Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040525d.jpg" width="353">
May data on consumer and business confidence are available for Belgium and the Netherlands, and business confidence for Germany (the IFO measure.) Confidence among both business and consumers had generally been steadily improving since early 2003 throughout Europe, but these recent data suggest that doubts are rising.
In May Consumer confidence fell in both Belgium and the Netherlands. Business confidence in Germany slipped for the third month in a row and, and in Belgium, fell sharply; but business confidence in the Netherlands rose by 2.3 percentage points and registered the first positive balance of opinion since August, 2002.
One factor eroding confidence is the rise in oil prices and its persistence. While these concerns have been reflected in the stock markets of the area, the recent declines in the stock markets probably reflect more uncertainties than just the price of oil and have affected confidence. In the attached chart we show the daily price of oil (West Texas Intermediate) inverted and the daily price of the German stock market over the past few months. (Trends in the German stock market are fairly typical of other European markets.) The rise in the stock market earlier this year has been virtually eliminated and similarly for the earlier decline in the price of oil.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Confidence</th>
<th scope="col">May 04</th>
<th scope="col">Apr 04</th>
<th scope="col">May 03</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y %&nbsp;</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">Belgium</td>
<td></td>
<td>&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">&nbsp; Business</td>
<td>-1.7</td>
<td>0.6</td>
<td>-14.9</td>
<td>-2.3</td>
<td>13.2</td>
<td>-12.9</td>
<td>-7.9</td>
<td>-9.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Consumer</td>
<td>-6</td>
<td>-4</td>
<td>-9</td>
<td>-2</td>
<td>3</td>
<td>-11</td>
<td>-2</td>
<td>-0</td>
</tr>
<tr>
<td class="firstcol">Netherlands</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Business</td>
<td>1.8</td>
<td>-1.4</td>
<td>-6.9</td>
<td>3.2</td>
<td>&nbsp;8.7</td>
<td>-5.6</td>
<td>-1.6</td>
<td>-1.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Consumer</td>
<td>-28</td>
<td>-25</td>
<td>-36</td>
<td>-3</td>
<td>&nbsp;8</td>
<td>-35</td>
<td>-20</td>
<td>-1</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business IFO</td>
<td>96.1</td>
<td>96.3</td>
<td>89.4</td>
<td>-0.2</td>
<td>6.7</td>
<td>91.7</td>
<td>89.4</td>
<td>92.1</td>
</tr>
</tbody>
</table>
</body>
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May data on consumer and business confidence are available for Belgium and the Netherlands, and business confidence for Germany (the IFO measure.) Confidence among both business and consumers had generally been steadily improving [...]

A Mixed Picture in European Confidence as Oil Prices Rise and Stock Markets Fall

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040525a.jpg" width="353">
Chain store sales fell 0.5% last week on top of a 0.8% decline the week prior, according to the International Council of Shopping Centers (ICSC)-UBS.
Retail gasoline prices rose to an average $2.06 per gallon last week (+38.8% y/y), up 14.8% from the April average of $1.80.
So far in May, chain store sales are 1.0% above the April average due to a 1.5% jump at the end of last month.
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.

<table border="0" cellspacing="0" width="100%">
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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">05/22/04</th>
<th scope="col">05/15/04</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">Total Weekly Retail Chain Store Sales</td>
<td>439.8</td>
<td>442.2</td>
<td>5.5%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Consumer Confidence Held The Higher Ground 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040525c.jpg" width="353">
The Conference Board&#146;s Index of Consumer Confidence for May was about unchanged at 93.2 versus the upwardly revised April reading of 93.0. Confidence in April had improved 5.1% versus March. Consensus expectations were for a slight rise in May to 94.0.
The present situation reading was little changed at 90.3 (+34.2% y/y) and the index of consumer expectations ticked 0.4% higher (+0.7% y/y).
While perceptions of current business conditions improved to the highest level since June 2001, jobs were viewed as hard to get by 30.6% of respondents. The increase in this measure erased all of the improvement (decline) logged earlier this year.
Expectations for business conditions in six months jumped in May to the highest level since January as 19.2% of respondents expected there to be more jobs in six months, the highest percentage since January.
The May Confidence reading was right in line with the unchanged level of Consumer Sentiment in mid-May reported earlier by the University of Michigan.
During the last ten years there has been a 67% correlation between the level of consumer confidence and the y/y % change in real PCE.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM"> Conference Board</a></th>
<th scope="col">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">Consumer Confidence</td>
<td>93.2</td>
<td>93.0</td>
<td>11.5%</td>
<td>79.8</td>
<td>96.6</td>
<td>106.6</td>
</tr>
</tbody>
</table>
Existing Home Sales Rose Unexpectedly to Near-Record 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 25, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040525b.jpg" width="353">
Sales of existing single family homes reported by the National Association of Realtors added another 2.5% in April to the gains of the prior two months. Sales of 6.640M were near the record of 6.68M set in September of last year. Consensus expectations had been for April sales 6.40M. March was unrevised.
Housing affordability has continued to rise despite higher mortgage rates as home price inflation has been stable near 7% and growth in real disposable income has accelerated to 4.0% from 2.6% last year.
Sales rose in all regions of the nation. In the Midwest sales rose 4.4% (+11.0% y/y) and in the South they rose 3.5% (+16.6% y/y). Lesser gains were logged in the Northeast where sales rose 1.4% (12.3% y/y) and in the West where sales rose 0.5% (17.9% y/y).
The median price of an existing home rose 1.1% m/m to $176,000 (+7.3% y/y). The prior month&#39;s figure was revised down.
The figures reflect closings of home sales in earlier months.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/publicaffairsweb.nsf/Pages/AprilEHS04?OpenDocument"> here</a>.

<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/@E905/@E90501/@E90501.HTM"> Existing Home Sales (000, 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">Existing Single-Family</td>
<td>&nbsp;6,640</td>
<td>&nbsp;6,480</td>
<td>15.1%</td>
<td>6,098</td>
<td>5,593</td>
<td>5,290</td>
</tr>
</tbody>
</table>
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Chain store sales fell 0.5% last week on top of a 0.8% decline the week prior, according to the International Council of Shopping Centers (ICSC)-UBS. Retail gasoline prices rose to an average $2.06 per gallon last week (+38.8% y/y), [...]

Chain Store Sales Lower Again As Gasoline Prices Rose Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040524c.jpg" width="353">
Chile&#39;s Gross Domestic Product rose 1% in the first quarter of 2004 from the last quarter of 2003, the largest rate of growth since the fourth quarter of 2000. A small decline in domestic demand was more than offset by the exports of good and services, particularly exports of copper. Chart I shows the period to period changes in domestic demand and in exports of goods and services.
Exports of copper tend to be <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040524b.jpg" width="353"> volatile and, as they usually account for about 40% of Chile&#39;s total exports of goods, they are largely responsible for the volatility in the total exports of goods and services . In the first quarter of 2004, copper exports were especially strong and accounted for close to one half of the total export of goods. (See Chart 2) Copper exports are available monthly and the April data show a 8.4% decline from March, but they are 114.9% above April, 2003.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">(Bil 1966 Chilean Pesos)</th>
<th scope="col">Q1 04</th>
<th scope="col">Q4r 03</th>
<th scope="col">Q1&nbsp; 03</th>
<th scope="col">Q/Q &nbsp;&nbsp; %</th>
<th scope="col">Y/Y&nbsp; %&nbsp;</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>10010.0</td>
<td>9852.6</td>
<td>9618.6</td>
<td>1.60</td>
<td>4.07</td>
<td>3.12</td>
<td>2.21</td>
<td>3.48</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Domestic demand</td>
<td>9832.6</td>
<td>9855.4</td>
<td>9342.9</td>
<td>-0.23</td>
<td>5.24</td>
<td>3.51</td>
<td>2.50</td>
<td>2.28</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>3561.8</td>
<td>3393.0</td>
<td>3227.9</td>
<td>4.98</td>
<td>10.34</td>
<td>7.77</td>
<td>1.52</td>
<td>7.55</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>3401.8</td>
<td>3381.6</td>
<td>3028.1</td>
<td>0.60</td>
<td>12.34</td>
<td>8.81</td>
<td>2.38</td>
<td>4.09</td>
</tr>
<tr class="odd">
<td class="firstcol">(Mil US$)</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Total Exports</td>
<td>6970.7</td>
<td>5082.1</td>
<td>5004.1</td>
<td>37.16</td>
<td>39.30</td>
<td>&nbsp;16.16</td>
<td>0.52</td>
<td>-4.06</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Copper exports</td>
<td>3047.2</td>
<td>2058.2</td>
<td>177.2</td>
<td>48.05</td>
<td>71.96</td>
<td>19.43</td>
<td>-3.90</td>
<td>-10.27</td>
</tr>
</tbody>
</table>
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Chile's Gross Domestic Product rose 1% in the first quarter of 2004 from the last quarter of 2003, the largest rate of growth since the fourth quarter of 2000. A small decline in domestic demand was more than offset by the exports of [...]

Chile's Gross Domestic Product Increases 1% in Q1 of 2004. Exports of Copper Play a Major Role

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040524a.jpg" width="353">
The Chicago Fed National Activity Index (CFNAI) improved in April to 0.64 from 0.23 in March. The latest was the highest reading since last November.
The three-month moving average of the CFNAI also improved to 0.45, the highest level since January.
A zero value of the CFNAI indicates that the economy is expanding at its historical trend rate of growth.
During the last twenty years there has been a 75% correlation between the level of the CFNAI and q/q growth in real GDP.
The CFNAI is a weighted average of 85 indicators of economic activity. The indicators reflect activity in the following categories: production and income, the labor market, personal consumption and housing, manufacturing and trade sales, and inventories &amp; orders.
The latest release of the Chicago Fed&#39;s National Activity Index is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_may2004.pdf"> here</a>.
Last week&#39;s speech by Federal Reserve Board Governor Ben S. Bernanke on Gradualism is available <a href="http://www.federalreserve.gov/boarddocs/speeches/2004/200405202/default.htm">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM"> Chicago Fed</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#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">CFNAI</td>
<td>0.64</td>
<td>0.23</td>
<td>-1.18</td>
<td>-0.10</td>
<td>-0.40</td>
<td>-1.18</td>
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The Chicago Fed National Activity Index (CFNAI) improved in April to 0.64 from 0.23 in March. The latest was the highest reading since last November. The three-month moving average of the CFNAI also improved to 0.45, the highest level [...]

Chicago Fed Nat'l Activity Index Up

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/040521a.jpg" width="353">
We noted here this past Tuesday the push in retail gasoline prices above $2.00/gallon for the first time ever. The price of the US benchmark crude oil has closed above $40/barrel every day since May 11. The oil market is a world-wide one and highly sensitive to geo-political forces as well as more quantifiable production and demand factors. We don&#39;t presume here to interpret the impact of the Iraq War, for instance. But we can illustrate some of the more traditional economic aspects of this price situation.
Most prominently, demand for gasoline in the US is growing rapidly. According to Department of Energy data, gasoline consumption was up 4.5% year-on-year in the four weeks ended May 14 (volume, measured in thousands of barrels/day). The prior couple of months have seen similar magnitudes. These are higher growth rates than prevailed over the preceding three years and among the highest in the 16-year history of these data. In contrast, the demand for other petroleum products is soft. This spring, consumption of all petroleum products, including gasoline, is virtually flat with year-ago volumes, a striking development in view of the rapid growth in the overall economy.
Supply factors are responding to the upward price pressure. Oil production in the US has been drifting downward for years. But in recent months the number of operating drilling rigs has climbed noticeably. While still well below the level of 20 years ago, expansion of production operations is quite distinct. From a low annual average of 830 in 2002, the May 14 week showed 1,162 active rigs, according to the Baker Hughes tally.
World oil production has been increasing as well. Data through February (only published on May 10) shows total crude production up 3.7% from a year ago following two months averaging more than 7% gains. Production actually fell in 2001 and 2002. OPEC has participated in the production upturn.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Selected Oil Market Indicators</th>
<th scope="col">May 14</th>
<th scope="col">Apr</th>
<th scope="col">Mar</th>
<th scope="col">Year Ago</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">US Demand for Gasoline &nbsp; (000 b/d)</td>
<td>9168</td>
<td>8913</td>
<td>8644</td>
<td>8810</td>
<td>8887</td>
<td>8767</td>
<td>8544</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Year/year % Change</td>
<td>4.5</td>
<td>6.5</td>
<td>3.0</td>
<td>--</td>
<td>1.4</td>
<td>2.6</td>
<td>1.1</td>
</tr>
<tr class="odd">
<td class="firstcol">US Demand for All Refined Product &nbsp; (000 b/d)</td>
<td>19949</td>
<td>20010</td>
<td>19833</td>
<td>19962</td>
<td>20004</td>
<td>19565</td>
<td>19628</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Year/year % Change</td>
<td>-0.1</td>
<td>-0.1</td>
<td>-1.2</td>
<td>--</td>
<td>2.2</td>
<td>-0.3</td>
<td>0.1</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td>Feb</td>
<td>Jan</td>
<td>Dec</td>
<td>Year Ago</td>
<td>2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">World Crude Oil Production &nbsp; (000 b/d)</td>
<td>71936</td>
<td>72266</td>
<td>72126</td>
<td>69343</td>
<td>69458</td>
<td>66841</td>
<td>68056</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Year/year % Change</td>
<td>3.7</td>
<td>6.7</td>
<td>7.8</td>
<td>--</td>
<td>3.9</td>
<td>-1.8</td>
<td>-0.2</td>
</tr>
<tr>
<td class="firstcol">OPEC Production&nbsp; &nbsp; (000 b/d)</td>
<td>29413</td>
<td>29483</td>
<td>29283</td>
<td>28810</td>
<td>28005</td>
<td>26369</td>
<td>28318</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Year/year % Change</td>
<td>4.6</td>
<td>10.2</td>
<td>12.3</td>
<td>--</td>
<td>6.2</td>
<td>-6.9</td>
<td>-2.7</td>
</tr>
</tbody>
</table>
</body>
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We noted here this past Tuesday the push in retail gasoline prices above $2.00/gallon for the first time ever. The price of the US benchmark crude oil has closed above $40/barrel every day since May 11. The oil market is a world-wide [...]

Some Demand and Supply Factors in the US Oil Market

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040520b.jpg" width="353">
The CPI in Canada picked up modestly in April, rising 0.3% after three successive weak months. A sharp rise in energy seems to be the main culprit. Food prices have been flat to down all year long and the core rate, as seen in the table, has little upward force.
While the surge in energy prices certainly pushed up Canadian inflation in April, the main aspect this move seems to highlight is the volatility in the energy sector. Wide swings, both up and down, have characterized these prices over the last several years. When these prices rise sharply, they often experience outright declines soon after. The current episode is characterized by especially large up and down moves in electricity and natural gas. Gasoline prices are volatile too, but not much more than they have been historically.
Other prices are moving in a narrow range. So far this year, food prices are down, and shelter costs are up slightly. Household operation had its first monthly increase in April since December. Clothing prices are falling sharply. Recreation, reading and cultural activities have flat prices of late. Thus, one possible implication of the volatility in the energy sector is that there is less time for higher energy costs to work their way into the pricing structure of other industries. To the extent this immunity holds, it can limit the reach of those very basic prices, reducing the probability that higher energy costs produce permanently higher core inflation.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Canada CPI, % Changes</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">Feb 2004</th>
December/December
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">All Items</td>
<td></td>
<td></td>
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; SA % Chg</td>
<td>0.3</td>
<td>0.1</td>
<td>-0.1</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; NSA Yr/Yr % Chg</td>
<td><center></center></td>
<td>1.6</td>
<td>0.7</td>
<td>0.7</td>
<td>2.0</td>
<td>3.9</td>
<td>0.7</td>
</tr>
<tr class="odd">
<td class="firstcol">All Items ex Food &amp; Energy</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; SA % Chg</td>
<td>0.1</td>
<td>0.2</td>
<td>-0.2</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; NSA, Yr/Yr % Chg</td>
<td><center></center></td>
<td>1.2</td>
<td>1.2</td>
<td>1.1</td>
<td>1.6</td>
<td>3.9</td>
<td>1.6</td>
</tr>
<tr>
<td class="firstcol">Energy</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; NSA, Yr/Yr % Chg</td>
<td>6.4</td>
<td>-4.1</td>
<td>-3.1</td>
<td>6.7</td>
<td>7.1</td>
<td>-11.4</td>
</tr>
</tbody>
</table>
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The CPI in Canada picked up modestly in April, rising 0.3% after three successive weak months. A sharp rise in energy seems to be the main culprit. Food prices have been flat to down all year long and the core rate, as seen in the [...]

Canadian CPI Picks Up with Energy; Core Inflation Remains Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040520a.jpg" width="353">
Initial claims for jobless insurance rose 12,000 last week to 345,000 and the prior week&#39;s increase was revised up slightly. Consensus expectations had been for a decline in claims to 325,000.
The latest figure covers the survey period for May nonfarm payrolls and initial claims were down 11,000 (3.1%) from the April period.
The 4-week moving average of initial claims fell to 333,500 (-21.7% y/y).
Continuing claims for unemployment insurance fell 23,000 following a downwardly revised gain of 51,000 the week prior.
The insured rate of unemployment dropped back to 2.3%, the three year low.

<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"> 5/15/04</th>
<th scope="col">5/08/04</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; 345</td>
<td>333</td>
<td>-18.6%</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>-19.4%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
Leading Indicators Uptrend Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 20, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040520c.jpg" width="353">
The Composite Index of Leading Economic Indicators reported by the Conference Board rose a slightly less-than-expected 0.1% in April, but the prior month&#39;s gain was revised to 0.8% from 0.3% reported initially.
The slackening in April reflected m/m gains in only 40% of the component series versus gains in 70% of the components over a six-month span. During the last ten years there has been a 63% correlation between the six-month diffusion index of the leaders and quarterly growth in real GDP.
Shorter manufacturing weekly hours had the largest negative influence on the leaders in April. Other negative contributions were slight. A higher money supply and a steeper yield curve made meaningful positive contributions.
The Leading index is based on eight previously reported economic data series and two that are estimated.
The coincident indicators rose 0.3% and all of the component series were higher over one and six month spans.
The ratio of coincident-to-lagging indicators rose 0.2% to another record level despite a 0.2% gain in the lagging indicators. The ratio is an indicator of excess relative to actual economic performance.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<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/BCI/BCI.HTM"> Business Cycle Indicators</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">Leading</td>
<td>0.1%</td>
<td>0.8%</td>
<td>4.9%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.3%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>-2.7%</td>
<td>-2.2%</td>
<td>-2.8%</td>
<td>-1.4%</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Down, Hiring Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 20, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040520d.jpg" width="353">
The Philadelphia Fed&#146;s April index of general business conditions in the manufacturing sector fell unexpectedly to 23.8. The 8.7 point decline versus April reversed all of that month&#39;s gain and dropped the index to its lowest since October. Consensus expectations had been for a slight decline to 31.0.
During the last twenty years there has been a 60% correlation between the level of the Philadelphia Fed Business Conditions Index and quarterly growth in real GDP. The correlation with quarterly growth in factory sector industrial production has been 74%.
The separate index of expected business conditions in six months recovered to the highest level since February after several months of decline
Amongst the sub indexes new orders fell sharply to the lowest level since last August, however, the employment index jumped to the highest level since 1973.
The business conditions index reflects a separate survey question, not the sub indexes.
The prices paid index surged to its highest level since 1988.
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/bos0504.html">here</a>.
From the Federal Reserve Bank of New York is this new article titled &quot;What Investment Patterns across Equipment and Industries Tell Us about the Recent Investment Boom and Bust&quot; and could be read <a href="http://www.newyorkfed.org/research/current_issues/ci10-6.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">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>
<td class="firstcol">General Activity Index</td>
<td>23.8</td>
<td>32.5</td>
<td>-4.2</td>
<td>10.6</td>
<td>7.7</td>
<td>-17.2</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>59.6</td>
<td>51.9</td>
<td>9.6</td>
<td>16.7</td>
<td>12.2</td>
<td>-0.9</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for jobless insurance rose 12,000 last week to 345,000 and the prior week's increase was revised up slightly. Consensus expectations had been for a decline in claims to 325,000. The latest figure covers the survey [...]

Initial Jobless Insurance Claims Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040519c.jpg" width="353">
Labor market conditions have been mixed in several moderately sized economies in Europe and western Asia, which reported current figures today. In several of these nations, however, signs suggest that a stabilization has perhaps occurred, so that, as in the US, employment might gain more vigor in coming months.
In Kazakhstan, the unemployment rate actual fell during much of the last four years for which data are available. Economic activity there is oil-centered and recently strong consumption of petroleum and rising prices are a benefit to them. At the same time, the unemployment rate has now been basically flat for the past six months at 1.9%, just above its record low of 1.8%. So there has been a pause in the improvement and it will be interesting to see if the recent surge in oil prices gives the Kazakh economy a boost.
In the Netherlands, there has been considerable back-tracking of employment and a commensurate rise in the number unemployed. In fact, while employment has stabilized in the last six months, unemployment has continued rising. As seen in the graph, this is tied to further growth in the labor force, which extended a fairly steady trend throughout the history of these data, albeit only four years. Perhaps as happens in the US, the recently more stable employment picture is encouraging people to keep looking for jobs, rather than back away from the labor force.
Sweden and Denmark are seeing the first signs of a turnaround in employment. In both countries, the number employed was higher in the first quarter (Denmark) or in April (Sweden) than its year-ago value for the first time in many months. Denmark has seen a downtrend in jobs for nearly two years, and Sweden for 11 months. So while the gains are not large and have so far recouped little of the recent contraction in employment, they lend hope of more favorable conditions to come.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><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>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Kazakhstan:Unemployment Rate (%)</td>
<td>N.A.*</td>
<td>1.9</td>
<td>1.9</td>
<td>2.6</td>
<td>2.3</td>
<td>3.2</td>
<td>3.1</td>
</tr>
<tr>
<td class="firstcol">Netherlands:Employment (SA, Thous)</td>
<td>N.A.</td>
<td>7093</td>
<td>7090</td>
<td>7132</td>
<td>7114</td>
<td>7125</td>
<td>7062</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployed (SA, Thous)</td>
<td>N.A.</td>
<td>482</td>
<td>483</td>
<td>369</td>
<td>397</td>
<td>302</td>
<td>352</td>
</tr>
<tr>
<td class="firstcol">Denmark:Employment (NSA, Thous)</td>
<td>N.A.</td>
<td>2680</td>
<td>N.A.</td>
<td>2667</td>
<td>2693</td>
<td>2712</td>
<td>2723</td>
</tr>
<tr class="odd">
<td class="firstcol">Sweden:Employment (NSA, Thous)</td>
<td>4209</td>
<td>N.A.</td>
<td>N.A.</td>
<td>4203</td>
<td>4232</td>
<td>4242</td>
<td>4239</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (NSA, %)</td>
<td>5.4</td>
<td>N.A.</td>
<td>N.A.</td>
<td>4.6</td>
<td>4.9</td>
<td>4.0</td>
<td>4.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Labor market conditions have been mixed in several moderately sized economies in Europe and western Asia, which reported current figures today. In several of these nations, however, signs suggest that a stabilization has perhaps [...]

Employment Stabilizes in 3 Countries, but Unemployment Unimproved

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

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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.