Tom Moeller

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Online retail sales rose a seasonally adjusted 3.0% (7.8% y/y) in Q1’23 following an increase of 0.3% in Q4, revised from -0.1%, according to the U.S. Census Bureau. Sales rose 7.5% during all of last year (Q4/Q4) following 10.7% growth in 2021. E-Commerce sales accounted for 14.1% of total retail sales in Q1'23 and has been steady at that level since 2020.

The following details of the E-Commerce data by sector are not seasonally adjusted.

Sales of nonstore retailers, which accounted for 61.1% of total E-Commerce, rose 12.7% y/y last quarter following a 12.2% y/y rise in Q4. General merchandise store sale rose 16.5% y/y following last year’s 0.8% rise, and health & personal care store sales increased 10.9% y/y on the heels of a 0.8% 2022 decline. Food & beverage store sales improved 2.6% y/y after a 5.7% rise last year while sales of building materials & garden equipment rose 2.2% y/y, down from 8.6% growth in 2022.

Elsewhere, sales declined. Furniture & home furnishing sales weakened 8.9% y/y after rising 1.5% in 2022 while sales of motor vehicles & parts declined 8.6% y/y after falling 3.7% last year. Electronics & appliance store sales fell 7.1% y/y following a 14.6% 2022 falloff. Clothing accessory store sales declined 2.2% y/y after a 5.7% 2022 rise and sporting goods, hobby shop, musical instrument & book store sales eased 1.1% y/y after rising 5.1% y/y in 2022. Miscellaneous sales, including gasoline stations, fell 0.9% y/y following an 8.4% rise last year.

E-commerce sales are goods and services ordered over an internet, mobile device (M-commerce), extranet, Electronic Data Interchange (EDI) network, electronic mail, or other comparable online system. Payment may or may not be made online and sometimes sale & price are negotiated. Total sales estimates are adjusted for seasonal variation, but not for price changes. They are also adjusted for trading-day differences and moving holidays.

E-Commerce sales data can be found in Haver's **USECON** database.


-	Sales pick up following Q4 lethargy.
-	Nonstore retail sales firm.
-	Most other categories weaken y/y.


U.S. E-Commerce Sales Strengthen in Q1'23

Andrew Cates

**The US yield curve**
The shape of the US Treasury market yield curve still suggests very high odds of a US recession in the period ahead. Front-month yields are still well above longer-dated yields, for example, and even more so at present relative to three months ago (see chart 1). Investors are, in other words, assuming the US economy will respond much more negatively to the Fed’s prior tightening campaign in the immediate months ahead and that this will, in turn, prompt a pivot toward easier monetary policy by the end of the year. 


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**Private sector de-leveraging**
The pace at which households and companies deleverage their balance sheets will be key for resolving the hard versus soft landing debate in the period ahead. A steep climb in private sector savings balances is, after all, usually a key channel via which recessionary forces take hold. That these balances have started to creep up over the last few months, as savings propensities have climbed, is therefore of some concern (see chart 2 below). With banks now also more actively tightening lending standards and thereby choking off the supply of credit, this deleveraging process may have further to run in the coming months.


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**China’s economy**
Turning to China where this week’s data were disappointing, to say the very least. April’s industrial production and fixed asset investment growth, for example, both fell well short of economists’ expectations. Retail sales growth was admittedly much stronger, climbing by 18.4%y/y in April, after 10.1% in March. But those numbers too disappointed the consensus. Most of that growth, moreover, can be traced to services (e.g. restaurant dining); spending on goods - which would have bigger domestic and global spill-overs - was much weaker. That China’s inflationary pressures have remained dormant in recent months, even as a reopening phase should have unleashed firmer demand, is perhaps no surprise against this backdrop (see chart 3 below). 


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**Japan’s economy**
That absence of international spill-overs from China’s recovery phase may be one reason why Japan’s economy has not picked up more pace in recent months. In fairness, Japan’s GDP grew by 0.4% q/q in Q1, a relatively impressive pace compared with expectations (which were centered on growth of 0.1%). Growth would have been much stronger than this, however, were it not for a big drag from net trade. As chart 4 below suggests, net trade has derailed Japan’s economic growth over the past few months, in part because of the weakness of China’s import demand.
_Note: The inventory contribution for Q1 2023 is unavailable and therefore excluded from the calculations in this chart_

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**The UK labor market**
Another high profile data release this week concerned labor market activity in the UK. And on the whole, this was an inflation-friendly report, which provided some welcome news for the Bank of England. Most gauges of activity, for example, suggested that a lot of heat is now coming out of the market. And the same could be said of the gauges for wage pressures as well.  


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**Inflation, demand and profits**
Unsurprisingly there is an active debate at present about the causes of stubbornly high inflation. Some economists, for example, have been emphasizing the leeway for companies to lift prices beyond what might be construed as normal relative to their unit costs in order to ramp up profitability. The latest evidence from the Atlanta Fed survey of companies’ inflation expectations, however, does not sit neatly with this narrative. Profit margins, for example, are not deemed to be that high at present relative to the averages that have prevailed over the last 10 years. It is noteworthy too, incidentally, and relative to another narrative that concerns the role of loose policy and demand pressures, that there is also little evidence to suggest that heightened sales activity (i.e. additional demand) has been a key cause of higher inflation either. 


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Financial markets were a little unsettled earlier this week but heightened optimism about the willingness of US politicians to raise the US debt ceiling has calmed some fears. Incoming economic data, however, have taken a turn for the worse and there is arguably now mounting evidence to suggest that tighter monetary policy is beginning to exact a heavier toll. Against this backdrop, our charts this week look at the expectations for US monetary policy that are now implicit in the shape of the US yield curve (in chart 1). We turn next to the trend toward private sector deleveraging that’s being instigated by tighter monetary policy (in chart 2). China’s economy is our next focus (in chart 3) and the accumulating evidence to suggest that its reopening phase has failed to live up to expectations. That’s an indirect message too from the drag on Japan’s economy from net trade in Q1 that we subsequently explore (in chart 4). A slowing UK labor market and the welcome messages this is offering the Bank of England in its inflation-fighting campaign is our next focus (in chart 5). Finally, and staying with inflation issues, we explore what US companies have to say about demand pressures and profit margins and their impact on prices (in chart 6).

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Charts of the Week (May 19, 2023)

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Sales of existing homes fell 3.4% in April (-23.2% y/y) to 4.28 million units (SAAR) after declining 2.6% to 4.43 million during March, revised from 4.44 million. Sales remained up from the January low of 4.00 million. The Action Economics Forecast Survey expected April sales of 4.25 million units.

Single-family home sales fell 3.5% (-22.4% y/y) to 3.85 million units after falling 2.7% to 3.99 million in March. Sales remained 34.2% lower than the high of 5.85 million in October 2020. Condo and co-op sales weakened 2.3% (-29.5% y/y) to 430,000 after falling 2.2% in March. Sales have fallen 42.7% from the January 2021 high of 750,000.

Sales fell m/m across the country. Sales in the West declined 6.1% (-31.3% y/y) to 770,000 last month following a 3.5% March shortfall. Sales in the South also declined in April by 3.4% (-20.2% y/y) to 1.98 million after falling 1.9% in the prior month. In the Midwest, sales slid 1.9% (-21.5% y/y) to 1.02 million after a 4.6% March decline. Sales in the Northeast also weakened 1.9% (-23.9% y/y) to 510,000 after holding steady in March.

The number of existing homes for sale (NSA) rose 7.2% (1.0% y/y) to 1.04 million in April after holding steady m/m in March. The supply of homes on the market (NSA) rose to 2.9 months at the current selling rate, significantly higher than the record low of 1.6 months reached in January, 2022. These figures date back to January 1999.

The median price of an existing home (NSA) rose 3.6% (-1.7% y/y) to $388,800 following a 3.2% March increase. They were 6.0% below the June peak of $413,800. Prices rose last month in each region of the country. The median price of an existing single-family home rose 3.6% (-2.1% y/y) to $393,300 while the price of existing co-ops and condos rose 3.0% (0.7% y/y) to $348,000.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.



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-	Sales fall to three-month low.
-	Decline occurs throughout country.
-	Home prices continue to rebound from January low.


U.S. Existing Home Sales Decline in April

Carol Stone, CBE

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The Philadelphia Federal Reserve Bank reported that its monthly survey of manufacturers saw its Current Activity Diffusion Index at -10.4% in May, an improvement from the -31.3% reading in April.  While obviously still negative, the monthly move was sizable and even larger than the expectation of a move to -20.0% in the Action Economics Forecast Survey.  The Philly Fed survey responses were collected from May 8 to May 15.

The ISM-Adjusted Composite Index, calculated by Haver Analytics from the survey results, was 46.4 in May, up from 42.2 in April.  The May result still showed net contraction in activity, but was less weak than the April value.

Changes in the component series were mixed.  New orders were still negative, at -8.9%, but less so than April’s -22.7%.  In May, 27.4% of respondents reported an increase in new orders while 33.6% had no change in new orders and 36.3% had decreasing new order amounts.  Shipments had a relative improvement, with a 4.7% net decline, representing an increase at 21.4% of respondent versus a decrease at 26.1%.  These compare to increasing shipments in April at 20.4% of companies and a decrease at 27.7%.  Unfilled orders actually had a slightly positive reading in May, 0.8%, up from -11.1% in April; the May result was the first positive reading since May 2022.  Inventories turned back positive in the May data, at +6.4% versus -17.9% in April; the share of companies with increases was 18.5% in May after just 2.9% in April, while the share with decreasing inventories was 12.1% in May, less than April’s 20.8%.

Employment conditions remained negative in May, at -8.6% after April’s marginal -0.2%.  The number of employees increased at 6.6% of firms in May while they decreased at 15.1%.  

Prices paid were slightly stronger in May, at a net of 10.9% after April’s 8.2%.  This was composed of increases at 25.5% of respondents and decreases at 14.6%.  In April, prices paid had risen at a relatively moderate 18.5% of firms, the smallest since mid-2020, and they declined in April at 10.3%.

Prices received in May had the weakest net reading since the pandemic era in the spring of 2020, as they registered a net index of -7.0%.  This reflected the largest share of firms with price reductions, 22.0%, since 25.4% in July 2009.  Prices had fallen at just 10.4% of firms in April 2023.  Prices rose in May at 14.9% of firms after rising in April at 7.1% of firms.

Expectations for business conditions in the next six months had a -10.3% May reading, notably weaker than April’s -1.5%.  The May survey showed weaker net expectations for new orders, at -2.3% after +9.8% in April, shipments at +4.5% after +13.3% and delivery times at -31.0% after -28.1%.  Readings in the May survey for expectations of the number of employees were stronger, though, at +12.6% after +3.8% in April and there were also firmer readings for both prices paid and prices received.

The diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The Philadelphia Fed data can be found in Haver's **SURVEYS** database. The expectations forecast figures are from the Action Economics Forecast Survey in **AS1REPNA**.


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-	Index at -10.4%, markedly less weak than April’s -31.3%.
-	New orders & shipments still negative, but less than month before.
-	Prices received weaker in May, but prices paid were stronger.


Philadelphia Fed Manufacturing Survey Still Negative in May, but Less Weak than in April

Robert Brusca

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The sequential growth rates show exports moving from 6% growth over 12-months to falling at a 10% pace over 6-months and then reversing to post a substantial 23.6% annual rate increase over 3-months. Imports grow by only 0.1% over 12 months, fall at a 30% annual rate over 6-months and then trim that to a decline of 13.6% at an annual rate over 3-months.  Both exports and imports show improvement over 3-months compared to 6-months but exports transition to a strong, positive, growth rate while imports better than half their rate of decline. 

The exchange rate against the dollar has fallen on balance over 12 months by 5.6%, over 6-months it rises at a 17.6% pace but then over 3-months it's off at a 9.6% annual rate. The table lists average exchange rates over 12-months, 6-months, and 3-months but it calculates percentage changes on a point-to-point basis on those horizons. The average yen change rate has improved slightly over 3-months compared to 12 months moving up to a level of 133 from a level of 136 on its twelve-month average.

The broad-yen has fared somewhat similarly; this exchange rate measures the yen’s value against its trading partners on a trade weighted basis. The broad yen is lower by 2.7% over 12-months, strengthening at a 9.5% pace over 6-months, and weakening at a 7.7% annual rate pace over 3-months.

Export and import prices show very different behavior and on the price front we see that there's been a lot more weakness in import prices while export prices have generally clung to small positive gains. Export prices are up 1.7% over 12-months and up at a 1.6% pace over 3-months. Import prices fall by 2.9% over 12 months and fall at an 18.5% annual rate over 3-months.

As a result of these extreme price moves - and very different price moves between exports and imports - real exports and real imports behave very differently. Real exports, that are exports adjusted for inflation, rise 4.2% over 12-months, are flat over 6-months and are rising at a 21.6% annual rate over 3-months. Real imports rise 3.2% over 12-months fall at a 1.2% pace over 6-months and then rise at a 6.1% annual rate over 3-months. Exports are still much stronger than imports over 3-months but real imports over 3-months are growing at a 6.1% pace not falling at a13.5% as the nominal flow shows. Accounting for inflation changes everything.

Japan's economy in the first quarter surprised with its growth, rising by more than what had been expected. However, in the quarterly trade data it was clear that bold export and import flows were slowing down as we see in the big picture for this month. But, this month, there is an exception with exports showing a significant pickup over three months. We'll have to see if that is going to hold up when we get to the next quarter’s data. 

Globally, trade is also slowing down; the manufacturing sectors of economies show more weakness than the services sectors and that is playing out in terms of weaker trade flows. Inflation continues to be high throughout most of the global economy. Japan has less of a problem with this than other G-7 countries because it has been emerging from a past-period of deflation and while its current inflation rate is over the top of its target, it is not as excessive as the inflation has been in Europe and in the US. For the most part G-7 excessive inflation pressures linger and where central banks have been raising rates to combat inflation; Japan is an exception. Markets are beginning to brace for the Federal Reserve in the US to stop raising rates. They are beginning to look ahead to a period of rate cuts, that the Fed itself mostly denies... The ECB still has more rate hiking ahead of it because its inflation rate is still quite a bit excessive compared to its target although there is clear evidence of headline inflation decelerating there. And, in Japan, the outlook for policy continues to be unknown as the new central bank governor has been content to continue with the policies that are in place including yield curve control, but these policies have resulted in substantial purchases and ownership by the central bank of government bonds in Japan. 

Globally the inflation outlook is still unclear because the war in Ukraine continues and Russia's alliance with OPEC, in the OPEC-plus agreement, last decided to cut-back output to try to firm-up oil prices in the face of weakening global growth. So, we can't be quite sure what policies OPEC has planned for the future or what resolve it has to implement those policies. But with the US and with Europe still focused on ‘green’ policies it has been hard for them to unlock new sources of cheap energy to offset high prices from OPEC the risk to inflation from oil, as well as other sources,  remains in play.



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Japan

- The speed of export and import growth for Japan has steadily slowed with the exception of a pickup in export growth over the last three months. These trends have accompanied an improvement in Japan's trade deficit from 12-months to 6-months to 3-months.

- In April Japan's exports rose 2.5% after falling 0.7% in March and rising 3.6% in February. Imports rose by only 0.1% in April after falling in step with exports in March, by -0.7%, but also fell by 3% month-to-month in February. Over this stretch exports have clearly outpaced imports.



Japan's Trade Flow Momentum Shrinks...but so Does Its Deficit

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Initial claims for unemployment insurance fell to a seasonally adjusted 242,000 (+9.0% y/y) in the week ended May 13 after the prior week’s increase to an unrevised 264,000 from 242,000. A decline to 255,000 initial claims had been expected in the Action Economics Forecast Survey. The four-week moving average fell to 244,250 from 245,250, but remained above the late-January low of 199,500 initial claims.

The number of continued weeks claimed, “insured unemployment,” fell to 1.799 million (+25.5% y/y) in the week ended May 6 from 1.807 million in the prior week, revised from 1.813 million. The four-week moving average of continued weeks claimed fell to 1.813 million, the lowest level since late-March.

In the week of May 6, the insured unemployment rate was 1.2% for the third straight week. This rate has been between 1.2% and 1.3% since late January and compares with 0.9% in September and early October last year, which is the all-time low for this measure of unemployment.

In the week of April 29, the total number of continued weeks claimed in all unemployment insurance programs was 1.686 million. This was down from 1.715 million the prior week and compares to a recent high of 2.000 million the last week of February. This total includes federal employees, newly discharged veterans, extended benefits and other specialized programs and is not seasonally adjusted. Claims in the Pandemic Unemployment Assistance program and Pandemic Emergency Unemployment Compensation are no longer included in the main Labor Department press release.

The insured rates of unemployment in regular programs vary across states. The highest insured unemployment rates in the week ending April 29 were in California (2.38%), New Jersey (2.21%), Massachusetts (2.02%), Alaska (1.66%) and Minnesota (1.47%). The lowest rates were in South Dakota (0.24%), Nebraska (0.34%), Virginia (0.34%), Kansas (0.36%), and Tennessee (0.38%). Other large state rates include New York (1.61%), Illinois (1.57%), Pennsylvania (1.27%), Texas (0.98%) and Florida (0.40%). These state rates are not seasonally adjusted.

Data on weekly unemployment claims going back to 1967 are contained in Haver's **WEEKLY** database, and they are summarized monthly in **USECON.** Data for individual states are in **REGIONW**. The expectations figure is from the Action Economics Forecast Survey, carried in the **AS1REPNA** database.


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-	Upward trend remains in place. 
-	Continuing claims move lower.
-	Insured unemployment rate remains at 5-month low.



U.S. Initial Unemployment Insurance Claims Reverse Earlier Gain

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Mortgage loan applications fell 5.7% (-32.7% y/y) in the week ended May 12, and reversed	 a 6.3% increase in the prior week. These data come from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey.

Applications for loans to purchase a home fell 4.8% (-26.5% y/y) in the latest week following a 4.8% increase in the prior week. Applications to refinance an existing loan declined 7.7% (-43.4% y/y) last week after a 10.0% rise the prior week.

The share of loans to refinance an existing mortgage in the week of May 12 was 27.4%, down from 28.0% in the prior week. The share of loans with an adjustable rate remained low at 6.5% versus 6.8% the week before.

The effective interest rate on a 30-year fixed rate loan was 6.74% in the week of May 12 versus 6.66% the week before. That rate was 7.02% in the March 3 week and 7.42% on October 21. The rate on a 15-year fixed-rate mortgage rose to 6.13% last week and reversed the decline in the prior week. The rate on a 30-year Jumbo loan rose to 6.57% last week from 6.48% the week before. For a 5-year ARM loan, the effective rate spiked to 6.12% from 5.64%. It was the highest level since early-November.

The average size of a mortgage loan fell 0.9% to $391,300 last week (+0.6% y/y) from $395,000 in the prior week. The average size of a purchase loan eased to $440,400 in the latest week, down 0.1% (-0.2% y/y) from $441,700 during the week before. Refinance loans averaged $261,300 in the week of May 12, down 6.0% (-7.7% y/y) from the prior week.

The Mortgage Bankers Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver's **SURVEYS** database.


-	Mortgage applications remain near cycle low.
-	Effective interest rate increases to two-month high.
-	Average loan size declines.


Mortgage Loan Applications Fall Sharply

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Total housing starts rose 2.2% (-22.3% y/y) during April to 1.401 million units (SAAR) from 1.371 in March, revised from 1.420 million. Earlier figures were revised. Starts were 22.3% below the April 2022 peak of 1.803 million units. The Action Economics Forecast Survey expected 1.40 million starts in April.

The rise in total starts last month was led by a 3.2% increase (-11.5% y/y) in multi-family starts to 555,000. The rise followed a 10.5% March decline. Single-family starts rose 1.6% (-28.1% y/y) to 846,000 after easing 0.2% in March. They remained 35.5% below the December 2020 peak.

Starts in the Midwest jumped 32.6% (-21.9% y/y) to 171,000, following a 31.0% March drop. Starts in the West improved 34.6% (-25.5% y/y) to 315,000 after falling 33.5% in March. To the downside, starts in the Northeast fell 23.4% in April (-2.2% y/y) to 131,000 after surging 62.9% in March. In the South, starts weakened 6.3% (23.7% y/y) to 784,000 following a 5.7% March rise.

Building permits fell 1.5% (-21.1% y/y) to 1.416 million from 1.437 million in March, revised from 1.413 million. Multi-family permits fell 7.7% (-21.0% y/y) to 561,000 after an 11.4% March decline. Single-family permits gained 3.1% (-21.2% y/y) to 855,000 after a 4.1% March increase.

The housing starts and permits figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.


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-	Gain in multi-family starts outpaces single-family advance.
-	Starts are mixed across the country.
-	Decline in building permits dominated by multi-family.


U.S. Housing Starts Rise in April

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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Existing home sales unexpectedly fell 2.4% m/m (+2.8% y/y) to 4.09 million units (SAAR) in June, the first monthly decline since March, following an upwardly revised 3.7% increase to 4.19 million in May (previously +3.2%; 4.17 mil.), according to the National Association of Realtors (NAR). The Action Economics Forecast Survey had expected June sales of 4.20 million units. Sales remained 36.4% below a high of 6.43 million in January 2022 and 38.0% below a peak of 6.60 million in January 2021. The June decline coincided with a rise in the average 30-year fixed mortgage rate to 6.49% in June, the highest since August 2025, after increasing to 6.44% in May, according to Freddie Mac. The sales figures are based on closings of sales contracts signed over the past couple of months.

Existing single-family home sales fell 2.4% (+3.3% y/y) to 3.73 million units in June, the first m/m fall in three months, following a 4.1% gain to 3.82 million in May, remaining 34.6% below a high of 5.70 million in January 2022. Sales of condos and co-ops decreased 2.7% (-2.7% y/y) to 360,000 in June, the lowest level since May 2025, after being unchanged m/m for the third successive month at 370,000, remaining 50.7% below a high of 730,000 in January 2022.

Regionally, June existing home sales declined m/m in all regions except the Northeast. Sales in the South dropped 3.6% (+3.8% y/y) to 1.89 million in June, a three-month low, after a 3.2% rise in May, and sales in the Midwest slid 3.0% (+2.1% y/y) to 980,000 following a 7.4% May advance; both posted the first m/m decrease in three months. Sales in the West fell 1.3% (+2.8% y/y) to 740,000, the lowest level since January, after being flat m/m at 750,000 in May. In contrast, sales in the Northeast increased 2.1% (0.0% y/y) to 480,000 after a 4.4% May gain. Notably, the South remained the dominant region, accounting for 46.2% of total U.S. existing home sales.

The median price of all existing homes (NSA) rose 2.2% (1.8% y/y) to $440,600 in June, the fifth consecutive m/m rise, on top of an upwardly revised 3.3% increase to $431,200 in May ($429,300 previously). Prices were 22.1% above a low of $360,800 in January 2023. The median price of an existing single-family home climbed 2.3% (1.8% y/y) to $446,400 in June, the fifth straight m/m increase, after a 3.4% advance to $436,400 in May. The median price of condos and co-ops, up for the sixth time in seven months, grew 0.6% (1.6% y/y) to $380,000 following a 1.0% May gain to $377,800. Regionally, overall prices rose m/m and y/y in June in the Northeast (+5.6%; +3.9% y/y), Midwest (+2.1%; +2.7% y/y), South (+1.0%; +0.9% y/y), and West (+0.8%; +0.9% y/y). All these price series were at their record highs.

Inventories of homes for sale fell m/m in June for the first time since December. The number of existing homes for sale (NSA) declined 0.6% (+1.3% y/y) to 1.56 million units following an upwardly revised 4.7% May rise to 1.57 million (the highest level since November 2019). The supply of homes on the market at the current selling rate (NSA) increased to 4.6 months in June from 4.5 months in May and April, matching the highest level since August 2025. A record low in supply of 1.6 months was in January 2022.

The data on existing home sales, prices and affordability are compiled by the National Association of Realtors. The data on single-family home sales extend back to February 1968. Total sales and price data and regional sales can be found in Haver's **USECON** database. Regional price and affordability data and national inventory data are available in the **REALTOR** database. Mortgage interest rates can be found in the **WEEKLY** database. The expectations figure is from the Action Economics Forecast Survey, reported in the **AS1REPNA** database.

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- June sales -2.4% m/m to 4.09 mil., first drop in three mths.; +2.8% y/y, third straight y/y rise.
- Sales m/m down in the South (-3.6%), Midwest (-3.0%), and West (-1.3%); up in the Northeast (+2.1%).
- Sales y/y up in all regions except the Northeast w/ a flat reading.
- Median sales price +2.2% (+1.8% y/y) to $440,600, a record high.
- Unsold inventory -0.6% (+1.3% y/y) to 1.56 mil. units, first m/m decline since Dec.; 4.6 months' supply, highest since Aug. ’25.

U.S. Existing Home Sales Unexpectedly Fall in June from a Five-Month High

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined 2,000 to 215,000 in the week ending July 4, from 217,000 in the week ending June 27, revised from 215,000. The four-week average was 218,750 in the July 4 week, down from 222,500 in the week ending June 27. The Action Economics/Haver Analytics Survey looked for 218,000 claims to have been filed. 

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 8,000 to 1.814 million in the week ending June 27, from 1.806 million in the week ending June 20, revised from 1.814 million. The four-week moving average rose to 1.808 million in the June 27 week from 1.801 million in the June 20 week. The insured unemployment rate was unchanged at 1.2% in the week of June 27. Except for a one-week dip to 1.1% in the week of April 25, the insured unemployment rate has been at 1.2% since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending June 20, the highest unemployment rates were in Washington (2.03%), New Jersey (2.11%), Minnesota (2.15%), and Puerto Rico (2.45%). The lowest rates were in South Dakota (0.28%), Florida (0.35%), Alabama and North Carolina (both 0.41%), Louisiana (0.42%), and Arkansas (0.49%). Rates in other notable states include California (1.88%), Pennsylvania (1.63%), Illinois (1.58%), New York (1.52%), and Texas (1.12%). These state data are not seasonally adjusted.

Data on weekly unemployment claims are from the Department of Labor itself, not the Bureau of Labor Statistics. They begin in 1967 and are contained in Haver’s **WEEKLY** database and summarized monthly in **USECON**. Data for individual states are in **REGIONW** back to December 1986.

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- New claims declined by 2,000 to 215,000 in the week ending July 4.
- Continuing claims rose by 8,000 to 1.814 million in the week ending June 27.
- The insured unemployment rate was unchanged at 1.2% in the week of June 27.

U.S. Initial Unemployment Claims Declined in the Week of July 4

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The German trade surplus surged in May to €19.1 billion from €14.7 billion in April. Exports rose by 0.9% in May while imports fell by 2.5%, creating a jump in the surplus month-to-month. In April, exports increased by 0.8% while imports rose by 1.1%.

Details on exports and imports lag by one month. In April, exports for motor vehicles and consumer goods declined, while exports of capital goods and other exports rose. On the import side, there were increases in imports ranging from 2.8% to 4.3% month-to-month across capital goods, motor vehicles, and consumer goods, but for the catch-all category ‘other’ imports fell by 2.7% month-to-month.

Flows adjusted for inflation showed an increase in exports of 0.4% in May while real imports fell by 3.3%. In April, real exports were flat while real imports fell by 0.2%.

The sequential behavior of real exports and real imports show independent activity. Imports log a clear weakening, rising 0.1% over 12 months, falling at a 5% annual rate over six months, and then falling at a 10.3% annual rate over three months. On the export side, real exports rose by 2.6% over 12 months, accelerated to a 7.2% annual rate over six months, but over three months have pulled back and fallen at a 1.6% annual rate. However, export growth still exceeds import growth over each of these horizons: 12 months, six months, and three months.

Trade trends paint a darkening picture of the German economy, with imports weak in real terms and trending even weaker, while activity on the export side of the equation pops over 12 months and six months but takes a hit over three months.

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The situation in the Strait of Hormuz continues to muddy the waters for the future. Passage through the strait has been sharply stopped, stabilized, revived, and now is back to being destabilized. That makes the strait a major uncertainty zone; it's hard to tell how these effects are going to play out over the coming months for German trade results and everyone else's. The deterioration of conditions in the Strait of Hormuz is now unknowable because Iran has decided to start shooting at ships, further destabilizing the outlook.

Germany

German Trades Surplus Balloons

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

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

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

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

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

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

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

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Charts of the Week: Growth Holds Firm

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Mortgage applications dropped 2.2% w/w (-5.4% y/y) in the week ending July 3, following no change in the week ending June 26, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. Applications for loans to purchase a house edged down 0.6% w/w (-6.3% y/y) in the latest week, after rising 0.5% w/w (3.2% y/y) in the June 26 week.  Applications for loan refinancing dropped 4.1% w/w (-4.2% y/y) in the week ending July 3, after declining 0.7% w/w (+9.1% y/y) in the June 26 week.

The effective interest rate on a 30-year fixed-rate loan rose 1bp to 6.77% in the week ending July 3 from 6.76% in the week ending June 26. The rate on 15-year fixed-rate mortgages edged down 2bps to 6.17% in the July 3 week from 6.19% in the June 26 week. The 30-year Jumbo rate edged down 1bp to 6.62% in the latest week from 6.63% in the June 26 week. The rate on a 5-year ARM rose 5bps to 6.19% in the July 3 week from 6.14% in the June 26 week.

The share of applications for refinancing an existing loan declined to 40.6% of total applications in the week of July 3 from 41.4% in the June 26 week. The adjustable-rate mortgage (ARM) share of activity edged up to 7.8% in the July 3 week from 7.6% in the June 26 week.

The average size of a mortgage declined 0.4% w/w (+1.3% y/y) to $391,500 in the week ending July 3, after rising 1.1% w/w (0.4% y/y) to $393,200 in the week ending June 26. The average size of a purchase loan declined 1.0% w/w (+4.3% y/y) to $451,000 in the latest week, after rising 1.2% w/w (2.7% y/y) to $455,600 in the June 26 week. The average size of a loan to refinance a mortgage edged down 0.1% w/w (-3.9% y/y) to $304,600 in the week ending July 3, after rising 0.5% w/w (-2.8% y/y) to $304,900 in the June 26 week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Both applications for loans to purchase and applications for loan refinancing declined in the latest week.
- Interest rate on 30-year fixed-rate loans rose 1bp to 6.77%. 
- Average loan size edged down.