Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040720b.jpg" width="353">
Housing starts fell 8.5% last month to the lowest level since May of last year. June starts totaled 1.802Mversus the Consensus expectation for 1.95M. It was the largest m/m drop in starts since February 2003.
Single family starts paced the decline with a 9.5% skid to the lowest level since last May.
Multi-family starts fell 3.7%, the third consecutive monthly decline.
The decline in housing starts last month was across the country&#39;s regions, but was most pronounced in the West where starts fell 16.5% from a record high.
Building permits fell 8.2% m/m from a record high.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM"> Housing Starts (000s, AR)</a></th>
<th scope="col"> June</th>
<th scope="col">May</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 class="odd">
<td class="firstcol">Total</td>
<td>1,802</td>
<td>1,970</td>
<td>-2.6%</td>
<td>1,848</td>
<td>1,711</td>
<td>1,601</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,489</td>
<td>1,645</td>
<td>-1.1%</td>
<td>1,501</td>
<td>1,364</td>
<td>1,272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>313</td>
<td>325</td>
<td>-9.3%</td>
<td>347</td>
<td>347</td>
<td>330</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,077</td>
<td>2,006</td>
<td>12.5%</td>
<td>1,831</td>
<td>1,750</td>
<td>1,637</td>
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Housing starts fell 8.5% last month to the lowest level since May of last year. June starts totaled 1.802Mversus the Consensus expectation for 1.95M. It was the largest m/m drop in starts since February 2003. Single family starts [...]

Housing Starts Fell Sharply

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040720b.jpg" width="353">
Housing starts fell 8.5% last month to the lowest level since May of last year. June starts totaled 1.802Mversus the Consensus expectation for 1.95M. It was the largest m/m drop in starts since February 2003.
Single family starts paced the decline with a 9.5% skid to the lowest level since last May.
Multi-family starts fell 3.7%, the third consecutive monthly decline.
The decline in housing starts last month was across the country&#39;s regions, but was most pronounced in the West where starts fell 16.5% from a record high.
Building permits fell 8.2% m/m from a record high.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM"> Housing Starts (000s, AR)</a></th>
<th scope="col"> June</th>
<th scope="col">May</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">Total</td>
<td>1,802</td>
<td>1,970</td>
<td>-2.6%</td>
<td>1,848</td>
<td>1,711</td>
<td>1,601</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,489</td>
<td>1,645</td>
<td>-1.1%</td>
<td>1,501</td>
<td>1,364</td>
<td>1,272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>313</td>
<td>325</td>
<td>-9.3%</td>
<td>347</td>
<td>347</td>
<td>330</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>2,077</td>
<td>2,006</td>
<td>12.5%</td>
<td>1,831</td>
<td>1,750</td>
<td>1,637</td>
</tr>
</tbody>
</table>
Housing Market Index Dipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 20, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040720c.jpg" width="353">
The Composite Housing Market Index reported by the National Association of Home Builders (NAHB) fell for the second consecutive month in July to 67. June&#39;s figure was revised slightly higher. The index remained 3.1% higher than last year.
During the last fifteen years there has been an 80% correlation between the y/y change in the NAHB index and the change in single family housing starts.
The index of expected single family home sales in six months fell moderately. The current sales index was stable.
Traffic of prospective buyers dropped to the lowest level since April (-2.0% y/y).
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the National Association of Home Builders using this <a href="http://www.nahb.org">link</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM"> Nat&#39;l Association of Home Builders</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;03</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">Composite Housing Market Index</td>
<td>67</td>
<td>68</td>
<td>65</td>
<td>64</td>
<td>61</td>
<td>56</td>
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Chain Store Sales Ticked Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 20, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040720a.jpg" width="353">
Chain store sales ticked 0.2% higher last week following no change the prior period, according to the International Council of Shopping Centers (ICSC)-UBS.
So far in July sales are up 0.1% versus the June average which fell 0.8% from May.
During the last ten years there has been a 59% 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">07/17/04</th>
<th scope="col">07/10/04</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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<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>439.2</td>
<td>438.5</td>
<td>3.3%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</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/040719b.jpg" width="353">
Times of economic transition are often the hardest periods to interpret as they exhibit mixed tendencies. So it was last week that we published here almost contradictory comments about CPI inflation in various countries. In some places, it remains quiescent, while elsewhere, it is picking up noticeably. So one can&#39;t generalize about the present evolution of price trends
Today brought PPI data for Germany and Switzerland for June. In these countries as well as the US, producer prices have firmed. But the inflationary potential in these figures varies widely. German and Swiss manufactured goods prices are rising, but they remain on modest uptrends: 1.5% year-on-year in Germany and 1.4% in Switzerland. But in Germany this pace is actually a bit slower than what prevailed at the end of 2003. Energy accounts for that, as those prices have moderated considerably in Germany since late last year. Excluding energy, German factory goods prices are also on a firming trend, although they were up just a modest 1.3% in June from a year earlier. Swiss producer prices look to be picking up across many categories, but all at a very modest pace.
US factory prices are on a rampage by comparison, gaining at a 4%-5% pace through June, year-on-year, measured as total manufacturing industry prices or total finished goods prices. Energy accounts for a notable portion of the advance in finished goods, as seen in the table below, but even removing it, we are still left with 3% year-on-year in recent months. And food appears to explain a good bit of that. Other price moves show wide variation. So, even though the total US PPI is showing some strength in the aggregate, it is quite uneven among sectors, so that the overall inflation potential in these wholesale prices is far from clear. Moreover, as the accompanying chart shows, there is virtually no correlation of producer prices excluding energy in Germany and the US.<div align="center"><center></center></div>

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">June 2004</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</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">Germany: Manufacturing</td>
<td>1.54</td>
<td>1.64</td>
<td>0.86</td>
<td>1.76</td>
<td>0.59</td>
<td>0.10</td>
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<tr>
<td class="firstcol">Germany: Manufacturing &nbsp; ex Energy</td>
<td>1.27</td>
<td>0.98</td>
<td>0.88</td>
<td>0.20</td>
<td>0.59</td>
<td>0.40</td>
</tr>
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<td class="firstcol">Switzerland: Manufacturing</td>
<td>1.40</td>
<td>1.50</td>
<td>1.10</td>
<td>0.50</td>
<td>-0.50</td>
<td>0.00</td>
</tr>
<tr>
<td class="firstcol">US Manufacturing</td>
<td>4.92</td>
<td>5.60</td>
<td>4.04</td>
<td>2.76</td>
<td>1.82</td>
<td>-2.01</td>
</tr>
<tr class="odd">
<td class="firstcol">US Finished Goods</td>
<td>3.99</td>
<td>5.00</td>
<td>3.66</td>
<td>3.96</td>
<td>1.16</td>
<td>-1.65</td>
</tr>
<tr>
<td class="firstcol">US Finished Goods &nbsp;&nbsp; ex Energy</td>
<td>2.97</td>
<td>3.10</td>
<td>2.56</td>
<td>2.65</td>
<td>-0.54</td>
<td>1.16</td>
</tr>
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Times of economic transition are often the hardest periods to interpret as they exhibit mixed tendencies. So it was last week that we published here almost contradictory comments about CPI inflation in various countries. In some [...]

German & Swiss PPI Rise Modestly; Inflation Potential Unclear

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040719a.jpg" width="353">
Through the end of last week the S&amp;P 500 Index of stock prices muddled along up just 1.4% from yearend levels. Recent weakness, however, follows strong gains through most of 2003. Year to year stock prices are up 11.6%.
Gains in stock prices raised the value of the household sector&#39;s financial assets. Through 1Q04 the market value of corporate equities held by the household sector rose 27.9% versus 1Q03. Despite the rise in interest rates that would have eroded the value of fixed income assets, the value of all mutual fund shares held by the household sector rose 39.0%.
The rise in the value of these financial assets greatly improved the net worth of the household sector to $45.2 trillion versus $39.6 trillion in 1Q03. A 10.1% rise in the value of real estate holdings aided the improvement. (Financial assets are more than twice the value of real estate assets for the household sector.)
Liabilities owed by the sector were up 10.9% y/y in 1Q due mostly to a 12.5% rise in home mortgage obligations.
&quot;Why Do Stock Prices React to the Fed?&quot; from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20040701/cover.pdf"> here</a>. 

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Through the end of last week the S&P 500 Index of stock prices muddled along up just 1.4% from yearend levels. Recent weakness, however, follows strong gains through most of 2003. Year to year stock prices are up 11.6%. Gains in stock [...]

Stock Market Rise Rebuilt Wealth

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040716g.jpg" width="353">
The US Treasury today published its array of monthly data on foreign investors&#39; purchases and sales of &quot;long-term&quot; US securities (having maturity greater than one year) for May. Known as the &quot;TIC&quot; data for Treasury International Capital&quot;, this extensive collection of information on foreign participation in US capital markets is contained in Haver&#39;s USINT database in the section &quot;US International Investment Tables&quot;, shown by security type and country. In May, net foreign purchases of securities traded in US markets totaled $56.4 billion, down from April&#39;s $76.1 billion.
The first graph above shows a simple history of these net foreign purchases of securities in US markets. Besides the simple fact that these transactions have expanded dramatically since about 1985, the most recent periods have also shown significant volatility. Simple explanations are often offered for this activity: a large current account deficit that must be financed, fear of a weakening dollar, the impact of a rising dollar, and so on. Indeed, the current account relationship is significant: aggregated on a quarterly basis, the value of these transactions has had a 90% negative correlation with the current account balance over the past 20 years. But the wide swings in the capital flows, particularly over the past year-and-a-half, suggest that causes for foreign moves in and out of US markets must be much more complex.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040716f.jpg" width="353">
The second graph examines the interaction in these data with a broad gauge of the exchange rate. Using the Fed&#39;s &quot;Broad&quot; trade-weighted dollar index, we see an attractive-looking 70% correlation over the past 15 years. However, this correlation coefficient changes markedly over varying time periods. So while the fit may be pretty good over the years we illustrate, during the last 10 years, that drops to just 44%. An earlier 10-year period, 1986-1995, shows a mere 1%. Thus, it&#39;s hard for investors and traders to count on a particular securities market response to foreign exchange developments. And these relationships deteriorate further when individual countries are examined. The correlations between the yen and net capital flows of Japanese investors generally run in the mid-20% area.[Note that all our comments are based on examination of data properties revealed using Haver&#39;s DLXVG3 software alone. With the &quot;correlation&quot; tool turned on, scrolling across the graph using the arrow keys shows the evolution of the correlation ratio through time.]

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<colgroup><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol">Net Foreign Purchases of Securities in US Markets&nbsp; (Billions US$)</th>
<th scope="col">May 2004</th>
<th scope="col">Apr&nbsp; 2004</th>
<th scope="col">Mar &nbsp;2004</th>
<th scope="col">May&nbsp; 2003</th>
Monthly Average
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
</tbody>
</table>
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<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Total</th>
<th scope="col"><center></center></th>
<th scope="col">56.4</th>
<th scope="col">76.1</th>
<th scope="col">76.8</th>
<th scope="col">109.9</th>
<th scope="col">58.4</th>
<th scope="col">47.9</th>
<th scope="col">41.8</th>
</tr>
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<td class="firstcol">Treasuries</td>
<td><center></center></td>
<td>21.9</td>
<td>35.3</td>
<td>61.5</td>
<td>41.1</td>
<td>22.7</td>
<td>10.0</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Federal Agencies (mostly &quot;GSEs&quot;)</td>
<td><center></center></td>
<td>20.7</td>
<td>31.0</td>
<td>3.9</td>
<td>31.9</td>
<td>13.6</td>
<td>16.3</td>
<td>13.7</td>
</tr>
<tr class="odd">
<td class="firstcol">US Corporate Bonds</td>
<td><center></center></td>
<td>19.9</td>
<td>16.8</td>
<td>30.4</td>
<td>27.4</td>
<td>22.7</td>
<td>15.2</td>
<td>18.5</td>
</tr>
<tr>
<td class="firstcol">US Corporate Stocks</td>
<td>-7.6</td>
<td>-1.8</td>
<td>-13.4</td>
<td>6.6</td>
<td>3.1</td>
<td>4.2</td>
<td>9.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign Bonds</td>
<td>7.4</td>
<td>6.1</td>
<td>-1.7</td>
<td>13.5</td>
<td>2.2</td>
<td>2.4</td>
<td>2.5</td>
</tr>
<tr>
<td class="firstcol">Foreign Stocks</td>
<td>-5.8</td>
<td>-11.3</td>
<td>-4.0</td>
<td>-10.9</td>
<td>-6.0</td>
<td>-0.1</td>
<td>-4.2</td>
</tr>
</tbody>
</table>
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The US Treasury today published its array of monthly data on foreign investors' purchases and sales of "long-term" US securities (having maturity greater than one year) for May. Known as the "TIC" data for Treasury International [...]

Foreign Purchases of U.S. Securities Ease in May Amid Wide Volatility

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040716b.jpg" width="353">
The Consumer Price Index (CPI-U) rose 0.3% in June versus Consensus expectations for a 0.2% rise. The upside surprise was fueled by a 2.6% gain in energy prices.
Seasonally adjusted gasoline prices jumped 3.1%, about double the not seasonally adjusted rise. Even that increase was somewhat surprising given that the weekly tracking of retail gasoline prices indicated a m/m decline of 0.7%. So far in July average gasoline prices are 3.2% below the June average at $1.91 per gallon.
Core consumer prices rose a less than expected 0.1%. The shortfall was the result of no change in the prices of core consumer goods. New &amp; used vehicle prices fell 0.1% (-3.5% y/y) and home furnishings prices rose a modest 0.1% (-0.5% y/y). Apparel prices rose 0.2% (0.5% y/y) and medical care commodities prices ticked 0.1% (2.9% Y/Y) higher.
Core service prices rose 0.2% for the second consecutive month. Shelter costs rose a modest 0.1% (2.9% y/y) and public transportation prices were unchanged after a 1.3% May decline (-0.9% y/y). Medical care services prices rose 0.4% (5.1% y/y), the strongest increase in three months.
The chained CPI which adjusts for shifts in consumer buying behavior rose 0.3%. It is similar to the PCE price deflator. The core chain price measure was unchanged.

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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM"> Consumer Price Index</a></th>
<th scope="col">June</th>
<th scope="col">May</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&nbsp;</td>
<td>0.3%</td>
<td>0.6%</td>
<td>3.2%</td>
<td>2.3%</td>
<td>1.6%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.2%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.1%</td>
<td>-1.0%</td>
<td>-2.0%</td>
<td>-1.1%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.0%</td>
<td>2.9%</td>
<td>3.8%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>2.6%</td>
<td>4.6%</td>
<td>17.0%</td>
<td>12.2%</td>
<td>-5.8%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.2%</td>
<td>0.9%</td>
<td>3.8%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM"> Chained CPI: Total (NSA)</a></td>
<td>0.3%</td>
<td>0.4%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>1.3%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>1.4%</td>
<td>1.1%</td>
<td>1.9%</td>
<td>&nbsp;2.0%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Edged Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 16, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040716a.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index for mid-July edged up to 96.0 from the June reading of95.6. Consensus expectations had been for a larger gain to 97.0.
During the last ten years there has been a 75% correlation between the level of consumer sentiment and the y/y change in real PCE.
Improvement in the expectations sub-index to 90.4 followed the sharp m/m rise in June. The index of current economic conditions fell 2.0% versus June.
The University of Michigan survey is not seasonally adjusted.The mid-month survey is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM"> University of Michigan</a></th>
<th scope="col"> Mid-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">Consumer Sentiment</td>
<td>96.0</td>
<td>95.6</td>
<td>5.6%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>104.6</td>
<td>106.7</td>
<td>2.4%</td>
<td>97.2</td>
<td>97.5</td>
<td>100.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Consumer Expectations</td>
<td>90.4</td>
<td>88.5</td>
<td>8.0%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
</body>
</html>

The Consumer Price Index (CPI-U) rose 0.3% in June versus Consensus expectations for a 0.2% rise. The upside surprise was fueled by a 2.6% gain in energy prices. Seasonally adjusted gasoline prices jumped 3.1%, about double the not [...]

CPI Rose Slightly More Than Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040715a.jpg" width="353">
Brazil&#39;s retail sales extended a strong recovery in data reported today for May, which showed a third straight month of double-digit year-on-year growth.
Furniture and appliances and motor vehicle dealers have participated in the growth consistently in recent months; the two store categories advanced 35.6% and 21.4% respectively in May from May 2003. Supermarkets and hypermarkets have also shown persistent but less spectacular gains, most recently in the 5% range. In May, clothing had a big jump as well.
These stores had all suffered some degree of contraction during the recessionary aftermath of the mid-2002 plunge in Brazil&#39;s currency value. The recent retail sales gains, particularly in durable goods, show that Brazilian consumers are back in a shopping mode, and with some exuberance.<div align="center"><center></center></div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Yr/Yr % Changes</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</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">Retail Sales: Total Volume</td>
<td>10.0</td>
<td>10.1</td>
<td>11.0</td>
<td>3.2</td>
<td>-5.1</td>
<td>-2.8</td>
</tr>
<tr>
<td class="firstcol">Retail Sales: Total Value</td>
<td>10.3</td>
<td>9.4</td>
<td>11.3</td>
<td>10.8</td>
<td>9.3</td>
<td>3.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Reais/US$</td>
<td>4.9</td>
<td>-6.8</td>
<td>-15.7</td>
<td>-19.3</td>
<td>53.5</td>
<td>20.4</td>
</tr>
</tbody>
</table>
</body>
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Brazil's retail sales extended a strong recovery in data reported today for May, which showed a third straight month of double-digit year-on-year growth. Furniture and appliances and motor vehicle dealers have participated in the [...]

Brazil's Retail Sales Up 10% in May

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040715d.jpg" width="353">
The June PPI fell 0.3%, the first m/m decline since November. Consensus expectations had been for a 0.2% rise.In line with expectations was the 0.2% rise in the &quot;core&quot; PPI.
Energy prices fell 1.6% (9.4% y/y), led lower by an 8.1% (+29.9% y/y) decline in gasoline prices and a 1.5% (+28.6% y/y) drop in duel oil prices.
Prices of finished consumer goods less food &amp; energy rose a modest 0.1% (1.9% y/y). Consumer durable prices again were firm and rose 0.5% (+2.5% y/y) but core non-durable prices fell 0.2% (+1.5% y/y).
Finished capital goods prices rose 0.2% (1.7% y/y).
Intermediate goods prices rose a firm 0.5% last month. Core intermediate prices rose the same 0.5% (5.7% y/y), though plywood prices fell 10.5% (34.9% y/y). Steel (40.0% y/y) &amp; aluminum (7.1% y/y) prices were quite strong.
Crude goods prices jumped 1.6% due to higher energy prices, up 7.7% (14.0% y/y). Core crude prices fell for the third consecutive month though more recently the decline in commodity prices has moderated.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM"> Producer Price Index</a></th>
<th scope="col">June</th>
<th scope="col">May</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">Finished Goods</td>
<td>-0.3%</td>
<td>0.8%</td>
<td>4.0%</td>
<td>3.2%</td>
<td>-1.3%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2%</td>
<td>0.3%</td>
<td>1.9%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.5%</td>
<td>1.1%</td>
<td>7.0%</td>
<td>4.7%</td>
<td>-1.5%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.5%</td>
<td>0.9%</td>
<td>5.7%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>1.6%</td>
<td>2.8%</td>
<td>18.9%</td>
<td>25.1%</td>
<td>-10.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.5%</td>
<td>-3.8%</td>
<td>20.8%</td>
<td>12.4%</td>
<td>3.8%</td>
<td>-10.0%</td>
</tr>
</tbody>
</table>
U.S. Industrial Production Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 15, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040715c.jpg" width="353">
Industrial production unexpectedly fell 0.3% last month following a downwardly revised 0.9% rise in May. Consensus expectations had been for a 0.1% uptick.
Production in the factory sector fell 0.1% (5.8% y/y) but the May gain was revised down to 0.6% from 0.9%.
Lower output of motor vehicles accounted for some of last month&#39;s weakness as it fell 3.7%, the third sharp decline in the last four months. Excluding motor vehicles, non-tech output was unchanged (+4.7% y/y). Furniture output fell for the third month in four (0.4% y/y). Non-durables output was unchanged (+3.3% y/y).
Output in selected high-technology industries was strong again, up 2.4% m/m (29.4% y/y). Output of semiconductors rose 2.3% (44.3% y/y) and output of computers &amp; peripheral equipment surged 3.0% (30.7% y/y). Output of communications equipment also rose 1.9% (2.5% y/y).
Total capacity utilization fell to 77.2% and growth in capacity rose to 1.3% y/y.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM"> Production &amp; Capacity</a></th>
<th scope="col">June</th>
<th scope="col">May</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>-0.3%</td>
<td>0.9%</td>
<td>5.6%</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>77.2%</td>
<td>77.6%</td>
<td>74.0%(6/03)</td>
<td>74.8%</td>
<td>75.6%</td>
<td>77.4%</td>
</tr>
</tbody>
</table>
Initial Claims For Jobless Insurance Rebounded 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 15, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040715b.jpg" width="353">
Initial claims for jobless insurance rebounded 40,000 last week to 349,000 following the 40,000 drop the prior week. Consensus expectations had been for 345,000 claims.
Recently volatility probably reflects difficulties in seasonally adjusting the regular layoff of autoworkers due to assembly plant closings to prepare for the new model year.
The 4-week moving average of initial claims rose to 339,000 (-18.8% y/y).
Continuing claims for unemployment insurance rose 112,000 following a 98,000 decline the prior week.
The insured rate of unemployment ticked up to 2.4%.

<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/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">7/10/04</th>
<th scope="col">7/03/04</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>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 349</td>
<td>309</td>
<td>-15.1%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,971</td>
<td>-18.0%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 15, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040716c.jpg">
The Philadelphia Fed&#146;s July index of general business conditions in the manufacturing sector rose much more than expected to 36.1. The 7.2 point increase versus June outpaced Consensus expectations for a decline to 25.0.
During the last ten years there has been a 57% correlation between the level of the Philadelphia Fed Business Conditions Index and m/m growth in factory sector industrial production.
Each of the sub indexes improved m/m with the exception of inventories and the workweek.
The business conditions index reflects a separate survey question, not the sub indexes.
The separate index of expected business conditions in six months slid for the sixth month this year to 36.3, just about the lowest level since the peak last August.
The prices paid index fell to the lowest level since February.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0704.html">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM"> Philadelphia Fed Business Outlook</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>36.1</td>
<td>28.9</td>
<td>8.7</td>
<td>10.6</td>
<td>7.7</td>
<td>-17.2</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>46.3</td>
<td>51.9</td>
<td>-5.1</td>
<td>16.7</td>
<td>12.2</td>
<td>-0.9</td>
</tr>
</tbody>
</table>
Empire State Index Up To Five Month High 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 15, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040716e.jpg">
The Empire State Index of General Business Conditions for July erased losses in the prior two months and rose 6.6 points to 36.54, the highest level since February. Consensus expectations had been for a decline to 27.8 and the June level was revised down.
All of the subgroups of the survey improved versus June. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question, not the components.
The prices paid index rose moderately to 56.03, reversing most of the prior two months&#39; decline from the record high.
The July index of expectations for business conditions six months ahead fell slightly. Expectations for capital expenditures fell for the third consecutive month.
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>.

<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/SURVEYS/@S5/@S511/@S511.HTM"> Empire State Manufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">7/03</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>36.54</td>
<td>29.93</td>
<td>20.20</td>
<td>16.30</td>
<td>7.02</td>
<td>-13.57</td>
</tr>
</tbody>
</table>
U.S. Business Inventories Continue Accumulation 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 15, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040716d.jpg">
Total business inventories rose 0.4% in May following the upwardly revised 0.7% gain in April. It was the ninth consecutive monthly increase. Consensus expectations were for a 0.5% rise.
Retail inventories fell slightly following an upwardly revised 1.3% gain in April. Lower auto inventories accounted for all of the decline. Non-auto inventories rose 0.6% for the eighth increase in the last nine months. Gains were strong and across the board except general merchandise.
Inventory additions lead production gains. During the last ten years there has been a 46% correlation between the three month change in business inventories and the three month change in US factory production. That correlation rises to 65% when the production gain is lagged three months.
Overall business sales jumped 0.7% (+12.3% y/y) led by a 1.5% gain in retail sales.
The ratio of inventories-to-sales held at the record low of 1.30 for the third consecutive month.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM"> Business Inventories</a></th>
<th scope="col">May</th>
<th scope="col">April</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>0.4%</td>
<td>0.7%</td>
<td>4.0%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-0.0%</td>
<td>1.3%</td>
<td>5.9%</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>0.6%</td>
<td>0.7%</td>
<td>4.9%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.2%</td>
<td>0.2%</td>
<td>5.6%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.5%</td>
<td>0.5%</td>
<td>1.1%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The June PPI fell 0.3%, the first m/m decline since November. Consensus expectations had been for a 0.2% rise.In line with expectations was the 0.2% rise in the "core" PPI. Energy prices fell 1.6% (9.4% y/y), led lower by an 8.1% [...]

Producer Prices Fell Unexpectedly

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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Housing Starts Fell Sharply

Housing Starts Fell Sharply

German & Swiss PPI Rise Modestly; Inflation Potential Unclear

Stock Market Rise Rebuilt Wealth

Foreign Purchases of U.S. Securities Ease in May Amid Wide Volatility

CPI Rose Slightly More Than Expected

Brazil's Retail Sales Up 10% in May

Producer Prices Fell Unexpectedly