Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113e.jpg" width="353">
The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) slipped 1.5% in December from the twenty year high to 106.1.
During the last ten years there has been a 68% correlation between the level of the NFIB index and the two quarter change in real GDP.
The percentage of firms expecting the economy to improve fell ten points to 37 but the 4Q level was the highest of the year. The percent of firms planning to raise employment also fell to a still high 17%. During the last ten years there has been a 65% correlation between these hiring plans and the three month growth in nonfarm payrolls. The percentage of firms with one or more job openings rose back to 23%, the highest level since 2001. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113f.jpg" width="353">
The percentage of firms expecting higher real sales in 6 months remained at an elevated 35%. The net of firms expecting higher earnings this quarter slipped.
The percentage of firms raising average selling prices fell to 15%, the lowest since February.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

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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">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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</thead>
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<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>106.1</td>
<td>107.7</td>
<td>-0.7%</td>
<td>104.6</td>
<td>101.3</td>
<td>101.2</td>
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The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) slipped 1.5% in December from the twenty year high to 106.1. During the last ten years there has been a 68% correlation between the [...]

Small Business Optimism Slipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113g.jpg" width="353">
Import prices fell 1.3% last month due to sharply lower prices for petroleum. The Consensus expectation had been for a 0.4% decline. Nonpetroleum prices, however, rose 0.5% and raised the y/y increase to 3.8%, its highest since 1995.
During the last ten years there has been a (negative) 55% correlation between the level of the dollar and the y/y change in nonpetroleum import prices.
Import pricing strength in December was most pronounced for foods, feeds &amp; beverages which rose 1.0% (7.8% y/y). Gains elsewhere were more moderate, but up moderately from earlier lows. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113h.jpg" width="353">
Capital goods prices rose 0.3% and the y/y change rose to -0.9% versus earlier 2% to 8% rates of decline. Excluding computers capital goods prices rose 0.5% and the y/y gain of 1.9% compared to price deflation of 1.9% in 2002 and of 4.2% during 1997. Non-auto consumer goods import prices rose 0.3% and the y/y change rose to 0.7% versus a peak rate of decline of 1.6% in early 2002.
Petroleum prices fell 1.5% as the price of Brent crude oil fell to $39.12 in December. It rose to $43.16 last week.
Export prices rose 0.2%. Nonagricultural export prices rose 0.1% (4.9% y/y).

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">Dec</th>
<th scope="col">Nov</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Import - All Commodities</td>
<td>-1.3%</td>
<td>-0.2%</td>
<td>6.9%</td>
<td>5.7%</td>
<td>2.9%</td>
<td>-2.5%</td>
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<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-11.5%</td>
<td>-5.7%</td>
<td>30.8%</td>
<td>30.6%</td>
<td>21.0%</td>
<td>3.0%</td>
</tr>
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<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.5%</td>
<td>0.9%</td>
<td>3.8%</td>
<td>2.6%</td>
<td>1.1%</td>
<td>-2.4%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.2%</td>
<td>0.3%</td>
<td>4.1%</td>
<td>3.9%</td>
<td>1.6%</td>
<td>-1.0%</td>
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Import prices fell 1.3% last month due to sharply lower prices for petroleum. The Consensus expectation had been for a 0.4% decline. Nonpetroleum prices, however, rose 0.5% and raised the y/y increase to 3.8%, its highest since 1995. [...]

Import Prices Lower With Petroleum, Non Oil Prices Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050113b.jpg" width="353">
Initial claims for unemployment insurance rose 10,000 to 367,000 last week but the sharp gain the prior week was lessened slightly to 35,000. Consensus expectations had been for a decline to 340,000 claims.
The four week moving average of initial claims rose to 344,000 (-3.6% y/y).
During the last ten years there has been a (negative) 82% correlation between the level of initial claims and the y/y change in payroll employment.
Continuing claims for unemployment insurance fell a huge 219,000 following an upwardly revised 71,000 increase the week prior.
The insured rate of unemployment fell to 2.1% from an upwardly revised 2.3% the week prior.
&quot;Why Are Married Women Working More? Some Macroeconomic Explanations&quot; from the Federal Reserve Bank of Philadelphia is available <a href="http://www.philadelphiafed.org/files/br/brq404ak.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">01/08/05</th>
<th scope="col">01/01/05</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Initial Claims</td>
<td>367</td>
<td>357</td>
<td>4.3%</td>
<td>343</td>
<td>402</td>
<td>404</td>
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<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,631</td>
<td>-17.3%</td>
<td>2,926</td>
<td>3,531</td>
<td>3,570</td>
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Initial claims for unemployment insurance rose 10,000 to 367,000 last week but the sharp gain the prior week was lessened slightly to 35,000. Consensus expectations had been for a decline to 340,000 claims. The four week moving [...]

Initial Unemployment Insurance Claims Up

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/050112c.jpg" width="353">
Canada&#39;s trade situation improved in November, as a small decrease in exports was well overweighted with a 10.1% drop in imports. The consequent balance of merchandise trade was a surplus Can$7.3 billion, the third largest on record. In US$, the surplus pierced US$6 billion, the largest ever.
Exports fell 2.9%, with moderate reductions in several types of products. By geography, the largest absolute drop occurred in shipments to the US, but percentage-wise, shipments to Europe were off by more than 10% on the month.
The drop in imports featured sizable declines &#150; 10% or more &#150; in a variety of product-types. Among regions, the US and Europe both had double-digit declines in sales to Canada.
Part of the drop in imports is a continuing correction to sizable increases that pushed the Canadian-dollar value of imports to a record Can$31.8 billion in both May and July. But Canadian statistics officials pointed out today that the November performance accompanied a marked increase in the exchange rate; this was 4.2% in November alone in US$/Can$ terms, extending a rise that totaled 15% since May. As clearly evident in the graph, the value of Canada&#39;s imports has a remarkable relationship with the exchange rate. Percent changes in the rate (shown here in the reciprocal Can$/US$) have a substantial 86% correlation with the monthly change in the difference of imports measured in Can$ less imports measured in US$. Trade with the US of course dominates Canadian trade (imports from the US are about two-thirds of Canada&#39;s total) and this tight currency value relationship highlights how strong that bond is, even on a month-to-month basis.

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<th scope="col" class="firstcol">Billions of Canadian$, Seasonally Adjusted</th>
<th scope="col">Nov 2004</th>
<th scope="col">Oct&nbsp; 2004</th>
<th scope="col">Year Ago</th>
Monthly Average
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<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
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<tr>
<td class="firstcol">Exports</td>
<td>34.7</td>
<td>35.7</td>
<td>+8.6%</td>
<td>33.3</td>
<td>34.5</td>
<td>35.1</td>
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<td class="firstcol">Imports</td>
<td>27.4</td>
<td>30.5</td>
<td>-1.5%</td>
<td>28.5</td>
<td>29.7</td>
<td>29.2</td>
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<td class="firstcol">Balance</td>
<td>+7.3</td>
<td>+5.2</td>
<td>+4.1</td>
<td>+4.8</td>
<td>+4.8</td>
<td>+5.8</td>
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<td class="firstcol">Balance, US$</td>
<td>+6.1</td>
<td>+4.2</td>
<td>+3.1</td>
<td>+3.5</td>
<td>+3.0</td>
<td>+3.8</td>
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<td class="firstcol">Exchange Rate, US$/CAN$</td>
<td>0.8356</td>
<td>0.8020</td>
<td>+9.7%</td>
<td>0.7157</td>
<td>0.6368</td>
<td>0.6457</td>
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</tbody>
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<th scope="col" class="firstcol">Billions of Canadian$, Seasonally Adjusted</th>
<th scope="col">Nov 2004</th>
<th scope="col">Oct&nbsp; 2004</th>
<th scope="col">Year Ago</th>
Monthly Average
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<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
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<td class="firstcol">Exports</td>
<td>34.7</td>
<td>35.7</td>
<td>+8.6%</td>
<td>33.3</td>
<td>34.5</td>
<td>35.1</td>
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<td class="firstcol">Imports</td>
<td>27.4</td>
<td>30.5</td>
<td>-1.5%</td>
<td>28.5</td>
<td>29.7</td>
<td>29.2</td>
</tr>
<tr>
<td class="firstcol">Balance</td>
<td>+7.3</td>
<td>+5.2</td>
<td>+4.1</td>
<td>+4.8</td>
<td>+4.8</td>
<td>+5.8</td>
</tr>
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<td class="firstcol">Balance, US$</td>
<td>+6.1</td>
<td>+4.2</td>
<td>+3.1</td>
<td>+3.5</td>
<td>+3.0</td>
<td>+3.8</td>
</tr>
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<td class="firstcol">Exchange Rate, US$/CAN$</td>
<td>0.8356</td>
<td>0.8020</td>
<td>+9.7%</td>
<td>0.7157</td>
<td>0.6368</td>
<td>0.6457</td>
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Canada's trade situation improved in November, as a small decrease in exports was well overweighted with a 10.1% drop in imports. The consequent balance of merchandise trade was a surplus Can$7.3 billion, the third largest on record. [...]

Canada's Trade Surplus Widens in November

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050112b.jpg" width="353">
Mortgage applications dropped last week for the fourth week in the last five according to the Mortgage Bankers Association (MBA) Survey. The 3.0% w/w decline was on the heels of a 10.6% plunge during the last week of 2004.
Applications to purchase slide another 5.8% after dropping 13.7% the prior week. The level of purchase applications began the new year 16.4% below the December average which fell 0.3% from November. 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.
Refi&#39;s recovered a modest 1.1% w/w after dropping 13.1% during the prior two weeks combined.
The effective interest rate on a conventional 30-year mortgage rose slightly to 5.97% versus an average 6.05% during 2004. The effective rate on a 15-year mortgage also rose to 5.50% last week versus the 2004 average of 5.47%.
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>.

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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">01/07/05</th>
<th scope="col">12/31/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
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<td class="firstcol">Total Market Index</td>
<td>587.8</td>
<td>605.7</td>
<td>-16.3%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
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<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>393.1</td>
<td>417.3</td>
<td>-11.8%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,720.5</td>
<td>1,701.3</td>
<td>-21.6%</td>
<td>2,366.8</td>
<td>4,981.8</td>
<td>3,388.0</td>
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Mortgage applications dropped last week for the fourth week in the last five according to the Mortgage Bankers Association (MBA) Survey. The 3.0% w/w decline was on the heels of a 10.6% plunge during the last week of 2004. [...]

Total Mortgage Applications Off Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050112a.jpg" width="353">
A surprising 2.3% drop in exports caused the U.S. foreign trade deficit to deepen sharply to $60.3B in November, by far a new record. Consensus expectations had been for a narrowing to $54.0B versus October&#39;s revised figure of $56.0B.
Goods exports, off 3.8%, fell across the board. A 5.1% (-0.7% y/y) decline in capital goods exports reflected sharp declines in exports of most types of machinery. Computer exports fell as well by 5.5% (+3.7% y/y) and exports of civilian aircraft plunged 8.4% (-34.5% y/y). Nonauto consumer goods exports were led 2.6% lower (+7.6% y/y) by steep declines in exports of appliances, furniture and apparel. Exports of food &amp; beverages (-7.1% Y/Y) and industrial supplies +17.0% y/y) also were off sharply. The only major category to show an increase was &quot;other goods&quot;, up 7.2% m/m.
Services exports rose 1.4% (7.2% y/y) due to increased travel and passenger fares.
Total imports rose 1.3% m/m though gains were mixed across categories. Imports of food as well as industrial supplies rose but capital goods imports fell 0.4% (+15.7% y/y) and automotive vehicles were off 2.3% (+4.7% y/y).
Imports of non-petroleum goods fell 0.6% (+14.7% y/y) while imports of petroleum surged 11.8% (79.0% y/y). The value of energy related petroleum products fell with lower oil prices but quantities rose (19.3% y/y).
The US trade deficit with China improved slightly to $16.6B ($124.1B in 2003) but the US trade deficit with Japan deepened to $7.3B ($66.0B in 2003) as did the deficit with the Asian NICs to $3.1B ($21.2B in 2003). The US trade deficit with the European Union deepened to $10.5B ($97.9B in 2003).
&quot;To Float or Not to Float? Exchange Rate Regimes and Shocks&quot; from the Federal Reserve Bank of San Francisco can be viewed <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-01.pdf"> here</a>.
&quot;U.S.&#150;Mexico Trade: Are We Still Connected?&quot; from the Federal Reserve Bank of Dallas can be found <a href="http://www.dallasfed.org/research/busfront/bus0403a.html"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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</thead>
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<td class="firstcol">Trade Deficit</td>
<td>$60.3B</td>
<td>$56.0B</td>
<td>$40.0B (11/03)</td>
<td>$496.5B</td>
<td>$421.7B</td>
<td>$362.7B</td>
</tr>
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<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>-2.3%</td>
<td>0.3%</td>
<td>6.0%</td>
<td>4.6%</td>
<td>-3.1%</td>
<td>-6.0%</td>
</tr>
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<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>1.3%</td>
<td>3.6%</td>
<td>19.8%</td>
<td>8.5%</td>
<td>2.1%</td>
<td>-5.5%</td>
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A surprising 2.3% drop in exports caused the U.S. foreign trade deficit to deepen sharply to $60.3B in November, by far a new record. Consensus expectations had been for a narrowing to $54.0B versus October's revised figure of $56.0B. [...]

Lower Exports Dropped U.S. Trade Deficit To Another Record

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050112a.jpg" width="353">
A surprising 2.3% drop in exports caused the U.S. foreign trade deficit to deepen sharply to $60.3B in November, by far a new record. Consensus expectations had been for a narrowing to $54.0B versus October&#39;s revised figure of $56.0B.
Goods exports, off 3.8%, fell across the board. A 5.1% (-0.7% y/y) decline in capital goods exports reflected sharp declines in exports of most types of machinery. Computer exports fell as well by 5.5% (+3.7% y/y) and exports of civilian aircraft plunged 8.4% (-34.5% y/y). Nonauto consumer goods exports were led 2.6% lower (+7.6% y/y) by steep declines in exports of appliances, furniture and apparel. Exports of food &amp; beverages (-7.1% Y/Y) and industrial supplies +17.0% y/y) also were off sharply. The only major category to show an increase was &quot;other goods&quot;, up 7.2% m/m.
Services exports rose 1.4% (7.2% y/y) due to increased travel and passenger fares.
Total imports rose 1.3% m/m though gains were mixed across categories. Imports of food as well as industrial supplies rose but capital goods imports fell 0.4% (+15.7% y/y) and automotive vehicles were off 2.3% (+4.7% y/y).
Imports of non-petroleum goods fell 0.6% (+14.7% y/y) while imports of petroleum surged 11.8% (79.0% y/y). The value of energy related petroleum products fell with lower oil prices but quantities rose (19.3% y/y).
The US trade deficit with China improved slightly to $16.6B ($124.1B in 2003) but the US trade deficit with Japan deepened to $7.3B ($66.0B in 2003) as did the deficit with the Asian NICs to $3.1B ($21.2B in 2003). The US trade deficit with the European Union deepened to $10.5B ($97.9B in 2003).
&quot;To Float or Not to Float? Exchange Rate Regimes and Shocks&quot; from the Federal Reserve Bank of San Francisco can be viewed <a href="http://www.frbsf.org/publications/economics/letter/2005/el2005-01.pdf"> here</a>.
&quot;U.S.&#150;Mexico Trade: Are We Still Connected?&quot; from the Federal Reserve Bank of Dallas can be found <a href="http://www.dallasfed.org/research/busfront/bus0403a.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/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$60.3B</td>
<td>$56.0B</td>
<td>$40.0B (11/03)</td>
<td>$496.5B</td>
<td>$421.7B</td>
<td>$362.7B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>-2.3%</td>
<td>0.3%</td>
<td>6.0%</td>
<td>4.6%</td>
<td>-3.1%</td>
<td>-6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>1.3%</td>
<td>3.6%</td>
<td>19.8%</td>
<td>8.5%</td>
<td>2.1%</td>
<td>-5.5%</td>
</tr>
</tbody>
</table>
Total Mortgage Applications Off Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> January 12, 2005


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/050112b.jpg" width="353">
Mortgage applications dropped last week for the fourth week in the last five according to the Mortgage Bankers Association (MBA) Survey. The 3.0% w/w decline was on the heels of a 10.6% plunge during the last week of 2004.
Applications to purchase slide another 5.8% after dropping 13.7% the prior week. The level of purchase applications began the new year 16.4% below the December average which fell 0.3% from November. 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.
Refi&#39;s recovered a modest 1.1% w/w after dropping 13.1% during the prior two weeks combined.
The effective interest rate on a conventional 30-year mortgage rose slightly to 5.97% versus an average 6.05% during 2004. The effective rate on a 15-year mortgage also rose to 5.50% last week versus the 2004 average of 5.47%.
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>
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<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">01/07/05</th>
<th scope="col">12/31/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>587.8</td>
<td>605.7</td>
<td>-16.3%</td>
<td>735.1</td>
<td>1,067.9</td>
<td>799.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>393.1</td>
<td>417.3</td>
<td>-11.8%</td>
<td>454.5</td>
<td>395.1</td>
<td>354.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,720.5</td>
<td>1,701.3</td>
<td>-21.6%</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/050111b.jpg" width="353">
The January ZEW indicator of analysts&#39; and institutional investors&#39; confidence in Germany&#39;s economic prospects showed a significant rise from December. The optimists outweighed the pessimists by 26.9% in January, compared with a balance of 14.4% in December. The figure is, however, 46 percentage points below that of January 2004.
Although analysts&#39; and institutional investors&#39; confidence is still below the long run median value of 35, the January rise, following one in December is encouraging. The ZEW measure is based on a small sample of 305 participants and it often anticipates changes in the broader IFO measure which is scheduled to be released later this month. The IFO index (2000=100) was 96.2 in December, 2.2% above November.
As Carol Stone pointed out last week, commentators tends to highlight a particular reason for changes in confidence. Last week it was strength in the euro that was a factor in the loss of confidence in the Euro-Zone. This week it is the decline in the price of oil and the impression that Christmas retail sales were better than expected--hard data are not yet available--that are responsible for the January rise in the ZEW measure.
The relation of the price of oil to confidence is shown in the attached chart. While over time, there is only a weak relationship, when the price of oil changes significantly, either up or down, it appears to have an impact on the state of confidence with a rise dampening, and a fall increasing, confidence.

<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">&nbsp;</th>
<th scope="col">Jan 05</th>
<th scope="col">Dec 04</th>
<th scope="col">Jan 04</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</th>
<th scope="col">2004</th>
<th scope="col">&nbsp;2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp; &nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">ZEW (Percent balance)</td>
<td>26.9</td>
<td>14.4</td>
<td>72.9</td>
<td>12.5</td>
<td>-46.0</td>
<td>44.6</td>
<td>38.4</td>
<td>45.3</td>
<td>2.8</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>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Dec 04</td>
<td>Nov 04</td>
<td>Oct 04</td>
<td>Sep 04</td>
<td>Aug 04</td>
<td>July 04</td>
<td>Jun 04</td>
<td>May 04</td>
<td>Apr 04</td>
</tr>
<tr>
<td class="firstcol">Monthly Average Price of Oil--Brent Crude ($/bbl).</td>
<td>39.12</td>
<td>43.23</td>
<td>49.73</td>
<td>43.42</td>
<td>42.65</td>
<td>38.02</td>
<td>35.32</td>
<td>36.87</td>
<td>33.16</td>
</tr>
</tbody>
</table>
</body>
</html>

The January ZEW indicator of analysts' and institutional investors' confidence in Germany's economic prospects showed a significant rise from December. The optimists outweighed the pessimists by 26.9% in January, compared with a [...]

German Analysts' and Institutional Investors' Confidence Measure (ZEW Index) Makes a Significant Rise

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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Winnie Tapasanun

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Existing home sales unexpectedly fell 2.4% m/m (+2.8% y/y) to 4.09 million units (SAAR) in June, the first monthly decline since March, following an upwardly revised 3.7% increase to 4.19 million in May (previously +3.2%; 4.17 mil.), according to the National Association of Realtors (NAR). The Action Economics Forecast Survey had expected June sales of 4.20 million units. Sales remained 36.4% below a high of 6.43 million in January 2022 and 38.0% below a peak of 6.60 million in January 2021. The June decline coincided with a rise in the average 30-year fixed mortgage rate to 6.49% in June, the highest since August 2025, after increasing to 6.44% in May, according to Freddie Mac. The sales figures are based on closings of sales contracts signed over the past couple of months.

Existing single-family home sales fell 2.4% (+3.3% y/y) to 3.73 million units in June, the first m/m fall in three months, following a 4.1% gain to 3.82 million in May, remaining 34.6% below a high of 5.70 million in January 2022. Sales of condos and co-ops decreased 2.7% (-2.7% y/y) to 360,000 in June, the lowest level since May 2025, after being unchanged m/m for the third successive month at 370,000, remaining 50.7% below a high of 730,000 in January 2022.

Regionally, June existing home sales declined m/m in all regions except the Northeast. Sales in the South dropped 3.6% (+3.8% y/y) to 1.89 million in June, a three-month low, after a 3.2% rise in May, and sales in the Midwest slid 3.0% (+2.1% y/y) to 980,000 following a 7.4% May advance; both posted the first m/m decrease in three months. Sales in the West fell 1.3% (+2.8% y/y) to 740,000, the lowest level since January, after being flat m/m at 750,000 in May. In contrast, sales in the Northeast increased 2.1% (0.0% y/y) to 480,000 after a 4.4% May gain. Notably, the South remained the dominant region, accounting for 46.2% of total U.S. existing home sales.

The median price of all existing homes (NSA) rose 2.2% (1.8% y/y) to $440,600 in June, the fifth consecutive m/m rise, on top of an upwardly revised 3.3% increase to $431,200 in May ($429,300 previously). Prices were 22.1% above a low of $360,800 in January 2023. The median price of an existing single-family home climbed 2.3% (1.8% y/y) to $446,400 in June, the fifth straight m/m increase, after a 3.4% advance to $436,400 in May. The median price of condos and co-ops, up for the sixth time in seven months, grew 0.6% (1.6% y/y) to $380,000 following a 1.0% May gain to $377,800. Regionally, overall prices rose m/m and y/y in June in the Northeast (+5.6%; +3.9% y/y), Midwest (+2.1%; +2.7% y/y), South (+1.0%; +0.9% y/y), and West (+0.8%; +0.9% y/y). All these price series were at their record highs.

Inventories of homes for sale fell m/m in June for the first time since December. The number of existing homes for sale (NSA) declined 0.6% (+1.3% y/y) to 1.56 million units following an upwardly revised 4.7% May rise to 1.57 million (the highest level since November 2019). The supply of homes on the market at the current selling rate (NSA) increased to 4.6 months in June from 4.5 months in May and April, matching the highest level since August 2025. A record low in supply of 1.6 months was in January 2022.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. Mortgage interest rates can be found in the **WEEKLY** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.

260709H57.jpg

260709I57.jpg

- June sales -2.4% m/m to 4.09 mil., first drop in three mths.; +2.8% y/y, third straight y/y rise.
- Sales m/m down in the South (-3.6%), Midwest (-3.0%), and West (-1.3%); up in the Northeast (+2.1%).
- Sales y/y up in all regions except the Northeast w/ a flat reading.
- Median sales price +2.2% (+1.8% y/y) to $440,600, a record high.
- Unsold inventory -0.6% (+1.3% y/y) to 1.56 mil. units, first m/m decline since Dec.; 4.6 months' supply, highest since Aug. ’25.

U.S. Existing Home Sales Unexpectedly Fall in June from a Five-Month High

Kathleen Stephansen, CBE

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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.

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- 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

Robert Brusca

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The German trade surplus surged in May to €19.1 billion from €14.7 billion in April. Exports rose by 0.9% in May while imports fell by 2.5%, creating a jump in the surplus month-to-month. In April, exports increased by 0.8% while imports rose by 1.1%.

Details on exports and imports lag by one month. In April, exports for motor vehicles and consumer goods declined, while exports of capital goods and other exports rose. On the import side, there were increases in imports ranging from 2.8% to 4.3% month-to-month across capital goods, motor vehicles, and consumer goods, but for the catch-all category ‘other’ imports fell by 2.7% month-to-month.

Flows adjusted for inflation showed an increase in exports of 0.4% in May while real imports fell by 3.3%. In April, real exports were flat while real imports fell by 0.2%.

The sequential behavior of real exports and real imports show independent activity. Imports log a clear weakening, rising 0.1% over 12 months, falling at a 5% annual rate over six months, and then falling at a 10.3% annual rate over three months. On the export side, real exports rose by 2.6% over 12 months, accelerated to a 7.2% annual rate over six months, but over three months have pulled back and fallen at a 1.6% annual rate. However, export growth still exceeds import growth over each of these horizons: 12 months, six months, and three months.

Trade trends paint a darkening picture of the German economy, with imports weak in real terms and trending even weaker, while activity on the export side of the equation pops over 12 months and six months but takes a hit over three months.

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The situation in the Strait of Hormuz continues to muddy the waters for the future. Passage through the strait has been sharply stopped, stabilized, revived, and now is back to being destabilized. That makes the strait a major uncertainty zone; it's hard to tell how these effects are going to play out over the coming months for German trade results and everyone else's. The deterioration of conditions in the Strait of Hormuz is now unknowable because Iran has decided to start shooting at ships, further destabilizing the outlook.

Germany

German Trades Surplus Balloons

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.

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**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.

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**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.

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