Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040519b.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association tumbled 11.9% (-58.1% y/y) last week led by a 16.8% collapse in applications to refinance (-78.2% y/y).
Purchase applications posted the first w/w decline in a month and fell 8.1% (+14.8% y/y). Purchase applications so far this month are 3.6% 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 fell slightly to 6.48% from 6.61% the week prior. The average for April was 6.16% versus 5.65% averaged in March. The effective rate on a 15-year mortgage similarly fell to 5.93% from 6.03% 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>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">05/14/04</th>
<th scope="col">05/07/04</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>654.1</td>
<td>742.2</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>454.2</td>
<td>494.3</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,816.9</td>
<td>2,184.6</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
Gasoline Prices Set Another Record At $2.02 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 19, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040519a.jpg" width="353">
The US average retail gasoline price for all formulations jumped above $2.00/gallon for the first time ever last week. At $2.02 per gallon the price was up more than twenty cents from an average of $1.80 in April.
Crude oil prices similarly have surged with the price of West Texas Intermediate crude at $40.53 (+38.4% y/y) yesterday versus an average $36.69 last month.
Wholesale natural gas prices also have moved up and last week averaged $6.28/mmbtu (+4.1% y/y).
&quot;Monetary Policy Actions, Macroeconomic Data Releases, and Inflation Expectations&quot; from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/review/04/05/Kliesen.pdf"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W4/@W403/@W40303/@W40303.HTM"> US Retail Gasoline Prices</a></th>
<th scope="col">05/17/04</th>
<th scope="col">12/29/03</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">All Formulations ($/Gal.)</td>
<td>$2.02</td>
<td>$1.48</td>
<td>34.6%</td>
<td>$1.56</td>
<td>$1.34</td>
<td>$1.42</td>
</tr>
</tbody>
</table>
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The index of mortgage applications compiled by the Mortgage Bankers Association tumbled 11.9% (-58.1% y/y) last week led by a 16.8% collapse in applications to refinance (-78.2% y/y). Purchase applications posted the first w/w decline [...]

Mortgage Applications Fell Further

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040518e.jpg" width="353">
Japan, Singapore and Taiwan have recently released data on their first quarter Gross Domestic Products. On a seasonally unadjusted basis, year-over-year growth in Japan was 5.36%, Singapore, 7.48% and Taiwan, 6.28%.
The increases in the rates of growth in each country over the past year are beginning to bring about a lessening of the deflationary climate that has characterized the area for the past several years. Japan has experienced the longest and most severe deflation; and although there was a slight decline in deflation in the first quarter, it is still too early to say that the trend has been reversed. In Taiwan and Singapore, however, the data are more encouraging. The rate of decline in Taiwan&#39;s deflator has moderated over the past year and in Singapore there was a 3% increase in the deflator in the first quarter of this year.
While these countries have been experiencing deflationary trends, China is contending with rapidly rising prices as its economic growth accelerates.

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<colgroup><col><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Year over Year Growth&nbsp; Not seasonally adjusted</th>
<th scope="col">Q1 04</th>
<th scope="col">Q4 03</th>
<th scope="col">Q3&nbsp; 03</th>
<th scope="col">Q2 03</th>
<th scope="col"> Q1 03&nbsp; </th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
<tbody>
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<td class="firstcol">Singapore</td>
<td>&nbsp;</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; GDP</td>
<td>7.48</td>
<td>4.90</td>
<td>1.70</td>
<td>-3.87</td>
<td>1.65</td>
<td>1.09</td>
<td>3.29</td>
<td>-2.37</td>
<td>9.41</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Deflator</td>
<td>3.02</td>
<td>-1.08</td>
<td>1.76</td>
<td>-1.82</td>
<td>0.43</td>
<td>-0.41</td>
<td>0.40</td>
<td>-1.14</td>
<td>4.48</td>
</tr>
<tr>
<td class="firstcol">Taiwan</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>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; GDP</td>
<td>6.28</td>
<td>5.17</td>
<td>4.18</td>
<td>-0.08</td>
<td>3.52</td>
<td>3.24&nbsp;</td>
<td>3.59</td>
<td>-2.18</td>
<td>5.86</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Deflator</td>
<td>-1.72</td>
<td>-2.52</td>
<td>-1.72</td>
<td>-1.89</td>
<td>-2.52</td>
<td>-2.17</td>
<td>-0.97</td>
<td>0.55</td>
<td>-1.79</td>
</tr>
<tr class="odd">
<td class="firstcol">Japan</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>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">&nbsp; GDP</td>
<td>5.36</td>
<td>3.17</td>
<td>1.99</td>
<td>2.19</td>
<td>2.73</td>
<td>2.53</td>
<td>-0.21</td>
<td>0.63</td>
<td>2.13</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Deflator</td>
<td>-2.51</td>
<td>-2.66</td>
<td>-2.08</td>
<td>-2.54</td>
<td>-3.21</td>
<td>-2.79</td>
<td>-1.16</td>
<td>-1.54</td>
<td>-1.94</td>
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Japan, Singapore and Taiwan have recently released data on their first quarter Gross Domestic Products. On a seasonally unadjusted basis, year-over-year growth in Japan was 5.36%, Singapore, 7.48% and Taiwan, 6.28%. The increases in [...]

Strong Growth in Asia excl China Beginning to Lessen Deflationary Tendencies

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040518b.jpg" width="353">
Housing starts fell 2.1% last month from the near-record level in March, that was revised slightly higher. April starts of 1.969M compared to the Consensus expectation for 1.98M.
Single family starts slipped a modest 0.6% from the upwardly revised March level. Nevertheless, April single-family starts were 3.6% below the record of November 2003.
Multi-family starts fell 8.4% and the surge in March was revised to show less of an increase.
The decline in housing starts last month was dominated by a 13.7% (+0.2 y/y) decline in the West. Elsewhere, housing starts rose. In the Northeast starts rose 0.6% (19.0% y/y) and the March decline was lessened. In the South starts added 1.2% (+31.7% y/y) and in the Midwest starts rose 4.5% (+23.1% y/y).
Building permits rose 1.2% m/m (+11.2% y/y).

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM"> Housing Starts (000s, AR)</a></th>
<th scope="col"> 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>
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<td class="firstcol">Total</td>
<td>1,969</td>
<td>2,011</td>
<td>20.3%</td>
<td>1,848</td>
<td>1,711</td>
<td>1,601</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,610</td>
<td>1,619</td>
<td>18.1%</td>
<td>1,501</td>
<td>1,364</td>
<td>1,272</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>359</td>
<td>392</td>
<td>31.0%</td>
<td>347</td>
<td>347</td>
<td>330</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,999</td>
<td>1,975</td>
<td>11.2%</td>
<td>1,831</td>
<td>1,750</td>
<td>1,637</td>
</tr>
</tbody>
</table>
Housing Market Index Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 18, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040518d.jpg" width="353">
The Composite Housing Market Index reported by the National Association of Home Builders (NAHB) remained at the improved level of 69 in May.
During the last fifteen years there has been a 79% correlation between the y/y change in the NAHB index and the change in single family housing starts.
The unchanged total reflected mixed patterns amongst the sub components. The index of expected single family home sales in six months fell slightly and the current sales index fell moderately. However, prospects in six months for sales of townhouses and condominiums improved.
Traffic of prospective buyers improved sharply in May (+37.5% y/y).
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the National Association of Home Builders using this <a href="http://www.nahb.org">link</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM"> Nat&#39;l Association of Home Builders</a></th>
<th scope="col">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">Composite Housing Market Index</td>
<td>69</td>
<td>69</td>
<td>57</td>
<td>64</td>
<td>61</td>
<td>56</td>
</tr>
</tbody>
</table>
Chain Store Sales Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 18, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040518c.jpg" width="353">
Chain store sales slipped 0.8% last week following two weeks of moderate gain, according to the International Council of Shopping Centers (ICSC)-UBS.
So far in May sales are 1.3% 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.
The rise gasoline prices to an average $2.02 per gallon last week (+34.6% y/y) may finally be curtailing the momentum in consumer spending.
For analysis of higher gasoline and energy prices on the consumer from the Federal Reserve Bank of Dallas see the following two articles: <a href="http://www.dallasfed.org/eyi/usecon/0405gasoline.html">U.S. Gasoline Prices on the Rise Once Again</a> and <a href="http://www.dallasfed.org/research/indepth/2004/id0402.html">Energy Prices and the Economy</a>

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<colgroup><col><col><col><col><col><col></colgroup>
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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">05/15/04</th>
<th scope="col">05/08/04</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">Total Weekly Retail Chain Store Sales</td>
<td>442.2</td>
<td>445.9</td>
<td>6.2%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
</tr>
</tbody>
</table>
Empire State Index Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 18, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040518a.jpg" width="353">
The Empire State Index of General Business Conditions fell in May to 30.21 and the sharp rise the month prior was lessened. Nevertheless, the readings in both months remained quite improved versus last year.
The new orders index in fact improved sharply, about to the record high, following the jump in April. The shipments index also added to the April gain and is at another series&#39; high. Finally, the employment index rose for the second month this year.
The prices paid index slipped a bit to 56.67 from the upwardly revised record high in April.
The April index of expectations for business conditions six months ahead improved following the sharp decline in April. Expectations for capital expenditures fell to the lowest level since January.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question, not the components.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html"> here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM"> Empire State Manufacturing Survey</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">5/03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col"> 2001</th>
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</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>30.21</td>
<td>34.03</td>
<td>9.75</td>
<td>16.30</td>
<td>7.02</td>
<td>-13.57</td>
</tr>
</tbody>
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Housing starts fell 2.1% last month from the near-record level in March, that was revised slightly higher. April starts of 1.969M compared to the Consensus expectation for 1.98M. Single family starts slipped a modest 0.6% from the [...]

Housing Starts Down As Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040517a.jpg" width="353">
For the first quarter of 2004, Japan reported a current account balance of 50,388 (100 million yen) or about 15,000 (100 million yen) above the first quarter of 2003. At the same time, the financial account showed an increase of 132,395 (100 million yen).
A country that runs a positive balance on current account usually tends to run a negative balance on its financial account since the balance of payments, by definition, has to sum to zero. Japan, however, frequently runs a positive balance on its financial account as well as its current account. As a result of these positive balances, Japan&#39;s holdings of foreign exchange increase. Changes in reserves have become an important item in Japan&#39;s balance of payments. Since the balance of payment has to sum to zero, an increase in reserves is shown as a negative figure while a decrease in reserves is shown as a positive figure
For the last four quarters, Japan has reported positive balances on both current and financial accounts. As a result, gold and foreign exchange reserves have risen sharply. Since the end of 2001 to the end of March this year, they have more than doubled from $402 billion to $827 billion.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Balance of Payments (100 million yen)</th>
<th scope="col">Q1 O4</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Current account</td>
<td>50,388</td>
<td>157,668</td>
<td>141,397</td>
<td>106,524</td>
</tr>
<tr>
<td class="firstcol">Capital account</td>
<td>-2,263</td>
<td>-4,672</td>
<td>-4,216</td>
<td>-3,462</td>
</tr>
<tr class="odd">
<td class="firstcol">Financial account</td>
<td>119,963</td>
<td>82,012</td>
<td>-80,559</td>
<td>-58,264</td>
</tr>
<tr>
<td class="firstcol">Errors and omissions</td>
<td>-11,583</td>
<td>-19723</td>
<td>1,347</td>
<td>4,568</td>
</tr>
<tr class="odd">
<td class="firstcol">Total of above</td>
<td>156,509</td>
<td>215,286</td>
<td>57,970</td>
<td>49,364</td>
</tr>
<tr>
<td class="firstcol">Change in reserves</td>
<td>-156,509</td>
<td>-215,286</td>
<td>-57,970</td>
<td>-49,364</td>
</tr>
<tr class="odd">
<td class="firstcol">Balance&nbsp;</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr>
<td class="firstcol">Addendum: Reserves in millions US$</td>
<td>826,577</td>
<td>673,529</td>
<td>469,728</td>
<td>401,959</td>
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For the first quarter of 2004, Japan reported a current account balance of 50,388 (100 million yen) or about 15,000 (100 million yen) above the first quarter of 2003. At the same time, the financial account showed an increase of [...]

With Positive Balances on Current and Financial Accounts Japan Continues to Pile Up Foreign Exchange Reserves

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/040514c.jpg" width="353">
CPI inflation in Spain picked up last month to a 2.7% year/year increase from just 2.1% in February. While 2.7% is not a &quot;high&quot; inflation rate for Spain, the steep upturn from February&#39;s pace is an unusual one-month move. As evident in the table below, half of it resulted from an abrupt turn in energy costs. Excluding energy, the increase in inflation was just 0.3%, and at 2.8%, this major subset of prices is rising more slowly than anytime since the middle of 2000, almost four years.
Energy prices have played an interesting role in Spanish inflation behavior in the last couple of years.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040514d.jpg" width="353"> As we described here exactly a month ago for other European countries, the strong Euro since early 2002 has offset rapidly rising dollar prices of energy when they are expressed in Euro terms. Seen in accompanying graph and table, for Spain, this meant that energy prices were flat across 2003, while they rose 6.9% in the US. The &quot;energy products&quot; sector of Spain&#39;s CPI actually declined year-on-year in several recent months, particularly this past January through March.
However, the euro has recently been declining, and by April, the monthly average was already down about 5% from a February peak. So now, with the higher dollar and lower euro, energy products are starting to get more expensive in Europe and Spain&#39;s experience is likely being repeated elsewhere on the Continent. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">NSA, Yr/Yr % 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">Spain: Total CPI</td>
<td>2.7</td>
<td>2.1</td>
<td>2.2</td>
<td>2.6</td>
<td>4.5</td>
<td>2.7</td>
</tr>
<tr class="odd">
<td class="firstcol">CPI ex Energy Products</td>
<td>2.8</td>
<td>2.5</td>
<td>2.7</td>
<td>2.9</td>
<td>4.3</td>
<td>4.0</td>
</tr>
<tr>
<td class="firstcol">Energy Products</td>
<td>1.5</td>
<td>-2.5</td>
<td>-2.6</td>
<td>0.0</td>
<td>6.3</td>
<td>-10.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">US: CPI: Energy</td>
<td>5.6</td>
<td>0.4</td>
<td>3.8</td>
<td>6.9</td>
<td>10.7</td>
<td>-13.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Euro/US $: Level</td>
<td>1.1989</td>
<td>1.2261</td>
<td>1.2640</td>
<td>1.2298*</td>
<td>1.0194*</td>
<td>0.8912*</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Yr/Yr % Change</td>
<td>10.4</td>
<td>13.6</td>
<td>17.2</td>
<td>20.6</td>
<td>14.4</td>
<td>-0.8</td>
</tr>
</tbody>
</table>
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CPI inflation in Spain picked up last month to a 2.7% year/year increase from just 2.1% in February. While 2.7% is not a "high" inflation rate for Spain, the steep upturn from February's pace is an unusual one-month move. As evident [...]

Upturn in Spain's CPI Led by Energy, as Euro Falls

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040514a.jpg" width="353">
The Consumer Price Index (CPI-U) rose 0.2% in April versus Consensus expectations for a 0.3% gain. Core consumer prices, however, rose 0.3%, slightly more than Consensus expectations for a 0.2% rise.
A surprising 0.3% m/m (11.0% y/y) decline in seasonally adjusted gasoline prices held back the rise in overall energy prices to 0.1% (2.6% y/y). Not seasonally adjusted gasoline prices rose 3.7% and not seasonally adjusted energy prices rose 2.0%.
Prices of core consumer goods were unchanged, the weakness in part reflecting no change in apparel prices (0.2% y/y) following the 0.9% spike in March. Prices for home furnishings &amp; operation slid 0.2% for the second consecutive month (-1.3% y/y) and new &amp; used vehicle prices were also unchanged (-3.8% y/y). Medical care commodities prices jumped 0.4% (2.7% y/y).
Core service prices rose a firm 0.4% led by a 0.5% gain in shelter costs though prices for medical care services eased to 0.3% (5.4% y/y). Public transportation prices strengthened 0.4%(+2.1% y/y) and tuition costs rose 0.6% for the second consecutive month (7.4% y/y).
The chained CPI which adjusts for shifts in consumer buying behavior eased to just a 0.3% gain. It is similar to the PCE price deflator. The core chain price measure also eased to 0.2%, the weakest increase since January.
&quot;The Historical and Recent Behavior of Goods and Services Inflation&quot; from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/epr/forthcoming/peach.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/USECON/@E8/@E801/@E80101/@E80101.HTM"> Consumer Price Index</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&nbsp;</td>
<td>0.2%</td>
<td>0.5%</td>
<td>2.3%</td>
<td>2.3%</td>
<td>1.6%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.4%</td>
<td>1.8%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.1%</td>
<td>-1.4%</td>
<td>-2.0%</td>
<td>-1.1%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.4%</td>
<td>0.5%</td>
<td>3.1%</td>
<td>2.9%</td>
<td>3.8%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>0.1%</td>
<td>1.9%</td>
<td>5.5%</td>
<td>12.2%</td>
<td>-5.8%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food</td>
<td>0.2%</td>
<td>0.2%</td>
<td>3.4%</td>
<td>2.1%</td>
<td>1.8%</td>
<td>3.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM"> Chained CPI: Total (NSA)</a></td>
<td>0.3%</td>
<td>0.6%</td>
<td>1.9%</td>
<td>1.9%</td>
<td>1.3%</td>
<td>2.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>0.7%</td>
<td>1.3%</td>
<td>1.1%</td>
<td>1.9%</td>
<td>&nbsp;2.0%</td>
</tr>
</tbody>
</table>
U.S. Industrial Production Jumped 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040514b.jpg" width="353">
Industrial production jumped 0.8% last month led by a surge in factory output. Consensus expectations had been for a 0.5% rise in total output.
Production in the factory sector surged 0.7% (5.0% y/y) following a slight uptick in March. The gain was paced by more strength in the tech sector.
Output in selected high-technology industries rose 1.7% m/m (27.0% y/y). Output of computers &amp; peripheral equipment surged 2.4% (24.1% y/y) and output of semiconductors &amp; related equipment jumped 2.5% (46.6% y/y). Output of communications equipment fell 2.7% (-2.7% y/y), down for the third consecutive month.
Excluding high-tech factory output jumped 0.6% (+3.8% y/y). Machinery output added 0.6% (10.2% y/y) and electrical equipment output surged 2.0% (6.5% y/y). Output of motor vehicles &amp; parts fell slightly (+8.5% y/y) and output of furniture jumped 1.2% (2.0% y/y). Non-durables output less energy was strong for the third month with a 0.6% (2.0% y/y) gain that was led by recently surging clothing output (+1.6% y/y).
Total capacity utilization rose to 76.9%. Growth in capacity remained low at 1.1% y/y.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM"> Production &amp; Capacity</a></th>
<th scope="col">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">Industrial Production</td>
<td>0.8%</td>
<td>-0.1%</td>
<td>4.8%</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>76.9%</td>
<td>76.5%</td>
<td>74.2%(4/03)</td>
<td>74.8%</td>
<td>75.6%</td>
<td>77.4%</td>
</tr>
</tbody>
</table>
U.S. Consumer Sentiment Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040514e.jpg" width="353">
The University of Michigan&#146;s Index of Consumer Sentiment was unchanged in mid-May from the April level at 94.2. Consensus expectations had been for a rise to 96.0.
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 improved 2.1% to 107.2 and rose to the highest level since January. The expectations index fell for the second consecutive month by 1.7% to 85.8.
The University of Michigan survey is not seasonally adjusted.It is based on telephone interviews with 250 households nationwide on personal finances and business and buying conditions. The survey is expanded to a total of 500 interviews at month end.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM"> University of Michigan</a></th>
<th scope="col"> Mid-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>94.2</td>
<td>94.2</td>
<td>2.3%</td>
<td>87.6</td>
<td>89.6</td>
<td>89.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Current Conditions</td>
<td>107.2</td>
<td>105.0</td>
<td>15.0%</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>85.8</td>
<td>87.3</td>
<td>-6.1%</td>
<td>81.4</td>
<td>84.6</td>
<td>82.3</td>
</tr>
</tbody>
</table>
U.S. Budget Swung to a Small Surplus in April 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040514f.jpg" width="353">
The U.S. Government Budget improved in April, as it usually does, to a surplus of $17.6B. That was less than the expected improvement to a $25.0B surplus and was quite a bit less than last April&#39;s surplus of $51.1B. For the first seven months of FY04 the deficit of $281.8B was nearly 40% larger than last year.
So far this fiscal year the deficit is running about 5% of US GDP versus 3.5% last year and a peak of 6.0% in 1983. Adjusted for economic and other fluctuations, the standardized budget deficit is projected to hit 3.4% this year versus 2.8% last year and a peak of 4.8% in 1986.
Growth in net receipts for the first seven months of FY04 dropped to 1.3% versus the first seven months of FY03. The drop from 3.1% growth last month reflected a slide in individual tax receipts of 4.5% (to $471.3B) versus the first seven months of FY02. Versus last April individual tax receipts were down 14.9%. Corporate tax receipts for the fiscal year-to-date were up 44.5% (at $90.8B) and in April were up 28.5%. Contributions for social insurance, estate taxes, and miscellaneous taxes rose.
Federal net expenditures surged 7.5% versus the first seven months of last fiscal year. Defense expenditures jumped 16.7% and Medicare outlays grew 8.9%. Interest expense fell 3.8% 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/@E1/@E106/@E10602/@E10602.HTM"> US Government Finance</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">April &#39;03</th>
<th scope="col">FY2003</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$17.6B</td>
<td>$-72.7B</td>
<td>$51.1B</td>
<td>$-374.2B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$220.1B</td>
<td>$132.4B</td>
<td>-4.8%</td>
<td>-3.8%</td>
<td>-6.9%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$202.5B</td>
<td>$205.1B</td>
<td>12.4%</td>
<td>7.2%</td>
<td>7.9%</td>
<td>4.2%</td>
</tr>
</tbody>
</table>
U.S. Business Inventories Rose Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040514g.jpg" width="353">
Total business inventories rose 0.7% in March for the seventh consecutive monthly increase. Consensus expectations were for a 0.5% increase.
Retail inventories rose a strong 1.1% in March that reflected a 1.9% (7.4% y/y) pop in auto inventories but also a 0.6% gain in non-auto inventories. The preliminary report of a 0.1% February rise in nonauto retail inventories was revised to 0.4%. What had been scattered inventory accumulation across retail sectors has broadened out.
Inventory additions lead production gains. During the last ten years there has been a 46% correlation between the three month change in business inventories and the three month change in US factory production. That correlation rises to 65% when the production gain is lagged three months.
Overall business sales jumped 2.9% (9.7% y/y) as factory shipments jumped 3.8% (9.2% y/y), wholesale sales rose 2.7% (12.0% y/y) and retail sales surged 2.1% (8.2% y/y).
The sales jump dropped the ratio of inventories-to-sales to a new record low of 1.30.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM"> Business Inventories</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.7%</td>
<td>0.8%</td>
<td>2.6%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>1.1%</td>
<td>0.7%</td>
<td>4.5%</td>
<td>4.9%</td>
<td>6.0%</td>
<td>-2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.6%</td>
<td>0.4%</td>
<td>3.1%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.6%</td>
<td>1.2%</td>
<td>3.8%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.3%</td>
<td>0.6%</td>
<td>-0.2%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Consumer Price Index (CPI-U) rose 0.2% in April versus Consensus expectations for a 0.3% gain. Core consumer prices, however, rose 0.3%, slightly more than Consensus expectations for a 0.2% rise. A surprising 0.3% m/m (11.0% y/y) [...]

Consumer Prices Rose Less Than Forecast, But ...

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040513c.jpg" width="353">
Retail sales eased 0.5% in April following little-revised jumps of 2.0% and 1.0% during the prior two months. Consensus expectations had been for a 0.1% dip.
Retail sales excluding motor vehicles &amp; parts dealers matched Consensus expectations and eased 0.1% following an upwardly revised 1.8% jump in March.
The easing of prior sales strength was fairly broad based last month. Clothing and accessory store sales fell 2.0% (+8.2% y/y) following a downwardly revised 0.8% gain in March.Sales at general merchandise stores fell 0.8% (+7.2% y/y) after a 0.4% March gain. Strength was exhibited by sales of furniture/home furnishings &amp; electronics/appliances which rose 0.7% (10.3% y/y) after an upwardly revised 1.2% March increase.
Sales of building materials, garden equipment &amp; supply dealers (20.4% y/y) dipped 0.7% following the 11.0% m/m March surge.
Motor vehicle dealers&#39; sales fell 1.8% after a 2.4% March gain as unit sales of light vehicles fell 1.6% to 16.41M. Sales at gasoline service stations rose 0.2% (10.9% y/y).

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</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"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM"> Retail Sales &amp; Food Services</a></td>
<td>-0.5%</td>
<td>2.0%</td>
<td>8.0%</td>
<td>5.4%</td>
<td>2.5%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-0.1%</td>
<td>1.8%</td>
<td>9.4%</td>
<td>5.2%</td>
<td>3.2%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
PPI Jumped 0.7% in April 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 13, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040513b.jpg" width="353">
Finished producer prices surged 0.7% last month, the largest monthly gain since March 2003. The surge was more than double Consensus expectations.In contrast, the core PPI rose a moderate, expected 0.2%.
Finished consumer goods prices jumped 0.9% after a 0.7% leap in March. Less food &amp; energy these consumer goods prices rose 0.3% (1.5% y/y) for the second month. Consumer durable prices fell 0.3% (+1.4% y/y) but core non-durable prices jumped 0.7% (+1.6% y/y).
Finished capital goods prices were unchanged for the second month in four (1.3% y/y).
Intermediate goods prices doubled the March gain with a 1.4% increase in April. The increase in core intermediate prices also nearly doubled with a 1.1% jump (4.3% y/y). Plywood prices added another 1.8% (NSA) to the pronounced strength in earlier months (52.3% y/y).
Crude goods prices jumped 3.0% as crude energy prices rebounded 6.3% (12.6% y/y) after the 6.1% March drop. Natural gas prices (5.4% y/y) and crude petroleum prices (29.7% y/y) jumped. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E802/@E80201/@E80201.HTM"> Producer Price Index</a></th>
<th scope="col">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">Finished Goods</td>
<td>0.7%</td>
<td>0.5%</td>
<td>3.6%</td>
<td>3.2%</td>
<td>-1.3%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2%</td>
<td>0.2%</td>
<td>1.4%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>1.4%</td>
<td>0.7%</td>
<td>5.2%</td>
<td>4.7%</td>
<td>-1.5%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.1%</td>
<td>0.6%</td>
<td>4.3%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>3.0%</td>
<td>0.7%</td>
<td>20.4%</td>
<td>25.1%</td>
<td>-10.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-3.9%</td>
<td>2.7%</td>
<td>26.3%</td>
<td>12.4%</td>
<td>3.8%</td>
<td>-10.0%</td>
</tr>
</tbody>
</table>
Jobless Claims Up A Bit More Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 13, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040513a.jpg" width="353">
Initial claims for jobless insurance rose 13,000 last week to 331,000 following a 20,000 drop the week prior that was slightly less than initially estimated. Consensus expectations had been for 320,000 claims.
The 4-week moving average of initial claims fell to 335,750 (-22.1% y/y), the lowest level since November 2000.
Continuing claims for unemployment insurance recouped 53,000 of the deepened 83,000 drop the week prior.
The insured rate of unemployment ticked back up to 2.4% from 2.3%.

<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"> 5/08/04</th>
<th scope="col">5/01/04</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; 331</td>
<td>318</td>
<td>-20.8%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,974</td>
<td>-19.5%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales eased 0.5% in April following little-revised jumps of 2.0% and 1.0% during the prior two months. Consensus expectations had been for a 0.1% dip. Retail sales excluding motor vehicles & parts dealers matched Consensus [...]

U.S. Retail Sales Moderate

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040512a.jpg" width="353">
Besides the US, three other countries reported March trade data today. And like the US, most of these data showed gains in both exports and imports. Similarities end there, however.
Canada&#39;s trade surplus increased by C$0.3 billion from February, with a larger increase in exports than in imports. While Canada is known as a major oil exporter and a major exporter of motor vehicles and parts to the US, these weren&#39;t the most significant sources of the March improvement. The auto sector did see a C$0.2 billion export increase, but energy exports actually edged lower. All other exports were up 1.9% and exports to non-US destinations rose more than those to the US. Further, shipments to the US are down from a year ago, but those elsewhere rose more than 10% from March 2003. Canadian imports were up in March by 0.9% from February. France maintained a modest trade surplus. It has maintained a near balance in trade virtually every month for the last two years, resulting from remarkably stable patterns in both exports and imports. In March, exports were up 4.5%, but that just about reversed declines in the previous two months, netting little change so far this year. What may be developing is stronger trade with France&#39;s EU partners. The most recent months have seen a tentative breakout of exports to the EU; March, at EUR17.9 billion and December at EUR18.0 billion are the largest in three years.Hungary&#39;s overall economy seems to be strengthening, and this is reflected in its trade performance. Its industrial production has rebounded vigorously through March after sluggish behavior during 2003. The demand evident in that measure is pulling in imports, which reached a new high of 1,003 billion florints in March, up 3.9% on the month and 19.7% on the year. Sometimes such large moves in these values can be related more to currency moves than to &quot;real&quot; developments, and indeed the florint has hardly been steady relative to the euro; but it has held to a basically flat trend and has in fact risen since January. Hungarian exports decreased in February and March, but from an all-time high in January; they have trended consistently higher since late 2002.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Trade in Goods, SA, Billions of Local Currency</th>
<th scope="col">Mar 2004</th>
<th scope="col">Feb 2004</th>
<th scope="col">Jan 2004</th>
<th scope="col">Year Ago</th>
Monthly Average
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2003</td>
<td>2002</td>
<td>2001</td>
</tr>
<tr>
<td class="firstcol">Canada: Balance (Bil.C$)</td>
<td>6.2</td>
<td>5.9</td>
<td>5.1</td>
<td>5.9</td>
<td>5.0</td>
<td>4.8</td>
<td>5.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>34.9</td>
<td>34.3</td>
<td>31.9</td>
<td>35.8</td>
<td>33.4</td>
<td>34.5</td>
<td>35.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>28.7</td>
<td>28.4</td>
<td>26.8</td>
<td>30.0</td>
<td>28.4</td>
<td>29.7</td>
<td>29.2</td>
</tr>
<tr class="odd">
<td class="firstcol">France:&nbsp; Balance (Bil.Euros)</td>
<td>0.8</td>
<td>0.3</td>
<td>0.9</td>
<td>-0.1</td>
<td>0.2</td>
<td>0.6</td>
<td>0.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports</td>
<td>28.1</td>
<td>26.9</td>
<td>27.9</td>
<td>27.0</td>
<td>27.0</td>
<td>27.6</td>
<td>27.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports</td>
<td>27.3</td>
<td>26.6</td>
<td>27.0</td>
<td>27.1</td>
<td>26.8</td>
<td>27.0</td>
<td>27.6</td>
</tr>
<tr>
<td class="firstcol">Hungary:&nbsp; Balance (Bil.Forints)</td>
<td>-143.5</td>
<td>-70.6</td>
<td>-4.3</td>
<td>-81.0</td>
<td>-87.7</td>
<td>-69.2</td>
<td>-76.4</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Exports</td>
<td>859.3</td>
<td>894.7</td>
<td>934.1</td>
<td>754.9</td>
<td>803.5</td>
<td>739.5</td>
<td>729.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Imports</td>
<td>1002.8</td>
<td>965.3</td>
<td>938.4</td>
<td>835.9</td>
<td>891.2</td>
<td>808.7</td>
<td>805.4</td>
</tr>
</tbody>
</table>
</body>
</html>

Besides the US, three other countries reported March trade data today. And like the US, most of these data showed gains in both exports and imports. Similarities end there, however. Canada's trade surplus increased by C$0.3 billion [...]

Two-Way Trade Gains in Canada, France and Hungary

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

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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.