Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030224a.jpg" width="353">
The Manpower Employment Outlook Survey index of net hiring deteriorated for 2Q03 from the improved level of the prior nine months.
The not seasonally adjusted survey results indicated that 22% of firms plan to add employees in 2Q03 compared to 20% in 1Q. 9% planned to cut payrolls in 1Q compared to 12% in 1Q.
Deterioration in the net hiring index occurred after seasonal adjustment.
Over the last 25 years there has been an 76% correlation between the Manpower survey net hiring figure and the y/y change in nonfarm payrolls. That correlation fell to 52% during the most recent ten years.
Manpower surveys nearly 16,000 public &amp; private firms in 477 US markets.
For the latest press release covering hiring intentions from Manpower Inc., click <a href="http://investor.manpower.com/ireye/ir_site.zhtml?ticker=MAN&amp;script=410&amp;layout=23&amp;item_id=385013">here</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S3/@S302/@S302.HTM">Manpower Employment Outlook Survey</a></th>
<th scope="col">2Q03</th>
<th scope="col">1Q03</th>
<th scope="col">2Q02</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">All Industries: Net Higher (SA, %)</td>
<td>11</td>
<td>16</td>
<td>9</td>
<td>11</td>
<td>17</td>
<td>24</td>
</tr>
</tbody>
</table>
U.S. Budget Surplus About As Expected in January 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 24, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030224c.jpg" width="353">
The US budget last month came in near Consensus expectations for a $10.0 bil. surplus. That surplus was a fraction of the prior year&#39;s figure. For the first four months of FY03, the federal government ran a deficit of $97.6 bil. versus a $0.8 bil. surplus during the first four months of FY02.
Net receipts for the first four months of FY03 fell 8.1% versus last year. Individual tax payments fell 9.4%. Corporate income taxes were down 47.4%. Social insurance contributions were up 3.9%. 
Federal expenditures rose 7.8% versus last fiscal year&#39;s first four months. Defense spending was up 18.6%. Spending on health (9.5%) and education (16.7%) programs continued strong. Spending on income security was up 14.3% as the unemployment rate rose. Interest expense was down 7.4% y/y.

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<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">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Jan &#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>$11.1B</td>
<td>$4.4B</td>
<td>$43.7B</td>
<td>$-157.8B</td>
<td>$127.3B</td>
<td>$236.4B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Revenues</td>
<td>$187.9B</td>
<td>$182.8B</td>
<td>-7.6%</td>
<td>-6.9%</td>
<td>-1.7%</td>
<td>10.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Outlays</td>
<td>$176.8B</td>
<td>$178.4B</td>
<td>10.7%</td>
<td>7.9%</td>
<td>4.2%</td>
<td>5.1%</td>
</tr>
</tbody>
</table>
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The Manpower Employment Outlook Survey index of net hiring deteriorated for 2Q03 from the improved level of the prior nine months. The not seasonally adjusted survey results indicated that 22% of firms plan to add employees in 2Q03 [...]

Manpower Survey Hiring Index Fell for 2Q03

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030221a.jpg" width="353">
The Consumer Price Index (CPI-U) rose as expected last month. Excluding food and energy, prices rose less than Consensus expectations for a 0.2% gain. The core CPI less tobacco rose 0.1% (1.8% y/y). The data reflect annual revisions to seasonal factors.
Core goods prices fell for the fifth consecutive month. Apparel prices fell 0.9% (-2.0% y/y). New and used vehicle prices fell 0.5% (-2.7% y/y), countering the indication of up car prices in yesterday&#39;s PPI report. Prices for household furnishings and operation ticked up 0.2% (-1.0% y/y) for only the third monthly increase since 2001.
Core services prices rose the same 0.3% as in the prior three months. Shelter prices rose 0.3% (3.1% y/y). Medical care services prices rose 0.1% (5.1% y/y) following strong gains during the prior three months.Education and communication prices rose 0.5% (2.3% y/y). Public transportation prices fell 0.6% (-1.8% y/y).
Energy prices were quite strong last month led by a 6.6% (29.2% y/y) increase in gasoline prices (+24.7% y/y). Fuel and utility prices rose 1.4% (3.1% y/y led by a 7.1% (20.9% y/y) gain in fuel oil prices. Piped gas &amp; electricity prices rose 1.5% (2.3% y/y).
Food prices fell for the first month since August led down by lower prices for meat and fruits.
The chained CPI, which correlates closely with the PCE price deflator, rose following two months of decline. The core price measure rose modestly. Shelter prices rose an unadjusted 0.7% (3.0% y/y).

<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">Jan</th>
<th scope="col">Dec</th>
<th scope="col">Y/Y</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
<th scope="col">2000</th>
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</thead>
<tbody>
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<td class="firstcol">Total&nbsp;</td>
<td>0.3%</td>
<td>0.1%</td>
<td>2.6%</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>0.1%</td>
<td>0.2%</td>
<td>1.9%</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>-1.4%</td>
<td>-1.1%</td>
<td>0.3%</td>
<td>0.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.4%</td>
<td>3.8%</td>
<td>3.7%</td>
<td>3.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>4.0%</td>
<td>-0.4%</td>
<td>14.1%</td>
<td>-5.8%</td>
<td>3.7%</td>
<td>16.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>-0.2%</td>
<td>0.2%</td>
<td>1.0%</td>
<td>1.8%</td>
<td>3.1%</td>
<td>2.3%</td>
</tr>
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<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>0.4%</td>
<td>-0.1%</td>
<td>2.4%</td>
<td>1.2%</td>
<td>2.1%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.2%</td>
<td>-0.1%</td>
<td>1.7%</td>
<td>1.7%</td>
<td>&nbsp;1.9%</td>
<td>1.4%</td>
</tr>
</tbody>
</table>
</body>
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The Consumer Price Index (CPI-U) rose as expected last month. Excluding food and energy, prices rose less than Consensus expectations for a 0.2% gain. The core CPI less tobacco rose 0.1% (1.8% y/y). The data reflect annual revisions [...]

CPI Up Moderately

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030220a.jpg" width="353">
Finished producer prices rose in January by the most for any one month since a 1.9% increase in January 1990. (That spike was followed by three months of decline.) Consensus expectations were for a 0.4% gain.
Excluding food and energy prices also were stronger than expectations for a 0.1% increase. The 0.9% rise was the strongest monthly gain since a 1.0% jump in 1998. (That spike was followed by eight consecutive months of little change.)
Finished energy prices jumped 4.8% (17.2% y/y). Gasoline prices spiked 15.7% (52.5% y/y). Fuel oil prices rose 15.1% (62.4% y/y). Residential gas prices rose 3.9% (12.9% y/y). These energy product price series are NSA.
Core finished consumer goods prices rose a strong 0.9% (1.0% y/y) following two months of decline. Higher passenger car prices led the increase, up 3.2% (-1.4% y/y) following two months of sharp decline. Household appliance prices jumped 1.0% (-0.9% y/y) following four down months. Many other consumer durables prices were flat. Core nondurable goods prices rose 0.4% (1.8% y/y). Capital goods prices jumped 0.7% (-0.1% y/y) following two months of decline.
Intermediate goods prices surged by the most for any one month since 1990. Core intermediate prices rose moderately following the decline December. 
Crude goods prices jumped the most since January 2001. Energy prices rose a strong 11.0% but it was a 5.2% spike in food prices that was most surprising. Core crude prices surged reflecting more strength in metals prices, notably for steel scrap which recovered after four down months.

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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">Jan</th>
<th scope="col">Dec</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>1.6%</td>
<td>-0.1%</td>
<td>1.8%</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>-0.5%</td>
<td>0.5%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>1.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>1.3%</td>
<td>-0.2%</td>
<td>4.5%</td>
<td>-1.5%</td>
<td>0.4%</td>
<td>4.9%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.3%</td>
<td>-0.1%</td>
<td>1.9%</td>
<td>-0.5%</td>
<td>-0.1%</td>
<td>2.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>6.9%</td>
<td>2.2%</td>
<td>28.9%</td>
<td>-10.5%</td>
<td>0.3%</td>
<td>22.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.0%</td>
<td>0.5%</td>
<td>13.0%</td>
<td>3.8%</td>
<td>-10.0%</td>
<td>7.4%</td>
</tr>
</tbody>
</table>
U.S. Trade Deficit Another Record 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 20, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030220b.jpg" width="353">
The U.S. foreign trade deficit deepened much more than expected in December. November&#39;s deficit was little revised. Consensus expectations had been for a December deficit of $38.5B.
Exports fell for the fourth month in five, and erased all of the prior month&#39;s gain. Lower exports of capital goods, down 9.1% (-5.6% y/y), led the drop. Nonauto consumer goods exports also fell 3.7% (-2.4% y/y) as did exports of other goods, down 3.8% (+3.9% y/y).
Imports surged to a near-record level. Capital goods imports rose 1.3% (9.9% y/y) following a 9.7% November gain. Imports of nonauto consumer goods added 0.3% (25.3% y/y) to a 10.9% November jump. Imports of industrial supplies &amp; materials rose only modestly as the value of oil imports fell due to lower prices and values, perhaps a reflection of fewer imports from Venezuela.

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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">Dec</th>
<th scope="col">Nov</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>$44.2B</td>
<td>$40.0B</td>
<td>$27.3B(12/01)</td>
<td>$435.2B</td>
<td>$358.3B</td>
<td>$378.7B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>-2.6%</td>
<td>1.4%</td>
<td>4.8%</td>
<td>-2.5%</td>
<td>-6.2%</td>
<td>11.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>1.7%</td>
<td>5.0%</td>
<td>19.7%</td>
<td>3.8%</td>
<td>-6.0%</td>
<td>18.3%</td>
</tr>
</tbody>
</table>
Initial Claims for Jobless Insurance Up Sharply 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 20, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030220c.jpg" width="353">
Initial claims for unemployment insurance rose more than expected last week. Claims rose 5.5% from the prior week&#39;s level which was revised up. The latest figure is for the February survey period for nonfarm payrolls. Claims were up 39,000 or roughly 10% from the January period.
The four-week moving average of initial claims rose to 394,750 (0.4% y/y).
Continuing claims for unemployment insurance surged 4.5% from the prior week&#39;s level which was revised down. It was the highest claimant level since mid-December.
The insured rate of unemployment rose slightly to 2.7%.

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<thead>
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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">2/15/03</th>
<th scope="col">2/08/03</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>402.0</td>
<td>381.0</td>
<td>3.9%</td>
<td>405.0</td>
<td>405.8</td>
<td>299.8</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,444</td>
<td>-2.7%</td>
<td>3,588</td>
<td>3,021</td>
<td>2,114</td>
</tr>
</tbody>
</table>
Leading Indicators Eased 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 20, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030220e.jpg" width="353">
The Composite Index of Leading Economic Indicators reported by the Conference Board eased slightly last month, about as expected, following three up months. The prior month&#39;s reading was revised up slightly.
Gains amongst the leaders&#39; component series narrowed significantly to 40%, the leanest breadth of gain since September.
Lower consumer expectations and lower building permits weighed the heaviest on the leading index. That was offset on the upside by lower claims for jobless insurance.
The ratio of coincident-to-lagging indicators rose again by 0.3%. The ratio is an indicator of excess relative to actual economic performance.
The coincident indicators rose to a level 0.2% above the 4Q average. During the last twenty years there has been an 80% correlation between the quarterly change in the coincident indicators and quarterly growth in real GDP.
The Leading index is based on eight previously reported economic data series and two that are estimated.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM">Business Cycle Indicators</a></th>
<th scope="col">Jan</th>
<th scope="col">Dec</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>0.2%</td>
<td>0.2%</td>
<td>2.2%</td>
<td>-0.9%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.2%</td>
<td>0.0%</td>
<td>0.8%</td>
<td>-0.2%</td>
<td>-0.4%</td>
<td>3.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>-3.2%</td>
<td>-4.3%</td>
<td>-1.3%</td>
<td>2.8%</td>
</tr>
</tbody>
</table>
Mortgage Applications Stable and Firm 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 20, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030220g.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association were about unchanged last week. Applications were more than double the year ago level.
Mortgage applications to refinance fell for the fifth week in six but the decline was modest.
Mortgage applications for home purchase rose slightly following a sharp drop the prior week. Purchase applications have been trending lower since last Summer and are down nearly 20% from the July peak.
Interest rates on conventional 30 Year mortgages were about stable at 5.69%.

<table border="0" cellspacing="0" width="100%">

</table>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">2/14/03</th>
<th scope="col">2/07/03</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>1,082.8</td>
<td>1,083.1</td>
<td>799.7</td>
<td>625.6</td>
<td>322.7</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>334.1</td>
<td>328.8</td>
<td>354.7</td>
<td>304.9</td>
<td>302.7</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>5,438.1</td>
<td>5,470.3</td>
<td>3,388.0</td>
<td>2,491.0</td>
<td>438.8</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 20, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030220f.jpg" width="353">
The Philadelphia Fed&#146;s index of general business conditions weakened more than expected this month. The Business Activity Index fell to 2.3 versus Consensus expectations for stability at 11.0.
The decline was more modest than the decline in the Empire State Factory survey reported earlier this week but bodes poorly for the February ISM index.
Amongst the sub indexes, shipments, unfilled orders and the length of the workweek fell significantly. Orders fell only moderately and employment and inventories improved. Pricing strengthened.
The business conditions index reflects a separate survey question, not the components. 
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
During the last ten years there has been a 64% correlation between the level of the General Activity Index and annual growth in real GDP.
For a discussion of the Philadelphia Fed&#39;s Business Outlook Survey click <a href="http://www.phil.frb.org/files/bos/brso98mt.pdf">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">Feb</th>
<th scope="col">Jan</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>2.3</td>
<td>11.2</td>
<td>13.5</td>
<td>7.7</td>
<td>-17.2</td>
<td>8.3</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>16.2</td>
<td>11.6</td>
<td>-5.4</td>
<td>12.2</td>
<td>-0.9</td>
<td>27.2</td>
</tr>
</tbody>
</table>
</body>
</html>

Finished producer prices rose in January by the most for any one month since a 1.9% increase in January 1990. (That spike was followed by three months of decline.) Consensus expectations were for a 0.4% gain. Excluding food and energy [...]

Producer Prices Spiked

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030219a.jpg" width="353">
Housing starts were stronger than expected last month. Total starts rose slightly from an upwardly revised December level. Starts had been expected to decline slightly.
Single family starts rose 2.1% m/m, nearly to the record high level set in 1978. 
Multi-family starts fell for the first month in three. The y/y comparison was to a strong January last year.
Building permits fell and gave back roughly half of a very strong December gain that was upwardly revised. The decline was entirely due to a drop in permits for five or more unit structures. Single family permits rose modestly m/m to a record level.
A strong seasonal factor lifted the adjusted level of housing starts last month by 29% versus a 24% add in December and a 10% addition in November.

<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">Jan</th>
<th scope="col">Dec</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>1,850</td>
<td>1,847</td>
<td>8.0%</td>
<td>1,711</td>
<td>1,603</td>
<td>1,573</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family</td>
<td>1,510</td>
<td>1,479</td>
<td>12.4%</td>
<td>1,365</td>
<td>1,273</td>
<td>1,232</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi Family</td>
<td>340</td>
<td>368</td>
<td>-7.9%</td>
<td>347</td>
<td>330</td>
<td>341</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,781</td>
<td>1,887</td>
<td>5.6%</td>
<td>1,717</td>
<td>1,639</td>
<td>1,598</td>
</tr>
</tbody>
</table>
NAHB Housing Index Down Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 19, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030219b.jpg" width="353">
The National Association of Home Builders Housing Market Index fell in February, down for the second month. Despite the declines, the index remained at the firmest level since 1999.
Surveys of market conditions for current sales were stable. Expected sales in six months fell to the lowest level since August. 
Traffic of prospective buyers fell sharply. This survey was taken prior to the snowstorm in the East.
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>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</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>62</td>
<td>64</td>
<td>58</td>
<td>61</td>
<td>56</td>
<td>62</td>
</tr>
</tbody>
</table>
Chain Store Sales Down Last Week 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 19, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030219c.jpg" width="353">
Chain store sales fell a slight 0.1% last week according to the BTM-UBSW survey. The decline followed flat sales the week prior and a sharp decline late in January.
February sales so far are down 0.3% from the January average. The year-to-year comparison went negative due to a sales surge during mid-February last year.
The y/y gain in Redbook Same Store sales remained positive despite a similar sales surge last year.
During the last ten years there has been a 56% correlation between the year-to-year percent change in monthly chain store sales and the change in nonauto retail sales less gasoline.

<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">2/15/03</th>
<th scope="col">2/08/03</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>408.3</td>
<td>408.9</td>
<td>-1.5%</td>
<td>3.6%</td>
<td>2.1%</td>
<td>3.4%</td>
</tr>
</tbody>
</table>
</body>
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Housing starts were stronger than expected last month. Total starts rose slightly from an upwardly revised December level. Starts had been expected to decline slightly. Single family starts rose 2.1% m/m, nearly to the record high [...]

Housing Starts Strong Again

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030214d.jpg" width="353">
Inflation in the United Kingdom was 2.7% in January, 2003, marking the third month of inflation above the Bank of England&#146;s target rate of 2.5%. The Bank uses the year over year change in the retail price index excluding mortgage interest payments as its measure of inflation. This index tends to be less volatile than the all items index. The recent rise in inflation is not expected to lead to a tightening of monetary policy. Inflation is not the Bank&#146;s sole concern. Indeed, the recent slow down in economic growth led the Bank to reduce the bank rate by 25 basis points to 3.75% on February 6th in spite of the rise in inflation.
The all items retail price index including mortgage interest payments was up 2.9% in January over a year ago. Much of the recent rise in inflation can be attributed to the rise in the price of oil.. Both the cost of heating oil in the Housing and Household Expenditure component and the cost of motor fuel in the Travel and Leisure component have risen sharply in recent 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/UK/@U6/@U601/@U60101/@U60101.HTM">U.K. Retail Price Indexes</a></th>
<th scope="col">Jan2003</th>
<th scope="col">Dec2002</th>
<th scope="col">Nov2002</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">All Items ex mortgage interest payments</td>
<td>2.7</td>
<td>2.7</td>
<td>2.8</td>
<td>2.2</td>
<td>2.1</td>
<td>2.1</td>
</tr>
<tr>
<td class="firstcol">All Items</td>
<td>2.9</td>
<td>2.9</td>
<td>2.7</td>
<td>1.6</td>
<td>1.8</td>
<td>2.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Housing and Household Expenditures</td>
<td>5.7</td>
<td>5.7</td>
<td>4.5</td>
<td>2.6</td>
<td>2.2</td>
<td>5.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Heating oil and other fuel</td>
<td>19.7</td>
<td>18.4</td>
<td>3.9</td>
<td>-5.6</td>
<td>-2.7</td>
<td>40.2</td>
</tr>
<tr class="odd">
<td class="firstcol">Travel and Leisure</td>
<td>2.6</td>
<td>2.6</td>
<td>2.4</td>
<td>1.3</td>
<td>1.0</td>
<td>2.8</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Motor fuel and oil</td>
<td>6.5</td>
<td>5.7</td>
<td>4.1</td>
<td>-3.2</td>
<td>-5.1</td>
<td>13.1</td>
</tr>
</tbody>
</table>
</body>
</html>

Inflation in the United Kingdom was 2.7% in January, 2003, marking the third month of inflation above the Bank of Englands target rate of 2.5%. The Bank uses the year over year change in the retail price index excluding mortgage [...]

U. K. Inflation Stays Above Bank of England’s Target for Third Month

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030218a.jpg" width="353">
The Empire State Manufacturing Survey reported that the index of general business conditions fell sharply this month. Expectations had been for just a sight decline versus January.
Despite the decline the general business conditions index remained positive, suggesting continued growth in area economic activity as well as positive growth in industrial production nationally.
Diffusion indexes for most subgroups fell. The employment index nevertheless was positive for just the second month since July. Shipments and orders fell. The readings remained fairly positive. The index of prices paid rose sharply to a record for the index as the percentage of respondents reporting higher prices surged.
The survey includes measures of business expectations, six months ahead. The diffusion index for general business conditions fell for the fifth consecutive month to the lowest level since September 2001. Expectations for prices paid in six months surged to the highest level since August.
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/2_2003.pdf">here</a>.

<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/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a></th>
<th scope="col">Feb</th>
<th scope="col">Jan</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>1.13</td>
<td>20.72</td>
<td>18.06</td>
<td>7.07</td>
<td>-13.81</td>
</tr>
</tbody>
</table>
</body>
</html>

The Empire State Manufacturing Survey reported that the index of general business conditions fell sharply this month. Expectations had been for just a sight decline versus January. Despite the decline the general business conditions [...]

Empire State Factory Survey Down in February

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030214b.jpg" width="353">
Industrial production rose more than Consensus expectations for a 0.3% gain in January. The rise followed a sharp decline in December that was downwardly revised from a 0.2% drop reported last month.
Output in the manufacturing sector rose 0.5% (1.3% y/y). The gain followed a 0.4% December decline that was double the initial estimate.
Excluding a 4.9% jump in motor vehicle and parts factory output rose just 0.1% (0.5% y/y), the second tepid monthly gain following three months of decline. Appliance, furniture &amp; carpeting output fell 0.6% (+1.4% y/y) for the first monthly decline since August. Computer output rose 1.2% (-5.2% y/y) was strong for the third consecutive month. 
Output of business equipment rose 1.0% (-2.8% y/y) following a sharp 1.2% December decline. Output of information processing equipment rose 1.2% (-0.5% y/y) following two down months. Output of transit equipment rose 1.2% (-14.6% y/y) following the 4.8% December collapse. 
Capacity utilization rose but remained near the 2002 average.

<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">Jan</th>
<th scope="col">Dec</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>0.7%</td>
<td>-0.5%</td>
<td>1.9%</td>
<td>-0.7%</td>
<td>-3.5%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>75.7%</td>
<td>75.2%</td>
<td>75.0%(1/02)</td>
<td>75.6%</td>
<td>77.3%</td>
<td>82.7%</td>
</tr>
</tbody>
</table>
Business Inventories Rose Through Yearend 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 14, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030214a.jpg" width="353">
Total business inventories rose more than expected in December. It was the eighth consecutive month of accumulation.
The effort to accumulate inventory has been sufficient to pull the inventory to sales ratio off record low levels but has generated only modest gains in industrial production.
Retail inventories rose strongly led by strong gains across the board. Auto inventories rose just 0.1% but were up 18.9% y/y.
Nonauto retail inventories clearly turned the corner toward accumulation as inventories at apparel stores jumped 1.1% (4.1% y/y). At general merchandise stores inventories surged 1.3% (2.7% y/y), the second consecutive month of accumulation at that rate. Inventories of building materials jumped 1.2% (6.6% y/y) for the third double digit gain in the last four months.
Overall business sales rose 0.2% (3.7% y/y). Gains in 4Q eased markedly from 2Q and 3Q.
The inventory-to-sales ratio rose to 1.37, off the monthly lows but on a quarterly basis stable at 1.36 since 2Q. 

<table border="0" cellspacing="0" width="100%">
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<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">Dec</th>
<th scope="col">Nov</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>0.6%</td>
<td>0.3%</td>
<td>1.9%</td>
<td>1.9%</td>
<td>-6.4%</td>
<td>5.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>0.6%</td>
<td>0.8%</td>
<td>5.3%</td>
<td>7.7%</td>
<td>-5.0%</td>
<td>6.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.8%</td>
<td>0.5%</td>
<td>3.1%</td>
<td>3.1%</td>
<td>-2.1%</td>
<td>4.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>0.8%</td>
<td>0.3%</td>
<td>-0.0%</td>
<td>-0.0%</td>
<td>-5.7%</td>
<td>6.6%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.5%</td>
<td>-0.2%</td>
<td>-2.0%</td>
<td>-2.0%</td>
<td>-8.0%</td>
<td>4.5%</td>
</tr>
</tbody>
</table>
Consumer Sentiment Down Further 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 14, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030214c.jpg" width="353">
The mid-February reading of Consumer Sentiment from the University of Michigan fell 3.9% from January to a level of 79.2. The figure is versus Consensus expectations for 82.0.
The index of current conditions fell moderately. The expectations index fell sharply for the second month and was down roughly 15% over the period.
Over the last 10 years there has been a 52% correlation between the level of consumer sentiment and the y/y change in the S&amp;P 500. That correlation rose to 86% during the last five years.
The University of Michigan survey is not seasonally adjusted.

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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-Feb</th>
<th scope="col">Jan</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>79.2</td>
<td>82.4</td>
<td>-12.7%</td>
<td>89.6</td>
<td>89.2</td>
<td>107.6</td>
</tr>
</tbody>
</table>
</body>
</html>

Industrial production rose more than Consensus expectations for a 0.3% gain in January. The rise followed a sharp decline in December that was downwardly revised from a 0.2% drop reported last month. Output in the manufacturing sector [...]

Industrial Production Rebounded

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030213c.jpg" width="353">
Retail sales fell more than consensus expectations for a 0.5% decline. Sales in December were revised up slightly. 
Sales excluding motor vehicles and parts dealers rose much more than Consensus expectations for a 0.4% gain. The gain was the strongest monthly increase in nonauto sales since September 2000.
Sales strength centered in higher sales of gasoline (2.7%), building materials (2.9%) and food (2.6%).
Furniture and home furnishing store sales fell 1.4% (-0.2% y/y) following a 0.4% December decline that was revised from an initial estimate of a 0.3% gain. Furniture sales fell a hard 1.3% following a like decline December (revised from unchanged). Sales at electronics and appliance stores fell 1.4% (0.0% y/y).
Sales at general merchandise stores rose a moderate 0.6% (3.5% y/y) following a little-revised 0.4% December gain.
Apparel store sales rose 0.3% (2.0% y/y) following an unrevised 0.8% December increase.Through December, apparel prices in the CPI were down 1.8% y/y.
Motor vehicle dealers&#39; sales fell 7.5% and more than reversed the prior month&#39;s gain. Unit sales of light vehicles fell 11.5% last month to 16.21 mil.

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Jan</th>
<th scope="col">Dec</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>-0.9%</td>
<td>2.0%</td>
<td>3.9%</td>
<td>3.4%</td>
<td>3.9%</td>
<td>6.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>1.3%</td>
<td>0.2%</td>
<td>4.8%</td>
<td>3.9%</td>
<td>3.4%</td>
<td>7.3%</td>
</tr>
</tbody>
</table>
<table border="0" cellspacing="0" width="100%">

</table>
Import Prices Surged Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 13, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030213b.jpg" width="353">
Prices for imported commodities rose quite a bit more than Consensus expectations for a 0.1% gain.
Petroleum import prices rose by the most for any month since April and were up double the strong December gain. This month, the price of West Texas Intermediate crude topped $35.00/bbl. versus $32.94/bbl averaged in January.
Nonpetroleum import prices rose modestly and by the same 0.2% as in December which was revised up. During the last ten years there has been a 60% correlation between the (inverted) level of the US dollar&#39;s real exchange rate and the y/y change in nonoil import prices.
Prices of imported capital goods fell for the fifth straight month (-2.1% y/y). Nonauto consumer goods prices rose modestly for the second month but were down 0.5% versus last year. Imported motor vehicle prices fell 0.2% (+0.5% y/y). Imported food prices rose 0.7% and were up a firm 5.3% y/y.
Export prices rose a firm 0.4% led by gains in both agricultural (7.4% y/y) and nonagricultural (1.0% y/y) commodities.

<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">Jan</th>
<th scope="col">Dec</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>1.5%</td>
<td>0.6%</td>
<td>5.5%</td>
<td>-2.5%</td>
<td>-3.5%</td>
<td>6.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>12.4%</td>
<td>6.2%</td>
<td>68.6%</td>
<td>3.0%</td>
<td>-17.2%</td>
<td>66.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Nonpetroleum</td>
<td>0.2%</td>
<td>0.2%</td>
<td>0.6%</td>
<td>-2.4%</td>
<td>-1.5%</td>
<td>1.0%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>0.4%</td>
<td>-0.2%</td>
<td>1.5%</td>
<td>-1.0%</td>
<td>-0.8%</td>
<td>1.6%</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> February 13, 2003


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/030213a.jpg" width="353">
Initial claims for unemployment insurance fell more than expected last week. Claims fell 4.6% from the prior week&#39;s level which was revised up.
The four-week moving average of initial claims rose slightly to 389,000 (-1.8% y/y).
Continuing claims for unemployment insurance fell slightly and the prior week&#39;s level was revised down.
The insured rate of unemployment was stable at 2.6% for the fifth consecutive week.

<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">2/08/03</th>
<th scope="col">2/01/03</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>377.0</td>
<td>395.0</td>
<td>-2.8%</td>
<td>405.0</td>
<td>405.8</td>
<td>299.8</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>3,312</td>
<td>-4.3%</td>
<td>3,588</td>
<td>3,021</td>
<td>2,114</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales fell more than consensus expectations for a 0.5% decline. Sales in December were revised up slightly. Sales excluding motor vehicles and parts dealers rose much more than Consensus expectations for a 0.4% gain. The gain [...]

Retail Sales Fell, Nonauto Sales Jump

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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Michael J. Moran

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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.

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- 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

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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- 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

Robert Brusca

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Industrial production in Japan fell by 0.5% in May after rising by 0.7% in April and declining by 0.2% in March. Manufacturing output rose by 0.1% in May after rising by 0.4% in April and declining by 0.3% in March. Total industrial output shows a 0.7% gain over 12 months, a 3.4% annual rate gain over six months, and zero change in output over three months. For manufacturing, 12-month output is up 0.7%; over six months, output is up at a 6.1% annual rate; and over three months, output is up by 0.8% at an annual rate.

These trends show that output continues to grow for manufacturing as well for total industry, but not by a great margin. In fact, there are still a number of industries still fighting off negative trends, such as textiles, where output falls over three months, six months, and 12 months, as well as investment goods and mining, both of which show declines over three months, six months and 12 months. One year ago, all of these sectors were showing year-over-year declines except for manufacturing, which was up by 0.5% over 12 months. Manufacturing output is now up by 0.7% year-over-year, with consumer goods up by 1.8%, intermediate goods output up by 2%, and investment goods falling by 3%. Japan is currently trying to fight off a legacy of weakness. The strength of the rebound is being borne by consumer goods and intermediate goods, with investment goods undergoing significant contractive effects.

Manufacturing is showing gains on all three sequential horizons. Utilities output is showing growth on each horizon, and actually shows gathering strength, rising by 0.9% over 12 months, at a 1.4% annual rate over six months, and at a very strong 7.9% annual rate over three months.

In the quarter-to-date (QTD) basis, most of these sectors are losing the battle against weakness, with most industry or sectors showing declines two months into the new quarter. Overall output declines at a 0.2% annual rate. Manufacturing output falls at a 2.2% annual rate, intermediate goods output falls at a 0.2% annual rate, and investment goods output falls at a 7.2% annual rate. The only exception is consumer goods output, which is rising at a solid 5.3% annual rate, but that's not strong enough to drag all of industrial output or even manufacturing into the plus column.

Manufacturing output currently is at about 87.7% of its past peak. Activity in electric and gas utilities are at 90.4% of their past peak, while mining is only at 59.6% of its past peak of activity. Comparing levels of output to where they were in January 2020, manufacturing is at 94% of that value, with total industry also at 94% of that value. Consumer goods are at 98% of that value, intermediate goods at 92%, and investment goods at 93%. Mining is only at 74% of its January 2020 value, while electric and gas utilities have moved beyond the January 2020 level and are 3.3% higher than they were and early 2020.

Since 2020, it has been a relatively difficult time for the global economy. The Japanese statistics show only one sector that has managed to create positive growth compared to its level in January 2020. The current month is a mix of plus-and-minus activity changes. Sequential trends generally show more positives than negatives, but there are still a lot of negatives in train that keep Japanese manufacturing from reaching clearly solid footing. When the Strait of Hormuz opened, it appeared that Japan would be in a position to build on its recovery, but now, with the failed peace agreement and failed ceasefire, the strait once again has been closed and the outlook is shrouded in negativity.

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Japan

Japan’s IP Is Fighting Off Weak Trends

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?

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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.

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**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.

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**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. 