Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040722b.jpg" width="353">
The June Composite Index of Leading Economic Indicators reported by the Conference Board fell unexpectedly by 0.2%. A 0.4% increase had been expected. It was the first decline since March of last year.
Though 55% of the component series rose last month, shorter weekly hours and lower building permits combined to subtract over 0.3 percentage points from the m/m change.
Over a six-month span 90% of the leaders&#39; components have risen. During the last ten years there has been a 63% correlation between the six-month diffusion index of the leaders and quarterly growth in real GDP.
The leading index is based on eight previously reported economic data series and two that are estimated.
The coincident indicators ticked 0.1% higher, the gain held back by a decline in industrial production.
The ratio of coincident-to-lagging indicators rose slightly to another record level. The ratio is an indicator of excess relative to actual economic performance.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM"> Business Cycle Indicators</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>3.8%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.8%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.0%</td>
<td>0.1%</td>
<td>-2.0%</td>
<td>-2.2%</td>
<td>-2.8%</td>
<td>-1.4%</td>
</tr>
</tbody>
</table>
</body>
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The June Composite Index of Leading Economic Indicators reported by the Conference Board fell unexpectedly by 0.2%. A 0.4% increase had been expected. It was the first decline since March of last year. Though 55% of the component [...]

Leading Indicators Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040722b.jpg" width="353">
The June Composite Index of Leading Economic Indicators reported by the Conference Board fell unexpectedly by 0.2%. A 0.4% increase had been expected. It was the first decline since March of last year.
Though 55% of the component series rose last month, shorter weekly hours and lower building permits combined to subtract over 0.3 percentage points from the m/m change.
Over a six-month span 90% of the leaders&#39; components have risen. During the last ten years there has been a 63% correlation between the six-month diffusion index of the leaders and quarterly growth in real GDP.
The leading index is based on eight previously reported economic data series and two that are estimated.
The coincident indicators ticked 0.1% higher, the gain held back by a decline in industrial production.
The ratio of coincident-to-lagging indicators rose slightly to another record level. The ratio is an indicator of excess relative to actual economic performance.
Visit the Conference Board&#39;s <a href="http://www.conference-board.org">site</a> for coverage of leading indicator series from around the world.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/BCI/BCI.HTM"> Business Cycle Indicators</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>-0.2%</td>
<td>0.4%</td>
<td>3.8%</td>
<td>1.3%</td>
<td>2.2%</td>
<td>-0.8%</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>0.1%</td>
<td>0.3%</td>
<td>2.8%</td>
<td>0.4%</td>
<td>-0.5%</td>
<td>-0.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>0.0%</td>
<td>0.1%</td>
<td>-2.0%</td>
<td>-2.2%</td>
<td>-2.8%</td>
<td>-1.4%</td>
</tr>
</tbody>
</table>
Initial Claims For Unemployment Insurance Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 22, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040722a.jpg" width="353">
Initial claims for jobless insurance fell an expected 11,000 last week to 339,000. The latest figure covers the July survey period for non-farm payrolls and claims were about even with the June period.
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless claims and the m/m change in non-farm payrolls.
The 4-week moving average of initial claims fell to 336,750 (-18.8% y/y).
Continuing claims for unemployment insurance cratered 167,000 following a downwardly revised 105,000 gain the prior week.
The insured rate of unemployment fell to 2.2%, the lowest level since May 2001.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">7/17/04</th>
<th scope="col">7/10/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 339</td>
<td>350</td>
<td>-14.0%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,797</td>
<td>-21.4%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040721c.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association fell sharply again last week. Applications fell 4.0% on the heels of the 6.3% drop the prior week.
Purchase applications led the decline, down 6.1% (-0.5% y/y) following the 6.4% drop the prior week. Because of a large gain the first week, July purchase applications so far are 6.1% higher than in June.
During the last ten years there has been a 63% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance mortgages fell a scant 0.7% after the 6.1% drop the prior week (-73.3% y/y). Refi&#39;s in July are 19.2% ahead of June.
The effective interest rate on a conventional 30-Year mortgage was stable at 6.22% versus 6.52% in June. The effective rate on a 15-year mortgage also was about stable at 5.68%, down from 5.98% averaged in June.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/16/04</th>
<th scope="col">07/09/04</th>
<th scope="col"> Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>617.9</td>
<td>643.9</td>
<td>-51.9%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>440.3</td>
<td>468.8</td>
<td>-0.5%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,651.1</td>
<td>1,662.4</td>
<td>-73.3%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
</html>

The index of mortgage applications compiled by the Mortgage Bankers Association fell sharply again last week. Applications fell 4.0% on the heels of the 6.3% drop the prior week. Purchase applications led the decline, down 6.1% (-0.5% [...]

Mortgage Applications Slump

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040721b.jpg" width="353">
The debt service ratio for the household sector fell again in 1Q04 to 12.98%, the lowest level since late 2001 as estimated the US Federal Reserve Bank.
The household debt service ratio estimates the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt.
A companion financial obligations ratio also fell to 18.09%, its lowest since late 2001. This ratio adds automobile lease payments, rental payments on tenant-occupied property, homeowners&#39; insurance, and property tax payments to the debt service ratio.
The decline in the debt-servicing burden occurred despite a very recent pickup in the amount of mortgage interest paid, though, growth of not quite 4% lagged disposable income growth of over 6%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040721a.jpg" width="353">
Lower interest rates through 1Q helped restrain the growth in interest paid. In 2Q, however, the average interest rate on a 30-Year mortgage rose roughly 50 basis points versus 1Q.
The financial obligations data are derived from the Fed&#39;s Survey of Consumer Finances which is discussed in this <a href="http://www.federalreserve.gov/pubs/oss/oss2/papers/softwaretools.pdf"> paper</a>.
Yesterday&#39;s testimony by Chairman Greenspan before the Senate Banking Committee can be found <a href="http://www.federalreserve.gov/BoardDocs/HH/2004/July/testimony.htm"> here</a>.

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<colgroup><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E103/@E10310/@E10310.HTM"> Debt Service Ratio</a></th>
<th scope="col">1Q04</th>
<th scope="col">4Q03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Household</td>
<td>12.98%</td>
<td>13.06%</td>
<td>13.06%</td>
<td>13.23%</td>
<td>13.27%</td>
</tr>
</tbody>
</table>
</body>
</html>

The debt service ratio for the household sector fell again in 1Q04 to 12.98%, the lowest level since late 2001 as estimated the US Federal Reserve Bank. The household debt service ratio estimates the ratio of debt payments to [...]

Consumer's 1Q Debt Service Burden Lower, But ...

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040721b.jpg" width="353">
The debt service ratio for the household sector fell again in 1Q04 to 12.98%, the lowest level since late 2001 as estimated the US Federal Reserve Bank.
The household debt service ratio estimates the ratio of debt payments to disposable personal income. Debt payments consist of the estimated required payments on outstanding mortgage and consumer debt.
A companion financial obligations ratio also fell to 18.09%, its lowest since late 2001. This ratio adds automobile lease payments, rental payments on tenant-occupied property, homeowners&#39; insurance, and property tax payments to the debt service ratio.
The decline in the debt-servicing burden occurred despite a very recent pickup in the amount of mortgage interest paid, though, growth of not quite 4% lagged disposable income growth of over 6%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040721a.jpg" width="353">
Lower interest rates through 1Q helped restrain the growth in interest paid. In 2Q, however, the average interest rate on a 30-Year mortgage rose roughly 50 basis points versus 1Q.
The financial obligations data are derived from the Fed&#39;s Survey of Consumer Finances which is discussed in this <a href="http://www.federalreserve.gov/pubs/oss/oss2/papers/softwaretools.pdf"> paper</a>.
Yesterday&#39;s testimony by Chairman Greenspan before the Senate Banking Committee can be found <a href="http://www.federalreserve.gov/BoardDocs/HH/2004/July/testimony.htm"> here</a>.

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<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E1/@E103/@E10310/@E10310.HTM"> Debt Service Ratio</a></th>
<th scope="col">1Q04</th>
<th scope="col">4Q03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Household</td>
<td>12.98%</td>
<td>13.06%</td>
<td>13.06%</td>
<td>13.23%</td>
<td>13.27%</td>
</tr>
</tbody>
</table>
Mortgage Applications Slump 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 21, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040721c.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association fell sharply again last week. Applications fell 4.0% on the heels of the 6.3% drop the prior week.
Purchase applications led the decline, down 6.1% (-0.5% y/y) following the 6.4% drop the prior week. Because of a large gain the first week, July purchase applications so far are 6.1% higher than in June.
During the last ten years there has been a 63% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
Applications to refinance mortgages fell a scant 0.7% after the 6.1% drop the prior week (-73.3% y/y). Refi&#39;s in July are 19.2% ahead of June.
The effective interest rate on a conventional 30-Year mortgage was stable at 6.22% versus 6.52% in June. The effective rate on a 15-year mortgage also was about stable at 5.68%, down from 5.98% averaged in June.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM"> MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/16/04</th>
<th scope="col">07/09/04</th>
<th scope="col"> Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>617.9</td>
<td>643.9</td>
<td>-51.9%</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>440.3</td>
<td>468.8</td>
<td>-0.5%</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,651.1</td>
<td>1,662.4</td>
<td>-73.3%</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040721d.jpg" width="353">
Monthly population estimates for Japan were reported today as of July 1 by the Japanese Ministry of Public Management, Home Affairs, Post &amp; Telecommunications. The new data reveal a small outright decline in the population of Japan this year from July 2003. Details are not yet available, but the decline may owe to foreign visitors or workers leaving the country, rather than to a decrease in the number of Japanese people. Even so, patterns of births and deaths through January (which were reported yesterday) imply a slight natural decrease.
Another major force in Japanese demographics is the rapidly increasing size of the elderly population. As indicated in the table below, women over age 75 constitute more than 10-1/2% of the total population of women; this share has increased almost 4 percentage points in the last ten years. The number of elderly men is also gaining; their share of the total male population has risen 2-1/2 percentage points since 1994 to 6.5% in July.
By comparison, the population of the US is growing at about 1% a year. Older Americans are also increasing, but much more gradually as a share of the total population than in Japan. Growing numbers of the elderly increase conditions of dependency in the economies of these two nations and others as well. Japan&#39;s rates are higher now, but as the US &quot;Baby Boomers&quot; age, the share of elderly will go up markedly here too.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">10 Thousand People</th>
<th scope="col">July 2004</th>
<th scope="col">July 2003</th>
<th scope="col">July 2002</th>
<th scope="col">July 2001</th>
<th scope="col">July 1994</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Japan: Total</td>
<td>12761</td>
<td>12765</td>
<td>12740</td>
<td>12713</td>
<td>12496</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Change</td>
<td>-0.03</td>
<td>0.20</td>
<td>0.21</td>
<td>0.20</td>
<td>0.21*</td>
</tr>
<tr class="odd">
<td class="firstcol">Female</td>
<td>6537</td>
<td>6534</td>
<td>6516</td>
<td>6497</td>
<td>6367</td>
</tr>
<tr>
<td class="firstcol">Yr/Yr % Change</td>
<td>0.05</td>
<td>0.28</td>
<td>0.29</td>
<td>0.17</td>
<td>0.26*</td>
</tr>
<tr class="odd">
<td class="firstcol">% over Age 75</td>
<td>10.6</td>
<td>10.1</td>
<td>9.7</td>
<td>9.3</td>
<td>6.8</td>
</tr>
<tr>
<td class="firstcol">Male</td>
<td>6224</td>
<td>6231</td>
<td>6224</td>
<td>6216</td>
<td>6129</td>
</tr>
<tr class="odd">
<td class="firstcol">Yr/Yr % Change</td>
<td>-0.11</td>
<td>0.11</td>
<td>0.13</td>
<td>0.24</td>
<td>0.15*</td>
</tr>
<tr>
<td class="firstcol">% over Age 75</td>
<td>6.5</td>
<td>6.1</td>
<td>5.8</td>
<td>5.4</td>
<td>4.0</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">United States: Total</td>
<td>29292**</td>
<td>29081</td>
<td>28797</td>
<td>28509</td>
<td>26313</td>
</tr>
<tr class="odd">
<td class="firstcol">Yr/Yr % Change</td>
<td>0.97**</td>
<td>0.98</td>
<td>1.01</td>
<td>1.03</td>
<td>1.11*</td>
</tr>
<tr>
<td class="firstcol">% over Age 75</td>
<td>N.A.</td>
<td>6.0</td>
<td>6.0</td>
<td>6.0</td>
<td>5.5</td>
</tr>
</tbody>
</table>
</body>
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Monthly population estimates for Japan were reported today as of July 1 by the Japanese Ministry of Public Management, Home Affairs, Post & Telecommunications. The new data reveal a small outright decline in the population of Japan [...]

Demographic Shifts in Japan

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040720d.jpg" width="353">
The Government of India today reported June trade data. The monthly deficit widened significantly to 117 billion rupees (seasonally adjusted by Haver Analytics) from 65 billion rupees in May. A surge in imports was the cause, although both imports and exports are growing rapidly and stand more than 30% ahead of a year ago.
A striking aspect of this information for us is that India runs a trade deficit at all, much less the record amount recorded for June. Anecdotal evidence emphasizes the role of outsourcing, giving one the impression that trade must be in surplus. That is clearly incorrect. However, we would surmise that a good part of Indian imports consists of components used in production of Indian exports. The deep erosion of the trade balance has occurred in just the last year, and that development might suggest that energy prices play some role as well in the onrush of imports.
At the same time, Indian exports are strong. And the Indian manufacturing sector surely must derive considerable boost from foreign demand. We examined this proposition using some simple analysis with DLXVG3 software. Industrial production is, of course, a volume measure, so we deflated merchandise exports to express them in volume terms. We used the wholesale price index for India as our deflator. Year-on-year growth rates in the resulting export volume and in industrial production in manufacturing are shown in the accompanying graph. Correlation of the levels of these measures is a whopping 97% over the last 15 years. But the 12-month growth rates have little correlation. Still, the appearance of the graph give a strong hint that export growth is a driving force of industrial production in India.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">June 2004</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">Year Ago</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Balance, Billion Rupees</td>
<td>-117.20</td>
<td>-65.43</td>
<td>-54.56</td>
<td>-70.64</td>
<td>-662.86</td>
<td>-352.78</td>
<td>-340.21</td>
</tr>
<tr>
<td class="firstcol">Exports, Mo/Mo % Chg</td>
<td>3.4</td>
<td>4.9</td>
<td>-15.4</td>
<td>30.9</td>
<td>10.6</td>
<td>18.5</td>
<td>5.8</td>
</tr>
<tr class="odd">
<td class="firstcol">Imports, Mo/Mo % Chg</td>
<td>18.7</td>
<td>7.6</td>
<td>-1.0</td>
<td>39.3</td>
<td>20.6</td>
<td>16.3</td>
<td>5.2</td>
</tr>
</tbody>
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The Government of India today reported June trade data. The monthly deficit widened significantly to 117 billion rupees (seasonally adjusted by Haver Analytics) from 65 billion rupees in May. A surge in imports was the cause, although [...]

India's Trade Deficit Sets a Record in June

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Chain store sales ticked 0.2% higher last week following no change the prior period, according to the International Council of Shopping Centers (ICSC)-UBS.
So far in July sales are up 0.1% versus the June average which fell 0.8% from May.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM"> ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/17/04</th>
<th scope="col">07/10/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>439.2</td>
<td>438.5</td>
<td>3.3%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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Chain store sales ticked 0.2% higher last week following no change the prior period, according to the International Council of Shopping Centers (ICSC)-UBS. So far in July sales are up 0.1% versus the June average which fell 0.8% from [...]

Chain Store Sales Ticked Higher

Renewed supply chain pressures point to a rebound in global inflation ahead

Apart from Japan, Blue Chip forecasters look for further significant monetary policy easing

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

Even with expected tariff-induced increases in inflation, BCFF forecasters look for a more aggressive round of monetary easing

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

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The National Association for Business Economics expects that following a 2.8% gain in 2024, real GDP growth will slow to 1.3% this year, revised from 1.9% in the June survey and 1.4% in 2026, revised from 2.0%. Growth from Q4-to-Q4 is expected to slow to 0.7% in 2025 from 2.5% in 2024, then rise a minimally changed 1.9% next year. Quarterly GDP is expected to grow 0.6% in Q3’25 and 0.9% in Q4. In the first two quarters of 2026, real growth of 1.6% followed by 1.8% is expected, followed by 2.0% in both Q3’26 and Q4’26.

Real growth in personal consumption expenditures was reduced. Expected PCE growth in 2025 was shaved to 2.3% from 2.8%, and reduced to 1.4% from 2.8% in 2026. The projection for business fixed investment growth was little-changed at 1.6% this year followed by 0.9% in 2026. An expected 0.5% gain in residential fixed investment this year has been reduced from 1.1%, followed by 0.9% growth in 2026, reduced substantially from 2.4%. Government spending growth of 1.3% this year compares to 1.7% projected earlier, and 0.5% growth in 2026 lessened from 0.8%.

The net export deficit is expected to widen to $1.204 trillion in 2025, revised from $1.118, then narrow to $1.085 trillion in 2026, revised from $1.150 trillion expected earlier. Exports should increase 1.1% this year, revised from 2.3% expected earlier, then 1.6% in 2026, revised from 2.0%. Imports are projected to rise 4.7% in 2025, revised from 4.0%, then fall 0.9% in 2026, down sharply from up 1.7% as expected earlier. Inventory accumulation should rise this year to little-revised $55.0 from $39 billion in 2024, then ease to $40.0 billion in 2026, revised from $52.0 billion expected earlier.

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Housing starts are expected to steady at 1.36 million, then rise to 1.39 million in 2026, revised from 1.40 million. They have been trending lower since the 2021 peak of 1.60 million. Light vehicle sales should ease to 15.5 million units, revised from 16.0. then improve to 15.5 million next year, revised from 16.2 million. The average gain in payroll employment should soften to 91 million per month in the current year, revised from 115,000, then increase to 99,000 in 2026, revised from 125,000. Payrolls increased 216,000 in 2023. The unemployment rate in 2025 has been nudged up to 4.4% from 4.3% projected earlier. The jobless rate is now expected to rise to 4.7% in 2026, revised from 4.3%.

Inflation pressures are expected to eventually abate. After falling in 2024 to 2.7% (Q4/Q4), the increase in the CPI is forecast to first rise to 3.4% this year, revised from 3.0%, then fall to 2.6% in 2026, revised from 2.5% a 2.7%. These increases compare to a 7.1% rise in 2022. Price inflation, as measured by the PCE chain price index, is expected to rise to 3.1% in 2025, revised from 2.3%, then fall to an unrevised 2.3% in 2026. It hit 6.0% in 2022. The gain in the chain PCE price index excluding food & energy is projected to rise to 3.1% this year, revised from 2.8%, then fall to 2.4% in 2026. The index rose to its high of 5.2% in 2022. The projected cost of crude oil of $65 per barrel compares to $70 projected earlier. The $68 per barrel at the end of next year compares to $66 expected earlier, and $70 per barrel at the end of 2024.

Long-term interest rates are expected to ease. The forecast of 4.19% at the end of this year compares to 4.23% expected earlier, with 4.00% forecast at the end of next year compared to 4.06% previously projected. The Fed is expected to continue its easing of monetary policy. The Federal funds rate is forecast to decline to 3.88% at the end of 2025 from 4.37% at the end of 2024, then fall to an unrevised 3.38% by the end of 2026. After-tax corporate profits are predicted to rise 2.1% this year, revised from 2.7%, and a minimally-changed 3.3% next year.

The figures from the latest NABE report can be found in Haver's **SURVEYS** database.

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- Consumer spend growth is reduced.
- Business investment growth unchanged.
- Price inflation is forecast to pick up, then moderate.

NABE Forecasts Sharply Reduced Growth for 2025 & 2026

Winnie Tapasanun

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The Empire State Manufacturing Index of General Business Conditions decreased to -16.0 in June, down from -9.2 in May and -8.1 in April, according to the Empire State Manufacturing Survey released by the Federal Reserve Bank of New York. A reading of -6.0 for June had been expected in the Action Economics Forecast Survey. The unexpected decrease in the June index indicated that the business activity in New York State contracted for the fifth time in six months and to the lowest level since March; it was also down from -7.7 in June 2024. The percentage of respondents reporting an increase in general business conditions was 16.9% in June, down from 28.3% in May; the percentage reporting a decrease was 32.9%, down from May’s 37.5%. The latest survey was conducted between June 2 and June 9.

The headline index reflects the answer to a single question concerning the state of economic activity. Haver Analytics calculates a composite index from the five major components, which is comparable to the ISM manufacturing index. This calculated index dropped to 48.6 in June, down from 51.1 in May and 49.3 in April, indicating contraction for the third month in four and to the lowest level since October. It was up from 48.5 in June 2024 and a low of 42.5 in January 2024; however, registering below 50, the breakeven point between expansion and contraction. The index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each).

In the latest survey, the new orders index dropped to -14.2 in June after a 15.8-point jump to 7.0 in May, indicating new orders contracted for the third time in four months and to the lowest level since March; nevertheless, it was an improvement from a low of -35.0 in January 2024. The shipments index slid to a three-month-low -7.2 in June following a 6.4-point rise to 3.5 in May, but it was up from a low of -22.7 in April 2024. The unfilled orders index decreased to -8.3 in June after a 0.7-point increase to 4.8 in May, indicating unfilled orders contracted this month following two successive months of expansion; the index reached a low of -24.2 in January 2024. The inventories index fell to 0.9 in June after a 2.6-point decline to 4.8 in May, suggesting that inventories expanded at the slowest pace in eight straight months of expansion. Meanwhile, the delivery times index increased to 1.8 in June, the highest reading since February, from 1.0 in May, with 14.7% of respondents reporting higher delivery times and 12.8% of respondents reporting lower delivery times.

On the labor front, the number of employees index rebounded to a positive 4.7 in June after a 2.5-point decline to -5.1 in May, showing employment expanded for the first time since January and at the highest level since December 2022. The index was up from a low of -9.7 in December 2023. A higher 14.6% of respondents reported an increase in employment in June while a lessened 9.9% reported a decline. The average workweek index increased to -1.5 in June, the highest reading since February, from -3.4 in May; however, having remained in negative territory for the seventh consecutive month.

Inflation indicators were mixed this month. The prices paid index dropped to 46.8 in June, the lowest level since March, following an 8.2-point rise to 59.0 in May. The index was up from its recent low of 21.1 in December and a low of 16.7 in December 2023 but significantly down from a high of 86.4 in April 2022. A 49.5% of respondents reported higher prices paid in June while only 2.8% reported lower prices paid. The prices received index rose to 26.6 in June following a 5.8-point drop to 22.9 in May. The index was up from its recent low of 4.2 in December and a low of 3.9 in July 2023 but well below a peak of 56.1 in March 2022. An increased 29.4% of respondents reported higher prices received in June while a lessened 2.8% reported lower prices received.

Firms grew optimistic about the future business outlook in the latest survey. The index for future business conditions jumped to 21.2 in June, the highest reading since February, from -2.0 in May and a near-record-low -7.4 in April, with an increased 38.4% of respondents expecting business conditions to improve in the next six months. Future new orders (26.1 vs. -2.7) and shipments (23.0 vs. -3.4) expanded in June after contracting in May. Growth in employment (10.4 vs. 11.6) weakened slightly in June vs. May but still showed continued expansion. Capital spending plans remained soft, with expectations for capital spending falling to -7.3 in June, the lowest reading since May 2020, from -6.7 in May. Expected prices paid fell to 59.6 in June, the lowest level since March, from 66.7 in May, while expected prices received rebounded to 41.3 from May’s five-month-low 35.2.

The headline index reflects the answer to only one question concerning general business conditions and is not calculated from the components. The indexes in this report are diffusion indexes and measure the percentage of respondents indicating an increase minus the percentage indicating a decrease with zero separating expansion from contraction.

The New York Fed survey data are contained in Haver’s **SURVEYS** database. The expectations series is in Haver’s **AS1REPNA** database.

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- June General Business Conditions Index down 6.8 pts. to -16.0.
- Negative numbers for new orders (-14.2), shipments (-7.2), and unfilled orders (-8.3), but positive readings for employment (4.7, highest since Dec. ’22) and inventories (0.9).
- Current prices paid drops 12.2 pts. to a three-month-low 46.8.
- Firms are optimistic about the future business outlook, w/ Future Business Conditions Index up to a four-month-high 21.2 and future prices paid down to a three-month-low 59.6.

U.S. Empire State Manufacturing Index Unexpectedly Falls in June to a Three-Month Low

Tian Yong Woon

This week, we focus on India’s economic developments, which continue to demonstrate resilience amid persistent global headwinds. In Q1, GDP growth accelerated to its fastest pace in a year, surpassing expectations. Services remained the primary growth driver, bolstered by gains in construction and manufacturing (chart 1). Despite widespread global downgrades, the World Bank still expects India to be the fastest-growing major economy in 2025.

While services have long underpinned India’s growth, the country is gradually pivoting toward manufacturing, including higher-end, IP-intensive sectors. Progress has been made—such as attracting iPhone production—but manufacturing has yet to significantly shift the composition of GDP, which remains heavily weighted toward services (chart 2). India’s rising role as a “China Plus One” destination has enhanced its global appeal, though the shift has drawn criticism from former US President Trump, who favours bringing manufacturing back to the US.

India’s strategic ties with both the US and China require a careful balancing act. The US is India’s top export destination, with major exports including pharmaceuticals, jewellery, and smartphones (chart 3). At the same time, India relies heavily on China for critical inputs such as Key Starting Materials (KSMs) and Active Pharmaceutical Ingredients (APIs), both vital to its pharmaceutical sector (chart 4). As a result, India is seeking to deepen trade relations with the US while avoiding actions that might provoke China. Trade negotiations with the US are reportedly progressing, with an interim deal possible ahead of Trump’s July 9 tariff deadline.

On the monetary front, the Reserve Bank of India cut policy rates by 50 bps in June and announced a phased 100 bps reduction in the Cash Reserve Ratio (CRR), in response to falling inflation and risks of weaker demand (chart 5). As a partial consequence, the rupee has underperformed its Asian peers—though the primary pressures stem from persistent foreign outflows and narrower interest rate differentials (chart 6).

**India’s economic developments**
India’s economy grew faster than expected in calendar Q1, with growth accelerating to 7.4% y/y—exceeding economists’ expectations and marking the fastest growth rate in a year. By sector, and based on gross value added at basic prices, services remained the primary growth driver, as shown in chart 1. However, contributions from the construction and manufacturing sectors also improved. More broadly, many investors and economists continue to view India as one of the few economies expected to deliver robust growth this year. This remains a rare distinction, given the growth-dampening effects of US tariffs and the associated retaliatory actions. That said, recent US-China breakthroughs on trade-related agreements have eased much of this latent risk.

Despite enacting widespread forecast downgrades in its latest projections just last week, the World Bank still expects India to post the fastest growth among major economies in 2025. Nonetheless, India’s outlook has been somewhat dampened by weaker export potential and slowing investment amid rising global trade barriers. Similarly, panellists in our recent Blue Chip Economic Indicators survey continued to rank India as the top-growing major economy among those covered.


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Over the years, India has positioned itself as a services-oriented economy, a strategy that initially offered a degree of insulation from external shocks. More recently, however, the country has begun shifting its focus toward manufacturing—not only at the low- and mid-range levels but also in high-end, intellectual property (IP)-intensive sectors. In support of this pivot, India has been gradually improving its IP protection framework. Nonetheless, it remains on the US Trade Representative’s 2025 Priority Watch List, partly due to what has been described as “inconsistent” progress on IP protection and enforcement. In more traditional forms of manufacturing, India has made several high-profile strides, including securing production capacity for iPhones. However, despite such headline-grabbing developments, the shift has yet to meaningfully alter the structure of India’s GDP (chart 2), which remains heavily services-dependent—likely due to the limited scale of manufacturing gains thus far. 

India has also emerged as a key beneficiary of the “China Plus One” strategy, as global firms seek to diversify production away from China amid rising geopolitical tensions, particularly with the US. These concerns—recently reinforced by US policy actions—have helped position India as a partial but increasingly viable alternative. That said, the shift has not been without controversy. The redirection of US-linked manufacturing capacity toward India has drawn criticism from former President Donald Trump, who has advocated for bringing such production back to American soil—even though the current US manufacturing landscape may be ill-equipped to fully absorb it.

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**India’s relationship with the US and China**
Amid ongoing US-China tensions, India finds itself in a complex—but potentially advantageous—position. On one hand, India is heavily reliant on the US as a key export market, with the US currently being its top export destination. On the other hand, India depends on China for critical inputs across several major sectors. Among India’s key exports to the US are pharmaceutical products, jewellery, and, more recently—as mentioned earlier—smartphones (see chart 3). Given this dual dependency, it is unsurprising that India is eager to maintain constructive trade relations with the US. India-US trade talks are reportedly progressing well, with an interim deal likely before President Trump’s 90-day tariff pause ends on July 9.

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At the same time, India remains highly dependent on China for low-level inputs, which may temper its willingness to appear too closely aligned with the US or to pursue a trade deal perceived as unfavourable to China. This strategic caution stems from India’s reliance on key material imports from China, including rare earth elements (REEs), recently spotlighted by China’s export restrictions. REEs are critical to several industries, notably automotive manufacturing. India is also heavily dependent on China for key starting materials (KSMs) and active pharmaceutical ingredients (APIs), both essential to its large and growing pharmaceutical export sector (see chart 4). As a result, India must carefully balance its strategic interests—deepening ties with the US while avoiding actions that could provoke a negative response from China amid rising geopolitical tensions.

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**India’s financial and monetary developments**
In response to the potentially demand-dampening effects of ongoing US tariffs, the Reserve Bank of India (RBI) cut policy rates by a larger-than-expected 50 bps at its June meeting. The move was supported by a sharp decline in CPI inflation, which fell well below the RBI’s 4% target amid easing commodity prices. However, the central bank warned that it now has “very limited” policy space left to support growth, a concern reflected in its shift in policy stance from “accommodative” to “neutral.” In addition, the RBI announced a 100 bps cut to the Cash Reserve Ratio (CRR), to be implemented in four tranches of 25 bps each from September to November, ultimately bringing the CRR down to 3%. This measure aims to release additional liquidity into the financial system.

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Lastly, we turn to the Indian rupee, which has underperformed relative to its Asian peers so far this year (see chart 6), despite the broad-based weakening of the US dollar. Weighing on the rupee have been persistent foreign equity outflows—substantial on a year-to-date basis—along with some net FDI outflows and other external pressures. The RBI’s recent interest rate cuts, though necessary to support the domestic economy, have also reduced the rupee’s appeal by narrowing interest rate differentials. Investor sentiment was further shaken during the previous wave of US-China tensions, prompting capital flight from emerging markets, including India. While some of that risk aversion has eased amid a temporary cooling in US-China rhetoric, caution remains warranted, as the US appears poised to announce a new round of unilateral tariffs in the coming weeks.

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Asia

Economic Letter from Asia: India Rising

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The National Association of Realtors' Fixed Rate Mortgage Housing Affordability Index (HAI) fell 2.3% (+6.2% y/y) in April to 101.0 after rising moderately in each of the prior four months. The recent high was 104.9 in September. The level of home affordability remained 12.3% higher than its low of 89.9 in October 2023. It remains 43.6% below the high of 179.2 in April 2020.

The decline in affordability in April occurred as the median price of an existing single-family home rose 2.6% (1.7% y/y) to $418,000, and mortgage rates rose to 6.81% from 6.73% in March. The price compared to the record $432,900 in June 2024. The rise in mortgage rates left them up from a recent low of 6.26% in September of last year and below a 7.70% high in October of 2023. It remained well above a December 2020 low of 2.73%. These changes raised the principal & interest payment by 3.5% (-1.0% y/y) to $2,182 per month. That was well above the most recent low of $984 in February 2020. Monthly mortgage payments averaged a higher 24.8% of income during April. They remained up from a low of 14.0% of income in April 2020.

The rise in housing costs in April was accompanied by improvement in median family income. It increased 1.0% (5.1% y/y) to a record $105,791 after rising 0.4% in each of the prior two months.

Housing affordability declined m/m across the country in April. The index fell 3.7% (+4.2% y/y) to 130.1 in the Midwest. It remains the most affordable region of the country. In the South, the index declined 1.1% (+8.3% y/y) to 105.6 and the affordability index in the Northeast declined 3.9% (+0.5% y/y) to 92.0. In the West, where homes are the least affordable, the index fell 1.1% (+7.7% y/y) to 71.0 in April.

The Housing Affordability Index (HAI) equals 100 when a median-income borrower qualifies for an 80% mortgage on a median-priced existing single-family home. The HAI had exceeded 100 in each month since July 1990 and reached its all-time high of 213.3 in January 2013.

Data on Housing Affordability can be found in Haver’s **REALTOR** database. Median home sales prices are also available in **USECON**. Higher frequency interest rate data are found in **SURVEYS**, **WEEKLY**, and **DAILY**.

**Inflation Expectations** from the Federal Reserve Bank of Cleveland is available [here](https://www.clevelandfed.org/indicators-and-data/inflation-expectations).

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- Home prices & mortgage rates rise.
- Median income improves.
- Affordability falls across country.

U.S. Housing Affordability Declines in April

Andrew Cates

**The Blue Chip growth consensus**
Our first chart this week depicting shifts in consensus growth expectations highlights significant divergences in the economic outlook over the past six months and the more recent one-month period. Major downward revisions over the past six months have prominently affected economies such as South Korea, Mexico, Australia and Canada, indicating heightened vulnerability to external shocks, particularly from disruptions linked to intensified US trade policies. Conversely, China has shown a slight improvement, possibly due to an effective policy response. The recent one-month adjustments, however, exhibit much smaller and generally modest upward revisions, suggesting some stabilization or cautious optimism amid ongoing uncertainties.

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**The Blue Chip inflation consensus**
This next chart tracking consensus forecasts for CPI inflation in 2025 across the US, Euro area, and China reveals a striking divergence in inflation expectations. In the US, inflation projections rose steadily through late 2024 and early 2025, peaking above 3% before easing slightly. This upward drift likely reflects the lagged impact of the US economy's relative strength in 2024, including robust consumer demand and tight labour markets, rather than more recent tariff-related pressures. By contrast, Euro area forecasts have remained relatively low and stable, suggesting more subdued domestic dynamics and tighter policy. Meanwhile, China's CPI forecast has fallen sharply over the same period pointing to deepening demand-side weakness and lingering deflationary risks.

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**Supply chain pressures** 
Looking ahead, the tight correlation between the New York Fed’s Global Supply Chain Pressure Index and producer price inflation for advanced economies underscores the risks posed by US trade policies. As supply chain pressures potentially intensify—partly due to renewed protectionist measures—global producer price pressures could again escalate, creating renewed inflationary challenges and complicating central bank policy calibration.

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**US policy uncertainty**
As the chart below illustrates, US monetary policy uncertainty remains elevated, even as it has eased from its recent peaks. This persistent uncertainty continues to drive market volatility, reflecting investor unease over the Federal Reserve’s future policy path in the face of tariff-related disruptions and inflationary pressures. The chart specifically shows a potentially valuable tool for tracking this uncertainty – the Kansas City Fed’s measure of Policy Rate Uncertainty (KC PRU). This index is constructed from the prices of financial options linked to future short-term interest rates—rates that closely track the federal funds rate—and captures one-year-ahead uncertainty at a daily frequency dating back to the late 1980s.

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**The UK labour market** 
The UK labour market data released this week revealed a sharp deterioration, with substantial job losses indicated by payroll data alongside a rising unemployment rate. This surprising weakness not only signals immediate economic challenges but also complicates the BoE’s monetary policy response at a time when policymakers face persistent inflationary pressures and broader macroeconomic uncertainty.

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**Energy and growth**
Over the longer term, the strong historical correlation between primary energy consumption and GDP growth in advanced economies underscores the critical role of energy in sustaining economic stability. Persistently high real energy prices and complex energy transition processes present significant obstacles, particularly for energy-intensive economies like the UK, which seek sustainable growth trajectories amid heightened geopolitical and trade uncertainties.

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Financial markets have experienced considerable gyrations in recent weeks, reflecting substantial shifts in investor expectations and heightened uncertainty, largely driven by ongoing US tariff policies. Over the past six months, consensus growth forecasts have seen notable downward revisions across most major economies, though these have been partially offset by modest upward revisions in the past month (chart 1). Concurrently, consensus inflation projections have diverged significantly, with upward pressures in the US contrasting with deflationary risks in China (chart 2). Compounding these US issues, renewed protectionism appears to be pressuring global supply chains again, potentially increasing inflation risks and sustaining elevated monetary policy uncertainty (charts 3 and 4). This week's particularly weak UK employment data highlight immediate domestic economic fragility, while longer-term economic stability remains challenged by persistently high real energy prices and complexities surrounding the energy transition (charts 5 and 6).

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Economy in Brief: July 2004

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Leading Indicators Fell

Leading Indicators Fell

Mortgage Applications Slump

Consumer's 1Q Debt Service Burden Lower, But ...

Consumer's 1Q Debt Service Burden Lower, But ...

Demographic Shifts in Japan

India's Trade Deficit Sets a Record in June

Chain Store Sales Ticked Higher