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/050309b.jpg" width="353">
Industry in Europe is generally gaining ground. January industrial production reports for five countries indicate firming trends, particularly in manufacturing sectors. In the UK factory output rose 0.2% in January and is 1.3% ahead of a year ago. In Germany, it was up a substantial 3.9% in the month and 4.4% from January 2004. At the same time, total industry output was restrained in both of these countries by weakness in other industry; in the UK, a steep downtrend in oil and gas extraction is pulling mining activity down sharply: 1.4% in January and 7.7% in the last year. Germany&#39;s mining sector carries a smaller weight the total, but it too has been generally negative: a 2.8% drop in January interrupted what had been a developing recovery and left the mining index 4.2% below the year-earlier amount. All told, then, industrial production in the UK was off marginally in January and just barely above a year ago. In Germany, total output is managing a climb, although somewhat more gradual than the manufacturing sector alone (this applies to Germany&#39;s &quot;production excluding construction&quot;, to make the coverage comparable to the UK).
The same combination holds in the Netherlands: factory output rose 2.0% in January, but total output decreased 0.9%. Dutch mining activity, though, had been quite strong through much of 2004 and has moved erratically, with wide up and down swings since October.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050309c.jpg" width="353">
In two smaller regions, production is headed higher, albeit somewhat irregularly. In Hungary total output was up 1.3% in January and 2.4% from the year-ago. This was a turnaround from a 1.8% decrease over the 12 months ended December. In Turkey, January&#39;s output eased 0.4% from December, but has climbed 6.5% in the last year.
As we have pointed out here before, economic activity in Europe is holding up well, despite the strength in the euro, and as well, despite rising energy costs. In part, this results from the importance of trade within Europe itself and with other countries whose currency is not tied to the dollar. This strength in the euro has also diminished the force on those countries of the rise in dollar-priced energy products.

<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/INDUSTRIALDETAIL.HTM">European Industrial Production</a></th>
<th scope="col">Jan 2005</th>
<th scope="col">Dec 2004</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">UK (2001=100)</td>
<td>97.7</td>
<td>97.8</td>
<td>97.6</td>
<td>97.8</td>
<td>97.3</td>
<td>97.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>99.5</td>
<td>99.3</td>
<td>98.2</td>
<td>98.8</td>
<td>97.4</td>
<td>96.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany (2000=100)</td>
<td>105.6</td>
<td>102.3</td>
<td>101.7</td>
<td>102.4</td>
<td>99.5</td>
<td>99.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>106.2</td>
<td>102.2</td>
<td>101.7</td>
<td>102.6</td>
<td>99.5</td>
<td>99.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands (2000=100)</td>
<td>98.9</td>
<td>99.8</td>
<td>99.9</td>
<td>99.9</td>
<td>97.7</td>
<td>100.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Manufacturing</td>
<td>97.6</td>
<td>95.7</td>
<td>98.2</td>
<td>96.1</td>
<td>95.8</td>
<td>98.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Hungary (2000=100)</td>
<td>123.4</td>
<td>121.9</td>
<td>120.6</td>
<td>123.3</td>
<td>114.3</td>
<td>107.8</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>
</tr>
<tr class="odd">
<td class="firstcol">Turkey (1997=100)</td>
<td>127.9</td>
<td>128.4</td>
<td>120.1</td>
<td>123.4</td>
<td>112.4</td>
<td>103.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Industry in Europe is generally gaining ground. January industrial production reports for five countries indicate firming trends, particularly in manufacturing sectors. In the UK factory output rose 0.2% in January and is 1.3% ahead [...]

Manufacturing Output in UK, Germany, Others Maintains Hesitant Growth in January

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050309a.jpg" width="353">
The Mortgage Bankers Association reported that mortgage applications slipped 0.7% last week, the fourth consecutive week of decline.
Applications to refinance declined 4.6% following the prior week&#39;s 9.9% w/w drop.
Purchase applications rose 2.7% on top of the prior week&#39;s 5.3% gain and began the month 4.7% above the February average. During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-year mortgage fell to 5.94% versus 5.98% the prior week. The effective rate on a 15-year mortgage also rose to 5.55% last week.
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>.
Federal Reserve Board Governor Ben S. Bernanke&#39;s speech titled The Economic Outlook can be viewed <a href="http://www.federalreserve.gov/boarddocs/speeches/2005/20050308/default.htm"> here</a>.
Loan Quality and How it Reflects the Overall Economy from Federal Reserve Board Governor Mark W. Olson is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2005/20050228/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/04/05</th>
<th scope="col">02/25/05</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>704.8</td>
<td>710.1</td>
<td>-20.7%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>451.7</td>
<td>440.0</td>
<td>5.4%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,176.8</td>
<td>2,281.1</td>
<td>-39.0%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The Mortgage Bankers Association reported that mortgage applications slipped 0.7% last week, the fourth consecutive week of decline. Applications to refinance declined 4.6% following the prior week's 9.9% w/w drop. Purchase [...]

Mortgage Applications Slip Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050309a.jpg" width="353">
The Mortgage Bankers Association reported that mortgage applications slipped 0.7% last week, the fourth consecutive week of decline.
Applications to refinance declined 4.6% following the prior week&#39;s 9.9% w/w drop.
Purchase applications rose 2.7% on top of the prior week&#39;s 5.3% gain and began the month 4.7% above the February average. During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-year mortgage fell to 5.94% versus 5.98% the prior week. The effective rate on a 15-year mortgage also rose to 5.55% last week.
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>.
Federal Reserve Board Governor Ben S. Bernanke&#39;s speech titled The Economic Outlook can be viewed <a href="http://www.federalreserve.gov/boarddocs/speeches/2005/20050308/default.htm"> here</a>.
Loan Quality and How it Reflects the Overall Economy from Federal Reserve Board Governor Mark W. Olson is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2005/20050228/default.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/04/05</th>
<th scope="col">02/25/05</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>704.8</td>
<td>710.1</td>
<td>-20.7%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>451.7</td>
<td>440.0</td>
<td>5.4%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,176.8</td>
<td>2,281.1</td>
<td>-39.0%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
Manufacturing Output in UK, Germany, Others Maintains Hesitant Growth in January 
by <a href="/comment/Stone.html">Carol Stone</a> March 9, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050309b.jpg" width="353">
Industry in Europe is generally gaining ground. January industrial production reports for five countries indicate firming trends, particularly in manufacturing sectors. In the UK factory output rose 0.2% in January and is 1.3% ahead of a year ago. In Germany, it was up a substantial 3.9% in the month and 4.4% from January 2004. At the same time, total industry output was restrained in both of these countries by weakness in other industry; in the UK, a steep downtrend in oil and gas extraction is pulling mining activity down sharply: 1.4% in January and 7.7% in the last year. Germany&#39;s mining sector carries a smaller weight the total, but it too has been generally negative: a 2.8% drop in January interrupted what had been a developing recovery and left the mining index 4.2% below the year-earlier amount. All told, then, industrial production in the UK was off marginally in January and just barely above a year ago. In Germany, total output is managing a climb, although somewhat more gradual than the manufacturing sector alone (this applies to Germany&#39;s &quot;production excluding construction&quot;, to make the coverage comparable to the UK).
The same combination holds in the Netherlands: factory output rose 2.0% in January, but total output decreased 0.9%. Dutch mining activity, though, had been quite strong through much of 2004 and has moved erratically, with wide up and down swings since October.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050309c.jpg" width="353">
In two smaller regions, production is headed higher, albeit somewhat irregularly. In Hungary total output was up 1.3% in January and 2.4% from the year-ago. This was a turnaround from a 1.8% decrease over the 12 months ended December. In Turkey, January&#39;s output eased 0.4% from December, but has climbed 6.5% in the last year.
As we have pointed out here before, economic activity in Europe is holding up well, despite the strength in the euro, and as well, despite rising energy costs. In part, this results from the importance of trade within Europe itself and with other countries whose currency is not tied to the dollar. This strength in the euro has also diminished the force on those countries of the rise in dollar-priced energy products.

<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/INDUSTRIALDETAIL.HTM">European Industrial Production</a></th>
<th scope="col">Jan 2005</th>
<th scope="col">Dec 2004</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">UK (2001=100)</td>
<td>97.7</td>
<td>97.8</td>
<td>97.6</td>
<td>97.8</td>
<td>97.3</td>
<td>97.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>99.5</td>
<td>99.3</td>
<td>98.2</td>
<td>98.8</td>
<td>97.4</td>
<td>96.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany (2000=100)</td>
<td>105.6</td>
<td>102.3</td>
<td>101.7</td>
<td>102.4</td>
<td>99.5</td>
<td>99.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>106.2</td>
<td>102.2</td>
<td>101.7</td>
<td>102.6</td>
<td>99.5</td>
<td>99.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands (2000=100)</td>
<td>98.9</td>
<td>99.8</td>
<td>99.9</td>
<td>99.9</td>
<td>97.7</td>
<td>100.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Manufacturing</td>
<td>97.6</td>
<td>95.7</td>
<td>98.2</td>
<td>96.1</td>
<td>95.8</td>
<td>98.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Hungary (2000=100)</td>
<td>123.4</td>
<td>121.9</td>
<td>120.6</td>
<td>123.3</td>
<td>114.3</td>
<td>107.8</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>
</tr>
<tr class="odd">
<td class="firstcol">Turkey (1997=100)</td>
<td>127.9</td>
<td>128.4</td>
<td>120.1</td>
<td>123.4</td>
<td>112.4</td>
<td>103.4</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050308d.jpg" width="353">
The Economy Watchers Survey shows a less negative attitude toward current and future economic conditions in Japan.
The Economy Watchers Survey is a regional survey of some 2050 individuals actively engaged in various aspects of the economy. They are asked to quantify their opinions on the current and future state of the economy--assign a value of 1, if conditions are better; .75, if rather better; .50, if no change; .25, if rather worse and 0, if worse. A diffusion index is then calculated by multiplying the percentage of respondents to each answer by the point assigned to it. A value of 50 would indicate that those who think things are better or rather better are equal to those who think things are rather worse or worse. A value above 50 indicates an excess of optimists over pessimists, while a value below 50 indicates an excess of pessimists.
The economy watchers raised their appraisal of current conditions in the economy for a second month in February to 45.6 from 45.0 in January. Except for a rise in July, they had steadily reduced their appraisal from May to December, 2004. As for the future, the economy watchers became less negative last December and have increased their appraisal of future conditions in January and February. The February index rose from 48.3 January to 49.9 just barely below the 50.0 level where those with a positive outlook just match those with a negative outlook. Although both the appraisal of current conditions and that of the future are still below year ago levels, the recent turn around in the trends of the appraisals, shown in the attached chart, is encouraging.

<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/JAPAN/JAPAN.HTM">Japan: Economy Watchers Survey Diffusion Indexes</a></th>
<th scope="col">Feb 05</th>
<th scope="col">Jan 05</th>
<th scope="col">Feb 04</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y%</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>
<td class="firstcol">Current conditions</td>
<td>45.6</td>
<td>45.0</td>
<td>50.1</td>
<td>1.33</td>
<td>-8.98</td>
<td>50.0</td>
<td>43.5</td>
<td>40.4</td>
</tr>
<tr>
<td class="firstcol">Future conditions</td>
<td>49.9</td>
<td>48.3</td>
<td>53.6</td>
<td>3.31</td>
<td>-6.90</td>
<td>51.4</td>
<td>45.2</td>
<td>43.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The Economy Watchers Survey shows a less negative attitude toward current and future economic conditions in Japan. The Economy Watchers Survey is a regional survey of some 2050 individuals actively engaged in various aspects of the [...]

Economy Watchers in Japan become Less Negative

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050308b.jpg" width="353">
The Small Business Optimism Index for February reported by the National Federation of Independent Business (NFIB) was unchanged versus January. The percentage of firms expecting the economy to improve fell further to 20% versus 47% last November.
During the last ten years there has been a 64% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percent of firms planning to raise employment rose slightly to 16%. During the last ten years there has been a 67% correlation between these hiring plans and the three month growth in nonfarm payrolls. The percentage of firms with one or more job openings rose to 24%, the highest level since 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050308c.jpg" width="353">
The percentage of firms planning to raise capital spending fell slightly to 33% roughly the average during 2004 but still up versus 29% in 2003.
The percentage of firms raising average selling prices rose to 19%, the highest since October.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</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">Small Business Optimism Index (1986=100)</td>
<td>103.6</td>
<td>103.6</td>
<td>1.0%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
</tr>
</tbody>
</table>
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The Small Business Optimism Index for February reported by the National Federation of Independent Business (NFIB) was unchanged versus January. The percentage of firms expecting the economy to improve fell further to 20% versus 47% [...]

Small Business Optimism Unchanged

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050301a.jpg" width="353">
Chain store sales fell 0.4% last week. The slip followed a 1.5% surge the week prior according to the International Council of Shopping Centers (ICSC)-UBS survey.
Sales began March 0.7% ahead of the February average which rose 1.0% from January.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department.
The leading indicator of chain store sales from ICSC was unchanged in the latest week (0.0% y/y), ending a six week stretch of erratic and mostly sideways movement. The indicator&#39;s February average rose 0.4% following a 0.6% January decline.
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">03/05/05</th>
<th scope="col">02/26/05</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>450.8</td>
<td>452.5</td>
<td>3.3%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body>
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Chain store sales fell 0.4% last week. The slip followed a 1.5% surge the week prior according to the International Council of Shopping Centers (ICSC)-UBS survey. Sales began March 0.7% ahead of the February average which rose 1.0% [...]

Chain Store Sales Off A Bit

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050308b.jpg" width="353">
The Small Business Optimism Index for February reported by the National Federation of Independent Business (NFIB) was unchanged versus January. The percentage of firms expecting the economy to improve fell further to 20% versus 47% last November.
During the last ten years there has been a 64% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percent of firms planning to raise employment rose slightly to 16%. During the last ten years there has been a 67% correlation between these hiring plans and the three month growth in nonfarm payrolls. The percentage of firms with one or more job openings rose to 24%, the highest level since 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050308c.jpg" width="353">
The percentage of firms planning to raise capital spending fell slightly to 33% roughly the average during 2004 but still up versus 29% in 2003.
The percentage of firms raising average selling prices rose to 19%, the highest since October.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

<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/SURVEYS/@S7/@S7.HTM">Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</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">Small Business Optimism Index (1986=100)</td>
<td>103.6</td>
<td>103.6</td>
<td>1.0%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
</tr>
</tbody>
</table>
Chain Store Sales Off A Bit 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 8, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050301a.jpg" width="353">
Chain store sales fell 0.4% last week. The slip followed a 1.5% surge the week prior according to the International Council of Shopping Centers (ICSC)-UBS survey.
Sales began March 0.7% ahead of the February average which rose 1.0% from January.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline, as published by the US Census Department.
The leading indicator of chain store sales from ICSC was unchanged in the latest week (0.0% y/y), ending a six week stretch of erratic and mostly sideways movement. The indicator&#39;s February average rose 0.4% following a 0.6% January decline.
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>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">03/05/05</th>
<th scope="col">02/26/05</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>450.8</td>
<td>452.5</td>
<td>3.3%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050307b.jpg" width="353">
Thailand&#39;s seasonally unadjusted Real Gross Domestic Product rose 5.05% in the fourth quarter of 2005 over the fourth quarter of 2004. The year over year rate of growth has decelerated during the year from the first quarter rate of 6,70%. For the year as a whole, GDP was up 6.05% in 2004, compared with 6.89% in 2003, 5.33% in 2002 and 2.17% in 2001.
A fall off in the year to year increase in private consumption and a much larger increase in imports than in exports largely offset increases in government consumption, inventories and gross fixed investment. The year to year changes in private consumption are compared with gross fixed investment in the first chart while the second chart compares the year to year changes in exports with those in imports.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050307c.jpg" width="353">
While real GDP growth, for the year as a whole, decelerated slightly in comparison with 2003, inflation as measured by the deflator more than doubled from 1.90% in 2003 to 4.55% in 2004.

<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/emerging.htm">Thailand: GDP</a> Year/Year % Changes&nbsp;</th>
<th scope="col">Q4 05</th>
<th scope="col">Q3&nbsp;05</th>
<th scope="col">Q2 05</th>
<th scope="col">Q1 05</th>
<th scope="col">2004</th>
<th scope="col">&nbsp;2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002</th>
<th scope="col">&nbsp; 2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP (1988 Bahts)</td>
<td>5.05</td>
<td>6.09</td>
<td>6.44</td>
<td>6.70</td>
<td>6.05</td>
<td>6.89</td>
<td>5.33</td>
<td>2.17</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Private Consumption</td>
<td>5.14</td>
<td>5.63</td>
<td>5.68</td>
<td>6.17</td>
<td>5.65</td>
<td>6.44</td>
<td>5.28</td>
<td>4.12</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Government Consumption</td>
<td>5.18</td>
<td>0.27</td>
<td>4.94</td>
<td>7.03</td>
<td>4.13</td>
<td>2.00</td>
<td>1.78</td>
<td>2.49</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Gross Fixed Investment</td>
<td>16.16</td>
<td>12.01</td>
<td>12.86</td>
<td>16.65</td>
<td>14.35</td>
<td>11.88</td>
<td>6.54</td>
<td>1.13</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Inventories*</td>
<td>17.58</td>
<td>18.59</td>
<td>10.76</td>
<td>-27.31</td>
<td>19.63</td>
<td>9.04</td>
<td>6.15</td>
<td>10.14</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Exports</td>
<td>5.10</td>
<td>8.37</td>
<td>11.84</td>
<td>6.22</td>
<td>7.78</td>
<td>7.03</td>
<td>11.99</td>
<td>-4.21</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Imports</td>
<td>3.58</td>
<td>12.46</td>
<td>20.09</td>
<td>13.54</td>
<td>12.14</td>
<td>7.65</td>
<td>13.69</td>
<td>-5.50</td>
</tr>
<tr>
<td class="firstcol">Deflator</td>
<td>6.07</td>
<td>5.10</td>
<td>4.81</td>
<td>2.20</td>
<td>4.55</td>
<td>1.90</td>
<td>0.69</td>
<td>2.11</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP (nominal)</td>
<td>11.42</td>
<td>11.51</td>
<td>11.55</td>
<td>9.05</td>
<td>10.89</td>
<td>6.09</td>
<td>6.09</td>
<td>4.28</td>
</tr>
</tbody>
</table>
</body>
</html>

Thailand's seasonally unadjusted Real Gross Domestic Product rose 5.05% in the fourth quarter of 2005 over the fourth quarter of 2004. The year over year rate of growth has decelerated during the year from the first quarter rate of [...]

Thailand's Fourth Quarter GDP Shows Moderate Deceleration in Growth and Acceleration in Inflation During 2004

PMIs showing widespread revival of global economy

Crude oil price has returned to pre-conflict level but traffic through Hormuz still subpar

Surging orders for computers and electronics propelling durable goods orders

Next year's inflation forecasts are on the rise and above target

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

Elevated energy prices putting intense upward pressure on input prices around the globe

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

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Andrew Cates

**Growth Surprises Continue to Underpin Equity Resilience**
Global equity markets have proved remarkably resilient in recent weeks, shrugging off intermittent bouts of geopolitical and policy uncertainty to grind higher. Chart 1 below helps explain why: it tracks the relationship between global growth-versus-inflation surprises and world equity markets, and on that measure the recent run of global growth data has continued to surprise on the upside relative to inflation outturns — a combination that has historically been supportive for risk assets. Whether that resilience persists will depend on whether the growth-surprise advantage evident in the chart below can be sustained in the face of the inflationary pressures explored below.

260709Z1.jpg

**PMIs Confirm a Broadly Solid Global Expansion**
This week's final composite PMI readings for June reinforced the broader impression of resilient global growth. As chart 2 below shows, most major economies posted readings comfortably in expansionary territory, with India continuing to lead the pack and the US not far behind. Even the laggards in the sample are hovering close to the expansion threshold rather than falling decisively below it, suggesting stabilisation rather than outright contraction (and with the UK a notable exception).

260709Z2.jpg

**Inflation Surprises Are Creeping Back, and Bond Yields Are Taking Notice**
The US growth picture painted by Haver's surprise indices broadly echoes the message from the global PMI data. Chart 3 below shows the combined growth-and-inflation surprise index drifting higher this week, and closer inspection suggests growth is doing most of that work, with activity data continuing to outperform expectations. That is, on the face of it, good news. But it has not stopped bond markets from taking notice: short-dated Treasury yields have remained elevated in recent weeks, as stronger growth keeps alive the possibility that the Federal Reserve holds rates higher for longer or even lifts them in coming weeks.

260709Z3.jpg

**Supply Chains Are Tightening** 
Latest data show that global supply chain pressures tightened by less in June than they had the month before, likely reflecting the easing of Middle East tensions through much of the period. Chart 4 below shows that pressures troughed in the middle of last year and have been building gradually since, though June's slower pace of tightening suggests that easing had started to feed through. Still, today's flare-up threatens to undo that improvement, particularly if it affects shipping routes or energy flows through the region once again.

260709Z4.jpg

**Extreme Weather: An Old Supply-Side Risk Returns**
Geopolitics is not the only source of supply-side risk currently in play. Large parts of Europe have been gripped this week by another intense and prolonged heatwave, with temperatures in several major cities running well above seasonal norms. Extreme heat of this kind carries real economic costs: it depresses labour productivity, particularly in outdoor and manufacturing-adjacent sectors, strains electricity grids as air-conditioning demand spikes, and can disrupt agricultural output and river-based transport when water levels fall. Episodes like this have become more frequent in recent years, and while any single heatwave rarely shifts the macro picture on its own, the cumulative effect of more frequent and more severe weather events could start showing up in productivity and inflation data across the advanced economies. It is a reminder that the supply side of the global economy faces structural as well as cyclical challenges, and that climate-related disruption deserves a permanent place alongside geopolitics and demographics in any assessment of medium-term inflation risk.

260709Z5.jpg

**AI Investment: The Other Side of the Supply Equation**
Set against these supply-side headwinds is a genuinely positive structural development: the extraordinary scale of private investment now flowing into artificial intelligence. Chart 6 below shows just how sharply that investment has grown in recent years, reaching a fresh high last year. If even a fraction of that investment translates into genuine productivity gains, it could provide a meaningful long-run offset to the energy, climate and geopolitical constraints highlighted elsewhere in this week's charts. The scale of the bet now being placed on AI is large enough that it is beginning to show up in aggregate investment and capital expenditure data across the advanced economies, and it is likely to remain one of the defining structural themes shaping the global growth outlook over the remainder of this decade.

260709Z6.jpg

Global markets head into this week’s closing stages digesting a mixed set of signals. Last week's US non-farm payrolls report undershot expectations, adding to questions about the durability of the US labour market even as broader activity data have continued to hold up well. Compounding that picture, news broke today of renewed instability in the Middle East, reintroducing a geopolitical risk premium into markets just as investors had begun to look past it. Global equity markets have nonetheless remained resilient, continuing to track the broadly encouraging tone of incoming activity data (chart 1). That resilience was reinforced by a solid set of global PMIs across most major economies over the past few days (chart 2). Haver's surprise indices tell a similar story of positive growth momentum in the US, but with an important caveat: incoming inflation data have also been surprising to the upside, driven largely by higher oil prices  (chart 3). These inflation risks could persist moreover, as global supply chain pressures have picked up in recent months and today's flare-up in the Middle East threatens to add further strain (chart 4). The world economy remains vulnerable to other supply-side shocks too, such as the extreme heat gripping much of Europe this week (chart 5). Still, on the other side of the ledger the enormous scale of investment now flowing into artificial intelligence could be a genuine source of supply-side potential (chart 6).

Charts of the Week: Growth Holds Firm

Kathleen Stephansen, CBE

260708A2.jpg

260708B2.jpg

Mortgage applications dropped 2.2% w/w (-5.4% y/y) in the week ending July 3, following no change in the week ending June 26, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house edged down 0.6% w/w (-6.3% y/y) in the latest week, after rising 0.5% w/w (3.2% y/y) in the June 26 week.  Applications for loan refinancing dropped 4.1% w/w (-4.2% y/y) in the week ending July 3, after declining 0.7% w/w (+9.1% y/y) in the June 26 week.

The effective interest rate on a 30-year fixed-rate loan rose 1bp to 6.77% in the week ending July 3 from 6.76% in the week ending June 26. The rate on 15-year fixed-rate mortgages edged down 2bps to 6.17% in the July 3 week from 6.19% in the June 26 week. The 30-year Jumbo rate edged down 1bp to 6.62% in the latest week from 6.63% in the June 26 week. The rate on a 5-year ARM rose 5bps to 6.19% in the July 3 week from 6.14% in the June 26 week.

The share of applications for refinancing an existing loan declined to 40.6% of total applications in the week of July 3 from 41.4% in the June 26 week. The adjustable-rate mortgage (ARM) share of activity edged up to 7.8% in the July 3 week from 7.6% in the June 26 week.

The average size of a mortgage declined 0.4% w/w (+1.3% y/y) to $391,500 in the week ending July 3, after rising 1.1% w/w (0.4% y/y) to $393,200 in the week ending June 26. The average size of a purchase loan declined 1.0% w/w (+4.3% y/y) to $451,000 in the latest week, after rising 1.2% w/w (2.7% y/y) to $455,600 in the June 26 week. The average size of a loan to refinance a mortgage edged down 0.1% w/w (-3.9% y/y) to $304,600 in the week ending July 3, after rising 0.5% w/w (-2.8% y/y) to $304,900 in the June 26 week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Both applications for loans to purchase and applications for loan refinancing declined in the latest week.
- Interest rate on 30-year fixed-rate loans rose 1bp to 6.77%. 
- Average loan size edged down.

U.S. Mortgage Applications Retrenched in the July 3 Week

Robert Brusca

260708E.jpg

**The Clash!**
The U.S.-Iranian clash in the Middle East resulted in a closure of the Strait of Hormuz that collapsed the economy watchers index in Japan earlier this year. However, as the war-like conditions settled down and the two sides have moved toward some kind of cease fire or a more permanent arrangement, in the wake of that comparative tranquility, the economy watchers index improved, and its future index improved more sharply. These comments applied to the data in the table and conditions up to the end of June.

**New day dawning...**
However, the data in the table are unrelated to what has happened in the past two days, when Iran took potshots at a couple of ships in the Strait, causing the U.S. to retaliate and President Trump to declare that the ceasefire has now ended. The door remains open for some kind of talks; however, the president’s recent remarks carried in the newspapers has clearly stated that the ceasefire has ended, and the U.S. intends to hit Iran and has suggested that it intends to hit it ‘hard.’ At the same time, Mr. Trump has said the door remains open to continuing talk and negotiations if both sides still want to get together; however, he admits he is not optimistic.

**Precarious times and conditions**
So, these are precarious conditions. Oil prices have already responded and moved higher. We have Japan’s economic data for June showing some revival in the current index and some sharply higher revivals over the last few months in the future index. However, when the dust clears the queue standings of the current and future indexes are revealed, they are pretty similar, with the current index at a standing of 29.6% and the future index of 31.6%. Both the current and future readings coalesce around a 30-percentile standing, marking the two segments of the survey as usually stronger about 70% of the time which marks the latest readings as relatively weak. And that is before we take the new realities of July into account.

**The current IS the future...**
There isn't too much point in talking about the two parts of the survey separately. The current and future surveys are simply not that different. This month, the lowest percentile standing in the current subindexes is housing, at an 11.5 percentile standing, followed by employment at a 17.8 percentile standing. In the future index, housing has an 11.1 percentile standing and employment has an 18.6 percentile standing; these readings are also the two lowest rankings in the future survey.

**Sequential improvement is only point-to-point**
Over three months, we can see the point-to-point changes in the current index and some improvements in all of the components except housing. In the future index, the three-month changes show point-to-point improvements in all of the components. However, both surveys show point-to-point declines over six months and broad point-to-point declines over 12 months as well. Looking at the changes based on smooth data (shown at the bottom of the table), for the three-month averages compared to six-month averages and six-month averages compared to 12-month averages, conditions show no improvement. We see no improvements in the current or future indexes over three months or six months, and no improvement in the future index in the 12-month average compared to 12-month average of 12 months ago—although 40% of the components in the current index are improved over 12 months compared to 12 months ago.

260708.jpg

**Summing up**
The bottom line here seems to be that the opening of the armed conflict in Iran that led to the closure of the Strait of Hormuz was a terrible blow according to the economy watchers. However, once conditions settled down, the willingness to believe that conditions were going to get better and eventually open the Strait led to improved perceptions as things appeared to be headed back toward normal. Now, war-like conditions are back into effect for a period that's more recent than the tabular data can address. It seems likely that we are going to see the indexes decline once again if this current rupture in the normalization process is unable to be repaired soon. The responses and changes in the economy watchers index illustrate a couple of things: one, being that the Strait of Hormuz is very important; two, being that the survey participants were willing to believe that the former war participants could act in a civilized manner and reopen the Strait. The question now is whether the survey participants can believe that after one normalization agreement fell apart, the next agreement is one that they can believe in. That's what we will be waiting to see.

Japan

Economy Watchers Poll Marks Revival—Still Weak; What’s Next Now with a New Rift?

Sandy Batten

260707J40.jpg

260707K40.jpg

The U.S. trade deficit in goods and services (BOP basis) widened markedly to $77.6 billion in May from a downwardly revised $54.6 billion in April (previously -$55.9 billion), according to the U.S. Census Bureau. The Action Economics Forecast Survey looked for a deficit of $78.6 billion. The goods deficit widened to $106.5 billion in May, the largest monthly shortfall since March 2025 when imports flooded in ahead of expected tariff increases, from a downwardly revised $82.9 billion in April (previously -$83.7 billion) while the services surplus widened to $28.9 billion in May from an upwardly revised $28.3 billion in April (previously +$27.8 billion).

The real (inflation-adjusted) trade deficit in goods widened to $100.0 billion (2017$) in May from an unrevised $84.3 billion in April. The April/May average is considerably higher than the Q1 average although some of this reflects a decline in exports of nonmonetary gold and other precious metals that are not included in the calculation of GDP. Still, the May report implies that net exports will once again subtract from overall GDP growth in Q2. They subtracted 0.37%-point in Q1.

Exports of goods and services fell 3.2% m/m (+12.6% y/y) in May following an upwardly revised 3.0% monthly increase in April (previously +2.6% m/m). This was the first monthly decline in exports since last December. Goods exports (Census basis) slumped 5.3% m/m (+15.1% y/y) led by outsized declines in exports of nonmonetary gold and other precious metals. In dollar terms, goods exports declined $11.6 billion in May. A $7.5 billion decline in exports of nonmonetary gold and other precious metals accounted for 65% of that decline. However, exports of capital goods ex autos (-4.9% m/m) and nonfood consumer goods ex autos exports (-9.1% m/m) were also very weak. Service exports edged up 0.7% m/m (6.6% y/y) in May following a 0.1% monthly rise in April. Travel service exports rebounded 2.4% m/m in May after having declined in both March and April. Transport exports rose 1.1% m/m in May, their third consecutive monthly gain. Over the past three months, transport exports have increased 6.7%.

Imports of goods and services increased 3.3% m/m (13.3% y/y) in May for their fourth consecutive monthly gain. Over the four months to May, imports rose 11.7%. Goods imports (Census basis) jumped 4.0% m/m (15.3% y/y) in May after a 1.9% monthly gain in April. Imports rose in every major end-use category in May, led by a 10.3% m/m jump in “other” imports, a 6.3% m/m rise in auto imports, a 6.2% m/m increase in nonfood consumer goods imports ex autos, and a 5.8% m/m rise in industrial supplies imports. Service imports increased 0.3% m/m (5.1% y/y) in May, slowing from a 1.6% monthly gain in April. Performance varied meaningfully across end-use categories. Imports of insurance services rose 1.4% m/m, their sixth consecutive monthly rise. Imports of personal and recreational services increased 1.1% m/m in May. Imports of financial services rose 0.6% m/m. By contrast, imported maintenance and repairs services slumped 3.9% m/m, their second monthly decline in the past three months. Imported intellectual property fell 0.3% m/m, their fourth monthly decline in the past five months. Imports of transport services declined 0.4% m/m, their fourth monthly decrease in the past five months.

By country, the goods trade deficit with China widened to $14.5 billion in May from $12.0 billion in April. The trade deficit with the European Union widened to $9.3 billion in May from $7.2 billion in April. The trade deficit with Japan declined to $2.0 billion in May from $2.8 billion in April.

The international trade data can be found in Haver’s **USECON** database. Detailed figures on international trade are available in the **USINT** and **USTRADE** databases. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.

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- The deficit in goods and services widened to $77.6 billion in May from $54.6 billion in April.
- Exports slumped 3.2% m/m, led by an outsized fall in exports of nonmonetary gold and other precious metals.
- Imports increased by 3.3% m/m with increases in each major end-use category.
- The goods deficit widened to $106.5 billion, while the services surplus widened to $28.9 billion.

U.S. Trade Deficit Widened Markedly in May

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German industrial production in May rose by 0.9% after rising by 0.2% in April. Top-line growth for industrial production shows an increase of 0.1% over 12 months, a decline of 0.2% over six months, but a revival with growth at a 4% annual rate over three months. The revival was led by consumer goods output, which gained 1.2% in May after rising 2.2% in April. Consumer goods output is lower by 0.1% over 12 months, rises at a 2.6% annual rate over six months, and again at an 8.6% annual rate over three months, marking an acceleration over this three-period sequence. Capital goods, however, an important sector in the German economy, continued to be erratic in May. Capital goods output rose by 1.3% in May after falling by more than 1% in each of the two previous months. Capital goods output is lower by 2.8% over 12 months, falling at an 8.6% annual rate over six months, and that drop is trimmed to a 4.4% contraction over three months.

The output of consumer goods is pushing industry production higher, but the output of capital goods is pulling industrial production back lower. Intermediate goods, however, are showing growth and acceleration, despite falling by 0.4% in May after increases in each of the two previous months. Nevertheless, intermediate goods output is up by 1.1% over 12 months; it accelerates from a 1.9% annual rate over six months to a 6.4% annual rate over three months.

Focusing on manufacturing output alone, there was a gain in output of 0.8% in May and a gain of 0.3% in April. However, manufacturing output is still lower by 0.6% over 12 months and falls at a 2.3% annual rate over six months before recovering a 2.2% annual rate gain over three months; nothing in this sequence is an impressive performance.

Real manufacturing orders have been oscillating back and forth, rising by 1.9% in May after falling 3.2% in April. However, over 12 months, real orders for manufactured goods are up 6.3%; yet that same series falls at a 4% annual rate over six months and then rebounds to surge ahead at a 12.8% annual rate over three months. That's an erratic performance, but with a good ending trend. Real sales in manufacturing show gains in each of the last three months, including a 1.8% month-over-month increase in May. Real sales in manufacturing rise to a 4.2% annual rate over six months and 12 months and then accelerate to a 12.4% annual rate over three months. The performance of sales is encouraging and fits well at least with the three-month spurt in real manufacturing orders.

Indicators for the German economy show that the ZEW current index weakened to -77.8 in May from -73.7 in April. The IFO manufacturing index moved higher, with the May reading of 86.7 compared to 86.3 in April. Manufacturing expectations in the IFO framework, however, weakened to 87.7 in May from 88.2 in April. The EU Commission industrial index registered -15.6 in May after -14.5 in April, another sign of weakening. Two of these four indexes weakened sequentially, looking at the values from 12 months to six months to three months; improvements were seen in the ZEW current index and the EU Commission index on this timeline.

Looking at manufacturing IP output data from select other European countries, France and Spain showed slippage in May compared to April, while Portugal posted a gain in May after a decline in April. Over 12 months, six months, and three months, France shows period-to-period positive growth, but growth is not gaining momentum. Spain shows an increase of 0.4% in output over 12 months, with slippage over six months and a solid gain over three months. In Portugal, output acceleration is in gear, with a 2.2% decline over 12 months shifting to a 6.7% annual rate gain over six months and a 10.6% annual rate gain over three months.

On a quarter-to-date (QTD) basis, German industrial production is rising for all the major sectors except for capital goods. Manufacturing output is rising QTD, along with real manufacturing orders and real sales in manufacturing. The industrial surveys for Germany all weaken QTD. Industrial production shows QTD declines for France and Spain, while Portugal posts a gain.

The ranking of year-over-year growth rates, or, for indicators, the ranking of the level compared to the past back to 2006, shows mostly weak performance for German output. There is a stronger assessment for the intermediate goods with a year-over-year growth rate ranking above the 50% rank, putting it above its historic median. Demand indicators, however, as reflected in real manufacturing orders and real sales for manufactured goods, have rankings in the 70th percentile, showing some better life for demand—that could bode well for output in the future. The industrial indicators, however, are all weak and substantially weak compared to their historic levels back to 2006.

On balance, the manufacturing and industrial data as well as surveys as of May for Germany and Europe show mixed results. There are a few pockets of strength; one of the bright spots is demand, but supply has not consistently responded to it yet. The industrial surveys are uniformly weak and definitely not a bright spot. Overall, the results are not reassuring.

Economy in Brief

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