Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627b.jpg" width="353">
 Total existing home sales fell 1.2% during May to 6.670M following a little revised 2.2% decline during April. Consensus expectations had been for sales of 6.62M and the figures were reported by the National Association of Realtors.
Sales of single-family homes fell 1.5%, down for the fourth month this year. The data cover sales closed in the latest and previous months and contrast to the new home sales (up in May) data which count sales at the signing of a contract.
In May sales of existing single family homes were down 8.1% versus the peak last June and for the first five months of this year were off 4.0% from the 2005 average.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627d.jpg" width="353">
Sales were weakest last month in the Northeast which posted a 4.8% drop (-5.9% y/y) and in the Midwest where they fell 4.3% (-5.6% y/y). In the South (-2.8% y/y) and in the West (-14.1% y/y), May sales were unchanged from the prior month.
The median price of an existing single-family home rose 3.2% (6.4% y/y). The price figures are not seasonally adjusted.
The inventory of unsold existing homes rose 5.5% and was up 41.0% from one year earlier. The supply of unsold single family homes was up 36.3% y/y and the supply of condos &amp; coops for sale was up 73.0%.
The latest release from the National Association of Realtors is available <a href="http://www.realtor.org/research.nsf/pages/EHSPage?OpenDocument">here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E905/@E90501/@E90501.HTM">Existing Home Sales (000, AR)</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Home Sales</td>
<td>&nbsp;6,670</td>
<td>6,750</td>
<td>-6.6%</td>
<td>7,064</td>
<td>6,722</td>
<td>6,176</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Single Family Home Sales</td>
<td>5,820</td>
<td>5,910</td>
<td>-6.6%</td>
<td>6,170</td>
<td>5,912</td>
<td>5,443</td>
</tr>
<tr class="odd">
<td class="firstcol">Single Family Median Home Price (000) </td>
<td>$229.7 </td>
<td>$222.6 </td>
<td>6.4% </td>
<td>$206.3</td>
<td>$182.8 </td>
<td>$169.1 </td>
</tr>
</tbody>
</table>
Consumer Confidence Improved A Bit 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 27, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627c.jpg" width="353">
Consumer confidence as reported by the Conference Board improved 1.0% in June to 105.7. The rise recovered a piece of the 4.6% May decline that was revised slightly shallower. It contrasted to Consensus expectations for a further decline to 103.5 and compared to a 4.2% rise in the University of Michigan&#39;s June Index of Consumer Sentiment.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
Consumers&#39; assessment of the present situation fell for a second month and posted a 1.0% decline (+9.9% y/y). The percentage of respondents who viewed business conditions as good (26.8%) fell for a second month and the percentage that viewed jobs as hard to get (19.9%) reversed the prior month&#39;s rise.
The index of consumers&#39; expectations rose a modest 2.9% (-9.1% y/y) and recovered just part of the May decline. Expectations for business conditions in six months improved slightly as did expectations that the number of jobs would rise. Expectations for the inflation rate in twelve months slipped to 5.1% from 5.6% expected in May.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>105.7</td>
<td>104.7</td>
<td>-0.5%</td>
<td>100.3</td>
<td>96.1</td>
<td>79.8</td>
</tr>
</tbody>
</table>
Chain Store Sales Fell 
by <a href="/comment/Moeller.html">Tom Moeller</a> June 27, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627a.jpg" width="353">
The International Council of Shopping Centers (ICSC)-UBS reported that chain store sales fell 0.4% last week after having been unchanged the prior period.
Sales in June are 0.2% below the May average which fell 0.4% from April. During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
The leading indicator of chain store sales from ICSC-UBS fell 0.3% (-2.0% y/y) during the latest period after three consecutive weeks of increase.
Parsing Recent Inflation Data from the Federal Reserve Bank of Dallas can be found <a href="http://dallasfed.org/eyi/usecon/archived/0606inflation.html"> here</a>

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">06/24/06</th>
<th scope="col">06/17/06</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">Total Weekly Chain Store Sales</td>
<td>471.6</td>
<td>473.6</td>
<td>4.1%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>
 Business Confidence in Europe Still Strong in Spite of Euro Strength, High Oil Prices and Rising Interest Rates 
by <a href="/comment/Curley.html">Louise Curley</a> June 27, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627e.jpg" width="353">
Germany, Italy and the Netherlands reported increased business confidence today. We noted yesterday that confidence in Belgium had also increased. France is the only Euro Zone country that, so far, has seen a decline in business confidence.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627f.jpg" width="353">
The German IFO measure of business confidence rose 1.0% from 105.7 to 106.8 (2000=100) in June, the highest level since February, 1991. In terms of the diffusion index the excess of optimists over pessimists rose 2.3 percentage points from 10.4% in May to 12.7% in June. In the Netherlands, where business confidence is measured by the excess of optimists over pessimists, the percent balance rose 3.1 percentage points from 3.3% to 6.4%. The first chart compares the percent balances indicators for Germany and the Netherlands. Business confidence in Italy, which has been lower than that in Germany, rose by almost 2% in June from May to reach 98.9 (2000=100), the highest level since December, 2000. The second chart compares the indexes of business confidence in Germany and Italy.<img align="left" border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060627g.jpg">
Italy and the Netherlands also reported on consumer confidence. The Italian consumer lost some confidence as the indicator of consumer confidence fell 0.7% from 107.1 (2000=100) in May to 106.8 in June. The Dutch consumer, on the contrary, became more optimistic in June as the optimists exceeded the pessimist by 5% in contrast to May when the pessimists exceeded the optimists by 4%. The third chart compares consumer confidence in Italy and in the Netherlands.
The rise in business confidence in these countries has occurred in spite of strength in the euro, continued high oil prices and the likelihood of a rise in the European Central Bank&#39;s main lending interest rate. It may be that the biggest threat to confidence is the possibility of greater than expected increases in ECB&#39;s lending rate. The rate is currently 2.75%, having risen by from the low 2% in three increments of 25 basis points in December of last year and in March and June of this year. In the past week six council members of the ECB have hinted that the bank may accelerate interest rate increases to combat inflationary pressures. And just today, in its Annual Report the Bank of International Settlements (BIS) called on central bankers to raise interest rates to combat these same global inflationary pressures. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Confidence Measures</th>
<th scope="col">Jun&nbsp; 06</th>
<th scope="col">May 06</th>
<th scope="col">Jun 05</th>
<th scope="col">M/M %</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">Germany&nbsp;Business Confidence</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Index (2000=100)</td>
<td>106.8</td>
<td>105.7</td>
<td>93.3</td>
<td>1.04</td>
<td>14.47</td>
<td>95.5</td>
<td>95.5</td>
<td>91.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; % Balance</td>
<td>12.7</td>
<td>10.4</td>
<td>-14.1</td>
<td>2.3*</td>
<td>24.5*</td>
<td>-9.7</td>
<td>-9.9</td>
<td>-17.2</td>
</tr>
<tr>
<td class="firstcol">Italy Business&nbsp;&nbsp;&nbsp; Confidence (2000=100)</td>
<td>98.9</td>
<td>92.0</td>
<td>84.8</td>
<td>1.96</td>
<td>16.62</td>
<td>87.5</td>
<td>89.5</td>
<td>87.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy Consumer Confidence (2000=100)</td>
<td>106.8</td>
<td>107.6</td>
<td>102.9</td>
<td>-0.74</td>
<td>3.79</td>
<td>104.2</td>
<td>101.4</td>
<td>106.1</td>
</tr>
<tr>
<td class="firstcol">Netherlands Business Confidence (% Balance&nbsp;</td>
<td>6.4</td>
<td>3.3</td>
<td>-1.7</td>
<td>3.1*</td>
<td>8.1*</td>
<td>0.6</td>
<td>-0.1</td>
<td>-5.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Netherlands Consumer Confidence (% Balance)&nbsp;</td>
<td>5</td>
<td>-4</td>
<td>-26</td>
<td>9*</td>
<td>31*</td>
<td>-22</td>
<td>-25</td>
<td>-35</td>
</tr>
</tbody>
</table>


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Total existing home sales fell 1.2% during May to 6.670M following a little revised 2.2% decline during April. Consensus expectations had been for sales of 6.62M and the figures were reported by the National Association of Realtors. [...]

U.S. Existing Home Sales Decline As Expected

Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060626c.jpg" width="353">
European measures of confidence for June are beginning to appear. Last Friday Belgium reported a surprisingly large increase in business confidence. The National Bank of Belgium&#39;s overall gross synthetic indicator of business confidence rose 8.1 point from May to June and reached 10.2%, the highest value on record since the series began in January, 1980. The Bank also calculates a smoothed series, excluding outliers, that reflects the underlying trend of confidence. The smoothed series is only available after a delay of three to four months. Both the current indicator and the smoothed series are shown in the first chart. The continued rise in the current indicator suggests that the underlying trend in consumer confidence is still positive.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060626d.jpg" width="353">
Consumers in Belgium are less confident than the business community. While they have shown a small increase in confidence recently, it has been more a case of a decline in the excess of pessimists over optimists.In June, the consumer indicator of confidence was -2% compared with -6% in May and -11% in June, 2005. Chart 2 compares the Belgian consumer and business confidence indicators.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060626e.jpg" width="353">
In contrast to Belgium, business confidence in France has been slipping since April when a recent peak of 109 was reached. Confidence measured 107 in June, down almost 1% from 108 in May, but up 7% since June, 2005. Chart 3 compares the measures of business confidence in France and Belgium. While the levels of confidence are not comparable, the trends in the two series can be compared. Until recently business confidence in France has tended to follow the same ups and downs as business confidence in Belgium. Since April, the trends have diverged. (The Belgian series is expressed as a percent balance between optimists and pessimists while the French series has been constructed so that it has an average of 100 and a standard deviation of 10.)

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Measures of Confidence</th>
<th scope="col">Jun&nbsp; 06</th>
<th scope="col">May 06</th>
<th scope="col">Jun 05</th>
<th scope="col">M/M</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">Belgium&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Business Confidence (%)</td>
<td>&nbsp;10.1</td>
<td>2.0</td>
<td>-10.7</td>
<td>8.1</td>
<td>20.8</td>
<td>-7.5.</td>
<td>-2.3</td>
<td>-12.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Consumer Confidence(%)</td>
<td>-2</td>
<td>-6</td>
<td>-11</td>
<td>4</td>
<td>9</td>
<td>-8</td>
<td>4</td>
<td>-11</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Business Confidence (Average=100)</td>
<td>107</td>
<td>108</td>
<td>100</td>
<td>-0.93</td>
<td>7.00</td>
<td>101</td>
<td>104</td>
<td>95</td>
</tr>
</tbody>
</table>
</body>
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European measures of confidence for June are beginning to appear. Last Friday Belgium reported a surprisingly large increase in business confidence. The National Bank of Belgium's overall gross synthetic indicator of business [...]

ĀBusiness Confidence Strengthens in BelgiumĀ But Weakens in FranceĀĀ

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060626a.jpg" width="353">
May new single family home sales continued unexpectedly firm and rose 4.6% m/m to 1.234 million (SAAR). The rise was third consecutive monthly increase and followed a 5.9% April gain that was little revised. Consensus expectations had been for a slight decline in sales to 1.15M during May.
Despite these signs of strength, new home sales so far this year are down 10.3% from the 2005 average and May sales were 9.7% below the monthly peak last July.
Sales down South posted the third consecutive firm m/m increase with a 6.0% gain (8.4% y/y). Year to year, that&#39;s the only region of country where sales were up. During May, sales in the Northeast fell 7.9% (-36.3% y/y), sales in the Midwest rose 2.7% but were off 20.8% y/y while in the West sales rose 5.3% in May but were down 12.7% y/y. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060626b.jpg" width="353">
The number of new homes for sale dipped 0.7% m/m in May but were up a sharp 23.6% y/y. The year to year breakdown by region is as follows: Northeast, 52.8%; West, 27.2%; South, 31.0%; Midwest, -2.8%.
The median sales price of a new single family home fell 4.3% m/m to $235,300 following a 3.9% rise during April that was very much upwardly revised.
Movin&#39; On Up from the Federal Reserve Bank of St. Louis is available <a href="http://stlouisfed.org/publications/re/2006/b/pages/movin_up.html"> here</a>.
Can Financial Innovation Help to Explain the Reduced Volatility of Economic Activity? from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2005/200554/200554pap.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E9/@E904/@E904.HTM">U.S. New Homes</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Sales (AR, 000&#39;s)</td>
<td>1,234</td>
<td>1,180</td>
<td>-5.9%</td>
<td>1,280</td>
<td>1,201</td>
<td>1,091</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA)</td>
<td>$235,300</td>
<td>$245,900</td>
<td>3.1%</td>
<td>$234,208</td>
<td>$217,817</td>
<td>$191,383</td>
</tr>
</tbody>
</table>
</body>
</html>

May new single family home sales continued unexpectedly firm and rose 4.6% m/m to 1.234 million (SAAR). The rise was third consecutive monthly increase and followed a 5.9% April gain that was little revised. Consensus expectations had [...]

New Home Sales Continued Firm

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060626a.jpg" width="353">
May new single family home sales continued unexpectedly firm and rose 4.6% m/m to 1.234 million (SAAR). The rise was third consecutive monthly increase and followed a 5.9% April gain that was little revised. Consensus expectations had been for a slight decline in sales to 1.15M during May.
Despite these signs of strength, new home sales so far this year are down 10.3% from the 2005 average and May sales were 9.7% below the monthly peak last July.
Sales down South posted the third consecutive firm m/m increase with a 6.0% gain (8.4% y/y). Year to year, that&#39;s the only region of country where sales were up. During May, sales in the Northeast fell 7.9% (-36.3% y/y), sales in the Midwest rose 2.7% but were off 20.8% y/y while in the West sales rose 5.3% in May but were down 12.7% y/y. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060626b.jpg" width="353">
The number of new homes for sale dipped 0.7% m/m in May but were up a sharp 23.6% y/y. The year to year breakdown by region is as follows: Northeast, 52.8%; West, 27.2%; South, 31.0%; Midwest, -2.8%.
The median sales price of a new single family home fell 4.3% m/m to $235,300 following a 3.9% rise during April that was very much upwardly revised.
Movin&#39; On Up from the Federal Reserve Bank of St. Louis is available <a href="http://stlouisfed.org/publications/re/2006/b/pages/movin_up.html"> here</a>.
Can Financial Innovation Help to Explain the Reduced Volatility of Economic Activity? from the Federal Reserve Board can be found <a href="http://www.federalreserve.gov/pubs/feds/2005/200554/200554pap.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/@E9/@E904/@E904.HTM">U.S. New Homes</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Sales (AR, 000&#39;s)</td>
<td>1,234</td>
<td>1,180</td>
<td>-5.9%</td>
<td>1,280</td>
<td>1,201</td>
<td>1,091</td>
</tr>
<tr>
<td class="firstcol">Median Price (NSA)</td>
<td>$235,300</td>
<td>$245,900</td>
<td>3.1%</td>
<td>$234,208</td>
<td>$217,817</td>
<td>$191,383</td>
</tr>
</tbody>
</table>
 Business Confidence Strengthens in Belgium  But Weakens in France   
by <a href="/comment/Curley.html">Louise Curley</a> June 26, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060626c.jpg" width="353">
European measures of confidence for June are beginning to appear. Last Friday Belgium reported a surprisingly large increase in business confidence. The National Bank of Belgium&#39;s overall gross synthetic indicator of business confidence rose 8.1 point from May to June and reached 10.2%, the highest value on record since the series began in January, 1980. The Bank also calculates a smoothed series, excluding outliers, that reflects the underlying trend of confidence. The smoothed series is only available after a delay of three to four months. Both the current indicator and the smoothed series are shown in the first chart. The continued rise in the current indicator suggests that the underlying trend in consumer confidence is still positive.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060626d.jpg" width="353">
Consumers in Belgium are less confident than the business community. While they have shown a small increase in confidence recently, it has been more a case of a decline in the excess of pessimists over optimists.In June, the consumer indicator of confidence was -2% compared with -6% in May and -11% in June, 2005. Chart 2 compares the Belgian consumer and business confidence indicators.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060626e.jpg" width="353">
In contrast to Belgium, business confidence in France has been slipping since April when a recent peak of 109 was reached. Confidence measured 107 in June, down almost 1% from 108 in May, but up 7% since June, 2005. Chart 3 compares the measures of business confidence in France and Belgium. While the levels of confidence are not comparable, the trends in the two series can be compared. Until recently business confidence in France has tended to follow the same ups and downs as business confidence in Belgium. Since April, the trends have diverged. (The Belgian series is expressed as a percent balance between optimists and pessimists while the French series has been constructed so that it has an average of 100 and a standard deviation of 10.)

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Measures of Confidence</th>
<th scope="col">Jun&nbsp; 06</th>
<th scope="col">May 06</th>
<th scope="col">Jun 05</th>
<th scope="col">M/M</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">Belgium&nbsp;</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp;Business Confidence (%)</td>
<td>&nbsp;10.1</td>
<td>2.0</td>
<td>-10.7</td>
<td>8.1</td>
<td>20.8</td>
<td>-7.5.</td>
<td>-2.3</td>
<td>-12.9</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Consumer Confidence(%)</td>
<td>-2</td>
<td>-6</td>
<td>-11</td>
<td>4</td>
<td>9</td>
<td>-8</td>
<td>4</td>
<td>-11</td>
</tr>
<tr>
<td class="firstcol">France</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Business Confidence (Average=100)</td>
<td>107</td>
<td>108</td>
<td>100</td>
<td>-0.93</td>
<td>7.00</td>
<td>101</td>
<td>104</td>
<td>95</td>
</tr>
</tbody>
</table>
</body>
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Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060623c.jpg" width="353">
Unemployment in Poland fell 59,000 in May, to 2.61 million, the lowest number since August 2000. The May decline accelerated a marked downtrend that began in July 2004 after a plateau at 3.2 million that had lasted about two years. These data, except where noted, are seasonally adjusted by Haver Analytics.
The associated unemployment rate was 16.6% in May, down from 17.0% in April. This is the lowest since late 2001. However, the rates prior to January 2002 were based on a different kind of population census, so they are not fully comparable. The May value is by far the lowest on the current population base. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060623d.jpg" width="353">
Employment is rising. Employment is measured several ways in Poland, but fortunately, they are all behaving in the same manner at present. A kind of grand total is taken quarterly; it shows 14.43 million employed in Q1, up by 144,000 from Q4 and the third successive sizable increase. Within this total, private sector jobs account for 9.9 million in Q1, not seasonally adjusted, up 4.0% from the year-ago quarter. The public sector has started to increase modestly after a long &quot;downsizing&quot;; jobs there number 4.29 million in Q1, up 0.9% from Q1 2005. When this data series began in Q1 2000, there were 5.09 million public sector jobs and 9.23 million in the private sector. The private sector experienced a cyclical downturn in 2002-2003 but has recovered to a new peak since then. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060623e.jpg" width="353">
A separate monthly tally of private nonagricultural enterprise employment (reported on June 19) reached 4.90 million in May, up 12,000 in the month and 3.0% ahead of a year ago. Industry detail through April shows cyclical gains since 2004 for most sectors except construction, which remains weak. The real estate/business services area has expanded consistently throughout the four-year history of these data.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGECW/@E9/@E96/@E96.HTM">Poland, 000s, SA* </a></th>
<th scope="col">May 2006 </th>
<th scope="col">April 2006 </th>
<th scope="col">Mar 2006/Q1 </th>
<th scope="col">Year Ago </th>
<th scope="col">2005 </th>
<th scope="col">2004 </th>
<th scope="col">2003 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Unemployment </td>
<td>2,608</td>
<td>2,667</td>
<td>2,714</td>
<td>2,897</td>
<td>2,871</td>
<td>3,091</td>
<td>3,179</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%) </td>
<td>16.6</td>
<td>17.0</td>
<td>17.2</td>
<td>18.4</td>
<td>18.2</td>
<td>19.5</td>
<td>19.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment </td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>14,430</td>
<td>14,002</td>
<td>14,116</td>
<td>13,795</td>
<td>13,716</td>
</tr>
<tr>
<td class="firstcol">Private Nonagr Employment </td>
<td>4,901</td>
<td>4,889</td>
<td>4,870</td>
<td>4,756</td>
<td>4,770</td>
<td>4,681</td>
<td>4,718</td>
</tr>
</tbody>
</table>
</body>
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Unemployment in Poland fell 59,000 in May, to 2.61 million, the lowest number since August 2000. The May decline accelerated a marked downtrend that began in July 2004 after a plateau at 3.2 million that had lasted about two years. [...]

Poland Unemployment Rate at 4-Year Low

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060623a.jpg" width="353">
New orders for durable goods fell 0.3% last month after a little revised 4.7% drop during April. Consensus expectations had been for a 0.5% decline.
Lower Boeing orders dropped nondefense aircraft &amp; parts bookings by 17.9% (-38.7% y/y) after a 29.7% decline during April. A partial offset to that decline came from a 2.5% (0.6% y/y) increase in new orders for motor vehicles &amp; parts.
Less the transportation sector altogether durable goods orders recovered most of the prior month&#39;s decline with 0.7% gain.
During the last ten years there has been a 69% correlation between the y/y change in durable goods orders and the change in output of durable goods.
Dragged down by the decline in aircraft, orders for nondefense capital goods fell 1.9%. Less aircraft, these orders recovered half of the prior month&#39;s decline with a 1.0% gain. During the last ten years there has been an 86% correlation between the y/y change in capital goods orders less aircraft and the y/y change in business fixed investment in equipment &amp; software from the GDP accounts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060623b.jpg" width="353">
Machinery orders jumped 2.3% (15.0% y/y) but electrical equipment orders slipped 0.2% (+13.4% y/y) after a 6.6% April spike. Primary metals surged 3.5% (22.2% y/y), surging for the third consecutive month. Orders for computers &amp; electronic products fell 1.1% (+7.5% y/y) after a 10.8% April slump though computer orders alone rose 1.9% (1.0% y/y).
Shipments of durable goods jumped 2.6% (7.7% y/y) after a 1.2% April decline. Shipments less the transportation sector surged 1.8% (9.0% y/y). During the last ten years there has been an 82% correlation between the y/y change in durable goods shipments and the change in industrial production of durable goods.
Order backlogs rose another 0.6% (20.7% y/y) reflecting a 1.5% jump in nondefense aircraft &amp; parts (59.4% y/y). Also strong was the 0.9% (14.3% y/y) rise in unfilled orders less transportation. The ratio of backlogs to shipments outside of transportation slipped moderately after surging in April.
Durable inventories rose 0.4% (3.3% y/y) after an upwardly revised 1.1% April increase. Less transportation inventories rose 0.3% (3.8% y/y) after two months of 1.0% gain. The inventory to sales ratio outside of the transportation sector gave back all of the prior month&#39;s increase.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>-0.3%</td>
<td>-4.7%</td>
<td>3.3%</td>
<td>9.0%</td>
<td>6.4%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>0.7%</td>
<td>-1.0%</td>
<td>9.8%</td>
<td>9.4%</td>
<td>7.6%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-1.9%</td>
<td>-6.3%</td>
<td>-1.7%</td>
<td>21.4%</td>
<td>5.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>1.0%</td>
<td>-1.9%</td>
<td>10.3%</td>
<td>12.3%</td>
<td>2.8%</td>
<td>-2.0%</td>
</tr>
</tbody>
</table>
</body>
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New orders for durable goods fell 0.3% last month after a little revised 4.7% drop during April. Consensus expectations had been for a 0.5% decline. Lower Boeing orders dropped nondefense aircraft & parts bookings by 17.9% (-38.7% [...]

U.S. Durable Goods Orders Off Slightly

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060623a.jpg" width="353">
New orders for durable goods fell 0.3% last month after a little revised 4.7% drop during April. Consensus expectations had been for a 0.5% decline.
Lower Boeing orders dropped nondefense aircraft &amp; parts bookings by 17.9% (-38.7% y/y) after a 29.7% decline during April. A partial offset to that decline came from a 2.5% (0.6% y/y) increase in new orders for motor vehicles &amp; parts.
Less the transportation sector altogether durable goods orders recovered most of the prior month&#39;s decline with 0.7% gain.
During the last ten years there has been a 69% correlation between the y/y change in durable goods orders and the change in output of durable goods.
Dragged down by the decline in aircraft, orders for nondefense capital goods fell 1.9%. Less aircraft, these orders recovered half of the prior month&#39;s decline with a 1.0% gain. During the last ten years there has been an 86% correlation between the y/y change in capital goods orders less aircraft and the y/y change in business fixed investment in equipment &amp; software from the GDP accounts.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060623b.jpg" width="353">
Machinery orders jumped 2.3% (15.0% y/y) but electrical equipment orders slipped 0.2% (+13.4% y/y) after a 6.6% April spike. Primary metals surged 3.5% (22.2% y/y), surging for the third consecutive month. Orders for computers &amp; electronic products fell 1.1% (+7.5% y/y) after a 10.8% April slump though computer orders alone rose 1.9% (1.0% y/y).
Shipments of durable goods jumped 2.6% (7.7% y/y) after a 1.2% April decline. Shipments less the transportation sector surged 1.8% (9.0% y/y). During the last ten years there has been an 82% correlation between the y/y change in durable goods shipments and the change in industrial production of durable goods.
Order backlogs rose another 0.6% (20.7% y/y) reflecting a 1.5% jump in nondefense aircraft &amp; parts (59.4% y/y). Also strong was the 0.9% (14.3% y/y) rise in unfilled orders less transportation. The ratio of backlogs to shipments outside of transportation slipped moderately after surging in April.
Durable inventories rose 0.4% (3.3% y/y) after an upwardly revised 1.1% April increase. Less transportation inventories rose 0.3% (3.8% y/y) after two months of 1.0% gain. The inventory to sales ratio outside of the transportation sector gave back all of the prior month&#39;s increase.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@ED/@ED01/@ED0101/@ED0101.HTM">NAICS Classification</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Durable Goods Orders</td>
<td>-0.3%</td>
<td>-4.7%</td>
<td>3.3%</td>
<td>9.0%</td>
<td>6.4%</td>
<td>-0.6%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;&nbsp;&nbsp; Excluding Transportation</td>
<td>0.7%</td>
<td>-1.0%</td>
<td>9.8%</td>
<td>9.4%</td>
<td>7.6%</td>
<td>-1.7%</td>
</tr>
<tr class="odd">
<td class="firstcol">Nondefense Capital Goods</td>
<td>-1.9%</td>
<td>-6.3%</td>
<td>-1.7%</td>
<td>21.4%</td>
<td>5.6%</td>
<td>-3.4%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Excluding Aircraft</td>
<td>1.0%</td>
<td>-1.9%</td>
<td>10.3%</td>
<td>12.3%</td>
<td>2.8%</td>
<td>-2.0%</td>
</tr>
</tbody>
</table>
Poland Unemployment Rate at 4-Year Low 
by <a href="/comment/Stone.html">Carol Stone</a> June 23, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060623c.jpg" width="353">
Unemployment in Poland fell 59,000 in May, to 2.61 million, the lowest number since August 2000. The May decline accelerated a marked downtrend that began in July 2004 after a plateau at 3.2 million that had lasted about two years. These data, except where noted, are seasonally adjusted by Haver Analytics.
The associated unemployment rate was 16.6% in May, down from 17.0% in April. This is the lowest since late 2001. However, the rates prior to January 2002 were based on a different kind of population census, so they are not fully comparable. The May value is by far the lowest on the current population base. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060623d.jpg" width="353">
Employment is rising. Employment is measured several ways in Poland, but fortunately, they are all behaving in the same manner at present. A kind of grand total is taken quarterly; it shows 14.43 million employed in Q1, up by 144,000 from Q4 and the third successive sizable increase. Within this total, private sector jobs account for 9.9 million in Q1, not seasonally adjusted, up 4.0% from the year-ago quarter. The public sector has started to increase modestly after a long &quot;downsizing&quot;; jobs there number 4.29 million in Q1, up 0.9% from Q1 2005. When this data series began in Q1 2000, there were 5.09 million public sector jobs and 9.23 million in the private sector. The private sector experienced a cyclical downturn in 2002-2003 but has recovered to a new peak since then. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060623e.jpg" width="353">
A separate monthly tally of private nonagricultural enterprise employment (reported on June 19) reached 4.90 million in May, up 12,000 in the month and 3.0% ahead of a year ago. Industry detail through April shows cyclical gains since 2004 for most sectors except construction, which remains weak. The real estate/business services area has expanded consistently throughout the four-year history of these data.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/EMERGECW/@E9/@E96/@E96.HTM">Poland, 000s, SA* </a></th>
<th scope="col">May 2006 </th>
<th scope="col">April 2006 </th>
<th scope="col">Mar 2006/Q1 </th>
<th scope="col">Year Ago </th>
<th scope="col">2005 </th>
<th scope="col">2004 </th>
<th scope="col">2003 </th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Unemployment </td>
<td>2,608</td>
<td>2,667</td>
<td>2,714</td>
<td>2,897</td>
<td>2,871</td>
<td>3,091</td>
<td>3,179</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (%) </td>
<td>16.6</td>
<td>17.0</td>
<td>17.2</td>
<td>18.4</td>
<td>18.2</td>
<td>19.5</td>
<td>19.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment </td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>14,430</td>
<td>14,002</td>
<td>14,116</td>
<td>13,795</td>
<td>13,716</td>
</tr>
<tr>
<td class="firstcol">Private Nonagr Employment </td>
<td>4,901</td>
<td>4,889</td>
<td>4,870</td>
<td>4,756</td>
<td>4,770</td>
<td>4,681</td>
<td>4,718</td>
</tr>
</tbody>
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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060622e.jpg" width="353">
Total production of petroleum products has surged in the last several weeks, and refineries are operating at their highest capacity since before last September&#39;s hurricanes. These statements are based on weekly petroleum supply statistics provided by the Energy Information Administration of the Department of Energy; just in the last month, Haver Analytics has begun to seasonally adjust these data, using the same software routine used by the Fed for the money supply and other weekly data. The raw figures are contained in the OILWKLY and WEEKLY databases, and the seasonally adjusted data are in WEEKLY. <img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060622f.jpg" width="353">
Domestic crude oil production continues its long downtrend. It was 5.05 million barrels/day (mil B/D) last week, compared with 5.10 mil B/D the week before and 5.38 mil B/D in the comparable 2005 week. So far during 2006, it has averaged 4.95 mil B/D, off 10% from 5.41 mil B/D in 2004. Domestic oil, of course, isn&#39;t nearly enough to meet today&#39;s energy needs in the US, and crude oil imports ran to 10.7 mil B/D last week, up almost exactly 8.0% from a year earlier. <img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060622g.jpg" width="353">
US refiners are producing more gasoline than ever, 9.34 mil B/D in the June 16 week, up 3.5% just in one week. The seasonal adjustment process is especially helpful here in smoothing the late winter/early spring slowdown due to refinery maintenance and then adjusting out the consequent rebound. This highlights the import of the latest week&#39;s jump: it&#39;s not due to some standard late-spring advance in gasoline output. Underlying gains in refinery output are also more evident in the refinery capacity utilization data, which also benefit from the seasonal adjustment. Last week&#39;s seasonally adjusted usage rate was 89.85%, which, except for one week in January, is the highest since late September 2005, just before Hurricane Rita.So gradually refiners are getting their capacity back on-stream. A hopeful note for limiting capacity pressures on product prices is that there are still a couple of percentage points of slack compared to pre-2005 levels, which were running between 91% and 92%. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@w5/@W508/@W50802/@W50802.HTM">Thous B/D,&nbsp; Seasonally Adjusted*</a> </th>
<th scope="col">June 16, 2006 </th>
<th scope="col">June 9, 2006 </th>
<th scope="col">May 19, 2006 </th>
<th scope="col">June 17, 2005 </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">Domestic Crude Oil Production </td>
<td>5,052 </td>
<td>5,095 </td>
<td>4,937 </td>
<td>5,380 </td>
<td>4,861 </td>
<td>5,410 </td>
<td>5,640 </td>
</tr>
<tr>
<td class="firstcol">Crude Oil Imports </td>
<td>10,749 </td>
<td>10,267 </td>
<td>9,166 </td>
<td>9,929 </td>
<td>10,111 </td>
<td>10,044 </td>
<td>9,511 </td>
</tr>
<tr class="odd">
<td class="firstcol">Refinery Gasoline Production </td>
<td>9,343 </td>
<td>9,028 </td>
<td>8,991 </td>
<td>8,707 </td>
<td>8,662 </td>
<td>8,681 </td>
<td>8,471 </td>
</tr>
<tr>
<td class="firstcol">Refinery Capacity Utilization (%) </td>
<td>89.85 </td>
<td>88.45 </td>
<td>87.05 </td>
<td>91.49 </td>
<td>90.29 </td>
<td>82.24 </td>
<td>91.83 </td>
</tr>
</tbody>
</table>
</body>
</html>

Total production of petroleum products has surged in the last several weeks, and refineries are operating at their highest capacity since before last September's hurricanes. These statements are based on weekly petroleum supply [...]

Refinery Gasoline Production Reaches Record in New Seasonally Adjusted Weekly Data

US is big leader in global surge in private AI investment

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

Sharply rising share of AI-related jobs

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

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

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

Cost of transporting crude oil has soared to series high

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

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

Is recent drop in sentiment signaling softer growth ahead?

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

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

AI-related outperformance of IP in Advanced Asia ex Japan

Resilient US economy pushing up Blue Chip 2026 outlook

US and China big leaders in adoption of AI models

Robust US demand for advanced technology products

China's export growth rotating away from the US

More pronounced upward revisions in countries more exposed to AI investment

Stable job openings and hiring rates point to cautious hiring

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

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

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

Tighter US immigration enforcement adversely impacting labor force

Economic policy uncertainty, while still elevated, is declining

Gradual disinflation and easier monetary policies across advanced economies

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Andrew Cates

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

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

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

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

260513Z4.jpg

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

260513Z5.jpg

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

260513Z6.jpg

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

Charts of the Week: The Tug of War

Sandy Batten

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

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

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

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

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


260514x5.jpg

260514y5.jpg

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


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

Kathleen Stephansen, CBE

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

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

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

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


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

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

Michael J. Moran

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

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

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

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


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


April PPI: Broad-Based Pressure

Robert Brusca

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

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

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

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

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

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

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





Economy in Brief: 2006

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U.S. Existing Home Sales Decline As Expected

ĀBusiness Confidence Strengthens in BelgiumĀ But Weakens in FranceĀĀ

New Home Sales Continued Firm

New Home Sales Continued Firm

Poland Unemployment Rate at 4-Year Low

U.S. Durable Goods Orders Off Slightly

U.S. Durable Goods Orders Off Slightly

Refinery Gasoline Production Reaches Record in New Seasonally Adjusted Weekly Data