Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041028b.jpg" width="353">
Initial claims for unemployment insurance last week recouped most of the prior period&#39;s decline with a 20,000 rise to 350,000 following a 25,000 decline that was little revised. The Consensus expectation had been for 340,000 claims.
During the last ten years there has been a (negative) 73% correlation between the level of initial claims and the m/m change in payroll employment.
The 4-week moving average of initial claims fell to 343,250 (-11.6% y/y).
Continuing claims for unemployment insurance rose 38,000 after sharp declines during five of the prior six weeks.
The insured rate of unemployment remained at 2.2% for the third week.

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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"> 10/23/04</th>
<th scope="col"> 10/16/04</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">Initial Claims</td>
<td>350</td>
<td>330</td>
<td>-9.3%</td>
<td>402</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,823</td>
<td>-19.5%</td>
<td>3,531</td>
<td>3,570</td>
<td>3,018</td>
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</tbody>
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Initial claims for unemployment insurance last week recouped most of the prior period's decline with a 20,000 rise to 350,000 following a 25,000 decline that was little revised. The Consensus expectation had been for 340,000 claims. [...]

Initial Jobless Insurance Claims Rose

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041028b.jpg" width="353">
Initial claims for unemployment insurance last week recouped most of the prior period&#39;s decline with a 20,000 rise to 350,000 following a 25,000 decline that was little revised. The Consensus expectation had been for 340,000 claims.
During the last ten years there has been a (negative) 73% correlation between the level of initial claims and the m/m change in payroll employment.
The 4-week moving average of initial claims fell to 343,250 (-11.6% y/y).
Continuing claims for unemployment insurance rose 38,000 after sharp declines during five of the prior six weeks.
The insured rate of unemployment remained at 2.2% for the third week.

<table border="0" cellspacing="0" width="100%">
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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"> 10/23/04</th>
<th scope="col"> 10/16/04</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>
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<td class="firstcol">Initial Claims</td>
<td>350</td>
<td>330</td>
<td>-9.3%</td>
<td>402</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,823</td>
<td>-19.5%</td>
<td>3,531</td>
<td>3,570</td>
<td>3,018</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041028c.jpg" width="353">
The National Index of Help-Wanted Advertising published by the Conference Board fell to 36 in September, the lowest level since May of last year.
The proportion of labor markets with rising want-ad volume plunged to 25%, half the prior month&#39;s level and the lowest since March.
During the last ten years there has been an 89% correlation between the level of help-wanted advertising and the year-to-year change in non-farm payrolls.
Recent weakness in help wanted indicates that most, if not all, of the improvement in non-farm payroll growth has been due to fewer job losses, not improved hiring and explains why the recent three month growth in payrolls of 0.9% is well below the growth which characterized other US economic recovery periods.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. 

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col"> Sept</th>
<th scope="col">Aug</th>
<th scope="col">Sept &#39;03</th>
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<tbody>
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<td class="firstcol">National Help Wanted Index</td>
<td>36</td>
<td>37</td>
<td>37</td>
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</table>
New Home Sales Higher Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041028a.jpg" width="353">
Sales of new single-family homes rose 3.5% in September to 1.206M, the highest level since May. Consensus estimates had been for sales of 1.150M. 
Sales rose in each of the country&#39;s regions except the West where a 0.8% (+9.1% y/y) decline followed a 10.1% August jump. In the South sales rose 2.7% (4.3% y/y) and in the Northeast sales rose 6.0% (-19.3% y/y). Sales in the Midwest jumped 12.3% (22.7% y/y).
The median price of a new single family home fell 8.4% m/m to $197,700 (3.0% y/y).

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E90401/@E90401.HTM"> Homes Sales (000s, AR)</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</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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<td class="firstcol">New Single-Family</td>
<td>1,206</td>
<td>1,165</td>
<td>7.0%</td>
<td>1,089</td>
<td>976</td>
<td>907</td>
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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/041027a.jpg" width="353">
September durable goods orders continued to be pushed around by the aircraft sector. Orders in that volatile industry fell back for a second month after their spike in June and July. Total durable goods orders turned up 0.2% following August&#39;s 0.6% fall; machinery and high tech equipment were mainly responsible for the advance.
Nondefense capital goods orders managed a 0.6% increase in September. Excluding the decline in commercial aircraft, they were up a notable 2.6%. This was the fourth consecutive monthly gain in that segment and extended a generally rising trend that began early in 2003.
Shipments, after a good gain of 1.9% in August, dropped back 1.2% last month. The distribution was mixed among industries and categories. With the decline in shipments, the backlog of unfilled orders rose 0.7%. A simple ratio of the backlog to shipments in industries that have unfilled orders stands at almost 4.0 months. This is not high by recent standards, but indicates a stabilization after a two-and-a-half year downtrend.
Inventories of durable goods rose 0.3% (6.3% y/y) moderating further after July&#39;s 1.1% spike and August&#39;s sizable 0.8% rise.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">July</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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<td class="firstcol">Durable Goods Orders</td>
<td>0.2%</td>
<td>-0.6%</td>
<td>1.9%</td>
<td>9.3%</td>
<td>3.0%</td>
<td>-1.9%</td>
<td>-10.6%</td>
</tr>
<tr>
<td class="firstcol">Nondefense Capital Goods</td>
<td>0.6%</td>
<td>-7.2%</td>
<td>9.3%</td>
<td>8.5%</td>
<td>6.4%</td>
<td>-7.4%</td>
<td>-15.8%</td>
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<td class="firstcol">Excluding Aircraft</td>
<td>2.6%</td>
<td>0.3%</td>
<td>0.6%</td>
<td>7.5%</td>
<td>2.8%</td>
<td>-6.4%</td>
<td>-10.5%</td>
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September durable goods orders continued to be pushed around by the aircraft sector. Orders in that volatile industry fell back for a second month after their spike in June and July. Total durable goods orders turned up 0.2% following [...]

U.S. Durable Goods Orders Turn Up, Helped by Machinery & Computers

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041026e.jpg" width="353">
The fourth quarter survey of industrial trends in the United Kingdom undertaken by the Confederation of Business Industries (CBI) revealed a sharp increase in pessimism among the 770 manufacturers participating in the survey. The CBI publishes the percent balance between those respondents who have a positive outlook and those who have a negative outlook on a number of business issues.
There were 10% more pessimists regarding domestic prospects than optimists in the latest survey. This compares with an excess of optimists of 7% in the third quarter survey. The pessimists and optimists were equally balanced regarding the outlook for exports in the fourth quarter survey, compared with an excess of optimists of 3% in the previous quarter.
One bright spot in the survey is the outlook for output over the next three months. In spite of the decline in optimism and a one percentage point drop in the balance, 6% more respondents increased rather than decreased output over the past three months and the balance of those expecting to increase over those expecting to lower output in the next three months rose to 14% from 6% in the third quarter..
In contrast to the optimism among manufacturers regarding output over the next three months is the pessimism regarding the outlook for capital spending and employment. The balance between those who expect to increase over those who expect to decrease spending on buildings has gone from -16 in the third quarter to -26 in the fourth. The comparable balances for spending on plant and equipment are 0 and -17. Furthermore, the balance between those who expect to increase over those intending to decrease employment in the next three months was -15 in the fourth quarter, compared to -7 in the third quarter.
In the first quarter of this year, the balance of those expecting prices to rise over those expecting them to fall was, for the first time since early 2001, greater than the balance of those expecting costs to rise over those expecting them to fall, suggesting that the respondents to the survey were looking forward to better profit trends. This relationship was, however, short lived and once more the balance of those predicting an increase over those predicting a decrease in costs is greater than the balance of those predicting a rise over those predicting a fall in prices. The trends are shown in the attached chart.

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<th scope="col" class="firstcol">CBI SURVEY&nbsp; (Percent Balances)</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 Pt Chg</th>
<th scope="col">Y/Y&nbsp; Pt Chg</th>
<th scope="col">2004</th>
<th scope="col">2003&nbsp;&nbsp;</th>
<th scope="col">&nbsp;2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp;</th>
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<td class="firstcol">Business Optimism Domestic</td>
<td>-10</td>
<td>7</td>
<td>-7</td>
<td>-17</td>
<td>-3</td>
<td>7</td>
<td>-17</td>
<td>-6</td>
<td>-27</td>
</tr>
<tr>
<td class="firstcol">Business Optimism Exports</td>
<td>0</td>
<td>3</td>
<td>-8</td>
<td>-3</td>
<td>8</td>
<td>7</td>
<td>-15</td>
<td>-6</td>
<td>-22</td>
</tr>
<tr class="odd">
<td class="firstcol">Output, past three months</td>
<td>6</td>
<td>7</td>
<td>-19</td>
<td>-1</td>
<td>25</td>
<td>11</td>
<td>-12</td>
<td>-13</td>
<td>-4</td>
</tr>
<tr>
<td class="firstcol">Output, next three months</td>
<td>14</td>
<td>6</td>
<td>-4</td>
<td>8</td>
<td>18</td>
<td>13</td>
<td>-4</td>
<td>5</td>
<td>-2</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Prices, next three months</td>
<td>1</td>
<td>6</td>
<td>-7</td>
<td>-5</td>
<td>8</td>
<td>3</td>
<td>-10</td>
<td>-13</td>
<td>-12</td>
</tr>
<tr>
<td class="firstcol">Unit Cost, next three months</td>
<td>14</td>
<td>13</td>
<td>-2</td>
<td>1</td>
<td>16</td>
<td>7</td>
<td>-1</td>
<td>-7</td>
<td>-4</td>
</tr>
<tr class="odd">
<td class="firstcol">Capital Expenditures, buildings</td>
<td>-26</td>
<td>-16</td>
<td>-29</td>
<td>-10</td>
<td>3</td>
<td>-18</td>
<td>-29</td>
<td>-26</td>
<td>-24</td>
</tr>
<tr>
<td class="firstcol">Capital Expenditures, plant &amp; equip</td>
<td>-17</td>
<td>0</td>
<td>-14</td>
<td>-17</td>
<td>-3</td>
<td>-3</td>
<td>-21</td>
<td>-23</td>
<td>-15</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment, past three months</td>
<td>-4</td>
<td>2</td>
<td>-21</td>
<td>-6</td>
<td>17</td>
<td>-6</td>
<td>-25</td>
<td>-31</td>
<td>-15</td>
</tr>
<tr>
<td class="firstcol">Employment, next three months</td>
<td>-15</td>
<td>-7</td>
<td>-26</td>
<td>-8</td>
<td>11</td>
<td>-11</td>
<td>-28</td>
<td>-26</td>
<td>-21</td>
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</tbody>
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The fourth quarter survey of industrial trends in the United Kingdom undertaken by the Confederation of Business Industries (CBI) revealed a sharp increase in pessimism among the 770 manufacturers participating in the survey. The CBI [...]

Pessimism Among U. K. Manufacturers Rises in the Fourth Quarter

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041026c.jpg" width="353">
Chain store sales fell another 0.6% last week and added to the 0.2% slip the prior period, according to the International Council of Shopping Centers (ICSC)-UBS.
The decline dropped sales so far in October 0.2% below the September average which fell 0.7% versusAugust.
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. 

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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">10/23/04</th>
<th scope="col">10/16/04</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">Total Weekly Retail Chain Store Sales</td>
<td>433.9</td>
<td>436.4</td>
<td>3.7%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Chain store sales fell another 0.6% last week and added to the 0.2% slip the prior period, according to the International Council of Shopping Centers (ICSC)-UBS. The decline dropped sales so far in October 0.2% below the September [...]

U.S. Chain Store Sales Down Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041026b.jpg" width="353">
The average price for unleaded regular gasoline rose to $2.03 per gallon last week and has averaged $2.00 so far this month.
The inflation adjusted &quot;real&quot; price of gasoline remained well below the early 1981 peak, but the roughly 50% increase during the last two years rivals the gain leading to the prior peak.
Crude oil prices also rose further. The price of West Texas Intermediate crude surged yesterday to $55.23 per barrel versus $53.29/bbl. averaged last week and $45.95 in September.
Wholesale natural gas prices also rose yesterday to $7.12/mmbtu (+55.8% y/y) and have averaged $5.96 in October versus $4.98 in September.
For the latest Short Term Energy Outlook from the US Department of Energy click <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">here</a>.
&quot;Monetary Policy and Inflation Dynamics&quot; from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2004/200462/200462abs.html">here.</a>

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/daily/@D3/@D306/@D306.HTM">Energy Prices</a></th>
<th scope="col">10/19/04</th>
<th scope="col">12/31/03</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">US Retail Gasoline, Regular ($/Gal.)</td>
<td>$2.03</td>
<td>$1.48</td>
<td>31.8%</td>
<td>$1.56</td>
<td>$1.35</td>
<td>$1.42</td>
</tr>
<tr>
<td class="firstcol">Domestic Spot Market Price: West Texas Intermediate ($/Barrel)</td>
<td>$53.29</td>
<td>$32.55</td>
<td>76.6%</td>
<td>$32.78</td>
<td>$31.23</td>
<td>$19.38</td>
</tr>
</tbody>
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The average price for unleaded regular gasoline rose to $2.03 per gallon last week and has averaged $2.00 so far this month. The inflation adjusted "real" price of gasoline remained well below the early 1981 peak, but the roughly 50% [...]

Gasoline Above $2.00/gal. & Crude Oil Topped $50/bbl.

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041026a.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence fell a sharp 4.0% in October to 92.8. It was the third consecutive monthly decline and was to the lowest level since March. Consensus expectations had been for a reading of 93.5.
During the last twenty years there has been a 50% correlation between consumer confidence and the y/y change in real consumer spending.
The present situation index fell a moderate 1.2% (+40.6% y/y) for the third consecutive down month but the index of consumer expectations fell a sharp 5.8% to 92.0 (+0.5% y/y).
Jobs were viewed as hard to get by fewer survey participants, 27.8% versus 28.0% in September although 18.4% of participants expected fewer jobs in six months, the highest percentage since February.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">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>
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<td class="firstcol">Consumer Confidence</td>
<td>92.8</td>
<td>96.7</td>
<td>13.6%</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
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The Conference Boards Index of Consumer Confidence fell a sharp 4.0% in October to 92.8. It was the third consecutive monthly decline and was to the lowest level since March. Consensus expectations had been for a reading of 93.5. [...]

Consumer Confidence Down Sharply

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.

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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

Robert Brusca

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Manufacturing output in the countries of the European Monetary Union continues to underperform. The median change for the 11 countries reporting on the table is a 0.5% decline in May following a 0.3% increase in April. However, only 41.7% of the reporters are accelerating in May, compared to 25% in April, although in March over half of the reporters had showed some acceleration, with output at 61.5%.

In May, of these eleven early reporters, seven showed month-to-month declines in output. This compares to four showing declines in April and four showing declines in March.

**Sequential trends**
Over 12 months, output is declining in four of these eleven countries: Germany, Luxembourg, Ireland, and Portugal. Over six months, output declines in five of the eleven countries. Over three months, output declines in four of the eleven countries. Over these broader sequential periods, output is increasing in most cases; only one country, Ireland, shows consistent declines in output over three months, six months, and 12 months. However, among EMU countries, only Italy shows output expanding on all three timelines, although Sweden, an EU member country, also shows output increasing in all three periods.

Amid the output weakness in May, the quarter-to-date calculation for industrial production growth is also broadly weak. In May, seven of the eleven quarter-to-date changes in industrial production are negative. Positive results, increases in the quarter-to-date, are registered by Germany, Luxembourg, Greece, and Portugal.

The ranking of the year-over-year growth rates shows seven countries with output growth rate rankings below 50%, marking them as below their respective medians. The comparisons for output growth are taken back to 2006, a period of about 20 years.

Four EMU countries rank above their twenty-year medians: France, Italy, Luxembourg, and Greece.

The snapshot of industry in the monetary union is consistent, showing little momentum, little strength, and relatively low rankings for current growth rates; only a minority of reporters show an acceleration in growth in May compared to April. With the situation in the Strait of Hormuz deteriorating again, the outlook for industrial production has to remain guarded.

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Europe

Industrial Sector Remains Under Pressure in EMU

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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- 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

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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.

Economy in Brief

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Initial Jobless Insurance Claims Rose

Initial Jobless Insurance Claims Rose

U.S. Durable Goods Orders Turn Up, Helped by Machinery & Computers

U.S. Durable Goods Orders Turn Up, Helped by Machinery & Computers

Pessimism Among U. K. Manufacturers Rises in the Fourth Quarter

U.S. Chain Store Sales Down Again

Gasoline Above $2.00/gal. & Crude Oil Topped $50/bbl.

Consumer Confidence Down Sharply