Tom Moeller

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<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041008a.jpg" width="353"></p>
<p>Nonfarm payrolls grew 96,000 last month following a downwardly revised 128,000 August increase. Consensus expectations had been for a 150,000 job gain in September.</p>
The four hurricanes which struck the US during August and September were estimated to not have had a significant effect on job growth. Jobs lost due to severe weather were offset by hiring for recovery efforts. 
<p>The employment report from the Bureau of Labor Statistics indicated that &quot;At the national level, the severe weather appears to have held down employment growth, but not enough to change materially the Bureau&#39;s assessment of the employment situation in September.&quot; </p>
<p>Factory sector payrolls fell by 18,000 (+0.1% y/y), the first monthly decline since June. A moderate 0.1% (-1.7% y/y) fall in nondurable industries hiring reflected sharp declines in textile mills (-6.4% y/y) and apparel (-5.7% y/y), offset by gains elsewhere. Hiring in durable goods industries was down broadly, 0.1% m/m, but up 1.2% y/y. Construction sector hiring grew a modest 4,000 (2.6% y/y).</p>
<p>Hiring in private service producing industries rose a modest 72,000 (1.6% y/y). Jobs in the financial sector rose another 28,000 m/m (1.1% y/y). Hiring in professional &amp; business services grew 34,000 (3.0% y/y) and temporary help services jobs grew 33,000 (9.6% y/y).</p>
<p>The index of aggregate hours worked (employment times hours worked) in September rose 0.1% (2.4% y/y) for the second consecutive month and in the third quarter grew 3.2% (AR) from 2Q.</p>
<p>Average hourly earnings rose 0.2% (2.4% y/y).</p>
<p>From the separate household survey, the unemployment rate held steady at 5.4%. Employment fell 201,000 (+1.3% y/y) but the labor force also fell by 221,000 (+0.6% y/y), the second consecutive down month, as the labor force participation rate slipped to 65.9%. <i>The Labor Department indicated that &quot;In the household survey, people who miss work for weather-related events are counted as employed whether or not they are paid for the time off.&quot;</i><i><a name="content"><br></a></i></p>

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EB/@EB01/@EB01.HTM"> Employment</a></th>
<th scope="col"><u><b> Sept</b></u></th>
<th scope="col"><u><b>Aug</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><u><b> 2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
<th scope="col"><u><b>2001</b></u></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Payroll Employment</td>
<td>96,000</td>
<td>128,000</td>
<td>1.3%</td>
<td>-0.3%</td>
<td>-1.1%</td>
<td>0.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Manufacturing</td>
<td>18,000</td>
<td>4,000</td>
<td>0.1%</td>
<td>-4.8%</td>
<td>-7.2%</td>
<td>-4.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Average Weekly Hours</td>
<td>33.8</td>
<td>33.8</td>
<td>33.6</td>
<td>33.7</td>
<td>33.8</td>
<td>34.0</td>
</tr>
<tr>
<td class="firstcol">Average Hourly Earnings</td>
<td>0.2%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>2.7%</td>
<td>2.9%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>5.4%</td>
<td>5.4%</td>
<td>6.1%</td>
<td>6.0%</td>
<td>5.8%</td>
<td>4.8%</td>
</tr>
</tbody>
</table>


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Nonfarm payrolls grew 96,000 last month following a downwardly revised 128,000 August increase. Consensus expectations had been for a 150,000 job gain in September. The four hurricanes which struck the US during August and September [...]

U.S. Job Creation Disappointing in September, Hurricane Effects Small

Carol Stone, CBE

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<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041007b.jpg" width="353"></p>
<p>Labor markets in Australia continue to look prosperous, based on data reported today for September. We last reported on them four months ago; employment in May had ticked down, but the unemployment rate was also at its lowest in 23 years. Over the winter in Australia, job growth resumed. The number employed gained 16,000 in July and 63,000 in September, with mild dips in intervening months. Employment is now 237,000 larger than its level in September 2003, a gain of 2.5%, the largest year-on-year percentage increase since May 2003. The unemployment rate stood at 5.6% in September and has hovered since May just above its low then of 5.5%.</p>
<p>In our prior commentary, published on June 10, we described an &quot;employment rate&quot;, that is, the percentage of the working-age population that is employed; this is a ratio we calculated using Haver&#39;s DLXVG3 software. In September it was 60.1%, up from 59.8% in August and from just barely under 60% in May. The September value is only the sixth in the 27-year history of the data which actually exceeds 60%. Similar rates are provided by government statistics bureaus in a number of other countries, and they look remarkably similar. Australia&#39;s 60% is something of a central value; it is almost exactly equal to a June reading in the UK of 59.9%, and it is higher than the recent 57.5% in Italy, but somewhat lower than 62.5% in the US and in Canada.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><b>Australia Labor Force Survey</b></th>
<th scope="col"><b>Sept 2004</b></th>
<th scope="col"><b>Aug 2004</b></th>
<th scope="col"><b>Jul 2004</b></th>
<th scope="col"><b>Year Ago</b></th>
<b>December/December</b>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>2003</b></td>
<td><b>2002</b></td>
<td><b>2001</b></td>
</tr>
<tr>
<td class="firstcol"><b>Employment: Change, Thous</b></td>
<td>+63</td>
<td>-9</td>
<td>+16</td>
<td>+237</td>
<td>+153</td>
<td>+282</td>
<td>+81</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>&nbsp; Yr/Yr % Change</b></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>2.5</td>
<td>1.6</td>
<td>3.0</td>
<td>0.9</td>
</tr>
<tr>
<td class="firstcol"><b>&quot;Employment Rate&quot;*, %</b></td>
<td>60.1</td>
<td>59.8</td>
<td>59.9</td>
<td>59.6</td>
<td>59.8**</td>
<td>59.4**</td>
<td>59.1**</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>Unemployment Rate, %</b></td>
<td>5.6</td>
<td>5.7</td>
<td>5.7</td>
<td>5.9</td>
<td>6.0**</td>
<td>6.4**</td>
<td>6.8**</td>
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Labor markets in Australia continue to look prosperous, based on data reported today for September. We last reported on them four months ago; employment in May had ticked down, but the unemployment rate was also at its lowest in 23 [...]

More Jobs in Australia; Unemployment Still Low

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<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041007a.jpg" width="353"></p>
<p>Initial claims for unemployment insurance fell 37,000 last week to 335,000 after a revised 21,000 jump the prior week. Consensus expectations had been for a more moderate decline to 355,000 claims.</p>
<p>Hurricane Jeanne made landfall on September 25th and initial claims in Florida remained high, but lower claims elsewhere offset this strength.</p>
<p>The 4-week moving average of initial claims rose to 348,500 (-11.6% y/y). During the last ten years there has been an 81% (negative) correlation between the monthly average of initial claims and the y/y change in payroll employment.</p>
<p>Continuing claims for unemployment insurance fell 1,000 following a decline the prior week that was revised deeper to 14,000.</p>
<p>The insured rate of unemployment remained at 2.3% where it has hovered since the end of April.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><b> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></b></th>
<th scope="col"><u><b>10/02/04</b></u></th>
<th scope="col"><u><b> 09/25/04</b></u></th>
<th scope="col"><b><u>Y/Y</u></b></th>
<th scope="col"><u><b> 2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
<th scope="col"><u><b>2001</b></u></th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>335</td>
<td>372</td>
<td>-13.9%</td>
<td>402</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,864</td>
<td>-19.9%</td>
<td>3,531</td>
<td>3,570</td>
<td>3,018</td>
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Initial claims for unemployment insurance fell 37,000 last week to 335,000 after a revised 21,000 jump the prior week. Consensus expectations had been for a more moderate decline to 355,000 claims. Hurricane Jeanne made landfall on [...]

Initial Jobless Insurance Claims Fell Despite Hurricane Jeanne

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<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041006b.jpg" width="353"></p>
<p>Press reports this morning bemoan what they describe as a disappointing outturn for German factory orders in August. Total orders were indeed off 1.5% from July (seasonally adjusted in 2000 prices), with domestic demand down 1.0% and foreign orders down 2.1%. It was the second decline in three months.</p>
<p>Of 12 industries reported, eight experienced decreases, most notably in textiles, leather goods, machinery and electrical equipment. In contrast, chemicals, basic metals and transport equipment saw gains.</p>
<p>As we occasionally highlight with such items as factory orders, a monthly swing one way or another may serve less to show fundamental change than to illustrate the volatility of the information. Thus, a month ago in this space, we described quite respectable development of these orders, with those from foreign customers standing out. Clearly the August decline is not particularly welcome, especially in the face of continuing increases in energy costs, but at the same time, the wide monthly ups and downs in orders suggest that commentators who express alarm over a single report should probably be taken with caution. Note for evidence the sizable advances over year-ago volumes: total foreign orders are up 11.6% and total orders are higher by 10.3%. All but two industries, textiles and leather, share in this growth.<br></p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">% Change</th>
<b>Seasonally Adjusted</b>
<th scope="col"><b>Aug 2003</b></th>
<th scope="col"><b>2003</b></th>
<th scope="col"><b>2002</b></th>
<th scope="col"><b>2001</b></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol"><b>Aug 2004</b></td>
<td><b>Jul 2004</b></td>
<td><b>Jun 2004</b></td>
</tr>
<tr>
<td class="firstcol"><b>Total</b></td>
<td>-1.5</td>
<td>2.8</td>
<td>-3.4</td>
<td>10.3</td>
<td>0.6</td>
<td>-0.3</td>
<td>-2.9</td>
</tr>
<tr class="odd">
<td class="firstcol"><b>Domestic</b></td>
<td>-1.0</td>
<td>0.9</td>
<td>-0.7</td>
<td>9.4</td>
<td>-0.1</td>
<td>-3.4</td>
<td>-3.5</td>
</tr>
<tr>
<td class="firstcol"><b>Foreign</b></td>
<td>-2.1</td>
<td>4.9</td>
<td>-6.3</td>
<td>11.6</td>
<td>1.5</td>
<td>3.5</td>
<td>-2.0</td>
</tr>
</tbody>
</table>
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Press reports this morning bemoan what they describe as a disappointing outturn for German factory orders in August. Total orders were indeed off 1.5% from July (seasonally adjusted in 2000 prices), with domestic demand down 1.0% and [...]

German Factory Orders Decline in August, but Hold Double-Digit Gains over Year-Ago Volume

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<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041006a.jpg" width="353"></p>
<p>The index of mortgage applications compiled by the Mortgage Bankers Association was stable last week with the prior period, but started October 4.1% ahead of the September average.</p>
<p>Applications to refinance rose 2.7% w/w. They began October 11.0% ahead of September when refis rose 12.9% versus August. Purchase applications fell 2.2% and began the month down 1.2% from the September average.</p>
<p>During the last ten years there has been a 60% correlation between the y/y change in purchase applications and the change in new plus existing home sales.</p>
<p>The effective interest rate on a conventional 30-year mortgage rose to 6.05% versus 5.91% the prior week. The effective rate on a 15-year mortgage roe to 5.54%.</p>
<p>&quot;<span class="pageTitle">Interest Rates, Yield Curves and the Monetary Regime&quot; from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/Research/Com2004/06-01.pdf"> here</a>.</span></p>
<p>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>.</p>
</span>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> <b>MBA Mortgage Applications (3/16/90=100)</b></a></th>
<th scope="col"><u><b>10/01/04</b></u></th>
<th scope="col"><u><b>09/24/04</b></u></th>
<th scope="col"><u><b> Y/Y</b></u></th>
<th scope="col"><u><b> 2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
<th scope="col"><u><b>2001</b></u></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>724.8</td>
<td>724.7</td>
<td>-11.3%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>459.0</td>
<td>469.1</td>
<td>4.1%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,270.8</td>
<td>2,211.1</td>
<td>-24.4%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
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The index of mortgage applications compiled by the Mortgage Bankers Association was stable last week with the prior period, but started October 4.1% ahead of the September average. Applications to refinance rose 2.7% w/w. They began [...]

Mortgage Applications Flat

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<span id="articletext">
<p></p>
<p><img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/041006a.jpg" width="353"></p>
<p>The index of mortgage applications compiled by the Mortgage Bankers Association was stable last week with the prior period, but started October 4.1% ahead of the September average.</p>
<p>Applications to refinance rose 2.7% w/w. They began October 11.0% ahead of September when refis rose 12.9% versus August. Purchase applications fell 2.2% and began the month down 1.2% from the September average.</p>
<p>During the last ten years there has been a 60% correlation between the y/y change in purchase applications and the change in new plus existing home sales.</p>
<p>The effective interest rate on a conventional 30-year mortgage rose to 6.05% versus 5.91% the prior week. The effective rate on a 15-year mortgage roe to 5.54%.</p>
<p>&quot;<span class="pageTitle">Interest Rates, Yield Curves and the Monetary Regime&quot; from the Federal Reserve Bank of Cleveland can be found <a href="http://www.clevelandfed.org/Research/Com2004/06-01.pdf"> here</a>.</span></p>
<p>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>.</p>
</span>
<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> <b>MBA Mortgage Applications (3/16/90=100)</b></a></th>
<th scope="col"><u><b>10/01/04</b></u></th>
<th scope="col"><u><b>09/24/04</b></u></th>
<th scope="col"><u><b> Y/Y</b></u></th>
<th scope="col"><u><b> 2003</b></u></th>
<th scope="col"><b><u>2002</u></b></th>
<th scope="col"><u><b>2001</b></u></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>724.8</td>
<td>724.7</td>
<td>-11.3%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>459.0</td>
<td>469.1</td>
<td>4.1%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,270.8</td>
<td>2,211.1</td>
<td>-24.4%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
</html>


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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

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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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U.S. Job Creation Disappointing in September, Hurricane Effects Small

U.S. Job Creation Disappointing in September, Hurricane Effects Small

More Jobs in Australia; Unemployment Still Low

Initial Jobless Insurance Claims Fell Despite Hurricane Jeanne

Initial Jobless Insurance Claims Fell Despite Hurricane Jeanne

German Factory Orders Decline in August, but Hold Double-Digit Gains over Year-Ago Volume

Mortgage Applications Flat

Mortgage Applications Flat