Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031015d.jpg" width="353">
Korean consumer sentiment declined sharply in September. Consumers&#39; view of their present situation worsened by 4.6% from August and was 37.3% below September, 2002. The index at 59.9 was the lowest value since December 2000.. Consumer expectations of conditions six months hence, declined by 1.6% and was 13.5% below September, 2002.. As part of their overall appraisal of current and future conditions, consumers are asked to appraise business conditions as well as household conditions and expectations for consumption expenditures. In both cases, consumers&#39; appraisal of the current business situation and expectations of future business conditions were largely responsible for the overall declines in sentiment.. Apprehension with regard to the business situation may have been heightened as a result of the current uncertain political climate. President Roh, who was elected last April has had to cope with an opposition dominated parliament, labor unrest, a series of scandals and declining approval ratings. He has recently called for a referendum on his leadership to take place on December 15. The constitutionality of such a move is in doubt, but whether or not the referendum takes place, the uncertainty is likely to continue to dampen consumer sentiment.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Consumer Sentiment</th>
<th scope="col">SEP 2003</th>
<th scope="col">AUG 2003</th>
<th scope="col">SEP 2002&nbsp;</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col">Y/Y&nbsp; %</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000 AUG-DEC AVERAGE</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Present situation</td>
<td>59.9</td>
<td>63.9</td>
<td>97.2</td>
<td>-4.2</td>
<td>-37.3</td>
<td>98.3</td>
<td>81.9</td>
<td>77.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business conditions&nbsp;&nbsp;&nbsp;</td>
<td>45.5</td>
<td>51.2</td>
<td>100.8</td>
<td>-5.7</td>
<td>-55.3</td>
<td>102.5</td>
<td>77.4</td>
<td>70.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Expectations&nbsp;&nbsp; </td>
<td>90.4</td>
<td>92.0</td>
<td>103.9</td>
<td>-1.6</td>
<td>-13.5</td>
<td>104.7</td>
<td>95.9</td>
<td>89.5</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business conditions</td>
<td>81.4</td>
<td>86.3</td>
<td>105.9</td>
<td>-4.9</td>
<td>-24.5</td>
<td>108.7</td>
<td>91.8</td>
<td>77.2</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>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
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Korean consumer sentiment declined sharply in September. Consumers' view of their present situation worsened by 4.6% from August and was 37.3% below September, 2002. The index at 59.9 was the lowest value since December 2000.. [...]

Consumer Sentiment In Korea Declines Sharply

Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031014a.jpg" width="353">
Chain store sales dipped 0.5% last week following the 1.3% surge during the week prior, according to the BTM-UBSW survey.
So far in October the level of sales is down 0.3% from the September average which fell 0.8% versus August.
During the last five years there has been a 61% correlation between the year-to-year percent change in the BTM-UBSW measure of chain store sales and the change in non-auto retail sales less gasoline.
The BTM-UBSW retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">10/11/03</th>
<th scope="col">10/04/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>421.9</td>
<td>424.0</td>
<td>5.3%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
Commodity Prices Up Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 14, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031014b.jpg" width="353">
Prices for industrial commodities recently have surged, suggesting a firming in industrial sector activity. The JoC-ECRI Industrial Price Index rose to a level yesterday that was 4.2% above the September average (25.2% y/y).
The metals sub-index was up 4.7% versus September (17.7% y/y) on the strength of surging prices for steel scrap (24.1% y/y). Prices for aluminum also were up 5.5% versus September (14.7% y/y).
Prices for lumber &amp; plywood retreated somewhat from earlier heights, but they still were up 22.2% y/y.
Textile prices also showed some lift, up 2.3% yesterday versus September (9.7% y/y). Cotton prices have been quite strong (74.6% y/y).
Energy prices continued strong, up 4.5% versus September (7.8% y/y) on the strength of higher prices for crude oil and natural gas. Separately, gasoline prices fell to an average $1.57 per gallon in the opening week of October versus a weekly high of $1.75 one month earlier.
For the October Short Term Energy Outlook from the US Department of Energy click <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">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">10/06/03</th>
<th scope="col">12/30/02</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">All Formulations ($/Gal.)</td>
<td>$1.57</td>
<td>$1.44</td>
<td>9.3%</td>
<td>$1.34</td>
<td>$1.42</td>
<td>$1.48</td>
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</tbody>
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Chain store sales dipped 0.5% last week following the 1.3% surge during the week prior, according to the BTM-UBSW survey. So far in October the level of sales is down 0.3% from the September average which fell 0.8% versus August. [...]

Weekly Chain Store Sales Dipped

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031013b.jpg" width="353">
Industrial production in Italy rose 0.1% in August, after a revised 1.8% rise in July and a 0.6% rise in June. Although the rise was small, consensus estimate had expected a decline.
A sharp rise in electricity usage as a result of the unusually severe summer heat wave contributed to the increase in the energy sector, which rose 1.1% in August and was 7.4% above a year ago.
Consumer goods production showed a mixed picture with durable goods production up 1.8%in the month but 0.5% below year ago levels while nondurable goods production declined 1.3% in August, but was 1.1% above year ago levels.
Production of intermediate goods declined 0.6% in August and was 0.5% below a year ago indicating little demand coming from inventory building. Finally, the production of investment goods rose 0.8% in August but was unchanged from a year ago.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Industrial&nbsp; Production&nbsp; (2000=1000)</th>
<th scope="col">AUG 2003</th>
<th scope="col">JULY 2003</th>
<th scope="col">JUN 2003&nbsp;</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col">Y/Y&nbsp; %</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>98.4</td>
<td>98.3</td>
<td>97.7</td>
<td>0.10</td>
<td>0.72</td>
<td>97.8</td>
<td>99.2</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Consumer goods</td>
<td>99.1</td>
<td>99.9</td>
<td>98.0</td>
<td>-0.80</td>
<td>1.12</td>
<td>98.3</td>
<td>100.5</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp; Durable goods</td>
<td>94.9</td>
<td>93.2</td>
<td>95.4</td>
<td>1.82</td>
<td>-0.52</td>
<td>96.0</td>
<td>99.1</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp; Nondurable goods</td>
<td>100.5</td>
<td>101.8</td>
<td>99.4</td>
<td>-1.28</td>
<td>1.11</td>
<td>99.0</td>
<td>100.8</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Intermediate goods</td>
<td>94.5</td>
<td>95.1</td>
<td>95.0</td>
<td>-0.63</td>
<td>-0.53</td>
<td>95.5</td>
<td>98.2</td>
<td>100.0</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Investment goods</td>
<td>98.1</td>
<td>97.3</td>
<td>98.1</td>
<td>0.82</td>
<td>0.0</td>
<td>97.7</td>
<td>99.0</td>
<td>100.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy&nbsp;&nbsp;</td>
<td>111.9</td>
<td>110.7</td>
<td>104.6</td>
<td>1.08</td>
<td>7.39</td>
<td>103.8</td>
<td>99.6</td>
<td>100.0</td>
</tr>
</tbody>
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Industrial production in Italy rose 0.1% in August, after a revised 1.8% rise in July and a 0.6% rise in June. Although the rise was small, consensus estimate had expected a decline. A sharp rise in electricity usage as a result of [...]

Industrial Production in Italy Rises in August for Third Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031013a.jpg" width="353">
The OECD Index of Leading Indicators (Big 7) rose in August for the fifth consecutive month. The 0.9% increase was the fourth of that strong magnitude and the fifth in a row.
Despite these gains the leading index remained 1.6% below the long term trend, but they do suggest much improved growth in industrial production.
Gains amongst the member country leading indexes were broad. The leading index for the European Union rose 0.7%, the fourth strong monthly increase.
The leaders in Germany jumped 1.0% for the second month. In Italy, the leaders finally mustered some upward momentum and rose 0.5% following an upwardly revised 0.6% July gain. In Switzerland the leaders have been rising since early last year. In France gains in the leading index have cooled recently, up just 0.1% and 0.2% in the last two months.
Leaders in Japan have been on a tear recently, rising 1.1% in August. That pulled the three-month growth rate to 14.9%, the strongest growth rate since 1987. Share prices continued to surge, up big for four straight months.
In Canada the August leading indicators posted the strongest one-month increase in over a year and rose 1.6%, lifting the three-month growth rate to 12.5%. In the U.K. the leaders managed the fifth respectable monthly increase in August, up 0.5% m/m. That brought the three month growth rate up to 5.8%, about the highest since Spring 2002.
Leading indicators in the United States rose strongly for the fifth straight month.
Visit the OECD&#39;s website at this <a href="http://www.oecd.org/home/">website</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/OECDMEI/OECDMEI.HTM"> OECD Main Economic Indicators</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">OECD Major Seven - Leading Index (Trend Restored)</td>
<td>122.5</td>
<td>121.4</td>
<td>4.1%</td>
<td>4.0%</td>
<td>-2.3%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; European Union</td>
<td>119.0</td>
<td>118.3</td>
<td>2.2%</td>
<td>3.1%</td>
<td>-1.9%</td>
<td>3.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Japan</td>
<td>105.5</td>
<td>104.3</td>
<td>4.3%</td>
<td>0.7%</td>
<td>-2.9%</td>
<td>2.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; United States</td>
<td>134.8</td>
<td>133.7</td>
<td>5.7%</td>
<td>5.6%</td>
<td>-2.6%</td>
<td>2.7%</td>
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</tbody>
</table>
</body>
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The OECD Index of Leading Indicators (Big 7) rose in August for the fifth consecutive month. The 0.9% increase was the fourth of that strong magnitude and the fifth in a row. Despite these gains the leading index remained 1.6% below [...]

OECD Leaders Up Again

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031010c.jpg" width="353">
Job growth resumed last month in Canada, according to the latest Labor Force Survey, reported today. After slim decreases in July and August, employment posted a 0.3% increase in September. The unemployment rate held steady at 8.0%, also following two successive months of deterioration, albeit modest.
Health care (+18,000), trade (16,300) and finance (12,600) had the largest job increases, while &quot;other services&quot; fell 18,000, and as in the US, manufacturing continued to lag. Total actual hours worked rebounded 2.2%, a partial offset to August&#39;s decline of 3.1%. Over longer spans, growth of both jobs and hours is slowing. Hours are up 0.8% over a year ago for both September and all of the third quarter; this is the smallest annual increase since early 2002, coming out of the last recession.
The employment slowdown is concentrated in manufacturing and closely related industries, including transportation and warehousing and technical support. In contrast, the accommodation and food service sector is generating stronger jobs gains, along with forestry, construction, recreation, finance and public administration. The emphasis on travel and tourism evident in this latter group is a bit unexpected in the face of slower growth in employment in basic Canadian industries. Perhaps the gains in these more discretionary sectors are due less to domestic travel than to an influx of foreign tourists. At the same time then, recent strengthening of the Canadian dollar could signal a cautionary outlook for those sectors as a sustained source of new jobs.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"></th>
<th scope="col">Sep 2003</th>
<th scope="col">Aug 2003</th>
<th scope="col">July 2003</th>
<th scope="col">Year/ Year</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Change in Total Employment (thousands)</td>
<td>+46.3 (+0.3%)</td>
<td>-19.0 (-0.1%)</td>
<td>-13.3 (-0.1%)</td>
<td>224.3 (+1.4%)</td>
<td colspan="3">Dec/Dec % Change</td>
</tr>
<tr>
<td class="firstcol">3.7%</td>
<td>0.1%</td>
<td>2.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate (%)</td>
<td>8.0%</td>
<td>8.0%</td>
<td>7.8%</td>
<td>7.7% (Sept. 2002)</td>
<td colspan="3>
 Annual Average</td>
</tr>
<tr>
<td class="firstcol">7.6%</td>
<td>7.2%</td>
<td>6.8%</td>
</tr>
</tbody>
</table>
</body>
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Job growth resumed last month in Canada, according to the latest Labor Force Survey, reported today. After slim decreases in July and August, employment posted a 0.3% increase in September. The unemployment rate held steady at 8.0%, [...]

Canada Sees Job Increase in September

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031010b.jpg" width="353">
Finished producer prices rose a surprising 0.3% in September. The gain was versus Consensus expectations for a 0.1% uptick. Core producer prices matched expectations for a 0.1% rise.
A 1.2% (6.7% y/y) jump in food prices accounted for last month&#39;s PPI strength. Both vegetable and meat prices were quite strong and added to gains in earlier months.
Finished energy prices rose just 0.1% (13.1% y/y). The tepid increase was due to a 3.3% (21.7% y/y) rise in gasoline prices and a 1.2% (29.5%) gain in residential gas prices. These gains were offset by lower fuel oil prices, down 7.1% (-1.5% y/y). These energy product price series are NSA.
Core finished consumer goods prices were tame, rising 0.1% (-0.1% y/y) for the third consecutive month. Price declines were widespread. Capital equipment prices fell 0.1% (0.5% Y/Y) due to across the board weakness.
Intermediate goods prices fell 0.1% reflecting a 2.3% (12.7% y/y) decline in energy prices which offset a 2.3% (8.4%) jump in food prices. Core intermediate goods prices rose 0.1%. This measure of prices was unchanged from its March level. 
Crude goods prices jumped 3.4% led by a 7.0% (17.9% y/y) surge in food prices. Crude energy prices were tame, up just 0.6% (32.9% y/y) following two months of decline. Core crude goods prices were strong for the second consecutive month and consistent with the recent strength in industrial commodity price series. 
A report from the Federal Reserve Bank of New York analyzing the effect of exchange rates on import prices can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr149.html"> here</a>.

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<thead>
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<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">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>0.3%</td>
<td>0.4%</td>
<td>3.5%</td>
<td>-1.3%</td>
<td>2.0%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.0%</td>
<td>0.1%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>-0.1%</td>
<td>0.5%</td>
<td>3.8%</td>
<td>-1.5%</td>
<td>0.4%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.1%</td>
<td>0.1%</td>
<td>1.7%</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>3.4%</td>
<td>-1.4%</td>
<td>22.2%</td>
<td>-10.6%</td>
<td>0.3%</td>
<td>22.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>2.3%</td>
<td>3.7%</td>
<td>11.0%</td>
<td>3.8%</td>
<td>-10.0%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
U.S. Trade Deficit Narrowed As Imports Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 10, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031010a.jpg" width="353">
The U.S. foreign trade deficit narrowed unexpectedly to $39.2B in August versus Consensus expectations for a deficit of $41.0B.
In July and August the trade deficit narrowed to an average $39.6B versus $41.2B in 2Q. Nevertheless, for the first eight months of this years the trade deficit averaged a $486.6B annual rate.
Lower imports accounted for the narrower trade deficit in August. Declines were across the board but a 13.1% (-10.3% y/y) drop in the automotive category was notable. Nonpetroleum imports fell 3.4% (+0.3% y/y) and petroleum imports fell 5.3% (+5.3% y/y).
Exports fell 2.7% (4.9% YTD, AR) in August but earlier gains raised the level for 3Q 2.6% above 2Q. Exports of capital goods (9.9% YTD, AR) and nonauto consumer goods (10.3% YTD, AR) have moderated recently from earlier strength.

<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/@EE/@EE03/@EE03.HTM"> Foreign Trade</a></th>
<th scope="col">Aug</th>
<th scope="col">July</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$39.2B</td>
<td>$40.0B</td>
<td>$36.2B(8/02)</td>
<td>$418.0B</td>
<td>$357.8B</td>
<td>$375.4B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>-2.7%</td>
<td>1.8%</td>
<td>1.4%</td>
<td>-3.3%</td>
<td>-5.8%</td>
<td>11.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>-2.5%</td>
<td>1.2%</td>
<td>3.4%</td>
<td>2.0%</td>
<td>-5.5%</td>
<td>18.5%</td>
</tr>
</tbody>
</table>
</body>
</html>

Finished producer prices rose a surprising 0.3% in September. The gain was versus Consensus expectations for a 0.1% uptick. Core producer prices matched expectations for a 0.1% rise. A 1.2% (6.7% y/y) jump in food prices accounted for [...]

Producer Prices Up Due To Food Price Surge

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031009a.jpg" width="353">
Initial claims for jobless insurance fell 23,000 to 382,000 last week. The gain reversed a 19,000 rise the prior week which was revised slightly upward from the initial report. Consensus expectations had been for claims of 395,000.
The four-week moving average of initial claims fell meaningfully to 393,500 (-5.1% y/y), the lowest level since early February.
Continuing claims for unemployment insurance fell 7,000 to 3,642,000. The claimant the prior week was revised down.
The insured rate of unemployment held steady at 2.9%. The rate has averaged 2.9% since April.

<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">10/04/03</th>
<th scope="col">9/27/03</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>382.0</td>
<td>405.0</td>
<td>-6.4%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,642</td>
<td>0.8%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
</table>
Import Prices Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 9, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031009b.jpg" width="353">
Prices for imported commodities fell in September by 0.5% (0.8% y/y). The decline was greater than Consensus expectations for a 0.2% dip.
Petroleum import prices fell 5.2% last month. Last week, the price of Brent Crude Oil was up sharply from the $26.77/bbl averaged in September.
Non-petroleum import prices rose 0.3% last month. The gain was entirely due to a 0.6% (2.3% y/y) jump in food, feeds &amp; beverages prices. Elsewhere prices were weak. Prices for capital goods fell 0.3% (-1.3% y/y). Motor vehicle prices also dipped 0.1% (0.2% y/y) and non-auto consumer goods prices were unchanged (-0.2% y/y).
Export prices jumped 0.4% and also reflected strength in food prices which rose 5.5% (5.2% y/y). Export prices elsewhere were tame.

<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/@E807/@E807.HTM"> Import/Export Prices (NSA)</a></th>
<th scope="col">Sept</th>
<th scope="col">Aug</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>-0.5%</td>
<td>0.1%</td>
<td>0.8%</td>
<td>-2.5%</td>
<td>-3.5%</td>
<td>6.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-5.2%</td>
<td>2.4%</td>
<td>1.2%</td>
<td>3.0%</td>
<td>-17.2%</td>
<td>66.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.2%</td>
<td>-0.3%</td>
<td>0.9%</td>
<td>-2.4%</td>
<td>-1.5%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.4%</td>
<td>0.0%</td>
<td>1.0%</td>
<td>-1.0%</td>
<td>-0.8%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial claims for jobless insurance fell 23,000 to 382,000 last week. The gain reversed a 19,000 rise the prior week which was revised slightly upward from the initial report. Consensus expectations had been for claims of 395,000. [...]

Initial Claims For Jobless Insurance Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031008b.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association rose 15.6% last week to the highest level since early August. The rise came despite a slight increase in interest rates.
Interest rates on a conventional 30-Year mortgage rose to 6.10%, up 18 basis points w/w. The effective rate on a 15-year mortgage rose to 5.47%. These recent increases in rates run counter to the rate declines reported by Freddie Mac.
Applications to refinance rose 19.9% w/w, also to the highest level since early August. Despite gains during the last two weeks, applications to refinance are down 70% from the weekly high in late May.
Purchase applications rose 10.8% w/w to the highest level since early August. For all of September the level of purchase applications rose 11.0% from a year ago but just 1.2% from August. The level in early October is up another 7.5% versus September.
During the last ten years there has been a 55% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">10/03/03</th>
<th scope="col">9/26/03</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>817.3</td>
<td>707.2</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>441.1</td>
<td>398.0</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>3,005.5</td>
<td>2,505.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
</table>
Consumer Credit Usage Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> October 8, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/031008a.jpg" width="353">
The Federal Reserve reported that consumer credit outstanding (which excludes mortgages) rose $8.2B (5.1% AR) in August. Consensus expectations had been for a $5.5B gain.
The Federal Reserve Board added student loans extended by the federal government and Sallie Mae to the Consumer Credit Outstanding figures (nonrevolving).This addition resulted in an average upward revision of 3% beginning in 1977 and an average upward revision of 0.4% to the growth rate each year. 
During the first eight months of this year, consumer credit usage rose at a 4.8% annual rate. The more comprehensive flow of funds figures published by the Federal Reserve indicated that through 2Q03, credit market debt owed by the household sector surged 11.0% y/y. That gain was led by a 13.8% y/y gain in outstanding liabilities on homes.
Nonrevolving credit (which includes auto loans) rose at a 6.9% annual rate in august following a 5.5% gain in July. Year to date, nonrevolving credit usage is up at a 5.8% annual rate. 
Revolving credit rose at a 2.0% annual rate in August following a 0.8% gain in July. Year to date, revolving credit usage is up at a 3.3% annual rate.

<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/@E103/@E10308/@E10308.HTM"> Consumer Credit Outstanding</a></th>
<th scope="col">Aug m/m</th>
<th scope="col">July m/m</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>$8.2B</td>
<td>$6.2B</td>
<td>3.5%</td>
<td>4.3%</td>
<td>7.3%</td>
<td>11.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revolving</td>
<td>$1.2B</td>
<td>$-0.2B</td>
<td>1.0%</td>
<td>1.5%</td>
<td>5.1%</td>
<td>11.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonrevolving</td>
<td>$7.0B</td>
<td>$6.4B</td>
<td>5.1%</td>
<td>6.4%</td>
<td>8.8%</td>
<td>11.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The index of mortgage applications compiled by the Mortgage Bankers Association rose 15.6% last week to the highest level since early August. The rise came despite a slight increase in interest rates. Interest rates on a conventional [...]

Despite Higher Rates Mortgage Applications Rose

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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Tian Yong Woon

In this week's Letter, we examine the underbelly of the AI boom, the risks that sit beneath its optimism. Start with the public mood: American concern about AI has grown alongside adoption over the past three to four years (chart 1). Those worries span mass job displacement, misuse of top-end models by bad actors, and fears of being left behind. The first of these is already surfacing: in June, AI was again the most cited reason for announced US layoffs, with year-to-date AI-linked cuts above 100,000 (chart 2). Technology led all sectors in overall cuts, though the data do not isolate how many were AI-driven. Among those hit, the young are arguably the most exposed to these labour effects. They enter a labour pool swollen by displaced professionals, just as AI masters the entry-level tasks where they would start. India and Indonesia illustrate the stakes on youth NEET, the share not in education, employment, or training, both above 20% and among Asia's highest (chart 3). Beyond the labour market, the same optimism reshapes asset prices. The rally has lifted AI-related valuations to historic highs and concentrated a few names in cap-weighted indexes (chart 4). That raises correlation and the risk of a sharper index fall should the rally unravel. The same concentration runs through economies via exports, from Taiwan's advanced chips to South Korea's memory (chart 5). Its footprint is physical too, and cuts both ways: data-centre investment has lifted growth in Johor, Malaysia (chart 6) while straining local power and water. None of this argues against riding the AI wave, which still promises real productivity and welfare gains. Rather, these are caveats that investors and policymakers must keep in view, since the story is not all upside.

**AI-related concerns**
AI adoption has exploded over the past three to four years, and Americans' concerns have risen alongside it (chart 1). That is understandable, given how advanced and broad AI's proven applications have become. They now span everyday tasks and subject-specific work across fields such as finance and production, as well as tech and development, the sector AI was born in. Major concerns run from mass AI-induced job displacement to a more recent fear, that top-end models fall into the wrong hands and are used by bad actors. A further worry is distributional: AI advances are powerful and could deliver leaps in productivity, yet they may also leave many people behind. Those most exposed include workers already displaced from their jobs and people facing scarcer basic resources as AI demand competes for them. Others simply lack equitable access to AI tools or their benefits.

260713T1.jpg

**AI-driven job displacement**
Some of the fears US workers first had about AI-driven job displacement are already playing out. In June, AI was again the most cited reason for announced job cuts in the US (chart 2). That pushed year-to-date job cuts attributed to AI above 100,000, more than half of all AI-tagged cuts since AI became a selectable reason in 2023. The data come from the latest survey by Challenger, Gray & Christmas. This likely reflects AI's disproportionately heavy impact on certain industries such as technology, which again led all sectors in cuts. At the same time, announced hiring plans stayed subdued, leaving laid-off workers with limited opportunities to find new roles. All of this is occurring even as market valuations remain elevated on the broader wave of AI optimism.

260713T2.jpg

**AI and youth unemployment**
Arguably among those bearing the brunt of these labour-related effects are the youth. Many have graduated on a curriculum built largely for a pre-AI era. They now enter a labour pool swollen by experienced professionals whom AI has displaced. At the same time, AI is proving especially capable at the entry-level tasks on which young workers usually start. An elevated youth unemployment rate only intensifies the competition young people face for gainful employment. On the broader NEET measure, which also captures youth who are neither working nor studying, India and Indonesia stand out. On the latest available WDI data, both have youth NEET rates above 20%, among the highest in Asia and above the global average (chart 3). Should employers in these economies adopt AI aggressively across processes and production, including physical AI such as humanoid robots, the problem could worsen. Yet firms that stay purely labour-intensive risk losing out to rivals using more efficient, and perhaps cheaper, AI-driven methods.

260713T3.jpg

**Concentration risk**
The recent wave of AI optimism has pushed the equity valuations of major AI developers and AI-related goods producers to historically high levels. These gains are partly backed by strong earnings and upbeat forward guidance. Most major indexes are weighted by market capitalisation, so a counter's weight tracks its price. As these counters have outperformed their peers (chart 4), their index weight has risen close to mechanically, when holding the number of shares constant. This raises concentration risk, since a small group of counters now carries more of the index and moves it more closely. So, if the rally in these counters were to unravel deeply, it would drag the broader index down more heavily with it.

260713T4.jpg

AI-related concentration risk is not confined to equity indexes; it also shows up in the growth of major economies. In Asia, that risk usually runs through a country's exports. Take Taiwan, the world's largest advanced semiconductor exporter, as an example. As chart 5 shows, its recent export growth has come more than entirely from integrated circuits and from infocomm and audiovisual equipment. Other goods categories have often contributed negatively in recent months. This is good news for the Taiwanese economy, which sits right at the centre of the global AI boom. Yet it is also a source of concentration risk, should AI-related goods demand collapse or substantial alternative supply emerge elsewhere. A similar story applies to South Korea, through its role in supplying high-end memory chips.

260713T5.jpg

**Data centres, energy, and water**
Finally, rapidly advancing AI promises major productivity gains and broad improvements to daily life. Yet AI infrastructure rests on resource-intensive inputs: the energy needed for data centre compute, and the water needed to cool those centres. Both may deprive real people of the very resources they need to survive. One recent hotspot is Malaysia, which has courted a wave of foreign direct investment to expand its data centre footprint in the state of Johor. These capital inflows are welcome, and have lifted state-level growth through the construction sector (chart 6). But they have also raised concerns about straining local grids and water supplies, possibly leaving less for residents. Among estimates, a recent one puts data centres at around 40% of Johor's electricity demand by 2035. That is pressuring the state to expand generation capacity and grid access to match the data centre pipeline already in place. Its neighbour Singapore faced similar strains earlier, and has since repositioned itself as a hub for the most advanced and efficient data centres, partly because of its severe land constraints. 

260713T6.jpg

Asia

Economic Letter from Asia: The AI Underbelly

Robert Brusca

260714E.jpg

Industrial output in Norway fell by 1% in May after rising by 0.6 in April and falling by 1.1% in March. The seesaw act for output continues. Over broader horizons, however, output is falling. It falls by 0.1% over 12 months, falls at a 1.1% annual rate over six months, and falls at a 6.2% annual rate over three months, giving us a clear sequential trend toward falling and decelerating output. Utilities output has chaotic trends, as do mining and quarrying; however, manufacturing shows a clear trend toward output acceleration, with a 2.1% output increase over 12 months, a 2.6% annual rate rise over six months, and a 9% annual rate increase over three months.

Manufacturing sectors show consumer goods output increasing in May, also showing secular acceleration from 12 months to six months to three months. Durable goods, however, are the fly in the ointment, with output up 2.2% over 12 months, accelerating over six months, and then dropping at a 20.4% annual rate over three months. However, consumer nondurables show growth and acceleration, with a 12-month gain of 1.8%, rising to a 3.6% annual rate increase over six months and a 10.9% annual rate increase over three months. Intermediate goods output trends return to more difficult times and show declines over 12 months, six months, and three months, but not a clear path of deceleration. Capital goods output is up 5.4% over 12 months and at an 8.5% annual rate over three months, but there is an intervening soft spot with output up at only a 3.4% annual rate over six months.

Against this background, inflation in Norway showed solid increases in May, rising by 0.2% overall and by 0.3% for the core HICP. However, sequentially inflation gains 3% over 12 months, rises at a 3.8% annual rate over six months, and then backs down to a 1.2% annual rate over three months. The core HICP is steadier, with a 3.4% gain over 12 months, rising to a 3.8% annual rate over six months, and then backing down to 3.2% at an annual rate over three months. That's a set of growth rates that are more stable than either accelerating or decelerating.

In the quarter-to-date (QTD) basis, industrial production is falling 4.6%; this is two months into the second quarter. On the other hand, manufacturing output is rising QTD at a 4.9% annual rate, with consumer nondurables showing strong positive growth along with intermediate goods output. There is a solid gain of 3.1% at an annual rate from capital goods. The QTD inflation trends remain somewhat mixed, with a weak headline showing a 1.6% annual rate, against a core HICP at a 3.4% annual rate rise, the latter gain being well in step with its sequential results.

The far right-hand column compares industrial production over the broad period from just before COVID (in January 2020) looking at the ratio of the level of output in May 2026 to its index value in January 2020. Remember that IP data are inflation-adjusted, so these are real data. Over this span, industrial production excluding construction is up by approximately 10%, with utilities output up at about 21%, mining and quarrying up about 5%, and manufacturing up a little more than 7%. This is a 5½-year period. Consumer goods output is up by 2.7%, led by consumer nondurables which rise 4.1% on the period and against durable goods output where there is a decline of about 13% on that timeline. Intermediate goods output drops slightly on the timeline by less than half a percentage point, while capital goods output is up at a solid and strong 23% gain. Looking at prices over the same period, the headline HICP is higher by 27% while the core is higher by 24%.

The weakened output shows the stresses and strains of the period, with weak gains in place over the last 5½ years and with the consumer showing considerable wear and tear, leaving consumer goods output lower on balance over this 5½-year span. It hasn't been such a bad time for capital goods, where output rose by 23% over the period. Inflation got out-of-the-box and grew quite strongly. The headline HICP grew by 27% at a time when sticking to its target would have implied a gain in the price level of only 11.5%.

**Ongoing overshooting**
Even now central banks are trying to decide how to come to grips with the inflation pressures from that. Pressures continue to linger and threaten the economies. Of course, there are some new factors in place, but that's the nature of inflation: if it's not one thing, it's something else. And failing to respond to the one thing means that you're going to get hit even worse when it becomes something else. This is the lesson the central banks haven't learned during this period. 

**Have central banks learned their lesson?**
Noting that inflation is over target and then forecasting that it's going to come back down to target over some period ahead puts the inflation performance at risk to whatever happens between now and the end of that period ‘ahead.’ If that forecast isn't perfectly right and if there's something else that disturbs the path of prices, what will happen is that an inflation that is already over the top of the target will push even farther over the top of the target and the dilemma faced by the central bank will become even worse. This is why kicking the can down the road generally is not a very good strategy, but it's one that virtually all the central banks pursued in the wake of COVID. So, will central bankers come to see inflation that is here and now as a here-and-now problem to be addressed here and now, or as a candidate for tomorrow land? The ECB seems to be changing, and the Fed has formed task forces. What about Norway and the rest of the world? Norway did push its target rate up as the ECB hiked. But what is its plan?

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Norway

Norwegian IP Struggles, but Manufacturing Shows Some Strength

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Manufacturing output in the countries of the European Monetary Union continues to underperform. The median change for the 11 countries reporting on the table is a 0.5% decline in May following a 0.3% increase in April. However, only 41.7% of the reporters are accelerating in May, compared to 25% in April, although in March over half of the reporters had showed some acceleration, with output at 61.5%.

In May, of these eleven early reporters, seven showed month-to-month declines in output. This compares to four showing declines in April and four showing declines in March.

**Sequential trends**
Over 12 months, output is declining in four of these eleven countries: Germany, Luxembourg, Ireland, and Portugal. Over six months, output declines in five of the eleven countries. Over three months, output declines in four of the eleven countries. Over these broader sequential periods, output is increasing in most cases; only one country, Ireland, shows consistent declines in output over three months, six months, and 12 months. However, among EMU countries, only Italy shows output expanding on all three timelines, although Sweden, an EU member country, also shows output increasing in all three periods.

Amid the output weakness in May, the quarter-to-date calculation for industrial production growth is also broadly weak. In May, seven of the eleven quarter-to-date changes in industrial production are negative. Positive results, increases in the quarter-to-date, are registered by Germany, Luxembourg, Greece, and Portugal.

The ranking of the year-over-year growth rates shows seven countries with output growth rate rankings below 50%, marking them as below their respective medians. The comparisons for output growth are taken back to 2006, a period of about 20 years.

Four EMU countries rank above their twenty-year medians: France, Italy, Luxembourg, and Greece.

The snapshot of industry in the monetary union is consistent, showing little momentum, little strength, and relatively low rankings for current growth rates; only a minority of reporters show an acceleration in growth in May compared to April. With the situation in the Strait of Hormuz deteriorating again, the outlook for industrial production has to remain guarded.

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Europe

Industrial Sector Remains Under Pressure in EMU

Andrew Cates

**Growth Surprises Continue to Underpin Equity Resilience**
Global equity markets have proved remarkably resilient in recent weeks, shrugging off intermittent bouts of geopolitical and policy uncertainty to grind higher. Chart 1 below helps explain why: it tracks the relationship between global growth-versus-inflation surprises and world equity markets, and on that measure the recent run of global growth data has continued to surprise on the upside relative to inflation outturns — a combination that has historically been supportive for risk assets. Whether that resilience persists will depend on whether the growth-surprise advantage evident in the chart below can be sustained in the face of the inflationary pressures explored below.

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**PMIs Confirm a Broadly Solid Global Expansion**
This week's final composite PMI readings for June reinforced the broader impression of resilient global growth. As chart 2 below shows, most major economies posted readings comfortably in expansionary territory, with India continuing to lead the pack and the US not far behind. Even the laggards in the sample are hovering close to the expansion threshold rather than falling decisively below it, suggesting stabilisation rather than outright contraction (and with the UK a notable exception).

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

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

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

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

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Global markets head into this week’s closing stages digesting a mixed set of signals. Last week's US non-farm payrolls report undershot expectations, adding to questions about the durability of the US labour market even as broader activity data have continued to hold up well. Compounding that picture, news broke today of renewed instability in the Middle East, reintroducing a geopolitical risk premium into markets just as investors had begun to look past it. Global equity markets have nonetheless remained resilient, continuing to track the broadly encouraging tone of incoming activity data (chart 1). That resilience was reinforced by a solid set of global PMIs across most major economies over the past few days (chart 2). Haver's surprise indices tell a similar story of positive growth momentum in the US, but with an important caveat: incoming inflation data have also been surprising to the upside, driven largely by higher oil prices (chart 3). These inflation risks could persist moreover, as global supply chain pressures have picked up in recent months and today's flare-up in the Middle East threatens to add further strain (chart 4). The world economy remains vulnerable to other supply-side shocks too, such as the extreme heat gripping much of Europe this week (chart 5). Still, on the other side of the ledger the enormous scale of investment now flowing into artificial intelligence could be a genuine source of supply-side potential (chart 6).

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Charts of the Week: Growth Holds Firm

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.