Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040715d.jpg" width="353">
The June PPI fell 0.3%, the first m/m decline since November. Consensus expectations had been for a 0.2% rise.In line with expectations was the 0.2% rise in the &quot;core&quot; PPI.
Energy prices fell 1.6% (9.4% y/y), led lower by an 8.1% (+29.9% y/y) decline in gasoline prices and a 1.5% (+28.6% y/y) drop in duel oil prices.
Prices of finished consumer goods less food &amp; energy rose a modest 0.1% (1.9% y/y). Consumer durable prices again were firm and rose 0.5% (+2.5% y/y) but core non-durable prices fell 0.2% (+1.5% y/y).
Finished capital goods prices rose 0.2% (1.7% y/y).
Intermediate goods prices rose a firm 0.5% last month. Core intermediate prices rose the same 0.5% (5.7% y/y), though plywood prices fell 10.5% (34.9% y/y). Steel (40.0% y/y) &amp; aluminum (7.1% y/y) prices were quite strong.
Crude goods prices jumped 1.6% due to higher energy prices, up 7.7% (14.0% y/y). Core crude prices fell for the third consecutive month though more recently the decline in commodity prices has moderated.

<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/USECON/@E8/@E802/@E80201/@E80201.HTM"> Producer Price Index</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>-0.3%</td>
<td>0.8%</td>
<td>4.0%</td>
<td>3.2%</td>
<td>-1.3%</td>
<td>2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2%</td>
<td>0.3%</td>
<td>1.9%</td>
<td>0.2%</td>
<td>0.1%</td>
<td>1.4%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.5%</td>
<td>1.1%</td>
<td>7.0%</td>
<td>4.7%</td>
<td>-1.5%</td>
<td>0.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.5%</td>
<td>0.9%</td>
<td>5.7%</td>
<td>2.0%</td>
<td>-0.5%</td>
<td>-0.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>1.6%</td>
<td>2.8%</td>
<td>18.9%</td>
<td>25.1%</td>
<td>-10.6%</td>
<td>0.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>-0.5%</td>
<td>-3.8%</td>
<td>20.8%</td>
<td>12.4%</td>
<td>3.8%</td>
<td>-10.0%</td>
</tr>
</tbody>
</table>
U.S. Industrial Production Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 15, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040715c.jpg" width="353">
Industrial production unexpectedly fell 0.3% last month following a downwardly revised 0.9% rise in May. Consensus expectations had been for a 0.1% uptick.
Production in the factory sector fell 0.1% (5.8% y/y) but the May gain was revised down to 0.6% from 0.9%.
Lower output of motor vehicles accounted for some of last month&#39;s weakness as it fell 3.7%, the third sharp decline in the last four months. Excluding motor vehicles, non-tech output was unchanged (+4.7% y/y). Furniture output fell for the third month in four (0.4% y/y). Non-durables output was unchanged (+3.3% y/y).
Output in selected high-technology industries was strong again, up 2.4% m/m (29.4% y/y). Output of semiconductors rose 2.3% (44.3% y/y) and output of computers &amp; peripheral equipment surged 3.0% (30.7% y/y). Output of communications equipment also rose 1.9% (2.5% y/y).
Total capacity utilization fell to 77.2% and growth in capacity rose to 1.3% y/y.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EA/@EA.HTM"> Production &amp; Capacity</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Industrial Production</td>
<td>-0.3%</td>
<td>0.9%</td>
<td>5.6%</td>
<td>0.3%</td>
<td>-0.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">Capacity Utilization</td>
<td>77.2%</td>
<td>77.6%</td>
<td>74.0%(6/03)</td>
<td>74.8%</td>
<td>75.6%</td>
<td>77.4%</td>
</tr>
</tbody>
</table>
Initial Claims For Jobless Insurance Rebounded 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 15, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040715b.jpg" width="353">
Initial claims for jobless insurance rebounded 40,000 last week to 349,000 following the 40,000 drop the prior week. Consensus expectations had been for 345,000 claims.
Recently volatility probably reflects difficulties in seasonally adjusting the regular layoff of autoworkers due to assembly plant closings to prepare for the new model year.
The 4-week moving average of initial claims rose to 339,000 (-18.8% y/y).
Continuing claims for unemployment insurance rose 112,000 following a 98,000 decline the prior week.
The insured rate of unemployment ticked up to 2.4%.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM"> Unemployment Insurance (000s)</a></th>
<th scope="col">7/10/04</th>
<th scope="col">7/03/04</th>
<th scope="col">Y/Y</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>&nbsp;&nbsp; 349</td>
<td>309</td>
<td>-15.1%</td>
<td>403</td>
<td>404</td>
<td>406</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>&nbsp;&nbsp; --</td>
<td>2,971</td>
<td>-18.0%</td>
<td>3,533</td>
<td>3,573</td>
<td>3,023</td>
</tr>
</tbody>
</table>
Philadelphia Fed Index Up 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 15, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040716c.jpg">
The Philadelphia Fed&#146;s July index of general business conditions in the manufacturing sector rose much more than expected to 36.1. The 7.2 point increase versus June outpaced Consensus expectations for a decline to 25.0.
During the last ten years there has been a 57% correlation between the level of the Philadelphia Fed Business Conditions Index and m/m growth in factory sector industrial production.
Each of the sub indexes improved m/m with the exception of inventories and the workweek.
The business conditions index reflects a separate survey question, not the sub indexes.
The separate index of expected business conditions in six months slid for the sixth month this year to 36.3, just about the lowest level since the peak last August.
The prices paid index fell to the lowest level since February.
The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.
The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found <a href="http://www.phil.frb.org/files/bos/bos0704.html">here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S504/@S504.HTM"> Philadelphia Fed Business Outlook</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#39;03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Activity Index</td>
<td>36.1</td>
<td>28.9</td>
<td>8.7</td>
<td>10.6</td>
<td>7.7</td>
<td>-17.2</td>
</tr>
<tr>
<td class="firstcol">Prices Paid Index</td>
<td>46.3</td>
<td>51.9</td>
<td>-5.1</td>
<td>16.7</td>
<td>12.2</td>
<td>-0.9</td>
</tr>
</tbody>
</table>
Empire State Index Up To Five Month High 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 15, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040716e.jpg">
The Empire State Index of General Business Conditions for July erased losses in the prior two months and rose 6.6 points to 36.54, the highest level since February. Consensus expectations had been for a decline to 27.8 and the June level was revised down.
All of the subgroups of the survey improved versus June. Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question, not the components.
The prices paid index rose moderately to 56.03, reversing most of the prior two months&#39; decline from the record high.
The July index of expectations for business conditions six months ahead fell slightly. Expectations for capital expenditures fell for the third consecutive month.
The Empire State Manufacturing Survey is a monthly survey of manufacturers in New York State conducted by the Federal Reserve Bank of New York. Participants from across the state in a variety of industries respond to a questionnaire and report the change in a variety of indicators from the previous month. Respondents also state the likely direction of these same indicators six months ahead. April 2002 is the first report, although survey data date back to July 2001.
For more on the Empire State Manufacturing Survey, including methodologies and the latest report, click <a href="http://www.newyorkfed.org/research/regional_economy/empiresurvey_overview.html"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM"> Empire State Manufacturing Survey</a></th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">7/03</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col"> 2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">General Business Conditions (diffusion index)</td>
<td>36.54</td>
<td>29.93</td>
<td>20.20</td>
<td>16.30</td>
<td>7.02</td>
<td>-13.57</td>
</tr>
</tbody>
</table>
U.S. Business Inventories Continue Accumulation 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 15, 2004


<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040716d.jpg">
Total business inventories rose 0.4% in May following the upwardly revised 0.7% gain in April. It was the ninth consecutive monthly increase. Consensus expectations were for a 0.5% rise.
Retail inventories fell slightly following an upwardly revised 1.3% gain in April. Lower auto inventories accounted for all of the decline. Non-auto inventories rose 0.6% for the eighth increase in the last nine months. Gains were strong and across the board except general merchandise.
Inventory additions lead production gains. During the last ten years there has been a 46% correlation between the three month change in business inventories and the three month change in US factory production. That correlation rises to 65% when the production gain is lagged three months.
Overall business sales jumped 0.7% (+12.3% y/y) led by a 1.5% gain in retail sales.
The ratio of inventories-to-sales held at the record low of 1.30 for the third consecutive month.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"> <a href="http://www.haverselect.com/dlx/USECON/@ED/@ED06/@ED0601/@ED0601.HTM"> Business Inventories</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total</td>
<td>0.4%</td>
<td>0.7%</td>
<td>4.0%</td>
<td>1.9%</td>
<td>1.5%</td>
<td>-4.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Retail</td>
<td>-0.0%</td>
<td>1.3%</td>
<td>5.9%</td>
<td>4.9%</td>
<td>6.0%</td>
<td>-2.8%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;&nbsp;&nbsp; Retail excl. Autos</td>
<td>0.6%</td>
<td>0.7%</td>
<td>4.9%</td>
<td>3.0%</td>
<td>2.6%</td>
<td>-1.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Wholesale</td>
<td>1.2%</td>
<td>0.2%</td>
<td>5.6%</td>
<td>2.2%</td>
<td>0.4%</td>
<td>-4.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Manufacturing</td>
<td>0.5%</td>
<td>0.5%</td>
<td>1.1%</td>
<td>-1.3%</td>
<td>-1.8%</td>
<td>-6.1%</td>
</tr>
</tbody>
</table>
</body>
</html>

The June PPI fell 0.3%, the first m/m decline since November. Consensus expectations had been for a 0.2% rise.In line with expectations was the 0.2% rise in the "core" PPI. Energy prices fell 1.6% (9.4% y/y), led lower by an 8.1% [...]

Producer Prices Fell Unexpectedly

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/040715a.jpg" width="353">
Brazil&#39;s retail sales extended a strong recovery in data reported today for May, which showed a third straight month of double-digit year-on-year growth.
Furniture and appliances and motor vehicle dealers have participated in the growth consistently in recent months; the two store categories advanced 35.6% and 21.4% respectively in May from May 2003. Supermarkets and hypermarkets have also shown persistent but less spectacular gains, most recently in the 5% range. In May, clothing had a big jump as well.
These stores had all suffered some degree of contraction during the recessionary aftermath of the mid-2002 plunge in Brazil&#39;s currency value. The recent retail sales gains, particularly in durable goods, show that Brazilian consumers are back in a shopping mode, and with some exuberance.<div align="center"><center></center></div>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Yr/Yr % Changes</th>
<th scope="col">May 2004</th>
<th scope="col">Apr 2004</th>
<th scope="col">Mar 2004</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Sales: Total Volume</td>
<td>10.0</td>
<td>10.1</td>
<td>11.0</td>
<td>3.2</td>
<td>-5.1</td>
<td>-2.8</td>
</tr>
<tr>
<td class="firstcol">Retail Sales: Total Value</td>
<td>10.3</td>
<td>9.4</td>
<td>11.3</td>
<td>10.8</td>
<td>9.3</td>
<td>3.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Reais/US$</td>
<td>4.9</td>
<td>-6.8</td>
<td>-15.7</td>
<td>-19.3</td>
<td>53.5</td>
<td>20.4</td>
</tr>
</tbody>
</table>
</body>
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Brazil's retail sales extended a strong recovery in data reported today for May, which showed a third straight month of double-digit year-on-year growth. Furniture and appliances and motor vehicle dealers have participated in the [...]

Brazil's Retail Sales Up 10% in May

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040714a.jpg" width="353">
Retail sales slipped 1.1% in June following an upwardly revised 1.4% rise in May. Consensus expectations had been for a 0.8% decline.
Recent sales volatility reflects large m/m changes in motor vehicle dealers&#39; sales, down 4.3% last month after a 3.2% gain in May. June unit sales of light vehicles fell 13.4% after an 8.7% May gain.
Excluding motor vehicles &amp; parts dealers sales fell 0.2% versus an upwardly revised 0.9% gain in May. Consensus expectations had been for a 0.2% rise. Less gasoline non-auto sales slipped 0.1% (7.0% y/y) after a 0.4% May increase.
Sales of furniture/home furnishings &amp; electronics/appliances rose 0.8% (+5.4% y/y) following declines in the prior two months. Sales at general merchandise stores slipped 0.2% (+6.7% y/y) and clothing and accessory store sales fell 0.5% (+6.0% y/y).
Sales at gasoline service stations fell 0.9% (21.4% y/y) after a 5.0% May rise. Average gasoline prices fell 0.7% m/m in June to $1.97/gallon and have fallen further this month to an average $1.91/gal.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/usecon/@ED/@ED04/@ED0401/@ED0401.HTM"> Retail Sales &amp; Food Services</a></td>
<td>-1.1%</td>
<td>1.4%</td>
<td>6.3%</td>
<td>5.3%</td>
<td>2.5%</td>
<td>3.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Excluding Autos</td>
<td>-0.2%</td>
<td>0.9%</td>
<td>8.3%</td>
<td>5.2%</td>
<td>3.2%</td>
<td>3.1%</td>
</tr>
</tbody>
</table>
Import Prices Slipped 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040714c.jpg" width="353">
Import prices slipped 0.2% last month following a downwardly revised 1.4% gain in May.The Consensus expectation had been for a 0.1% rise.
Lower oil prices accounted for the decline last month, off 1.0%. The price of Brent crude during the several days moved higher to $36.53 per barrel and so far in July has averaged $36.47 versus $35.24 in June.
Non-petroleum import prices were unchanged last month. The decline was led by a 0.5% (+5.6% y/y) decline in food prices and a 0.1% dip capital goods prices (-1.4% y/y). Capital goods prices excluding computers fell 0.1% (+0.5% y/y) for the second month. Non-auto consumer goods prices were unchanged (+0.4% y/y) following two months of slight decline.
Export prices dropped 0.6% as food prices slid 4.6% (+16.5% y/y). Nonagricultural export prices dipped 0.1% (+2.9% y/y).
&quot;US Production Abroad&quot; from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/net/20040601/cover.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/USECON/@E8/@E807/@E807.HTM"> Import/Export Prices (NSA)</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Import - All Commodities</td>
<td>-0.2%</td>
<td>1.4%</td>
<td>5.6%</td>
<td>2.9%</td>
<td>-2.5%</td>
<td>-3.5%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Petroleum</td>
<td>-1.0%</td>
<td>9.4%</td>
<td>34.3%</td>
<td>21.0%</td>
<td>3.0%</td>
<td>-17.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Non-petroleum</td>
<td>0.0%</td>
<td>0.3%</td>
<td>2.4%</td>
<td>1.1%</td>
<td>-2.4%</td>
<td>-1.5%</td>
</tr>
<tr>
<td class="firstcol">Export - All Commodities</td>
<td>-0.6%</td>
<td>0.4%</td>
<td>4.0%</td>
<td>1.6%</td>
<td>-1.0%</td>
<td>-0.8%</td>
</tr>
</tbody>
</table>
Mortgage Applications Backpedal 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 14, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040714b.jpg" width="353">
The index of mortgage applications compiled by the Mortgage Bankers Association gave back 6.3% (-52.6% y/y) last week of the 19.5% rise the prior period.
Applications to refinance mortgages slipped 6.1% after the 27.7% spike the prior week (-75.0% y/y).
Purchase applications fell 6.4% (4.8% y/y) after the 15.0% gain the prior week. So far in July purchase applications are 9.5% higher than in June.
The effective interest rate on a conventional 30-Year mortgage fell slightly to 6.22% from 6.24% the week earlier and an average 6.52% in June. The effective rate on a 15-year mortgage also fell to 5.67% versus an average 5.98% in June.
During the last ten years there has been a 63% correlation between the y/y change in purchase applications and the change in new plus existing home sales.
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>.

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</table>
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<colgroup><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">07/09/04</th>
<th scope="col">07/02/04</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>643.9</td>
<td>687.0</td>
<td>1,067.9</td>
<td>799.7</td>
<td>625.6</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>468.8</td>
<td>500.9</td>
<td>395.1</td>
<td>354.7</td>
<td>304.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,662.4</td>
<td>1,769.7</td>
<td>4,981.8</td>
<td>3,388.0</td>
<td>2,491.0</td>
</tr>
</tbody>
</table>
</body>
</html>

Retail sales slipped 1.1% in June following an upwardly revised 1.4% rise in May. Consensus expectations had been for a 0.8% decline. Recent sales volatility reflects large m/m changes in motor vehicle dealers' sales, down 4.3% last [...]

U.S. Retail Sales Pause

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040714d.jpg" width="353">
Inflation in the United Kingdom, as measured by the year-to-year percentage increase in the Consumer Price Index has risen in the past three months and in June was 1.6%, the highest level since March,2003.
Prior to December 10, 2003, inflation in the U.K. was measured by year-to-year changes in the Retail Price Index. The MPC (Monetary Policy Committee) tracked the Retail Price Index, less mortgage interest (RPIX) as its inflation measure. The target at that time was 2.3%. The change to the Consumer Price Index as the preferred measure of inflation facilitates comparisons with inflation in the Euro Zone countries as this index is based on the same methodology and has the same base year as the Harmonized Indexes of Consumer Price Indexes (HICP) of Euro Zone countries.
In addition to the release of data on inflation in the U.K., inflation data were also released today for Spain and France. In both countries, like the U. K. inflation is rising. Until 2000, inflation was generally higher in the U.K. than in France, but since then has been lower. Inflation in Spain continues to be higher than both the U.K. and France.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Harmonized Indexes of Consumer Prices (1996=100)</th>
<th scope="col">Jun 04</th>
<th scope="col">May 04</th>
<th scope="col">Jun&nbsp; 03</th>
<th scope="col">M/M %</th>
<th scope="col">Y/Y&nbsp;%&nbsp;</th>
<th scope="col">2003 %</th>
<th scope="col">2002 %</th>
<th scope="col">&nbsp;2001 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">France</td>
<td>113.5</td>
<td>113.4</td>
<td>110.5</td>
<td>0.09</td>
<td>2.71</td>
<td>2.17</td>
<td>1.94</td>
<td>1.78</td>
</tr>
<tr>
<td class="firstcol">Spain</td>
<td>124.8</td>
<td>124.6</td>
<td>120.6</td>
<td>0.16</td>
<td>3.48</td>
<td>3.01</td>
<td>2.87</td>
<td>3.65</td>
</tr>
<tr class="odd">
<td class="firstcol">United Kingdom</td>
<td>111.3</td>
<td>111.4</td>
<td>109.6</td>
<td>-0.09</td>
<td>1.55</td>
<td>1.36</td>
<td>1.27</td>
<td>1.22</td>
</tr>
<tr>
<td class="firstcol">Addendum:</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">UK Retail Price Index&nbsp; (1997=100)</td>
<td>186.8</td>
<td>186.5</td>
<td>181.3</td>
<td>0.16</td>
<td>3.03</td>
<td>2.91</td>
<td>1.63</td>
<td>1.82</td>
</tr>
<tr>
<td class="firstcol">UK RPIX excl Mortgage Interest&nbsp;</td>
<td>184.2</td>
<td>184.3</td>
<td>180.0</td>
<td>-0.05</td>
<td>2.33</td>
<td>2.81</td>
<td>2.21</td>
<td>2.13</td>
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</tbody>
</table>
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Inflation in the United Kingdom, as measured by the year-to-year percentage increase in the Consumer Price Index has risen in the past three months and in June was 1.6%, the highest level since March,2003. Prior to December 10, 2003, [...]

Inflation as Measured by Harmonized Indexes of Consumer Prices (HICP) Rises in the United Kingdom, France and Spain

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040713c.jpg" width="353">
The U.S. foreign trade deficit narrowed in May to $46.0B versus the little revised record deficit of $48.1B a month earlier. Consensus expectations had been for a deficit of $48.3B.
Exports rebounded 2.9% to a record high following a 1.0% decline in April. Notably strong were capital goods exports, up 6.3% (22.1% y/y). Exports of food &amp; beverages rose 2.8% (9.5% y/y) and exports of industrial supplies jumped 6.0% (22.6% y/y). Non-auto consumer goods exports fell slightly for the second month (17.6% y/y).
Total imports rose by 0.4% for the second month. Imports of petroleum products fell for the third consecutive month (-1.9% y/y). Imports of non-petroleum goods rose a modest 0.1% (11.1% y/y) following a 1.5% jump in April.
Imports of capital goods rose 0.2% (14.2% y/y) following a 2.0% April rise. Imports of non-auto consumer goods slumped 3.0% (+11.0% y/y) led by large declines in imports of apparel &amp; household goods, TVs and stereo equipment.
By country, the US trade deficit with China deepened m/m to $12.1.0B ($124.1B in 2003). The US trade deficit with Japan eased to $5.5B ($66.0B in 2003) and the deficit with Western Europe eased to $8.2B ($100.3B in 2003).

<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/@EE/@EE03/@EE03.HTM"> Foreign Trade</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Trade Deficit</td>
<td>$46.0B</td>
<td>$48.1B</td>
<td>$40.8B(5/03)</td>
<td>$496.5B</td>
<td>$421.7B</td>
<td>$362.7B</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Exports - Goods &amp; Services</td>
<td>2.9%</td>
<td>-1.0%</td>
<td>17.6%</td>
<td>4.6%</td>
<td>-3.1%</td>
<td>-6.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Imports - Goods &amp; Services</td>
<td>0.4%</td>
<td>0.4%</td>
<td>15.9%</td>
<td>8.5%</td>
<td>2.1%</td>
<td>-5.5%</td>
</tr>
</tbody>
</table>
Small Business Optimism Fell Again 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 13, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040713b.jpg" width="353">
The Small Business Optimism Index published by the National Federation of Independent Business (NFIB) fell 1.4% last month. It was the fifth monthly decline this year.
The percentage of firms expecting the economy to improve fell sharply to 26% from a high of 51% last November. The percent of firms planning to raise capital expenditures also fell sharply but the percentage planning to raise employment rose slightly.
The percentage of firms raising average selling prices jumped to a record high and the percent reporting higher earnings this quarter deteriorated.
During the last ten years there has been a 50% correlation between the level of the NFIB index and the y/y change in real GDP.
About 24 million businesses exist in the United States. Small business creates 80% of all new jobs in America.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM"> Nat&#39;l Federation of Independent Business</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col"> Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Small Business Optimism Index (1986=100)</td>
<td>103.0</td>
<td>104.5</td>
<td>1.3%</td>
<td>101.3</td>
<td>101.2</td>
<td>98.4</td>
</tr>
</tbody>
</table>
Chain Store Sales Unchanged 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 13, 2004


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040713a.jpg" width="353">
Chain store sales were unchanged last week following the 0.9% rise the prior period, according to the International Council of Shopping Centers (ICSC)-UBS.
So far in July sales are up 0.1% versus the June average.
During the last ten years there has been a 59% correlation between y/y change in chain store sales and the change in non-auto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. 

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<colgroup><col><col><col><col><col><col></colgroup>
<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">07/10/04</th>
<th scope="col">07/03/04</th>
<th scope="col">Y/Y</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Retail Chain Store Sales</td>
<td>438.5</td>
<td>438.5</td>
<td>3.4%</td>
<td>2.9%</td>
<td>3.6%</td>
<td>2.1%</td>
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The U.S. foreign trade deficit narrowed in May to $46.0B versus the little revised record deficit of $48.1B a month earlier. Consensus expectations had been for a deficit of $48.3B. Exports rebounded 2.9% to a record high following a [...]

U.S. Trade Deficit Eased

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040712b.jpg" width="353">
More data on industrial production in countries outside the U. S. were released today. The data are mixed. In the Pacific Rim, India reported an increase of 0.15% in May from April and a 6.35% rise over April 2003. Indonesia reported a sharp rice of 5.12% in the month of May which resulted in a 24.25% increase over May 2003.
In Europe, France showed an increase of 0.20%, or an annual rate of 2.4% in May from April and was 3.37% above a year ago.In Italy, however, industrial production was unchanged from April and was only 2.05% above April, 2003. In Ireland, where double digit increases in the annual rate of production were the norm from the time the country joined the Euro Zone up to 2002, industrial production is now declining. In May, industrial production was 3.96% below April and 0.33% below May of 2003.
Finally, Mexico reported that seasonally unadjusted industrial production increased 0.74% in May from April and was 2.11% above May, 2003. The year over year percent change in industrial production for Mexico has been positive for each month of the current year and suggests that the year over year increase for all of 2004 is likely to be positive for the first time since 2000.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Industrial Production</th>
<th scope="col">May 04</th>
<th scope="col">Apr 04</th>
<th scope="col">May&nbsp; 03</th>
<th scope="col">M/M&nbsp; %</th>
<th scope="col">Y/Y %&nbsp;</th>
<th scope="col">2003 %</th>
<th scope="col">2002 %</th>
<th scope="col">&nbsp;2001 %</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">France (2000=100)</td>
<td>101.1</td>
<td>100.9</td>
<td>97.8</td>
<td>0.20</td>
<td>3.37</td>
<td>-0.09</td>
<td>-1.25</td>
<td>1.09</td>
</tr>
<tr>
<td class="firstcol">Italy (2000=100)</td>
<td>98.0</td>
<td>98.0</td>
<td>96.0</td>
<td>0.00</td>
<td>2.08</td>
<td>-1.6</td>
<td>-1.38</td>
<td>-1.05</td>
</tr>
<tr class="odd">
<td class="firstcol">Ireland (1995=1000</td>
<td>245.1</td>
<td>255.20</td>
<td>245.9</td>
<td>-3.96</td>
<td>-0.33</td>
<td>6.47</td>
<td>7.71</td>
<td>10.23</td>
</tr>
<tr>
<td class="firstcol">India (FY 1993=100)</td>
<td>194.4</td>
<td>194.1</td>
<td>182.8</td>
<td>0.15</td>
<td>6.35</td>
<td>6.56</td>
<td>4.59</td>
<td>2.71</td>
</tr>
<tr class="odd">
<td class="firstcol">Indonesia (1993=100)</td>
<td>125.22</td>
<td>118.12</td>
<td>100.78</td>
<td>5.12</td>
<td>24.25</td>
<td>4.52</td>
<td>-7.06</td>
<td>-1.08</td>
</tr>
<tr>
<td class="firstcol">Mexico (1993=100)</td>
<td>134.8</td>
<td>135.8</td>
<td>133.0</td>
<td>0.74</td>
<td>2.11</td>
<td>-0.75</td>
<td>-0.31</td>
<td>-3.38</td>
</tr>
</tbody>
</table>
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More data on industrial production in countries outside the U. S. were released today. The data are mixed. In the Pacific Rim, India reported an increase of 0.15% in May from April and a 6.35% rise over April 2003. Indonesia reported [...]

A Mixed Picture of Industrial Production Trends Outside the United States

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040712a.jpg" width="353">
Growth in the Index of Leading Indicators for the Major Seven OECD Countries slumped through May. The 4.4% rate of growth was the weakest since last July and reflected declines in the index level during two of the last three months. Benchmark revisions lowered the country index levels but growth rates through 2003 were generally raised.
Leaders in Japan fell in each of the last three months and are down 1.3% from the February high. The six-month growth rate went negative for the first time in about a year. Weakness in construction and an excess of imports over exports accounts for much of the decline.
The leading index for the European Union has continued to rise, up 0.2% in each of the last two months but the six month growth rate eased to 4.7% versus the high of 6.2% late last year.
In France the leading index jumped 0.6% in May leaving the six-month growth rate at 6.4%. Leaders in Germany rose 0.3% in four of the five months this year, though these figures are slightly lower than initially reported. The six-month growth rate of 6.1% is off its December high of 9.0%.
Leaders in the UK fell 0.3% for the second month in the last three. The six month growth rate dropped to fell to 2.0% from the high of 5.1% in February. In Italy the leaders fell for the second consecutive month in May and that pulled six month growth to 0.4% its lowest in a year.
In Canada the leading index has been on a tear, up 1.0% in May following an upwardly revised 0.7% gain in April. The six-month growth rate rose to 8.4%, its highest in two years. In the United States the leading indicators slipped 0.1% for the second month in the last three. The six-month growth rate fell to 6.5% from its December high of 12.2%.
Visit the OECD&#39;s website at this <a href="http://www.oecd.org/home/">website</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/OECDMEI/OECDMEI.HTM"> OECD Main Economic Indicators</a></th>
<th scope="col"> May</th>
<th scope="col"> April</th>
<th scope="col"> 6-Mth Chg.</th>
<th scope="col"> 2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">OECD Major Seven - Leading Index (Trend Restored)</td>
<td>102.5</td>
<td>102.6</td>
<td>4.4%</td>
<td>2.6%</td>
<td>2.3%</td>
<td>-3.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; European Union</td>
<td>105.9</td>
<td>105.7</td>
<td>4.7%</td>
<td>2.4%</td>
<td>3.5%</td>
<td>-2.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Japan</td>
<td>96.5</td>
<td>97.0</td>
<td>-0.5%</td>
<td>1.7%</td>
<td>0.2%</td>
<td>-4.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; United States</td>
<td>103.3</td>
<td>103.5</td>
<td>6.5%</td>
<td>3.9%</td>
<td>2.1%</td>
<td>-3.2%</td>
</tr>
</tbody>
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Growth in the Index of Leading Indicators for the Major Seven OECD Countries slumped through May. The 4.4% rate of growth was the weakest since last July and reflected declines in the index level during two of the last three months. [...]

OECD Leaders Wobble

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040709a.jpg" width="353">
The Manufacturers Alliance/MAPI Survey of expected business conditions improved sharply for 2Q04, reflecting sharp improvement in order books.
The Composite Business Index rose to its highest level in the series&#39; history which began in 1991. During that period there has been a 63% correlation between the index level and y/y change in factory sector industrial production.
The index of orders, which measures orders in the current quarter versus last year, also rose to its record high. There has been a 94% correlation between the orders index level and the year to year to year change in factory order. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/040709c.jpg" width="353"> 
Profit margins were at the highest level on record as the index rose to 79 versus 73 in 1Q and 47 a year ago. Profit margins rose at a record 68% of the firms surveyed and fell at just 10% of those surveyed. 
The index of capital spending plans also rose to 75 versus 69 last quarter. These figures were down somewhat from the record high of 81 in 4Q03 as 59% of firms planned to increase capital spending.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@SE/@SE.HTM">Manufacturers Alliance/MAPI Survey</a></th>
<th scope="col">2Q04</th>
<th scope="col">1Q04</th>
<th scope="col">2Q03</th>
<th scope="col">2003</th>
<th scope="col">2002</th>
<th scope="col">2001</th>
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<td class="firstcol">Composite Business Index</td>
<td>80</td>
<td>78</td>
<td>60</td>
<td>67</td>
<td>60</td>
<td>37</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Current Orders Index</td>
<td>93</td>
<td>90</td>
<td>53</td>
<td>70</td>
<td>52</td>
<td>30</td>
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The Manufacturers Alliance/MAPI Survey of expected business conditions improved sharply for 2Q04, reflecting sharp improvement in order books. The Composite Business Index rose to its highest level in the series' history which began [...]

Manufacturers Expect Improved Growth: Profits Firm

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

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

Apart from the US, productivity is moribund

Financial market concerns ebb even though policy uncertainty continues to soar

US tariff revenues nearly doubled in April

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

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

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The Housing Market Index, compiled by the National Association of Home Builders/Wells Fargo, fell 5.9% (-25.6% y/y) to 32 in June after declining 15.0% in May. It was well below the break-even point of 50, where it’s been since May of last year. The index remains below a July 2023 high of 56 and a November 2020 peak of 90.

The rate on a 30-year fixed rate mortgage averaged 6.85% in the first two weeks of June versus 6.82% during all of May. It remained below the high of 7.79% in the last week of October 2023, according to Freddie Mac.

The single-family sales measure declined 5.4% (-27.1% y/y) this month to 35 after falling 17.8% in May. The prospective sales index in six months declined 4.8% (-14.9% y/y) to 40 after falling 2.3% in May. It was the lowest level since November 2023. The traffic of prospective buyers’ index fell 8.7% (-25.0% y/y) to 21 in June after declining 8.0% in May.

Housing performance weakened across most of the country during June. In the South, the index dropped 6.3% (-30.2% y/y) to 30 this month, after falling 15.8% in May. The index for the Midwest declined 2.5% both m/m and y/y to 39 after falling 7.0% in May. The index in the West dove 18.5% (-42.1% y/y) to 22 after plunging 25.0% in May. Moving higher, the Northeast index rose 4.8% (-29.0% y/y) to 44, after falling 2.3% in May.

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions which ask builders to rate sales and sales expectations as "good," "fair" or "poor" and traffic as "very high," "average" or "very low." The figures are diffusion indexes with values over 50 indicating a predominance of "good"/"very high" readings. In constructing the composite index, the weights assigned to the individual index components are: 0.5920 for single-family detached sales, present time, 0.1358 for single-family detached sales, next six months, and 0.2722 for traffic of prospective buyers. The regional indexes run back to December 2004.

These data are included in Haver's **SURVEYS** database.

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- Overall reading stands at lowest level since December 2022.
- All component measures fall.
- Most regional indexes retreat.

U.S. Home Builders Index Declines in June

Winnie Tapasanun

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Industrial production (IP) fell 0.2% m/m in May following an upwardly revised 0.1% increase in April (0.0% initially) and an upwardly revised 0.2% decline in March (-0.3% previously), data from the Federal Reserve Board showed. A 0.0% m/m for May had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase decelerated to 0.6% in May, the lowest since December, from 1.5% in April; nevertheless, it was an improvement from +0.1% y/y in May 2024. The May IP index was at 103.6, slightly down from its recent high of 104.0 in February; however, having remained 2.1% above its recent low of 101.5 in January 2024.

By **industry groups**, manufacturing production edged up 0.1% (0.5% y/y) in May, the third m/m increase in four months, after a downwardly revised 0.5% drop in April (-0.4% initially). Durable goods production rose 0.4% (0.9% y/y) in May, up for the third month in four, reversing a 0.4% decline in April. This reflected m/m output rises of 4.9% (0.9% y/y) in motor vehicles & parts, 1.1% (5.7% y/y) in aerospace & miscellaneous transportation equipment, 0.9% (2.4% y/y) in electrical equipment, appliances & components, 0.9% (-1.2% y/y) in furniture & related products, 0.9% (4.1% y/y) in wood products, and 0.2% (-1.5% y/y) in primary metals. Notably, aircraft & parts production rose 2.0% (9.9% y/y) in May, the seventh straight m/m rise, on top of a 1.4% increase in April. To the downside, the following durable goods categories fell m/m in May, including output drops of 1.6% (+1.2% y/y) in nonmetallic mineral products, 1.2% (-2.2% y/y) in fabricated metal products, 1.0% (+1.0% y/y) in machinery, 0.4% (-3.9% y/y) in miscellaneous durables goods, and 0.2% (+4.8% y/y) in computer & electronic products.

Nondurable goods production fell 0.2% (+0.4% y/y) in May following a 0.6% decrease in April and two successive m/m increases. The May fall reflected m/m output declines of 1.7% (-0.9% y/y) in printing & related support activities, 1.4% (-2.7% y/y) in petroleum & coal products, and 0.3% (-0.9% y/y) in food, beverages & tobacco. To the upside, the following nondurable goods categories rose m/m in May, including output rises of 2.2% (-3.7% y/y) in apparel & leather goods, 0.8% (-1.6% y/y) in textiles & product mills, 0.6% (-0.5% y/y) in paper, 0.1% (4.1% y/y) in chemicals, and 0.1% (-2.4% y/y) in plastics & rubber products.

Utilities output declined 2.9% (-1.6% y/y) in May, the third m/m decrease in four months, following an upwardly revised 4.9% gain in April (+3.3% initially). In contrast, mining activity ticked up 0.1% (2.9% y/y), up for the third month in four, after a 0.3% April decline (unrevised).

By **market groups**, construction supplies production slid 0.7% (+1.6% y/y) in May after a 1.2% drop in April and two consecutive m/m rises. Consumer goods output fell 0.2% (-0.5% y/y) in May, the third successive m/m fall, after a 0.3% decline in April, reflecting a 2.0% rebound (-1.9% y/y) in durable consumer goods and a 0.8% drop (-0.1% y/y) in nondurable consumer goods. Materials production declined 0.2% (+0.9% y/y), down for the second month in three, following a 0.5% April gain. To the upside, business equipment output grew 0.8% (2.7% y/y) in May, the seventh straight m/m rise, on top of a 0.2% increase in April.

In **special classifications**, factory output of selected high-tech industries rose 0.4% (9.8% y/y) in May, the fifth m/m rise in six months, after an upwardly revised 2.8% gain in April (+1.4% initially). Manufacturing production excluding selected high-tech industries inched up 0.1% (0.2% y/y) in May, the third m/m increase in four months, following a 0.6% drop in April, while manufacturing production excluding selected high-tech and motor vehicles & parts fell 0.3% (+0.2% y/y) following a 0.5% April decline and two consecutive m/m gains.

Capacity utilization fell to 77.4% in May, the lowest since January, from 77.7% in both April (unrevised) and March (77.8% previously). The Action Economics Forecast Survey forecasted 77.7%. The May reading was 2.2 percentage points below its long-run (1972–2024) average. Manufacturing capacity utilization held at 76.7% in May and April (76.8% initially); the May rate was 1.5 percentage points below its long-run average.

Industrial production and capacity data are in Haver’s **USECON** database. Additional detail on production and capacity utilization can be found in the **IP** database. The expectations figures come from the **AS1REPNA** database.

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- May IP -0.2% (+0.6% y/y), led by a 2.9% m/m decrease in utilities output.
- Mfg. IP +0.1%, reflecting m/m gains of 4.9% in auto production and 1.1% in aerospace & misc. transp. equipt. (w/ durable goods up 0.4% and nondurable goods down 0.2%).
- Mining activity edges up 0.1%, the third m/m increase in four months.
- Key categories in market groups mostly drop.
- Capacity utilization down 0.3%pt. to a four-month-low 77.4%; mfg. capacity utilization unchanged at 76.7%.

U.S. Industrial Production Declines in May, the Second M/M Fall in Three Months

Sandy Batten

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Total retail sales slumped 0.9% m/m (+3.3% y/y) in May following a downwardly revised 0.1% monthly decline in April (previously +0.1% m/m). The May decline was led by a 3.5% m/m (+2.5% y/y) drop in motor vehicle and parts sales and a 2.0% m/m (-6.9% y/y) price-related decline in sales at gasoline stations. This was the fourth consecutive monthly decline in gasoline sales. Sales excluding autos fell 0.3% m/m (+3.5% y/y) in May after a downwardly revised unchanged reading in April (previously +0.1% m/m). The Action Economics Forecast Survey looked for total sales to fall 0.6% m/m in May and for sales ex autos to rise 0.2% m/m. Sales excluding autos and gasoline slipped 0.1% m/m in May after a 0.1% m/m increase in April.

On a more positive note, sales in the retail control group, which excludes autos, building materials, gasoline and food services, rebounded 0.4% m/m (5.0% y/y) in May after an upwardly revised 0.1% m/m decline in April (previously -0.2% m/m). These sales are used in the construction of personal consumption expenditures in the NIPA accounts. While these sales slowed in April and May from a relatively strong February and March, the April/May average is still 2.9% at an annual rate above the Q1 average, providing a solid foundation for Q2 PCE.

By category, in addition to declines in auto and gasoline sales, building material and garden equipment sales slumped 2.7% m/m, their first monthly decline in three months. Sales at food service and drinking places declined 0.9% m/m, their first monthly decline in three months. Sales at electronics and appliance stores fell 0.6% m/m, their first decline in four months. In contrast, sales at furniture stores continued to rise, increasing 1.2% m/m, their fourth consecutive monthly gain. Sales at sporting goods, etc. stores rose 1.3% m/m but failed to offset a 3.0% m/m decline in April. Sales at nonstore retailers rose 0.9% m/m in May for their fourth consecutive monthly gain. Miscellaneous store sales jumped 2.9% m/m.

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

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- Sales fell a more-than-expected 0.9% m/m, led by a 3.5% decline in motor vehicle sales and a 2.0% drop in gasoline store sales.
- Sales excluding autos unexpectedly fell 0.3% m/m.
- In contrast, sales in the control group (used to estimate PCE) rebounded 0.4% m/m.

U.S. Retail Sales Fell More than Expected in May 2025

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Import prices were unchanged during May after rising 0.1% in April, and falling 0.4% in March, according to the Bureau of Labor Statistics. A 0.3% decline had been expected in the Action Economics Forecast Survey. The year-on-year increase picked up to 0.2% but remained below the recent high of 2.2% in December. Export prices fell 0.9% during May after an unrevised 0.1% April gain. A 0.2% decline had been expected. The y/y rise eased to 1.7% from 1.9% in April and was the slowest gain since November.

The steady import price index in May included a 4.0% drop (-15.8% y/y) in imported fuel prices, the third consecutive month of sharp decline. The decline in imported fuel costs reflected a 9.0% fall (+88.4% y/y) in natural gas, a 2.7% drop (-18.8% y/y) in fuel oil costs, a 3.7% decline (-17.4% y/y) in petroleum & petroleum products and a 5.4% drop (-17.1% y/y) in crude oil prices. Nonfuel import prices fell 0.2% (+7.7% y/y) in May following a 17% April increase. Import prices for nonfuel industrial supplies & materials rose 1.3% (5.4% y/y) and capital goods rose 0.2% (1.1% y/y), but foods, feeds & beverages prices declined 0.3% (+6.9% y/y). Import prices for automotive vehicles & parts edged 0.1% higher (1.1% y/y) and consumer goods excluding autos increased 0.2% (-0.7% y/y) after rising 0.3% in April.

The May decline in export prices reflected a 1.0% (1.7% y/y) drop in nonagricultural prices following a 0.1% dip. Petroleum & petroleum product prices fell 3.8% (-11.4% y/y). Industrial supplies & materials export prices dropped 2.9% (+1.0% y/y) in May, down for the third straight month. In contrast, agricultural export prices rose 0.2% (1.8%) following a 0.4% gain in April. The cost of capital goods rose 0.4% (1.9% y/y) after two straight 0.3% increases. Prices of consumer goods excluding autos rose 0.2% (1.4% y/y) after a 0.7% rise, while automotive vehicles & parts prices rose 0.2% (2.7% y/y) following a 0.9% April gain. Foods, feeds & beverages prices rose 0.3% (3.1% y/y) after increasing 0.4% in April.

These import and export price series are not seasonally adjusted; they can be found in Haver’s **USECON** database. Detailed figures are available in the **USINT** database. The expectations figure from the Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Sharp decline in imported fuel costs is offset by increases in other products.
- Export price decline reflects lower petroleum prices.

U.S. Import Prices Hold Steady in May While Export Prices Decline

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Total business inventories were unchanged in April from March (+2.2% y/y) after having inched up 0.1% m/m in March. The Action Economics Forecast Survey had anticipated an unchanged reading. Manufacturing inventories edged down 0.1% m/m (+0.9% y/y) following five consecutive monthly gains. Retail inventories were essentially unchanged (-0.03% m/m) after having declined in three of the four previous months. In contrast, wholesale inventories rose 0.2% m/m (2.3% y/y) in April for their fourth consecutive monthly gain.

Drilling down into retail inventories, auto inventories declined 0.8% m/m in April for their sixth consecutive monthly fall. Retail inventories excluding autos increased 0.3% m/m for their fourth consecutive monthly gain. General merchandise store inventories fell 0.3% m/m, their second decline in the past three months. Inventories increased in all other major retail categories, led by a 1.0% m/m increase in food and beverage store inventories. Inventories at building materials and garden equipment stores rose 0.8% m/m following two consecutive monthly declines. Furniture store inventories increased 0.4% m/m, their third monthly increase in the past four months.

Total business sales slipped 0.1% m/m (+3.8% y/y) in April, their first monthly decline in three months. Wholesale sales edged up 0.1% (6.0% y/y), their third consecutive monthly rise. Factory sales fell 0.3% m/m (+0.6% y/y) on top of a 0.2% monthly decline in March. Retail sales decreased 0.2% m/m (+4.7% y/y) in April though in a separate report also released today, retail sales slumped 0.9% m/m in May, led by declines in auto and gasoline sales.

With the little change in both sales and inventories in April, the inventory/sales (I/S) ratio was unchanged after having fallen in four of the five previous months. The 1.38 reading in April tied the reading in the previous month as the lowest one since September 2023. The I/S ratios for retailers and wholesalers were also unchanged in April from March while the manufacturing I/S ratio increased 0.6% m/m.

The manufacturing and trade data are in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Total inventories were unchanged in April from March.
- Wholesale inventories rose for the fourth consecutive month while retail and factory inventories slipped.
- Sales edged down 0.1% m/m, the first monthly decline in three months, with declines in both factory and retail sales.
- With little change in both sales and inventories, the inventories/sales ratio was unchanged in April following two consecutive monthly declines.

Economy in Brief: July 2004

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