Tom Moeller

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030721a.jpg" width="353">
The Conference Board reported that the Composite Index of Leading Economic Indicators rose for the third consecutive month in June. The 0.1% gain was as expected and the prior month&#39;s increase was revised up slightly.
Gains amongst the leaders&#39; component series fell back to a still-high 55% from the 80% breadth of gain in May. The percentage of leading components rising over a six month period dropped to 30% from 50% in the prior two months.
A higher money supply and higher stock prices had large positive influences on theJune leading index. These were offset by negative influences from a narrower yield curve and lower consumer expectations.
The Leading index is based on eight previously reported economic data series and two that are estimated.
The coincident indicators rose slightly for the second month.
The ratio of coincident-to-lagging indicators surged 0.6%, again to a new high. The ratio is an indicator of excess relative to actual economic performance.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">June</th>
<th scope="col">May</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">Leading</td>
<td>0.1%</td>
<td>1.1%</td>
<td>0.5%</td>
<td>2.1%</td>
<td>-0.9%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-0.2%</td>
<td>-0.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>-2.0%</td>
<td>-4.4%</td>
<td>-1.3%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
U.S. June Budget in Small Surplus  
by <a href="/comment/Moeller.html">Tom Moeller</a> July 21, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030721b.jpg" width="353">
The U.S. Government budget was in surplus last month by $21.2B. The surplus was about as expected by most analysts but it was the smallest surplus for the month of June since 1995.
The Federal government&#39;s deficit totaled $270.5B through the first nine months of this fiscal year. That is versus a deficit of $116.3B through the first nine months of FY2002.
The latest update of the outlook for the US Budget from the Office of Management &amp; Budget is available <a href="http://www.whitehouse.gov/omb/pubpress/071503_press_briefing_midsession.html">here</a>.
Net receipts for the first nine months of FY03 fell 3.5% versus last year. Individual tax payments fell 6.0% and corporate income taxes were down 15.8%. Social insurance contributions rose a small 1.7% but excise taxes fell slightly. 
Federal net expenditures rose 6.9% versus last fiscal year&#39;s first nine months led by higher defense spending which rose 15.7%. Spending on health programs also was strong, up 10.5%. Spending on education surged 17.3%. Spending on income security rose 8.8% while Medicare outlays rose 8.8%. Social Security outlays rose just 4.1% and interest expense fell 8.1% 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/@E1/@E106/@E10602/@E10602.HTM">US Government Finance</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;02</th>
<th scope="col">FY2002</th>
<th scope="col">FY2001</th>
<th scope="col">FY2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Budget Balance</td>
<td>$21.2B</td>
<td>$-90.0B</td>
<td>$29.1B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
<td>$236.4B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$193.1B</td>
<td>$103.4B</td>
<td>5.7%</td>
<td>-6.9%</td>
<td>-1.7%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$171.9B</td>
<td>$193.5B</td>
<td>11.9%</td>
<td>7.9%</td>
<td>4.2%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The Conference Board reported that the Composite Index of Leading Economic Indicators rose for the third consecutive month in June. The 0.1% gain was as expected and the prior month's increase was revised up slightly. Gains amongst [...]

Leading Indicators Up

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030718b.jpg" width="353">
The mid-July reading of Consumer Sentiment from the University of Michigan rose 0.7% from June to 90.3. Consensus expectations were for a reading of 91.0.
Consumer Sentiment rose as consumer&#39;s read of current conditions jumped 7.8%, the largest one month rise in over ten years. The index of consumer expectations fell 4.3% for the second consecutive monthly decline.
Over the last ten years there has been a 66% correlation between the level of consumer sentiment and the y/y change in real PCE. The correlation over the last five years has been 82%.
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-July</th>
<th scope="col">June</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">Consumer Sentiment</td>
<td>90.3</td>
<td>89.7</td>
<td>2.5%</td>
<td>89.6</td>
<td>89.2</td>
<td>107.6</td>
</tr>
</tbody>
</table>
More Whiffs of U.S. Reflation 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 18, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030718a.jpg" width="353">
Two &quot;market based indicators of monetary policy&quot; recently have further flashed a signal that the Federal Reserve&#39;s attempts to reflate the U.S. economy will succeed. 
The yield curve (the ratio of the rate on the 10 year Treasury note to Federal funds) steepened sharply last month then took another leg up earlier this week after Chairman Greenspan suggested that short term interest rates would be held low for some time.
The prepared text of the Chairman&#39;s testimony on Tuesday is available <a href="http://www.federalreserve.gov/BoardDocs/HH/2003/July/Testimony.htm">here</a>.
A report from the Federal Reserve Bank of San Francisco titled &quot;What Makes the Yield Curve Move? is available <a href="http://www.frbsf.org/publications/economics/letter/2003/el2003-15.html">here</a>.
Commodity prices also have recently signaled reflation. The price index complied by the Economic Cycle Research Institute (ECRI) is up roughly 7% from its lows this past Spring. Higher prices for metals, textiles and &quot;miscellaneous,&quot; including petroleum products, have contributed to the gain.
The higher value of the dollar, up more than 4% since early June, has reversed some of the indication of reflation it flashed earlier this year and in 2002. Much of the rise has been against the Euro and is a reversal of prior sharp declines. But the dollar also is up versus the UK pound and stable versus the Japanese yen.

</body>
</html>

The mid-July reading of Consumer Sentiment from the University of Michigan rose 0.7% from June to 90.3. Consensus expectations were for a reading of 91.0. Consumer Sentiment rose as consumer's read of current conditions jumped 7.8%, [...]

Consumer Sentiment Up Slightly

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030717c.jpg" width="353">
The Business Cycle Dating Committee at the National Bureau of Economic Research (NBER) reported that &quot;a trough in economic activity occurred in November 2001.&quot;
Earlier this month, Haver Analytics began using November 2001 as the trough date for purposes of shading the last economic cycle in its graphs.
Click <a href="http://release.nber.org/recessions.html">here</a> for the memo from NBER&#39;s Business Cycle Dating Committee.

Housing Starts Strong 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 17, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030717b.jpg" width="353">
Housing starts were much stronger than expected last month, rising 3.7% to 1.80 mil. units. Consensus expectations had been for starts of 1.75 mil. June was the second highest level of starts this year.
Single family starts rose 5.3% m/m to the third highest level since the late 1970s. So far this year single family starts are up 2.9% from the 2002 average. 
Multi-family starts fell 2.6% last month following a 29.6% surge in May. Multi-family starts this year are down 6.1% versus 2002.
Building permits ticked higher by 0.8%, adding to strong gains in the prior two months. Single family permits were quite strong and rose 5.3% (8.6% y/y) while multi family permits fell.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,803</td>
<td>1,738</td>
<td>5.5%</td>
<td>1,711</td>
<td>1,601</td>
<td>1,573</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family</td>
<td>1,462</td>
<td>1,388</td>
<td>7.6%</td>
<td>1,364</td>
<td>1,272</td>
<td>1,232</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi Family</td>
<td>341</td>
<td>350</td>
<td>-2.6%</td>
<td>347</td>
<td>330</td>
<td>341</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,817</td>
<td>1,803</td>
<td>4.1%</td>
<td>1,750</td>
<td>1,637</td>
<td>1,598</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 17, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030717a.jpg" width="353">
Initial claims for unemployment insurance fell more than expected last week. The 29,000 drop to 412,000 erased virtually all of the gains in the prior two weeks. Consensus expectations had been for claims of 430,000.
The latest claims data is for the July survey period for nonfarm payrolls. Initial claims fell 14,000 from the June survey period.
The four-week moving average of initial claims dropped to 424,000 (+8.4% y/y).
Continuing claims for unemployment insurance collapsed by 117,000 (-3.1%) w/w and the prior week&#39;s surge was roughly halved to 43,000.
During the last ten years there has been a 79% (inverse) correlation between the level of initial claims for unemployment insurance and the y/y change in nonfarm payrolls.
The insured rate of unemployment fell to 2.9% from 3.0% the week prior.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">7/12/03</th>
<th scope="col">7/5/03</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>412.0</td>
<td>441.0</td>
<td>6.5%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,654</td>
<td>2.6%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Improved 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 17, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030717d.jpg" width="353">
The Philadelphia Fed&#146;s index of general business conditions for July rose slightly more than expected to 8.3 from 4.0 in June. Consensus expectations had been for a reading of 7.0.
Gains amongst the sub indexes were broad based. New orders improved substantially to 10.4, the first month in five the index was not in negative territory. Shipments also surged to 9.1, the first positive reading in four months. The employment index even indicated positive growth for only the third month since October 2000.
During the last twenty years there has been a 67% correlation between the level of the Philadelphia Fed Business Conditions Index and quarterly growth in real GDP. The correlation with quarterly growth in factory sector industrial production has been 79%.
The business conditions index reflects a separate survey question, not the components.
A separate survey of expected business conditions in six months rose to 56.9, the highest reading since November 1992.
The prices paid index fell to -6.5, the first negative reading since February 2002.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Fed can be found <a href="http://www.phil.frb.org/media/newsreleases/071703.html">here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">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">General Activity Index</td>
<td>8.3</td>
<td>4.0</td>
<td>5.9</td>
<td>7.7</td>
<td>-17.2</td>
<td>8.3</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>-6.5</td>
<td>5.8</td>
<td>19.2</td>
<td>12.2</td>
<td>-0.9</td>
<td>27.2</td>
</tr>
</tbody>
</table>
</body>
</html>

The Business Cycle Dating Committee at the National Bureau of Economic Research (NBER) reported that "a trough in economic activity occurred in November 2001." Earlier this month, Haver Analytics began using November 2001 as the [...]

NBER Determined the Recession Ended in November 2001

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030716c.jpg" width="353">
The Consumer Price Index (CPI-U) rose an expected 0.3% last month following no change in May.
The CPI less food and energy was unchanged versus Consensus expectations for a 0.2% rise. A slowdown in services price inflation and continued deflation of goods prices resulted in the third unchanged &quot;core&quot; CPI this year.
Core services prices rose only 0.1% and that was below the 0.2% monthly average of this year. Shelter prices fell slightly (1.8% YTD AR) following the 0.6% gain in May. Medical care services prices were strong for the second consecutive month, up 0.4% (3.1% YTD AR).Education and communication prices fell for the fourth consecutive month. Public transportation prices rose 0.7% (5.2% YTD AR) following a 2.0% May gain.
Goods prices continued to deflate. New and used vehicle prices fell 0.3% for the fifth monthly decline this year. Prices for household furnishings and operation fell 0.2% for the fourth consecutive monthly drop. Apparel prices managed the first monthly increase since August of last year.
Energy prices increased moderately. A 1.3% rise in gasoline prices, the first gain in three months, was offset by the third consecutive decline in fuel oil prices and a moderate 0.7% rise in piped gas &amp; electricity prices.
The chained CPI which adjusts for shifts in consumer buying behavior increased for the first month in three. It is similar to the PCE price deflator. The core price measure fell 0.2% after having been unchanged for two months (1.1% YTD AR).
Analysis by the Federal Reserve Bank of Atlanta titled &quot;Inflation Persistence: How Much Can We Explain?&quot; can be found <a href="http://www.frbatlanta.org/invoke.cfm?objectid=F0032574-E423-472F-AE6FF9E491589A5D&amp;method=display_body#rubio">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">June</th>
<th scope="col">May</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&nbsp;</td>
<td>0.2%</td>
<td>0.0%</td>
<td>2.1%</td>
<td>1.6%</td>
<td>2.8%</td>
<td>3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.0%</td>
<td>0.3%</td>
<td>1.5%</td>
<td>2.3%</td>
<td>2.7%</td>
<td>2.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>-0.1%</td>
<td>-0.4%</td>
<td>-1.9%</td>
<td>-1.1%</td>
<td>0.3%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.1%</td>
<td>0.5%</td>
<td>2.9%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>0.8%</td>
<td>-3.1%</td>
<td>9.4%</td>
<td>-5.8%</td>
<td>3.7%</td>
<td>16.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>0.4%</td>
<td>0.3%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>3.1%</td>
<td>2.3%</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>0.1%</td>
<td>-0.2%</td>
<td>1.7%</td>
<td>1.3%</td>
<td>2.3%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>1.0%</td>
<td>1.8%</td>
<td>&nbsp;2.0%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
Industrial Production Up Slightly, Factory Output Surged 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 16, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030716d.jpg" width="353">
Industrial production rose 0.1% in June for the second month. Consensus expectations were for a 0.2% gain.
Output in the manufacturing sector surged 0.5% (-1.0% y/y) for the second consecutive monthly gain.
Output in selected high-technology industries added 1.0% (9.2% y/y) to strong gains in the prior five months. Excluding high-tech factory output in June rose 0.4% (-1.6% y/y). Motor vehicle output rose for the first month in five and output of electrical equipment rose for the second consecutive month. Output of furniture jumped 1.0% for the second consecutive monthly gain.
Total capacity utilization was unchanged at 74.3%, the lowest level since July 1983. Factory sector utilization rose slightly to 72.6%. Growth in capacity remained slow at 1.0% y/y versus 1.5% growth last year and 3.2% growth in 2001.
The influence of trend output growth on the US economy&#39;s &quot;speed limit&quot; is discussed by the Federal Reserve Bank of San Francisco <a href="http://www.frbsf.org/publications/economics/letter/2003/el2003-14.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>0.1%</td>
<td>0.1%</td>
<td>-1.0%</td>
<td>-0.8%</td>
<td>-3.5%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>74.3%</td>
<td>74.3%</td>
<td>75.9%(6/02)</td>
<td>75.6%</td>
<td>77.3%</td>
<td>82.7%</td>
</tr>
</tbody>
</table>
Mortgage Applications Up a Bit 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 16, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030716a.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association nudged up 0.9% last week following the 17.7% decline the week earlier.
Applications for home purchase jumped 8.0% and recouped all of the 5.5% decline the previous week. So far in July, mortgage applications for home purchase are setting a new record.
During the last ten years there has been a 51% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance fell another 1.6% following the 21.3% w/w decline the previous week.
Interest rates on a conventional 30-Year mortgage fell slightly w/w with the effective rate at 5.62% versus 6.13% averaged in December. The effective rate on a 15-year mortgage also fell to 5.04%.
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 at <a href="http://www.mbaa.org/">www.mbaa.org.</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">7/11/03</th>
<th scope="col">7/4/03</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>1,358.2</td>
<td>1,346.3</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>447.2</td>
<td>414.1</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>6,657.2</td>
<td>6,768.3</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
</table>
Business Inventories Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 16, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030716b.jpg" width="353">
Total business inventories fell unexpectedly in May. The 0.2% decline was versus Consensus expectations for a 0.1% rise.
Retail inventories fell sharply. The 0.3% decline reflected lower inventories of motor vehicles and parts as well as a huge 1.5% decline in general merchandise store inventories.
Overall business sales fell slightly m/m (2.0% y/y) following a 1.7% April drop.
The inventory-to-sales ratio was stable m/m at 1.40 and versus 1.38 last year. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-0.2%</td>
<td>0.0%</td>
<td>3.5%</td>
<td>2.1%</td>
<td>-5.4%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-0.3%</td>
<td>0.2%</td>
<td>7.3%</td>
<td>7.6%</td>
<td>-2.9%</td>
<td>6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>-0.3%</td>
<td>-0.1%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>-1.2%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>-0.3%</td>
<td>-0.3%</td>
<td>2.3%</td>
<td>0.4%</td>
<td>-4.9%</td>
<td>6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.1%</td>
<td>-0.1%</td>
<td>0.7%</td>
<td>-1.9%</td>
<td>-8.0%</td>
<td>4.5%</td>
</tr>
</tbody>
</table>
Housing Market Index Higher 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 16, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030716e.jpg" width="353">
The National Association of Home Builders (NAHB) reported that their Composite Housing Market Index rose another two points in July to 64. The index was up 4.9% from July of last year.
During the last fifteen years there has been a 68% correlation between the y/y change in the NAHB index and the change in new home sales.
The index of current market conditions for home sales rose (6.2% y/y) as the percentage of builders indicating &quot;good&quot; conditions rose to 50% from 47%.
The index which measures expected home sales in six months rose to 73 (5.8% y/y) versus an average of 69 during all of last year.
Traffic of prospective buyers again rose sharply to near the high for this year.
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.
For a description of the housing market index from the National Association of Home Builders, visit the <a href="http://www.nahb.org/generic.aspx?sectionID=134&amp;genericContentID=532">NAHB 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/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">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">Composite Housing Market Index</td>
<td>64</td>
<td>62</td>
<td>61</td>
<td>61</td>
<td>56</td>
<td>62</td>
</tr>
</tbody>
</table>
</body>
</html>

The Consumer Price Index (CPI-U) rose an expected 0.3% last month following no change in May. The CPI less food and energy was unchanged versus Consensus expectations for a 0.2% rise. A slowdown in services price inflation and [...]

CPI Tame

Louise Curley

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030715d.jpg" width="353">
TheZEW index that measures investor confidence almost doubled in July. It rose from 21.3 in June to 41.9, the highest level since September, 2002 and well above the long term average of 33. A reduction in the Euro Zone&#39;s central interest rate to 2% last month, plans by the government to bring forward by one year tax cuts scheduled for January 2005 and proposed measures to ease labor laws and cut jobless benefits have improved the business climate. Moreover, the abortive strikein East Germany last month byIG Metall&#39;s, Germany&#39;s largest trade union, is seen as harbinger of a better climate for labor reform and reduced wage demands generally.. While the rise in confidence is impressive, the ZEW index is based on a relatively small sample of investors. The broader IFO index based on businessmen&#39;s appraisal of economic conditions is due to be released in a few weeks.. The outlook for economic growth in Germany in 2003 remains tenuous. GDP declined in the first quarter of 2003 and the rise in the value of the Euro is having its toll on exports. The European Commission is estimating that the German economy will grow 0.2-0.3% at best this year.

<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"></th>
<th scope="col">July 2003</th>
<th scope="col">&nbsp;June 2003</th>
<th scope="col">July 2002</th>
<th scope="col">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">ZEW INDEX</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Percent Balance</td>
<td>41.9</td>
<td>21.3</td>
<td>69.1</td>
<td>96.7</td>
<td>-39.4</td>
<td>45.3</td>
<td>2.8</td>
<td>59.1</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Real GDP</td>
<td>IQ 03</td>
<td>4Q02</td>
<td>1Q 02</td>
<td>Q/Q</td>
<td>Y/Y</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr class="odd">
<td class="firstcol">Bil. 95 Euros</td>
<td>483.0</td>
<td>506.8</td>
<td>480.5</td>
<td>-4.7</td>
<td>0.5</td>
<td>1984.3.</td>
<td>1980.8.</td>
<td>1969.5</td>
</tr>
<tr>
<td class="firstcol">Percent Change</td>
<td>-3.55</td>
<td>-1.11</td>
<td>-3.53</td>
<td></td>
<td></td>
<td>0.18</td>
<td>0.57</td>
<td>2.86</td>
</tr>
</tbody>
</table>
</body>
</html>

TheZEW index that measures investor confidence almost doubled in July. It rose from 21.3 in June to 41.9, the highest level since September, 2002 and well above the long term average of 33. A reduction in the Euro Zone's central [...]

German Investors' Confidence Takes a Big Jump But Economic Outlook Still Tenuous

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030715a.jpg" width="353">
Retail sales rose an expected 0.5% in June following just a slight increase in May. The May figures were little revised.
Sales excluding motor vehicles and parts dealers rose a strong 0.7%, more than twice Consensus expectations for a 0.3% gain. The slight increase in May was little revised.
Sales gains were widespread last month. Apparel and accessory stores added 1.3% (2.9% y/y) to the 1.6% May sales spurt that was revised up. Furniture, home furnishing and electronics store sales increased 0.2% (3.4% y/y) following a 1.4% May gain which was weaker than the 2.0% rise reported last month. Sales at general merchandise stores rose 0.3% (2.4% y/y) following an unrevised 0.7% May gain.
Sales of building materials and garden supplies surged 2.6% (6.1% y/y). Excluding these categories, nonauto retail sales rose 0.5% (3.5% y/y).
Motor vehicle dealers&#39; sales fell 0.1% for the second consecutive monthly decline. Unit sales of light vehicles rose 1.9% last month to 16.43 mil. (AR). Sales at gasoline service stations rose 1.3% following two months of sharp decline.

<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">June</th>
<th scope="col">May</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"><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>0.0%</td>
<td>4.2%</td>
<td>3.2%</td>
<td>2.9%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>0.7%</td>
<td>0.1%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>2.9%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
Empire State Factory Survey Showed Third Month of Gain 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030715b.jpg" width="353">
The Empire State Manufacturing Survey indicated the third month of improvement for area manufacturers. The index of general business conditions fell somewhat to 22.56 in July but remained near the series&#39; highs.
Consensus expectations were for a reading of 25.0. The data were reported by the Federal Reserve Bank of New York.
New orders sustained nearly all of the June surge while shipments improved to a series high. Offsetting this strength was sharp deterioration in the unfilled orders and employment indexes which both fell back into negative territory.
The index of prices paid improved to 6.45 versus the negative reading of June.
The survey includes measures of business expectations six months ahead. This diffusion index fell to 52.5 but for the last three months is much improved from the lows of the February-to-April period. Expectations for capital expenditures rose.
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 the latest Empire State Manufacturing Survey report, click <a href="http://www.newyorkfed.org/rmaghome/regional/mfg_survey/index.html">here</a>.

<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/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General business conditions (diffusion index)</td>
<td>22.56</td>
<td>27.60</td>
<td>0.21</td>
<td>7.10</td>
<td>-13.02</td>
</tr>
</tbody>
</table>
Chain Store Sales Jump Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030715c.jpg" width="353">
Chain store sales added 0.9% last week to the 0.7% jump the week prior, according to the BTM-UBSW survey.
Sales started July 1.1% ahead of June which were barely changed from May.
During the last five years there has been a 60% correlation between the year-to-year percent change in chain store sales and the change in nonauto retail sales less gasoline.
The BTM leading indicator of chain store sales fell 0.5% in early July. It was the fourth decline in the last five weeks for this indicator.
The BTM-UBSW retail chain-store sales index is constructed from the sales results reported by seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

<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/surveyw/@S2/@S2.HTM">BTM-UBSW (SA, 1977=100)</a></th>
<th scope="col">7/12/03</th>
<th scope="col">7/5/03</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>423.9</td>
<td>420.1</td>
<td>2.3%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales rose an expected 0.5% in June following just a slight increase in May. The May figures were little revised. Sales excluding motor vehicles and parts dealers rose a strong 0.7%, more than twice Consensus expectations for a [...]

Retail Sales Rose As Expected

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030714b.jpg" width="353">
Stock markets in Latin America are up sharply from late 2002. The Morgan Stanley Capital International index of Latin America EMF (Emerging Markets Free) stock prices in U.S. dollars has risen almost 15% in the last month and is up 23% from July 2002.
Currency appreciation in Argentina and Brazil have accounted for a part of the rise in dollar terms, but political changes have also been important. Brazil&#39;s new president who took office on January 1, has so far surprised investors by adhering to a tough government deficit reduction plan. In Argentina belief that the new president, who was inaugurated in May, will restructure the government debt together with a surge in exports has increased confidence.. Stock markets in Japan, Asian emerging markets and in the United States have increased in recent months, but remain below levels reached a year ago while the stock market in dollar terms in Europe shows little gain in spite of the rise in the Euro.

<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">Stock Prices</th>
<th scope="col">June 2003</th>
<th scope="col">&nbsp;May 2003</th>
<th scope="col">June 2002</th>
<th scope="col">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">Morgan Stanley (12/87=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Asia</td>
<td>154.432</td>
<td>143.572</td>
<td>161.157</td>
<td>7.56</td>
<td>-4.14</td>
<td>140.350</td>
<td>149.704</td>
<td>143.615</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Latin America&nbsp;</td>
<td>800.192</td>
<td>782.791</td>
<td>731.890</td>
<td>14.85</td>
<td>23.00</td>
<td>658.941</td>
<td>876.163</td>
<td>915.634</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Europe&nbsp;</td>
<td>942.252</td>
<td>935.729</td>
<td>1021.604</td>
<td>0.70</td>
<td>-7.77</td>
<td>867.447</td>
<td>1085.759</td>
<td>1378.396</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Japan</td>
<td>1630.444</td>
<td>1518.857</td>
<td>1927.331</td>
<td>7.35</td>
<td>-15.40</td>
<td>1593.175</td>
<td>1789.256</td>
<td>2551.957</td>
</tr>
<tr>
<td class="firstcol">S&amp;P 500 (1941-43=100)</td>
<td>988.00</td>
<td>935.96</td>
<td>1014.05</td>
<td>5.56</td>
<td>-2.57</td>
<td>995.64</td>
<td>1192.08</td>
<td>1426.76</td>
</tr>
</tbody>
</table>
</body>
</html>

Stock markets in Latin America are up sharply from late 2002. The Morgan Stanley Capital International index of Latin America EMF (Emerging Markets Free) stock prices in U.S. dollars has risen almost 15% in the last month and is up [...]

Stock Markets in Latin America Outpace Other Major Areas

<html>
<head>
<style>
.odd{
 background-color:#edf5ff;
}
.even{
 background-color:#dde5ef;
}
.grey1{
	background-color:#f0f0f0;
}
.grey2{
	background-color:#e2e2e2;
}
.grey3{
	background-color:#d4d4d4;
}
.grey4{
	background-color:#c6c6c6;
}
.grey5{
	background-color:#b8b8b8;
}
</style>
</head>
<body>
 



<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030714a.jpg" width="353">
The OECD Index of Leading Indicators (Big 7) rose in May for the second consecutive month. The 0.7% gain followed a 0.1% rise in April but the two increases represented the only real upward movement in the index so far this year.
Not only has the index just one material rise this year, gains amongst the member country leading indexes have been limited. The leading index for the US rose a smart 1.2% in May following a 0.7% increase in April, and those gains more than made up for sharp declines in February and March.
Also showing some strength were the leaders in Italy. They managed the fourth increase of the year in May and were up 1.2% YTD.
On the weak side, the leading index in Germany rose just 0.3% in May and year to date was up 0.1%. In France, the leaders rose 0.6% in May but remained down 1.6% YTD. Similarly, in the U.K. the May leaders did rise 0.6% but were down 0.7% YTD.
Leaders for Japan were down in May for the third straight month (-1.0% YTD) and in Canada the May leading indicators jumped 2.0% but the gain just made up for three consecutive months of decline.
For more from the Organisation for Economic Cooperation and Development (OECD), visit its <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">May</th>
<th scope="col">April</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>119.1</td>
<td>118.2</td>
<td>-0.3%</td>
<td>4.2%</td>
<td>-2.1%</td>
<td>3.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; European Union</td>
<td>117.2</td>
<td>116.5</td>
<td>0.2%</td>
<td>3.1%</td>
<td>-1.7%</td>
<td>3.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Japan</td>
<td>100.6</td>
<td>100.7</td>
<td>-1.0%</td>
<td>0.7%</td>
<td>-2.9%</td>
<td>2.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; United States</td>
<td>131.0</td>
<td>129.4</td>
<td>-0.0%</td>
<td>5.8%</td>
<td>-2.5%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
</body>
</html>

The OECD Index of Leading Indicators (Big 7) rose in May for the second consecutive month. The 0.7% gain followed a 0.1% rise in April but the two increases represented the only real upward movement in the index so far this year. Not [...]

OECD Leaders Up A Little

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

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

Optimized for precision analytics, our data is seamlessly integrated with Microsoft Office and all leading statistical packages through our DLX® software and platform independent HaverView™ website. We further offer direct database feeds, client server or cloud-based delivery, and RESTful API.


Privacy Policy

Disclaimer

Contact us

Service Health

A premier time series data platform for the global strategy, research, and quant communities. 

New York

London

Singapore

Tokyo

Economy in Brief

Viewpoints

Contact Us

Our Data

Our Products

What We Do

Our Authors

About Us

Data News

Featured Data Additions

Resources

Release Calendars

Training Center

Webinars

Newsletters

Download Software

For Clients

Live Updates

Michael J. Moran

260713A.jpg

260713B.jpg

Most analysts were looking for a dip in the CPI because of a likely retreat in gasoline prices, but the published decline of 0.4% in the headline index was noticeably softer than the consensus estimate of -0.1%. Gasoline prices did not disappoint, with a drop of 9.7% offsetting approximately one-quarter of the cumulative surge in the prior three months. Prices of fuel oil fell almost as much as gasoline prices, and electricity charges contributed to the softness with a decline of 1.0%. The price of natural gas services was the only major energy item to increase in June (0.5%). All told, the energy component of the CPI fell 5.7% after climbing 19.6% in the prior three months.

The drop in energy prices was notable, but the core component provided a bigger surprise by posting a decline, the first since a series of three consecutive decreases during the pandemic. Before the pandemic-related retreat, the core component fell only twice from 1990 to 2019. The drop in June was minuscule (-0.02%), but the fact that it carried a minus sign was striking.

Both the goods and services components of the core index contributed to the restraint. Prices of goods other than food and energy fell 0.1%. The Bureau of Labor Statistics publishes six key subcategories of core goods, and five of them fell in June. Apparel prices stood out with a decline of 0.6%. Prices of core services were nearly unchanged at 0.03%, restrained by declines in medical services and motor vehicle insurance. Airfares, which showed upward pressure from rising fuel prices in the prior three months, posted a nondescript increase of 0.2%. The modest increase in the prices of core services led to a dip in the 12-month average increase after stepping up in April and May. The trend in core goods prices continued its gradual deceleration (chart, below right).

Food prices in June rose 0.2%, a reading comfortably within the range of the past few years.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

260713C.jpg

260713D.jpg

- The energy component retraced a portion of its surge in the prior three months.
- Prices excluding food and energy provided a surprise by posting a rare decline.

June CPI: Cooling Energy Prices and a Restrained Core Component

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% since January 2020, a duration of time during which, 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?

260713.jpg

Norway

Norwegian IP Struggles, but Manufacturing Shows Some Strength

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

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

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>