Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030516b.jpg" width="353">
The Consumer Price Index (CPI-U) fell 0.3%, the first monthly decline since December 2001. Consensus expectations had been for a 0.1% decline. Lower energy prices led the overall CPI lower but prices for most goods also fell.
The CPI less food and energy was unchanged for the second month. That reading also was weaker than Consensus expectations for a 0.1% uptick.
Energy prices fell 4.6% in April and reversed the 4.6% gain the prior month. Gasoline prices fell 8.3% and so far in May are down another 5.5% versus April. Fuel oil prices fell 11.8% (28.4% y/y). Piped gas &amp; electricity prices fell 0.5% (9.4% y/y).
Goods prices were down broadly last month, continuing a decline begun early in 2001. Core goods prices have fallen 2.7% since the March 2001 peak. Apparel prices fell 0.6%, down 10.9% since their peak in 1998. New and used vehicle prices fell 0.4%, down 4.2% since February 2001. Prices for household furnishings and operation fell 0.2% and are down 1.9% from the December 2001 peak. Even medical care commodities prices fell slightly last month.
Core services prices rose a slight 0.1% last month and are up at a 1.8% (AR) so far this year. Shelter prices rose 0.1% in April and 1.1% YTD (AR). Medical care services prices rose 0.3% and 1.9% YTD.Education and communication prices fell for the second consecutive month. Public transportation prices ticked 0.3% higher in April but are down 0.4% YTD.
The chained CPI which adjusts for shifts in consumer buying behavior fell 0.2%. It is similar to the PCE price deflator. The core price measure was unchanged.
Comments by Federal Reserve Board Governor Ben S. Bernanke on Deflation can be found <a href="http://www.federalreserve.gov//BoardDocs/speeches/2002/20021121/default.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">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>-0.3%</td>
<td>0.3%</td>
<td>2.2%</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>0.0%</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>-0.3%</td>
<td>-0.1%</td>
<td>-1.7%</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>0.0%</td>
<td>2.8%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-4.6%</td>
<td>4.6%</td>
<td>12.8%</td>
<td>-5.8%</td>
<td>3.7%</td>
<td>16.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>-0.1%</td>
<td>0.2%</td>
<td>1.2%</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>-0.2%</td>
<td>0.6%</td>
<td>1.8%</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>0.0%</td>
<td>0.3%</td>
<td>1.0%</td>
<td>1.8%</td>
<td>&nbsp;2.0%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
Housing Starts Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 16, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030516c.jpg" width="353">
Housing starts were weaker than expected last month. Total starts fell 6.8% from March (revised slightly down) to 1.63 mil. Consensus expectations had been for starts of 1.73 mil. units. Figures back to 2001 were revised slightly.
Single family starts fell 3.0% m/m, reversing about half of the gain the prior month. So far this year single family starts are up 2.2% from the 2002 average. 
Multi-family starts fell sharply last month, down 21.7%. Multi-family starts this year are down 8.4% versus 2002.
Building permits rose 1.2% last month but the gain just partially recovered a 5.5% March decline. Single family permits rose 1.2% in April and for 2003 so far are up 0.4% from last year.
An article by St. Louis Federal Reserve Bank President William Poole titled &quot;Housing in the Macroeconomy&quot; can be found <a href="http://research.stlouisfed.org/publications/review/03/05/Poole.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>1,630</td>
<td>1,748</td>
<td>2.7%</td>
<td>1,711</td>
<td>1,601</td>
<td>1,573</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family</td>
<td>1,356</td>
<td>1,398</td>
<td>6.4%</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>274</td>
<td>350</td>
<td>-12.2%</td>
<td>347</td>
<td>330</td>
<td>341</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,708</td>
<td>1,688</td>
<td>2.8%</td>
<td>1,750</td>
<td>1,637</td>
<td>1,598</td>
</tr>
</tbody>
</table>
Consumer Sentiment Again Firmer Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 16, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030516a.jpg" width="353">
The preliminary May reading of Consumer Sentiment from the University of Michigan rose 8.4% versus April. The reading of 93.2 was firmer than Consensus expectations for 86.0 and added to a 10.8% jump in sentiment in last month.
The index of current conditions fell 2.4% and has been flat for most of the year. The index of expectations jumped another 16.9% back to the monthly high of last year.
Over the last ten years there has been a 64% correlation between the level of consumer sentiment and the y/y change in real PCE. The correlation over the last five years has been 83%.
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.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1402/@EF1402.HTM">University of Michigan</a></th>
<th scope="col">Mid-May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Sentiment</td>
<td>93.2</td>
<td>86.0</td>
<td>-3.8%</td>
<td>89.6</td>
<td>89.2</td>
<td>107.6</td>
</tr>
</tbody>
</table>
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The Consumer Price Index (CPI-U) fell 0.3%, the first monthly decline since December 2001. Consensus expectations had been for a 0.1% decline. Lower energy prices led the overall CPI lower but prices for most goods also fell. The CPI [...]

Consumer Price Index Fell, Core Flat

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515a.jpg" width="353">
Finished producer prices fell 1.9% in April, a record decline for any one month. Consensus expectations were for a 0.6% decline.
Lower finished energy prices, down 8.6%, accounted for much of the decline in the overall PPI. Gasoline prices fell 16.8% (12.7% y/y) following three months of strong gain. Fuel oil prices fell 27.7% (21.4% y/y). Residential gas prices dropped 4.0% (27.9% y/y). These energy product price series are NSA.
Excluding food and energy prices fell 0.9%, more than expectations for a -0.1% drop.
Core finished consumer goods prices fell 1.3% (-0.4% y/y). The decline was the largest since August 1993 and very much reflected the 8.4% drop in tobacco prices. Passenger car prices also fell 2.6% (-0.5% y/y). Many other durable consumer goods prices either rose slightly or were unchanged. Capital goods prices fell 0.5% (0.1% y/y).
Intermediate goods prices dropped sharply and the unchanged reading for core intermediate prices was the weakest of this year. 
Crude goods prices plunged 16.3%, a record decline for one month. Finished energy prices were off by almost one third but a 1.3% decline in core crude prices was the steepest since November 2001 and reflected declines in a broad range of commodity prices, mostly metals.

<table border="0" cellspacing="0" width="100%">
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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">April</th>
<th scope="col">Mar</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>-1.9%</td>
<td>1.5%</td>
<td>2.4%</td>
<td>-1.3%</td>
<td>2.0%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.9%</td>
<td>0.7%</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>-2.2%</td>
<td>2.0%</td>
<td>4.8%</td>
<td>-1.5%</td>
<td>0.4%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.0%</td>
<td>0.2%</td>
<td>2.4%</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-16.3%</td>
<td>13.3%</td>
<td>18.0%</td>
<td>-10.6%</td>
<td>0.3%</td>
<td>22.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-1.3%</td>
<td>1.0%</td>
<td>11.4%</td>
<td>3.8%</td>
<td>-10.0%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Down Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515c.jpg" width="353">
Initial claims for unemployment insurance fell slightly more than Consensus expectations for a decline to 425,000. Initial claims fell 3.0% w/w to 417,000. That added to a 5.1% decline the week earlier which was revised shallower. It was the third consecutive weekly decline which has totaled 9.2%.
The four-week moving average of initial claims fell to a still high 439,750 (5.4% y/y).
During the last ten years there has been an 81% (inverse) correlation between the level of initial jobless insurance claims and the y/y change in real GDP.
Continuing claims for unemployment insurance rose 3.3% w/w to the highest level since mid-November, 2001. The prior week&#39;s figure was revised down.
The insured rate of unemployment rose to 3.0%, again the highest level since mid-November, 2001.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">5/10/03</th>
<th scope="col">5/03/03</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>417.0</td>
<td>430.0</td>
<td>-0.2%</td>
<td>404.3</td>
<td>406.0</td>
<td>299.7</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,770</td>
<td>1.3%</td>
<td>3,575</td>
<td>3,022</td>
<td>2,114</td>
</tr>
</tbody>
</table>
Industrial Production Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515b.jpg" width="353">
Industrial production fell about as expected last month. The 0.5% decline was the second in a row and versus Consensus expectations for a 0.4% decline. Revisions to prior months&#39; data were small.
Output in the manufacturing sector fell 0.6% (-0.7% y/y) and that added to modest 0.1% declines in the prior two months.
Higher output in selected high-technology industries, up 1.0% (9.3% y/y), offset declines in other industries. Excluding high-tech, factory output fell 0.7% (-1.3% y/y) in April following two months of 0.2% decline. Motor vehicle output fell sharply for the third straight month. 
Output of consumer goods fell 0.5% (-0.9% y/y) as appliance output was flat and nondurable consumer goods output was down for the second month.
Total capacity utilization fell sharply to 74.4%, the lowest level since June 1983. Factory sector utilization also fell to 72.5%, the lowest level since mid-1983.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM">Production &amp; Capacity</a></th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>-0.5%</td>
<td>-0.5%</td>
<td>-0.4%</td>
<td>-0.8%</td>
<td>-3.5%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>74.4%</td>
<td>74.8%</td>
<td>75.6%(4/02)</td>
<td>75.6%</td>
<td>77.3%</td>
<td>82.7%</td>
</tr>
</tbody>
</table>
Empire State Factory Survey Improved 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515d.jpg" width="353">
The Empire State Manufacturing Survey index of general business conditions jumped 30 points and improved to 10.60. That was the first positive reading since February. The data were reported by the Federal Reserve Bank of New York. Consensus expectations for a reading of -2.0.
Diffusion indexes for all the subgroups improved with orders, shipments and employment each moving into positive territory and thus suggesting positive growth.
The index of prices paid fell sharply to 13.98 and reversed virtually all of the prior month&#39;s rise.
The survey includes measures of business expectations six months ahead. This diffusion index for general business conditions rose sharply to 55.61 led by improved expectations for new orders, shipments and employment. Expectations for capital expenditures surged to the highest level since last September.
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>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">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>10.60</td>
<td>-20.20</td>
<td>8.66</td>
<td>7.10</td>
<td>-13.02</td>
</tr>
</tbody>
</table>
Business Inventories Accumulate Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515e.jpg" width="353">
Total business inventories again rose twice Consensus expectations. In March, inventories rose 0.4% versus expectations for a 0.2% gain. The turn to accumulation began early last year and has bolstered output in the factory sector.
Retail inventories rose sharply as they have since early last year. Inventories of motor vehicles and parts again surged and are up 20.1% y/y.
Nonauto retail inventories rose by 0.6% for the third month in four. Inventories at apparel stores rose 0.7% (7.4% y/y) for the fifth month of strong gain. Inventories at general merchandise stores jumped 1.2% (4.0% y/y). Inventories of furniture, home furnishings and electronics fell for the third consecutive month (4.3% y/y).
Overall business sales jumped 1.8% (5.6% y/y), following the 0.9% decline in February, led by across the board gains.
The inventory-to-sales ratio fell to 1.38 from an upwardly revised 1.40 in February. 

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM">Business Inventories</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.4%</td>
<td>0.7%</td>
<td>4.0%</td>
<td>2.1%</td>
<td>-5.4%</td>
<td>5.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.8%</td>
<td>1.1%</td>
<td>9.1%</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>0.6%</td>
<td>0.6%</td>
<td>4.1%</td>
<td>2.5%</td>
<td>-1.2%</td>
<td>3.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.5%</td>
<td>0.3%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.9%</td>
<td>6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>-0.0%</td>
<td>0.4%</td>
<td>0.4%</td>
<td>-1.9%</td>
<td>-8.0%</td>
<td>4.5%</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Improved Some 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515f.jpg" width="353">
The Philadelphia Fed&#146;s index of general business conditions improved about as expected in May to -4.8 from -8.8 in April. Consensus expectations were for improvement to -4.0.
The decline contrasts with the much sharper rise in the Empire State Factory survey for May reported earlier today.
Amongst the sub indexes new orders, shipments, and employment each improved modestly but remained negative.
During the last twenty years there has been a 68% 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 80%.
The business conditions index reflects a separate survey question, not the components.
A separate survey of expected business conditions eased slightly for the second month to 45.2 versus 50.9 last year and 32.4 in 2001.
The prices paid index fell sharply to 8.9, the lowest level since April of last year.
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/files/bos/bos0503.html">here</a>. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM">Philadelphia Fed Business Outlook</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">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>-4.8</td>
<td>-8.8</td>
<td>7.3</td>
<td>7.7</td>
<td>-17.2</td>
<td>8.3</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>8.9</td>
<td>22.8</td>
<td>16.5</td>
<td>12.2</td>
<td>-0.9</td>
<td>27.2</td>
</tr>
</tbody>
</table>
Housing Market Index Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 15, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030515g.jpg" width="353">
The National Association of Home Builders Housing Market Index moved moderately higher in May. The rise recovered a part of the sharp decline earlier this year.
The index of current market conditions rose to highest level since February. The index which measures expected sales in six months surged to about its high level of 2002.
Traffic of prospective buyers rose sharply and recovered much of the decline of the prior two months.
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%">
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<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">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>
<td class="firstcol">Composite Housing Market Index</td>
<td>56</td>
<td>52</td>
<td>60</td>
<td>61</td>
<td>56</td>
<td>62</td>
</tr>
</tbody>
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Finished producer prices fell 1.9% in April, a record decline for any one month. Consensus expectations were for a 0.6% decline. Lower finished energy prices, down 8.6%, accounted for much of the decline in the overall PPI. Gasoline [...]

Producer Prices Down a Record Amount

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030514a.jpg" width="353">
Retail sales fell unexpectedly in April. A 0.1% dip was versus Consensus expectations for a 0.4% rise. The drop followed a 2.3% March gain that was revised up slightly from the advance report. 
Sales excluding motor vehicles and parts dealers fell 0.9% versus Consensus expectations for a 0.2% rise. The March gain in nonauto sales also was revised up.
Sales at gasoline service stations fell a sharp 5.9% owing to a 6.1% decline in retail gasoline prices. Excluding gasoline, nonauto retail sales fell 0.4% (+2.4% y/y) following a 1.6% gain in March, revised up from 1.2%.
Motor vehicle dealers&#39; sales rose 2.5% following a sharp 5.0% gain in March. Unit sales of light vehicles rose 1.9% last month to 16.50 mil. (AR).
Declines in sales were widespread last month but were most pronounced at apparel and accessory stores where sales fell 3.2% (-0.9% y/y). That followed a 3.0% March gain. Much of the weakness in these sales reflects lower prices that have been falling steadily since 1998.
Sales at general merchandise stores fell 0.6% (1.2% y/y) following a scant 0.1% March gain.
Furniture, home furnishing and electronics store sales dipped 0.1% (1.3% y/y) following an upwardly revised 2.8% March gain.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">April</th>
<th scope="col">Mar</th>
<th scope="col">Y/Y</th>
<th scope="col">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>-0.1%</td>
<td>2.3%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>3.9%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-0.9%</td>
<td>1.5%</td>
<td>2.8%</td>
<td>3.7%</td>
<td>2.9%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
Lower Oil Prices Pulled Import Prices Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 14, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030514b.jpg" width="353">
Prices for imported commodities fell 2.7% last month versus Consensus expectations for a 0.5% decline. The gain in prices in March was revised up slightly.
Petroleum import prices fell sharply last month, down 16.2% following a 0.1% March dip. So far in May the price of West Texas Intermediate crude has been around $26.50 versus $28.25/bbl averaged in April.
Nonpetroleum import prices fell 0.9%, reversing just about all of the 1.0% gain in March. Price weakness was across the board. Food prices fell 0.5% (6.1% y/y) and industrial supplies and materials fell 9.7% (10.2% y/y).
Prices of imported capital goods were unchanged (-1.5% y/y) and have been about unchanged since October. Nonauto consumer goods prices also were unchanged (-0.2% y/y) and have been flat since last year. Motor vehicle prices were flat (0.4% y/y) for the second month.
Export prices fell 0.1% following gains in the prior three months.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E807/@E807.HTM">Import/Export Prices (NSA)</a></th>
<th scope="col">April</th>
<th scope="col">Mar</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>-2.7%</td>
<td>0.7%</td>
<td>2.3%</td>
<td>-2.5%</td>
<td>-3.5%</td>
<td>6.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-16.2%</td>
<td>-0.1%</td>
<td>15.9%</td>
<td>3.0%</td>
<td>-17.2%</td>
<td>66.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>-0.9%</td>
<td>1.0%</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>-0.1%</td>
<td>0.2%</td>
<td>1.6%</td>
<td>-1.0%</td>
<td>-0.8%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
Mortgage Applications Rose Further, Rates at Record Lows 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 14, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030514c.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association rose 13.7% last week and added to a 18.6% jump the week prior.
Applications to refinance took off again as interest rates fell. Refinancing applications rose 19.3% w/w following a 19.4% gain the week prior. Refi&#39;s were still down 22.8% from the March peak.
Interest rates on a conventional 30-Year mortgage fell to a record low with the effective rate at 5.55% versus 5.83% the prior week. The effective rate on a 15-year mortgage was 5.06%.
Applications for home purchase fell a slight 0.2% (16.5% y/y) following a 16.9% jump the week prior.
During the last ten years there has been a 52% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
The average size of a mortgage loan application fell slightly to $178,300 (-3.1% y/y). The average size of an application for home purchase fell to $192,000 (+4.2% y/y). The average size of an application to refinance slumped 4.0% to $172,000 (-6.2% y/y). March figures were revised down.
Visit the Mortgage Bankers Association site at <a href="http://www.mbaa.org/">www.mbaa.org.</a>

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</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">5/02/03</th>
<th scope="col">4/25/03</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>1,246.6</td>
<td>1,050.8</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>416.0</td>
<td>356.0</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>6,077.8</td>
<td>5,092.0</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
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Retail sales fell unexpectedly in April. A 0.1% dip was versus Consensus expectations for a 0.4% rise. The drop followed a 2.3% March gain that was revised up slightly from the advance report. Sales excluding motor vehicles and parts [...]

Retail Sales Dip

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030513c.jpg" width="353">
The ZEW indicator of economic sentiment that often foreshadows movements in the broader and more closely watched IFO measures of German business confidence rose minimally in May but is still at low levels. The ZEW indicator of economic sentiment measures the difference between those participants in the survey with a positive outlook on the economy over the next six months and those with a negative outlook. In May this indicator rose to 18.7% from 18.4% in April. The ZEW indicators are based on a small sample of some 300 analysts and institutional investors and the economic sentiment measure is volatile. The attached chart shows the ZEW indicator of Business Sentiment and the IFO balance of business expectations over the next six months.
The ZEW market survey also tracks the opinions of analysts and institutional investors regarding the outlook for stocks and bonds. The outlook for stocks has improved and that for bonds has become less negative.

<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">May 2003</th>
<th scope="col">April 2003</th>
<th scope="col">March 2003</th>
<th scope="col">Feb 2003</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 Indicators</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Economic Sentiment (% balance)</td>
<td>18.7</td>
<td>18.4</td>
<td>17.7</td>
<td>15</td>
<td>45.3</td>
<td>2.8</td>
<td>59.1</td>
</tr>
<tr class="odd">
<td class="firstcol">Bonds (% balance)</td>
<td>-3.9</td>
<td>-4.3</td>
<td>-4.1</td>
<td>-3.3</td>
<td>4.3</td>
<td>0.3</td>
<td>-2.8</td>
</tr>
<tr>
<td class="firstcol">Stocks (% balance)</td>
<td>6.6</td>
<td>5.8</td>
<td>6.2</td>
<td>5.7</td>
<td>7</td>
<td>7.3</td>
<td>6.3</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Ifo Indicators</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Business Climate</td>
<td>n.a.</td>
<td>86.6</td>
<td>88.1</td>
<td>88.9</td>
<td>89.1</td>
<td>89.8</td>
<td>99.3</td>
</tr>
<tr>
<td class="firstcol">Business Expectations</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Next 6 Months (% Balance)</td>
<td>n.a.</td>
<td>-12.1</td>
<td>-7.8</td>
<td>-5.6</td>
<td>-3</td>
<td>-15.3</td>
<td>5.9</td>
</tr>
</tbody>
</table>
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The ZEW indicator of economic sentiment that often foreshadows movements in the broader and more closely watched IFO measures of German business confidence rose minimally in May but is still at low levels. The ZEW indicator of [...]

A Small Rise in German Business Confidence

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030513a.jpg" width="353">
The U.S. foreign trade deficit deepened quite a bit more than expected in March. The deficit deepened to $43.5B versus Consensus expectations for a deficit of $41.0B. February&#39;s deficit was little revised.
Imports rose a strong 2.9% and the strength was fairly broad based. Nonauto consumer goods rose 1.5% (15.9% y/y) and auto imports rose 2.1% (7.7% y/y).Imports of other merchandise rose 3.8% (-7.0% y/y). Capital goods imports fell 0.1% (-0.5% y/y) for the third consecutive monthly decline.
Imports of industrial supplies and materials rose 9.6% (42.3% y/y) as the value of petroleum product imports rose 24.9%. The quantity of crude petroleum imports jumped 25.0% (18.1% y/y). The per barrel price of crude petroleum fell slightly (57.8% y/y).
Exports rose 0.6% for the fourth gain in five months and were up 1.1% during that period.
Nonauto consumer goods exports jumped 5.6% (7.8% y/y). Exports of automotive vehicles, parts &amp; engines rose 1.2% (6.0% y/y). Capital goods exports fell 0.2% (-1.3% y/y) after strong gains in the prior two months.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EE/@EE03/@EE03.HTM">Foreign Trade</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</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>$43.5B</td>
<td>$40.4B</td>
<td>$32.6B(3/02)</td>
<td>$435.7B</td>
<td>$358.3B</td>
<td>$378.7B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>0.6%</td>
<td>0.4%</td>
<td>5.8%</td>
<td>-2.6%</td>
<td>-6.2%</td>
<td>11.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>2.9%</td>
<td>-0.5%</td>
<td>13.9%</td>
<td>3.8%</td>
<td>-6.0%</td>
<td>18.3%</td>
</tr>
</tbody>
</table>
Chain Store Sales Down Slightly 
by <a href="/comment/Moeller.html">Tom Moeller</a> May 13, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030513b.jpg" width="353">
Chain store sales last week gave back just 0.2% of the 2.1% jump the prior week, according to the BTM-UBSW survey.
During the first ten days of May sales were 2.1% above the April average. The latest weekly index level was 4.1% above the December average.
During the last ten years there has been a 58% correlation between the year-to-year percent change in these chain store sales and the change in nonauto retail sales less gasoline.
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%">
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<thead>
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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">5/10/03</th>
<th scope="col">5/03/03</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>416.9</td>
<td>417.7</td>
<td>2.7%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
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The U.S. foreign trade deficit deepened quite a bit more than expected in March. The deficit deepened to $43.5B versus Consensus expectations for a deficit of $41.0B. February's deficit was little revised. Imports rose a strong 2.9% [...]

U.S. Trade Deficit Deepened Unexpectedly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030512a.jpg" width="353">
The Weekly Leading Index of the US economy jumped in the opening week of May. The 2.0% w/w rise was the largest gain since a like increase in the middle of March. The index is published by the Economic Cycle Research Institute (ECRI).
These recent gains raised the six-month growth rate of the weekly index into positive territory where it has not been since the Summer of 2002, except briefly in January.
Higher stock prices and a narrower spread between higher-risk corporate bonds and safe-haven U.S. treasuries contributed to gains in the leading index.
During the last five years there has been a 55% correlation between growth in the leading index and next quarter&#39;s growth in real GDP.
Construction of the ECRI Leading Index differs from the Index of Leading Economic Indicators published by the Conference Board. Nevertheless there has been an 80% correlation between the annual percent change in the two series over the last 20 years.
The components of the weekly index are money supply plus stock &amp; bond mutual funds, the JOC-ECRI industrial materials price index, mortgage applications, bond quality spreads, stock prices, bond yields, and initial jobless insurance claims.
The median lead of the ECRI index at business cycle peaks has been 10.5 months and at cycle troughs 3.0 months. The sideways movement of the leading index in 2002 may or may not signal something about the economy&#39;s growth rate.
For more on ECRI and the Weekly Leading Index go to <a href="http://businesscycle.com">businesscycle.com</a>.

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</table>
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<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W8/@W801/@W801.HTM">ECRI Leading Index</a></th>
<th scope="col">5/02/03</th>
<th scope="col">4/25/03</th>
<th scope="col">Growth Rate</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">Weekly</td>
<td>121.8</td>
<td>119.4</td>
<td>0.6%</td>
<td>1.2%</td>
<td>-5.3%</td>
<td>-0.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;</td>
<td>April</td>
<td>Mar</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Monthly</td>
<td>119.6</td>
<td>119.2</td>
<td>0.1%</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
</tbody>
</table>
</body>
</html>

The Weekly Leading Index of the US economy jumped in the opening week of May. The 2.0% w/w rise was the largest gain since a like increase in the middle of March. The index is published by the Economic Cycle Research Institute (ECRI). [...]

ECRI Leading Indicators Move Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030509b.jpg" width="353">
Data on German industrial production and exports, released today, give little cause for cheer. Exports, which had been the one bright spot in the German economy during 2002, are now showing signs of weakening as the rise in the Euro over the past years has begun to take its toll. The monthly average Euro/dollar exchange rate has risen 23% between March of 2002 and March 0f 2003. Exports appear to have peaked in September of 2002 at 57.2 billion euros. With declines in February and March exports are now almost 5% below the peak.
Total industrial production dropped 1.06% from February to March. Excluding construction, industrial production was down almost 2% in the month. The more volatile construction series rose almost 9% in March, nevertheless, the longer term downward trend in construction appears to be still in progress.
Earlier in the week data on unemployment were released. In April there were about 4.5 million unemployed persons in Germany or 10.7% of the labor force. The unemployment rate has been rising steadily since the low of 9.2% in May of 2001.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Germany</th>
<th scope="col">Mar2003</th>
<th scope="col">Feb 2003</th>
<th scope="col">M/M %Chg</th>
<th scope="col">Y/Y %Chg</th>
<th scope="col">2002 %Chg</th>
<th scope="col">2001 %Chg</th>
<th scope="col">2000 %Chg</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Exports (Bil.Euros)</td>
<td>54.5</td>
<td>54.8</td>
<td>-.0.55</td>
<td>0.093</td>
<td>1.62</td>
<td>7.42</td>
<td>12.86</td>
</tr>
<tr>
<td class="firstcol">Euro/US$</td>
<td>1.079</td>
<td>1.078</td>
<td>0.11</td>
<td>23.17</td>
<td>5.56</td>
<td>-3.02</td>
<td>-13.43</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">Industrial Production (1995=100)</td>
<td>111.5</td>
<td>112.7</td>
<td>-1.06</td>
<td>-0.45</td>
<td>-1.28</td>
<td>-0.13</td>
<td>5.26</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Total excl construction</td>
<td>116.5</td>
<td>118.8</td>
<td>-1.94</td>
<td>0.26</td>
<td>-1.15</td>
<td>0.53</td>
<td>6.17</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Construction</td>
<td>73.7</td>
<td>67.8</td>
<td>8.7</td>
<td>-8.33</td>
<td>-2.85</td>
<td>-7.13</td>
<td>-3.28</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"></td>
<td>Apr2003</td>
<td>Mar 2003</td>
<td>Feb2003</td>
<td>Apr2002</td>
<td>2002</td>
<td>2001</td>
<td>2000</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment Rate</td>
<td>10.7</td>
<td>10.6</td>
<td>10.5</td>
<td>9.6</td>
<td>9.8</td>
<td>9.4</td>
<td>9.6</td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
</tbody>
</table>
</body>
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Data on German industrial production and exports, released today, give little cause for cheer. Exports, which had been the one bright spot in the German economy during 2002, are now showing signs of weakening as the rise in the Euro [...]

The Economic News from Germany Continues to be Discouraging

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030509a.jpg" width="353">
Retail gasoline prices continued the recent decline last week to an average of $1.51 per gallon. The decline since the peak of $1.73 in mid-March totaled 12.4%.
Crude oil prices during the two month period fell sharply. The price of West Texas Intermediate crude averaged $25.73 per barrel last week (-3.4% y/y) but prices very recently seem to have stabilized.
Wholesale natural gas prices averaged $5.26/mmbtu last week, down from the cold-weather spike over $12.00 in late February. Recent natural gas prices were roughly double last year&#39;s level, however, in the Consumer Price Index the price of piped gas &amp; electricity was up about 10% y/y through March.
For a discussion of residential natural gas prices by the US Department of Energy click <a href="http://www.eia.doe.gov/oil_gas/natural_gas/analysis_publications/natbro/gasprices.htm">here</a>.
For the latest 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>.

<table border="0" cellspacing="0" width="100%">
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/weekly/@W4/@W403/@W40303/@W40303.HTM">US Retail Gasoline Prices</a></th>
<th scope="col">05/05/03</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>$1.51</td>
<td>$1.44</td>
<td>8.5%</td>
<td>$1.34</td>
<td>$1.42</td>
<td>$1.48</td>
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Retail gasoline prices continued the recent decline last week to an average of $1.51 per gallon. The decline since the peak of $1.73 in mid-March totaled 12.4%. Crude oil prices during the two month period fell sharply. The price of [...]

Gasoline Prices Fell Further

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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Winnie Tapasanun

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The NFIB Small Business Optimism Index rose to 97.4 in June, the highest level since February, after a 0.6-point decline to 95.3 in May, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. The index was slightly below its 52-year average of 98.0 for the fourth consecutive month and down from a peak of 105.1 in December 2024, albeit above a low of 88.5 in March 2024. Seven of the 10 index components rose, while three fell. Meanwhile, the NFIB Small Business Uncertainty Index edged down to 89 in June following a three-point increase to 91 in May, remaining well above its historical average of 68. The index was below its record high of 110 in October 2024 but above its recent low of 84 in December 2025 and a low of 65 in November 2023.

The outlook for business conditions in the next six months remained positive for the 20th straight month in the latest survey. The net balance of respondents expecting the economy to improve advanced to 13% in June, a four-month high, following a one-point decline to 3% in May; these readings were far below a high of 52% in December 2024 but significantly above a record low of -61% in June 2022. Expected real sales climbed to a net 9% in June, a five-month high, from 1% in May; the latest figure was below a high of 22% in December 2024 but above a low of -18% in August 2024. A net -4% of respondents reported higher nominal sales in the past three months, up from -5% in May and marking the highest reading in four months; the latest result remained above a low of -20% in October 2024 but below the recent positive reading of 1% in February and a peak of 9% in June 2021.

Plans to expand the business inched up to 8% in June from 7% in May and April; the latest figure was down from a high of 20% in December 2024 but up from a low of 2% in March 2023. Plans to make capital outlays rebounded to 20% in June from 16% in May; these numbers were still below a high of 28% in November 2024 and a peak of 31% in October 2021. Expected credit conditions slipped to -5% in June, a three-month low, from -3% in May; this result was slightly below a high of -2% in December 2024 but above a low of -11% in November 2023. Meanwhile, a net 0% of respondents viewed current inventory stocks as “too low” in June, up from -4% in May and matching the highest reading since August 2025 (also 0%); the positive reading of 1% was recorded in May 2025.

On the labor front, 51% of respondents reported that qualified workers to fill job openings were hard to find in June, up from 46% in May and registering the highest level since September 2024. These numbers were above a low of 43% in August 2025 but below a high of 56% in August 2024 and a peak of 62% in September 2021. A net 11% planned to increase employment in June, up from 9% in May; it matched a low of 11% in March 2024 but remained below its recent high of 19% in November 2025 and a peak of 32% in August 2021. Notably, 32% reported positions not able to be filled in June, up from 29% in May (the lowest level since May 2020); these figures remained below a high of 51% in May 2022.

Overall earnings trends had remained in negative territory since December 2019. The measure fell to -20% in June, the lowest level in three months, following a four-point increase to -15% in May. These readings were below the most recent high of -14% in February and a high of -5% in June 2021 but above a low of -37% in August 2024,

On the pricing front, actual and expected selling prices remained at an inflationary level, indicating continued inflationary pressures. The net percent of firms raising their average selling prices rose to 38% in June, the highest reading since February 2023, after a six-point increase to 36% in May. The latest reading was up from a low of 20% in August 2024 but well below a peak of 66% in March 2022. The percentage planning to raise prices eased to a still-elevated 32% in June following a seven-point rise to 34% in May (the highest level since November 2023); these readings remained above a low of 21% in April 2023.

Wage inflation remained relatively high in the June survey. A net 28% of respondents raised compensation during the last three months, down from 31% in May and marking the lowest since November 2025. It was also below a high of 46% in February 2023 and a peak of 50% in January 2022. A net 17% of firms planned to raise worker compensation in the next three months, slightly down from 18% in May and matching the lowest reading since July 2025; this remained below highs of 28% in November 2024, 30% in November 2023, and 32% in October 2022.

Inflation was cited as the single most important problem facing small businesses, as reported by 21% of NFIB members in June, up from 18% in May and representing the highest since October 2024; these readings were well below a peak of 37% in July 2022. Taxes ranked second as the next most important problem (alongside labor quality), as reported by 19% of respondents in June, unchanged from May. Labor quality also remained a key challenge for small businesses, as reported by 19% of respondents in June—the highest since December—compared with 13% in May (the lowest level since December 2016). Other concerns (in June vs. May) included labor costs (8% vs. 14%), government requirements (8% vs. 10%), insurance cost/availability (8% vs. 8%), poor sales (7% vs. 7%), and competition from large businesses (5% vs. 6%).

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s **SURVEYS** database.

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260714W36.jpg

- Uncertainty Idx down 2 pts. to 89, remaining well above the historical avg. of 68.
- Expectations for economy up 10 pts. to 13%, a four-month high.
- Expected real sales up 8 pts. to 9%, a five-month high.
- Plans to expand business up 1 pt. to 8%, highest in three mths.
- Firms raising avg. selling prices up 2 pts. to 38%, highest since Feb. ’23.
- Top three business concerns: inflation (21%), taxes (19%), and labor quality (19%).

U.S. NFIB Small Business Optimism Rebounds in June to a Four-Month High

Michael J. Moran

260714A.jpg

260714B.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.

260714C.jpg

260714D.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.

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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.

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**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. 

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Asia

Economic Letter from Asia: The AI Underbelly

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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.