Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041123c.jpg" width="353">
Sales of existing single family homes held the high ground with a 0.1% (+5.6% y/y) slip in October to 6.75M. September sales were revised up slightly and Consensus expectations had been for sales of 6.72M.
The figures reflect closings of home sales in earlier months.
Sales fell moderately in most areas of the country except in the South where they rose (+7.4% y/y) to a record high.
The median price of an existing home rose slightly to $187,000 (+8.8% y/y) following three months of decline.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</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>
<td class="firstcol">Existing Single-Family</td>
<td>&nbsp;6,750</td>
<td>&nbsp;6,760</td>
<td>5.6%</td>
<td>6,098</td>
<td>5,593</td>
<td>5,290</td>
</tr>
</tbody>
</table>
Chicago Fed Nat'l Activity Index Improved Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 23, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041123b.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) for October rose to 0.52 but the prior month&#39;s negative reading was deepened slightly. The three-month moving average of the CFNAI fell to the lowest level in nearly a year.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
During the last twenty years there has been a 74% correlation between the level of the CFNAI and q/q growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago Fed</a></th>
<th scope="col">Oct</th>
<th scope="col">Sept</th>
<th scope="col">Oct &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>0.52</td>
<td>-0.04</td>
<td>0.19</td>
<td>-0.11</td>
<td>-0.40</td>
<td>-1.19</td>
</tr>
</tbody>
</table>
Chain Store Sales Recover 
by <a href="/comment/Moeller.html">Tom Moeller</a> November 23, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041123a.jpg" width="353">
Last week, chain store sales recovered 0.8% following the prior week&#39;s 0.4% dip, according to the International Council of Shopping Centers (ICSC)-UBS.
Sales so far in November are 0.7% ahead of October.
Not so positive was the second consecutive 0.5% weekly decline in the leading indicator of chain store sales from ICSC. The monthly average is up just 0.2% from October which rose 0.4% from September.
During the last ten years there has been a 60% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
This 2001 report from the Federal Reserve Bank of New York examines <a href="http://www.newyorkfed.org/research/current_issues/ci7-11.pdf"> &quot;The Effect of Tax Changes on Consumer Spending&quot;</a>. 

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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">11/20/04</th>
<th scope="col">11/13/04</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>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>439.6</td>
<td>436.1</td>
<td>3.9%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Sales of existing single family homes held the high ground with a 0.1% (+5.6% y/y) slip in October to 6.75M. September sales were revised up slightly and Consensus expectations had been for sales of 6.72M. The figures reflect closings [...]

U.S. Existing Home Sales Remained High

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041123d.jpg" width="353">
Taiwan&#39;s third quarter real gross domestic production, on a seasonally unadjusted basis. was 5.3% above the third quarter of 2003 In nominal terms it was 4.7% above a year ago, indicating that deflation is still a factor in the Taiwanese economy.The attached chart shows the year-to-year changes in Taiwan&#39;s real and nominal GDP.
Detailed data for the third quarter real GDP are not yet available, but the nominal data indicate that the improvement in capital spending that began late last year is continuing at a fast year-over-year rate of 20.1%. Exports are up almost 20% and imports, probably reflecting the strength in capital spending, are up 30.3%. Even private consumption expenditures are showing strength. Although, the year-to-year increases have been declining this year, they are well above the quarters of last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041123e.jpg" width="353">
While changes in the deflator are still negative, changes in consumer and wholesale prices have become positive. Big increases in agricultural products and petroleum products have led to sharp increases in wholesale prices that are beginning to affect consumer prices. In the table below we have aggregated the monthly wholesale and consumer data to quarterly for easy comparison with the GDP deflator. The second chart compares the year-to-year change in the GDP deflator and the Consumer Price Index. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol">Year-to-Year % Change&nbsp;</th>
<th scope="col">Q3 04</th>
<th scope="col">Q2&nbsp; 04</th>
<th scope="col">Q1 04</th>
<th scope="col">Q4 03</th>
<th scope="col">Q3 04</th>
<th scope="col">Q2 04&nbsp;&nbsp;</th>
<th scope="col">Q1 03&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Real GDP</td>
<td>5.27</td>
<td>7.88</td>
<td>6.72</td>
<td>7.22</td>
<td>4.82</td>
<td>1.61</td>
<td>5.26</td>
</tr>
<tr>
<td class="firstcol">Nominal GDP</td>
<td>3.73</td>
<td>4.90</td>
<td>4.69</td>
<td>2.83</td>
<td>1.54</td>
<td>-1.86</td>
<td>0.98</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Private Consumption</td>
<td>3.50</td>
<td>5.45</td>
<td>4.17</td>
<td>1.98</td>
<td>0.59</td>
<td>-2.58</td>
<td>0.27</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Gross Fixed Capital&nbsp;</td>
<td>20.12</td>
<td>23.52</td>
<td>16.14</td>
<td>6.75</td>
<td>-1.96</td>
<td>-6.99</td>
<td>-1.97</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports&nbsp;&nbsp;</td>
<td>19.47</td>
<td>25.25</td>
<td>17.16</td>
<td>14.64</td>
<td>9.37</td>
<td>3.41</td>
<td>10.82</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>30.25</td>
<td>32.72</td>
<td>25.57</td>
<td>18.50</td>
<td>3.46</td>
<td>3.46</td>
<td>15.76</td>
</tr>
<tr class="odd">
<td class="firstcol">GDP Deflator&nbsp;</td>
<td>-0.97</td>
<td>-2.84</td>
<td>-1.83</td>
<td>-2.45</td>
<td>-2.20</td>
<td>-1.71</td>
<td>-2.16</td>
</tr>
<tr>
<td class="firstcol">CPI</td>
<td>2.89</td>
<td>1.20</td>
<td>0.51</td>
<td>-0.19</td>
<td>-0.59</td>
<td>-0.11</td>
<td>-0.21</td>
</tr>
<tr class="odd">
<td class="firstcol">WPI</td>
<td>10.47</td>
<td>6.46</td>
<td>2.47</td>
<td>0.92</td>
<td>1.76</td>
<td>2.22</td>
<td>5.07</td>
</tr>
</tbody>
</table>
</body>
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Taiwan's third quarter real gross domestic production, on a seasonally unadjusted basis. was 5.3% above the third quarter of 2003 In nominal terms it was 4.7% above a year ago, indicating that deflation is still a factor in the [...]

Taiwan Shows Good Growth in the Third Quarter: Consumer and Wholesale Price Increases Suggest Deflation May Soon [...]

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041122a.jpg" width="353">
The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) rose last week for the fourth period in the last five. The 0.4% w/w rise eased the decline in the index&#39;s smoothed six-month growth rate to -0.7% from -1.6% late last month.
Successive positive growth in the weekly index as recently tallied occurred last this past March after which the index&#39;s forward momentum eased, foreshadowing a slowdown in real GDP growth into the 3-4% range from the 4-7% range.
Past recessionary periods in the US economy were signaled by negative growth in the ECRI Leading Index in the -5 to -10% range. 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>.

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<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">11/12/04</th>
<th scope="col">11/05/04</th>
<th scope="col">Growth Rate</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">Weekly</td>
<td>132.7</td>
<td>132.2</td>
<td>-0.7%</td>
<td>6.5%</td>
<td>1.1%</td>
<td>-5.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>Oct</td>
<td>Sept</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Monthly</td>
<td>131.2</td>
<td>131.7</td>
<td>-1.2%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
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The Weekly Leading Index of the US economy published by the Economic Cycle Research Institute (ECRI) rose last week for the fourth period in the last five. The 0.4% w/w rise eased the decline in the index's smoothed six-month growth [...]

ECRI U.S. Leading Index Moved 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/041119d.jpg" width="353">
The Cabinet Office of the Japanese Government announced yesterday that it would shift GDP calculations to chain-weighting beginning with the release of revised Q3 data on December 8. It will also switch the reference year from 1995 to 2000 and incorporate new input data in various components.
Beneficially for users, the Cabinet Office released &quot;Interim series&quot;, in which the current official data are converted to a chain-weighted basis, so the effect of the chain-weighting alone can be seen. Total GDP in 1995 yen is reduced from &yen;567.6 trillion in Q3 to &yen;550.2 trillion, or about 3.1%. The hesitant growth in the latest couple of quarters is eliminated all together.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041119c.jpg" width="353">
While this now flat pattern in Japanese GDP might be disappointing, some growth is still evident over the last year, and the pattern now in evidence allows a more realistic appraisal. Chain-weighting or chain-linking reduces the numerical impact on total growth of components for which prices are falling rapidly. Since computer prices are the main single source of price decline, the adjustment to growth is most apparent in fixed investment. Private fixed investment is lowered by &yen;5.2 trillion or 5.3% in the latest quarter. While in nominal yen, investment is 15.5% of total GDP, its share of the chaining adjustment is 30%. Interestingly, this negative difference is, however, a recent development, and in the late 1990s, chained investment was sometimes slightly larger than fixed-weight investment. This unusual situation bears closer investigation and may be related to the overall pattern of deflation in the Japanese economy.
The &quot;interim&quot; chain-weight series are now contained in Haver&#39;s JAPAN database, right in the &quot;National Accounts&quot; menus. Our colleagues at Nomura Research Institute in Tokyo assisted with a quick translation of the release tables into English.

<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">Trillion Yen</th>
<th scope="col">3 Qtr 2004</th>
<th scope="col">2 Qtr 2004</th>
<th scope="col">Year Ago</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">GDP: Chain Weighted</td>
<td>550.2</td>
<td>550.4</td>
<td>535.8</td>
<td>535.9</td>
<td>528.9</td>
<td>530.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>-0.0</td>
<td>0.0</td>
<td>2.7</td>
<td>1.3</td>
<td>-0.4</td>
<td>0.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Fixed Weighted</td>
<td>567.6</td>
<td>567.2</td>
<td>546.9</td>
<td>546.4</td>
<td>533.3</td>
<td>534.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>0.1</td>
<td>0.3</td>
<td>3.8</td>
<td>2.5</td>
<td>-0.2</td>
<td>0.6</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">Private Fixed Investment: Chain Weighted</td>
<td>93.9</td>
<td>94.6</td>
<td>87.4</td>
<td>88.2</td>
<td>82.6</td>
<td>88.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>-0.8</td>
<td>0.2</td>
<td>7.4</td>
<td>6.8</td>
<td>-6.3</td>
<td>0.7</td>
</tr>
<tr>
<td class="firstcol">Fixed Weighted</td>
<td>99.1</td>
<td>99.3</td>
<td>90.7</td>
<td>91.1</td>
<td>83.1</td>
<td>89.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Change</td>
<td>-0.2</td>
<td>0.6</td>
<td>9.2</td>
<td>9.6</td>
<td>-6.9</td>
<td>1.7</td>
</tr>
</tbody>
</table>
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The Cabinet Office of the Japanese Government announced yesterday that it would shift GDP calculations to chain-weighting beginning with the release of revised Q3 data on December 8. It will also switch the reference year from 1995 to [...]

Chain-Linking Comes to Japan's GDP Accounts

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041119a.jpg" width="353">
The Philadelphia Fed&#146;s November index of general business conditions in the manufacturing sector eased to 20.7 from 28.5. A decline to 23.2 had been the Consensus expectation.
During the last ten years there has been a 71% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 53% correlation with q/q growth in real GDP.
Most of the sub indexes declined with the notable exception of the index for the number of employees which rose to 17.4 and recovered most of the prior month&#39;s.
The business conditions index reflects a separate survey question, not the sub indexes.
The separate index of expected business conditions in six months reversed virtually all of the prior two months&#39; declines with a 24.5 point jump to 52.1. That was still off the highs last year in the 60s.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041119b.jpg" width="353">
The prices paid index fell to 53.9. Expectations for prices rose to the highest level since March. During the last ten years there has been a 76% correlation between the prices paid index and the three month growth in the PPI for intermediate goods. The correlation with the finished goods PPI has been 41% and with the CPI it&#39;s been 45%.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos1104.html">here</a>.
Today&#39;s comments by Fed Chairman Greenspan on the Euro can be found <a href="http://www.federalreserve.gov/boarddocs/speeches/2004/20041119/default.htm"> 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/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">Nov</th>
<th scope="col">Oct</th>
<th scope="col">Nov &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>20.7</td>
<td>28.5</td>
<td>27.9</td>
<td>10.6</td>
<td>7.7</td>
<td>-17.2</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>53.9</td>
<td>57.1</td>
<td>26.2</td>
<td>16.7</td>
<td>12.2</td>
<td>-0.9</td>
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The Philadelphia Feds November index of general business conditions in the manufacturing sector eased to 20.7 from 28.5. A decline to 23.2 had been the Consensus expectation. During the last ten years there has been a 71% correlation [...]

Philadelphia Fed Activity Index Eased

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041118c.jpg" width="353">
Hesitant improvement are evident in labor market conditions reported today by two widely disparate areas, Hong Kong and Sweden. Both have undergone economic &quot;adjustments&quot; over the last couple years, but it now looks that both are starting to turn around.
This is clearer in Hong Kong, where employment growth in the three months ended in October is a notable 2.8% above year-earlier levels. Month-to-month moves, even in this moving average series, are fairly irregular, but the longer trend looks favorable, especially after two years of contraction in 2002 and 2003. The unemployment rate is falling too, reaching 6.7% in the October period, down from a peak of 8.6% in mid-2003 and the lowest since early 2002.
In Sweden, the employment figures are not so buoyant, still on the downside compared with a year ago, but the decline now seems to be occurring more gradually. More hopeful is a reduction in the unemployment rate, which fell below 5% for the first time in 14 months and well off its high of 6.0% in February and much higher levels in prior years.
For both regions, the price of energy remains a wildcard as a potential block to further progress. As in the US, fuel prices for both transportation and heating have climbed sharply. Thus it remains to be seen if these recently better labor force developments will continue or be constrained by ballooning energy budgets. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Labor Force Data</th>
<th scope="col">Oct 2004</th>
<th scope="col">Sept 2004</th>
<th scope="col">Aug 2004</th>
<th scope="col">Year Ago</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">Hong Kong Employment &nbsp; (3-mo Avg, Mil., SA)</td>
<td>3.30</td>
<td>3.28</td>
<td>3.30</td>
<td>3.21</td>
<td>3.22</td>
<td>3.23</td>
<td>3.25</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Chg</td>
<td>0.5</td>
<td>-0.4</td>
<td>0.1</td>
<td>2.8</td>
<td>-0.4</td>
<td>-0.6</td>
<td>1.4</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>6.7</td>
<td>6.8</td>
<td>6.8</td>
<td>8.0</td>
<td>8.0</td>
<td>7.3</td>
<td>5.1</td>
</tr>
<tr>
<td class="firstcol">Underemployment Rate</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Sweden Employment &nbsp; (Mil., NSA)</td>
<td>4.20</td>
<td>4.20</td>
<td>4.27</td>
<td>4.22</td>
<td>4.23</td>
<td>4.24</td>
<td>4.24</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Chg</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>-0.6</td>
<td>-0.2</td>
<td>0.1</td>
<td>2.0</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>4.9</td>
<td>5.8</td>
<td>5.5</td>
<td>5.1</td>
<td>4.9</td>
<td>4.0</td>
<td>4.0</td>
</tr>
</tbody>
</table>
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Hesitant improvement are evident in labor market conditions reported today by two widely disparate areas, Hong Kong and Sweden. Both have undergone economic "adjustments" over the last couple years, but it now looks that both are [...]

Unemployment Rates Down in Hong Kong & Sweden

PMIs showing widespread revival of global economy

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

Surging orders for computers and electronics propelling durable goods orders

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

Disrupted global supply chains placing upward pressure on US goods prices

Construction of data centers has overtaken transportation construction in US

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

US is big leader in global surge in private AI investment

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

Sharply rising share of AI-related jobs

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

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

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Andrew Cates

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

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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).

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**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.

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**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.

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**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.

260709Z6.jpg

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

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Charts of the Week: Growth Holds Firm

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.

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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

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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.

Economy in Brief

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U.S. Existing Home Sales Remained High

Taiwan Shows Good Growth in the Third Quarter: Consumer and Wholesale Price Increases Suggest Deflation May Soon [...]

ECRI U.S. Leading Index Moved Up

ECRI U.S. Leading Index Moved Up

Chain-Linking Comes to Japan's GDP Accounts

Philadelphia Fed Activity Index Eased

Philadelphia Fed Activity Index Eased

Unemployment Rates Down in Hong Kong & Sweden