Tom Moeller

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090722a.jpg">
In its latest report, the Mortgage Bankers Association indicated that mortgage applications overall increased 2.8% but that was the weakest increase in the last three weeks. As a result, applications remained near the lowest level since last November.
Earlier indications of improved home buying activity faded this month. Purchase applications rose just 1.3% last week after the 9.4% decline during the prior period. For the month so far applications are down slightly after the 3.2% increase during June. Nevertheless, since the early-February low purchase applications have risen 14% as new and existing home sales have recovered.
During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage. Moreover, during the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Though it ticked up in the latest week or two, the interest in refinancing an existing mortgage remained quite low. Applications to refinance rose 4.0% after even stronger increases during the prior two weeks. Despite these gains, however, refinancings for July so far are down 5.6% from June and near the lowest level since November. Since their peak in January, refinance applications have fallen by three-quarters.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090722b.jpg">
Since the beginning of this year, fixed-rate mortgage applications have fallen by slightly more than one-half while adjustable-rate mortgages have doubled. The number of conventional loans has fallen roughly two-thirds while gov&#39;t backed loans have fallen nearly 40%.
The end of the mortgage financing boom can be traced, in part, to the rise in interest rates. The effective interest rate on a conventional 15-year mortgage rose last week to 5.06% and for the month has averaged 5.00%, up from the April low of 4.69%. For a 30-year mortgage, the rate also rose last week to 5.55%. Though down slightly from June, rates were up from the 4.81% March low. Interest rates on 15- and 30-year mortgages are closely correlated (&gt;90%) with the rate on 10-year Treasury securities. Rates on adjustable 1-Year mortgages averaged 6.55% this month versus the low near 6.0% during January. Nevertheless, the rate remained down from the 7.07% peak reached last fall.
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 covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.The figures for weekly mortgage applications are available in Haver&#39;s SURVEYW database.
Has Greater Globalization Made Forecasting Inflation More Difficult? from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/research/eclett/2009/el0905.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">07/17/09</th>
<th scope="col">07/10/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>528.9</td>
<td>514.4</td>
<td>8.0%</td>
<td>642.9</td>
<td>652.6</td>
<td>584.2</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>262.1</td>
<td>258.8</td>
<td>-21.9%</td>
<td>345.4</td>
<td>424.9</td>
<td>406.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>2,089.7</td>
<td>2,009.4</td>
<td>50.0%</td>
<td>2,394.1</td>
<td>1,997.9</td>
<td>1,634.0</td>
</tr>
</tbody>
</table>
</body>
</html>

In its latest report, the Mortgage Bankers Association indicated that mortgage applications overall increased 2.8% but that was the weakest increase in the last three weeks. As a result, applications remained near the lowest level [...]

U.S. Weekly Mortgage Applications Rise But Trend Is Weak

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721a.jpg" align="right" border="0" height="265" width="353">
The Chicago Federal Reserve Bank reported that its June
National Activity Index rose further to the highest level since July of
last year. The reading of -1.80 was up from May and both figures were
higher than the series' low of -3.99 reached this past January. Since
1970 there has been a 74% correlation between the level of the index
and the q/q change in real GDP.
The three-month moving average of the index also
improved to its highest level since August.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_july2009.pdf">here.</a><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721b.jpg" align="right" border="0" height="265" width="353">
The production and income components made the largest positive
contributions to the JUnel CFNAI. Twenty-two of the index components
had a positive influence while 63 made a negative contribution.
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during May to its lowest level since
1994. Indicators for the auto, steel, and machinery each fell. The
Chicago Federal Reserve figures are available in Haver's SURVEYS
database.
Today's testimony by Fed Chairman Ben S. Bernanke is available
<a href="http://www.federalreserve.gov/newsevents/testimony/DBBB5C9F26B6440AA4A21E104A61577A.htm">here.</a>




<table border="0" cellspacing="0" width="100%">
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<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.80</td>
<td>-2.30</td>
<td>-0.98</td>
<td>-1.76</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-2.12</td>
<td>-2.65</td>
<td>-1.07</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

The Chicago Federal Reserve Bank reported that its June National Activity Index rose further to the highest level since July of last year. The reading of -1.80 was up from May and both figures were higher than the series' low of -3.99 [...]

Chicago Fed Index Indicates That Economic Activity Improved Further

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721e.jpg" width="353">
The strengthening of chain store sales around the July 4th holiday faded as the month progressed. During the latest week, chain store sales rose 0.5% but that recovered just half of the prior week&#39;s decline. So far in July sales have increased 0.7% since June after that month&#39;s 0.3% decline and a 0.2% May downtick.
During the last ten years there has been a 69% correlation between the year-to-year growth in chain store sales and the growth in general merchandise sales. The weekly figures are available in Haver&#39;s SURVEYW database.
The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Prospects for improvement in sales seems limited. The leading indicator of sales ticked up 0.3% (-2.4% y/y) during the latest week and it has been flat-to-lower all this year.
Exit Strategies for the Federal Reserve from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/econ/bullard/PhiladelphiaGIC28june2009FINAL653pm.pdf">here.</a>

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">07/18/09</th>
<th scope="col">07/11/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>491.7</td>
<td>489.4</td>
<td>-0.3%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>


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The strengthening of chain store sales around the July 4th holiday faded as the month progressed. During the latest week, chain store sales rose 0.5% but that recovered just half of the prior week's decline. So far in July sales have [...]

Weekly Chain Store Sales Remain Flat

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721c.jpg" width="353">
Recession in the U.S. economy prompted a lower retail price for gasoline last week. The pump price for regular gasoline fell to an average $2.46 per gallon, down twenty-three cents from last month&#39;s high. Nevertheless, prices remained up by eighty-five cents (53%) from the December low. In the cash market, gasoline prices yesterday continued to rally off last week&#39;s low. At $1.75 per gallon the price was up from the low of $1.60. The figures are reported by the U.S. Department of Energy and can be found in Haver&#39;s WEEKLY &amp; DAILY databases.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721d.jpg" width="353">
Crude oil prices also fell last week, but not by as much as gasoline costs. Light sweet crude oil prices (WTI) fell to $61.27 per barrel, off nearly ten dollars from last week&#39;s high of $70.83. Yesterday the one-month futures price for light sweet crude oil recovered and moved up to $63.98 per barrel. Prices had reached a daily high of $72.68.
The ongoing recession lowered the demand for motor gasoline by 2.2% y/y during the last four weeks. The rate of decline has moderated from the 4.8% shortfall this past autumn. Demand for distillate also is off by a sharp 21.5% though residual fuel oil demand has moved higher. Finally, oil remains plentiful as evidenced by a 13.7% y/y rise in inventories of crude oil &amp; petroleum products. The figures on crude oil inventories are available in Haver&#39;s OILWKLY database.
The weakening of natural gas prices stabilized last week at the seven-year low. Last week&#39;s average price of $3.28 per mmbtu (-70.8% y/y) was down by three-quarters from the high reached in early-July of $13.19/mmbtu.

<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/@W4/@W4.HTM">Weekly Prices</a></th>
<th scope="col">07/20/09</th>
<th scope="col">07/13/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.46</td>
<td>2.53</td>
<td>-39.4%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil, WTI&nbsp; ($ per bbl.)</td>
<td>61.27</td>
<td>61.48</td>
<td>-54.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
</body>
</html>

Recession in the U.S. economy prompted a lower retail price for gasoline last week. The pump price for regular gasoline fell to an average $2.46 per gallon, down twenty-three cents from last month's high. Nevertheless, prices remained [...]

Gasoline Prices Fall Again

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721a.jpg" align="right" border="0" height="265" width="353">
The Chicago Federal Reserve Bank reported that its June
National Activity Index rose further to the highest level since July of
last year. The reading of -1.80 was up from May and both figures were
higher than the series' low of -3.99 reached this past January. Since
1970 there has been a 74% correlation between the level of the index
and the q/q change in real GDP.
The three-month moving average of the index also
improved to its highest level since August.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_july2009.pdf">here.</a>
The production and income components made the largest positive
contributions to the JUnel CFNAI. Twenty-two of the index components
had a positive influence while 63 made a negative contribution.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721b.jpg" align="right" border="0" height="265" width="353">
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during May to its lowest level since
1994. Indicators for the auto, steel, and machinery each fell. The
Chicago Federal Reserve figures are available in Haver's SURVEYS
database.
Today's testimony by Fed Chairman Ben S. Bernanke is available
<a href="http://www.federalreserve.gov/newsevents/testimony/DBBB5C9F26B6440AA4A21E104A61577A.htm">here.</a>




<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.80</td>
<td>-2.30</td>
<td>-0.98</td>
<td>-1.76</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-2.12</td>
<td>-2.65</td>
<td>-1.07</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body></html>

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721a.jpg" align="right" border="0" height="265" width="353">
The Chicago Federal Reserve Bank reported that its June
National Activity Index rose further to the highest level since July of
last year. The reading of -1.80 was up from May and both figures were
higher than the series' low of -3.99 reached this past January. Since
1970 there has been a 74% correlation between the level of the index
and the q/q change in real GDP.
The three-month moving average of the index also
improved to its highest level since August.
An index level at or below -0.70 typically has indicated
negative U.S. economic growth. A zero value of the CFNAI indicates that
the economy is expanding at its historical trend rate of growth of
roughly 3%. The complete CFNAI report is available <a href="http://www.chicagofed.org/economic_research_and_data/files/cfnai_july2009.pdf">here.</a>
The production and income components made the largest positive
contributions to the JUnel CFNAI. Twenty-two of the index components
had a positive influence while 63 made a negative contribution.
<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721b.jpg" align="right" border="0" height="265" width="353">
The CFNAI is a weighted average of 85 indicators of economic
activity. The indicators reflect activity in the following categories:
production &amp; income, the labor market, personal consumption
&amp; housing, manufacturing &amp; trade sales, and inventories
&amp; orders.
In a separate survey, the Chicago Fed indicated that its
Midwest manufacturing index fell during May to its lowest level since
1994. Indicators for the auto, steel, and machinery each fell. The
Chicago Federal Reserve figures are available in Haver's SURVEYS
database.
Today's testimony by Fed Chairman Ben S. Bernanke is available
<a href="http://www.federalreserve.gov/newsevents/testimony/DBBB5C9F26B6440AA4A21E104A61577A.htm">here.</a>




<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S503/@S503.HTM">Chicago
Fed</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June '08</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">CFNAI</td>
<td>-1.80</td>
<td>-2.30</td>
<td>-0.98</td>
<td>-1.76</td>
<td>-0.35</td>
<td>0.05</td>
</tr>
<tr>
<td class="firstcol">&nbsp; 3-Month Moving
Average</td>
<td>-2.12</td>
<td>-2.65</td>
<td>-1.07</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
Gasoline Prices Fall Again 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721c.jpg" align="left" border="0" height="265" width="353">
Recession in the U.S. economy prompted a lower retail price
for gasoline last week. The pump price for regular gasoline fell
to an average $2.46 per gallon, down twenty-three cents from last
month's high. Nevertheless, prices remained up by eighty-five cents
(53%) from the December low. In the cash market, gasoline prices
yesterday continued to rally off last week's low. At $1.75 per gallon
the price was up from the low of $1.60. The figures are reported by the
U.S. Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721d.jpg" align="right" border="0" height="265" width="353">
Crude oil prices also fell last week, but
not by as much as gasoline costs. Light sweet crude oil prices (WTI)
fell to $61.27 per barrel, off nearly ten dollars from last week's high
of $70.83. Yesterday the one-month futures price for light sweet crude
oil recovered and moved up to $63.98 per barrel. Prices had reached a
daily high of $72.68.
The ongoing recession lowered the demand for motor gasoline by
2.2% y/y during the last four weeks. The rate of decline has moderated
from the 4.8% shortfall this past autumn. Demand for distillate also is
off by a sharp 21.5% though residual fuel oil demand has moved higher.
Finally, oil remains plentiful as evidenced by a 13.7% y/y rise in
inventories of crude oil &amp; petroleum products. The figures on
crude oil inventories are available in Haver's OILWKLY database.
The weakening of natural gas prices stabilized last week at
the seven-year low. Last week's average price of $3.28 per mmbtu
(-70.8% y/y) was down by three-quarters from the high reached in
early-July of $13.19/mmbtu.

<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/@W4/@W4.HTM">Weekly
Prices</a></th>
<th scope="col">07/20/09</th>
<th scope="col">07/13/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Retail Regular Gasoline ($ per
Gallon, Regular)</td>
<td>2.46</td>
<td>2.53</td>
<td>-39.4%</td>
<td>3.25</td>
<td>2.80</td>
<td>2.57</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>61.27</td>
<td>61.48</td>
<td>-54.7%</td>
<td>100.16</td>
<td>72.25</td>
<td>66.12</td>
</tr>
</tbody>
</table>
Weekly Chain Store Sales Remain
Flat 
by <a href="/comment/Moeller.html">Tom
Moeller</a> July 21, 2009


<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090721e.jpg" align="left" border="0" height="265" width="353">
The strengthening of chain store sales around the July 4th
holiday faded as the month progressed. During the latest week, chain
store sales rose 0.5% but that recovered just half of the prior week's
decline. So far in July sales have increased 0.7% since June after that
month's 0.3% decline and a 0.2% May downtick.
During the last ten years there has been a 69% correlation
between the year-to-year growth in chain store sales and the growth in
general merchandise sales. The weekly figures are available
in Haver's SURVEYW database.
The ICSC-Goldman
Sachs retail chain-store sales index is constructed using the
same-store sales (stores open for one year) reported by 78 stores of
seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney,
Sears and Wal-Mart.


Prospects for improvement in sales seems limited. The leading
indicator of sales ticked up 0.3% (-2.4% y/y) during the latest week
and it has been flat-to-lower all this year.
Exit Strategies for the Federal Reserve
from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/econ/bullard/PhiladelphiaGIC28june2009FINAL653pm.pdf">here.</a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS
(SA, 1977=100)</a></th>
<th scope="col">07/18/09</th>
<th scope="col">07/11/09</th>
<th scope="col">Y/Y</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain
Store Sales</td>
<td>491.7</td>
<td>489.4</td>
<td>-0.3%</td>
<td>1.4%</td>
<td>2.8%</td>
<td>3.3%</td>
</tr>
</tbody>
</table>
</body></html>

Chicago Fed Index Indicates ThatEconomic Activity Improved Further

Robert Brusca

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<img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090720g.jpg" align="left" border="0" height="265" width="353">
Industrial orders in Italy made a slight bounce in May. French
orders fell after a slight bounce in April. Neither shows any sign of
upward momentum and the downward momentum has only just been trimmed if
we compare 3-month growth rates to 12-month growth rates. 
What is interesting is the very different performance in foreign
orders as between Italy and France and Germany. Germany is showing some
very substantial recovery in foreign-sourced orders. But it Italy,
foreign order are falling at an accelerating pace through May. In
France, foreign orders have shown a clear patterns of progress with the
three-month growth rate reduced to an annual pace of -9.7% compared to
-24% Yr/Yr. 
Whatever progress is being experienced in Europe, it is irregular.
Clearly some economies in the Zone are doing better than others despite
the common currency regime - and that is true for sales overseas
underlining the that exchange rates are not the only factor in the
success of foreign sales efforts. The more variance there is across
e-Zone countries in their respective economic performances, the more it
will wear on the fragile e-Zone area where talk of integration is tough
despite member countries efforts to continue to go it alone on fiscal
policy. Europe still has a recession and still has some divisive
political forces to weather. And yet more European &#8216;integration&#8217; lies
ahead. 

<table border="0" cellspacing="0" width="100%">

</table>
Italy Orders<table border="0" cellspacing="0" width="100%">
<colgroup></colgroup>
<thead>
<tr>

</tr>
</thead>
<tbody>
<tr class="even">
<td class="firstcol">Saar exept m/m</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.4%</td>
<td>-3.6%</td>
<td>-2.6%</td>
<td>-20.9%</td>
<td>-24.3%</td>
<td>-29.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>0.2%</td>
<td>-2.9%</td>
<td>-9.3%</td>
<td>-39.4%</td>
<td>-27.5%</td>
<td>-33.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic</td>
<td>0.5%</td>
<td>-3.9%</td>
<td>1.0%</td>
<td>-9.3%</td>
<td>-22.7%</td>
<td>-26.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Sales</td>
<td>-1.1%</td>
<td>-0.1%</td>
<td>-0.7%</td>
<td>-7.3%</td>
<td>-22.3%</td>
<td>-21.9%</td>
</tr>
<tr>
<td colspan="7">French Orders</td>
</tr>
<tr>
<td class="firstcol">Saar exept m/m</td>
<td>May-09</td>
<td>Apr-09</td>
<td>Mar-09</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
</tr>
<tr class="odd">
<td class="firstcol">Total</td>
<td>-1.1%</td>
<td>0.6%</td>
<td>-5.7%</td>
<td>-22.3%</td>
<td>-9.2%</td>
<td>-23.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Foreign</td>
<td>0.4%</td>
<td>6.5%</td>
<td>-8.8%</td>
<td>-9.7%</td>
<td>-12.4%</td>
<td>-27.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">IP xConstruct</td>
<td>2.4%</td>
<td>-0.6%</td>
<td>-1.4%</td>
<td>1.4%</td>
<td>-15.1%</td>
<td>-15.0%</td>
</tr>
</tbody>
</table>
</body></html>

Industrial orders in Italy made a slight bounce in May. French orders fell after a slight bounce in April. Neither shows any sign of upward momentum and the downward momentum has only just been trimmed if we compare 3-month growth [...]

Industrial Orders Trends Begin To Turn...Ever So Slowly

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<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090720e.jpg">
The Conference Board&#39;s Index of Leading Economic Indicators continued to suggest a pending economic recovery. The June composite index of leaders rose another 0.7% after gains of 1.3% (upwardly revised) and 1.0% during the prior two months. The combined 3.0% rise during those three months was the strongest since early 2002 while the index itself was at the highest level since last July. The leading index is based on actual reports for eight economic data series. The Conference Board initially estimates two series, orders for consumer goods and orders for capital goods.
For the third straight month, nearly three quarters of the ten components of the leading index increased with the largest positive contributions coming from a steeper yield curve, higher building permits and higher stock prices. The money supply and consumer expectations made slight negative contributions.
Again suggesting that the rate of decline in the economy is slowing were the coincident indicators. They fell 0.2%, about as they have for three consecutive months. These compare with monthly declines of 0.6%-to-1.1% dating back to September. The negative contributions from lower employment and production have eased. The remaining two component series actually rose during June, led by very slight gains in real disposable income and business sales. Over the last ten years there has been a 76% correlation between this y/y change and real GDP.<img align="right" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/090720f.jpg">
In a sign that excesses in the U.S. economy are diminishing, the lagging index fell for the sixth month in the last seven. The declines have been paced by a longer duration of unemployment, lower commercial and industrial loans and lower consumer installment credit. The ratio of coincident-to-lagging indicators (a measure of economic excess) rose m/m to the highest level since December.
The Conference Board figures are available in Haver&#39;s BCI database. 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.
World Economic Outlook Update; Contractionary Forces Receding But Weak Recovery Ahead from the international Monetary Fund can be found <a href="http://www.imf.org/external/pubs/ft/weo/2009/update/02/index.htm">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><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">April</th>
<th scope="col">March 6-Month % (AR)</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
<th scope="col">2006</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Leading</td>
<td>0.7</td>
<td>1.3</td>
<td>1.0</td>
<td>4.1</td>
<td>-2.8</td>
<td>-0.3</td>
<td>1.5</td>
</tr>
<tr>
<td class="firstcol">Coincident</td>
<td>-0.2</td>
<td>-0.3</td>
<td>-0.7</td>
<td>-5.9</td>
<td>-0.8</td>
<td>1.6</td>
<td>2.5</td>
</tr>
<tr class="odd">
<td class="firstcol">Lagging</td>
<td>-0.2</td>
<td>-0.8</td>
<td>-0.6</td>
<td>-5.9</td>
<td>2.9</td>
<td>2.8</td>
<td>3.3</td>
</tr>
</tbody>
</table>


</html>

The Conference Board's Index of Leading Economic Indicators continued to suggest a pending economic recovery. The June composite index of leaders rose another 0.7% after gains of 1.3% (upwardly revised) and 1.0% during the prior two [...]

U.S. Leading Indicators Rise For A Third Month Signaling Economic Recovery

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

250501Z1.jpg

**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

250501Z2.jpg

**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

250501Z3.jpg

**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

250501Z4.jpg

**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

250501Z5.jpg

**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

250501Z6.jpg

Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

<iframe style="border-radius:12px" src="https://open.spotify.com/embed/episode/3PzXXKrkHcwtOLipohEdnB?utm_source=generator" width="100%" height="152" frameBorder="0" allowfullscreen="" allow="autoplay; clipboard-write; encrypted-media; fullscreen; picture-in-picture" loading="lazy"></iframe>

Charts of the Week: Tariff Truce, Tenuous Trust

250501J5.jpg

250501K5.jpg

The ISM Purchasing Managers Index of activity in the manufacturing sector slipped to 48.7 in April from 49.0 during March and 50.3 in February. It remained up from a low of 46.9 in October of last year. A level of 50 is the break-even point between a rising and falling level of activity. The Action Economics Forecast Survey expected a reading of 47.8 for April. The series reached a monthly high of 63.8 in March 2021.

Two of the five component indexes weakened last month. The April production index fell to 44.0 after declining to 48.3 in March. It was the lowest level since May 2020. A lessened 19.8% (NSA) of respondents reported higher production while an increased 24.2% reported lower output. The inventories index declined to 50.8 last month from 53.4 in March. The index remained up from a low of 43.2 in October of last year.

Moving higher, the new orders index rose to 47.2 last month from 45.2 in March. The index remained below a January high of 55.1. Twenty-eight percent (NSA) of respondents reported higher new orders while 26.7% reported a decline. The employment index rose to 46.5 from 44.7 in March. It was below a high of 50.3 in January. A greater 13.1% (NSA) of respondents reported more hiring while a fewer 16.2% indicated less. The supplier delivery index rose to 55.2 from 53.5 in March. A higher 16.6% (NSA) of respondents reported slower delivery speeds while a fairly steady 6.2% reported a quickening.

The prices index, which is not part of the composite series, edged up to 69.8 (NSA) in April after increasing to 69.4 in March. It was the highest level since June 2022, up from a December 2022 low of 39.4. An increased 49.2% of respondents reported higher prices last month, up from 12.2% in November, while a higher 9.7% reported lower prices.

In other series, the export orders index plummeted to 43.1 in April from 49.6 during March. It was down from the high of 52.4 in January. The imports index fell sharply to 47.1 from 50.1 in March. It was the lowest reading since December 2023. The order backlog index dropped to 43.7 (NSA) last month from 44.5 in March. It was the lowest level in five months.

The ISM figures are based on responses from over 400 purchasing executives from 18 industries, which are weighted according to each industry’s contribution to GDP. These indexes are diffusion indexes where a reading above 50 indicates expansion and a reading below 50 points to contraction. The figures from the Institute for Supply Management can be found in Haver’s **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver’s **AS1REPNA** database.

250501L5.jpg

250501M5.jpg

- Declines in last three months follow earlier improvement.
- Production & inventories account for m/m shortfall.
- Prices index edges up to another three-year high.

U.S. ISM Manufacturing Index Indicates Contraction in April

250430N1.jpg

250430O1.jpg

Real GDP eased 0.3% SAAR (+2.1% y/y) during the first quarter of 2025 after increasing 2.4% in Q4’24 and 3.1% in Q3’24. A 0.4% increase had been expected in the Action Economics Forecast Survey. It was the first decline since Q1 2022.

Foreign trade subtracted 4.83 percentage points from growth last quarter as imports surged 41.3% (13.4% y/y) ahead of tariffs, which began to come into effect in the first quarter. The rise followed a 1.9% decline in Q4’24. Exports rose 1.8% (3.0% y/y) after easing 0.2% in Q4. Inventories added 2.25 percentage points to growth after subtracting 0.84 percentage point from Q4 growth.

Real final sales to domestic purchasers grew 2.3% (2.9% y/y) in Q1 after rising 3.0% in Q4. Personal consumption expenditures rose 1.8% (3.1% y/y) following a 4.0% gain. Durable goods spending fell 3.4% (+5.3% y/y) after surging 12.4% in Q4. Motor vehicle purchases declined 11.1% (+5.5% y/y) after strengthening 19.7% in Q4. Spending on home furnishings & appliances gained 1.5% (6.1% y/y) following a 5.4% rise. Recreational goods & vehicle outlays rose 2.5% (7.0% y/y) last quarter after a 13.9% Q4 increase.

Nondurable goods outlays rose 2.7% (3.0% y/y) following 3.1% growth in Q4. Apparel spending increased 6.7% (2.5% y/y) following a 5.0% rise. Food & beverage buying gained 2.5% (2.3% y/y) after a 1.8% increase. Gasoline & fuel oil purchases increased 4.6% (3.4% y/y) after falling 2.0% in Q4.

Spending on services increased 2.4% last quarter (2.7% y/y) after a 3.0% gain. Outlays on housing & utilities increased 3.4% (1.8% y/y) after rising 1.1% in Q4. Health care expenditures rose 4.0% (4.8% y/y) following a 4.7% strengthening. Transportation outlays increased 5.3% (4.6% y/y) after a 3.7% rise while recreation spending rose 4.7% (2.8% y/y) following a 4.5% rise. Restaurant & hotel expenditures declined 2.1% (+0.5% y/y) following a 2.8% rise. Financial services expenditures rose 1.9% (2.0% y/y) after a 3.1% Q4 increase.

Business fixed investment increased 9.8% (3.6% y/y) following a 3.0% decline in Q4. Expenditures on structures rose 0.4% (-0.4% y/y) after a 2.9% increase. Expenditures on producers’ durable equipment jumped 22.5% (8.0% y/y) after falling 8.7%.  Outlays on information processing equipment soared 69.3% (18.9% y/y) following a 7.3% decline. Industrial equipment investment fell 1.4% (-0.3% y/y) after easing 0.9%. Intellectual property product spending rose 4.1% (1.8% y/y) following a 0.5% decline. 

Residential structures investment increased 1.3% (-0.1% y/y) in Q1 after a 5.5% Q4 rise.

250430P1.jpg

250430Q1.jpg

Government spending fell 1.5% (+2.4% y/y) after a 3.1% Q4 rise. Federal government expenditures declined 5.1% (+2.9% y/y) after rising 4.0% in Q4. National defense expenditures declined 8.0% (+4.0% y/y) after increasing 4.8% in Q4. State & local government spending rose 0.8% (2.1% y/y) following a 2.5% rise.

The GDP price index rose 3.7% (2.6% y/y) after increasing 2.3% in Q4. It was the largest increase since Q4’22. A 2.4% increase had been expected. The PCE chain price index increased 3.6% (2.5% y/y) following a 2.4% rise. The PCE price index excluding food and energy rose 3.5% (2.8% y/y) after increasing 2.6% in Q4. The business fixed investment price index rose 0.4% (1.8% y/y) after 1.5% rise. The residential price index strengthened 3.9% (3.2% y/y) after a 1.9% rise while the government price index increased 4.7% (2.8% y/y) following a 2.1% rise.

The GDP data can be found in Haver’s **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis detail in the national accounts. The Action Economics consensus estimates can be found in **AS1REPNA**.

250430R1.jpg

250430S1.jpg

- Decline in GDP is first in three years.
- Foreign trade subtracts substantially ahead of tariffs.
- Domestic final demand growth weakens.
- Price index strengthens with higher core PCE prices.

U.S. GDP Unexpectedly Declines in Q1’25; Prices Strengthen

Michael J. Moran

250430A.jpg

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High-side readings on the price indexes for personal consumption expenditures in January and February caused some concern about emerging price pressure, especially with some policies of the Trump administration possibly adding to the upward force. However, March brought notable relief, with the headline price index falling slightly (-0.04%). A marked decline in energy prices was helpful (-2.7%), but core prices also were subdued, increasing less than 0.1%.  Year-over-year changes were still above the Fed’s target of 2%, but only barely so for the headline measure (2.3%). The core index backed away from the reading of 3.0% in February, but the latest reading of 2.7% was in line with observations in the past year, and still uncomfortably above target.

Consumers roused from a winter slumber in March, with nominal outlays increasing 0.7%. With inflation restrained, real outlays also posted a gain of 0.7%. Spending on durable gods stood out, with real outlays advancing 3.2%. Real outlays for both nondurable goods and services rose 0.4%, a solid pace. Signs of life were certainly welcome after an average decline of 0.1% in January and February. The March rebound left growth of 1.8% (annual rate) in the first quarter.

The brisk increase in spending in March was supported by a solid gain in personal income (0.5% in both nominal and real terms). Growth in wage income was firm at 0.5%, while proprietors’ income was robust with a gain of 1.8% (not annualized!). The farm sector led the advance in proprietors’ income, but the nonfarm sector also was strong (0.6%).

The personal income and consumption figures are available in Haver’s **USECON** database with detail in the **USNA** database. The Action Economics forecasts are in **AS1REPNA**.

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- Price pressure eases.
- Spending rebounds after two soft months.

Personal Income, Consumption, and Prices in March

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The Pending Home Sales Index, a forward-looking home sales measure based on contract signings, from the National Association of Realtors rose 6.1% to 76.5 (-0.6% y/y) during March after rising a little-revised 2.1% in February. These changes followed a 4.6% January decline.

The rise in March sales occurred as the rate on a 30-year mortgage eased to an average 6.65% from 6.84% in February. This rate was well above a low of 2.68% averaged in December 2020.

Pending home sales were up in most regions of the country. Sales in the Midwest rose 4.9% (1.4% y/y) last month after rising 1.8% in February. Sales in the South increased 9.8% (-0.4% y/y) following a 5.8% February rise. Sales in the West improved 4.8% (-2.0% y/y) after falling 3.0% in February. Sales in the Northeast were off 0.5% (-3.0% y/y) in March after falling 0.9% in February.

The pending home sales index measures sales at the time the contract for the purchase of an existing home is signed, similar to the Census Bureau's new home sales data. In contrast, the National Association of Realtors' existing home sales data are recorded when the sale is closed, which is usually a couple of months after the sales contract has been signed. In developing the pending home sales index, the NAR found that the level of monthly sales contract activity leads the level of closed existing home sales by about two months.

The series dates back to 2001 and are available in Haver's **PREALTOR** database. Weekly mortgage interest rates from the Mortgage Bankers Association can be found in the **WEEKLY** database.

- Sales rise to highest level in four months.
- Strength is evident throughout most of country.

Economy in Brief: July 2009

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