Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050531b.jpg" width="353">
The May Index of Consumer Confidence from the Conference Board rebounded much more than expected to 102.2. Confidence had fallen in each of the prior three months and Consensus expectations had been for another decline to 96.1.
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.
Consumer expectations recovered nearly all of the prior month&#39;s sharp drop as expectations for jobs and business conditions rose.
The present situation index also recovered nearly all of the prior month&#39;s decline though jobs were viewed both as more plentiful and hard to get by a greater number of survey participants.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050531c.jpg" width="353">
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">May</th>
<th scope="col">April</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>102.2</td>
<td>97.5</td>
<td>9.8%</td>
<td>96.1</td>
<td>79.8</td>
<td>96.6</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Down Big 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 31, 2005


<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.

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<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>
Consumer and Business Confidence in the Euro Zone Declines in May 
by <a href="/comment/Curley.html">Louise Curley</a> May 31, 2005


<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%">
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<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>
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The May Index of Consumer Confidence from the Conference Board rebounded much more than expected to 102.2. Confidence had fallen in each of the prior three months and Consensus expectations had been for another decline to 96.1. During [...]

Consumer Confidence Rebounded

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050527c.jpg" width="353">
British Bankers Association data on lending to individuals have recently been added to Haver&#39;s &quot;UK&quot; database. The April figures were reported today and updated by our &quot;European shift&quot;, the manager and crew who work from roughly midnight in New York to 8:00AM.
Gross new mortgage lending gave a tentative sign of stabilizing after a period of deep weakness during the winter. New loans totaled &pound;14,120 million, up 2.9% from March, although still 12.6% below the April 2004 amount. The number of loans approved for house purchase, 69,323, was off 21.0% from a year ago, but this is the smallest 12-month decline since last August. Intervening months have seen 30%-40% rates of decline.
The average value of newly approved loans has been increasing, but more slowly in recent months. The April figures show a 10.7% rise from a year ago. This is stronger than several months of single-digit increases since last summer, but weaker than the 15%-20% gains prior to that. This general tapering trend is reflected in house prices, with the Halifax Standardised Price, for example, virtually flat for the first four months of 2005. The UK housing market appears to have cooled, and other data on the industry have turned in a mixed, basically indeterminate performance so far this year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050527d.jpg" width="353">
The BBA figures on consumer credit show weakness. The amount of new credit card debt was &pound;7,064 million in April, down 7.2% from a year ago. More, the total amount of credit card debt outstanding fell by a seasonally adjusted &pound;40 million in April, the first monthly decline since August 1994. The recent sluggishness coincides to a decline in UK retail sales of 2.7% in value since September.
The BBA lending data are cited in two sections of our UK database, both in &quot;Financial Data&quot; and also in &quot;Housing and Construction&quot;. They cover several &quot;major banking groups&quot;, the so-called &quot;MBBG&quot; and are styled to parallel some similar concepts reported by the Bank of England for all banks, building societies and other mortgage lenders. Those broader data are due for release on Wednesday 1 June. 

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/UK/UK.HTM">United Kingdom</a> Mil.GBP&nbsp; (NSA except where noted)</th>
<th scope="col">Apr 2005</th>
<th scope="col">Mar 2005</th>
<th scope="col">Feb 2005</th>
<th scope="col">Year Ago</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Gross New Loans</td>
<td>14,120</td>
<td>13,721</td>
<td>11,938</td>
<td>16,150</td>
<td>15,701</td>
<td>15,071</td>
<td>12,586</td>
</tr>
<tr class="odd">
<td class="firstcol">Loan Approvals- Number</td>
<td>69,323</td>
<td>65,635</td>
<td>47,365</td>
<td>87,800</td>
<td>69,244</td>
<td>76,105</td>
<td>83,915</td>
</tr>
<tr>
<td class="firstcol">- Average Value (&pound;)</td>
<td>122,700</td>
<td>121,600</td>
<td>119,000</td>
<td>110,800</td>
<td>112,083</td>
<td>97,817</td>
<td>87,367</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; - 12-mo. % change</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>10.7</td>
<td>14.6</td>
<td>12.0</td>
<td>14.3</td>
</tr>
<tr>
<td class="firstcol">Credit Card Debt- Gross</td>
<td>7,064</td>
<td>7,586</td>
<td>6,842</td>
<td>7,610</td>
<td>7,707</td>
<td>6,818</td>
<td>6,105</td>
</tr>
<tr class="odd">
<td class="firstcol">- Outstanding EOP</td>
<td>34,015</td>
<td>33,628</td>
<td>33,728</td>
<td>31,139</td>
<td>33,973</td>
<td>28,689</td>
<td>26,409</td>
</tr>
<tr>
<td class="firstcol">- Net Change SA</td>
<td>-40</td>
<td>134</td>
<td>50</td>
<td>&nbsp;</td>
<td>388</td>
<td>310</td>
<td>266</td>
</tr>
</tbody>
</table>
</body>
</html>

British Bankers Association data on lending to individuals have recently been added to Haver's "UK" database. The April figures were reported today and updated by our "European shift", the manager and crew who work from roughly [...]

BBA Data Show Tentative Firming in UK Mortgage Lending; Consumer Credit Still Soft

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050527a.jpg" width="353">
The University of Michigan&#39;s reading of consumer sentiment for all of May did fall 0.9% from the prior month to 85.9 but that was better than the mid-month reading of a 2.7% decline. Consensus expectations had been for a level of 86.0.
Sentiment still is down in each of the last five months and is off 16.3% from the January &#39;04 peak. During the last ten years there has been a 75% (inverse) correlation between the level of consumer sentiment and the y/y change in real PCE, although the correlation has fallen in recent years.
The reading of current economic conditions recovered late in the month and rose for the first full month since January. Buying conditions for large household goods recovered sharply.
Consumer expectations recovered though expectations about personal finances remained depressed.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>86.9</td>
<td>87.7</td>
<td>-3.7%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>104.9</td>
<td>104.4</td>
<td>1.3%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>75.3</td>
<td>77.0</td>
<td>-7.7%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
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The University of Michigan's reading of consumer sentiment for all of May did fall 0.9% from the prior month to 85.9 but that was better than the mid-month reading of a 2.7% decline. Consensus expectations had been for a level of [...]

U.S. Consumer Sentiment A Bit Better

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050527b.jpg" width="353">
Personal income in April rose 0.7% following a 0.5% increase in March. Consensus expectations had been for a 0.6% rise. Disposable personal income increased 0.5% (6.0% y/y) following two months of 0.4% gain. When adjusted for price inflation take home pay rose 0.1% (3.3% y/y) following a slight decline in March.
Wages &amp; salaries were notably strong and growth during the prior year was upwardly revised. A 0.7% April increase (7.6% y/y) doubled the prior months&#39; increases and year to year growth through March was revised up to 7.6% from 5.8% y/y estimated earlier. Wages in service producing industries surged 0.9% and y/y growth rose to 9.2% versus the 6.4% pace previously estimated. Even factory sector wages showed life and rose 0.5% (6.4% y/y) in April. Year to year growth through March now stands at 7.0%, up from the 5.8% y/y gain estimated last month.
Offsetting some of this strength have been declines in rental income (-14.1% y/y).
Personal consumption increased 0.6% following an upwardly revised 0.9% increase in March. Consensus expectations had been for a 0.8% gain. Durable goods spending rose 0.7% (9.4% y/y) and spending on services rose 0.3% (5.6% y/y) following earlier gains that were revised down.
Nondurables spending surged 1.1% (8.3% y/y) as spending on gasoline &amp; oil jumped 5.5% (25.9% y/y). Spending on clothing recovered 1.5% (5.9% y/y) following the prior month&#39;s 2.1% drop.
The PCE chain price index rose 0.4% but less food &amp; energy the 0.1% m/m increase was the slimmest of the year. 

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</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">Personal Income</td>
<td>0.7%</td>
<td>0.5%</td>
<td>7.0%</td>
<td>5.8%</td>
<td>3.2%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.6%</td>
<td>0.9%</td>
<td>6.9%</td>
<td>6.0%</td>
<td>5.2%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>0.4%</td>
<td>0.5%</td>
<td>1.5%</td>
<td>1.3%</td>
<td>1.4%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.4%</td>
<td>0.5%</td>
<td>2.7%</td>
<td>2.2%</td>
<td>1.9%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.6%</td>
<td>1.5%</td>
<td>1.3%</td>
<td>1.8%</td>
</tr>
</tbody>
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</body>
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Personal income in April rose 0.7% following a 0.5% increase in March. Consensus expectations had been for a 0.6% rise. Disposable personal income increased 0.5% (6.0% y/y) following two months of 0.4% gain. When adjusted for price [...]

U.S. Income & Outlays Firm, Wage Revisions Upward

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050527b.jpg" width="353">
Personal income in April rose 0.7% following a 0.5% increase in March. Consensus expectations had been for a 0.6% rise. Disposable personal income increased 0.5% (6.0% y/y) following two months of 0.4% gain. When adjusted for price inflation take home pay rose 0.1% (3.3% y/y) following a slight decline in March.
Wages &amp; salaries were notably strong and growth during the prior year was upwardly revised. A 0.7% April increase (7.6% y/y) doubled the prior months&#39; increases and year to year growth through March was revised up to 7.6% from 5.8% y/y estimated earlier. Wages in service producing industries surged 0.9% and y/y growth rose to 9.2% versus the 6.4% pace previously estimated. Even factory sector wages showed life and rose 0.5% (6.4% y/y) in April. Year to year growth through March now stands at 7.0%, up from the 5.8% y/y gain estimated last month.
Offsetting some of this strength have been declines in rental income (-14.1% y/y).
Personal consumption increased 0.6% following an upwardly revised 0.9% increase in March. Consensus expectations had been for a 0.8% gain. Durable goods spending rose 0.7% (9.4% y/y) and spending on services rose 0.3% (5.6% y/y) following earlier gains that were revised down.
Nondurables spending surged 1.1% (8.3% y/y) as spending on gasoline &amp; oil jumped 5.5% (25.9% y/y). Spending on clothing recovered 1.5% (5.9% y/y) following the prior month&#39;s 2.1% drop.
The PCE chain price index rose 0.4% but less food &amp; energy the 0.1% m/m increase was the slimmest of the year. 

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E711/@E71102/@E71102.HTM">Disposition of Personal Income</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">Personal Income</td>
<td>0.7%</td>
<td>0.5%</td>
<td>7.0%</td>
<td>5.8%</td>
<td>3.2%</td>
<td>1.8%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.6%</td>
<td>0.9%</td>
<td>6.9%</td>
<td>6.0%</td>
<td>5.2%</td>
<td>4.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>0.4%</td>
<td>0.5%</td>
<td>1.5%</td>
<td>1.3%</td>
<td>1.4%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.4%</td>
<td>0.5%</td>
<td>2.7%</td>
<td>2.2%</td>
<td>1.9%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Less food &amp; energy</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.6%</td>
<td>1.5%</td>
<td>1.3%</td>
<td>1.8%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment A Bit Better 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 27, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050527a.jpg" width="353">
The University of Michigan&#39;s reading of consumer sentiment for all of May did fall 0.9% from the prior month to 85.9 but that was better than the mid-month reading of a 2.7% decline. Consensus expectations had been for a level of 86.0.
Sentiment still is down in each of the last five months and is off 16.3% from the January &#39;04 peak. During the last ten years there has been a 75% (inverse) correlation between the level of consumer sentiment and the y/y change in real PCE, although the correlation has fallen in recent years.
The reading of current economic conditions recovered late in the month and rose for the first full month since January. Buying conditions for large household goods recovered sharply.
Consumer expectations recovered though expectations about personal finances remained depressed.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Sentiment</td>
<td>86.9</td>
<td>87.7</td>
<td>-3.7%</td>
<td>95.2</td>
<td>87.6</td>
<td>89.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>104.9</td>
<td>104.4</td>
<td>1.3%</td>
<td>105.6</td>
<td>97.2</td>
<td>97.5</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>75.3</td>
<td>77.0</td>
<td>-7.7%</td>
<td>88.5</td>
<td>81.4</td>
<td>84.6</td>
</tr>
</tbody>
</table>
BBA Data Show Tentative Firming in UK Mortgage Lending; Consumer Credit Still Soft 
by <a href="/comment/Stone.html">Carol Stone</a> May 27, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050527c.jpg" width="353">
British Bankers Association data on lending to individuals have recently been added to Haver&#39;s &quot;UK&quot; database. The April figures were reported today and updated by our &quot;European shift&quot;, the manager and crew who work from roughly midnight in New York to 8:00AM.
Gross new mortgage lending gave a tentative sign of stabilizing after a period of deep weakness during the winter. New loans totaled &pound;14,120 million, up 2.9% from March, although still 12.6% below the April 2004 amount. The number of loans approved for house purchase, 69,323, was off 21.0% from a year ago, but this is the smallest 12-month decline since last August. Intervening months have seen 30%-40% rates of decline.
The average value of newly approved loans has been increasing, but more slowly in recent months. The April figures show a 10.7% rise from a year ago. This is stronger than several months of single-digit increases since last summer, but weaker than the 15%-20% gains prior to that. This general tapering trend is reflected in house prices, with the Halifax Standardised Price, for example, virtually flat for the first four months of 2005. The UK housing market appears to have cooled, and other data on the industry have turned in a mixed, basically indeterminate performance so far this year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050527d.jpg" width="353">
The BBA figures on consumer credit show weakness. The amount of new credit card debt was &pound;7,064 million in April, down 7.2% from a year ago. More, the total amount of credit card debt outstanding fell by a seasonally adjusted &pound;40 million in April, the first monthly decline since August 1994. The recent sluggishness coincides to a decline in UK retail sales of 2.7% in value since September.
The BBA lending data are cited in two sections of our UK database, both in &quot;Financial Data&quot; and also in &quot;Housing and Construction&quot;. They cover several &quot;major banking groups&quot;, the so-called &quot;MBBG&quot; and are styled to parallel some similar concepts reported by the Bank of England for all banks, building societies and other mortgage lenders. Those broader data are due for release on Wednesday 1 June. 

<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/UK/UK.HTM">United Kingdom</a> Mil.GBP&nbsp; (NSA except where noted)</th>
<th scope="col">Apr 2005</th>
<th scope="col">Mar 2005</th>
<th scope="col">Feb 2005</th>
<th scope="col">Year Ago</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">Gross New Loans</td>
<td>14,120</td>
<td>13,721</td>
<td>11,938</td>
<td>16,150</td>
<td>15,701</td>
<td>15,071</td>
<td>12,586</td>
</tr>
<tr class="odd">
<td class="firstcol">Loan Approvals- Number</td>
<td>69,323</td>
<td>65,635</td>
<td>47,365</td>
<td>87,800</td>
<td>69,244</td>
<td>76,105</td>
<td>83,915</td>
</tr>
<tr>
<td class="firstcol">- Average Value (&pound;)</td>
<td>122,700</td>
<td>121,600</td>
<td>119,000</td>
<td>110,800</td>
<td>112,083</td>
<td>97,817</td>
<td>87,367</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; - 12-mo. % change</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>10.7</td>
<td>14.6</td>
<td>12.0</td>
<td>14.3</td>
</tr>
<tr>
<td class="firstcol">Credit Card Debt- Gross</td>
<td>7,064</td>
<td>7,586</td>
<td>6,842</td>
<td>7,610</td>
<td>7,707</td>
<td>6,818</td>
<td>6,105</td>
</tr>
<tr class="odd">
<td class="firstcol">- Outstanding EOP</td>
<td>34,015</td>
<td>33,628</td>
<td>33,728</td>
<td>31,139</td>
<td>33,973</td>
<td>28,689</td>
<td>26,409</td>
</tr>
<tr>
<td class="firstcol">- Net Change SA</td>
<td>-40</td>
<td>134</td>
<td>50</td>
<td>&nbsp;</td>
<td>388</td>
<td>310</td>
<td>266</td>
</tr>
</tbody>
</table>
</body>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050526e.jpg" width="353">
Consumers in Sweden have been less optimistic over the past couple of months than earlier this year, according to the consumer confidence survey conducted by the National Institute of Economic Research (NIER) in Stockholm. The resulting consumer confidence indicator (&quot;CCI&quot;) was 5.9 in May and 6.5 in April after averaging 11.5 in Q1 2005. These are &quot;balance&quot; indicators, the net of &quot;better&quot; less &quot;worse&quot; responses.
The confidence survey consists of two kinds of questions, &quot;macro&quot; questions about the current and expected state of the Swedish economy generally and expectations about unemployment, and &quot;micro&quot; questions about the condition of personal finances now and expected and the willingness to make durable goods purchases. These two segments are telling very different stories. The Macro index has been negative almost continuously since early 2001, indicating a lack of confidence in the overall Swedish outlook. But people seem comfortable with their own situations, so that the Micro index has remained in a tight range averaging 12.5 over the last 15 months.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050526f.jpg" width="353">
Notably, the Micro index correlates fairly well with Sweden&#39;s retail trade. Also reported today, the retail trade index from Statistics Sweden fell in April by 2.8%, but that followed a 2.2% gain in March. These sales, valued in real terms in fixed 2000 prices, are up 4.0% on a year ago. This is a bit slower than the last three years, but the store types with the less vigorous performance have been in the consumer staples area: food and personal products. The more cyclically sensitive durable goods are showing some strength, along with &quot;household products&quot;. It is seen in the second graph that durable goods sales have a high correlation with that CCI Micro Index, 73% over the last 13 years.
So the bifurcation of the confidence data is puzzling -- how could people be worried about an unfavorable unemployment picture in the year ahead, while being fairly comfortable with their own finances? At the same time, their relative comfort with what they experience for their own financial well-being is reflected in actions they take, that is in growing purchases of durable and household goods.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/NORDIC/@NS/@NS09/@NS09.HTM">Sweden</a></th>
<th scope="col">May 2005</th>
<th scope="col">Apr 2005</th>
<th scope="col">Mar 2005</th>
<th scope="col">Year Ago</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Consumer Confidence Indicator</td>
<td>5.9</td>
<td>6.5</td>
<td>10.7</td>
<td>4.9</td>
<td>8.7</td>
<td>0.9</td>
<td>7.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Macro Index</td>
<td>-19.0</td>
<td>-14.5</td>
<td>-12.0</td>
<td>-18.1</td>
<td>-12.6</td>
<td>-22.7</td>
<td>-7.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Micro Index</td>
<td>13.0</td>
<td>11.7</td>
<td>13.8</td>
<td>11.3</td>
<td>12.1</td>
<td>8.8</td>
<td>10.1</td>
</tr>
<tr>
<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>
</tr>
<tr class="odd">
<td class="firstcol">Retail Trade (2000=100)</td>
<td>--</td>
<td>120.9</td>
<td>124.4</td>
<td>116.1</td>
<td>117.9</td>
<td>112.4</td>
<td>107.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>--</td>
<td>-2.8</td>
<td>2.2</td>
<td>4.0</td>
<td>4.8</td>
<td>4.5</td>
<td>4.6</td>
</tr>
</tbody>
</table>
</body>
</html>

Consumers in Sweden have been less optimistic over the past couple of months than earlier this year, according to the consumer confidence survey conducted by the National Institute of Economic Research (NIER) in Stockholm. The [...]

Consumer Confidence in Sweden Edges Lower, but Spending on Durable Goods Remains Strong

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050526d.jpg" width="353">
The April Index of Help-Wanted Advertising from the Conference Board remained at 39. It fell in March from 41 during the prior two months.
During the last ten years there has been a 65% correlation between the level of help-wanted advertising and the three month change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume improved to a still low 31% following the evaporation to 10% in March.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month.
The latest help wanted report from the Conference Board is available <a href="http://www.conference-board.org/economics/helpwanted.cfm">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">April &#39;04</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>39</td>
<td>39</td>
<td>38</td>
</tr>
</tbody>
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The April Index of Help-Wanted Advertising from the Conference Board remained at 39. It fell in March from 41 during the prior two months. During the last ten years there has been a 65% correlation between the level of help-wanted [...]

Help-Wanted Advertising Flat

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050526c.jpg" width="353">
Initial claims for unemployment insurance nudged 1,000 higher last week to 323,000 and the prior week&#39;s drop was lessened slightly to 19,000. Consensus expectations had been for 325,000 claims.
During the last ten years there has been a (negative) 75% correlation between the level of initial claims for unemployment insurance and the monthly change in payroll employment. There has been a (negative) 65% correlation with the level of continuing claims.
The four week moving average of initial claims was little changed at 300,500 (-2.7% y/y).
Continuing claims for unemployment insurance fell 22,000 and the prior week was revised down slightly.
The insured unemployment rate held at 2.0% for the fifth consecutive week.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">05/21/05</th>
<th scope="col">05/14/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>323</td>
<td>322</td>
<td>-6.1%</td>
<td>343</td>
<td>402</td>
<td>404</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,574</td>
<td>-12.7%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
</tr>
</tbody>
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</body>
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Initial claims for unemployment insurance nudged 1,000 higher last week to 323,000 and the prior week's drop was lessened slightly to 19,000. Consensus expectations had been for 325,000 claims. During the last ten years there has been [...]

Initial Claims for Jobless Insurance Nudged Up

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

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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

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- 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.

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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

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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.

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- 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

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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.

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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.

Global Manufacturing PMIs Stall—Will It Get Worse?

Andrew Cates

**Global shipping costs**
The Baltic Dirty Tanker Index has surged to multi-year highs, reflecting a sharp tightening in global oil shipping markets. The primary driver is the escalation in Middle East tensions, particularly the effective disruption to flows through the Strait of Hormuz—a critical artery for roughly a fifth of global oil trade. Heightened security risks, including missile and drone attacks on vessels and port infrastructure, have forced rerouting, increased insurance premia and reduced effective tanker supply. At the same time, longer voyage distances—especially for Gulf exports diverted around the Cape—are tying up capacity and amplifying rate pressures. The result is a classic squeeze: constrained supply of available ships meeting elevated demand for transport, pushing freight costs sharply higher.

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**Supply Chain Bottlenecks**
Flash PMI data point to a renewed build-up of supply chain pressures across the major economies. Supplier delivery times—where readings below 50 indicate slower deliveries—have deteriorated in both the US and UK, with the latter showing a particularly sharp decline. The euro area, while more stable, is also drifting in the same direction. This broad-based softening suggests that the disruptions visible in energy and shipping markets are now feeding into the real economy. Longer delivery times are typically an early indicator of tightening supply conditions, rising input costs and, ultimately, renewed pipeline inflation pressures. While not yet at the extremes seen during the pandemic, the direction of travel is clear: supply chains are becoming less efficient just as geopolitical risks intensify.

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**Policy Uncertainty Versus Market Volatility**
A striking divergence is emerging between policy uncertainty and financial market volatility. The US Economic Policy Uncertainty Index has risen sharply, reflecting the intensifying geopolitical backdrop, trade disruptions and an increasingly complex policy environment. By contrast, the VIX—while off its lows—remains relatively contained by historical standards. This gap suggests that financial markets may be underpricing the scale and persistence of current risks. Either uncertainty begins to recede, or market volatility has further to rise. For now, the message is clear: policymakers are operating in a far more uncertain world than markets appear to be discounting.

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**Oil Prices and Monetary Policy** 
The sharp rise in oil prices is once again feeding directly into short-term interest rate expectations, with a strong positive correlation evident between WTI and US 2-year Treasury yields. As energy prices surge, markets are reassessing the near-term inflation outlook and the likely policy response, pushing yields higher. This reflects a familiar dynamic: energy shocks tighten financial conditions not just directly, but via expectations of more restrictive monetary policy. That said, there are important caveats. Medium-term market-based inflation expectations remain relatively well contained, suggesting credibility in central banks’ ability to anchor inflation over time. Moreover, recent communication from Fed Chair Powell indicates that the Federal Reserve is in no immediate hurry to raise rates, pointing instead to a more cautious, data-dependent approach in the face of heightened uncertainty.

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**Loose Labour Markets**
Wage growth across the US, UK and euro area continues to moderate, pointing to a gradual loosening in labour market conditions. The sharp post-pandemic surge in wage pressures—particularly pronounced in the US—has clearly faded, with all three regions now on a downward trajectory. This matters in the current context: while the oil shock is pushing headline inflation higher and complicating the near-term outlook, easing wage dynamics reduce the risk of persistent second-round effects. In turn, this lessens the urgency for central banks to respond aggressively with tighter policy. The result is a more nuanced policy backdrop—one where energy-driven inflation pressures are rising, but underlying domestic cost pressures are moving in the opposite direction.

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**Headline Inflation in Advanced Economies**
Despite the recent energy shock, broader inflation dynamics across advanced economies remain relatively well behaved. The euro area HICP flash estimate rose from 1.9% in February to 2.5% in March, driven largely by higher energy prices. However, core inflation edged down to 2.3% from 2.4%, suggesting that pass-through into underlying price pressures remains limited for now. More generally, inflation across many advanced economies continues to hover close to central bank targets—a marked contrast to the peaks seen in 2022. While higher oil prices will almost certainly continue to lift headline inflation in the near term, and the risk is clearly tilted toward further upside, the broader picture for now remains one of relatively contained underlying pressures. This suggests the current shock is more likely to complicate the disinflation process—potentially slowing or interrupting it—rather than decisively reversing it, though the balance of risks has become less favourable.

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Amid tentative signs of de-escalation from the US administration over the past 48 hours—including suggestions that the conflict with Iran could conclude relatively quickly—financial markets have begun to retrace some of last week’s sharp repricing of Middle East risk. Oil prices have come off their highs, while equities and bonds have rallied as risk premia ease. That said, the earlier phase of the week saw a decisive adjustment: oil surged, front-end yields moved higher, and uncertainty rose as investors grappled with the implications of disrupted energy flows. Even now, the overall adjustment has been uneven—volatility has picked up, but not to levels typically associated with sustained geopolitical stress—raising questions about how fully markets are internalising both the risks and the rapidly shifting outlook. Our charts this week capture these cross-currents. Tanker rates have spiked as shipping routes are disrupted and capacity tightens (chart 1), while PMI delivery times point to early signs of supply chain strain feeding into the real economy (chart 2). At the same time, the divergence between elevated policy uncertainty and relatively contained market volatility suggests there could have been a degree of complacency (chart 3). The rise in oil prices is already feeding into higher short-term yields, though this is being tempered by cooling labour markets, anchored inflation expectations and more cautious central bank signalling (charts 4 and 5). Meanwhile, euro area flash CPI has picked up, but core inflation remains relatively benign, suggesting underlying price pressures are still contained for now (chart 6).

Economy in Brief

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