Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706h.jpg" width="353">
Factory inventory accumulation stalled during May but that followed an upwardly revised 1.0% April increase. Despite the latest stall, the running rate of inventory accumulation this year matches the gains in 2005.
Inventories of computers &amp; electronic products fell 0.5% (+6.1% y/y) while inventories of electrical equipment dropped 0.3% (+6.5% y/y). Inventories of furniture &amp; related products fell 0.3% (+4.6% y/y), the second down month, and primary metals inventories jumped 2.3% (4.0% y/y).
Total factory orders rose 0.7%, a gain led by a 1.6% jump in nondurables which reflected a 2.3% rise petroleum &amp; coal. Less petroleum, nondurable goods orders (which equal shipments) rose 1.4% (3.1% y/y). Durable goods orders fell 0.2%, little revised from the advance report of a 0.3% slip.
Factory shipments surged 2.2% led higher by a 5.1% jump in transportation. Civilian aircraft shipments rose 19.8% (33.0% y/y). Less transportation shipments also were strong and rose 1.7% (7.7% y/y).
Unfilled orders rose another 0.6% led by a 1.5% (59.4% y/y) jump in civilian aircraft. Less the transportation sector altogether backlogs rose 0.9% (14.3% y/y).<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </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/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.0%</td>
<td>1.0%</td>
<td>3.9%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.7%</td>
<td>-2.0%</td>
<td>4.9%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>2.2%</td>
<td>-0.1%</td>
<td>7.2%</td>
<td>7.1%</td>
<td>6.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.6%</td>
<td>1.5%</td>
<td>20.7%</td>
<td>16.3%</td>
<td>4.5%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
</body>
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Factory inventory accumulation stalled during May but that followed an upwardly revised 1.0% April increase. Despite the latest stall, the running rate of inventory accumulation this year matches the gains in 2005. Inventories of [...]

U.S. Factory Inventory Accumulation Stalled in May

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706g.jpg" width="353">
The total number of mortgage applications rose 5.9% last week and recovered about all of the prior week&#39;s sharp decline. For the month of June, the average number of applications fell 1.5% from May.
A 6.5% increase in purchase applications recovered all of the prior week&#39;s decline but nevertheless left the June average 0.8% below May which fell 0.8% from April.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance rose 5.0% after a 7.5% drop the prior week. Refis during all of June were 3.1% below the May average.
The effective interest rate on a conventional 30-year mortgage reversed half of the prior week&#39;s rise with a six basis point decline to 7.02%. The rate on 15-year financing reversed most of the prior week&#39;s gain with a seven basis point decline to 6.68%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
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.
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%">
<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">06/30/06</th>
<th scope="col">06/23/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>561.0</td>
<td>529.6</td>
<td>-34.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>414.2</td>
<td>389.0</td>
<td>-20.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,423.9</td>
<td>1,356.0</td>
<td>-48.9%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
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The total number of mortgage applications rose 5.9% last week and recovered about all of the prior week's sharp decline. For the month of June, the average number of applications fell 1.5% from May. A 6.5% increase in purchase [...]

Mortgage Applications Up, Rates Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706f.jpg" width="353">
Challenger, Grey &amp; Christmas indicated that announced job cuts rose 25.1% last month (67,176) to the highest level since February.
During the last ten years there has been an 83% (inverse) correlation between the three month moving average level of announced job cuts and the three month change payroll employment.
Increases m/m were pronounced in the automotive (-73.2% y/y), health care (+23.2% y/y), retail (-80.8% y/y), pharmaceutical (-27.5% y/y) and industrial goods (+45.9% y/y) industries.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported a moderate m/m increase in announced hiring plans (-34.6% y/y).

<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/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>67,176</td>
<td>53,716</td>
<td>-39.5%</td>
<td>1,072,054</td>
<td>1,039,935</td>
<td>1,236,426</td>
</tr>
</tbody>
</table>
</body>
</html>

Challenger, Grey & Christmas indicated that announced job cuts rose 25.1% last month (67,176) to the highest level since February. During the last ten years there has been an 83% (inverse) correlation between the three month moving [...]

Challenger Layoffs Rose

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706d.jpg" width="353">
The June Business Activity Index for the non-manufacturing sector about matched the three point May decline and fell to 57.0, reported the Institute for Supply Management (ISM). Consensus expectations for a lesser decline to 59.0.
For 2Q the index average nevertheless rose modestly to 60.0 from 59.1 during 1Q. It was the highest quarterly average in a year. Since the series&#39; inception in 1997 there has been a 50% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders index fell three points to 56.6, the lowest level since February and the employment index dropped a large six points to 52.0, its lowest since January. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706e.jpg" width="353">
Pricing power eased modestly and gave up half of the prior month&#39;s sharp increase. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates back to July 1997.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>57.0</td>
<td>60.1</td>
<td>61.1</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>73.9</td>
<td>77.5</td>
<td>61.6</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>


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The June Business Activity Index for the non-manufacturing sector about matched the three point May decline and fell to 57.0, reported the Institute for Supply Management (ISM). Consensus expectations for a lesser decline to 59.0. For [...]

ISM Nonmanufacturing Index Down

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706c.jpg" width="353">
Initial unemployment insurance claims slipped 2,000 to 313,000 last week after a 6,000 rise the prior week that was upwardly revised, slightly. Consensus expectations had been for 315,000 claims.
The four-week moving average of initial claims rose to 308,500 (-4.8% y/y).
Continuing claims for unemployment insurance rose 52,000 following a 20,000 decline the previous week which was revised from a 54,000 increase reported initially.
The insured rate of unemployment was stable at 1.9% where it has been since February.
If You Lost Your Job from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/pubs/region/06-06/unemployment.cfm"> 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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">06/31/06</th>
<th scope="col">06/24/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>313</td>
<td>315</td>
<td>-4.0%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,455</td>
<td>-5.6%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
</body>
</html>

Initial unemployment insurance claims slipped 2,000 to 313,000 last week after a 6,000 rise the prior week that was upwardly revised, slightly. Consensus expectations had been for 315,000 claims. The four-week moving average of [...]

Initial Claims for Unemployment Insurance Fell

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706c.jpg" width="353">
Initial unemployment insurance claims slipped 2,000 to 313,000 last week after a 6,000 rise the prior week that was upwardly revised, slightly. Consensus expectations had been for 315,000 claims.
The four-week moving average of initial claims rose to 308,500 (-4.8% y/y).
Continuing claims for unemployment insurance rose 52,000 following a 20,000 decline the previous week which was revised from a 54,000 increase reported initially.
The insured rate of unemployment was stable at 1.9% where it has been since February.
If You Lost Your Job from the Federal Reserve Bank of Minneapolis can be found <a href="http://www.minneapolisfed.org/pubs/region/06-06/unemployment.cfm"> 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/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">06/31/06</th>
<th scope="col">06/24/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>313</td>
<td>315</td>
<td>-4.0%</td>
<td>332</td>
<td>343</td>
<td>403</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Continuing Claims</td>
<td>--</td>
<td>2,455</td>
<td>-5.6%</td>
<td>2,663</td>
<td>2,923</td>
<td>3,530</td>
</tr>
</tbody>
</table>
ISM Nonmanufacturing Index Down 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 6, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706d.jpg" width="353">
The June Business Activity Index for the non-manufacturing sector about matched the three point May decline and fell to 57.0, reported the Institute for Supply Management (ISM). Consensus expectations for a lesser decline to 59.0.
For 2Q the index average nevertheless rose modestly to 60.0 from 59.1 during 1Q. It was the highest quarterly average in a year. Since the series&#39; inception in 1997 there has been a 50% correlation between the level of the Business Activity Index and the q/q change in real GDP for services plus construction.
The new orders index fell three points to 56.6, the lowest level since February and the employment index dropped a large six points to 52.0, its lowest since January. Since the series&#39; inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing plus the construction industries.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706e.jpg" width="353">
Pricing power eased modestly and gave up half of the prior month&#39;s sharp increase. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates back to July 1997.
Business Activity Index for the non-manufacturing sector reflects a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF03/@EF03.HTM">ISM Nonmanufacturing Survey</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">June &#39;05</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Business Activity Index</td>
<td>57.0</td>
<td>60.1</td>
<td>61.1</td>
<td>60.1</td>
<td>62.5</td>
<td>58.3</td>
</tr>
<tr>
<td class="firstcol">Prices Index</td>
<td>73.9</td>
<td>77.5</td>
<td>61.6</td>
<td>67.9</td>
<td>68.8</td>
<td>56.6</td>
</tr>
</tbody>
</table>
Challenger Layoffs Rose 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 6, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706f.jpg" width="353">
Challenger, Grey &amp; Christmas indicated that announced job cuts rose 25.1% last month (67,176) to the highest level since February.
During the last ten years there has been an 83% (inverse) correlation between the three month moving average level of announced job cuts and the three month change payroll employment.
Increases m/m were pronounced in the automotive (-73.2% y/y), health care (+23.2% y/y), retail (-80.8% y/y), pharmaceutical (-27.5% y/y) and industrial goods (+45.9% y/y) industries.
Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.
Challenger also reported a moderate m/m increase in announced hiring plans (-34.6% y/y).

<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/@S3/@S301/@S301.HTM">Challenger, Gray &amp; Christmas</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Announced Job Cuts</td>
<td>67,176</td>
<td>53,716</td>
<td>-39.5%</td>
<td>1,072,054</td>
<td>1,039,935</td>
<td>1,236,426</td>
</tr>
</tbody>
</table>
Mortgage Applications Up, Rates Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 6, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706g.jpg" width="353">
The total number of mortgage applications rose 5.9% last week and recovered about all of the prior week&#39;s sharp decline. For the month of June, the average number of applications fell 1.5% from May.
A 6.5% increase in purchase applications recovered all of the prior week&#39;s decline but nevertheless left the June average 0.8% below May which fell 0.8% from April.
During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance rose 5.0% after a 7.5% drop the prior week. Refis during all of June were 3.1% below the May average.
The effective interest rate on a conventional 30-year mortgage reversed half of the prior week&#39;s rise with a six basis point decline to 7.02%. The rate on 15-year financing reversed most of the prior week&#39;s gain with a seven basis point decline to 6.68%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities.
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.
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%">
<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">06/30/06</th>
<th scope="col">06/23/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>561.0</td>
<td>529.6</td>
<td>-34.3%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>414.2</td>
<td>389.0</td>
<td>-20.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,423.9</td>
<td>1,356.0</td>
<td>-48.9%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
U.S. Factory Inventory Accumulation Stalled in May 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 6, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706h.jpg" width="353">
Factory inventory accumulation stalled during May but that followed an upwardly revised 1.0% April increase. Despite the latest stall, the running rate of inventory accumulation this year matches the gains in 2005.
Inventories of computers &amp; electronic products fell 0.5% (+6.1% y/y) while inventories of electrical equipment dropped 0.3% (+6.5% y/y). Inventories of furniture &amp; related products fell 0.3% (+4.6% y/y), the second down month, and primary metals inventories jumped 2.3% (4.0% y/y).
Total factory orders rose 0.7%, a gain led by a 1.6% jump in nondurables which reflected a 2.3% rise petroleum &amp; coal. Less petroleum, nondurable goods orders (which equal shipments) rose 1.4% (3.1% y/y). Durable goods orders fell 0.2%, little revised from the advance report of a 0.3% slip.
Factory shipments surged 2.2% led higher by a 5.1% jump in transportation. Civilian aircraft shipments rose 19.8% (33.0% y/y). Less transportation shipments also were strong and rose 1.7% (7.7% y/y).
Unfilled orders rose another 0.6% led by a 1.5% (59.4% y/y) jump in civilian aircraft. Less the transportation sector altogether backlogs rose 0.9% (14.3% y/y).<a href="http://research.stlouisfed.org/publications/review/05/07/Gali.pdf"> </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/USECON/@ED/@ED01/@ED0101/@ED01016/@ED01016.HTM">Factory Survey</a> (NAICS)</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Inventories</td>
<td>-0.0%</td>
<td>1.0%</td>
<td>3.9%</td>
<td>4.0%</td>
<td>6.9%</td>
<td>-7.4%</td>
</tr>
<tr>
<td class="firstcol">New Orders</td>
<td>0.7%</td>
<td>-2.0%</td>
<td>4.9%</td>
<td>8.5%</td>
<td>7.5%</td>
<td>0.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">Shipments</td>
<td>2.2%</td>
<td>-0.1%</td>
<td>7.2%</td>
<td>7.1%</td>
<td>6.8%</td>
<td>0.2%</td>
</tr>
<tr>
<td class="firstcol">Unfilled Orders</td>
<td>0.6%</td>
<td>1.5%</td>
<td>20.7%</td>
<td>16.3%</td>
<td>4.5%</td>
<td>-1.0%</td>
</tr>
</tbody>
</table>
Mortgage Equity Withdrawal Stages Partial Recovery in Both US and UK; UK House Prices Moderating 
by <a href="/comment/Stone.html">Carol Stone</a> July 6, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706i.jpg" width="353">
Mortgage equity withdrawal in the UK picked up in Q1, according to data reported today by the Bank of England. It came to &pound;12,509 million, up from &pound;12,121 million in Q4 and &pound;6,478 million in the year-ago period. The Bank of England originated this concept about five years ago and gave it the name &quot;mortgage equity withdrawal&quot;. It represents the borrowing by consumers on their homes which exceeds the amount necessary to finance the investment in the house itself. Because of recent strength in home prices over construction values, homeowners have considerable equity, and they have been leveraging that toward any number of unrelated purchases. This borrowing in the UK was equivalent to 5.8% of consumers&#39; post-tax income in Q1. In 2003 and 2004, house prices were stronger and mortgage equity withdrawal was greater; 2003 was the peak year, with a total of &pound;57,233 million, a quarterly average of &pound;14,308 million and 7.5% of consumer income. [The relationship of MEW to HBOS (Halifax) house prices, which were also reported today through June, can be seen in the first graph.]<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706j.jpg" width="353">
As we have discussed here previously, the same phenomenon has been occurring in the US, and we are struck by -- indeed, amazed -- at the similarity in the trends of this practice in each country. The volume of what we prefer to call &quot;home equity withdrawal&quot; also increased in Q1, recovering to $664.3 billion after falling in Q4 2005 to $619.3 billion. The peak quarter was $712.0 billion in Q3 2005. The series we cite is calculated by Haver, based on the value of residential investment by households, including improvements. [The Fed calculates a series based on the value of home sales and does not cover funding of improvements.] The Haver data, our series MEW1, equaled 7.2% of disposable income in Q1, compared with 6.7% in Q4 and 7.9% in Q3. 2005 was the big year for home equity withdrawal in the US, as easily noted in the accompanying graphs.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706k.jpg" width="353">
Comparing the trends in the UK and the US, we see in the second graph, there is an extraordinary 87% correlation between equity withdrawal in the two countries. The period of softness in the mid-1990s, with modest equity buildup (that is, negative MEW), was repeated in both economies. But MEW grew rapidly in both places in the late 1990s. The patterns diverge a bit in 2003, but continue to tell essentially the same story of homeowners&#39; significant borrowing on their homes to finance other activity. The final graph shows a 66% correlation in the ratios of this borrowing to disposable income in each country, augmenting income resources by some 6% in recent years. Now housing markets are moderating in both countries, with a flattening or notable slowing of price gains and some hesitancy in sales. So it remains to be seen how MEW will behave in both the UK and the US and what the implications of that will be for consumer spending.

<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">Q1 2006</th>
<th scope="col">Q4 2005</th>
<th scope="col">Q3 2005</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">UK: Mortgage Equity Withdrawal(Bil. &pound;)</td>
<td>&pound;12.5</td>
<td>&pound;12.1</td>
<td>&pound;9.2</td>
<td>&pound;6.5</td>
<td>&pound;9.5</td>
<td>&pound;12.4</td>
<td>&pound;14.3</td>
</tr>
<tr>
<td class="firstcol">% of Post-Tax Income</td>
<td>5.8%</td>
<td>5.7%</td>
<td>4.4%</td>
<td>3.2%</td>
<td>4.6%</td>
<td>6.3%</td>
<td>7.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">HBOS House Price (000s &pound;)</td>
<td>June 2006</td>
<td>May 2006</td>
<td>Apr 2006</td>
<td>&pound;163.0</td>
<td>&pound;165.4</td>
<td>&pound;157.0</td>
<td>&pound;132.2</td>
</tr>
<tr>
<td class="firstcol">&pound;176.5</td>
<td>&pound;178.7</td>
<td>&pound;178.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Yr/Yr % Change</td>
<td>8.2%</td>
<td>10.0%</td>
<td>9.9%</td>
<td>--</td>
<td>5.3%</td>
<td>18.8%</td>
<td>19.0%</td>
</tr>
<tr>
<td class="firstcol">US: Home Equity Withdrawal(Bil. $)</td>
<td>Q1 2006</td>
<td>Q4 2005</td>
<td>Q3 2005</td>
<td>$429.1</td>
<td>$591.3</td>
<td>$475.2</td>
<td>$451.8</td>
</tr>
<tr class="odd">
<td class="firstcol">$664.3</td>
<td>$619.3</td>
<td>$712.0</td>
</tr>
<tr>
<td class="firstcol">% of Disp. Income</td>
<td>7.2%</td>
<td>6.7%</td>
<td>7.9%</td>
<td>4.8%</td>
<td>6.5%</td>
<td>5.5%</td>
<td>5.5%</td>
</tr>
</tbody>
</table>


</html>

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/060705c.jpg" width="353">
The national average temperature in June was 71.4&deg;F, up 1.8&deg; from last June and 2.25&deg; higher than the average of the last 86 years. In that 86- year span, only 1933 saw a higher June figure, 72.0&deg;, although several years have been above 71.0&deg;.
Rainfall was a little short this June, and although not nearly a record low, was much less than the last several years. The national average amount was 2.58&quot;, compared with 3.15&quot; in June 2005 and 3.52&quot; in June 2004. These were relatively wet times, though, as seen in the table below, with an average since 1921 of 2.92&quot;.
These data come from the National Climatic Data Center, a branch of the Commerce Department in the division known as the National Oceanic and Atmospheric Administration. The National Weather Service is another part of the same Administration. Haver maintains temperature and precipitation by region and state in our REGIONAL database and the national averages are in USECON.
In assessing these data, we made use of some tools in Excel along with the DLX add-in for Excel. Copying codes into a spreadsheet is really easy with the latest versions of DLXVG3. Putting it in &quot;Excel mode&quot; leaves the menus visible. In Excel, we place the cursor in the cell where the first code will appear. In DLXVG3, we highlight the menu item we want, or to get a whole list, we can just click to the left of the first menu item we want and paint down the list as far as needed. Magically (seemingly), the codes and the database name will appear in the spreadsheet.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060705d.jpg" width="353">
Instead of the typical date-span entry, we begin to enter the dates manually: for June of each year, we would type in 192106 and 192206. Then, we highlight those cells, grab the box on the corner and drag it down as far as needed. Excel will see the pattern in the dates and replicate it all the way down the column. In setting the range, we&#39;ll need to highlight the entire area covering the columns of codenames and the rows of dates. Then when we retrieve the data we&#39;ll have June of each year for 86 years for whichever items are of interest to us.
For instance, I retrieved temperatures for the nine special weather regions and used Excel functions to find the maximum, minimum, median and mean. A quick look at these figures and the bottom row of data shows that only one region, the West, set a new temperature record in June, but seven of the nine regions had above-average temperatures for the month. The maximums for each show that most records occurred many years ago: three in the early 1950s, one in 1943 and one in 1933, the same year as the national record. Besides the West, recent records were in the Southwest in 2002 and in the West North Central states in 1988.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EH/@EH03/@EH03.HTM">June Weather</a></th>
<th scope="col">June 2006</th>
<th scope="col">June 2005</th>
<th scope="col">June 2004</th>
Averages for Junes
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2001-2006</td>
<td>1976-2000</td>
<td>1951-1975</td>
<td>1921-2006</td>
</tr>
<tr>
<td class="firstcol">Temperature (degrees F)</td>
<td>71.4</td>
<td>69.6</td>
<td>68.5</td>
<td>69.78</td>
<td>69.24</td>
<td>68.26</td>
<td>69.15</td>
</tr>
<tr class="odd">
<td class="firstcol">Precipitation (inches)</td>
<td>2.58</td>
<td>3.15</td>
<td>3.52</td>
<td>3.07</td>
<td>2.93</td>
<td>2.85</td>
<td>2.92</td>
</tr>
</tbody>
</table>
</body>
</html>

The national average temperature in June was 71.4°F, up 1.8° from last June and 2.25° higher than the average of the last 86 years. In that 86- year span, only 1933 saw a higher June figure, 72.0°, although several years have been [...]

High & Dry: June Temperature Near Record and Rainfall Well Below Average

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706a.jpg" width="353">
US light vehicle sales in June rose 1.3% m/m to 16.30M units and recaptured a piece of the prior month&#39;s 3.9% drop, according to the Autodata Corporation. Consensus expectations had been for sales of 16.4M units.
Overall light truck sales rose 3.6% (-17.2% y/y) last month as sales of imported light trucks rose 2.3% m/m (5.1% y/y) and domestic truck sales recovered all of the prior month&#39;s decline with a 3.9% rise (-20.2% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060706b.jpg" width="353">
Auto sales slipped for the second consecutive month in June with a 1.2% decline (+3.1% y/y). Domestic car sales fell 0.2% (-1.8% y/y) while sales of imported autos fell 3.1% (+14.7% y/y).
Imports&#39; share of the US light vehicle market slipped to 23.7% from a record 24.5% during May but remained up versus 20.4% during all of last year.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED09/@ED0901/@ED0901.HTM">Light Vehicle Sales (SAAR, Mil. Units)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>16.30</td>
<td>16.10</td>
<td>-8.7%</td>
<td>16.92</td>
<td>16.87</td>
<td>16.63</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Autos</td>
<td>7.69</td>
<td>7.79</td>
<td>3.1%</td>
<td>7.65</td>
<td>7.49</td>
<td>7.62</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Trucks</td>
<td>8.61</td>
<td>8.31</td>
<td>-17.2%</td>
<td>9.27</td>
<td>9.37</td>
<td>9.01</td>
</tr>
</tbody>
</table>
</body>
</html>

US light vehicle sales in June rose 1.3% m/m to 16.30M units and recaptured a piece of the prior month's 3.9% drop, according to the Autodata Corporation. Consensus expectations had been for sales of 16.4M units. Overall light truck [...]

U.S. Vehicle Sales Up a Bit

US is big leader in global surge in private AI investment

Larger-than-usual income tax refunds this year are supporting consumer spending

Sharply rising share of AI-related jobs

Inflationary impact of surge in oil prices larger in Europe than in the US

Futures market thinks the price of oil will recede significantly over the next six months

Recent pickup in US defense orders could help support overall growth ahead

Cost of transporting crude oil has soared to series high

Market-based inflation expectations have not yet reflected recent surge in oil prices

Global equity markets are fearing a major economic disruption from soaring oil prices

Is recent drop in sentiment signaling softer growth ahead?

With the Iran conflict, geopolitical risk has soared to alarming levels

Soaring AI-related investment in US underpinning strong contribution of business spending to overall growth

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

Global freight costs are on the rise while supply chain pressures are contained

Accelerating positive economic surprises in the G10 are boosting the global economy

Considerably more monetary ease expected from US and UK as Japan tightens

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

Our global data offering is unparalleled in terms of coverage, quality, and organization. We offer 290+ databases from 2500 government and private sources, a wealth of key survey and forecast data covering the world’s economies, and a robust offering of archive databases that drive machine learning for big data applications.

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Andrew Cates

**A Tug of War Between AI Hope and Geopolitical Shock**
The latest Blue Chip Economic Indicators survey highlights a growing divergence between economies benefiting from AI-driven optimism and those more exposed to the inflationary consequences of renewed geopolitical instability. Taiwan stands out as the clearest AI beneficiary, with growth forecasts revised sharply higher while inflation expectations have risen only modestly, reflecting surging semiconductor demand and continued investment in global technology supply chains. China also remains relatively resilient, supported by ongoing AI-related capital spending and stronger technology sectors. By contrast, the euro area and UK have seen much larger upward revisions to inflation forecasts alongside weaker or declining growth expectations, underscoring their greater vulnerability to the recent Middle East shock and higher energy costs. Korea sits somewhere in between: benefiting from the AI hardware cycle but still exposed to trade and energy headwinds. Overall, the chart illustrates the increasingly important push-and-pull shaping the global outlook: AI optimism and productivity hopes on one side, and geopolitical fragmentation, energy insecurity and supply-side inflation pressures on the other.

260513Z1.jpg

**Forecasters See Contained Pass-Through**
Against this backdrop, our latest Blue Chip special question sought to gauge whether economists believe the recent rise in energy prices will remain largely contained — or whether it risks spilling more meaningfully into underlying global inflation dynamics. The results suggest forecasters have become somewhat less concerned about a broad and persistent inflationary impulse since April. A larger share of respondents in the May survey now expect only a “limited and temporary” pass-through into core inflation, while the proportion anticipating “moderate and persistent” effects has declined noticeably. Very few panelists expect significant second-round effects, implying that most still believe inflation expectations and wage-setting behaviour remain relatively well anchored. In part, this reflects confidence in central bank credibility and the view that softer global demand conditions will constrain firms’ pricing power. Yet the persistence of a sizeable minority still expecting moderate pass-through underscores the uncomfortable tension facing policymakers. 

260513Z2.jpg

**Energy Reawakens as a US Inflation Driver**
While survey respondents generally expect only limited pass-through from higher energy prices into broader inflation, the latest US CPI data provide a reminder that the process may already be underway at the margin. April’s CPI report showed core inflation coming in slightly firmer than expected, suggesting underlying price pressures remain more persistent than many policymakers had hoped. The decomposition of CPI inflation highlights that services continue to dominate overall inflation dynamics, reflecting still-elevated wage and labour-intensive price pressures across the economy. However, the more notable recent development has been the renewed contribution from energy prices, which had previously acted as a disinflationary force through much of 2025. Food inflation has also remained comparatively steady, while non-energy goods prices continue to exert only modest upward pressure despite ongoing tariff and supply-chain concerns. Taken together, the data reinforce the idea that the US economy is not facing a classic demand collapse, but rather a more uncomfortable supply-side environment in which geopolitical energy shocks risk colliding with still-resilient domestic demand, AI-related investment spending and sticky service-sector inflation.

260513Z3.jpg

**AI: The Powerful Counterweight to Geopolitical Headwinds**
If rising energy prices and geopolitical instability represent one major force shaping the current macroeconomic outlook, the extraordinary surge in AI-related investment represents the other. The latest data from Our World in Data show global private investment in AI accelerating sharply again in 2025, reaching close to $300 billion — more than double the level seen just two years earlier. The United States continues to dominate the global AI landscape, accounting for the overwhelming majority of private investment spending, while China and Europe remain considerably smaller contributors despite continued growth. The scale and speed of the 2025 increase is particularly striking given the broader backdrop of elevated policy uncertainty, trade fragmentation and concerns about slowing global productivity growth. In effect, the global economy is now being pulled in two competing directions: on one side, geopolitical tensions, supply-chain fragilities and more recent energy shocks are weighing on confidence and raising supply-side costs; on the other, AI enthusiasm is driving an enormous wave of capital expenditure, infrastructure build-out and technology-related demand. This helps explain why growth expectations — particularly in the US and parts of Asia — have remained comparatively resilient despite an increasingly uncertain global environment.

260513Z4.jpg

**Industrial Winners and Losers in a Fragmenting Global Economy**
The divergence in industrial performance across advanced economies has become increasingly striking. Taiwan has emerged as one of the clearest beneficiaries of the global AI boom, with industrial production surging as semiconductor demand, data-centre investment and advanced electronics exports continue to accelerate. Denmark has also significantly outperformed, though for very different reasons, with the extraordinary global success of its pharmaceutical sector — particularly weight-loss and diabetes drugs — driving a powerful expansion in manufacturing output. By contrast, the UK and Germany have experienced a far weaker industrial recovery. In both cases, elevated energy costs and greater dependence on imported energy have weighed heavily on industrial competitiveness since the post-pandemic energy shock. Germany’s large manufacturing sector has been particularly exposed to higher natural gas prices and weaker external demand, while the UK has continued to struggle with a combination of high energy costs, weak productivity growth and subdued business investment. The chart highlights an increasingly important feature of the global economy: countries exposed to powerful structural growth themes such as AI or pharmaceuticals are pulling away from those still burdened by energy dependence and deteriorating industrial competitiveness.

260513Z5.jpg

**China’s Pulse Is Picking Up Again**
China’s economic backdrop has shown clearer signs of improvement in recent months, with both the Citigroup Economic Surprise Index and the Yicai High Frequency Economic Activity Index moving higher. The rebound suggests that incoming data have begun consistently outperforming expectations after a prolonged period of disappointment. Part of the recent improvement likely reflects the cumulative effects of policy easing, including targeted fiscal support, infrastructure spending and further efforts to stabilise the property sector. Export demand has also remained more resilient than many expected, helped in part by the continued strength of global technology and AI-related supply chains. At the same time, improving domestic mobility and energy usage indicators point to firmer underlying activity momentum. The Yicai index itself is designed to provide a near real-time pulse of the Chinese economy using a basket of high-frequency indicators including subway usage, air pollution, coal consumption, freight activity, unemployment and bankruptcy trends. While China still faces significant structural headwinds — including weak household confidence, property-sector fragilities and deflationary pressures — the recent pickup suggests that growth momentum may be stabilising at a time when several other major economies are becoming more vulnerable to geopolitical and energy-related shocks.

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The global economy is still caught between two powerful and competing forces. On one side, the AI investment boom continues to support growth, industrial activity and equity markets, particularly in the US and parts of Asia. On the other, renewed Middle East tensions and higher energy prices are adding to inflation risks and broader policy uncertainty. The latest Blue Chip survey reflects this divide clearly: growth expectations have generally held up best in economies tied to AI-related investment and technology supply chains, while inflation forecasts have risen more sharply in more energy-exposed economies such as the UK and euro area (chart 1). Forecasters still largely expect only limited pass-through from higher energy prices into core inflation, although recent US CPI data suggest underlying price pressures remain somewhat sticky (charts 2 and 3). At the same time, the extraordinary continued surge in global AI investment — now approaching $300 billion annually — highlights the sheer scale of capital being deployed into semiconductors, data centres and digital infrastructure, particularly in the United States (chart 4). The divergence in industrial production trends also reinforces the growing gap between economies benefiting from structural growth drivers — such as Taiwan’s semiconductor sector and Denmark’s pharmaceutical industry — and those struggling with higher energy costs and weaker competitiveness, notably Germany and the UK (chart 5). Meanwhile, improving Chinese activity indicators suggest policy support and stronger technology demand may finally be helping to stabilise growth (chart 6). Overall, the world economy remains resilient, but increasingly uneven, with AI-related investment continuing to offset — though not eliminate — the drag from geopolitical fragmentation and rising energy insecurity.

Charts of the Week: The Tug of War

Sandy Batten

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Total retail sales rose a solid 0.5% m/m (4.9% y/y) in April on top of a slightly downwardly revised 1.6% monthly jump in March (previously 1.7%), according to data released by the U.S. Census Bureau. The Action Economics Forecast Survey looked for a 05% m/m gain. Excluding autos, other sales increased 0.7% m/m (6.3% y/y) in April following an unrevised 1.9% monthly jump in March. Expectations were for a 0.6% monthly increase. The strong performance in March and the additional solid gain in April put the April level up 7.8% at an annual rate from the Q1 average, providing a very solid start for Q2.

As expected, the continued rise in retail gasoline prices boosted gasoline sales further in April. Gasoline sales increased 2.8% m/m in April following a 13.7% m/m surge in March and accounted for more than 40% of the April increase in total sales. However, sales were solid even without gasoline sales. Total sales excluding gasoline rose 0.3% m/m in April versus a 0.7% monthly gain in March. Sales excluding both autos and gasoline increased 0.5% m/m in April following a 0.7% m/m rise in March.

The control group of sales (total sales excluding food services, autos, gasoline and building materials that the BEA uses to construct PCE in the national accounts) posted another solid increase in March, rising 0.5% m/m in April following an upwardly revised 0.8% m/m increase in March (previously (0.7% m/m). The solid performances of the control group sales in March and April provide a strong start to Q2. April control-group sales are 5.4% at an annual rate above the Q1 average, in line with the 5.7% annualized increase in Q1. Consumer spending remains surprisingly resilient notwithstanding the recent hit to disposable income from the marked increase in energy prices.

Sales across major sectors were varied in April. Consumers clearly spent more on necessities, owing largely to higher prices. Food sales increased 0.8% m/m in April on top of a 1.0% m/m rise in March. And as already noted, gasoline sales posted another outsized monthly increase. By contrast, department store sales slumped 3.2% m/m, clothing sales fell 1.5% m/m, auto sales declined 0.4% m/m and furniture sales fell 2.0% m/m. More encouragingly, sales of nonstore retailers rose 1.1% m/m, their fourth consecutive solid monthly gain. And sales at restaurants increased 0.6% m/m in April, their third consecutive monthly rise. Analysts frequently use restaurant sales as a barometer of consumer attitudes, believing that consumers would not eat out regularly if they were under serious financial stress.

Retail sales data can be found in Haver’s **USECON** database. The expectations figures are from the Action Economics Forecast Survey in **AS1REPNA**.


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- Total sales increase 0.5% m/m in April after a 1.6% monthly jump in March.
- Gasoline sales rose 2.8% m/m in April on top of a 13.7% surge in March.
- Auto sales fell 0.4% m/m after a 0.6% m/m rise in March.
- Excluding auto and gasoline sales, remaining sales increased by a solid 0.5% m/m in April versus a 0.7% m/m rise in March.
- Sales of the retail control group that is used to construct PCE rose 0.5% m/m in April and are 5.4% annualized above the Q1 average, providing a good start to Q2.


U.S. Retail Sales Slowed in April But Remained Solid

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance rose by 12,000 to 211,000 in the week ending May 9, from 199,000 in the week ending May 2, revised from 200,000. The four-week average rose 750 to 203,750 in the week ending May 9, from 203,000 the May 2 week, revised from 203,250. The Action Economics/Haver Analytics Survey looked for 205,000 claims to have been filed. 

The total number of unemployment insurance beneficiaries—also known as “continuing claims”—rose by 24,000 to 1.782 million in the week ending May 2, from 1.758 million in the week ending April 25, revised from 1.766 million. The four-week moving average declined to 1.781 million in the latest week from 1.788 million in the April 25 week. The four-week moving average reached the lowest level since May 2024. The insured unemployment rate rose back to 1.2% in the week of May 2 from the one-week dip to 1.1% in the April 25 week. It had been at 1.2% since the week of November 29, 2025.

The insured unemployment rate varied greatly across individual states and territories. In the week ending April 25, the highest unemployment rates were in Rhode Island (2.29%), New Jersey and Massachusetts (both 2.20%), and Washington (2.15%). The lowest rates were in Florida and Louisiana (both 0.31%), South Dakota (0.32%), Alabama and Arkansas (both 0.36%), North Carolina (0.38%), Tennessee (0.47%) and Iowa, Kansas and Virginia (all 0.48%). Rates in other notable states include California (1.99%), New York (1.66%), Illinois (1.56%), Pennsylvania (1.28%), and Texas (1.03%). These state data are not seasonally adjusted.

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


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- New claims rose by 12,000 to 211,000.
- Continuing claims rose by 24,000 to 1.782 million.
- The insured unemployment rate was back up to 1.2% in the week of May 2, from the one-week dip to 1.1% the prior week.

U.S. Initial Unemployment Claims rose in the Week of May 9

Michael J. Moran

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The Producer Price Index surged 1.4% in April, far in excess of the expected increase of 0.5%. Energy prices accounted for much of the increase with a jump of 7.8%, a much sharper change than the advance of 3.8% in the CPI. The marked difference between the energy components of the CPI and the PPI was primarily due to the nature of the customers. The Consumer Price Index, naturally, collects prices paid by individuals; the PPI, in addition to individuals, collects prices paid by businesses, governments, and exporters. Energy prices paid by governments and exporters rose sharply (12.1% and 15.8%, respectively). The PPI also showed a sharp increase in energy prices paid by individuals (6.1% versus 3.8% in the CPI).

Service prices also contributed to the high-side surprise in the PPI, posting an increase of 1.2%. This area often moves erratically, but still the latest move can be viewed as unusual, as it marked the second largest increase in service prices since the current structure of the PPI began in 2010 (three other observations were close with increases of 1.1%; the largest increase was 1.3% during the inflation burst in 2022).

Goods prices other than energy items were tame compared with service prices, but they too were unsettling. This grouping posted an increase of 0.6%, a reading in the upper end of the range from the past few years. The increase, although pronounced, was not broadly based. In a list of 53 non-energy goods provided by the BLS, only 13 posted increases of 0.4% or more, although a handful were especially sharp (electronic components 8.1%, industrial chemicals 4.4%, household furniture 1.8%).

Food represented the only major grouping that was not troubling, registering an increase of 0.2%. 


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- The energy component led the sharp increase in the PPI, but it had support from many other areas
- Excluding energy, most service prices rose sharply; prices of non-energy goods also were under pressure
- The food component went against the grain with an increase of only 0.2%


April PPI: Broad-Based Pressure

Robert Brusca

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Industrial production in the European monetary area in March rose by 0.2%. Manufacturing output rose by 0.4%, marking two-months in a row of output increases. Output is still falling overall and in manufacturing over three months. Over three-months total manufacturing output excluding construction falls 2.7% annualized, over 6-months, it falls at a 0.4% annual rate, and over three-months the pace of decline steps back up again to -1.2% at an annual rate. The declines in manufacturing are more or less along the same lines.

**Sectors**
Output of consumer goods fell in March, driven by a decline in the output of nondurable goods that fell 4.5% month-to-month. Intermediate goods output rose by 0.9% in the month, increasing for the second month in a row. Capital goods output rose 1.1% after rising 0.8% in February.

**Sequential growth**
However sequential growth rates find headline growth negative over 12-months, six-months, and three-months- the same as for manufacturing. Consumer goods output declines at an accelerating pace dropping 11.6% over 12-months, at a 13.6% annual rate over six-months and at a 24.9% annual-rate over three-months. Those declines are led by reduction in consumer nondurables output. Intermediate goods output is mostly weak over the horizon, falling by 1.5% over 12-months and by 0.9% over 3 months annualized. The exception is capital goods sector where output rises by 2.2% over 12 months and accelerates to 4.6% over 6-months but then tails back, trimming growth to a 1.2% annual rate over three-months.

**Country Performance**
On a country basis declines occur in only two early-reporting members; those are Malta and Germany in March. Over three months output declines in the monetary area occurs in Ireland and Luxembourg and in Germany- with increases elsewhere. Output declines over 12-months, six-months, and three-months in the monetary area only for Germany, Luxembourg, and Ireland. There are consistent output increases in the monetary union in Austria, France, Finland, Italy, Greece, and Portugal. For most countries, increasing output is the rule despite the weak headlines, indicating that large economies are faring worse than smaller economies.

**Q1 Growth**
In the completed first quarter, we have manufacturing output falling by 1.8% at an annual rate and overall output falling at a 1.9% annual rate. Output declines in the quarter and in all major sectors. As for country reporters output falls in the quarter for Austria, Germany, Luxembourg, and Ireland.

**Growth rate rankings**
So, the percentile queue standings presented in the right-hand column are rankings of industrial production growth rates over 12-months. Compared to recent history, overall output has a 17-percentile standing which is relatively weak, in the lower one-fifth of its ranked results over the period (back to 2006). Only capital goods output at 52.5% has a standing above the 50% level which places it above its median result for the period. Among reporting countries seven have percentile standings above 50%, above their respective medians. The countries where output does not grow at a pace in excess of its median are Germany, Luxembourg, Malta, and Ireland.

On balance the smaller countries seem to be faring better in the European monetary union. The last two months have been relatively good months for output across the union; however, January had been so weak that the two months have not been able to recover from the weakness experienced in January. And the March data hardly reflect the hardships that are going to be visiting these economies because of the rise in oil prices and concerns about the situation in Iran and the strait of Hormuz. The future is unlikely to get better.





Economy in Brief: 2006

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U.S. Factory Inventory Accumulation Stalled in May

Mortgage Applications Up, Rates Fell

Challenger Layoffs Rose

ISM Nonmanufacturing Index Down

Initial Claims for Unemployment Insurance Fell

Initial Claims for Unemployment Insurance Fell

High & Dry: June Temperature Near Record and Rainfall Well Below Average

U.S. Vehicle Sales Up a Bit