Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040915c.jpg" width="353">
Total business inventories rose 0.9% in July, marking the eleventh consecutive month of accumulation. Consensus expectations were for a 0.7% increase. During the last ten years there has been a 60% correlation between the y/y change in inventories and the change in factory sector industrial production.
Retail inventories rose 0.6%, half the rate of accumulation in June. Higher auto inventories accounted for all of the gain with a 1.8% (12.4% y/y) rise. Non-auto inventories actually fell slightly following five months of moderate accumulation. Apparel (-0.1% y/y) &amp; general merchandise (+3.6% y/y) accounted for the July drop.
Wholesale inventories jumped 1.3%, the third consecutive strong monthly increase. During the last ten years there has been a 62% correlation between the y/y change in wholesale inventories and the change in imports of merchandise.
Overall business sales rose 0.6% (+9.9% y/y).
The ratio of inventories-to-sales rose to 1.32 but remained below the 1.37 averaged last year.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM"> Business Inventories</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.9%</td>
<td>1.1%</td>
<td>6.4%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.6%</td>
<td>1.2%</td>
<td>7.3%</td>
<td>4.9%</td>
<td>6.0%</td>
<td>-2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>-0.0%</td>
<td>0.5%</td>
<td>4.8%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.3%</td>
<td>1.1%</td>
<td>8.6%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.8%</td>
<td>1.0%</td>
<td>3.9%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
</tbody>
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Total business inventories rose 0.9% in July, marking the eleventh consecutive month of accumulation. Consensus expectations were for a 0.7% increase. During the last ten years there has been a 60% correlation between the y/y change [...]

U.S. Inventory Accumulation Raised Output

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040915a.jpg" width="353">
The Empire State Index of General Business Conditions in New York&#39;s manufacturing industries recovered most of the prior month&#39;s skid with a 15.1 point rise in September to 28.34.
All of the activity components of the survey recovered, especially new orders and shipments.The employment measure, as well, rose notably. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The prices paid rose modestly to 51.64 from 50.00 in August but remained below the highs of earlier this year.
Expectations for business conditions six months ahead rose sharply to the highest level since January. Expectations for capital expenditures also jumped to the highest level since April.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM"> Empire State Manufacturing Survey</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">9/03</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">General Business Conditions (diffusion index)</td>
<td>28.34</td>
<td>13.22</td>
<td>19.96</td>
<td>16.30</td>
<td>7.02</td>
<td>-13.57</td>
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The Empire State Index of General Business Conditions in New York's manufacturing industries recovered most of the prior month's skid with a 15.1 point rise in September to 28.34. All of the activity components of the survey [...]

Empire State Index Rebounded Strongly in September

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040915b.jpg" width="353">
Industrial production rose just 0.1% following an upwardly revised 0.6% gain in July. Market forecasters had looked for a 0.5% increase but the disappointment was that utility output fell 2.4% and mining output fell 1.1%.
Production in the factory sector rose 0.5% (6.7% y/y) last month following an upwardly revised 0.8% gain in July.
Output of motor vehicles jumped 3.7% (6.1% y/y) following declines in each of the prior five months. Less motor vehicles factory output rose 0.3% (6.8% y/y) in August. The high tech sector continued strong with a 1.8% (23.7% y/y) rise.Factory output elsewhere (excluding motor vehicles &amp; high tech) rose 0.2% (5.7% y/y) following a 0.9% gain in July.
Total capacity utilization was stable at an upwardly revised 77.3%. Growth in capacity inched up to 1.4% y/y from 1.1% earlier this year.
&quot;Predicting the Recent Behavior of Inflation Using Output Gap-Based Phillips Curves&quot; from the Federal Reserve Bank of Richmond is available <a href="http://www.rich.frb.org/pubs/economic_quarterly/pdfs/summer2004/mehra.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">August</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">Industrial Production</td>
<td>0.1%</td>
<td>0.6%</td>
<td>5.1%</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>77.3%</td>
<td>77.3%</td>
<td>74.5%(8/03)</td>
<td>74.8%</td>
<td>75.6%</td>
<td>77.4%</td>
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Industrial production rose just 0.1% following an upwardly revised 0.6% gain in July. Market forecasters had looked for a 0.5% increase but the disappointment was that utility output fell 2.4% and mining output fell 1.1%. Production [...]

Industrial Production Up Slightly, Factory Output Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040915b.jpg" width="353">
Industrial production rose just 0.1% following an upwardly revised 0.6% gain in July. Market forecasters had looked for a 0.5% increase but the disappointment was that utility output fell 2.4% and mining output fell 1.1%.
Production in the factory sector rose 0.5% (6.7% y/y) last month following an upwardly revised 0.8% gain in July.
Output of motor vehicles jumped 3.7% (6.1% y/y) following declines in each of the prior five months. Less motor vehicles factory output rose 0.3% (6.8% y/y) in August. The high tech sector continued strong with a 1.8% (23.7% y/y) rise.Factory output elsewhere (excluding motor vehicles &amp; high tech) rose 0.2% (5.7% y/y) following a 0.9% gain in July.
Total capacity utilization was stable at an upwardly revised 77.3%. Growth in capacity inched up to 1.4% y/y from 1.1% earlier this year.
&quot;Predicting the Recent Behavior of Inflation Using Output Gap-Based Phillips Curves&quot; from the Federal Reserve Bank of Richmond is available <a href="http://www.rich.frb.org/pubs/economic_quarterly/pdfs/summer2004/mehra.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">August</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>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>0.1%</td>
<td>0.6%</td>
<td>5.1%</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>77.3%</td>
<td>77.3%</td>
<td>74.5%(8/03)</td>
<td>74.8%</td>
<td>75.6%</td>
<td>77.4%</td>
</tr>
</tbody>
</table>
Empire State Index Rebounded Strongly in September 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 15, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040915a.jpg" width="353">
The Empire State Index of General Business Conditions in New York&#39;s manufacturing industries recovered most of the prior month&#39;s skid with a 15.1 point rise in September to 28.34.
All of the activity components of the survey recovered, especially new orders and shipments.The employment measure, as well, rose notably. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The prices paid rose modestly to 51.64 from 50.00 in August but remained below the highs of earlier this year.
Expectations for business conditions six months ahead rose sharply to the highest level since January. Expectations for capital expenditures also jumped to the highest level since April.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM"> Empire State Manufacturing Survey</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">9/03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>28.34</td>
<td>13.22</td>
<td>19.96</td>
<td>16.30</td>
<td>7.02</td>
<td>-13.57</td>
</tr>
</tbody>
</table>
U.S. Inventory Accumulation Raised Output 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 15, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040915c.jpg" width="353">
Total business inventories rose 0.9% in July, marking the eleventh consecutive month of accumulation. Consensus expectations were for a 0.7% increase. During the last ten years there has been a 60% correlation between the y/y change in inventories and the change in factory sector industrial production.
Retail inventories rose 0.6%, half the rate of accumulation in June. Higher auto inventories accounted for all of the gain with a 1.8% (12.4% y/y) rise. Non-auto inventories actually fell slightly following five months of moderate accumulation. Apparel (-0.1% y/y) &amp; general merchandise (+3.6% y/y) accounted for the July drop.
Wholesale inventories jumped 1.3%, the third consecutive strong monthly increase. During the last ten years there has been a 62% correlation between the y/y change in wholesale inventories and the change in imports of merchandise.
Overall business sales rose 0.6% (+9.9% y/y).
The ratio of inventories-to-sales rose to 1.32 but remained below the 1.37 averaged last year.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM"> Business Inventories</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.9%</td>
<td>1.1%</td>
<td>6.4%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.6%</td>
<td>1.2%</td>
<td>7.3%</td>
<td>4.9%</td>
<td>6.0%</td>
<td>-2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>-0.0%</td>
<td>0.5%</td>
<td>4.8%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.3%</td>
<td>1.1%</td>
<td>8.6%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.8%</td>
<td>1.0%</td>
<td>3.9%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
Mortgage Applications Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> September 15, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040915d.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association slipped 2.0% last week following a strong 7.7% gain the week prior. So far in September mortgage applications are 5.6% ahead of August.
Purchase applications fell 4.3% last week, undoing most of the 7.4% rise the prior week. Nevertheless, purchase applications in September are 3.9% higher than in August. During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance mortgages rose 1.2% following an 8.0% surge the prior week. Refi&#39;s in September are 8.1% ahead of August.
The effective interest rate on a conventional 30-year mortgage fell to 5.95% from 6.06% the prior week. In May, 30-year financing averaged 6.53%. The effective rate on a 15-year mortgage fell to 5.38%, down from the 5.97% averaged in May.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">09/10/04</th>
<th scope="col">09/03/04</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 class="odd">
<td class="firstcol">Total Market Index</td>
<td>678.2</td>
<td>692.0</td>
<td>-6.7%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>455.7</td>
<td>476.0</td>
<td>5.4%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,972.5</td>
<td>1,948.9</td>
<td>-19.1%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040914h.jpg" width="353">
Just a week ago, the report of good increases in industrial production and new orders in July suggested a more encouraging outlook for economic activity in Germany. Today&#39;s report of the Zew index casts a dampener on this outlook. The Zew index of German institutional investors&#39; and analysts&#39; appraisal of the outlook over the next six months dropped sharply in September to 38.4 from 45.3 in August and the recent peak of 73.4 in December, 2003.
The index complied by the Mannheim economic institute measures the excess of respondents who are optimistic about the future over those who are pessimistic. In spite of its small sample--298 respondents in the September survey--the index often foreshadows the results of the much broader IFO survey.
According to Michael Schroeder, head of international finance at the Zew institute, &quot;The drop reflects the fact that expectations for the global economy have cooled.&quot; leading to reduced expectations of exports. In addition, continued high unemployment suggests sluggish domestic demand.
The relationship between sentiment and actual production is far from a close one, as can be seen in the attached chart, which shows the Zew index and the industrial production index. Nevertheless, the feelings of unease concerning foreign and domestic demand, reflected in the Survey, may well have some impact on the willingness of business and consumers to increase their spending. 

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Sep 04</th>
<th scope="col">Aug 04</th>
<th scope="col">Sep 03</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %</th>
<th scope="col">2003&nbsp;</th>
<th scope="col">&nbsp; 2002&nbsp;</th>
<th scope="col">&nbsp; 2001&nbsp;</th>
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<td class="firstcol">Zew Index (Excess of Optimists over Pessimists %)</td>
<td>38.4</td>
<td>45.3</td>
<td>60.9</td>
<td>-6.9</td>
<td>-22.5</td>
<td>38.4</td>
<td>45.3</td>
<td>28.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>Jul&nbsp;04</td>
<td>Jun 04</td>
<td>Jul 03</td>
<td>M/M %</td>
<td>Y/Y %</td>
<td>2003&nbsp;</td>
<td>&nbsp; 2002&nbsp;</td>
<td>&nbsp; 2001&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Industrial Production (2000=100)</td>
<td>101.4</td>
<td>99.8</td>
<td>99.2</td>
<td>1.60</td>
<td>2.22</td>
<td>98.4</td>
<td>98.3</td>
<td>99.5</td>
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</tbody>
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Just a week ago, the report of good increases in industrial production and new orders in July suggested a more encouraging outlook for economic activity in Germany. Today's report of the Zew index casts a dampener on this outlook. The [...]

ZEW Index Puts a Dampener on Germany's Third Quarter Prospects

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040914g.jpg" width="353">
The US current account deficit deepened sharply to$166.2B in 2Q04, a new record. Consensus expectations had been for a 2Q deficit of $159.0B. 
The deficit in goods trade deteriorated to $163.6B from $135.5B a year ago, driven by the huge rise in the June merchandise trade deficit reported last month.
Exports of goods, services &amp; income in 2Q rose 3.2% (17.0% y/y) led by a 2.8% (14.2% y/y) rise in merchandise exports. Imports rose 6.7% (19.3% y/y) with merchandise imports up 5.3% (17.0% y/y).
The surplus on services rose slightly to $13.3B but so far this year is off the pace which in 2003 generated a surplus of $51.0B and $89.9B in 1997.

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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@EE/@EE01/@EE01.HTM">US Int&#39;l Balance of Payments</a></th>
<th scope="col"> 2Q &#39;04</th>
<th scope="col">1Q &#39;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 class="odd">
<td class="firstcol">Current Account Deficit</td>
<td>$166.2B</td>
<td>$147.2B</td>
<td>$133.9B</td>
<td>$530.7B</td>
<td>$473.9B</td>
<td>$385.7B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Goods/Services/Income Deficit</td>
<td>$147.6B</td>
<td>$126.4B</td>
<td>$117.5B</td>
<td>$463.2B</td>
<td>$414.6B</td>
<td>$339.1B</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Exports</td>
<td>3.2%</td>
<td>2.1%</td>
<td>17.0%</td>
<td>5.8%</td>
<td>-3.9%</td>
<td>-9.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Imports</td>
<td>6.7%</td>
<td>5.3%</td>
<td>19.3%</td>
<td>7.3%</td>
<td>1.5%</td>
<td>-8.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Unilateral Transfers Deficit</td>
<td>$18.5B</td>
<td>$20.7B</td>
<td>$16.4B</td>
<td>$67.4</td>
<td>$59.4B</td>
<td>$46.6B</td>
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The US current account deficit deepened sharply to$166.2B in 2Q04, a new record. Consensus expectations had been for a 2Q deficit of $159.0B. The deficit in goods trade deteriorated to $163.6B from $135.5B a year ago, driven by the [...]

U.S. Current Account Deficit Another Record

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Home prices as tallied by the Office of Federal Housing Enterprise Oversight (OFHEO) rose 2.2% (9.1% AR) in 2Q 2004 versus an upwardly revised 1Q gain of 1.5%.
The OFHEO house price index is a geometric weighted average based on more than 26.5 million repeat transactions over 29 years and 12,000 transactions annually.
View the latest OFHEO release <a href="http://www.ofheo.gov/media/pdf/2q04hpi.pdf">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E911/@E91101/@E91101.HTM"> OFHEO</a></th>
<th scope="col">2Q04</th>
<th scope="col">1Q04</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>
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<td class="firstcol">House Price Index</td>
<td>2.2%</td>
<td>1.5%</td>
<td>9.4%</td>
<td>7.0%</td>
<td>7.0%</td>
<td>8.0%</td>
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Home prices as tallied by the Office of Federal Housing Enterprise Oversight (OFHEO) rose 2.2% (9.1% AR) in 2Q 2004 versus an upwardly revised 1Q gain of 1.5%. The OFHEO house price index is a geometric weighted average based on more [...]

Home Prices Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040914e.jpg" width="353">
Chain store sales again ticked slightly higher last week, up 0.2% w/w according to the International Council of Shopping Centers (ICSC)-UBS.
So far in September sales are 0.1% below the August average which was unchanged from July.
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">09/11/04</th>
<th scope="col">09/04/04</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>
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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>439.4</td>
<td>438.6</td>
<td>2.7%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Chain store sales again ticked slightly higher last week, up 0.2% w/w according to the International Council of Shopping Centers (ICSC)-UBS. So far in September sales are 0.1% below the August average which was unchanged from July. [...]

U.S. Chain Store Sales Ticked Higher

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).

260709Z2.jpg

**Inflation Surprises Are Creeping Back, and Bond Yields Are Taking Notice**
The US growth picture painted by Haver's surprise indices broadly echoes the message from the global PMI data. Chart 3 below shows the combined growth-and-inflation surprise index drifting higher this week, and closer inspection suggests growth is doing most of that work, with activity data continuing to outperform expectations. That is, on the face of it, good news. But it has not stopped bond markets from taking notice: short-dated Treasury yields have remained elevated in recent weeks, as stronger growth keeps alive the possibility that the Federal Reserve holds rates higher for longer or even lifts them in coming weeks.

260709Z3.jpg

**Supply Chains Are Tightening** 
Latest data show that global supply chain pressures tightened by less in June than they had the month before, likely reflecting the easing of Middle East tensions through much of the period. Chart 4 below shows that pressures troughed in the middle of last year and have been building gradually since, though June's slower pace of tightening suggests that easing had started to feed through. Still, today's flare-up threatens to undo that improvement, particularly if it affects shipping routes or energy flows through the region once again.

260709Z4.jpg

**Extreme Weather: An Old Supply-Side Risk Returns**
Geopolitics is not the only source of supply-side risk currently in play. Large parts of Europe have been gripped this week by another intense and prolonged heatwave, with temperatures in several major cities running well above seasonal norms. Extreme heat of this kind carries real economic costs: it depresses labour productivity, particularly in outdoor and manufacturing-adjacent sectors, strains electricity grids as air-conditioning demand spikes, and can disrupt agricultural output and river-based transport when water levels fall. Episodes like this have become more frequent in recent years, and while any single heatwave rarely shifts the macro picture on its own, the cumulative effect of more frequent and more severe weather events could start showing up in productivity and inflation data across the advanced economies. It is a reminder that the supply side of the global economy faces structural as well as cyclical challenges, and that climate-related disruption deserves a permanent place alongside geopolitics and demographics in any assessment of medium-term inflation risk.

260709Z5.jpg

**AI Investment: The Other Side of the Supply Equation**
Set against these supply-side headwinds is a genuinely positive structural development: the extraordinary scale of private investment now flowing into artificial intelligence. Chart 6 below shows just how sharply that investment has grown in recent years, reaching a fresh high last year. If even a fraction of that investment translates into genuine productivity gains, it could provide a meaningful long-run offset to the energy, climate and geopolitical constraints highlighted elsewhere in this week's charts. The scale of the bet now being placed on AI is large enough that it is beginning to show up in aggregate investment and capital expenditure data across the advanced economies, and it is likely to remain one of the defining structural themes shaping the global growth outlook over the remainder of this decade.

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

Robert Brusca

260710E.jpg

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.

260710.jpg

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

260709E.jpg

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. Inventory Accumulation Raised Output

Empire State Index Rebounded Strongly in September

Industrial Production Up Slightly, Factory Output Firm

Industrial Production Up Slightly, Factory Output Firm

ZEW Index Puts a Dampener on Germany's Third Quarter Prospects

U.S. Current Account Deficit Another Record

Home Prices Firm

U.S. Chain Store Sales Ticked Higher