Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719b.jpg" width="353">
Consumer prices (CPI-U) rose an expected 0.2% during June. The 0.3% rise in prices less food &amp; energy was, however, like the previous month firmer than expectations for a 0.2% gain.
The upside surprise in &quot;core&quot; price inflation represented the fourth consecutive month of 0.3% gain. It pulled the y/y gain in prices to 2.7%, the fastest since mid-2001.
Core goods prices rose 0.1% for the third consecutive month. While the resulting 0.5% y/y increase is modest, and indeed below a high 0.9% gain in early 2005, the rise contrasts with outright price deflation from 2002 to 2004.
Furniture &amp; bedding costs rose 0.3% (2.0% y/y) in June to produce the strongest y/y increase in ten years. Apparel prices were unchanged last month (0.6% y/y) but here again the y/y gain was the firmest in two years. Appliance prices fell 0.3% (+0.7% y/y) while new &amp; used motor vehicle prices ticked up 0.1% (0.1% y/y). Tobacco prices jumped 0.8% (4.8% y/y) and medical care commodity prices fell 0.1% (3.9% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719a.jpg" width="353">
Core services prices rose 0.4% for the second consecutive month. Shelter prices again increased 0.4% (3.5% y/y) reflecting another strong 0.4% increase in the rental equivalence measure of owners&#39; primary residences. The 3.6% y/y increase in this measure is the fastest since late 2002. Rents also increased 0.4% (3.5% y/y), an acceleration from the low of 2.5% in early 2004. Public transportation costs also have shown considerable strength and in June rose 1.2% to pull the y/y gain to 5.4%. Finally, education costs rose 0.5% for the fourth consecutive month (6.0% y/y) and medical care services prices rose 0.4% (4.2% y/y).
Food &amp; beverage prices rose 0.3% helped by a 0.4% (0.4% y/y) rise in meat, fish &amp; poultry prices. Fruit &amp; vegetable prices soared 1.4% to lift the y/y increase to 4.0%.
Energy prices fell 0.9% due to a 1.0% decline in gasoline prices which has since reversed while natural gas &amp; electricity prices fell 1.1% (+11.9% y/y).
The chained CPI, which adjusts for shifts in the mix of consumer purchases rose 0.3%. Less food &amp; energy the increase in prices also was stable at 0.1%.
Is All That Talk Just Noise? from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20060801/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</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&nbsp;</td>
<td>0.2%</td>
<td>0.4%</td>
<td>4.3%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.5%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.4%</td>
<td>0.4%</td>
<td>3.5%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-0.9%</td>
<td>2.4%</td>
<td>23.2%</td>
<td>16.9%</td>
<td>10.8%</td>
<td>12.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>0.3%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.7%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.4%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
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Consumer prices (CPI-U) rose an expected 0.2% during June. The 0.3% rise in prices less food & energy was, however, like the previous month firmer than expectations for a 0.2% gain. The upside surprise in "core" price inflation [...]

Core CPI Firmer Than Expected

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719b.jpg" width="353">
Consumer prices (CPI-U) rose an expected 0.2% during June. The 0.3% rise in prices less food &amp; energy was, however, like the previous month firmer than expectations for a 0.2% gain.
The upside surprise in &quot;core&quot; price inflation represented the fourth consecutive month of 0.3% gain. It pulled the y/y gain in prices to 2.7%, the fastest since mid-2001.
Core goods prices rose 0.1% for the third consecutive month. While the resulting 0.5% y/y increase is modest, and indeed below a high 0.9% gain in early 2005, the rise contrasts with outright price deflation from 2002 to 2004.
Furniture &amp; bedding costs rose 0.3% (2.0% y/y) in June to produce the strongest y/y increase in ten years. Apparel prices were unchanged last month (0.6% y/y) but here again the y/y gain was the firmest in two years. Appliance prices fell 0.3% (+0.7% y/y) while new &amp; used motor vehicle prices ticked up 0.1% (0.1% y/y). Tobacco prices jumped 0.8% (4.8% y/y) and medical care commodity prices fell 0.1% (3.9% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719a.jpg" width="353">
Core services prices rose 0.4% for the second consecutive month. Shelter prices again increased 0.4% (3.5% y/y) reflecting another strong 0.4% increase in the rental equivalence measure of owners&#39; primary residences. The 3.6% y/y increase in this measure is the fastest since late 2002. Rents also increased 0.4% (3.5% y/y), an acceleration from the low of 2.5% in early 2004. Public transportation costs also have shown considerable strength and in June rose 1.2% to pull the y/y gain to 5.4%. Finally, education costs rose 0.5% for the fourth consecutive month (6.0% y/y) and medical care services prices rose 0.4% (4.2% y/y).
Food &amp; beverage prices rose 0.3% helped by a 0.4% (0.4% y/y) rise in meat, fish &amp; poultry prices. Fruit &amp; vegetable prices soared 1.4% to lift the y/y increase to 4.0%.
Energy prices fell 0.9% due to a 1.0% decline in gasoline prices which has since reversed while natural gas &amp; electricity prices fell 1.1% (+11.9% y/y).
The chained CPI, which adjusts for shifts in the mix of consumer purchases rose 0.3%. Less food &amp; energy the increase in prices also was stable at 0.1%.
Is All That Talk Just Noise? from the Federal Reserve Bank of St. Louis is available <a href="http://research.stlouisfed.org/publications/mt/20060801/cover.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
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<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80101/@E80101.HTM">Consumer Price Index</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&nbsp;</td>
<td>0.2%</td>
<td>0.4%</td>
<td>4.3%</td>
<td>3.4%</td>
<td>2.7%</td>
<td>2.3%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.3%</td>
<td>0.3%</td>
<td>2.7%</td>
<td>2.2%</td>
<td>1.8%</td>
<td>1.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Goods less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>0.5%</td>
<td>0.5%</td>
<td>-0.9%</td>
<td>-2.0%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Services less Energy</td>
<td>0.4%</td>
<td>0.4%</td>
<td>3.5%</td>
<td>2.8%</td>
<td>2.8%</td>
<td>2.9%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Energy</td>
<td>-0.9%</td>
<td>2.4%</td>
<td>23.2%</td>
<td>16.9%</td>
<td>10.8%</td>
<td>12.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Food &amp; Beverages</td>
<td>0.3%</td>
<td>0.2%</td>
<td>2.3%</td>
<td>2.4%</td>
<td>3.4%</td>
<td>2.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr>
<td class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E8/@E801/@E80113/@E80113.HTM">Chained CPI: Total (NSA)</a> </td>
<td>0.3%</td>
<td>0.3%</td>
<td>3.7%</td>
<td>2.9%</td>
<td>2.5%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Total less Food &amp; Energy</td>
<td>0.1%</td>
<td>0.1%</td>
<td>2.4%</td>
<td>1.9%</td>
<td>1.7%</td>
<td>1.1%</td>
</tr>
</tbody>
</table>
June Housing Starts Fell More Than Expected 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719c.jpg" width="353">
Housing starts fell 5.3% last month to 1.850M units, a decline that outpaced Consensus expectations for a lesser drop to 1.90M starts. For 2Q starts averaged 1.878M, down 11.5% from 1Q and it was the lowest quarterly level since mid 2003.
Total housing starts in June were 18.3% below the peak this past January.
Single-family starts fell 6.5% last month to 1.486M, a level which was 18.1% below the January peak. During 2Q single family starts fell 12.2% from the prior quarter.
Multi family starts rose a slight 0.3% in June but for 2Q fell 8.2%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719d.jpg" width="353">
By region, single family housing starts were the weakest last month in the Northeast where starts plummeted by one third (-37.8% y/y) to the lowest level in ten years. In the South single family starts fell 5.5% (-11.2% y/y) and in the West single family starts fell 5.9% (-11.0% y/y). In the Midwest starts rose a modest 3.6% during June but were down 13.3% y/y.
Building permits fell for the fifth consecutive month and were down 16.9% from last year&#39;s peak.
Today&#39;s Semiannual Monetary Policy Report to the Congress by Chairman Ben S. Bernanke is available <a href="http://www.federalreserve.gov/boarddocs/hh/2006/july/testimony.htm"> here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E901/@E90101/@E90101.HTM">Housing Starts (000s, AR)</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>1,850</td>
<td>1,953</td>
<td>-11.0%</td>
<td>2,073</td>
<td>1,950</td>
<td>1,854</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single-family</td>
<td>1,486</td>
<td>1,590</td>
<td>-13.8%</td>
<td>1,719</td>
<td>1,604</td>
<td>1,505</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Multi-family</td>
<td>364</td>
<td>363</td>
<td>2.8%</td>
<td>354</td>
<td>345</td>
<td>349</td>
</tr>
<tr>
<td class="firstcol">Building Permits</td>
<td>1,862</td>
<td>1,946</td>
<td>-14.9%</td>
<td>2,159</td>
<td>2,058</td>
<td>1,888</td>
</tr>
</tbody>
</table>
NAHB Housing Market Index Lowest Since 1991 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719e.jpg" width="353">
The July Composite Housing Market Index at 39 was at its lowest level since late 1991. The index compiled by the National Association of Home Builders (NAHB) fell from 42 in June and compared to Consensus expectations for a reading of 41.
During the last twenty years there has been a 75% correlation between the y/y change in the Composite Index and the change in single family housing starts.
The sub indexes covering current sales of single family homes (-43.4% y/y) and sales in the next six months (-40.3% y/y) were both down sharply m/m.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719f.jpg" width="353">
An index of the traffic of prospective home buyers fell even further from a dried up June level and was down 50.9% y/y.
Housing markets around the country were weak in July. The index for the Northeast off 47.8% y/y, in the Midwest the index fell 56.3% y/y, out West it was down 42.0% y/y and in the South it fell 32.4% y/y.
The NAHB index is a diffusion index based on a survey of builders. Readings above 50 signal that more builders view conditions as good than poor.
Visit the <a href="http://www.nahb.org">National Association of Home Builders</a>.

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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S4/@S4.HTM">Nat&#39;l Association of Home Builders</a> </th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#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">Composite Housing Market Index</td>
<td>39</td>
<td>42</td>
<td>70</td>
<td>67</td>
<td>68</td>
<td>64</td>
</tr>
</tbody>
</table>
Mortgage Applications Confirm Housing Soft in July 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719g.jpg" width="353">
A 4.6% decline in the total number of mortgage applications last week reversed most of the increases during the prior two weeks and left applications early in July about even (+0.2%) with the June average which fell 1.5% from May.
Purchase applications fell a hard 6.2% w/w and left applications in July only 1.5% above the June average which fell 0.8% from May.
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 fell 1.6% for the second week and the early July average was 2.2% below June. Refis during all of June fell 3.1% from the May average.
The effective interest rate on a conventional 30-year mortgage slipped w/w to 6.96% and the rate on 15-year financing also fell to 6.63%. 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%">
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<thead>
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<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">07/14/06</th>
<th scope="col">07/07/06</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>540.8</td>
<td>566.8</td>
<td>-32.5%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>398.5</td>
<td>425.0</td>
<td>-18.5%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,377.6</td>
<td>1,400.5</td>
<td>-47.4%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Building Plans Moderate in South Africa, but Recent Strength Puts Plans Well Ahead of Completions 
by <a href="/comment/Stone.html">Carol Stone</a> July 19, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719h.jpg" width="353">
As the following charts and table illustrate, there&#39;s been something of a building boom in South Africa. Over the last few months, however, some areas of construction have been slowing.
Statistics South Africa reported today that total building plans passed declined in May to ZAR 3.92 billion from ZAR 4.00 billion in April (seasonally adjusted, 2000 prices. &quot;ZAR&quot; is the ISO code for the South African Rand). This amount is 3.2% below May 2005. This collection of data begins in 2000 and remains relatively erratic, so caution should be used in assessing just one month&#39;s figures. Indeed, Statistics South Africa highlights 3-month moving averages and year-to-date data in its press releases.
<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060719i.jpg" width="353">By type, there is an emerging downtrend in residential construction, while nonresidential building remains strong. Additions and alterations have been fairly steady. In the residential sector, small houses (under 80 square meters, about 861 square feet) are quite vigorous, with a 6-month moving average ending May up 70% from a year ago. Larger houses, though, are trailing off: in May the 6-month average was up 9.2% year-on-year, but a 3-month average was up only 4.1%.
Within the nonresidential sector, data are available not seasonally adjusted in nominal terms for offices, shopping centers, and industrial and warehouse structures. Perhaps in line with the residential sector&#39;s general slowing, shopping space construction plans have been flat now for about six months. Offices and banks, though, are still advancing, and industrial and warehousing facilities were up in May by nearly 63% from a year ago, based on 3-month average figures. This is large, but considerably more moderate than the 100%+ pace that characterized the latter part of 2005.
These are building &quot;plans&quot;. With the recent surge in plans, many projects, especially nonresidential buildings will take some time for the construction. Thus, buildings completed, a separate measure, is much smaller than the plans figure. In May, a 3-month average of that total (seasonally adjusted) was ZAR 2.12 billion, up 23.9% from May 2005.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGEMA/@M2/@M210/@M210.HTM">South Africa</a><a href="http://www.haverselect.com/dlx/EMERGEMA/@M2/@M210/@M210.HTM">:</a>&nbsp; SA, Mil.2000.Rand</th>
<th scope="col">May 2006</th>
<th scope="col">Apr 2006</th>
<th scope="col">Mar 2006</th>
<th scope="col">Year Ago</th>
Monthly Averages
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">2005</td>
<td>2004</td>
<td>2003</td>
</tr>
<tr>
<td class="firstcol">Building Plans Passed</td>
<td>3925</td>
<td>4001</td>
<td>3886</td>
<td>3996</td>
<td>3912</td>
<td>2707</td>
<td>2013</td>
</tr>
<tr class="odd">
<td class="firstcol">Residential</td>
<td>2006</td>
<td>2048</td>
<td>2227</td>
<td>2403</td>
<td>2230</td>
<td>1624</td>
<td>1146</td>
</tr>
<tr>
<td class="firstcol">Nonresidential</td>
<td>847</td>
<td>881</td>
<td>613</td>
<td>591</td>
<td>651</td>
<td>395</td>
<td>334</td>
</tr>
<tr class="odd">
<td class="firstcol">Additions &amp; Alterations</td>
<td>1072</td>
<td>1072</td>
<td>1046</td>
<td>1002</td>
<td>1031</td>
<td>688</td>
<td>533</td>
</tr>
<tr>
<td class="firstcol">Buildings Completed</td>
<td>1915</td>
<td>2064</td>
<td>2371</td>
<td>1884</td>
<td>1943</td>
<td>1417</td>
<td>1147</td>
</tr>
</tbody>
</table>
</body>
</html>

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718f.jpg" width="353">
The ZEW institute of economic research polls some 300 institutional investors and analysts regarding their views of the current situation and their expectations of activity six months in the future. The excess of optimists over pessimists among the participants appraising the current situation rose to 23.3% from 11.8% in May. A year ago, in July, 2005, there was an excess of pessimists over optimists of 61.8%. There has been a steady improvement in the appraisal of current conditions since mid 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718g.jpg" width="353">
While the participants have become more positive about current economic conditions, they have become less positive about the outlook six months ahead as can be seen in the first chart. The excess of optimists over pessimists dropped 22.7 percentage points from 37,8% in June to 15.1% in July, the biggest drop since August,2002. For the first time, the six month horizon extends to 2007, when the value added tax (VAT) is scheduled to increase from 16% to 19% and health care contributions will be increased. In addition, the latest poll was conducted between June 26 and July 17. Towards the end of this period, the crisis in the mid east erupted leading to a jump in oil prices and a fall in stock market prices. The daily prices of the German Dax stock index and the prices of spot Brent crude oil are shown in the second chart. During the period June 26 to July 17, 2006, the oil price rose from an low of 69.69 on June 26 to just over 8% on July 17th. The stock market fell 5.5% from its high to July 17th.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718h.jpg" width="353">
The ZEW indicator is sometimes thought to be a good indicator of the broader IFO Institute&#39;s survey, which usually comes out 10 to 15 days later. In fact there is little correlation between the two series as shown in the third chart. The third chart suggests that different temperaments of the participants in the two surveys may account for some of the divergence. The financial community whose opinions color the ZEW results, tend to be more volatile than those of the business community whose opinions are reflected in the IFO survey. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">ZEW Survey</th>
<th scope="col">Jul&nbsp; 06</th>
<th scope="col">Jun 06</th>
<th scope="col">Jul 05</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</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">Current Conditions % bal&nbsp;</td>
<td>23.3</td>
<td>11.9</td>
<td>-66.9</td>
<td>11.2</td>
<td>90.0</td>
<td>-61.7</td>
<td>-67.7</td>
<td>-92.3</td>
</tr>
<tr>
<td class="firstcol">Expectations 6 Mo Ahead</td>
<td>15.1</td>
<td>37.8</td>
<td>32.0</td>
<td>-22.7</td>
<td>-21.9</td>
<td>34.8</td>
<td>44.6</td>
<td>38.4</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Stock Prices and Oil</td>
<td>7/17</td>
<td>High or Low 6/27-7/17</td>
<td>% Change&nbsp;</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">German Stock Price DAX 12/30/87=1000)</td>
<td>5416.96</td>
<td>5729.01H</td>
<td>-5.45</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Spot Price of Oil-Brent&nbsp; $per&nbsp; bbl&nbsp;</td>
<td>75.30</td>
<td>69.69L</td>
<td>8.05</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
</body>
</html>

The ZEW institute of economic research polls some 300 institutional investors and analysts regarding their views of the current situation and their expectations of activity six months in the future. The excess of optimists over [...]

More German Investors Confident about Current Conditions but Many More Wary of the Future

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718d.jpg" width="353">
Versus the prior week, retail gasoline prices rose two cents last week to $2.99 per gallon (29.0% y/y). During June prices averaged $2.89.
A further increase in retail gas prices may be in store this week as the spot market price for regular unleaded gasoline yesterday at $2.25 was up another nickel from last week&#39;s average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718e.jpg" width="353">
The price of West Texas Intermediate crude oil yesterday at $75.31 per barrel was about unchanged with last week&#39;s average but it was up sharply from the $70.96 averaged during June.
The latest Short-Term Energy and Summer Fuels Outlook from the U.S. Energy Information Administration can be found <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">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/@W4/@W403/@W40303/@W40303.HTM">US Weekly</a></th>
<th scope="col">07/17/06</th>
<th scope="col">07/10/06</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">U.S. Retail Gasoline, Regular per Gal.</td>
<td>$2.99</td>
<td>$2.97</td>
<td>29.0%</td>
<td>$2.27</td>
<td>$1.85</td>
<td>$1.56</td>
</tr>
</tbody>
</table>
</body>
</html>

Versus the prior week, retail gasoline prices rose two cents last week to $2.99 per gallon (29.0% y/y). During June prices averaged $2.89. A further increase in retail gas prices may be in store this week as the spot market price for [...]

Gasoline Prices Rose Last Week

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718a.jpg" width="353">
The June producer price index for finished goods increased 0.5% and exceeded Consensus expectations for a 0.3% rise. Excluding food &amp; energy, however, prices rose an expected 0.2%.
Despite the relatively tame m/m rise in prices less food &amp; energy, year to date prices have risen at a 3.1% annual rate, the fastest six month rate of increase since early last year. During the last ten years there has been a 47% correlation between the y/y change in core producer prices and the change in the core CPI for goods. Over the last twenty years the correlation has been 78%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718b.jpg" width="353">
Prices of all finished consumer goods less food &amp; energy rose 0.2% (1.9% y/y) and rose at a 3.2% annual rate during the last six months. Durable consumer goods prices rose 0.2% (1.0% y/y) and the 2.8% annual rate of advance during the last six months was the fastest since January &#39;05. A tame 0.1% rise in consumer nondurable prices (2.5% y/y) also belied the elevated nature of the rise during the last six months at a 3.4% rate.
Capital equipment prices rose 0.3% (1.8% y/y) for the second consecutive month. Here again, however, the 3.1% annual rate of advance during the last six months is elevated and the fastest since January of last year.
Finished consumer food prices showed strength in June with a 1.4% (0.6% y/y) increase that was the strongest since May 2004. A 15.0% (NSA, 3.3% y/y) jump in fresh fruit &amp; melon prices fueled the increase along with a 38.1% (NSA, 36.6% y/y) rise in egg prices.
Finished energy prices increased 0.7% (19.1% y/y) as gasoline prices surged 6.3% (44.3% y/y) though natural gas prices fell for the fifth month this year (+7.2% y/y) and residential electric power costs fell 2.8% (+5.2% y/y).
Intermediate goods prices rose 0.7% as energy prices increased 0.4% (19.2% y/y) and food prices jumped 1.0% (-0.4% y/y). Core intermediate prices also rose a strong 0.8%. The six month growth in core intermediate goods prices remained elevated at 7.7% versus a 5.5% advance last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718c.jpg" width="353">
Crude goods prices reversed the prior month&#39;s strength with a 1.7% decline due to a 6.8% drop in energy prices (7.7% y/y). The decline reflected lower crude petroleum costs which have since risen to record high levels. In addition, core crude prices rose a strong 1.7%. Iron &amp; steel scrap prices jumped a strong 6.2% (73.3% y/y) though aluminum base scrap prices eased 4.4% (+44.1% y/y). During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.
The Relationship between Expected Inflation, Disagreement, and Uncertainty: Evidence from Matched Point and Density Forecasts from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr253.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/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">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>0.5%</td>
<td>0.2%</td>
<td>4.8%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2%</td>
<td>0.3%</td>
<td>1.9%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.7%</td>
<td>1.1%</td>
<td>9.3%</td>
<td>8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.8%</td>
<td>1.1%</td>
<td>7.2%</td>
<td>5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-1.7%</td>
<td>2.0%</td>
<td>8.7%</td>
<td>14.6%</td>
<td>17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.7%</td>
<td>6.2%</td>
<td>33.7%</td>
<td>4.8%</td>
<td>26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
</body>
</html>

The June producer price index for finished goods increased 0.5% and exceeded Consensus expectations for a 0.3% rise. Excluding food & energy, however, prices rose an expected 0.2%. Despite the relatively tame m/m rise in prices less [...]

June PPI Firm & Core Tame M/M, Pricing Trends Elevated

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718a.jpg" width="353">
The June producer price index for finished goods increased 0.5% and exceeded Consensus expectations for a 0.3% rise. Excluding food &amp; energy, however, prices rose an expected 0.2%.
Despite the relatively tame m/m rise in prices less food &amp; energy, year to date prices have risen at a 3.1% annual rate, the fastest six month rate of increase since early last year. During the last ten years there has been a 47% correlation between the y/y change in core producer prices and the change in the core CPI for goods. Over the last twenty years the correlation has been 78%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718b.jpg" width="353">
Prices of all finished consumer goods less food &amp; energy rose 0.2% (1.9% y/y) and rose at a 3.2% annual rate during the last six months. Durable consumer goods prices rose 0.2% (1.0% y/y) and the 2.8% annual rate of advance during the last six months was the fastest since January &#39;05. A tame 0.1% rise in consumer nondurable prices (2.5% y/y) also belied the elevated nature of the rise during the last six months at a 3.4% rate.
Capital equipment prices rose 0.3% (1.8% y/y) for the second consecutive month. Here again, however, the 3.1% annual rate of advance during the last six months is elevated and the fastest since January of last year.
Finished consumer food prices showed strength in June with a 1.4% (0.6% y/y) increase that was the strongest since May 2004. A 15.0% (NSA, 3.3% y/y) jump in fresh fruit &amp; melon prices fueled the increase along with a 38.1% (NSA, 36.6% y/y) rise in egg prices.
Finished energy prices increased 0.7% (19.1% y/y) as gasoline prices surged 6.3% (44.3% y/y) though natural gas prices fell for the fifth month this year (+7.2% y/y) and residential electric power costs fell 2.8% (+5.2% y/y).
Intermediate goods prices rose 0.7% as energy prices increased 0.4% (19.2% y/y) and food prices jumped 1.0% (-0.4% y/y). Core intermediate prices also rose a strong 0.8%. The six month growth in core intermediate goods prices remained elevated at 7.7% versus a 5.5% advance last year.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718c.jpg" width="353">
Crude goods prices reversed the prior month&#39;s strength with a 1.7% decline due to a 6.8% drop in energy prices (7.7% y/y). The decline reflected lower crude petroleum costs which have since risen to record high levels. In addition, core crude prices rose a strong 1.7%. Iron &amp; steel scrap prices jumped a strong 6.2% (73.3% y/y) though aluminum base scrap prices eased 4.4% (+44.1% y/y). During the last thirty years &quot;core&quot; crude prices have been a fair indicator of industrial sector activity with a 48% correlation between the six month change in core crude prices and the change in factory sector industrial production.
The Relationship between Expected Inflation, Disagreement, and Uncertainty: Evidence from Matched Point and Density Forecasts from the Federal Reserve Bank of New York can be found <a href="http://www.newyorkfed.org/research/staff_reports/sr253.pdf">here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/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">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Finished Goods</td>
<td>0.5%</td>
<td>0.2%</td>
<td>4.8%</td>
<td>4.9%</td>
<td>3.6%</td>
<td>3.2%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.2%</td>
<td>0.3%</td>
<td>1.9%</td>
<td>2.4%</td>
<td>1.5%</td>
<td>0.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">Intermediate Goods</td>
<td>0.7%</td>
<td>1.1%</td>
<td>9.3%</td>
<td>8.0%</td>
<td>6.6%</td>
<td>4.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>0.8%</td>
<td>1.1%</td>
<td>7.2%</td>
<td>5.5%</td>
<td>5.7%</td>
<td>2.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Crude Goods</td>
<td>-1.7%</td>
<td>2.0%</td>
<td>8.7%</td>
<td>14.6%</td>
<td>17.5%</td>
<td>25.1%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Core</td>
<td>1.7%</td>
<td>6.2%</td>
<td>33.7%</td>
<td>4.8%</td>
<td>26.5%</td>
<td>12.4%</td>
</tr>
</tbody>
</table>
Gasoline Prices Rose Last Week 
by <a href="/comment/Moeller.html">Tom Moeller</a> July 18, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718d.jpg" width="353">
Versus the prior week, retail gasoline prices rose two cents last week to $2.99 per gallon (29.0% y/y). During June prices averaged $2.89.
A further increase in retail gas prices may be in store this week as the spot market price for regular unleaded gasoline yesterday at $2.25 was up another nickel from last week&#39;s average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718e.jpg" width="353">
The price of West Texas Intermediate crude oil yesterday at $75.31 per barrel was about unchanged with last week&#39;s average but it was up sharply from the $70.96 averaged during June.
The latest Short-Term Energy and Summer Fuels Outlook from the U.S. Energy Information Administration can be found <a href="http://www.eia.doe.gov/emeu/steo/pub/contents.html">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/@W4/@W403/@W40303/@W40303.HTM">US Weekly</a></th>
<th scope="col">07/17/06</th>
<th scope="col">07/10/06</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">U.S. Retail Gasoline, Regular per Gal.</td>
<td>$2.99</td>
<td>$2.97</td>
<td>29.0%</td>
<td>$2.27</td>
<td>$1.85</td>
<td>$1.56</td>
</tr>
</tbody>
</table>
 More German Investors Confident about Current Conditions but Many More Wary of the Future  
by <a href="/comment/Curley.html">Louise Curley</a> July 18, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718f.jpg" width="353">
The ZEW institute of economic research polls some 300 institutional investors and analysts regarding their views of the current situation and their expectations of activity six months in the future. The excess of optimists over pessimists among the participants appraising the current situation rose to 23.3% from 11.8% in May. A year ago, in July, 2005, there was an excess of pessimists over optimists of 61.8%. There has been a steady improvement in the appraisal of current conditions since mid 2005.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718g.jpg" width="353">
While the participants have become more positive about current economic conditions, they have become less positive about the outlook six months ahead as can be seen in the first chart. The excess of optimists over pessimists dropped 22.7 percentage points from 37,8% in June to 15.1% in July, the biggest drop since August,2002. For the first time, the six month horizon extends to 2007, when the value added tax (VAT) is scheduled to increase from 16% to 19% and health care contributions will be increased. In addition, the latest poll was conducted between June 26 and July 17. Towards the end of this period, the crisis in the mid east erupted leading to a jump in oil prices and a fall in stock market prices. The daily prices of the German Dax stock index and the prices of spot Brent crude oil are shown in the second chart. During the period June 26 to July 17, 2006, the oil price rose from an low of 69.69 on June 26 to just over 8% on July 17th. The stock market fell 5.5% from its high to July 17th.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060718h.jpg" width="353">
The ZEW indicator is sometimes thought to be a good indicator of the broader IFO Institute&#39;s survey, which usually comes out 10 to 15 days later. In fact there is little correlation between the two series as shown in the third chart. The third chart suggests that different temperaments of the participants in the two surveys may account for some of the divergence. The financial community whose opinions color the ZEW results, tend to be more volatile than those of the business community whose opinions are reflected in the IFO survey. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">ZEW Survey</th>
<th scope="col">Jul&nbsp; 06</th>
<th scope="col">Jun 06</th>
<th scope="col">Jul 05</th>
<th scope="col">M/M Dif</th>
<th scope="col">Y/Y Dif</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">Current Conditions % bal&nbsp;</td>
<td>23.3</td>
<td>11.9</td>
<td>-66.9</td>
<td>11.2</td>
<td>90.0</td>
<td>-61.7</td>
<td>-67.7</td>
<td>-92.3</td>
</tr>
<tr>
<td class="firstcol">Expectations 6 Mo Ahead</td>
<td>15.1</td>
<td>37.8</td>
<td>32.0</td>
<td>-22.7</td>
<td>-21.9</td>
<td>34.8</td>
<td>44.6</td>
<td>38.4</td>
</tr>
<tr class="odd">
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">Change in Stock Prices and Oil</td>
<td>7/17</td>
<td>High or Low 6/27-7/17</td>
<td>% Change&nbsp;</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr>
<td class="firstcol">German Stock Price DAX 12/30/87=1000)</td>
<td>5416.96</td>
<td>5729.01H</td>
<td>-5.45</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
<tr class="odd">
<td class="firstcol">Spot Price of Oil-Brent&nbsp; $per&nbsp; bbl&nbsp;</td>
<td>75.30</td>
<td>69.69L</td>
<td>8.05</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
<td>--</td>
</tr>
</tbody>
</table>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060717e.jpg" width="353">
Several of the economic effects of the Middle East Crisis can be monitored using data found in various Haver Databases. Among the information to be found in the daily and weekly databases are stock prices, exchange rates, spot and future oil prices, and gasoline prices in major U.S. cities.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060717f.jpg" width="353">
One of the most immediate effects of the crisis has been increases in the prices of oil and gasoline. Spot and future prices of oil are found in the DAILY database and are shown in the first chart. The spot price of Louisiana Sweet rose almost 5% in the week ending July 14 and was over 37% above July 14, 2005. The December 2006 contract price reached $80 a barrel on July 14.
The price of unleaded regular, self service gasoline at the pump for the U. S. and major cities is found in the OILWKLY database (Oil and Gas Weekly Journal.) In the second chart we show the average gasoline price for the U. S. and the gasoline price for San Francisco--one of the cities with above average prices. The average price of a gallon of gasoline in San Francisco was $3.438 on July 6 compared with $2.935 for the US as a whole. The OILWKLY database contains a wealth of information in addition to prices, such as supply and demand conditions, imports and exports and inventories.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060717g.jpg" width="353">
Some daily financial and economic data (mainly exchange rates and, in some cases, stock market indexes) are found in the INTDAILY dat base for individual countries in broad geographical regions. In the third chart we show the stock market index for Israel and the exchange rate. In the past week, the stock market declined by more than 8% and the exchange rate fell more than 3%. The MSCID database also gives daily stock market prices for many countries.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"></th>
<th scope="col">July 14&nbsp; 06</th>
<th scope="col">July 7 06</th>
<th scope="col">Jul 14 05</th>
<th scope="col">W/W%</th>
<th scope="col">Y/Y%</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Spot Oil Price LA. Sweet&nbsp;</td>
<td>79.53</td>
<td>75.79</td>
<td>47.91</td>
<td>4.93</td>
<td>37.33</td>
</tr>
<tr>
<td class="firstcol">Dec 2006 Contract Price</td>
<td>80.00</td>
<td>76.83</td>
<td>58.86</td>
<td>4.13</td>
<td>35.92</td>
</tr>
<tr class="odd">
<td class="firstcol">US Pump Price Unleaded, Self Serve Gasoline*</td>
<td>293.5</td>
<td>291.6</td>
<td>222.0</td>
<td>0.65</td>
<td>32.21</td>
</tr>
<tr>
<td class="firstcol">San Francisco Pump Price Unleaded, Self Serve*</td>
<td>343.80</td>
<td>341.70</td>
<td>247.70</td>
<td>0.61</td>
<td>38.80</td>
</tr>
<tr class="odd">
<td class="firstcol">Israel Stock Index Tel Aviv 100( 12/91/=100)</td>
<td>763.31</td>
<td>834.58</td>
<td>686.75</td>
<td>-8.34</td>
<td>11.15</td>
</tr>
<tr>
<td class="firstcol">Israel Exchange Rate&nbsp; New Shequel/US$ &nbsp;</td>
<td>4.5393</td>
<td>4.3579</td>
<td>4.5351</td>
<td>-3.34</td>
<td>-0.09</td>
</tr>
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Several of the economic effects of the Middle East Crisis can be monitored using data found in various Haver Databases. Among the information to be found in the daily and weekly databases are stock prices, exchange rates, spot and [...]

Monitoring the Economic Effects of the Middle East Conflict

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060717c.jpg" width="353">
The Empire State Mfg. Index of General Business Conditions, reported by the Federal Reserve Bank of New York, during July reversed most of the prior month&#39;s surge and fell 13.37 points to 15.64. Consensus expectations had been for a lesser decline to 20.0.
Since the series&#39; inception in 2001 there has been a 75% correlation between the index level and the three month change in U.S. factory sector industrial production.
New orders &amp; shipments both reversed all of the prior month&#39;s improvement with sharp declines to the lowest levels of 2006. However, the index indicating the number of employees rose modestly m/m to a still low level.
Pricing pressure eased slightly. Since 2001 there has been an 88% correlation between the index of prices paid and the three month change in the core intermediate materials PPI.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060717d.jpg" width="353">
Like the Philadelphia Fed Index of General Business Conditions, the Empire State Business Conditions Index reflects answers to an independent survey question; it is not a weighted combination of the components.
The Empire State index of expectations for business conditions in six months for July rose sharply to the highest level since January as expected new orders surged.
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>.
The Predictive Abilities of the New York Fed&#146;s Empire State Manufacturing Survey from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/current_issues/ci11-1/ci11-1.html">here</a>.

<table border="0" cellspacing="0" width="100%">

</table>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYS/@S5/@S511/@S511.HTM">Empire State Manufacturing Survey</a> </th>
<th scope="col">July</th>
<th scope="col">June</th>
<th scope="col">July &#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">General Business Conditions (diffusion index)</td>
<td>15.64</td>
<td>29.01</td>
<td>23.61</td>
<td>15.56</td>
<td>28.79</td>
<td>15.98</td>
</tr>
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The Empire State Mfg. Index of General Business Conditions, reported by the Federal Reserve Bank of New York, during July reversed most of the prior month's surge and fell 13.37 points to 15.64. Consensus expectations had been for a [...]

Empire State Index Slipped During July

Reaccelerating goods price inflation along with sticky services inflation clouds the outlook

Falling oil prices aren't pulling down inflation expectations, pointing to a boost from increased tariffs

Equity market exuberance outpacing macroeconomic data

Apart from Japan, Blue Chip forecasters expect further sizable monetary easing

US production rebounded in Q2, but demand continued to slow

US leader, Germany trailer for real GDP growth over past 3 years

Negative US inflation surprises leading G10 down

Deflation continues in China

Incoming data surprising on downside in US; positive surprises elsewhere

FOMC expects more inflation and less growth than in March

With escalation of Israel/Iran conflict, geopolitical risk has recently surged while US trade policy uncertainty has ebbed

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

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Andrew Cates

**The US labour market**
The latest data highlight a growing sense of fragility in the US labour market. The unemployment rate, while still relatively low by historical standards, has been edging higher through the course of this year. More telling, however, is the signal from this week’s consumer confidence survey from Conference Board and specifically the labour market differential — the gap between the share of consumers saying jobs are plentiful versus those saying jobs are hard to get. That balance has narrowed sharply, moving back toward levels historically associated with softer labour demand and rising unemployment.

250828Z1.jpg

**Goods and services inflation** 
Haver’s breakdown of goods and services CPI inflation in the advanced economies highlights where fresh risks are emerging. Goods inflation, which had been receding sharply after the pandemic supply shocks, has recently shown signs of firming again. Some of this probably reflects the impact of US tariff policies, which are raising import costs and putting renewed upward pressure on traded goods prices. While services inflation remains the more stubborn component in most advanced economies, the risk is that tariffs could reintroduce stickiness into goods prices, slowing the overall disinflation process.

250828Z2.jpg

**China, Europe and US trade policy**
A consequence of US tariff policies has been a sharp contraction in Chinese exports to the US market, with much of the surplus redirected elsewhere. Europe in particular has recorded near double-digit import growth in recent months, raising concerns that Beijing is deflecting its industrial overcapacity problem rather than resolving it, effectively transferring the pressure onto trading partners. China’s authorities, however, have begun to push back, introducing measures to curb excess supply and rein in so-called “involution,” including clampdowns on price wars across several industries.

250828Z3.jpg

**China’s excess capacity and Europe**
A closer look at Europe–China trade shows that electric vehicles remain a key flashpoint. Import volumes from China have continued to rise even as per-unit prices fall sharply from a year ago —evidence suggesting that industrial overcapacity persists, with low-cost Chinese EVs increasingly challenging European automakers. The surge has carried on despite EU tariffs of up to 45% on battery EVs, as Chinese producers have adapted by pushing plug-in hybrids and expanding onshore production in Europe to bypass duties and defend market share.

250828Z4.jpg

**Wage growth in the US and Europe** 
Turning back to inflation dynamics, the UK stands out for its persistent wage pressures. While posted wage growth has cooled across the US and euro area, the UK measure has remained elevated at around 6% year-on-year, well above pre-pandemic norms. This stickiness reflects a still-tight labour market in key service sectors, even as broader activity has slowed and unemployment has edged higher. For the Bank of England, it underscores the dilemma: headline inflation is easing, but underlying pay growth risks keeping services inflation uncomfortably high, complicating the timing and scale of policy easing.

250828Z5.jpg

**The UK economy**
The UK’s net international investment position has deteriorated noticeably in recent years, with both direct investment and portfolio flows showing persistent weakness. The latest data underline how net FDI has turned increasingly negative, while the portfolio investment balance has also eroded, leaving the UK more reliant on volatile short-term funding sources. This deterioration comes against a backdrop of heightened investor unease about the riskiness of UK debt markets, where elevated gilt yields and rising debt-servicing costs have amplified concerns over fiscal sustainability. Taken together, these trends underscore the vulnerability of the UK’s external position at a time when global capital is arguably proving more selective and risk sensitive.

250828Z6.jpg

Global markets have continued to rally into late summer, buoyed by AI optimism, dovish signals from central bankers at Jackson Hole, and expectations of easier policy ahead. Yet beneath the surface, risks to the world economy are accumulating. In the US, labour market indicators point to softening conditions (chart 1), while tariff-driven pressures are beginning to push goods prices higher (chart 2). Global trade flows are being reshaped by US policy, with China’s excess capacity increasingly diverted toward Europe, most visibly through surging exports of electric vehicles (EVs) (charts 3 and 4). At the same time, wage growth remains stubbornly elevated in the UK, complicating disinflation (chart 5), while concerns are mounting over the country’s external vulnerabilities as net FDI and portfolio positions weaken against the backdrop of jittery debt markets (chart 6). Together, these dynamics highlight the tension between buoyant market performance and a global economy still grappling with structural fragilities.

Charts of the Week: Riskbusters

250828N8.jpg

250828C8.jpg

Real GDP grew 3.3% (SAAR) during the second quarter of 2025, revised from a 3.0% gain reported initially. The increase followed an unrevised 0.5% decline in Q1. A 3.1% rise had been expected in the Action Economics Forecast Survey. Growth during the last four quarters of 2.1% compared to 2.0% y/y in Q1, and remained below its most recent high of 3.2% in Q4 2023.

After-tax corporate profits without IVA & CCA adjustment increased 1.4% (7.0% y/y) last quarter after easing 0.8% in Q1. Before-tax earnings with IVA & CCA rose 1.7% (4.3% y/y) after falling 2.3% in Q1. Financial sector earnings rose 1.4% (15.3% y/y) after rising 2.3% in Q1. Nonfinancial corporate profits rose 2.2% (2.5% y/y) after falling 2.5% in Q1. Earnings from abroad eased 0.7% (-0.4% y/y) following a 7.3% Q1 decline.

Foreign trade balance improvement added 4.95 percentage points to growth last quarter after subtracting 4.61 percentage points in Q1. Imports fell 29.8% (+1.3% y/y) after surging 38.0% in Q1. Exports declined 1.3% (+2.0% y/y) after improving 0.4% in Q1. Inventories subtracted 3.29 percentage points from growth after adding 2.59 percentage point to Q1 growth.

Real final sales to domestic purchasers grew 1.6% (2.4% y/y), revised from 1.1%, in Q2 after rising 1.5% in Q1. Personal consumption expenditures rose 1.6% (2.4% y/y), revised from 1.4%, following a 0.5% gain. Durable goods spending rose 2.6% (4.6% y/y) after falling 3.7% in Q1. Motor vehicle purchases strengthened 11.7% (6.7% y/y) after declining 11.2% in Q1. Spending on home furnishings & appliances weakened 2.1% (+3.5% y/y) following a 1.5% rise. Recreational goods & vehicle outlays fell 3.5% (+4.3% y/y) last quarter after a 0.4% Q1 gain.

Nondurable goods outlays in constant dollars rose 2.3% (3.0% y/y) following 2.1% growth in Q1. Apparel spending increased 5.4% (4.8% y/y) following a 7.0% rise. Food & beverage buying gained 0.3% (1.5% y/y) after a 1.0% increase. Gasoline & fuel oil purchases weakened 1.4% (+0.9% y/y) after gaining 3.6% in Q1.

Real spending on services increased 1.2% (1.9% y/y) after a 0.6% gain. Outlays on housing & utilities eased 0.4% (+1.1% y/y) after rising 2.9% in Q1. Health care expenditures rose 4.2% (4.8% y/y) after a 3.1% increase. Transportation outlays declined 2.9% (-0.6% y/y) after a 1.4% rise, while recreation spending rose 3.6% (0.7% y/y) following a 5.1% decline. Restaurant & hotel expenditures increased 5.1% (1.9% y/y) after falling 1.8%. Financial services expenditures rose 1.9% (2.3% y/y) following a 0.1% Q1 increase.

Business fixed investment in constant dollars increased 5.7% last quarter (4.2% y/y), revised from 1.9%, following a 10.3% surge in Q1. Expenditures on structures declined 8.9% (-3.4% y/y), after falling 2.4% in Q1. Expenditures on producers’ durable equipment increased 7.4% (7.7% y/y), revised from 4.8%, after surging 23.7% in Q1. Outlays on information processing equipment rose 10.1% (20.1% y/y), revised from 5.5%, after soaring 72.8% during Q1. Industrial equipment investment rose 6.7% (4.0% y/y) after a 4.7% rise. Transportation equipment investment surged 20.4% (6.8% y/y) after a 6.9% gain. Intellectual property product spending rose 12.8% last quarter (5.2% y/y) following a 6.0% rise.

Residential structures investment in real terms declined a little-revised 4.7% (-1.3% y/y), the fourth decline in the last five quarters.

250828O8.jpg

250828P8.jpg

Government spending eased 0.2%, revised from up 0.5% in Q2 (+1.8% y/y) after a 0.6% decline. Federal government expenditures declined 4.7% (+0.7% y/y) after falling 4.6% in Q1. National defense expenditures increased 1.4% (3.0% y/y) after declining 7.1% in Q1. State & local government spending rose 2.6% (2.5% y/y) following a 2.0% rise.

The GDP chain price index rose an unrevised and expected 2.0% last quarter (2.5% y/y) after increasing 3.8% in Q1. The PCE chain price index increased 2.0% (2.4% y/y) following a 3.7% rise. The PCE price index excluding food and energy rose 2.5% (2.7% y/y) after increasing 3.5% in Q1. The business fixed investment price index edged 0.5% lower (+1.1% y/y) after a 0.4% rise. The residential price index rose 1.1% (2.6% y/y) after a 4.1% rise while the government price index increased 3.3% (3.1% y/y) following a 4.6% rise.

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

250828Q8.jpg

250828S8.jpg

- Business investment strengthens & consumer spending firms.
- U.S. business earnings reverse Q1 decline.
- Increase in price index is unrevised, remaining roughly half of Q1’s gain.

U.S. GDP Q2’25 Growth Revised Up; Profits Improve

Sandy Batten

250828J2.jpg

250828K2.jpg

The Kansas City Fed manufacturing composite index was unchanged at 1 in August from July. This was the second consecutive month that the index has been positive, indicating the manufacturing in the KC Fed district continue to inch up in August. Prior to the positive reading in July, the index had been negative for 22 consecutive months. The index’s most recent high was 31 reached in both April 2021 and October 2021. The durable manufacturing sector was mostly flat in August, while nondurable manufacturing activity declined slightly driven by printing activities and paper and chemical manufacturing. 

The August survey was open for a six-day period from August 20-25, 2025 and included 103 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

The ISM-adjusted index calculated by Haver Analytics rose to 51.1 (NSA) in August from 50.2 in July. This was the fifth reading above the critical 50 level that separates expansion from contraction in the past six months, a further indication of expanding manufacturing activity.

For the major component indexes, the production index was 0 in August, but this was up from -3 in July. The new orders index rose to 5 in August, its highest reading since May 2022, from 2 in July. The shipments index increased to 6 in August from 3 in July. The employment index was 0 in August, but this was up from -11 in July. Also, the average workweek index rebounded to 3 in August after having been in negative territory for the previous four months. Supplier delivery times were unchanged at 7 in August. The elevation of this index since April may indicate some incipient supply-chain disruptions from higher tariffs. In contrast, raw materials inventories fell to -7 in August from 8 in July.

On the inflation front, the prices paid for raw materials index remained elevated but fell to 43 in August from 47 in July and a local high of 51 in June. Forty-four percent of respondents reported an increase in raw materials prices in August, down from 48% in July and 53% in June, while only 4% reported a decrease, down from 5% in July and 6% in June. The prices received for finished products index increased to 21 in August from 18 in July. This index has fluctuated in a range between 17 and 21 for the past four months.

Expectations for future activity remained positive, with the composite index rising to 11 from 8, as firms anticipate an improvement in production and new orders. While expectations have been trending up over the past several months, they remain depressed relative to the recent high reading of 17 last December. Capital expenditures expectations remained in negative territory in August for the second consecutive month but edged up to -3 from -4 in July.

The series dates back to July 2001. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Data for the Kansas City Fed Survey can be found in Haver’s **SURVEYS** database.

250828L2.jpg

250828M2.jpg

- Index remained (though barely) in positive territory for the second consecutive month, indicating that manufacturing activity was inching up.
- Prior to last month, the index had been negative for 22 consecutive months.
- Positive readings across most key components.

FRB Kansas City Manufacturing Index Unchanged in August

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The Pending Home Sales Index weakened 0.4% in July (+0.7% y/y) to 71.7 after falling an unrevised 0.8% in June and rising an unrevised 1.8% in May, according to the National Association of Realtors (NAR). The Index remained 42.7% below its most recent peak of 125.1 in October 2021. The index is a forward-looking measure of home sales based on contract signings.

The fall in pending home sales occurred as the average rate on a 30-year mortgage rose to 6.72% in July after holding steady m/m at 6.82% in June. These rates remained well above a low of 5.22% in August 2022 and more than double a record-low 2.68% in December 2020.

Pending home sales were mixed last month in the four major regions of the country. Sales in the Midwest declined 4.0% (+1.3% y/y) in July after easing 0.8% in June. Sales in the Northeast fell 0.6% both m/m and y/y, after holding steady in June. In the South, sales eased 0.1% (+1.8% y/y) following a 0.6% June decline, but sales in the West increased 3.7% (-1.9% y/y), reversing a 3.9% June drop.

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

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

- Decline adds to June weakness.
- Regional changes are mixed.


U.S. Pending Home Sales Decline in July

Kathleen Stephansen, CBE

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Initial claims for unemployment insurance declined to 229,000 during the week of August 23, after rising to 234,000 in the week of August 16, revised from 235,000. The Action Economics Forecast Survey expected 230,000 initial claims for last week. The four-week moving average of initial claims increased to 228,500 from 226,000, revised from 226,250. It was the highest level since the second week of July.

In the week ended August 16, the total number of unemployment insurance beneficiaries – also known as “continuing claims” – decreased by 7,000 to 1.954 million from 1.961 million in the prior week, revised down by 11,000 from 1.972 million. The four-week moving average rose to 1.956 million in the week ending August 16, the highest level in six weeks, and up from 1.952 million in the prior week, revised from 1.955 million.

In the week ending August 16, the insured rate of unemployment (the number of beneficiaries as a percent of covered employment) was 1.3% for the twelfth consecutive week.

The insured unemployment rate varied greatly across individual states and territories. In the week ended August 9, the highest unemployment rates were in New Jersey (2.75%), Rhode Island (2.58%), Massachusetts (2.18%), Minnesota (2.17%), California (2.11%), Washington (2.08%), District of Columbia (2.04%), and Puerto Rico (2.02%). The lowest were in South Dakota (0.28%), Florida (0.42%), and Alabama and North Carolina (both 0.47%). Rates in other notable states include Pennsylvania (1.92%), New York (1.73%), Illinois (1.72%), and Texas (1.24%). 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. The expectations figure is from the Action Economics Forecast Survey in the **AS1REPNA** database.

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- Initial claims declined in latest week after a surge in the prior week.
- Continuing claims declined.
- Insured unemployment rate holds steady.

Economy in Brief: July 2006

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