Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050223b.jpg" width="353">
Chain store sales dipped 0.1% last week and reversed the prior week&#39;s up tick according to the International Council of Shopping Centers (ICSC)-UBS survey.
Sales in February are 0.7% ahead of the January average which rose 0.9% from December.
During the last ten years there has been a 58% 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 fell 0.2 in the latest week (+0.5% y/y).
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">02/19/05</th>
<th scope="col">02/12/05</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>445.6</td>
<td>446.2</td>
<td>1.8%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
</body>
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Chain store sales dipped 0.1% last week and reversed the prior week's up tick according to the International Council of Shopping Centers (ICSC)-UBS survey. Sales in February are 0.7% ahead of the January average which rose 0.9% from [...]

Chain Store Sales Dipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050223a.jpg" width="353">
Consumer Prices (CPI-U) rose a modest 0.1% in January following an upwardly revised no change the month earlier. Consensus expectations had been for a 0.2% increase for last month.
Prices less food &amp; energy rose the same 0.2% in January as during the prior three months and the gain matched expectations
&quot;Core&quot; commodities prices posted a 0.3% increase, one of the larger increases of the last three years, led by a 1.9% (4.4% y/y) spurt in tobacco prices and a 0.7% (1.3% y/y) gain in new vehicle prices. Apparel prices rose 0.3% (+0.2% y/y) and furniture prices rose 0.1% (0.6% y/y). Personal computer prices rose 0.7% (NSA, -13.6% y/y).
Services prices less energy rose 0.2% for the fourth consecutive month. Shelter prices rose a stable 0.2% (2.7% y/y), medical care services inflation also was stable at a firm 0.4% (5.0% y/y) but public transportation prices fell for the second consecutive month (-1.0% y/y). School tuition rose 0.3% (6.5% y/y).
Energy prices fell for the second consecutive month, pulled lower by a 2.1% (+14.3% y/y) decline in gasoline prices. In February gasoline prices are 4.0% higher than in January and have reversed about half of the decline since November. Fuel oil prices fell 4.9% last month (+20.9% y/y) and natural gas &amp; electricity prices rose 0.1% (+5.9% y/y).
Food prices rose 0.1%, the gain held back by a 4.6% drop (+4.6% y/y) in fruit &amp; vegetable prices.
The chained CPI, which adjusts for shifts in the mix of consumer purchases, rose 0.2% and offset the revised 0.2% December decline. Core chain prices rose for the first time since October.
Real Effects of Inflation Through the Redistribution of Nominal Wealth from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/research/sr/sr355.pdf"> here</a>.

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</table>
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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</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&nbsp;</td>
<td>0.1%</td>
<td>0.0%</td>
<td>2.9%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.9%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-1.1%</td>
<td>-1.3%</td>
<td>10.5%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.1%</td>
<td>0.0%</td>
<td>2.8%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</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>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>0.2%</td>
<td>-0.2%</td>
<td>2.8%</td>
<td>2.2%</td>
<td>1.9%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>2.1%</td>
<td>1.4%</td>
<td>1.1%</td>
<td>1.9%</td>
</tr>
</tbody>
</table>
</body>
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Consumer Prices (CPI-U) rose a modest 0.1% in January following an upwardly revised no change the month earlier. Consensus expectations had been for a 0.2% increase for last month. Prices less food & energy rose the same 0.2% in [...]

Consumer Prices Rose As Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050223a.jpg" width="353">
Consumer Prices (CPI-U) rose a modest 0.1% in January following an upwardly revised no change the month earlier. Consensus expectations had been for a 0.2% increase for last month.
Prices less food &amp; energy rose the same 0.2% in January as during the prior three months and the gain matched expectations
&quot;Core&quot; commodities prices posted a 0.3% increase, one of the larger increases of the last three years, led by a 1.9% (4.4% y/y) spurt in tobacco prices and a 0.7% (1.3% y/y) gain in new vehicle prices. Apparel prices rose 0.3% (+0.2% y/y) and furniture prices rose 0.1% (0.6% y/y). Personal computer prices rose 0.7% (NSA, -13.6% y/y).
Services prices less energy rose 0.2% for the fourth consecutive month. Shelter prices rose a stable 0.2% (2.7% y/y), medical care services inflation also was stable at a firm 0.4% (5.0% y/y) but public transportation prices fell for the second consecutive month (-1.0% y/y). School tuition rose 0.3% (6.5% y/y).
Energy prices fell for the second consecutive month, pulled lower by a 2.1% (+14.3% y/y) decline in gasoline prices. In February gasoline prices are 4.0% higher than in January and have reversed about half of the decline since November. Fuel oil prices fell 4.9% last month (+20.9% y/y) and natural gas &amp; electricity prices rose 0.1% (+5.9% y/y).
Food prices rose 0.1%, the gain held back by a 4.6% drop (+4.6% y/y) in fruit &amp; vegetable prices.
The chained CPI, which adjusts for shifts in the mix of consumer purchases, rose 0.2% and offset the revised 0.2% December decline. Core chain prices rose for the first time since October.
Real Effects of Inflation Through the Redistribution of Nominal Wealth from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/research/sr/sr355.pdf"> here</a>.

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</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</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&nbsp;</td>
<td>0.1%</td>
<td>0.0%</td>
<td>2.9%</td>
<td>2.7%</td>
<td>2.3%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.0%</td>
<td>0.9%</td>
<td>-0.9%</td>
<td>-2.0%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-1.1%</td>
<td>-1.3%</td>
<td>10.5%</td>
<td>10.9%</td>
<td>12.2%</td>
<td>-5.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.1%</td>
<td>0.0%</td>
<td>2.8%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</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>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a></td>
<td>0.2%</td>
<td>-0.2%</td>
<td>2.8%</td>
<td>2.2%</td>
<td>1.9%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>2.1%</td>
<td>1.4%</td>
<td>1.1%</td>
<td>1.9%</td>
</tr>
</tbody>
</table>
Chain Store Sales Dipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 23, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050223b.jpg" width="353">
Chain store sales dipped 0.1% last week and reversed the prior week&#39;s up tick according to the International Council of Shopping Centers (ICSC)-UBS survey.
Sales in February are 0.7% ahead of the January average which rose 0.9% from December.
During the last ten years there has been a 58% 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 fell 0.2 in the latest week (+0.5% y/y).
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">02/19/05</th>
<th scope="col">02/12/05</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>445.6</td>
<td>446.2</td>
<td>1.8%</td>
<td>4.6%</td>
<td>2.9%</td>
<td>3.6%</td>
</tr>
</tbody>
</table>
Mortgage Applications Off Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 23, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050223c.jpg" width="353">
The Mortgage Bankers Association reported that mortgage applications fell another 0.6% last week but slight decline during the last two weeks only tempered earlier gains which lifted the average in February 11.1% above January.
Last week&#39;s decline was due to a 1.3% drop in purchase applications. 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. Purchase applications in February are down 0.3% versus January.
Applications to refinance ticked up 0.1% following several weeks of strong gain and in February are 25.6% higher than in January.
The effective interest rate on a conventional 30-year mortgage rose to 5.92% versus 5.75% the prior week. The effective rate on a 15-year mortgage also rose to 5.52% 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>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">02/18/05</th>
<th scope="col">02/11/05</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>727.9</td>
<td>732.3</td>
<td>-14.8%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>417.8</td>
<td>423.3</td>
<td>-1.3%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,532.0</td>
<td>2,530.1</td>
<td>-24.7%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050222d.jpg" width="353">
Data released today show that Russian Gross Domestic Product rose 7.14% in real terms in 2004, marginally less than the 7.35% rise in 2003.
Growth in consumption accelerated to a 9.20% increase from a 6.24% rise in 2003. Imports, perhaps in part at least, due to the rise in consumption, rose sharply. They were up 23.92 % from the 17.66% rise in 2003. The 13.14% rise in exports in 2004 was little changed from the 12.47% of 2003. The year to year growth in exports and imports is shown in the first chart. The growth in Gross fixed investment was 10.83% last year compared to 12.47% in the previous year. Inventory accumulation was a positive, if relatively small, factor in the rise of GDP. Total GDP for the year amounted to 16,779 billion rubles or $535.billion. Per capita GDP in dollar terms was a little more than $4000 in 2004.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050222c.jpg" width="353">
Although inflation has come down from extremely high levels of 2000, it continues to be high. The GDP deflator rose 18.64% in 2004, up from 13.67% in 2003. The second chart shows the rate of increase in real GDP and in the GDP deflator.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGECW/@EB/@EB.HTM">GDP (Bil. 2000 Rubles)</a></th>
<th scope="col">Q4 04</th>
<th scope="col">Q3&nbsp;04</th>
<th scope="col">Q4 03</th>
<th scope="col">Q/Q %</th>
<th scope="col">Y/Y &nbsp;%</th>
<th scope="col">&nbsp;2004&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2003</th>
<th scope="col"> 2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Gross Domestic Product</td>
<td>2371.8</td>
<td>2307.2</td>
<td>2224.9</td>
<td>2.80</td>
<td>9.60</td>
<td>7.14</td>
<td>7.35</td>
<td>4.74</td>
<td>5.09</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumption</td>
<td>1541.5</td>
<td>1498.6</td>
<td>1402.9</td>
<td>2.86</td>
<td>9.88</td>
<td>9.20</td>
<td>6.24</td>
<td>7.02</td>
<td>6.83</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Household</td>
<td>1225.3</td>
<td>1184.3</td>
<td>1093.0</td>
<td>3.46</td>
<td>12.10</td>
<td>11.26</td>
<td>7.51</td>
<td>8.50</td>
<td>9.50&nbsp;&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Government</td>
<td>295.6</td>
<td>294.2</td>
<td>289.2</td>
<td>0.48</td>
<td>5.21</td>
<td>2.35</td>
<td>2.47</td>
<td>2.60</td>
<td>-0.78</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Non Profit Institutions Serving Households</td>
<td>20.6</td>
<td>20.1</td>
<td>20.7</td>
<td>2.49</td>
<td>-0.48</td>
<td>-0.49</td>
<td>1.11</td>
<td>0.74</td>
<td>1.90</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Gross Capital Formation</td>
<td>448.3</td>
<td>435.2</td>
<td>414.9</td>
<td>2.99</td>
<td>8.05</td>
<td>10.83</td>
<td>12.94</td>
<td>2.78</td>
<td>10.25</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Inventory Change</td>
<td>91.9</td>
<td>36.3</td>
<td>76.6</td>
<td>55.6*</td>
<td>15.3*</td>
<td>73.9*</td>
<td>26.1*</td>
<td>-79.5*</td>
<td>102.3*</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Net Exports</td>
<td>291.7</td>
<td>292.0</td>
<td>324.5</td>
<td>-0.3*</td>
<td>-32.8*</td>
<td>-125.9*</td>
<td>39.8*</td>
<td>10.4*</td>
<td>-192.9*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>1237.0</td>
<td>1185.8</td>
<td>1080.0</td>
<td>3.90</td>
<td>14.07</td>
<td>13.14</td>
<td>12.47</td>
<td>10.26</td>
<td>4.22</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>940.3</td>
<td>893.8</td>
<td>755.5</td>
<td>5.20</td>
<td>24.46</td>
<td>23.92</td>
<td>17.66</td>
<td>14.58</td>
<td>18.72</td>
</tr>
<tr class="odd">
<td class="firstcol">Deflator (2000=100)</td>
<td>194.6</td>
<td>180.33</td>
<td>161.03</td>
<td>7.9</td>
<td>20.86</td>
<td>18.64</td>
<td>13.67</td>
<td>15.47</td>
<td>19.49</td>
</tr>
</tbody>
</table>
</body>
</html>

Data released today show that Russian Gross Domestic Product rose 7.14% in real terms in 2004, marginally less than the 7.35% rise in 2003. Growth in consumption accelerated to a 9.20% increase from a 6.24% rise in 2003. Imports, [...]

Russia Chalks Up Another 7+% Real Growth in 2004: Inflation Accelerates

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050222b.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence slipped in February to 104.0 from an upwardly revised January level of 105.1. Consensus expectations had been for a reading of 103.3.
The index of consumer expectations fell for the second consecutive month (+4.1% y/y). The present situation index added another 3.8% to strong gains in the prior three months (+39.7% y/y).
During the last twenty years there has been a 51% correlation between consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Perceptions of the job market improved further. Jobs were viewed as hard to get by 22.6% of survey participants, the lowest percentage since May 2002.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.
The Survey of Professional Forecasters from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/spf/survq105.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</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">Consumer Confidence</td>
<td>104.0</td>
<td>105.1</td>
<td>17.5%</td>
<td>96.1</td>
<td>79.8</td>
<td>96.6</td>
</tr>
</tbody>
</table>
</body>
</html>

The Conference Boards Index of Consumer Confidence slipped in February to 104.0 from an upwardly revised January level of 105.1. Consensus expectations had been for a reading of 103.3. The index of consumer expectations fell for the [...]

Consumer Confidence Slipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050222a.jpg" width="353">
The Weekly Leading Index of the US economy from the Economic Cycle Research Institute (ECRI) resumed an up trend after stuttering around the new year. Flat in the latest week, the index in February is up 1.2% from January and the six month growth rate improved to +1.9%, its best since early July.
Higher stock and commodity prices as well as lower interest rates offset fewer new mortgage applications in the latest week.
During the last ten years there has been a 69% correlation between the six-month growth in the ECRI leading index of the US economy and two quarter growth in real GDP.
The components of the ECRI weekly leading index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The ECRI Leading Index&#39;s recent pattern generally mirrors the Conference Board&#39;s Index of Leading Economic Indicators, with a slight lead. Construction of the ECRI Leading Index differs from the Conference Board Index but there has been a 70% correlation between the y/y percent change in the two series over the last 10 years.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months.
The latest from ECRI is available <a href="http://www.businesscycle.com/">here</a>.
Productivity and Inflation from Janet L. Yellen, President &amp; CEO of the Federal Reserve Bank of San Francisco, can be found <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-04.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM">ECRI Leading Index</a></th>
<th scope="col">02/11/05</th>
<th scope="col">02/04/05</th>
<th scope="col">Growth Rate</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">Weekly</td>
<td>134.3</td>
<td>134.3</td>
<td>1.9%</td>
<td>4.2%</td>
<td>6.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Jan</td>
<td>Dec</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Monthly</td>
<td>132.7</td>
<td>133.2</td>
<td>-0.1%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
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The Weekly Leading Index of the US economy from the Economic Cycle Research Institute (ECRI) resumed an up trend after stuttering around the new year. Flat in the latest week, the index in February is up 1.2% from January and the six [...]

ECRI U.S. Leading Index Trending Higher

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050222a.jpg" width="353">
The Weekly Leading Index of the US economy from the Economic Cycle Research Institute (ECRI) resumed an up trend after stuttering around the new year. Flat in the latest week, the index in February is up 1.2% from January and the six month growth rate improved to +1.9%, its best since early July.
Higher stock and commodity prices as well as lower interest rates offset fewer new mortgage applications in the latest week.
During the last ten years there has been a 69% correlation between the six-month growth in the ECRI leading index of the US economy and two quarter growth in real GDP.
The components of the ECRI weekly leading index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The ECRI Leading Index&#39;s recent pattern generally mirrors the Conference Board&#39;s Index of Leading Economic Indicators, with a slight lead. Construction of the ECRI Leading Index differs from the Conference Board Index but there has been a 70% correlation between the y/y percent change in the two series over the last 10 years.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months.
The latest from ECRI is available <a href="http://www.businesscycle.com/">here</a>.
Productivity and Inflation from Janet L. Yellen, President &amp; CEO of the Federal Reserve Bank of San Francisco, can be found <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-04.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM">ECRI Leading Index</a></th>
<th scope="col">02/11/05</th>
<th scope="col">02/04/05</th>
<th scope="col">Growth Rate</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">Weekly</td>
<td>134.3</td>
<td>134.3</td>
<td>1.9%</td>
<td>4.2%</td>
<td>6.6%</td>
<td>1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Jan</td>
<td>Dec</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Monthly</td>
<td>132.7</td>
<td>133.2</td>
<td>-0.1%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
Consumer Confidence Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 22, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050222b.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence slipped in February to 104.0 from an upwardly revised January level of 105.1. Consensus expectations had been for a reading of 103.3.
The index of consumer expectations fell for the second consecutive month (+4.1% y/y). The present situation index added another 3.8% to strong gains in the prior three months (+39.7% y/y).
During the last twenty years there has been a 51% correlation between consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Perceptions of the job market improved further. Jobs were viewed as hard to get by 22.6% of survey participants, the lowest percentage since May 2002.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.
The Survey of Professional Forecasters from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/spf/survq105.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</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">Consumer Confidence</td>
<td>104.0</td>
<td>105.1</td>
<td>17.5%</td>
<td>96.1</td>
<td>79.8</td>
<td>96.6</td>
</tr>
</tbody>
</table>
</body>
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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/050218e.jpg" width="353">
PPI data for Germany have shown a tendency toward stronger prices in recent months, The total PPI surged 0.8% in January, but this was mainly due to an abrupt upturn in energy, which swung from a 0.9% decline in December to a 2.8% jump in January. Excluding energy, the PPI rose 0.3%, slower than the December increase of 0.5%. (This PPI is a comprehensive measure including finished products, semi-processed items and raw materials. The US &quot;headline&quot; figure called PPI, in comparison, covers only final goods.)
The year-on-year performance of the German PPI has been firm, and January continued that trend. The total index was up 3.9%, following a 2.9% yearly increase in December. These were the largest since the middle of 2001. Energy is clearly one component of this gain. Chemicals and plastics, which are petroleum related, have also risen more rapidly.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050218d.jpg" width="353">
A third source of the increase in the German PPI is prices of metals and metal products. The dramatic increase in prices of basic metals is evident in the table and also in the second graph. Metals prices rose rapidly on world commodity markets last year. In the second graph, we show the closing spot price of copper on the London Metals Exchange; it is quoted there in US dollars and we converted that to euros. The correlation tool in Haver&#39;s DLX software indicates a substantial 85% correlation between that commodity price and the German PPI for basic metals. Further, the simple lead-lag feature of the software, implemented with the &lt;CTRL&gt; key and the right or left arrow, shows that the correlation is maximized at a 4-month lead for the commodity price. Thus, we can see in the chart that the pace of price increase in commodity markets has eased most recently, suggesting -- if this history is any guide -- the possibility for slowing during the next several months of the PPI for this very fundamental item in the production process.

<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/GERMANY/GERMANY.HTM">Germany: Producer Price Indexes (% chg)</a></th>
<th scope="col">Jan 2005</th>
<th scope="col">Dec 2004</th>
<th scope="col">Nov 2004</th>
<th scope="col">Year/ Year</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2004</td>
<td>2003</td>
<td>2002</td>
</tr>
<tr>
<td class="firstcol">PPI</td>
<td>0.8</td>
<td>0.1</td>
<td>-0.4</td>
<td>3.9</td>
<td>2.9</td>
<td>1.8</td>
<td>0.6</td>
</tr>
<tr class="odd">
<td class="firstcol">ex Energy</td>
<td>0.3</td>
<td>0.5</td>
<td>0.1</td>
<td>3.0</td>
<td>2.8</td>
<td>0.2</td>
<td>0.6</td>
</tr>
<tr>
<td class="firstcol">Energy</td>
<td>2.8</td>
<td>-0.9</td>
<td>-2.1</td>
<td>7.3</td>
<td>3.3</td>
<td>8.0</td>
<td>0.5</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>
</tr>
<tr>
<td class="firstcol">Manufacturing</td>
<td>0.3</td>
<td>0.1</td>
<td>-0.4</td>
<td>3.4</td>
<td>3.2</td>
<td>0.2</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Basic Metals</td>
<td>1.7</td>
<td>0.0</td>
<td>0.2</td>
<td>22.6</td>
<td>21.0</td>
<td>2.3</td>
<td>1.7</td>
</tr>
<tr>
<td class="firstcol">Fabricated Metals</td>
<td>1.1</td>
<td>0.1</td>
<td>0.2</td>
<td>5.9</td>
<td>4.8</td>
<td>0.2</td>
<td>0.7</td>
</tr>
</tbody>
</table>
</body>
</html>

PPI data for Germany have shown a tendency toward stronger prices in recent months, The total PPI surged 0.8% in January, but this was mainly due to an abrupt upturn in energy, which swung from a 0.9% decline in December to a 2.8% [...]

German PPI on Firm Uptrend; Could It Slow?

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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260709B1.jpg

Initial claims for unemployment insurance declined 2,000 to 215,000 in the week ending July 4, from 217,000 in the week ending June 27, revised from 215,000. The four-week average was 218,750 in the July 4 week, down from 222,500 in the week ending June 27. The Action Economics/Haver Analytics Survey looked for 218,000 claims to have been filed. 

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 8,000 to 1.814 million in the week ending June 27, from 1.806 million in the week ending June 20, revised from 1.814 million. The four-week moving average rose to 1.808 million in the June 27 week from 1.801 million in the June 20 week. The insured unemployment rate was unchanged at 1.2% in the week of June 27. Except for a one-week dip to 1.1% in the week of April 25, the insured unemployment rate has been at 1.2% since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending June 20, the highest unemployment rates were in Washington (2.03%), New Jersey (2.11%), Minnesota (2.15%), and Puerto Rico (2.45%). The lowest rates were in South Dakota (0.28%), Florida (0.35%), Alabama and North Carolina (both 0.41%), Louisiana (0.42%), and Arkansas (0.49%). Rates in other notable states include California (1.88%), Pennsylvania (1.63%), Illinois (1.58%), New York (1.52%), and Texas (1.12%). 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.

260709C1.jpg

260709D1.jpg

- New claims declined by 2,000 to 215,000 in the week ending July 4.
- Continuing claims rose by 8,000 to 1.814 million in the week ending June 27.
- The insured unemployment rate was unchanged at 1.2% in the week of June 27.

U.S. Initial Unemployment Claims Declined in the Week of July 4

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.

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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).

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Charts of the Week: Growth Holds Firm

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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

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**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.

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**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

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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.

Economy in Brief

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