Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040601d.jpg" width="353">
Except for a minor decline in February, 2004, the manufacturing sector of the Euro-12 area has been rising since June, 2003 according to the survey of some 3000 purchasing managers surveyed by NTC Research Ltd. for Reuters Group Plc. The data are presented in the form of diffusion indexes with a value above 50 representing expansion, while one below 50 indicates contraction. For the area as a whole, the index rose 1.45% from 53.95 in April to 54.73 in May and is now above the level reached in October 2000.
Data are available for six of the component countries: Germany, France, Italy, the Netherlands, Spain and Ireland. All except Spain improved in the month and all are well above levels of a year ago.
While the manufacturing data in April and May suggest continued growth or even some acceleration in Gross Domestic Product for the Euro-12, there is cloud on the horizon in the form of higher oil prices. According to the purchasing managers, prices of inputs in the manufacturing process rose 4.14% in May and were just over 50% above prices a year ago. The rise in oil prices accounts for much of rise in input prices.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Diffusion Indexes for Manufacturing</th>
<th scope="col">May 04</th>
<th scope="col">Apr 04</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">&nbsp; Euro -12</td>
<td>54.73</td>
<td>53.95</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Germany</td>
<td>56.15</td>
<td>55.34</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; France</td>
<td>55.45</td>
<td>53.53</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Italy</td>
<td>52.78</td>
<td>52.48</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Netherlands</td>
<td>54.01</td>
<td>53.35</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Spain&nbsp;</td>
<td>53.18</td>
<td>53.59</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Ireland</td>
<td>54.47</td>
<td>53.88</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Euro-12</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Input prices</td>
<td>&nbsp; 72.26</td>
<td>69.39</td>
</tr>
</tbody>
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Except for a minor decline in February, 2004, the manufacturing sector of the Euro-12 area has been rising since June, 2003 according to the survey of some 3000 purchasing managers surveyed by NTC Research Ltd. for Reuters Group Plc. [...]

Purchasing Managers Say Manufacturing in the Euro-12 Area Rose in May to the Highest Level Since October 2000

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040601c.jpg" width="353">
The May Purchasing Managers&#146; Composite Index (PMI) released by the Institute of Supply Management rose slightly to 62.8 from 62.4 in April. Consensus expectations were for a decline to 61.5.
During the last twenty years there has been a 70% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.
Patterns amongst the component series again were mixed. Production fell to 64.8, reversing all of the April jump, and new orders fell for the fifth straight month. The separate index of export orders fell for the second month from a March high.
These declines were offset by a rise in the employment index to the highest level since 1973, a higher level of vendor performance and higher inventories.
The prices paid index fell slightly to a still high 86.0.
&quot;What Investment Patterns across Equipment and Industries Tell Us about the Recent Investment Boom &amp; Bust&quot; from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/current_issues/ci10-6.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF02/@EF02.HTM"> ISM Manufacturing Survey</a></th>
<th scope="col"> May</th>
<th scope="col">April</th>
<th scope="col">May &#39;03</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">Composite Index</td>
<td>62.8</td>
<td>62.4</td>
<td>50.0</td>
<td>53.3</td>
<td>52.4</td>
<td>43.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders Index</td>
<td>62.8</td>
<td>65.0</td>
<td>52.6</td>
<td>58.1</td>
<td>56.6</td>
<td>46.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid Index (NSA)</td>
<td>86.0</td>
<td>88.0</td>
<td>51.5</td>
<td>59.6</td>
<td>57.6</td>
<td>42.9</td>
</tr>
</tbody>
</table>
U.S. Construction Spending Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 1, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040601b.jpg" width="353">
The total value of construction put in place surged another 1.3% in April following an upwardly revised 2.4% March gain. A 0.5% rise had been the Consensus expectation.
Private residential building activity rose 1.2% following a 1.1% March gain, revised from 0.7%. Residential building rose 1.2% as single family building rose 1.6% (23.7% y/y).
Nonresidential building rose for the third straight month (0.1% y/y) led by gains in the health care, education and commercial building categories.
Public construction added 1.7% led by another gain in spending on highways &amp; streets (nearly one third of the value of public construction spending), up 22.0% y/y.
These more detailed categories represent the Census Bureau&#146;s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E907/@E90701/@E90701.HTM"> Construction Put-in-place</a></th>
<th scope="col"> April</th>
<th scope="col">Mar</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>1.3%</td>
<td>2.4%</td>
<td>11.3%</td>
<td>4.0%</td>
<td>1.1%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">Private</td>
<td>1.2%</td>
<td>1.1%</td>
<td>11.6%</td>
<td>4.6%</td>
<td>-0.2%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Residential</td>
<td>1.2%</td>
<td>1.3%</td>
<td>17.3%</td>
<td>10.1%</td>
<td>8.6%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Nonresidential</td>
<td>1.3%</td>
<td>0.7%</td>
<td>0.1%</td>
<td>-5.5%</td>
<td>-13.0%</td>
<td>-1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Public</td>
<td>1.7%</td>
<td>7.0%</td>
<td>10.2%</td>
<td>2.1%</td>
<td>5.3%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
Challenger Layoffs Ticked Up Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 1, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040601a.jpg" width="353">
Challenger, Gray &amp; Christmas reported that announced job cuts ticked 1.6% higher to 73,368 in May following a 6.1% m/m increase in April.
The three month moving average of job cut announcements fell to 71,195 (-28.9% y/y) due to sharp decline in layoffs in February and March.
During the last ten years there has been an 87% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S301/@S301.HTM"> Challenger, Gray &amp; Christmas</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>
<td class="firstcol">Announced Job Cuts</td>
<td>73,368</td>
<td>72,184</td>
<td>6.9%</td>
<td>1,236,426</td>
<td>1,431,052</td>
<td>1,956,876</td>
</tr>
</tbody>
</table>
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The May Purchasing Managers Composite Index (PMI) released by the Institute of Supply Management rose slightly to 62.8 from 62.4 in April. Consensus expectations were for a decline to 61.5. During the last twenty years there has been [...]

ISM Factory Index Up Slightly

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/040528d.jpg" width="353">
Japan&#39;s economy gave more signs of building momentum in April. This has reached the consumer sector in a significant way. First, the labor force survey showed a sizable 240,000 increase in the number of people reporting they are employed. This followed March&#39;s 190,000 rise and cumulates to 770,000 from an apparent trough last November. The total number of employed persons was 63.64 million, the highest since 63.66 million in January 2002. The peak in employment was 65.84 million in July 1997, just as the Asian currency crisis hit full force.
Consumer spending data look better too in April. The index of living expenditure per household jumped to 105.6 from March&#39;s 96.7 (2000=100). Press reports highlighted this leap as a record monthly increase. However, March&#39;s index had fallen 4.0%, so the two-month gain averages &quot;just&quot; 2.5%. Even so, this itself is the fifth largest such two-month change in the 29-year history of the survey.
A month ago, the Cabinet Office&#39;s consumer sentiment survey had reported a sizable rise in confidence in the first quarter, as people felt better about their job situation, income prospects and standard of living (see Louise Curley&#39;s comment here on April 27). They also indicated that this seemed to be a good time to buy durable goods. Today&#39;s report on their spending for April shows they did that, with a huge increase in furniture and household utensils for April that put the two-month advance at the highest in over five years. Transportation, education, culture and miscellaneous were also strong in April, while categories that might described as &quot;necessities&quot;, food, clothing and housing, all declined. The more confident consumers are spending more vigorously on discretionary items than they have in quite some time.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Feb 2004</th>
<th scope="col">Year Ago</th>
Annual Average
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Employment (millions)</td>
<td>63.64</td>
<td>63.40</td>
<td>63.21</td>
<td>63.15</td>
<td>63.17</td>
<td>63.30</td>
<td>64.10</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Change&nbsp;&nbsp;&nbsp; (thousands or %)</td>
<td>+240</td>
<td>+190</td>
<td>-10</td>
<td>+490 (+0.8%)</td>
<td colspan="3">December/December</td>
</tr>
<tr>
<td class="firstcol">+0.3%</td>
<td>-1.1%</td>
<td>-1.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>4.7%</td>
<td>4.7%</td>
<td>5.0%</td>
<td>5.4%</td>
<td colspan="3">Annual Average</td>
</tr>
<tr>
<td class="firstcol">5.3%</td>
<td>5.4%</td>
<td>5.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Household Spending (2000=100)</td>
<td>105.9</td>
<td>96.7</td>
<td>100.7</td>
<td>98.6</td>
<td>98.0</td>
<td>99.3</td>
<td>99.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; % Change</td>
<td>9.5%</td>
<td>-4.0%</td>
<td>-0.5%</td>
<td>7.5%</td>
<td colspan="3">December/December</td>
</tr>
<tr class="odd">
<td class="firstcol">0.9%</td>
<td>-3.1%</td>
<td>-4.8%</td>
</tr>
</tbody>
</table>
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<colgroup></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&middot; We&#39;ve seen a collection of Q1 GDP reports the last two days.&nbsp; The highlight, we&#39;ve judged, is the role of investment spending as a leading factor in better growth trends apparent in reports so far.&nbsp; Today we briefly summarize three more, Switzerland, Denmark and Hong Kong.&nbsp; The first two of these look somewhat different, with less buoyant investment sectors.&middot; Switzerland is climbing gradually out of a period of stagnation, with its year-on-year GDP growth running at 1.5%, the best since Q2 2001.&nbsp; Consumer spending is the main support.&nbsp; Investment, though, is erratic at best and has been unable to sustain a strong 2003 performance into this year.&middot; Denmark shows a similar current performance, although its behavior earlier differs from most economies.&nbsp; It seems not to have suffered much in the 2001 recession, and investment spending there was actually strong then.&nbsp; Thus, its investment cycle appears to have different timing from most, with a slowdown now after respectable gains in periods when capital spending elsewhere was weak.&nbsp;&middot; Hong Kong did experience the 2001 recession in sync with others, but has come back with some vigor.&nbsp; Investment there is moving ahead in a recovery phase, while exports and inventory building provided the largest part of the 2.4% growth in Q1.&nbsp;&nbsp;</th>
</tr>
</thead>

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GDP &amp; Select Components, % Changes</th>
Qtr/Qtr (Seas Adj)
<th scope="col">Year/ Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">1st Qtr 2004</td>
<td>4th Qtr 2003</td>
<td>3rd Qtr 2003 &nbsp;</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Denmark (1995 Krone)</td>
<td>0.6</td>
<td>0.6</td>
<td>0.3</td>
<td>1.3</td>
<td>1.0</td>
<td>0.4</td>
<td>0.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;-&nbsp; Investment</td>
<td>-3.0</td>
<td>0.7</td>
<td>4.4</td>
<td>0.2</td>
<td>3.1</td>
<td>0.5</td>
<td>11.6</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Switzerland (2000 Swiss Francs)</td>
<td>0.4</td>
<td>0.5</td>
<td>0.5</td>
<td>1.5</td>
<td>0.0</td>
<td>0.9</td>
<td>0.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;-&nbsp; Fixed Capital Formation</td>
<td>-0.1</td>
<td>0.8</td>
<td>0.8</td>
<td>0.6</td>
<td>4.9</td>
<td>-2.1</td>
<td>-9.2</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Hong Kong (2000 HK$)</td>
<td>2.4</td>
<td>2.5</td>
<td>4.9</td>
<td>6.8</td>
<td>4.9</td>
<td>4.8</td>
<td>-1.1&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;-&nbsp; Fixed Capital Formation</td>
<td>1.3</td>
<td>2.3</td>
<td>4.0</td>
<td>5.8</td>
<td>1.9</td>
<td>-0.3</td>
<td>-4.4</td>
</tr>
</tbody>
</table>
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Japan's economy gave more signs of building momentum in April. This has reached the consumer sector in a significant way. First, the labor force survey showed a sizable 240,000 increase in the number of people reporting they are [...]

Japan Employment and Consumer Spending Have Big Gains in April

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040528a.jpg" width="353">
Personal income rose 0.6% (+5.7% y/y) last month versus the Consensus expectation for a 0.5% gain.
While the upside surprise was slight, it reflected a firm 0.5% (4.8% y/y) rise in wages &amp; salaries that followed an upwardly revised 0.3% March increase. Firm wage gains were logged across industries.
Personal disposable income increased 0.5% following a 0.4% March increase. The 6.3% y/y increase in disposable income was the strongest since June 2002. After accounting for a 1.9% rise in prices, real disposable income rose 4.3%.
Consumer spending rose a modest 0.3% in April, held back by a 1.6% m/m decline unit light vehicle sales. A 0.2% gain in PCE had been expected. 
The PCE chain price index rose just 0.1%. Less food &amp; energy, prices rose 0.1% (1.4% y/y) following a 0.2% March gain. 
The savings rate moved higher to 2.4%, the highest level since last Summer. 

<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/@E7/@E711/@E71102/@E71102.HTM"> Disposition of Personal Income</a></th>
<th scope="col">April</th>
<th scope="col">Mar</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">Personal Income</td>
<td>0.6%</td>
<td>0.4%</td>
<td>5.7%</td>
<td>3.3%</td>
<td>2.3%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">Personal Consumption</td>
<td>0.3%</td>
<td>0.5%</td>
<td>6.5%</td>
<td>5.0%</td>
<td>4.8%</td>
<td>4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Savings Rate</td>
<td>2.4%</td>
<td>2.2%</td>
<td>2.4%</td>
<td>2.1%</td>
<td>2.3%</td>
<td>1.7%</td>
</tr>
<tr>
<td class="firstcol">PCE Chain Price Index</td>
<td>0.1%</td>
<td>0.3%</td>
<td>1.9%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Down in May 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040528c.jpg" width="353">
The University of Michigan&#146;s consumer sentiment index for the full month of May fell to90.2 from 94.2 in April. The reading reflected deterioration late in the month versus a mid-month reading of 94.2. Consensus expectations had been for a slight rise to 95.0.
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. That correlation has risen to 82% during the last five years.
Perceptions of current economic conditions fell 1.3% following the 1.7% decline in April. The expectations index dropped a sharp 6.5% m/m and added to a 1.7% April dip. Both readings were down from mid-month.
The decline in Sentiment in May contrasted with the very slight rise in Consumer Confidence reported earlier by the Conference Board. During the last ten years there has been an 84% correlation between the y/y change in the two measures.
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"> 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">Consumer Sentiment</td>
<td>90.2</td>
<td>94.2</td>
<td>-2.1%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>103.6</td>
<td>105.0</td>
<td>11.2%</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>81.6</td>
<td>87.3</td>
<td>-10.7%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
Chicago Purchasing Agents' Index Again Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 28, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040528b.jpg" width="353">
The Chicago Purchasing Managers Business Barometer for May rose to 68.0 from 63.9 in April. The rise reflected strength versus Consensus expectations for a slight decline to 62.5 and was to the highest level since July 1988.
During the last ten years there has been an 83% correlation between the level of the Chicago Business Barometer and quarterly growth in factory sector industrial output. There has been a 48% correlation with growth in real GDP.
The new orders index led the increase to 74.4, the highest level since 1988. Production also rose a hefty 6.3 points to 71.1 and moved closer to the January high of 76.5.
Employment surged 3.9 points to 54.8, the current cycle high. During the last twenty years there has been a 71% correlation between the level of this employment index and the y/y change in factory sector payroll employment.
The index of prices paid jumped to 80.0, the highest since February 1995.

<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/@EF05/@EF05.HTM"> Chicago Purchasing Managers Index, SA</a></th>
<th scope="col"> May</th>
<th scope="col">April</th>
<th scope="col">May&nbsp; &#39;03</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">Business Barometer</td>
<td>68.0</td>
<td>63.9</td>
<td>51.6</td>
<td>54.7</td>
<td>52.7</td>
<td>41.4</td>
</tr>
<tr>
<td class="firstcol">&nbsp; New Orders</td>
<td>74.4</td>
<td>65.1</td>
<td>54.5</td>
<td>58.0</td>
<td>56.2</td>
<td>42.3</td>
</tr>
<tr class="odd">
<td class="firstcol">Prices Paid</td>
<td>80.0</td>
<td>76.1</td>
<td>52.6</td>
<td>55.8</td>
<td>56.9</td>
<td>50.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Personal income rose 0.6% (+5.7% y/y) last month versus the Consensus expectation for a 0.5% gain. While the upside surprise was slight, it reflected a firm 0.5% (4.8% y/y) rise in wages & salaries that followed an upwardly revised [...]

U.S. Personal Income Up 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/040527d.jpg" width="353">
US financial markets are on alert during the middle of the first month of each quarter as companies report profits, a period that investors and traders refer to informally as &quot;earnings season&quot;. Similarly, the second half of the middle month of each quarter could be dubbed &quot;GDP season&quot;, as country after country publishes its prior quarter growth performance.
Today, Brazil and the Philippines released their first quarter results. Brazil&#39;s growth edged higher, to 1.6% quarter-on-quarter from 1.4% in the final period of 2003. This lifted the year-on-year rate to 2.7% after three quarters of contraction. Notably, as with the UK and Spain&#39;s data discussed here yesterday, investment is playing a roll in the improving trend in demand in Brazil. Investment growth was slower in Q1, at 2.3% compared with Q4&#39;s 4.0%. But these two gains, plus a similar one in the prior period, mark a distinct turnaround from a previous stretch of outright declines. Over longer periods, such as two and four years, overall growth in Brazil seems to be settling into a pace around 2%, not as high as some years, but less volatile.
Growth in the Philippines, by contrast, has been fairly steady over the last couple of years at rates higher than 5%. Even in the recession-plagued year of 2001, Philippine GDP did not contract year-over-year, and moreover, during the Asian crisis in 1997-98 there was only a modest and brief reduction in economic activity. Steady growth in the consumer sector, which constitutes about three-quarters of the Philippine economy (more than in many countries), is a source of stability. In the latest quarter, total GDP growth was 1.9%, down from Q4&#39;s 2.5%; however, the Q1 rate is hardly &quot;low&quot;, and it included a firming of private consumption from 1.5% to 1.6%. Investment is more erratic here than elsewhere, and it rose 7.1% in Q1 after falling 2.9% in Q4.
The gains in investment in many varied countries, which have been evident in most of the recently issued Q1 reports, suggest that low world interest rates are helping support world economic activity.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GDP &amp; Select Components, % Changes</th>
Qtr/Qtr (Seasonally Adjusted)
<th scope="col">Year/ Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">1st Qtr&nbsp; 2004</td>
<td>4th Qtr 2003</td>
<td>3rd Qtr 2003 &nbsp;</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Brazil - Chain Index, 1990=100</td>
<td>1.6</td>
<td>1.4</td>
<td>0.5</td>
<td>2.7</td>
<td>-0.1</td>
<td>3.9</td>
<td>-0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; -&nbsp; Investment</td>
<td>2.3</td>
<td>4.0</td>
<td>3.2</td>
<td>2.2</td>
<td>-5.0</td>
<td>4.1</td>
<td>-8.2</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Philippines - 1985 Pesos</td>
<td>1.9</td>
<td>2.5</td>
<td>1.1</td>
<td>6.4</td>
<td>5.0</td>
<td>5.6</td>
<td>2.3</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; -&nbsp; Fixed Capital Formation</td>
<td>7.1</td>
<td>-2.9</td>
<td>1.6</td>
<td>4.8</td>
<td>1.2</td>
<td>5.8</td>
<td>-15.5</td>
</tr>
</tbody>
</table>
</body>
</html>

US financial markets are on alert during the middle of the first month of each quarter as companies report profits, a period that investors and traders refer to informally as "earnings season". Similarly, the second half of the middle [...]

Steadying GDP Trends in Brazil, Philippines; Investment Grows

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527b.jpg" width="353">
US real GDP growth in 1Q was revised slightly higher to 4.4% (AR) from the advance report of 4.2% growth. The Consensus expectation was for a revision to 4.5% growth.
Growth in operating earnings slowed. Before tax corporate profits with inventory valuation adjustment (IVA) &amp; capital consumption adjustment (CCA) dropped to 4.9% (AR, 31.6% y/y) from the barnburner growth rates of 32.3%, 46.0% and 48.1% during the prior three quarters. After tax operating earnings grew 5.6% (AR) last quarter.
Operating profits for nonfinancial corporations grew 3.6% (AR, 37.7% y/y). Profit margins at nonfinancial corporations did not grow last quarter as indicated by an unchanged level of operating earnings per unit real value added. Nevertheless, margins were about two thirds higher than in 2001.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527a.jpg" width="353">
&quot;Recent Revisions to Corporate Profits: What We Know and When We Knew It&quot; from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/newsevents/news/research/2004/rp040323.html"> here</a>.
Personal consumption expenditures growth was little changed at 3.9% (4.3% y/y) rate. Durables spending fell 4.2% due to lower light vehicle sales but nondurables grew 6.6% and services were up 4.2%.
Nonresidential fixed investment growth was revised higher to 9.8% (AR, 12.5% y/y) from 7.2%. Investment in equipment &amp; software was revised to 17.0% (19.4% y/y) from 11.4%. Residential investment growth also was revised up to 3.8% (9.3% y/y) from 2.1%.
Additional investment in inventories is now estimated to have added 0.8 percentage points to GDP growth, up from the initial estimate of a 0.3% add.
The trade sector, however, is now estimated to have subtracted 0.4 percentage points from GDP growth as imports were revised up to 5.9% (AR, 7.9% y/y) from 2.0%. Export growth of 4.9% (8.3% y/y) was a little better than first estimated.
Inflation was little revised at 2.6% for the chain price index. The gain in the PCE chain price index actually was revised down to 3.0% (1.6% y/y) from 3.2%. Business equipment &amp; software prices were revised up to a 0.2% decline (0.0% y/y) from -0.5%.
&quot;Technology, Globalization, and Economic Policy&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/iet/20040501/cover.pdf"> here</a>.<table border="1" cellpadding="0" cellspacing="0" width="100%"><tr><td valign="top" width="211"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM"> Chained 2000$, % AR</a></td><td align="center" valign="top" width="118"> 1Q &#39;04 (Prelim.)</td><td align="center" valign="top" width="118"> 1Q &#39;04 (Advance)</td><td align="center" valign="top" width="86"> 4Q &#39;03 (Final)</td><td align="center" valign="top" width="60"> Y/Y</td><td align="center" valign="top" width="60">2003</td><td align="center" valign="top" width="60">2002</td><td align="center" valign="top" width="60">2001</td></tr><tr><td valign="top" width="211">GDP</td><td align="center" valign="top" width="118">4.4%</td><td align="center" valign="top" width="118">4.2%</td><td align="center" valign="top" width="86">4.1%</td><td align="center" valign="top" width="60">5.0%</td><td align="center" valign="top" width="60">3.1%</td><td align="center" valign="top" width="60">2.2%</td><td align="center" valign="top" width="60">0.5%</td></tr><tr><td valign="top" width="211"> Inventory Effect</td><td align="center" valign="top" width="118">0.8%</td><td align="center" valign="top" width="118">0.3%</td><td align="center" valign="top" width="86">0.7%</td><td align="center" valign="top" width="60">0.2%</td><td align="center" valign="top" width="60">-0.1%</td><td align="center" valign="top" width="60">0.4%</td><td align="center" valign="top" width="60">-0.9%</td></tr><tr><td valign="top" width="211">Final Sales</td><td align="center" valign="top" width="118">3.7%</td><td align="center" valign="top" width="118">3.9%</td><td align="center" valign="top" width="86">3.4%</td><td align="center" valign="top" width="60">4.7%</td><td align="center" valign="top" width="60">3.2%</td><td align="center" valign="top" width="60">1.8%</td><td align="center" valign="top" width="60">1.4%</td></tr><tr><td valign="top" width="211"> Trade Effect</td><td align="center" valign="top" width="118">-0.4%</td><td align="center" valign="top" width="118">0.0%</td><td align="center" valign="top" width="86">-0.3%</td><td align="center" valign="top" width="60">0.0%</td><td align="center" valign="top" width="60">-0.2%</td><td align="center" valign="top" width="60">-0.6%</td><td align="center" valign="top" width="60">-0.2%</td></tr><tr><td valign="top" width="211">Domestic Final Demand</td><td align="center" valign="top" width="118">3.9%</td><td align="center" valign="top" width="118">3.7%</td><td align="center" valign="top" width="86">3.6%</td><td align="center" valign="top" width="60">4.8%</td><td align="center" valign="top" width="60">3.4%</td><td align="center" valign="top" width="60">2.4%</td><td align="center" valign="top" width="60">1.6%</td></tr><tr><td valign="top" width="211">Chained GDP Price Index</td><td align="center" valign="top" width="118">2.6%</td><td align="center" valign="top" width="118">2.5%</td><td align="center" valign="top" width="86">1.5%</td><td align="center" valign="top" width="60">1.7%</td><td align="center" valign="top" width="60">1.7%</td><td align="center" valign="top" width="60">1.5%</td><td align="center" valign="top" width="60">2.4%</td></tr></table>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM"> Chained 2000$, % AR</a></th>
<th scope="col"> 1Q &#39;04 (Prelim.)</th>
<th scope="col"> 1Q &#39;04 (Advance)</th>
<th scope="col"> 4Q &#39;03 &nbsp; &nbsp;(Final)</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">GDP</td>
<td>4.4%</td>
<td>4.2%</td>
<td>4.1%</td>
<td>&nbsp;5.0%</td>
<td>3.1%</td>
<td>2.2%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>0.8%</td>
<td>0.3%</td>
<td>0.7%</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>0.4%</td>
<td>-0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>3.7%</td>
<td>3.9%</td>
<td>3.4%</td>
<td>4.7%</td>
<td>3.2%</td>
<td>1.8%</td>
<td>1.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Trade Effect</td>
<td>-0.4%</td>
<td>0.0%</td>
<td>-0.3%</td>
<td>0.0%</td>
<td>-0.2%</td>
<td>-0.6%</td>
<td>-0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>3.9%</td>
<td>3.7%</td>
<td>3.6%</td>
<td>4.8%</td>
<td>3.4%</td>
<td>2.4%</td>
<td>1.6%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>2.6%</td>
<td>2.5%</td>
<td>1.5%</td>
<td>1.7%</td>
<td>1.7%</td>
<td>1.5%</td>
<td>2.4%</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Dip 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527c.jpg" width="353">
Initial claims for jobless insurance dipped 3,000 last week to 344,000 following the 14,000 increase during the prior week that was revised up slightly. Consensus expectations had been for 335,000 initial claims.
The 4-week moving average of initial claims ticked up to 335,500 (-20.3% y/y).
Continuing claims for unemployment insurance rose 19,000 following a 30,000 decline the prior week that was deeper than originally estimated.
The insured rate of unemployment was unchanged at 2.3% where it has been for four weeks.

<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">5/22/04</th>
<th scope="col">5/15/04</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; 344</td>
<td>347</td>
<td>-17.9%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,943</td>
<td>-19.8%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
Help-Wanted Advertising Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 27, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040527e.jpg" width="353">
The Conference Board&#146;s National Index of Help-Wanted Advertising fell for the second month to 38 from 39 in March and from 40 in February.
The decline runs counter to the improvement in hiring portended by the Manpower Employment Outlook Survey for 2Q04. During the last ten years there has been a 74% correlation between the help wanted index and the Manpower Survey.
There has been a 93% correlation between the level of help-wanted advertising and the year-to-year change in non-farm payrolls.
The proportion of labor markets with rising want-ad volume recovered some of the slump in March and rose to 43% from 22%.
The Conference Board surveys help-wanted advertising volume in 51 major newspapers across the country every month. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/CBDB/@C3/@C3.HTM">Conference Board</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;03</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">National Help Wanted Index</td>
<td>38</td>
<td>39</td>
<td>37</td>
</tr>
</tbody>
</table>
</body>
</html>

US real GDP growth in 1Q was revised slightly higher to 4.4% (AR) from the advance report of 4.2% growth. The Consensus expectation was for a revision to 4.5% growth. Growth in operating earnings slowed. Before tax corporate profits [...]

Q1 2004 GDP Revised Up Slightly, Corporate Profit Growth Slowed

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526d.jpg" width="353">
GDP reported today for Q1 2004 in the UK, Spain and Malaysia showed slower growth than in the final quarter of 2003, but important segments of each of those economies still show signs of strength.
This was the second report of the UK data, and they were virtually unchanged from last month&#39;s preliminary figures. The newly released detail show the downshift in growth from 0.9% in Q4 to 0.6% in Q1 due to an outright decline in exports and a smaller gain in fixed capital formation. However, this latter item still had a quite respectable performance that lifted its four-quarter growth to 6.9%, the strongest since late 1998.
Total growth in Spain eased to 0.6% in Q1 from 0.7% the period before.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526e.jpg" width="353"> Consumption by households and nonprofit institutions was the main source of the lesser advance. Capital formation actually strengthened, up 0.9% relative to 0.6% before; the machinery segment firmed from a sluggish 0.1% to 1.6% in Q1.
Growth in Malaysia had a bigger slowdown, to 0.8% from 2.7% in Q4. But the more remarkable aspect was the Q4 number, which was the highest since early 2000. So some consolidation was hardly surprising. An industrial breakdown of the data shows that most sectors had slower growth in Q1, and manufacturing activity fell by 0.9%. However, after its surge in Q4, the year-on-year pace in manufacturing sustained its huge 12%-plus Q4 amount.
So the lower growth rates in these countries in Q1 don&#39;t look to spell slowdown; they are more likely signals of desirable reversion toward underlying trends in these very diverse economies.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">GDP &amp; Select Components, % Changes</th>
Qtr/Qtr (Seasonally Adjusted)
<th scope="col">Year/ Year</th>
4th Qtr/4th Qtr
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">1st Qtr 2004</td>
<td>4th Qtr 2003</td>
<td>3rd Qtr &nbsp;2003 &nbsp;</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">UK - GDP, 2000 Pounds</td>
<td>0.6</td>
<td>0.9</td>
<td>0.8</td>
<td>3.0</td>
<td>2.7</td>
<td>1.9</td>
<td>1.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; -&nbsp; Fixed Capital Formation</td>
<td>1.1</td>
<td>2.4</td>
<td>1.9</td>
<td>6.9</td>
<td>3.7</td>
<td>5.3</td>
<td>-1.8</td>
</tr>
<tr>
<td class="firstcol">Spain - GDP, 1995 Euros</td>
<td>0.6</td>
<td>0.7</td>
<td>0.6</td>
<td>2.9</td>
<td>2.8</td>
<td>2.1</td>
<td>2.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; -&nbsp; Fixed Capital Formation</td>
<td>0.9</td>
<td>0.6</td>
<td>1.7</td>
<td>3.0</td>
<td>2.6</td>
<td>3.1</td>
<td>2.9</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Malaysia - GDP, 1987 Ringgit</td>
<td>0.8</td>
<td>2.7</td>
<td>2.0</td>
<td>7.6</td>
<td>6.6</td>
<td>5.6</td>
<td>-0.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - Manufacturing</td>
<td>-0.9</td>
<td>6.0</td>
<td>3.3</td>
<td>12.5</td>
<td>12.2</td>
<td>5.8</td>
<td>-6.4</td>
</tr>
</tbody>
</table>
</body>
</html>

GDP reported today for Q1 2004 in the UK, Spain and Malaysia showed slower growth than in the final quarter of 2003, but important segments of each of those economies still show signs of strength. This was the second report of the UK [...]

GDP Growth Moderates in 3 Countries, But Key Sectors Remain Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526b.jpg" width="353">
Sales of new one-family homes fell 11.8% in April to 1.093M. Consensus estimates had been for a lesser decline to 1.200 million. March sales were revised slightly higher.
The figures contrast with yesterday&#39;s report of a 2.5% m/m gain sales of existing single family homes. These new home sales data from the US Census Department reflect current sales versus the existing home sale figures which reflect closings on past sales.
Nevertheless, sales last month were up 6.4% from April 2003, although the rate of gain has eased considerably from the peaks above 20%. 
Sales fell hardest in the South with a 22.0% (-5.5% y/y) drop. Sales also fell 2.5% (+1.3% Y/Y) in the Northeast, down for the third consecutive month, and in the West where they fell 9.4% (+16.5% y/y). Sales rose 10.8% (25.6% y/y) in the Midwest.
The median price of a new single family home rose 8.8% to $221,200 (16.7% 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/@E9/@E904/@E90401/@E90401.HTM"> Homes Sales (000s, AR)</a></th>
<th scope="col">April</th>
<th scope="col">Mar</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">New Single-Family</td>
<td>1,093</td>
<td>1,239</td>
<td>6.4%</td>
<td>1,088</td>
<td>977</td>
<td>907</td>
</tr>
</tbody>
</table>
Mortgage Applications & Business Borrowing Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association fell another 3.3% (-61.3% y/y) last week.
A similar pattern of decline has been exhibited by commercial &amp; industrial (C&amp;I) loans. C&amp;I loans extended by all commercial banks in the US were down 7.0% y/y in the latest week, a decline that began early in 2001.
&quot;Why No Business Loan Growth?&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20040501/cover.pdf"> here</a>.
Applications to refinance mortgages cratered 6.7% last week on top of the double digit declines of the prior several periods. Purchase applications fell another 1.0% w/w but for the month still are 1.8% ahead of the April average.
During the last ten years there has been a 56% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The effective interest rate on a conventional 30-Year mortgage rose slightly to 6.53% from 6.48% the week prior. The average for April was 6.16% versus 5.65% averaged in March. The effective rate on a 15-year mortgage also ticked up to 5.97% from 5.93% the week prior. The average for April was 5.54% versus 5.00% in March.
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>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<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">05/21/04</th>
<th scope="col">05/14/04</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>632.4</td>
<td>654.1</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>449.8</td>
<td>454.2</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,694.9</td>
<td>1,816.9</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
U.S. Durable Goods Orders Down More Than Expected, But ... 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 26, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040526c.jpg" width="353">
Durable goods orders fell 2.9% last month but the increase in March was revised up to a 5.7% jump from the advance report of a 3.4% gain. Consensus expectations had been for a 0.5% decline in April orders.
Transportation orders dropped 4.7% following a 4.1% jump in March, pulled down by a decline in motor vehicle orders and lower aircraft orders. Excluding the transportation sector, durable goods orders fell 2.1% (+16.9% y/y) following a 6.3% surge in March.
Non-defense capital goods orders fell 2.7% but the gain in March is now pegged at 6.0% versus the advance report of a 2.1% gain. Excluding aircraft and parts, orders fell 3.5% (+13.2% y/y) after a 6.0% March jump, revised up from 2.4%.
Orders for computers &amp; electronic products lost all of the March gain, posting a 4.1% (+13.9% y/y) decline. Lower orders for semiconductors dragged the sector down while computer orders surged 5.4% (8.8% y/y) and orders for communications equipment jumped 16.6% (15.2% y/y).
Machinery orders fell 4.9% (18.9% y/y) but orders for electrical equipment, appliances &amp; components jumped 3.4% (11.9% y/y).
Shipments of durable goods slipped 0.8% (12.5% y/y) following an upwardly revised 4.3% gain in March. Excluding transportation, shipments added 0.4% (13.8% y/y) to the upwardly revised 5.6% gain in March.
Durable inventories rose 0.5% (-0.9% y/y) for the sixth gain in the last seven months.

<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/@ED01/@ED0101/@ED0101.HTM"> NAICS Classification</a></th>
<th scope="col">April</th>
<th scope="col">Mar</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">Durable Goods Orders</td>
<td>2.9%</td>
<td>5.7%</td>
<td>13.9%</td>
<td>2.6%</td>
<td>-1.7%</td>
<td>-10.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Non-defense Capital Goods</td>
<td>-2.7%</td>
<td>6.0%</td>
<td>12.6%</td>
<td>5.6%</td>
<td>-7.2%</td>
<td>-15.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

Sales of new one-family homes fell 11.8% in April to 1.093M. Consensus estimates had been for a lesser decline to 1.200 million. March sales were revised slightly higher. The figures contrast with yesterday's report of a 2.5% m/m gain [...]

New Home Sales Down

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.

260709Z1.jpg

**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).

<iframe data-testid="embed-iframe" style="border-radius:12px" src="https://open.spotify.com/embed/episode/0dl4LKZaL1oTC5UPIaqrA9?utm_source=generator&si=7aa69345dbfd4ac4" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

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

260709F57.jpg

260709G57.jpg

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.

260709H57.jpg

260709I57.jpg

- June sales -2.4% m/m to 4.09 mil., first drop in three mths.; +2.8% y/y, third straight y/y rise.
- Sales m/m down in the South (-3.6%), Midwest (-3.0%), and West (-1.3%); up in the Northeast (+2.1%).
- Sales y/y up in all regions except the Northeast w/ a flat reading.
- Median sales price +2.2% (+1.8% y/y) to $440,600, a record high.
- Unsold inventory -0.6% (+1.3% y/y) to 1.56 mil. units, first m/m decline since Dec.; 4.6 months' supply, highest since Aug. ’25.

U.S. Existing Home Sales Unexpectedly Fall in June from a Five-Month High

Kathleen Stephansen, CBE

260709A1.jpg

260709B1.jpg

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.

260709C1.jpg

260709D1.jpg

- 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.