Tom Moeller

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<p align="justify">The Mortgage Bankers Association reported that its total
Mortgage Applications Index fell 1.1% (+36.0% y/y) during the week ending July
12 and added to the prior week's 2.4% decline. The fall reflected a 3.8% drop
(+6.9% y/y) in applications to purchase a home after rising 2.3% in the prior
week. Refinance applications rose 1.5% (86.5% y/y) after 6.5% decline.</p>

<p align="justify">The effective interest rate, which includes points, on a
15-year fixed-rate mortgage rose w/w to 3.56%. That compared to a high of
4.71% early in November 2018. The effective rate on a 30-year fixed-rate loan
also rose w/w to 4.23% but remained below the November high of 5.33%.
The effective rate on a 30-year Jumbo mortgage gained slightly w/w to 4.13%. It
remained below the October peak of 5.09%. The rate on an adjustable 5-year
mortgage was essentially unchanged at 3.68%. It's recent high was 4.52% averaged last October.</p>

<p align="justify">The average mortgage loan size declined w/w to $323,400
(+13.7% y/y) and remained below the record of $381,700 in late-March. For
purchases, the average loan size was fairly stable at $323,000 (6.1% y/y). The average loan
size for refinancings fell to $322,800 (+29.9% y/y). These series date back to 1990.</p>

<p align="justify">Applications for fixed-rate loans rose by more than one-third
y/y, while adjustable rate loan applications gained 10.0% y/y.</p>

<p align="justify">The survey covers over 75% of all U.S. retail residential
mortgage applications and has been conducted weekly since 1990. Respondents
include mortgage bankers, commercial banks and thrifts. The base period and
value for all indexes is March 16, 1990=100. The figures for weekly mortgage
applications and interest rates are available in Haver's <b>SURVEYW</b> database.</p>

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  <thead>
    <tr>
      <th class="firstcol" scope="col" >MBA Mortgage Applications (%,
        SA)</th>
      <th>7/12/2019</th>
      <th>7/5/2019</th>
      <th>6/28/2019</th>
      <th>Y/Y</th>
      <th>2018</th>
      <th>2017</th>
      <th>2016</th>
    </tr>
  </thead>
  <tbody>
    <tr class="odd">
      <td class="firstcol" >Total Market Index</td>
      <td>-1.1</td>
      <td>-2.4</td>
      <td>-0.1</td>
      <td>36.0</td>
      <td>-10.4</td>
      <td>-17.8</td>
      <td>15.6</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Purchase</td>
      <td>-3.8</td>
      <td>2.3</td>
      <td>1.1</td>
      <td>6.9</td>
      <td>2.1</td>
      <td>5.6</td>
      <td>13.3</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;Refinancing</td>
      <td>1.5</td>
      <td>-6.5</td>
      <td>-1.2</td>
      <td>86.5</td>
      <td>-24.3</td>
      <td>-34.0</td>
      <td>17.3</td>
    </tr>
    <tr>
      <td class="firstcol" >15-Year Mortgage Effective Interest Rate
        (%)</td>
      <td>3.56</td>
      <td>3.50</td>
      <td>3.50</td>
      <td>4.35 (July '18)</td>
      <td>4.35</td>
      <td>3.59</td>
      <td>3.22</td>
   </tr>
               </tbody>
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The Mortgage Bankers Association reported that its total Mortgage Applications Index fell 1.1% (+36.0% y/y) during the week ending July 12 and added to the prior week's 2.4% decline. The fall reflected a 3.8% drop (+6.9% y/y) in [...]

U.S. Mortgage Loan Applications Decline as Interest Rates Rise

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<p align="justify">Housing starts eased 0.9% (+6.2% y/y) during June to 1.253
million (SAAR) from 1.265 million in May, revised from 1.269
million. Starts in April also were revised to 1.270 million from 1.199 million. The Action
Economics Forecast Survey expected 1.260 million starts during June.</p>

<p align="justify">Starts of single-family homes increased 3.5% (-0.8% y/y) to
847,000 units from 818,000 in May, revised from 820,000. Multi-family
housing starts fell 9.2% last month (+24.5% y/y) from 447,000 in May, revised from 449,000.</p>

<p align="justify">The decline in housing starts last month continued to reflect mixed
performance across the country. In the Northeast, starts surged by roughly
one-third m/m (4.8% y/y) to 109,000 units, and reversed most of May's sharp
decline. Starts in the Midwest surged by roughly one-quarter, both m/m and y/y, to
197,000, the highest level since May of last year. Offsetting these gains was a
4.9% decline (-9.6% y/y) in housing starts in the West to 312,000, after
little-change in May. Starts in the South also weakened, falling 9.2% (+12.0% y/y) to
635,000, the lowest level since October of last year.</p>

<p align="justify">Building permits weakened 6.1% last month (-6.6% y/y) to
1.220 million, the lowest level since May 2017 and 13.2% below the high in March of
last year. Permits to build a single-family home rose 0.4% (-4.7% y/y) to 813,000, but
have been in a downtrend since early last year. Multi-family building permits fell 16.8% (-10.2% y/y) to
407,000, the lowest level since April 2016. Permits data back through 2013 were revised.</p>

<p align="justify">The housing starts and permits figures can be found in
Haver's <b>USECON</b> database. The expectations figure is contained in the <b>AS1REPNA</b> database.</p>

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    <tr>
      <th class="firstcol" scope="col" >Housing Starts (000s, SAAR)</th>
      <th>Jun</th>
      <th>May</th>
      <th>Apr</th>
      <th>Jun Y/Y %</th>
      <th>2018</th>
      <th>2017</th>
      <th>2016</th>
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      <td class="firstcol" >Total</td>
      <td>1,253</td>
      <td>1,265</td>
      <td>1,270</td>
      <td>6.2</td>
      <td>1,250</td>
      <td>1,209</td>
      <td>1,178</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Single-Family</td>
      <td>847</td>
      <td>818</td>
      <td>862</td>
      <td>-0.8</td>
      <td>873</td>
      <td>852</td>
      <td>786</td>
    </tr>
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      <td class="firstcol" >&nbsp;&nbsp;Multi-Family</td>
      <td>406</td>
      <td>447</td>
      <td>408</td>
      <td>24.5</td>
      <td>377</td>
      <td>357</td>
      <td>392</td>
    </tr>
    <tr class="grey2">
      <td class="firstcol" >Starts By Region</td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
      <td></td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;Northeast</td>
      <td>109</td>
      <td>83</td>
      <td>132</td>
      <td>4.8</td>
      <td>111</td>
      <td>111</td>
      <td>116</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Midwest</td>
      <td>197</td>
      <td>155</td>
      <td>162</td>
      <td>20.1</td>
      <td>171</td>
      <td>180</td>
      <td>185</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;South</td>
      <td>635</td>
      <td>699</td>
      <td>649</td>
      <td>12.0</td>
      <td>631</td>
      <td>603</td>
      <td>585</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;West</td>
      <td>312</td>
      <td>328</td>
      <td>327</td>
      <td>-9.6</td>
      <td>336</td>
      <td>314</td>
      <td>292</td>
    </tr>
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      <td class="firstcol" >Building Permits</td>
      <td>1,220</td>
      <td>1,299</td>
      <td>1,290</td>
      <td>-6.6</td>
      <td>1,330</td>
      <td>1,286</td>
      <td>1,207</td>
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Housing starts eased 0.9% (+6.2% y/y) during June to 1.253 million (SAAR) from 1.265 million in May, revised from 1.269 million. Starts in April also were revised to 1.270 million from 1.199 million. The Action Economics Forecast [...]

U.S. Housing Starts and Building Permits Weaken

in the U.S. increased to $2.78 per gallon (-3.0% y/y) from $2.74 in the previous week. It was the highest price since early-June. Haver Analytics adjusts for the seasonal variation in gasoline pump prices. The seasonally adjusted [...]

U.S. Energy Product Prices Strengthen

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<title>Empire State Manufacturing Index Turns Negative by Tom Moeller&nbsp; July
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<br>
<span id="byline">&nbsp;&nbsp; July 16, 2019</span>
<p><span id="byline">The pump price for a gallon of</span><span id="byline"> <b>gasoline</b></span><span id="articletext">
in the U.S. increased to $2.78 per gallon (-3.0% y/y) from $2.74 in the previous
week. It was the highest price since early-June. Haver Analytics adjusts for the
seasonal variation in gasoline pump prices. The seasonally adjusted price
increased to $2.68 per gallon from $2.65. </span></p>
<p><span id="articletext">The price of</span> <span id="articletext"><b>West
Texas Intermediate crude oil</b> rose to $59.15 per barrel&nbsp; (-17.8% y/y) in
the week ended July 12 from $57.44 in the previous week. It was the highest
price since late-May. Yesterday, prices rose to $59.58 per barrel. Brent crude
oil prices also increased to an average of $65.71 (-13.7% y/y) last week from $63.54
per barrel in the previous week. Nevertheless, the price remained below the high
of $$73.82 late in April.&nbsp; Yesterday, the price rose to $66.40.
<p align="justify">The price of<b> natural gas</b> improved to $2.46 per mmbtu (-13.3%
y/y) in the week ended July 12 from $2.30/mmbtu averaged in the previous week.
It remained below last November's high of $4.67/mmbtu.</p>
<p align="justify">For the four-weeks ending July 5, <b>U.S. gasoline demand</b>
increased 1.2% y/y, while total petroleum product demand gained 2.5% y/y. <b>U.S.
gasoline inventories</b> declined 4.1% y/y, but inventories of all petroleum
products were up 4.8% y/y. Crude oil input to U.S. refineries was 2.1% below one
year earlier.</p>
<p align="justify">These data are reported by the U.S. Department of Energy. The
price data can be found in Haver's <b>WEEKLY</b> and <b>DAILY</b> databases.
Greater detail on prices, as well as the demand, production and inventory data,
including regional breakdowns, are in <b>OILWKLY</b>.</p>
<p align="justify"><b>Labor Scarcity, Trade Woes Squeeze Texas Business, Survey
Finds</b> from the Federal Reserve Bank of Dallas is available here&nbsp; <a href="https://www.dallasfed.org/research/economics/2019/0711">https://www.dallasfed.org/research/economics/2019/0711</a></p>
<table width="1871" class="centered" border="0" cellSpacing="0">
  <thead>
    <tr>
      <th class="firstcol" scope="col" width="1036">Weekly Energy Prices</th>
      <th width="118">7/16/2019</th>
      <th width="118">7/8/2019</th>
      <th width="119">7/1/2019</th>
      <th width="119">Y/Y %</th>
      <th width="119">2018</th>
      <th width="119">2017</th>
      <th width="119">2016</th>
    </tr>
  </thead>
  <tbody>
    <tr class="odd">
      <td class="firstcol" width="1036">Retail Gasoline ($ per Gallon Regular,
        Monday Price, End of Period)</td>
      <td align="center" width="118">2.78</td>
      <td align="center" width="118">2.74</td>
      <td align="center" width="119">2.71</td>
      <td align="center" width="119">-3.0</td>
      <td align="center" width="119">2.27</td>
      <td align="center" width="119">2.47</td>
      <td align="center" width="119">2.31</td>
    </tr>
    <tr>
      <td class="firstcol" width="1036">Light Sweet Crude Oil, WTI ($ per bbl,
        Previous Week's Average)</td>
      <td align="center" width="118">59.15</td>
      <td align="center" width="118">57.44</td>
      <td align="center" width="119">58.38</td>
      <td align="center" width="119">-17.8</td>
      <td align="center" width="119">64.95</td>
      <td align="center" width="119">50.87</td>
      <td align="center" width="119">43.22</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="1036">Natural Gas ($/mmbtu, LA, Previous
        Week's Average)</td>
      <td align="center" width="118">2.46</td>
      <td align="center" width="118">2.30</td>
      <td align="center" width="119">2.34</td>
      <td align="center" width="119">-13.3</td>
      <td align="center" width="119">3.15</td>
      <td align="center" width="119">2.96</td>
      <td align="center" width="119">2.49</td>
    </tr>
  </tbody>
</table>
</span>
</p><p>&nbsp;</p>
<span id="articletitle">U.S. Retail Sales Firm Broadly; Revisions Show
Improvement</span><br>
<span id="byline">by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp;&nbsp;July 16, 2019</span><span id="articletext">
<p align="justify">Total retail sales increased 0.5% (3.2% y/y) during May
following a 0.3% April increase, revised from a 0.2% slip reported initially. A
0.6% gain had been expected in the Action Economics Forecast Survey. Retail
sales excluding motor vehicles and parts rose 0.5% (3.2% y/y), the same as
during April, revised from 0.1%. A 0.4% gain had been expected.</p>
<p align="justify">Last month, sales of motor vehicle &amp; parts increased 0.7%
(3.1% y/y) after a 0.5% fall during April. This compared to a 6.2% gain in unit
sales of motor vehicles during May.</p>
<p align="justify">A measure of the underlying pace of retail spending is
nonauto sales growth excluding gasoline and building materials. These sales rose
0.5% (3.4% y/y) after a 0.4% rise, revised from unchanged.</p>
<p align="justify">Sales strength was broad-based last month. Purchases via the
internet surged 1.4% (11.4% y/y), following a 0.5% rise. Purchases at sporting
goods, hobby, book and music stores rose 1.1% (-4.2% y/y) and repeated April's
strength. Sales of electronics &amp; appliance store also rose 1.1% (-2.4% y/y)
and reversed April's 1.3% decline. General merchandise store sales increased
0.7% (3.3% y/y), extending the strength during the prior two months. Elsewhere,
goods spending was tepid. Furniture &amp; home furnishings store sales gained
0.1% (0.6% y/y) following a 0.6% rise. Sales of building materials and garden
equipment were little changed (0.2% y/y) following a 0.6% decline. Clothing
&amp; accessory store sales also held steady (-2.3% y/y)&nbsp; after a 0.2% dip.&nbsp;</p>
<p align="justify">Gasoline service station sales improved 0.3% (3.2% y/y) as
prices continued to increase.</p>
<p align="justify">Sales of nondiscretionary items were mixed last month. Food
&amp; beverage store sales slipped 0.1% (+1.6% y/y) after a 0.2% rise. Health
&amp; personal care product store sales improved 0.6% (3.4% y/y) following a
0.2% increase.</p>
<p align="justify">Restaurant &amp; drinking establishment sales&nbsp; increased
0.7% (3.7% y/y) after a 0.3% rise.</p>
<p align="justify">The retail sales data can be found in Haver's <b>USECON</b>
database. The Action Economics forecast is in the <b>AS1REPNA</b> database.</p>
<table width="1871" class="centered" border="0" cellSpacing="0">
  <thead>
    <tr>
      <th class="firstcol" scope="col" width="941">Retail Spending (% chg)</th>
      <th scope="col" width="132">Jun</th>
      <th scope="col" width="132">May</th>
      <th scope="col" width="132">Apr</th>
      <th scope="col" width="132">Jun Y/Y</th>
      <th scope="col" width="132">2018</th>
      <th scope="col" width="133">2017</th>
      <th scope="col" width="133">2016</th>
    </tr>
  </thead>
  <tbody>
    <tr class="grey2">
      <td class="firstcol" width="941"><b>Total Retail Sales &amp; Food Services</b></td>
      <td align="center" width="132">0.4</td>
      <td align="center" width="132">0.4</td>
      <td align="center" width="132">0.4</td>
      <td align="center" width="132">1.8</td>
      <td align="center" width="132">4.9</td>
      <td align="center" width="133">4.7</td>
      <td align="center" width="133">2.9</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="941">&nbsp;&nbsp;Excluding Autos</td>
      <td align="center" width="132">0.4</td>
      <td align="center" width="132">0.4</td>
      <td align="center" width="132">0.6</td>
      <td align="center" width="132">1.9</td>
      <td align="center" width="132">5.5</td>
      <td align="center" width="133">4.7</td>
      <td align="center" width="133">2.5</td>
    </tr>
    <tr class="grey2">
      <td class="firstcol" width="941"><b>Retail Sales</b></td>
      <td align="center" width="132">0.4</td>
      <td align="center" width="132">0.3</td>
      <td align="center" width="132">0.3</td>
      <td align="center" width="132">1.7</td>
      <td align="center" width="132">4.7</td>
      <td align="center" width="133">5.0</td>
      <td align="center" width="133">2.5</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="941">&nbsp;&nbsp;Motor Vehicle &amp; Parts</td>
      <td align="center" width="132"></td>
      <td align="center" width="132">0.7</td>
      <td align="center" width="132">-0.5</td>
      <td align="center" width="132">3.1</td>
      <td align="center" width="132">2.7</td>
      <td align="center" width="133">4.9</td>
      <td align="center" width="133">4.3</td>
    </tr>
    <tr>
      <td class="firstcol" width="941">&nbsp;Retail Less Autos</td>
      <td align="center" width="132"></td>
      <td align="center" width="132">0.5</td>
      <td align="center" width="132">0.5</td>
      <td align="center" width="132">3.1</td>
      <td align="center" width="132">5.4</td>
      <td align="center" width="133">5.0</td>
      <td align="center" width="133">2.0</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="941">&nbsp;&nbsp;Gasoline Stations</td>
      <td align="center" width="132"></td>
      <td align="center" width="132">0.3</td>
      <td align="center" width="132">2.1</td>
      <td align="center" width="132">3.2</td>
      <td align="center" width="132">12.9</td>
      <td align="center" width="133">9.4</td>
      <td align="center" width="133">-5.8</td>
    </tr>
    <tr class="grey2">
      <td class="firstcol" width="941"><b>Food Service &amp; Drinking Places
        Sales</b></td>
      <td align="center" width="132"></td>
      <td align="center" width="132">0.7</td>
      <td align="center" width="132">0.3</td>
      <td align="center" width="132">3s.7</td>
      <td align="center" width="132">6.1</td>
      <td align="center" width="133">3.1</td>
      <td align="center" width="133">5.2</td>
    </tr>
  </tbody>
</table>
</span>
<p>&nbsp;</p>
<span id="articletitle">U.S. Business Inventories Rise in April as Sales Decline</span><br>
<span id="byline">by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a></span><span id="byline">&nbsp; July 16, 2019</span><span id="articletext">
<p align="justify">Total business inventories increased 0.5% (5.3% year-on-year)
during April, after being unchanged in March (unrevised). Total business sales
decreased 0.2% (+2.8% y/y) following a 1.3% gain (revised down from 1.6%). The
inventory-to-sales (I/S) ratio ticked up to 1.39 from an upwardly-revised 1.38.
Business inventory swings can have a meaningful impact on GDP. In the first
quarter inventories added 0.6 percentage point to GDP growth.</p>
<p align="justify">Retail inventories increased 0.5% (4.6% y/y) in April after
declining 0.3%. Auto inventories, which comprise roughly 35% of retail
inventories, grew 0.8% (8.2% y/y). Non-auto retail inventories rose 0.4% (2.6%
y/y). General merchandise inventories, the second largest sector were unchanged
(+0.1% y/y). The troubled department store sector – a subset of general
merchandise – saw inventories down 1.4% (-7.7% y/y). Factory sector
inventories gained 0.3% (3.8% y/y). As reported last week, wholesale inventories
were up 0.8% (7.6% y/y).</p>
<p align="justify">Retail sales increased an upwardly-revised 0.3% in April (was
-0.2%) and 3.5% y/y, with non-auto sales growing 0.5% (3.6% y/y). Note: the
advanced retail sales data for May was released today showing a 0.5% gain (3.1%
y/y). Wholesale sector sales declined 0.4% in April (+2.7% y/y), while shipments
from the factory sector were down 0.5% (+2.2% y/y).</p>
<p align="justify">The inventory-to-sales ratio in the retail sector was
unchanged at 1.45. The non-auto I/S ratio ticked up down to 1.19, slightly above
the historic low of 1.17 reached in November 2018 (data goes back to 1967). The
wholesale and factory sector I/S ratios edged up to 1.34 and 1.37 respectively.</p>
<p align="justify">The manufacturing and trade data are in Haver's <b>USECON</b>
database.</p>
<table width="1871" class="centered" border="0" cellSpacing="0">
  <thead>
    <tr>
      <th class="firstcol" scope="col" width="823">Manufacturing &amp; Trade</th>
      <th width="149">May</th>
      <th width="149">Apr</th>
      <th width="149">Mar</th>
      <th width="149">May Y/Y</th>
      <th width="149">2018</th>
      <th width="149">2017</th>
      <th width="150">2016</th>
    </tr>
  </thead>
  <tbody>
    <tr class="odd">
      <td class="firstcol" width="823">Business Inventories (% chg)</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">0.53</td>
      <td align="center" width="149">0.05</td>
      <td align="center" width="149">5.30</td>
      <td align="center" width="149">4.92</td>
      <td align="center" width="149">3.37</td>
      <td align="center" width="150">1.70</td>
    </tr>
    <tr>
      <td class="firstcol" width="823">&nbsp;&nbsp;Retail</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">0.53</td>
      <td align="center" width="149">-0.26</td>
      <td align="center" width="149">4.61</td>
      <td align="center" width="149">4.22</td>
      <td align="center" width="149">2.36</td>
      <td align="center" width="150">4.10</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="823">&nbsp;&nbsp;&nbsp;&nbsp;Retail excl.
        Motor Vehicles</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">0.39</td>
      <td align="center" width="149">-0.05</td>
      <td align="center" width="149">2.60</td>
      <td align="center" width="149">1.25</td>
      <td align="center" width="149">2.16</td>
      <td align="center" width="150">1.95</td>
    </tr>
    <tr>
      <td class="firstcol" width="823">&nbsp;&nbsp;Merchant Wholesalers</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">0.82</td>
      <td align="center" width="149">-0.02</td>
      <td align="center" width="149">7.63</td>
      <td align="center" width="149">7.14</td>
      <td align="center" width="149">3.26</td>
      <td align="center" width="150">1.90</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="823">&nbsp;&nbsp;Manufacturing</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">0.26</td>
      <td align="center" width="149">0.41</td>
      <td align="center" width="149">3.78</td>
      <td align="center" width="149">3.52</td>
      <td align="center" width="149">4.46</td>
      <td align="center" width="150">-0.71</td>
    </tr>
    <tr class="grey3">
      <td class="firstcol" colSpan="7" width="1717"><b>Business Sales (% chg)</b></td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="823">Total</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">-0.23</td>
      <td align="center" width="149">1.27</td>
      <td align="center" width="149">2.77</td>
      <td align="center" width="149">6.09</td>
      <td align="center" width="149">5.57</td>
      <td align="center" width="150">-0.80</td>
    </tr>
    <tr>
      <td class="firstcol" width="823">&nbsp;&nbsp;Retail</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">0.29</td>
      <td align="center" width="149">1.87</td>
      <td align="center" width="149">3.49</td>
      <td align="center" width="149">4.72</td>
      <td align="center" width="149">4.96</td>
      <td align="center" width="150">2.55</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="823">&nbsp;&nbsp;&nbsp;&nbsp;Retail excl.
        Motor Vehicles</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">0.52</td>
      <td align="center" width="149">1.46</td>
      <td align="center" width="149">3.64</td>
      <td align="center" width="149">5.35</td>
      <td align="center" width="149">4.97</td>
      <td align="center" width="150">2.01</td>
    </tr>
    <tr>
      <td class="firstcol" width="823">&nbsp;&nbsp;Merchant Wholesalers</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">-0.40</td>
      <td align="center" width="149">1.82</td>
      <td align="center" width="149">2.73</td>
      <td align="center" width="149">6.54</td>
      <td align="center" width="149">6.72</td>
      <td align="center" width="150">-1.30</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="823">&nbsp;&nbsp;Manufacturing</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">-0.53</td>
      <td align="center" width="149">0.19</td>
      <td align="center" width="149">2.18</td>
      <td align="center" width="149">6.89</td>
      <td align="center" width="149">4.98</td>
      <td align="center" width="150">-3.17</td>
    </tr>
    <tr class="grey3">
      <td class="firstcol" colSpan="7" width="1717"><b>I/S Ratio</b></td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="823">Total</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">1.39</td>
      <td align="center" width="149">1.38</td>
      <td align="center" width="149">1.36</td>
      <td align="center" width="149">1.36</td>
      <td align="center" width="149">1.38</td>
      <td align="center" width="150">1.42</td>
    </tr>
    <tr>
      <td class="firstcol" width="823">&nbsp;&nbsp;Retail</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">1.45</td>
      <td align="center" width="149">1.45</td>
      <td align="center" width="149">1.44</td>
      <td align="center" width="149">1.44</td>
      <td align="center" width="149">1.47</td>
      <td align="center" width="150">1.49</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="823">&nbsp;&nbsp;&nbsp;&nbsp;Retail excl.
        Motor Vehicles</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">1.19</td>
      <td align="center" width="149">1.20</td>
      <td align="center" width="149">1.21</td>
      <td align="center" width="149">1.20</td>
      <td align="center" width="149">1.24</td>
      <td align="center" width="150">1.28</td>
    </tr>
    <tr>
      <td class="firstcol" width="823">&nbsp;&nbsp;Merchant Wholesalers</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">1.34</td>
      <td align="center" width="149">1.33</td>
      <td align="center" width="149">1.28</td>
      <td align="center" width="149">1.29</td>
      <td align="center" width="149">1.30</td>
      <td align="center" width="150">1.35</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" width="823">&nbsp;&nbsp;Manufacturing</td>
      <td align="center" width="149"></td>
      <td align="center" width="149">1.37</td>
      <td align="center" width="149">1.36</td>
      <td align="center" width="149">1.35</td>
      <td align="center" width="149">1.35</td>
      <td align="center" width="149">1.37</td>
      <td align="center" width="150">1.41</td>
    </tr>
  </tbody>
</table>
</span>

</body>

</html>


Sandy Batten

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</head>
<body>
	  <br>
      
      <span id="articletext">
      <p></p>

<p><a href="/comment/190716a.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716a.png"></a>
      <a href="/comment/190716b.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716b.png"></a></p>

<p align="justify">Import prices fell 0.3% (-1.5% y/y) during May........
Export prices declined 0.2% (-0.7% y/y)........

</p><p align="justify">The import and export price series can be found in Haver's <b>USECON</b>
database. Detailed figures are available in the <b>USINT</b> database. The
expectations figure from the Action Economics Forecast Survey is in the <b>AS1REPNA</b>
database.</p>

<p><a href="/comment/190716c.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716c.png"></a>
      <a href="/comment/190716d.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716d.png"></a></p>

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>
  <thead>
    <tr>
      <th class="firstcol" scope="col" ><a href="http://www.haverselect.com/dlx/USARC04/@E8/@E807/@E807.HTM">Import/Export
        Prices (NSA, %)</a></th>
      <th scope="col" >Jun</th>
      <th scope="col" >May</th>
      <th scope="col" >Apr</th>
      <th scope="col" >Jun Y/Y</th>
      <th scope="col" >2018</th>
      <th scope="col" >2017</th>
      <th scope="col" >2016</th>
    </tr>
  </thead>
  <tbody>
    <tr>
      <td class="firstcol" >Imports - All Commodities</td>
      <td  >-0.9</td>
      <td  >0.0</td>
      <td  >0.2</td>
      <td  >-2.0</td>
      <td  >3.1</td>
      <td  >2.9</td>
      <td  >-3.3</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;Petroleum &amp; Petroleum
        Products</td>
      <td  >-6.2</td>
      <td  >2.4</td>
      <td  >4.6</td>
      <td  >-7.4</td>
      <td  >22.0</td>
      <td  >26.6</td>
      <td  >-19.7</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Nonpetroleum</td>
      <td  >-0.4</td>
      <td  >-0.3</td>
      <td  >-0.5</td>
      <td  >-1.4</td>
      <td  >1.3</td>
      <td  >1.1</td>
      <td  >-1.5</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >Exports - All Commodities</td>
      <td  >-0.7</td>
      <td  >-0.2</td>
      <td  >0.1</td>
      <td  >-1.6</td>
      <td  >3.4</td>
      <td  >2.4</td>
      <td  >-3.2</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Agricultural</td>
      <td  >2.7</td>
      <td  >-1.1</td>
      <td  >-1.5</td>
      <td  >-1.9</td>
      <td  >0.6</td>
      <td  >1.5</td>
      <td  >-5.4</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;Nonagricultural</td>
      <td  >-1.1</td>
      <td  >-0.2</td>
      <td  >0.2</td>
      <td  >-1.6</td>
      <td  >3.7</td>
      <td  >2.5</td>
      <td  >-3.0</td>
     </tr>
	               </tbody>
	             </table>
	             </span>
	 </body></html>

Import prices fell 0.3% (-1.5% y/y) during May........ Export prices declined 0.2% (-0.7% y/y)........ The import and export price series can be found in Haver's USECON database. Detailed figures are available in the USINT database. [...]

Gerald D. Cohen

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<body>
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      <span id="articletext">
      <p></p>

<p><a href="/comment/190716j.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716j.png"></a>
      <a href="/comment/190716k.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716k.png"></a></p>

<p align="justify">The industrial sector exhibited life last month. Industrial
production increased 0.4% (2.0% y/y) during May


</p><p align="justify">

</p><p align="justify">Industrial production and capacity data and US Population-Weighted Heating
and Cooling Days are included in Haver's <b>USECON</b> database. Additional detail on production and
capacity can be found in the <b>IP</b> database. The expectations figures come from the <b>AS1REPNA</b> database.</p>

<p><a href="/comment/190716l.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716l.png"></a>
      <a href="/comment/190716m.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716m.png"></a></p>

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

  <thead>
    <tr>
      <th class="firstcol" scope="col" >Industrial Production (SA, %
        Change)</th>
      <th>Jun</th>
      <th>May</th>
      <th>Apr</th>
      <th>Jun Y/Y</th>
      <th>2018</th>
      <th>2017</th>
      <th>2016</th>
    </tr>
  </thead>
  <tbody>
    <tr class="odd">
      <td class="firstcol" >Total Output</td>
<td  >0.0</td>
<td  >0.4</td>
<td  >-0.5</td>
<td  >1.3</td>
<td  >3.9</td>
<td  >2.3</td>
<td  >-2.0</td>
    </tr>
    <tr>
      <td class="firstcol" >Manufacturing</td>
<td  >0.4</td>
<td  >0.2</td>
<td  >-0.7</td>
<td  >0.4</td>
<td  >2.3</td>
<td  >2.0</td>
<td  >-0.8</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;&nbsp; Consumer Goods</td>
<td  >0.0</td>
<td  >0.5</td>
<td  >-1.7</td>
<td  >-0.7</td>
<td  >2.1</td>
<td  >0.5</td>
<td  >0.6</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;&nbsp; Business Equipment</td>
<td  >0.5</td>
<td  >0.4</td>
<td  >-1.5</td>
<td  >1.8</td>
<td  >3.2</td>
<td  >3.6</td>
<td  >-5.3</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;&nbsp; Construction Supplies</td>
<td  >0.5</td>
<td  >0.6</td>
<td  >-0.8</td>
<td  >1.4</td>
<td  >2.8</td>
<td  >3.5</td>
<td  >0.9</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp; Materials</td>
<td  >-0.2</td>
<td  >0.4</td>
<td  >0.5</td>
<td  >2.6</td>
<td  >5.9</td>
<td  >2.7</td>
<td  >-3.0</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >Utilities </td>
<td  >-3.6</td>
<td  >2.4</td>
<td  >-3.3</td>
<td  >-2.6</td>
<td  >4.4</td>
<td  >-0.8</td>
<td  >-0.4</td>
    </tr>
    <tr>
      <td class="firstcol" >Mining</td>
<td  >0.2</td>
<td  >0.2</td>
<td  >2.6</td>
<td  >8.7</td>
<td  >12.4</td>
<td  >7.4</td>
<td  >-9.9</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >Capacity Utilization (%)</td>
<td  >77.9</td>
<td  >78.1</td>
<td  >77.9</td>
<td  >78.6</td>
<td  >78.7</td>
<td  >76.5</td>
<td  >75.0</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp; Manufacturing</td>
<td  >75.9</td>
<td  >75.6</td>
<td  >75.6</td>
<td  >76.5</td>
<td  >76.6</td>
<td  >75.1</td>
<td  >74.2</td>
   </tr>
              </tbody>
            </table>
            </span>
</body></html>

The industrial sector exhibited life last month. Industrial production increased 0.4% (2.0% y/y) during May Industrial production and capacity data and US Population-Weighted Heating and Cooling Days are included in Haver's USECON [...]

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<body>
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      <span id="articletext">
      <p></p>

<p><a href="/comment/190716v.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716v.png"></a>
      <a href="/comment/190716w.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716w.png"></a></p>

<p align="justify">Total business inventories rose 0.3% (5.3% y/y) during May
following an unrevised 0.5% April gain. Total business sales rose 0.2% (1.5%
y/y) following an unrevised 0.2% decline. The inventory-to-sales (I/S) ratio
held steady at an unrevised 1.39. Business inventory swings can have a
meaningful impact on GDP. In 1Q'19 inventories added 0.6 percentage point to GDP
growth following a 0.1 point addition to 4Q'18 growth.</p>

<p align="justify">Retail inventories increased 0.4% (4.7% y/y) in May after
rising 0.6% during April. Auto inventories, which comprise roughly 35% of retail
inventories, grew 0.7% (7.7% y/y). Non-auto retail inventories rose 0.3% (3.0%
y/y). General merchandise inventories, the second largest sector fell 0.4% (-0.0%
y/y). Department store inventories, a subset of general merchandise, moved 0.3%
lower (-8.4% y/y) as clothing &amp; accessory store inventories ticked 0.1%
higher (0.8% y/y). Factory sector inventories gained 0.2% (3.6% y/y). As
reported last week, wholesale inventories rose 0.4% (7.7% y/y).</p>

<p align="justify">Retail sales increased 0.3% in May (2.7% y/y, with non-auto
sales growing 0.2% (2.6% y/y). Wholesale sector sales edged 0.1% higher (0.4%
y/y), while shipments from the factory sector also rose 0.1% (1.4% y/y).</p>

<p align="justify">The inventory-to-sales ratio in the retail sector was
unchanged at 1.46. The non-auto I/S ratio also was stable at 1.20, above the
historic low of 1.17 reached in November 2018 (data goes back to 1967). The
wholesale and factory sector I/S ratios edged up to 1.35 and 1.38 respectively.</p>

<p align="justify">The manufacturing and trade data are in Haver's <b>USECON</b> database.</p>

<p><a href="/comment/190716x.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716x.png"></a>
      <a href="/comment/190716y.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716y.png"></a></p>

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

  <thead>
    <tr>
      <th class="firstcol" scope="col" >Manufacturing &amp; Trade</th>
      <th>May</th>
      <th>Apr</th>
      <th>Mar</th>
      <th>May Y/Y</th>
      <th>2018</th>
      <th>2017</th>
      <th>2016</th>
    </tr>
  </thead>
  <tbody>
    <tr class="odd">
      <td class="firstcol" >Business Inventories (% chg)</td>
      <td  >0.3</td>
      <td  >0.5</td>
      <td  >0.0</td>
      <td  >5.3</td>
      <td  >4.9</td>
      <td  >3.4</td>
      <td  >1.7</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Retail</td>
      <td  >0.4</td>
      <td  >0.6</td>
      <td  >-0.4</td>
      <td  >4.7</td>
      <td  >4.2</td>
      <td  >2.4</td>
      <td  >4.0</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;Retail excl.
        Motor Vehicles</td>
      <td  >0.3</td>
      <td  >0.5</td>
      <td  >-0.2</td>
      <td  >3.0</td>
      <td  >1.7</td>
      <td  >2.0</td>
      <td  >2.0</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Merchant Wholesalers</td>
      <td  >0.4</td>
      <td  >0.8</td>
      <td  >-0.0</td>
      <td  >7.7</td>
      <td  >7.1</td>
      <td  >3.3</td>
      <td  >1.9</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;Manufacturing</td>
      <td  >0.2</td>
      <td  >0.2</td>
      <td  >0.4</td>
      <td  >3.6</td>
      <td  >3.5</td>
      <td  >4.5</td>
      <td  >-0.7</td>
    </tr>
    <tr class="grey3">
      <td class="firstcol" colSpan="8" ><b>Business Sales (% chg)</b></td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >Total</td>
      <td  >0.2</td>
      <td  >-0.2</td>
      <td  >1.3</td>
      <td  >1.5</td>
      <td  >6.1</td>
      <td  >5.4</td>
      <td  >-0.8</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Retail</td>
      <td  >0.3</td>
      <td  >0.3</td>
      <td  >2.0</td>
      <td  >2.7</td>
      <td  >4.6</td>
      <td  >4.5</td>
      <td  >2.4</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;Retail excl.
        Motor Vehicles</td>
      <td  >0.2</td>
      <td  >0.5</td>
      <td  >1.5</td>
      <td  >2.6</td>
      <td  >5.3</td>
      <td  >4.8</td>
      <td  >1.9</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Merchant Wholesalers</td>
      <td  >0.1</td>
      <td  >-0.4</td>
      <td  >1.8</td>
      <td  >0.4</td>
      <td  >6.5</td>
      <td  >6.7</td>
      <td  >-1.3</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;Manufacturing</td>
      <td  >0.1</td>
      <td  >-0.6</td>
      <td  >0.2</td>
      <td  >1.4</td>
      <td  >6.9</td>
      <td  >5.0</td>
      <td  >-3.2</td>
    </tr>
    <tr class="grey3">
      <td class="firstcol" colSpan="8" ><b>I/S Ratio</b></td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >Total</td>
      <td  >1.39</td>
      <td  >1.39</td>
      <td  >1.38</td>
      <td  >1.34</td>
      <td  >1.36</td>
      <td  >1.38</td>
      <td  >1.42</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Retail</td>
      <td  >1.46</td>
      <td  >1.46</td>
      <td  >1.46</td>
      <td  >1.44</td>
      <td  >1.45</td>
      <td  >1.47</td>
      <td  >1.49</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;Retail excl.
        Motor Vehicles</td>
      <td  >1.20</td>
      <td  >1.20</td>
      <td  >1.20</td>
      <td  >1.19</td>
      <td  >1.20</td>
      <td  >1.24</td>
      <td  >1.28</td>
    </tr>
    <tr>
      <td class="firstcol" >&nbsp;&nbsp;Merchant Wholesalers</td>
      <td  >1.35</td>
      <td  >1.34</td>
      <td  >1.33</td>
      <td  >1.26</td>
      <td  >1.29</td>
      <td  >1.30</td>
      <td  >1.35</td>
    </tr>
    <tr class="odd">
      <td class="firstcol" >&nbsp;&nbsp;Manufacturing</td>
      <td  >1.38</td>
      <td  >1.37</td>
      <td  >1.36</td>
      <td  >1.35</td>
      <td  >1.35</td>
      <td  >1.37</td>
      <td  >1.41</td>
</tr>
              </tbody>
            </table>
            </span>
</body></html>

Total business inventories rose 0.3% (5.3% y/y) during May following an unrevised 0.5% April gain. Total business sales rose 0.2% (1.5% y/y) following an unrevised 0.2% decline. The inventory-to-sales (I/S) ratio held steady at an [...]

U.S. Business Inventories & Sales Increase

Robert Brusca

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<p align="justify"><a href="/comment/190716e.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/190716e.png" align="left"></a>
The ZEW experts' macroeconomic current assessment in July has been cut for the euro area, Germany, Japan, and the United Kingdom. The U.S. outlook stepped up in July while the weak outlook for Italy improved and the negative outlook for France became less intense. Still, as of July, only the United States has a positive assessment of its current economic condition and that is by a wide margin. Germany, that had been clinging to a positive outlook and was neck-and-neck with the U.S. diffusion assessment just one year ago, has posted its first net negative diffusion reading of this cycle. However, Japan, the U.S., France, and the euro area all have rank standings of the current readings that lie above their historic medians (above 50) back to early-1999. Yes! That is true despite the very weak negative reading for France and the negative reading for Japan. Japan with a diffusion response this month of -1.1 and the U.S. with a reading of 50.0 find that Japan's queue standing is higher than that of the U.S.! That is a ‘statement' about how long Japan's economy has been mired in difficulty. It is reminiscent of the expression “been down so long, looks like up to me.”
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<b>Economic expectations</b><br>
Turning to economic expectations-where all observations are negative- the U.K. has the weakest diffusion reading as its Brexit woes drag on and on. Italy, the U.S. and Germany, in that order, have the next weakest readings, followed by France and Japan, whose -14.3 reading is the highest. However, much of this is hairsplitting. The queue rankings for countries are in their lower 16th percentile or weaker across the board. The U.K. reading has been weaker only 3% of the time. On a queue basis, the U.S. reading is the relative strongest being lower historically only 15.8% of the time. Still, it's not impressive.
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<b>Inflation expectations</b><br>
Inflation diffusion readings are weak across the board. Since deflation is a rare occurrence, most of the inflation assessments are low but positive with global inflation already running quite low. The euro area is an exception this month with a net -1.7 percentile reading, reflecting the expectation of inflation falling and raising the specter of deflation as a possibility. German inflation expectation readings ‘improved' month-to-month from a negative reading to zero. Japan remains at a low 4.0 diffusion reading with Italy at 3.4 and France at 1.7. The U.K. reading moved the most in July, declining from a 30.4 June reading to an 18.9 reading apparently indicting some potential for disinflationary results if there is a hard Brexit. That is somewhat confusing since a hard Brexit would seem more likely to crash the sterling that is already weak and setting new 2-year-plus low vs. the dollar. Perhaps this reading reflects the expectations that sterling has gotten most of its decline out of the way. The queue ranking for these inflation metrics are in the mid-20th to low-30th percentiles for most countries. Japan is an exception with a 16.7 percentile standing; the U.K. has the high side reading at its 44.4 percentile (despite the monthly decline in the diffusion index), that is still below its historic median.
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<b>Market outlook</b><br>
Turning to the summary table below, we see that short-term and long-terms rate expectations have very low queue standings. Short-term rate expectations fell everywhere in July. In the EMU, they plunged from a -5.4 reading to -44.3 in July. In the U.S. they also plunged from -43.6 to -72 in July with a strong knock down from -3.3 to -20.4 in July in the U.K. as well.  All members have short-term rate expectations in the lower 20th percentile on a queue standing basis or lower. Long-term rate expectations also fell broadly although less sharply and has have even lower queue standings (see table).
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Amid these changes, expectations foresee inflation lower, interest rates, both short and long rates lower. There are across the board deeply negative expectations and largely reduced (but somewhat mixed and clearly weak) current assessments, stock market expectations are no HIGHER than their 1.7% percentile on a queue standing basis anywhere and that top reading is from the U.S. where stocks have been moving to record highs. Germany and euro area stock expectations have not had weaker readings on this timeline. Japan, the U.K., France, and Italy all post extreme weak readings.
</p><p align="justify">
 <b>Summing up</b><br>
Clearly the ZEW experts continue to see a lot of chaos. Their view of the stock market is worrisome. Interest rates are low and seem to be heading lower while inflation readings remain depressed and are weakening.  Central banks have little ammunition left to boost growth or inflation. The lingering trade war still seems to be eating away at the foundations for growth and there is more to come. But the trade-warring parties are still talking. In Europe, the new political arrangements in the EU are being sorted out. In the U.S. violent verbal clashes mark the political scene clashes of the sort that American politics has never seen in the post WWII period. There is still about one and one-half years to the next presidential election cycle. Iran is a major sticking point with Israel freshly accusing Europe of appeasement over its attempt to keep the clearly crumbling nuclear deal in place. Turkey is playing the ‘China Card' by drilling off the coast of Cyrus despite having only a ‘disputed right' to be there that no one else supports. Meanwhile, the Middle East and Straits of Hormuz are not safe but are being patrolled. Risks abound. Uncertainties lurk. Danger is clearly present. Why does the U.S. equity market love it all so?
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The ZEW experts' macroeconomic current assessment in July has been cut for the euro area, Germany, Japan, and the United Kingdom. The U.S. outlook stepped up in July while the weak outlook for Italy improved and the negative outlook [...]

ZEW Experts' Assessments Dim

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

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

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

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

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

US economy expected to outperform other major economies in 2025

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

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

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

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

Policy uncertainty has surged since the US national elections.

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

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

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

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

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

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

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Andrew Cates

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

250501Z1.jpg

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

250501Z2.jpg

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

250501Z3.jpg

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

250501Z4.jpg

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

250501Z5.jpg

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

250501Z6.jpg

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

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

Charts of the Week: Tariff Truce, Tenuous Trust

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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the I**NDUSTRY** database.

250501H20.jpg

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- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

U.S. Light Vehicle Sales Fall in April

250501J5.jpg

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

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

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

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

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

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

250501L5.jpg

250501M5.jpg

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

U.S. ISM Manufacturing Index Indicates Contraction in April

Winnie Tapasanun

250501N.jpg

250501O.jpg

The value of construction put in place unexpectedly fell 0.5% m/m in March after rises of 0.6% in February (+0.7% initially) and 0.1% in January (-0.5% previously), data from the U.S. Census Bureau showed. The March reading was the first m/m fall following five straight m/m gains. A 0.3% m/m March rise had been expected in the Action Economics Forecast Survey. The year-on-year rate of increase decelerated to 2.8% in March, the lowest since May 2019, after registering at 3.4% in February and January. The latest y/y figure was lower than 8.7% in March 2024; thus, having remained below its recent high of 9.8% in January 2024 and a peak of 18.6% in April 2022.

Private construction slid 0.6% (+2.3% y/y) in March, down for the first time since September, following increases of 0.7% in February (+0.9% initially) and 0.1% in January (-0.7% previously). Residential private construction fell 0.4% (+2.8% y/y) in March, the first m/m fall in six months, after an unrevised 1.3% gain in February. Home improvement building dropped 1.2% (+13.4% y/y), the first m/m decline since December, following a 2.3% February gain; it was 41.1% of the residential private construction. Single-family building edged up 0.1% (-0.8% y/y), the smallest of seven consecutive m/m increases, after a 0.8% February rise; it was 46.6% of the residential private construction. Meanwhile, multi-family building was essentially unchanged m/m (-12.1% y/y) in March following 15 straight m/m decreases; it was 12.3% of the residential private construction.

Nonresidential private construction fell 0.8% (+1.6% y/y) in March after a 0.1% increase in February (+0.4% initially) and a 0.1% easing in January (-0.2% previously). The March fall reflected m/m drops in the following nonresidential private constructions. These included religious (-2.9%; +16.4% y/y), health care (-2.2%; -5.2% y/y), office (-1.8%; +2.7% y/y), educational (-1.7%; -4.2% y/y), lodging (-1.6%; -1.0% y/y), commercial (-1.0%; -5.8% y/y), manufacturing (-0.4%; +3.6% y/y), communication (-0.3%; +2.2% y/y), and utilities (-0.1%; +7.0% y/y). In contrast, private constructions for amusement & recreation (1.5%; 7.0% y/y) and transportation (0.7%; 10.2% y/y) rose m/m in March.

The value of public construction declined 0.2% (+4.7% y/y) in March after holding steady in February (+0.2% initially), reflecting a 0.2% increase (-1.9% y/y) in residential public construction and a 0.2% easing (+4.8% y/y) in nonresidential public construction. The March decline reflected m/m drops in the following nonresidential public constructions. These included utilities (-4.8%; -12.8% y/y), commercial (-1.6%; +40.3% y/y), amusement & recreation (-1.0%; +19.1% y/y), educational (-0.6%; +7.6% y/y), sewage & waste disposal (-0.6%; +10.6% y/y), and health care (-0.4%; +13.0% y/y). Notably, spending on highways & streets, which made up 28.7% of public construction spending, fell 0.5% (-2.4% y/y) in March, the first m/m fall since October, following a 0.9% increase in February. To the upside, the following public constructions rose m/m in March: office (1.6%; 6.0% y/y), transportation (1.4%; 7.3% y/y), public safety (0.7%; 4.1% y/y), conservation & development (0.6%; 4.7% y/y), and water supply (0.6%; 12.2% y/y).

The construction figures can be found in Haver's **USECON** database. The expectations figure is from the Action Economics Forecast Survey in **AS1REPNA**.

250501P.jpg

250501Q.jpg

- March construction spending -0.5% m/m; +2.8% y/y, the lowest y/y rate since May ’19.
- Residential private construction -0.4% m/m, led by a 1.2% drop in home improvement building.
- Nonresidential private construction -0.8% m/m, down for the second month in three.
- Public sector construction -0.2% m/m, reflecting a 0.2% decline in nonresidential public building.

U.S. Construction Spending Unexpectedly Drops in March, the First M/M Fall Since September

Carol Stone, CBE

250501A8.jpg

250501B8.jpg

Initial claims for unemployment insurance rose 18,000 in the week ended April 26 to 241,000, seasonally adjusted.  This is higher by 16,000 than the Action Economics Forecast Survey amount of 225,000 and is the largest amount since the week of February 22. The previous week’s actual count was revised up by 1,000 to 223,000, from 222,000 reported initially.

The total number of unemployment insurance beneficiaries – also known as “continuing claims” – in the week ended April 19 was 1.916 million, up 83,000 from the prior week’s 1.833 million; that earlier amount was revised down by 8,000.

The insured unemployment rate, that is, the number of beneficiaries as a percentage of covered employment, was 1.3% in the April 19 week, following 1.2% continuously since the week of January 6, 2024.

Economic conditions vary widely across states and territories.  In the week ended April 12, the highest unemployment rates were in New Jersey (2.39%), California (2.24%), Washington (2.19%), Rhode Island (2.17%) and Massachusetts (1.93%).  The lowest rates were in Florida (0.35%), South Dakota (0.40%), Alabama (0.41%), Virginia (0.45%) and Tennessee (0.48%).  Rates in other notable states include the Illinois (1.85%), New York (1.71%), Pennsylvania (1.54%) and Texas (1.09%). 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 U**SECON**. 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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- Actual initial claims amount is 16,000 more than forecast.
- Total beneficiaries rose by 83,000.
- Insured unemployment rate ticked up to 1.3% after 15 months at 1.2%.

Economy in Brief: July 2019

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U.S. Mortgage Loan Applications Decline as Interest Rates Rise

U.S. Housing Starts and Building Permits Weaken

U.S. Energy Product Prices Strengthen

U.S. Energy Product Prices Strengthen

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U.S. Business Inventories & Sales Increase

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