However, giving it more time, we may see that the dry index begins to show some difficulties.

Economy in Brief

Jump to:

Euro-Zone Manufacturing PMI Shows Net Contraction for Second Month

Mortgage Applications Off Again

Weekly Chain Store Sales Fell For Third Week

U.S. Construction Again Led Higher By Residential Building

ISM Factory Index Fell Again

ISM Factory Index Fell Again

Consumer and Business Confidence in the Euro Zone Declines in May

Chicago Purchasing Agents' Index Down Big